Bottom of the pyramid

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An Industrial Workers of the World poster (1911).

In economics, the bottom of the pyramid is the largest, but poorest socio-economic group. In
global terms, this is the 2.5 billion people who live on less than $2.50 per day[1]. The phrase
�bottom of the pyramid� is used in particular by people developing new models of doing
business that deliberately target that demographic, often using new technology. This field is also
often referred to as the "Base of the Pyramid" or just the "BoP".

Several books and journal articles have been written on the potential market by members of
business schools offering consultancy on the burgeoning market. They include The Fortune at
the Bottom of the Pyramid by C.K. Prahalad of the University of Michigan, Capitalism at the
Crossroads by Stuart L. Hart of Cornell University and the first empirical article, Reinventing
strategies for emerging markets: Beyond the transnational model, by Ted London of the
University of Michigan and Hart. London has also developed a working paper, commissioned by
the United Nations Development Programme, that explores the contributions of the BoP
literature to the poverty alleviation domain.

Contents
• 1 History
 • 2 Examples
o 2.1 Micro-credit
o 2.2 Agriculture
o 2.3 Market-specific products
o 2.4 Venture capital
o 2.5 Business and community partnerships
o 2.6 BoP conferences
• 3 Footnotes
• 4 References
• 5 Further reading

• 6 External links

[edit] History
The phrase �bottom of the pyramid� was used by U.S. president Franklin D. Roosevelt in his
April 7, 1932 radio address, The Forgotten Man, in which he said �These unhappy times call
for the building of plans that rest upon the forgotten, the unorganized but the indispensable units
of economic power...that build from the bottom up and not from the top down, that put their faith
once more in the forgotten man at the bottom of the economic pyramid.�

The more current usage refers to the billions of people living on less than $2 per day, as first
defined in 1998 by Professors C.K. Prahalad and Stuart L. Hart. It was subsequently expanded
upon by both in their books: The Fortune at the Bottom of the Pyramid by Prahalad in 2004[2]
and Capitalism at the Crossroads by Hart in 2005[3].

Prahalad proposes that businesses, governments, and donor agencies stop thinking of the poor as
victims and instead start seeing them as resilient and creative entrepreneurs as well as value-
demanding consumers. He proposes that there are tremendous benefits to multi-national
companies who choose to serve these markets in ways responsive to their needs. After all the
poor of today are the middle-class of tomorrow. There are also poverty reducing benefits if
multi-nationals work with civil society organizations and local governments to create new local
business models.

However, there is some debate over Prahalad's proposition. Aneel Karnani, also of the Ross
School at the University of Michigan, argued in a 2007 paper that there is no fortune at the
bottom of the pyramid and that for most multinational companies the market is actually very
small. Karnani also suggests that the only way to alleviate poverty is to focus on the poor as
producers, rather than as a market of consumers. Prahalad later provided a multi-page response
to Karnani's article. Additional critiques of Prahalad's proposition have been gathered in
Advancing the 'Base of the Pyramid' Debate.

Meanwhile, Hart and his colleague Erik Simanis at Cornell University's Center for Sustainable
Global Enterprise advance another approach, one that focuses on the poor as business partners
and innovators, rather than just as potential producers or consumers. Hart and Simanis have led
the development of the Base of the Pyramid Protocol, an entrepreneurial process that guides
companies in developing business partnerships with income-poor communities in order to "co-
create businesses and markets that mutually benefit the companies and the communities". This
process has been adopted by the SC Johnson Company[4] and the Solae Company (a subsidiary of
DuPont)[5].

Furthermore, Ted London at the William Davidson Institute at the University of Michigan
focuses on the poverty alleviation implications of Base of the Pyramid ventures. He has
identified the BoP Perspective as a unique market-based approach to poverty alleviation. London
has also developed the BoP Impact Assessment Framework, a tool that provides a holistic and
robust guide for BoP ventures to assess and enhance their poverty alleviation impacts.
Companies, non-profits, and development agencies in Latin America, Asia, and Africa have
implemented this framework.

Another recent focus of interest lies on the impact of successful BoP-approaches on sustainable
development. Some of the most significant obstacles encountered when integrating sustainable
development at the BoP are the limits to growth that restrict the extended development of the
poor, especially when applying a resource-intensive Western way of living. Nevertheless, from a
normative ethical perspective poverty alleviation is an integral part of sustainable development
according to the notion of intragenerational justice (i.e. within the living generation) in the
Brundtland Commission's definition. Ongoing research addresses these aspects and widens the
BoP approach also by integrating it into corporate social responsibility thinking[6].

[edit] Examples
[edit] Micro-credit

As The Economist reported on August 11, 2005, one example of �bottom of the pyramid� is
the growing microcredit market in South Asia, particularly in Bangladesh. With technology
being steadily cheaper and more ubiquitous, it is becoming economically efficient to �lend tiny
amounts of money to people with even tinier assets�. The microfinance network discussed in
the article, Sa-Dhan, argues that the availability of credit to the poor �helps the poor but allow
banks to increase their business�.

[edit] Agriculture

Another example of the bottom of the pyramid targeting at work is eChoupal in rural India. ITC
manages an agricultural trading company. To eliminate the inefficiencies in its supply chain
caused by corrupt middle men at local rural markets, it created a network of �e-Choupals�
(choupal = place of gathering) in rural communities. Through these e-Choupals, individual
farmers have been able to check the market trading price of their produce and sell it directly to
ITC. Both the individual farmers and ITC have increased their revenues, because the layers of
ineffiency no longer have a role in the transaction between seller and buyer.

[edit] Market-specific products

One of many examples of products that are designed with needs of the very poor in mind is that
of a shampoo that works best with cold water and is sold in small packets to reduce barriers of
upfront costs for the poor. Such a product is marketed by Hindustan UNILever.

[edit] Venture capital

Whereas Prahalad originally focussed on corporations for developing BoP products and entering
BoPmarkets, it is believed by many that SME might even play a bigger role. For LPs, this offers
an opportunity to enter new venture capital markets. Although several social venture funds are
already active, true VC funds are now emerging.

[edit] Business and community partnerships

As Fortune reported on November 15, 2006, since 2005 the SC Johnson Company has been
partnering with youth groups in the Kibera slum of Nairobi, Kenya. Together SC Johnson and
the groups have created a community-based waste management and cleaning company,
providing home-cleaning, insect treatment, and waste disposal services for residents of the slum.
SC Johnson's project was the first implementation of the Base of the Pyramid Protocol.

Book Summary: The Fortune at the Bottom of the Pyramid (BOP)

This book by C K Prahalad, Harvey C. Fruehauf Professor of Corporate Strategy and
International Business at the University of Michigan Business School addresses a challenge that
the author had thrown to himself in 1995 - "What are we doing about the poorest people in the
world? � Why can't we mobilize the investment capacity of large firms with the knowledge and
commitment of NGOs and the communities that need help? Why can't we co create new
solutions?"

The ideas given in the book had earlier been propounded in a working paper, called "The
Strategies for the Bottom of Pyramid", which the author had produced with his colleague,
Professor Stu Hart but was considered too radical for publication by journals. However, a
number of managers at Hwelett-Packard, DuPont, Monsanto and others read it on the internet
and accepted its premise. Widespread discussions and acceptance came with publication of two
articles, "The Fortune at the Bottom of the Pyramid" in Strategy+Business (January 2002) with
Stu Hart, and "Serve the World's Poor Profitably" in the Harvard Business Review (September
2002) with Allen Hammond.

The book is divided into three parts. First part, 'The Fortune at the Bottom of the Pyramid' gives
a framework for active engagement of the private sector at the Bottom of Pyramid (BOP) and is
divided into six chapters. The starting proposition of the author is that 'if we stop thinking of the
poor as victims or as a burden and start recognizing them as resilient and creative entrepreneurs
and value-conscious consumers, a whole new world of opportunity will open up.'

The first Chapter is titled "The Market at the Bottom of the Pyramid" and discusses the unique
character of the BOP market. The BOP as a segment consists of an estimated 4 billion people
who live at below $2/day. They represent a latent market for goods and services. Active
engagement of private enterprises at the BOP is a critical element in creating inclusive capitalism
as private sector competition for this market will foster attention to the poor as consumers. The
author states that each of the groups that is focusing on poverty alleviation - the World Bank,
rich countries providing aid, charitable organizations, national governments and private sector -
is conditioned by its own dominant logic. For example India had a deep suspicion about the
private sector. Multinational companies (MNCs) suffer from deeply entrenched logic regarding
cost structure, consumers and BOP sector. The donors consider private sector greedy. All these
agencies have come to an implicit agreement that market based solutions cannot lead to poverty
reduction and economic development.

If these agencies cross the barriers posed by their dominant logic, a whole set of opportunities
emerge in terms of BOP market, representing a major engine of growth and global trade. This
market has its own set of characteristics which are discussed in the book as under:

a. The dominant assumption is that there is no money at the BOP. The reality is that BOP offer
huge opportunity due to their large numbers. BOP consumers also pay a high premium for the
product and services they avail.

b. The dominant assumption is that distribution access to BOP markets is very difficult and
therefore represents a major impediment for the participation of large firms and MNCs. The
reality is that with urbanization and widespread migration of poor to the cities, distribution
logistics have become easier. In rural areas, there may be "media dark" areas and dispersed
communities. Solutions have emerged in different contexts - Project Shakti from Hindustan
Lever Limited and "Avon ladies" in Brazil. These cases have been discussed in detail in part II of
the book (discussed later in this review).

c. The third dominant assumption is that the poor are not brand-conscious. On the contrary, the
poor are very brand-conscious. They are also extremely value conscious by necessity.

d. Contrary to the popular view, BOP consumers are getting connected and networked. They are
readily exploiting the benefits of information networks.

e. Contrary to popular belief, the BOP consumers accept advanced technology readily.

The task therefore, is to convert the poor into consumers through market development. This
would require giving the poor capacity to consume on a sustainable basis. Philanthropy might
feel good but does not yield scalable and sustainable solutions. One illustration is innovative
purchase schemes of Casas Bahia, a retail chain started by Samuel Klein in 1952 in Brazil and
Cemex, started by Patrimonio Hoy in Mexico. Single serve packaging by consumer goods
marketers is another example. The principles in creating the capacity to consume has been
described as "Three As"

i. Affordability: Without compromising quality or efficacy

ii. Access: To be ensured through geographically intensive distribution

iii. Availability: To be ensured through distribution efficiency.

The ideal situation is to create capacity to earn more so that BOP consumers can afford to
consume more. ITC's e-Choupal is a successful example in this regard. The critical requirement
is the ability to invent ways that can take into account the variability in the cash flows of BOP
consumers that makes it difficult for them to access the traditional market.
The involvement of the private sector at the BOP can provide opportunities for the development
of new products and services, poor as consumers get more access to products and services and
acquire the dignity of attention and choices from the private sector that were previously reserved
for the middle-class and rich. The prerequisite is that both sides, the large firms and the BOP
consumers develop trust, which has been missing traditionally.

Chapter 2, on "Products and Services for the BOP" calls for a new philosophy of product
development and innovation in tune with the realities of the BOP market. The author has
identified 12 principles of Innovations for BOP Markets:

1. Price performance: Quantum jumps in the price performance are required.

2. Hybrid Solutions: Advanced and emerging technologies that are creatively blended with
existing and rapidly evolving infrastructure.
3. Scalable, transportable across countries, cultures and languages: Ease of adoption in similar
BOP markets is a key consideration for gaining scale.

4. Focus on conserving resources: Eliminate, reduce and recycle resources.

5. Product development must start from a deep understanding of functionality not just form.

6. Process innovations are as important as product innovations.

7. Deskilling work is critical. Products and services must take into account skill levels, poor
infrastructure, and difficulty of access for service in remote areas.

8. Education of customers on product usage is key.

9. Products must work in hostile environments.

10. Research on interfaces is critical given the nature of consumer population.

11. Innovations must reach the poor � designing methods for accessing the poor at low cost is
critical.

12. Product developers must focus on the broad architecture of the system � the platform � so
that new features can be easily incorporated.

Innovating at the BOP may seem daunting, but it is highly rewarding. It is also necessary for the
MNCs who want to stay ahead of the curve. Such successful innovations are seen in Reliance
Telecom�s �Monsoon Hungama�; Dr Venkataswamy�s Aravind Eye Care system in
Madurai; Molecular encapsulation technology for iodizing salt by Hindustan Levers Limited;
Amul�s Automatic Milk Collection System Units; Ram Chandra and Dr P K Sethi�s Jaipur
Foot; Device agnostic system by Voxiva, Peru; ICICI banks multi channel delivery mode; ITC
and EID Parry�s access to farmers through their networks.

Chapter 3 is titled �BOP: A Global Opportunity�. It justifies the efforts required for
innovating for BOP by identifying four source of opportunity for a large firm that makes and
effort to understand and cater to BOP:

a. Some BOP markets are large and attractive as stand-alone entities.

b. Many local innovations can be leveraged across other BOP markets, creating a global
opportunity for local innovations. For example, Unilever has replicated products in India in other
BOP markets � lessons from developing Wheel were used to launch a similar product, �Ala�
in Brazil.

c. Some innovations from the BOP will find applications in developed markets. The Voxvia
system found use in the U. S. Department of Defense in its inoculation programme.
d. Lessons from BOP markets can influence the management practices of global firms � Nirma
and Wheel operate on lower gross margin but yield a higher return on capita employed.

The BOP market pose challenge emerging from rapid acceptance of innovation (a �I curve� as
compared to traditional �S curve�. The rapid growth demands new approaches. Innovations
such as SHGs and Shakti Amma cut costs drastically and reduce risks.

Chapter 4, �The Ecosystem for Wealth Creation�, shows how large firms can create a private
sector ecosystem and act as a nodal firm. The author has included social organizations of
different types � individual entrepreneurs, SMEs, Cooperatives and MNCs. A market based
ecosystem for wealth creation consists of the following players:

� Extralegal NGO enterprises

� Micro enterprises

� Small and medium enterprises

� Cooperatives

� Large local firms

� MNCs

� NGOs

Every country has all these players, the relative importance of these firms differs across countries
and the policymakers face a dilemma in this regard � If we can�t pick one sector for special
attention, how do we mobilize the whole ecosystem? Alternatively, how do we move the
composition of the ecosystem towards large firms? The author says that the debate must shift
towards building market-based ecosystems for broad-based wealth creation. The HLL project
Shakti and ITC�s e-chaupal are such examples. The benefit of private sector ecosystems result
from the acceptance of sanctity of contracts by BOP and reduction in inequities of traditional
money-lender, local slum lord based contract system. The private sector, in its desire to leverage
resources and gain market coverage, will invest new systems depending on the nature of the
market. This means not only gaining the benefits of globalization but also accepting the
disciplines that it imposes. Also, opaque, local moneylender based contract enforcement and
participating in a national or regional private-sector ecosystem are not compatible.

Chapter 5, �Reducing Corruption: Transaction Governance Capacity�, addresses the issue of

corruption. Corruption is a market mechanism for privileged access. It adds to cost burden and
business uncertainty. The author refers to the work of Hernando De Soto titled 'The Mystery of
Capital' and establishes that substantial values lies locked within the underdeveloped societies
due to corruption. This can be overcome by developing Transaction Governance Capacity (TGC)
in the BOP.
TGC constitutes
a. Law to protect the property;
b. Micro regulation;
c. Social norms; and d. Institutions for enforcement.

BOP consumers live in a varying degrees of TGC � arbitrary, those where laws and market
economy exist or where all the components are well developed. The specifications prescribed for
building TGC are four fold:
a. A system of laws that allows for ownership and transfer of property
b. A process for changing the laws governing property rights that is clear and unambiguous.
c. A system of regulations that accommodates complex transactions.
d. Institutions that allow the laws to be implemented fairly, in a timely fashion and with
transparency.

A successful attempt at building TGC is Government of Andhra Pradesh�s e-governance

initiative. Here, however, it has been discovered that the level of corruption has initially
increased during the transition period. However, once the transition to digital delivery of service
and transfer of data in electronic mode is made and people become conversant with the new
technology, the accompanying transparency would ensure an almost nil level of corruption.

Given the capacity to solve problems of poverty through profit, innovations are required in
product design and in converting poor into market. The process generates TCG. These factors
can trigger rapid economic and social development. The author discusses this aspect in Chapter
6, titled Development as Social Transformation.

Building markets help in breaking down barriers in communication. This is evident in e-choupal
model. Farmers from villages could get information from Chicago Board of Trade. One of the
farmers also wrote an e-mail to one of the researchers who was assisting the author in compiling
the case studies. The BOP consumers are constantly upgrading in the process of participating in
expanded market, gain access to knowledge and identity as individuals.

Another well understood but poorly articulated reality is the role of women in development.
Their critical role is to be seen in the case of Avon Ladies, SHGs, Amul and in Cemex. Another
feature is that a system of checks and balances are emerging, thanks to civil society organizations
and free press. The last point the author makes is that the social transformation should lead the
pyramid structure to morph a diamond. Pyramid depicts unequal distribution in the society. A
diamond structure represents a minority at top and bottom and a majority of middle class. He
quotes National Council of Applied Economic Research to discern such trend in states such
Gujarat and Haryana. While states like Bihar and Orissa show a pyramid type of structure,
Maharashtra and Punjab show an inverted pyramid. This pattern is likely to repeat itself in rural
and urban India. The author concludes by emphasizing that the best allies in fighting poverty are
the poor themselves and also conjectures that the bold initiatives would lead to elimination of
poverty by 2020.

Part II of the book is a detailed discussion on the successful innovations under the heading
Innovative Practices at the Bottom of the Pyramid. The cases are categorized into different
sections �
1. The Market at the BOP, discusses Casas Bahia and CEMEX;
2. Known Problems and Known Solutions: What is the Missing Link, discusses Annapurna Salt
Story and HLL�s initiative in soap market and public health;
3. Known Problems and Unique Solutions; Documents the Jaipur Foot and Aravind Eye Care
System.
4. Known Problems and System Wide Reform; Documents ICICI Banks innovation in finance,
ITC�s e-choupal storey and The EIC Parry Story (on CD);
5. Scaling Innovations: The Voxiva story and Innovations in Energy by E+Co�s Investment in
Tecnosol (on CD);
6. Creating Enabling Conditions for the Development of Private Sector: E-Governance in
Andhra Pradesh (on CD).

The cases are quite detailed with the objective of providing information about how to innovate at
the BOP. The author also says that the cases go on to establish that there is no mystery to
unlocking the potential of these markets. Finally, they demonstrate the size of the market.

What is the Bottom of the Pyramid? Description

The bottom of the (economic) pyramid consists of the 4 billion people living on less than $2
per day. For more than 50 years, the World Bank, donor nations, various aid agencies,
national governments, and, lately, civil society organizations have all done their best, but they
were unable to eradicate poverty.

Aware of this frustrating fact, C.K. Prahalad begins his book: "The Fortune at the Bottom of
the Pyramid" with a simple yet revolutionary proposition: If we stop thinking of the poor as
victims or as a burden and start recognizing them as resilient and creative entrepreneurs and
value-conscious consumers, a whole new world of opportunity will open up.

Prahalad suggests that four billion poor can be the engine of the next round of global trade
and prosperity, and can be a source of innovations. Serving the Bottom of the Pyramid
customers requires that large firms work collaboratively with civil society organizations and
local governments. Furthermore, market development at the Bottom of the Pyramid will also
create millions of new entrepreneurs at the grass roots level.

Prahalad presents his new view regarding solving the problem of poverty as a Co-Creation
solution towards economic development and social transformation (figure), of which the
parties involved are:

• Private enterprises

• Development and aid agencies

• Bottom of the Pyramid consumers

• Bottom of the Pyramid entrepreneurs

• Civil society organizations and local government

12 Principles of Innovation for Bottom of the Pyramid Markets

Prahalad provides the following building blocks for creating products and services for Bottom
of the Pyramid markets:

1. Focus on (quantum jumps in) price performance.

2. Hybrid solutions, blending old and new technology.

3. Scaleable and transportable operations across countries, cultures and languages.

4. Reduced resource intensity: eco-friendly products.

5. Radical product redesign from the beginning: marginal changes to existing Western
products will not work.

6. Build logistical and manufacturing infrastructure.

7. Deskill (services) work.

8. Educate (semiliterate) customers in product usage.

9. Products must work in hostile environments: noise, dust, unsanitary conditions, abuse,
electric blackouts, water pollution.

10. Adaptable user interface to heterogeneous consumer bases.

11. Distribution methods should be designed to reach both highly dispersed rural markets
and highly dense urban markets.

12. Focus on broad architecture, enabling quick and easy incorporation of new features.

Origin of the Bottom of the Pyramid. History

Before his 2005 book, Prahalad published two articles regarding this framework about
alleviating poverty:

• Jan 2002: The Fortune at the Bottom of the Pyramid (Strategy+Business), with Stu
Hart

• Sep 2002: Serve the World's Poor, Profitable (Harvard Business Review), with Allen
Hammond

Usage of the Bottom of the Pyramid. Applications

• This framework provides an impetus for a more active involvement of the private
sector in building the marketing ecosystems for transforming the Bottom of the Pyramid.

• Helps to reconsider and change long held beliefs, assumptions and ideologies.

• Provides clues on developing products and services for Bottom of the Pyramid
consumers.

Strengths of Bottom of the Pyramid thinking. Benefits

The biggest strengths of the Bottom of the Pyramid approach by Prahalad is, that it helps to
reconsider and change long held beliefs, assumptions, and ideologies, which are all based on
and are supporting victim- and burden thinking:

• There is money at the Bottom of the Pyramid: it is a viable market.

• Access to Bottom of the Pyramid markets is not necessarily difficult. Unconventional

approaches such as the Avon ladies approach may work.

• The poor are very brand-conscious.

• The Bottom of the Pyramid market has been connected (mobile phones, TV, Internet).

• Bottom of the Pyramid consumers are very much open towards advanced technology.

Assumptions of the Bottom of the Pyramid. Conditions

1. The poor can not participate in the benefits of globalization without an active
involvement of the private sector and without access to products and services that represent
global quality standards.

2. The Bottom of the Pyramid market provides a new growth opportunity for the private
sector and a forum for innovations. Old and tried solutions cannot create markets at the
Bottom of the Pyramid.

3. Bottom of the Pyramid markets must become an integral part of the work and of the
core business of the private sector. Bottom of the Pyramid markets can not merely be left to
the realm of Corporate Social Responsibility (CSR) initiatives.

Book: C.K. Prahalad - The Fortune at the Bottom of the Pyramid: Eradicating Poverty through
Profits -

Bottom of the Pyramid Forum

Recent User Comments

Sergio Leite - Brazil Increase the Whole Pyramid "it is easy to imagine that if someone
move up to the top another one will move in counter sense, that is, to bottom. It happens when
the pyramid does not grow in its volume. Since space may be only occupied by an individual,
if someone gains, another one loses. Therefore the narrowing of the pyramid's base is not
enough. It needs more. Let's thus expand the whole pyramid in volume and we will really
make that its 6 billion people enjoy wealth. So we must maintain welfare programmes
supported by a strong education system and by infra-structural investments in order to
organize economics and promote better incomes distribution. This seems a good starting point
to generate real wealth and welfare for long and for all."

Chisakane Wasike - Kenya Using House of Quality With Bottom of the Pyramid
Framework "The Bottom of the Pyramid framework can be perceived as an idea that will
make the poorest people in our society more creative and innovative. Whichever approach or
policy is adopted to make this a reality can be achieved more effectively if the following
House of Quality (House of TQM) elements are considered;

1: Foundations; includes ethics, integrity and trust.

2: Building bricks; includes training, teamwork and leadership.

3: Binding mortar entails effective and sound communication.

4: Roof is recognition."

Sandip Pandya - USA Access to the Financial Models for Large Projects by BOP
"The financial models, such as Build Own Operate and Maintain (BOOM), BOO
(Build Own Operate), BOOT (Build, Own, Operate, and Transfer), tailor-made for the mega-
energy-products which were planned for the aid to the developing countries could see the light
of the day but not as expected because of uncontrollable reasons.

People’s mindset, the cultural differences, the language and interpretation pose a constriction
in adopting them. The developing countries need to transform the programs available to them
by developing a country specific regulatory structure to a reasonable risk of implementation.

The tariff for sale of the products need to ensure that the risk of foreign exchange is not
completely passed to the end user, the variable component going into the product sale price is
not exceeding the affordability of the purchaser, and so forth. Such models (BOO / BOOT /
BOOM) should be analyzed for easy access to BOP."

S C Narang - India BOP Concept by CK Prahalad is Profound "A profound concept.

Aiming at a win-win solution for all.

As Mahatma Gandhi said something like this (I do not remember exact words) if you govern a
state, think about whether your action brings a smile to the poorest person. As an acid test.
This is an extension to that philosophy."

Emmanuel Reyme - USA Leadership and Corruption in Developing Countries "I am

looking for ideas to start a study on how to "eliminate" corruption in developing countries.
Actually, most developing countries depend on rich countries and international organizations
to run their internal affairs. On a leadership standpoint, what could effective leaders do?

At a time rich countries start cutting their budget to overcome economic disasters, developing
countries increase their expenses and their social projects. What could we do as leaders? I
would like to have ideas from various sources across the world."

14
Best User Comments

Nikash Anand - India BOP as brand conscious "The people at the Bottom of the Pyramid
are referred to as brand conscious and at the same time they are price sensitive. How should
these two factors go together?"

44

Prachi Saini - India Redesigned Water Lifting Device and Park Equipment "I have
redesigned traditional hand-pumps and park equipments to work together. The result is water
lifting device which are twice as efficient as manual water pumps and have minimal
operational costs. These instruments can save 2-3 hours from a villagers life and cut pollution
substantially. Moreover, they will utilize rural youth and give them a way to contribute to
village's economic growth. I would like to market and produce them in India (or any other
market) Can you tell me the direction i should take now. Where would i be able to find
investors? sincerely prachi"

Lily Houston - USA Responsibility of International Corporations "Large corporations such

as Nestle and Exxon mobile have traditionally supplied raw materials with a low price from
developing countries, but they have shown only little amount of co-operation with local
associations and governments. The global economical downhill hits harder on people at BOP
who just were able to taste luxury of westernization. As if in Dante´s play the poorest become
more vulnerable while the richest hardly care anything else than environmental agreements
and their own benefits. Large corporations and the European Union should carry more
responsibility, minimize the export of cheap European food products to Africa and build
networks with BOP organizations. We cannot talk about markets without real activity.
Speculation and idealism do not make sense if we don't do anything by ourselves either."

Pushyamitra - India Rural Tourism Marketing "How is rural tourism marketing

different? How can rural tourism be used as an effective tool to remove unemployment of
rural people?"

Yashwant Raj Taingaria - India Bottom of Pyramid and Network Marketing Hybrid Plan
"Being an entrepreneur and very basic practical knowledge of sales and marketing and
challenges faced by middle & lower middle class in our society i. E. How to increase income
or how to get basic income to fullfill the daily needs. Since last 1year I am in process to
design a business model to promote small & creative entrepreneurs, unique and world class
production from these entrepreneurs will be sold by distributors through our designed network
marketig or mlm plan. We will provide all resources to entrpreneurs, distributors. This is also
to promote home based industries, arts & crafts, small industries and innovative ideas and
products. We will also form entrepreneurs community bank where we attract angel investors
and venture capitalists to invest. Like management studies we will promote entrepreneurship
studies & courses to develop entrepreneurial skills in mass public. Our basic aim is to provide
economic prosperity to individuals, region and nations. We are very near to BOP."
2

India - Bivore Sarawgi BOP and Communication "If the bottom of the pyramid is
not connected with communication tools and media, how can marketers position their product
to the BOP consumers (keeping in mind crisis of resources for further investments)?"

Brian - Canada Enabling BOP Entrepreneurs "Micro credit organizations such as

KIVA are enabling access to credit. Its a good start. Education institutions (now often profit
driven) need to make the access to trade education as well as other marketable skills available,
possibly through micro credit. In ones own company the contributions to micro credit
organizations could be matched. Such a great task requires many innovative solutions.
Consider the industrial revolution, how where skills developed to meet the needs?"

Diether Scherer - Germany Jugaad and Bottom of the Pyramid "What is the role of
'Jugaad' (Hindi term for innovative, improvising, lateral fixes and hacks using limited
resources) within Bottom of the Pyramid thinking?"
1

Dr Sanjeev Sood - India Improving the Lot of People at BOP Takes More "I don't
subscribe to the view that the lot of 4 billion people at the BOP can be changed by above
measures and initiative alone. Unless their basic daily needs of food, shelter, literacy and
health care are met with, it shall be unrealistic to assume that they can be lifted above poverty
line and converted into consumers, entrepreneurs and engine of growth."

Vervy - India Bottom of Pyramid People? "Which class of people come under BOP?"

Editor - NL 20 Gateway-Hubs "To capture the gigantic opportunities and to deal with
the immense complexities of the many emerging markets, C.K. Prahalad and Hrishikesh
Bhattacharyya recommend in strategy+business 50, Spring 2008, pp24-29) that large
multinational corporations should consider to move to a gateway-hub structure of 20 (or so)
gateways in countries that best serve as hubs to nearby regions.

Instead of decentralized models with a single HQ, 4 or 5 regional offices and seperate country
managers (bureaucratic and unnecessarily complex portfolios) or centralized models with 1
unified approach (one size does not fit all), the gateway-hub structure reduces the tension
between global integration and local responsiveness. The 20 hubs can be split up in 10 for
industrialized countries (US, Japan, Germany, UK, France, Italy, Spain, Canada, Australia,
the Netherlands) and 10 for the emerging markets (China, India, Brazil, Russia, Mexico, S-
Korea, Indonesia, Turkey, S-Africa and Thailand).

The executive committee of such a firm would contain the leaders of all hubs."

Book Review: Fortune at The Bottom of

The Pyramid, C.K.Prahalad
chillibreeze writer — Dr. Roopa Nishi Viswanathan

Did you know that your company could make a bigger profit by focusing on the market share
consisting of people who earn less than $2 per day? Have you realized that the world’s fastest
growing market is at the bottom and not the top of the fortune pyramid? Did you know that
nine countries-China, India, Brazil, Mexico, Russia, Indonesia, Turkey, South Africa, and
Thailand - collectively have a GDP of $12.5 trillion, larger than the GDP of Japan, Germany,
France, Italy, and the UK combined?

What is it all about?

The Fortune at The Bottom of The Pyramid provides you with these facts, while telling you
why what you know about BOP markets is wrong. This book, for a refreshing change, is not
about BPO, but BOP, the bottom of the pyramid, the real source of market promise. “Why is
it that with all our technology, managerial know-how, and investment capacity, we are unable
to make even a minor contribution to the problem of pervasive global poverty and
disenfranchisement?” This profound question hits you only to leave you answerless. This is
definitely a book which makes you sit up and think from the very beginning. Whether you're a
business leader or an anti-poverty activist, this book shows you why you can't afford to ignore
"Bottom of the Pyramid" (BOP).

The man at the BOP is a consumer too

University of Michigan Business School professor C.K. Prahalad challenges business's

common beliefs about the world's impoverished and introduces readers to the Bottom of the
Pyramid (BOP), an untapped market of more than four billion people, many of whom are seen
as “poor” in the public eye. This is the market companies should be paying attention to, he
says, even more so than the few rarified consumers at the high-profit pinnacle, or even the
growing middle markets. In short, Pralahad’s vision “is not about philanthropy and corporate
social responsibility”; but is centered around the idea that "If we stop thinking of the poor as
victims or as a burden and start recognizing them as resilient and creative entrepreneurs and
value-conscious consumers, a whole new world of opportunity will open up." That "simple
proposition" begins a controversial new management book that is poised to become essential
reading not just for the financial world but also in government offices.

Constant innovation is the need of the hour

According to the author, we need to find new and innovative approaches to rise to the
challenge of this fast growing population. One of the assumptions that he makes is that the
poor need to seen as a market, but one different from the conventional perception of a market.
This assumption has some immediate consequences - all of the traditional business concepts
are applicable but each and every one of those concepts needs to be applied from a distinct
perspective. What results is a practical example of the application of innovative thinking and
innovation to an intractable problem – How to cater to the more than 4-billion humans who do
not form part of the target market of the organizations that are driven by conventional
assumptions about products, services, value and needs.

Prahalad demonstrates that the process of making products more affordable to the world's
poor can provide substantial returns to create real partnerships and innovations for established
companies. One such example quoted is Dharavi, an area in Mumbai, India whose claim to
fame is that it is the largest single slum area in Asia. Its dwellers, not being property owners,
do not spend a lot of money improving their living quarters. But they do spend money on
luxury items-85 percent of households in this village own a television set, 75 percent own a
pressure cooker and blender, 56 percent a gas stove, and 21 percent have telephones.

Do the poor care about brand names?

And if you thought that brand names are not a factor to members of this group, then think
again. In fact, the author's research shows that brand consciousness among the poor is
universal. Prahalad points out that companies who want to invest in BOP markets must make
it part of their core business, and not make the mistake of considering it a corporate social
responsibility initiative. On the contrary, this is real investment that takes attention, planning,
and resources. It may seem improbable that companies can make money by selling to people
who have limited purchasing power, but, as Prahalad demonstrates, companies that have
actually bothered to try are flourishing.

Prahalad concedes that change will not be easy, but he does present well-researched case
studies and compelling reasoning for why the BOP is a market worthy of attention. The book
brims with interesting facts and statistics.

Some interesting cases

+ There are 5.5 million amputees in India. An additional 25,000 lose their limbs each year due
to disease, accidents or other hazards. Most of these people live well below the poverty line
and can afford neither a prosthetic limb (average cost = $7000) nor the subsequent
replacements and hospital visits. How did Dr. P.K. Sethi along with craftsman Ram Chandra
develop an effective prosthesis (cost = $30) that even enabled a professional dancer to further
her career on stage?

+ The world’s leading cause of mental disorders and retardation is Iodine Deficiency Disorder
(IDD). In India alone there are 70 million people who have IDD and another 200 million are
at risk. How did Hindustan Lever Ltd, a branch of a multinational company, solve the
problem and make a profit at the same time?

+ More than 24 million Mexicans earn less than $5 a day, hence they have been unable to get
access to credit. How did this change so that the Mexicans could build affordable housing for
themselves while the third largest cement manufacturer in the world, Cemex, continues to
reap the financial rewards?

+ Blindness affects 12 million people in India. How could the Aravind eye care system serve
more than a million patients and do it mostly for free, yet continue to be highly profitable?

These are four examples of the provocative 12 in-depth case stories from India, Peru,
Mexico, Brazil and Nicaragua that illustrate the world’s most exciting, and perhaps most
lucrative market.

Is it as easy as he makes it sound?

A skeptic might question the rationality of Prahalad’s vision and goals. The truth is, as the
author readily admits, that we have “a long way to go before the social transformation of
inequalities around the world will be accomplished”. But being a long way from reaching that
goal should not be a deterrent in working towards it. Indeed, if what is happening in the hi-
tech industry is anything to go by, companies have no way but to find unique ways of
servicing the BOP if they are to compensate for the trend of slowing growth in over-
consumed developed markets.

This book may not be superbly written but all the same, it is reeks of the indomitable force of
detail and meticulous research. It challenges so many conventional theories about the poor
and economically deprived, that it is sure to not only create a ripple in the world of finance but
also generate some controversy. Yet, the ramifications of this book are just beginning.

Globally, this is a movement in the making that will affect each and every human being in the
broad sense. The book’s content is a challenge to the way in which we approach the world.
And the responses to the challenges are illustrated by powerful and convincing examples. It is
only a very obdurate mind that will not receive an dose of ground-breaking thinking and zeal
for the opportunities that can be created by adopting an altered and innovative approach with
respect to one’s business activities concerning the bottom or for that matter even the top of the
pyramid.

After all, what entrepreneur wouldn’t want to “save the world”, get famous and make some
money while he is at it?