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Building the BoP Producer Ecosystem: The Evolving Engagement of Fabindia

with Indian Handloom Artisans

Article  in  Journal of Product Innovation Management · August 2010

DOI: 10.1111/j.1540-5885.2011.00877.x

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J PROD INNOV MANAG 2012;29(1):33–51
© 2011 Product Development & Management Association
DOI: 10.1111/j.1540-5885.2011.00877.x

Building the BoP Producer Ecosystem: The Evolving

Engagement of Fabindia with Indian Handloom Artisans*
J. Ramachandran, Anirvan Pant, and Saroj Kumar Pani

Recent research on the base of the pyramid (BoP) has called on firms to initiate market-driven interventions directed
at the BoP population with the objective of identifying and pursuing mutually profitable means of attaining meaningful
poverty alleviation outcomes. In response, firms as well as scholars have engaged at length with the creation of new
products and services for the BoP consumer but paid far less attention to the BoP producer—a member of the BoP
population who creates value by producing goods and services for sale in nonlocal markets. Additionally, extant studies
have largely focused on snapshot views of BoP interventions by firms, thereby limiting our understanding of the
emergence of meaningful poverty-alleviating outcomes over time from these interventions. This paper seeks to redirect
attention toward the dynamic of the long-term engagement between the firm and the BoP producer. Using rich
qualitative data from Fabindia—an Indian handloom retailer—this paper examines how the engagement between
Fabindia and communities of handloom artisans in India has persisted over a period of five decades. We found that,
even as it encountered changes in the external environment and pursued newer organizational goals, Fabindia
repeatedly renewed its engagement with handloom artisans and facilitated progression in poverty-alleviation out-
comes. Building on the insights from the case study, this paper presents a process model that highlights the role of
innovative management practices in sustaining engagements between firms and BoP producers over time. Additionally,
this paper proposes the concept of the “bridging enterprise”—a business enterprise that originates at the intersection
of specific BoP communities and the corresponding nonlocal markets—as an interpreter and innovator reconciling the
interests of stakeholders across the pyramid.

Introduction Hammond, 2002; Prahalad and Hart, 2002), the majority

of whom live outside the confines of the formal economy

O
ver the last several years, observers have drawn
the attention of firms around the world to the
need for innovative, contextualized, and sus-
tainable strategies of engaging profitably with the poor
(London and Hart, 2004; Prahalad, 2005; Simanis and
Hart, 2008; Viswanathan, Seth, Gau, and Chaturvedi,
2009). Discussions on this issue have centered on the
needs, the constraints, and the unique resources of
the base of the pyramid (BoP): a term that refers to the
approximately four billion people of the world with a per
capita income of less than $2 per day (Prahalad and
Address correspondence to: J. Ramachandran, Corporate Strategy
and Policy Area, D-103 Office Blocks, Indian Institute of Management,
Bangalore, Bannerghatta Road, Bangalore 560076, India. E-mail: jram@
iimb.ernet.in. Tel: 91-80-2699-3080.
* The authors gratefully acknowledge the contribution of Shubha Pat-
vardhan in the development of this paper. Her involvement was critical to
the emergence of the arguments presented in this paper. The authors are also
thankful to the guest editor, Professor Cheryl Nakata, and two anonymous
reviewers for their constant encouragement and insightful comments
throughout the review process. This research was partially funded by the
British Council office in India. We are also grateful for the assistance
provided by Mr. Hasit Shukla and his team at Reliance ADA Group.
(London, 2008). Our agenda in this paper was to study
two interrelated aspects of meaningful economic engage-
ment between firms and BoP communities that have, hith-
erto, received limited attention. First, we focused on the
BoP producer—a member of the BoP population who
creates value by producing goods and services for sale in
nonlocal markets—rather than, as is common, the BoP
consumer (London, Anupindi, and Sheth, 2010). Second,
we examined the persistence of the engagement between
a firm and BoP producers over a long period of time
rather than the incidence of a one-time intervention in
the BoP by the said firm. Our emphasis is on the dynamic
of the long-term engagement between a firm and BoP
producers. In adopting this focus, we seek to address two
significant gaps in the extant literature that has been
preoccupied with snapshots of one-time interventions by
firms engaging primarily with BoP consumers.
An exclusive focus on specific one-time interventions
in the BoP promotes a static view of BoP engagements.
This precludes us from attending to the impact, on the
engagement, of changes in the external environment or in
the goals and objectives of the parties to the engagement.
34 J PROD INNOV MANAG
2012;29(1):33–51
A shift in the research focus toward the study of the
long-term engagement and the dynamic relationship
between the firm and the BoP community may help us
better understand the sustainability, or persistence, of
BoP interventions over time. Accordingly, in this paper,
our emphasis is not on any specific one-time intervention
in the BoP but on the dynamic of the long-term engage-
ment between a firm and BoP producers.
A long-term engagement between a firm and a BoP
community (of producers) is meaningful for the commu-
nity only if it leads to significant poverty-alleviating
outcomes. It would be pertinent to recall Daviron and
Ponte’s (2005) “coffee paradox.” They pose the question:
At a time when coffee has emerged as a fashionable drink
among developed country consumers willing to pay
premium prices for a cup of coffee at their favorite coffee
chain, why do we witness a dramatic decline in the inter-
national coffee prices received by developing country
producers? The coffee paradox compels us to recognize
that linkages to prosperous nonlocal markets need not, by
BIOGRAPHICAL SKETCHES
Dr. J. Ramachandran is a Bain Fellow and BOC chair professor
of business policy at the Indian Institute of Management Bangalore.
His research focuses on the strategic and organizational challenges
of emerging economy multinationals, family business groups and
firms in cultural and creative industries. India’s leading business
publications—Business World and Business Today—have cited him as a
Star Teacher. A qualified chartered and cost accountant, and a fellow of
the Indian Institute of Management Ahmedabad, Professor Ramachan-
dran has been a visiting professor at INSEAD, Fontainebleau, France;
the Wharton School of the University of Pennsylvania, USA; and the
Carlson School of Management, University of Minnesota, USA. He has
also served Indian Institute of Management Bangalore as a member
of the Board of Governors. Professor Ramachandran is Chairman of
the Board of Redington (India) Limited and a member of the board of
directors of select companies across a wide variety of industries, includ-
ing telecommunications and information technology services.
Dr. Anirvan Pant is a fellow of the Indian Institute of Management
Bangalore. His research interests lie at the intersection of international
strategic management, organization theory, and the emerging economy
context. He is particularly interested in emerging economy multi-
national enterprises (MNEs), internationalization processes, parent-
subsidiary relationships, and new organizational forms. His dissertation
examined a diverse set of organizational legitimacy and organizational
identity challenges pertaining to the internationalization of Indian
MNEs and the Indian subsidiaries of foreign MNEs.
Dr. Saroj Kumar Pani is an assistant professor of strategic management
in the Indian Institute of Management Indore. He earned his Ph.D. in
corporate strategy and policy from Indian Institute of Management
Bangalore. His research and teaching interests lie in the domain of
socioeconomic networks, base of the pyramid strategy and innovations,
and corporate governance. Prior to entering academic life, he worked in
the advertising, pharmaceutical, and management consulting sectors.
J. RAMACHANDRAN ET AL.
themselves, serve to create poverty-alleviating outcomes
for producers of goods and services living in low-income
contexts. A review of the BoP literature helped us identify
three distinct poverty-alleviating outcomes that may
emerge for BoP producers as they engage with firms to
overcome their constraints. These outcomes, which we
term as substantive outcomes, are access to market,
access to organization, and access to ecosystem.
To understand what sustains mutually profitable
engagements between firms and BoP producers over a
long duration, and how substantive outcomes are enabled
through such ongoing engagements, we studied the case
of Fabindia Overseas Private Limited (Fabindia), an
Indian retailer of handloom and handicraft products. Fab-
india has engaged with communities of BoP producers
across the country for a period of nearly 50 years and,
therefore, provided us a valuable research site to examine
the evolution of a long-term relationship between a firm
and BoP producers.
Our study offers several insights into the persistence
of an engagement between firms and BoP producers, the
emergence of substantive outcomes for BoP producers,
and the role of innovative management practices in
renewing the engagement. As Fabindia adapted to chang-
ing business circumstances and to changing organiza-
tional goals, it provided enhanced substantive outcomes
for the BoP communities it engaged with and, interest-
ingly, reconceptualized the role played by the BoP pro-
ducers. Indeed, our study highlights that the label “BoP
producer” itself encompasses varying conceptualizations
of BoP producers held by the firm depending upon their
level of entrepreneurial expectations from the producer.
This study also suggests that the long-term persistence
of the engagement between the firm and BoP producers
depends upon the congruence between the ideological
centrality of the BoP engagement to the firm and the level
of economic symbiosis between the firm and the BoP
producers. Congruence between ideological centrality
and economic symbiosis, we find, induces the firm to
repeatedly renew the existing engagement with BoP pro-
ducers through the identification and deployment of inno-
vative management practices. Finally, building on our
case findings, we present the concept of the bridging
enterprise as an organizational form founded on a busi-
ness model that makes mediation between the BoP
context and the corresponding nonlocal market critical to
its inception and its continued existence.
This paper is divided into six parts. In the next section,
we draw upon the extant literature to provide the
conceptual foundations for our subsequent arguments.
Following that, we discuss the context of the research and
BUILDING THE BOP PRODUCER ECOSYSTEM
provide an overview of our data collection and analysis
procedures. Next, we present a chronological narrative
of the evolution of the engagement between Fabindia
and handloom artisans and identify the emergence of
substantive outcomes for the artisans over the course of
the engagement. In the subsequent section, we present a
process model that highlights the role of innovative man-
agement practices in renewing the engagement between
the firm and BoP producers over time. Finally, we con-
clude with some thoughts about possible directions for
future research.
Conceptual Foundations
A review of the BoP literature suggests that firms look at
BoP communities in terms of two broadly defined roles—
consumers or producers (London, 2008; Rangan, Quelch,
Herrero, and Barton, 2007). Accordingly, initiatives by
firms directed at engaging the BoP can be classified
into consumer-oriented BoP interventions and producer-
oriented BoP interventions. Consumer-oriented BoP inter-
ventions are those that aim to sell products and services
to low-income sections of the population specified as
BoP communities. As an illustration, consider “Patrimo-
nio Hoy,” the saving and credit scheme initiated by Mexi-
co’s Cemex. The scheme allowed the urban poor to add
one room to a house at a time and, thereby, enabled them to
optimally use their low and irregular income for securing
proper housing (Letelier, Flores, and Spinosa, 2003).
Producer-Oriented BoP Interventions
Producer-oriented BoP interventions, on the other hand,
have the objective of collaborating with BoP communi-
ties to create new goods or services or to help existing
BoP producers overcome their production and marketing
challenges in nonlocal markets (London, 2008). For
example, at Moga (India), Nestle has entered into a part-
nership with local BoP communities to develop a steady
supply of milk—a critical input for Nestle’s operations.
In the Nestle Milk District, working under the guidance
of Nestle personnel, BoP producers were able to acquire
know-how, enhance productivity, and, ultimately, secure
a better standard of living (Porter and Kramer, 2006).
Consumer-oriented BoP interventions have received
far greater attention, from scholars and practitioners, than
producer-oriented BoP interventions. Recently, however,
we have witnessed growing criticism of the “narrow,
consumption-based understanding of local needs and
aspirations” (Simanis and Hart, 2008: p. 2) and of the
“romanticization” of the poor as “value-conscious con-
J PROD INNOV MANAG 35
2012;29(1):33–51
sumers” (Karnani, 2007). In a wide-ranging critique of
consumer-oriented BoP interventions, Karnani (2007)
argues that the best way toward market-driven poverty
alleviation is through producer-oriented BoP interven-
tions that can enhance the income-generating capabilities
of the poor rather than merely accessing their untapped
purchasing power. The Nestle Milk District, cited earlier,
is an example of such an intervention. Indeed, BoP con-
texts have been recognized as hotbeds of entrepren-
eurship that are propelled by the compulsion of BoP
communities to find creative ways of supplementing their
incomes (Banerjee and Duflo, 2007; Viswanathan and
Rosa, 2007).
As greater attention is paid to producer-oriented BoP
interventions, researchers have moved to examine spe-
cific constraints faced by BoP producers and how these
challenges are being overcome by the firms that partner
with them (London et al., 2010). Complementarily, we
present a threefold classification of the substantive
(poverty-alleviating) outcomes that may emerge for BoP
producers as they engage with firms in an attempt to
overcome their challenges in the production of goods and
services for nonlocal markets.
Outcomes for BoP Producers
De Soto (2000) observes that poverty denies the poor
access to the institutions of capitalism (e.g., property
rights) and dents, thereby, their ability to use their meager
assets in a fair and effective manner. Therefore, any sub-
stantive outcome from a BoP intervention must enhance,
on some dimension, the ability of the BoP producers to
access and benefit from the formal economy. Tradition-
ally, formal economic systems have been viewed as
comprising two interacting elements: markets and orga-
nizations (cf. Simon, 1991). More recently, scholars
have proposed “ecosystems,” i.e., networks of markets
and organizations, as a third element of economic
systems (Iansiti and Levien, 2004). Correspondingly, in
this paper, we classify substantive outcomes (i.e., those
that have significant poverty-alleviation consequences)
for BoP producers into access to market, access to orga-
nization, and access to ecosystem.
Access to Market. Economists agree that there are
two kinds of markets—product markets and factor
markets. Product markets are markets where finished
goods and services are bought and sold. Factor markets,
on the other hand, are markets where factors of produc-
tion, i.e., the resources and raw materials required for the
production of goods and services, are bought and sold.
36 J PROD INNOV MANAG
2012;29(1):33–51
BoP producers face substantial hurdles in accessing both
product markets and factor markets. They find it difficult
to freely access factor markets because of their debilitat-
ing resource constraints and lack of sizable, recognized
assets (London et al., 2010). Any BoP intervention that
reduces the effective distance between BoP producers and
the factor markets by creating resource channels into the
BoP or by lowering their burden of credentials will help
enhance their access to factor markets. BoP producers
also face significant barriers in selling their goods and
services in the product market. They are often handi-
capped by poor last mile infrastructure (e.g., transporta-
tion facilities and access to points of sale) and a lack of
awareness of trends in customer requirements and speci-
fications (Hart, 2007; London et al., 2010). Firms can
help BoP producers gain access to product markets by
investing in procurement and transportation and by col-
lating customer requirements and communicating these
specifications to the producers.
Access to Organization. Markets in the formal
economy are, typically, constituted according to the
needs and preferences of top-of-the-pyramid consumers
(London and Hart, 2004). They may not be, therefore,
sensitive to the peculiarities of the context in which BoP
communities produce goods and services and the con-
straints they face in production (cf. Viswanathan and
Rosa, 2007). BoP producers need access to organization
to acquire and develop, on an ongoing basis, capabilities
for competing in factor and product markets.
In other words, capability development requires
the establishment of value-adding relationships between
firms and BoP producers where the relationship is char-
acterized not by purely market transactions but by a
degree of internalization of the interests of BoP produc-
ers into the firm organization. To capture higher value
for their products in the nonlocal markets that they
access, BoP producers need access to organization, i.e.,
access to structural mechanisms that can, on one hand,
represent their collective interests and voices in nonlo-
cal markets and, on the other hand, leverage scale to
invest in capability development (cf. Hart and Sharma,
2004). In using the term “structural mechanisms,” we
refer to the adaptation of the firm’s organizational
structure and processes to meet the representational
and collective needs of BoP producers (cf. Olsen and
Boxenbaum, 2009).
Access to Ecosystem. Ecosystems possess character-
istics of markets as well as organizations and are, yet,
neither. They are networks of complex interdependencies
J. RAMACHANDRAN ET AL.
and mutual responsiveness among competitors, colla-
borators, buyers and suppliers, resource providers, and
resource seekers (Arnould and Mohr, 2005; Iansiti and
Levien, 2004; Moore, 1996). Central to the notion of the
ecosystem is the idea of a keystone organization or a
leader firm, such as Microsoft or eBay, providing a
common vision to the ecosystem’s members and possess-
ing “a stable and predictable set of common assets”
(Iansiti and Levien, 2004, p. 73). These “assets” often
refer to specialized knowledge of or unique access to the
innovation (or set of innovations) that provides a junction
for the various interests of the different members of the
said ecosystem.
The notion of the ecosystem is very useful in the study
of BoP innovations and represents a more complex sub-
stantive outcome than either access to market or access to
organization for two reasons. First, ecosystems are resil-
ient in the face of the failure of individual members or the
derailment of particular relationships (Iansiti and Levien,
2004). Second, access to ecosystem can enhance the
quality of access to market and to organization because
it can enable access to a broader set of markets, better
collective representation, and a higher potential for
knowledge spillovers.
Innovative Management Practices
Over the last few years, scholars have called upon firms to
initiate unconventional innovation trajectories oriented
toward serving newer opportunities in the BoP (Hart and
Christensen, 2002; London and Hart, 2004). Discussions
in the literature on BoP innovations have related prima-
rily to innovations in product and process technologies
(Anderson and Markides, 2007; Hart and Christensen,
2002; Seelos and Mair, 2007). Technological innovation
may be defined as “an iterative process initiated by the
perception of a new market and/or new service oppor-
tunity for a technology-based invention” (Garcia and
Calantone, 2002).
However, a few scholars have also drawn attention to
innovations that focus not on product and process tech-
nologies aimed at creating new markets for products and
services but on the organizational structures, manage-
ment practices, or functional routines that facilitate the
initiation and renewal of a relationship between firms
and BoP constituents (Milstein, Hart, and London, 2007;
Olsen and Boxenbaum, 2009). We build on this latter
perspective on BoP innovation by orienting our study
toward management innovation—“a relatively under-
researched form of innovation” (Birkinshaw, Hamel, and
Mol, 2008, p. 825).
BUILDING THE BOP PRODUCER ECOSYSTEM
The origins of management innovation lie in an initia-
tive aimed at furthering organizational goals and at
leading to “a difference in the form, quality, or state over
time of the management activities in an organization,
where the change is a novel or unprecedented departure
from the past” (Birkinshaw et al., 2008, p. 826). The term
relates not to new management practices adopted off the
shelf by organizations but to those that emanate from
within the focal organization as a consequence of its high
level of adaptation to the specific context of the manage-
ment challenge. The units of management innovation are
management ideas (at an abstract level) and practices,
processes, techniques, and organizational structures
(at an operational level) (Birkinshaw et al., 2008).
Furthermore, Birkinshaw et al. (2008) emphasize that
management innovation would typically correspond to
management practices that are not only new to the organ-
ization but also new to the “state of the art” in manage-
ment models. As an example of management innovation,
consider the spaghetti organization of Oticon Inc., which
was aimed at increasing employee entrepreneurial behav-
ior and bypassing the negative influences of hierarchy
(Birkinshaw et al., 2008).
In this paper, we use the term “innovative management
practices” to refer to a management innovation where the
practice is new to the organization (but not necessarily to
the state of the art) and emerges from the specific context
of the management challenge faced by the organization.
Research Setting, Data, and Methods
We use a qualitative mode of inquiry that emphasizes
inductive reasoning to gain insights into the studied
process (Lincoln and Guba, 1985). We believe that this
was an appropriate choice for two reasons. First, the BoP
context itself introduces opacity. Each BoP intervention is
deeply embedded in its own unique social, economic, and
cultural context (Sánchez, Ricart, and Rodriguez, 2005).
It is, therefore, important that the research design be able
to manage the rich, contextual textures of the phenom-
enon under study (Viswanathan and Rosa, 2007). Second,
the thrust of our inquiry was on the location and compre-
hension of innovative management practices that helped
sustain the engagement over time. Case studies and
inductive logic are appropriate for the study of historical
processes with entangled causal forces (Lee, 1999).
Research Setting
Our field research was conducted at Fabindia, a leading
retailer of handicraft products in India with a strong focus
J PROD INNOV MANAG 37
2012;29(1):33–51
on handloom fabrics and garments. Fabindia was founded
in 1960 as an export house and has evolved today into a
full-fledged retailer with design capabilities with an
annual turnover of 3 billion India rupees (~USD 59
million) (as of March 2009). We were intrigued by Fab-
india’s sustained growth in a stagnant traditional industry
as well as its apparent success in making traditional han-
dloom garments fashionable in urban India. Furthermore,
we came across several articles in the business press
where Fabindia was commended for its unconventional
business model of engagement with BoP producers (e.g.,
Business Today, 2008; Business Week, 2009). This,
coupled with Fabindia’s 50-year-old history as a retailer
of handloom products in India, suggested that it presented
an appropriate site for an examination of the dynamic of
long-lasting engagements between firms and BoP produc-
ers, and the role of innovative management practices in
renewing such engagements.
Handloom weavers have an ancient lineage in India.
In the early years of the 18th century, Mukund (1992,
p. 2058) observes, Indian handlooms were “virtually
clothing the world.” However, the colonization of India
and the rising imports of machine-made fabrics into India
from the 19th century onwards led to the collapse of local
handloom ecosystems consisting of yarn makers, dyers,
weavers, embroiderers, master-artisans, and their patrons.
This drove the majority of weavers into alternate occu-
pations or into starvation. In an evocative passage in Das
Kapital on the plight of the Indian weavers, Marx (1977
(1867), p. 558) wrote: “The misery hardly finds a parallel
in the history of commerce. The bones of the cotton-
weavers are bleaching the plains of India.”
Following independence, the government of India
attempted to revive this traditional Indian industry
through a variety of policy measures, but with in-
different success. Practitioners of traditional handloom
techniques continue to subsist in conditions of deep
poverty (Business Today, 2007). Some of the problems
handloom weavers face today can be traced to their
household-based subsistence-oriented production, poor
demand for their products, competition from power
looms (small weaving factories that generally utilize
mechanized or semi-mechanized means of production),
poor educational levels, lack of access to market
information, absence of skill development, and bureau-
cratic inefficiency and corruption (Liebl and Roy, 2003;
Niranjana, 2001).
In such a sector, described as “doomed to decline”
(Niranjana, 2001), Fabindia presently coordinates a
network of over 35,000 independent artisans who con-
tribute to a portfolio of nearly 57,000 stock keeping units
38 J PROD INNOV MANAG J. RAMACHANDRAN ET AL.
2012;29(1):33–51

that it retails through its growing network of 107 retail This gave us a sense of the history and operations of
stores across India and two stores abroad. Fabindia. Subsequently, we secured access to Fabindia
and conducted interviews during 2007–2008. During
Data Sources 2008, we collected additional secondary data from public
sources as well as from inside Fabindia. In 2009, we
Our primary sources of data were semi-structured inter-
conducted a second set of interviews with Fabindia execu-
views. We interviewed 20 informants in all. Fourteen of
tives as well as with artisans associated with Fabindia.
our interviewees were Fabindia managers and directors,
We carried out detailed data analysis, following the
including the managing director (CEO) (interviewed
first phase of interviews, in three steps using guidelines
twice). We also interviewed the head of the All India
provided by Miles and Huberman (1994). First, we
Artisan and Craft Workers Welfare Association and the
sought data reduction by condensing the data and arrang-
head of a Supplier Region Company set up by Fabindia
ing it into a chronological account. Data reduction was
and the local artisans. Separately, we interviewed four
initially conducted with reference to the classification
master weavers based in Amroha, a town in north India.
of substantive outcomes discussed earlier. This helped
For selecting interviewees inside Fabindia, we employed
provide a cohesive narrative of events by explicating links
snowball sampling, i.e., we asked our initial set of inter-
between events, innovative management practices, and
viewees to suggest others who, in their opinion, might
the respective substantive outcome (market/organization/
help address our research concerns. Of the four master
ecosystem). Second, having developed a thick chro-
weavers, two had been associated with Fabindia for over
nological account, we sought to rearrange the data to
20 years and two for less than 5 years.
understand the underlying processes that explained shifts
The interviews focused on the nature and objectives
in the engagement between the BoP producers and Fab-
of Fabindia’s involvement with artisans; the business
india over time. Over several iterations between the data
model developed by Fabindia for the said purpose; the
and the emergent process model, we refined our under-
challenges faced; and how, if at all, those challenges
standing of the case, tightened the linkages between
were overcome. Interviews with the master weavers were
events and substantive outcomes, and converged on the
directed toward gauging their own interpretation of their
process model reported later in this paper. Third, during
ongoing relationship with Fabindia. All interviews were
the second phase of interviews, we sought to verify the
conducted by one of the authors along with an associate.
emerging dynamics and to probe unanticipated themes
Further, all interviews were between one and a half to two
latent in the data collected in the first round. Our primary
hours in length, were recorded with the consent of the
intent was to verify, at this stage, rather than to explore.
interviewees, and were subsequently transcribed. Inter-
This is in conformity with Miles and Huberman’s (1994)
views with the master weavers were conducted at their
“basic analytic cycle” of moving from inductive to
homes in Hindustani, a common dialect of Hindi in
deductive as interpretations firm up. Throughout this
which the interviewing author and his associate were
process, our supplementary data helped us triangulate
fluent. These interviews were then transcribed into
informant claims (cf. Jick, 1979) and flesh out the narra-
English. All other interviews were conducted in English.
tive. As the “narrative embodies sequence and time, it is
Contact summary sheets were prepared, as suggested by
naturally suited to the development of process theories
Miles and Huberman (1994), for all interviews to capture
and explanations” (Pentland, 1999, p. 717). As we ana-
key ideas discussed during the interviews as well as
lyzed the data and drew inferences, we sought to ensure
immediate impressions.
that data were “triangulated,” and “member checks” were
Our supplementary data came from a variety of archi-
secured. In the case narrative below, we have tried to
val sources. These were (1) all newspaper and magazine
infuse “thick descriptions” of the data using appropriately
articles on Fabindia retrievable from India Business
contextualized quotes from the interviews. Overall, we
Insight Database; (2) status reports from the government
sought to enhance the trustworthiness of the inferences
of India and from nongovernmental organizations on the
(Lincoln and Guba, 1985) and to meet the criteria for
Indian handloom sector; and (3) internal documents from
validation of naturalistic generalization (Stake, 1995).
Fabindia (as were made available to us).

Data Collection and Analysis Case Analysis

Between 2006 and 2007, we collected supplementary data In this section, we present a chronological narrative of
on Fabindia from public sources (as mentioned above). the evolution of Fabindia’s engagement with handloom
BUILDING THE BOP PRODUCER ECOSYSTEM
Table 1. Illustrations Presented in Case Narrative of Fabindia Initiatives Facilitating Substantive Outcomes for Base
of the Pyramid (BoP) Producers
Phase of Evolution of Fabindia’s Engagement with BoP Producers
1960–1992
Access to Exports of handloom products to
market overseas retailers.
Establishment of experimental retail store
for domestic market in New Delhi.
Introduction of mix-and-match format for
traditional handloom garments.
Access to
organization
Access to
ecosystem
artisans. This narrative is organized along the successive
emergence of each of the three substantive outcomes
discussed in a previous section (see Table 1 for illustra-
tions). The organization of data with reference to the
relative salience of different substantive outcomes in a
particular period of time allows for ease of presentation
and corresponds to a close approximation of the complex
nature of the evolving engagement between Fabindia and
the handloom artisans.
Enabling Access to Market (1960–1992)
Fabindia was founded in 1960 by John Bissell, a buyer
at the American department store Macy’s, who came to
India on the invitation of the All India Handicrafts Board
to examine market opportunities for traditional handicraft
artisans in India. John Bissell was reportedly amazed at
the paradoxical simultaneity of the rich variety of hand-
loom fabrics and craftsmanship styles in India and the
deep poverty of the handloom artisans. The solution, as
Bissell saw it, lay in leveraging the traditional skills of
artisan communities while helping them secure a better
J PROD INNOV MANAG 39
2012;29(1):33–51
1992–2003 2003–
Accelerated expansion of retail stores in Diversification into organic foods,
domestic market. Retail stores set up handcrafted furniture, and organic
in all major cities of India. body care products.
Initiation of customer education activities Creation of designer-buyer-domain
focused on dissemination of awareness specialist teams for each product
about the inherent idiosyncrasies of line.
handloom production.
Development of processes aimed at Creation of Product Selection
enhancing production quality by Committee.
providing handloom artisans
infrastructural support, e.g., common
fabric washing facilities.
Restructuring of the Fabindia
organization.
Creation of designer–buyer teams for
each product line.
Inception of All India Artisans and
Craft Workers Association.
Launch of Craftmark to provide a
common identity to handloom
products in retail market.
Conceptualization and roll-out of
Supplier Region Companies across
the country.
standard of living. After his contract ended, Bissell stayed
back and set up Fabindia in New Delhi. Fabindia’s objec-
tives were inscribed into its credo, which Bissell wrote at
that time:
In addition to making profits, our aims are constant
development of new hand-woven products, a fair, equi-
table, and helpful relationship with our producers, and
the maintenance of quality on which our reputation rests.
Fabindia began by sourcing handloom home furnish-
ings from local artisans and then by selling them to
several overseas retailers. Then, in 1976, Fabindia opened
a retail store in an upmarket neighborhood in New Delhi.
The store stocked items from Fabindia’s export catalogue
but was intended primarily as an exhibition hall for hand-
loom and other handicraft products. To the surprise of
the Fabindia staff who had not expected any significant
domestic demand, the retail store proved to be rather
successful, and sales grew steadily year after year. The
Fabindia staff noted that customers at the retail store in
those days were, typically, thrifty intellectuals, artists,
40 J PROD INNOV MANAG
2012;29(1):33–51
and journalists who strongly identified with the Gandhian
ideology of self-reliance through khadi (coarse home-
spun cloth). John Bissell, who had acquired a fondness
for wearing kurtas (loose traditional Indian shirt),
decided to introduce a line of men’s handloom kurtas at
the firm’s sole retail store. As this initiative proved hugely
successful in the retail store in New Delhi, the firm started
a line of ready-to-wear ethnic garments for women. In
spite of these successes, Fabindia did not open any new
retail stores between 1976 and 1994 and chose, instead, to
focus on the stable export market.
An innovative management practice initiated in Fab-
india’s experimental retail store during this period related
to the format in which garments were sold. Traditional
Indian attire of salwar-kameez and pyjama-kurta (trouser
and shirt for women and men, respectively) are typically
sold in pre-matched sets. Fabindia, however, started
selling them individually, which allowed its customers to
mix and match the trouser and the shirt across a wide
range of prints, colors, and designs. Over time, it emerged
that Fabindia’s practice of selling them individually had
three advantages. First, it reduced the number of items
rejected on quality criteria as the company did not need to
reject a pair (of upper and lower garments) when only one
of them contained a flaw, a very high likelihood given the
craft mode of handloom production. Second, it helped
Fabindia avoid the problem of having to mark down
prices, a standard practice among garment retailers.
Third, it eased the pressure on the customer’s wallet as
the customer did not need to buy a pair of garments. This
was an important factor given the profile of Fabindia’s
customers at that time.
During this first phase in Fabindia’s evolution, i.e.,
from 1960 to 1992, it initiated an engagement with small
groups of artisans by providing them access to (nonlo-
cal) markets on a sustained basis. John Bissell was con-
vinced that it was necessary to intervene in the lives of
the handloom artisans and to provide them opportunities
for regular employment while utilizing their traditional
skills. Fabindia’s experimental retail initiatives also
helped expand access to market for handloom artisans in
India. The retail store in New Delhi not only provided
a small window for Fabindia’s artisans into the urban
domestic market in India but also acted as a laboratory
where Fabindia’s innovative mix-and-match retail
format was first tested. Overall, Fabindia’s engagement
with handloom artisans, although rather narrow in scope
at this time and limited to procurement of handloom
products and payment of fair returns, was crucial to the
provision of access to market for a large number of BoP
producers.
J. RAMACHANDRAN ET AL.
Enabling Access to Organization (1992–2003)
While this business model kept Fabindia profitable
and helped provide a context-sensitive, skill-based live-
lihood to artisans, the venture was vulnerable because
Fabindia relied greatly upon demand from overseas
retailers. A crisis in 1992 exposed their vulnerability on
this count.
Following its acquisition in 1992 by a Swedish
group, Habitat—a U.K.-based interior design firm that
accounted for the bulk of Fabindia’s exports—abruptly
stopped buying from Fabindia. Fabindia suddenly found
itself unable to maintain its ongoing commitment to the
artisans. Around this time, William Bissell, John Bissell’s
son, took over the management of the company. He real-
ized that Fabindia’s objective of profitable partnership
with artisan communities was unsustainable unless Fab-
india secured its own direct channels to the market. On
the firm’s outlook at that time, William Bissell recalled,
Those years were tough. The rug had been pulled from
under our feet. It then struck me that for the last thirty
years we had been selling under somebody else’s label.
Over the next few years, Fabindia tried to reduce its
dependence upon exports and moved, cautiously at first,
to explore the domestic market. The company opened its
second store in Delhi in 1994. It followed it up with three
more stores in other Indian cities between 1994 and 1998.
Fabindia’s retail expansion coincided with significant
shifts in urban consumption patterns in India. Following
the liberalization of the economy and rapid economic
growth, a newly prosperous consumption class emerged
with a taste for the aesthetic appeal of handloom gar-
ments. For these consumers, Fabindia was one of the few
retailers of authentic handlooms. By frequently reviewing
the design offerings and ensuring authenticity, Fabindia
grew beyond a handful of loyal customers whose pur-
chases were grounded in Gandhian ideology to a wider
group of regular customers spanning age-groups and
income levels.
However, in contrast to the earlier set of customers
who were satisfied with the ideological value of wearing
handloom products, Fabindia’s new class of customers
demanded consistency of quality and color in handloom
garments. This forced Fabindia to confront one of the
fundamental paradoxes of handloom production. To a
substantial extent, lack of consistency of quality and
color is intrinsic to the craft mode of handloom produc-
tion that made it difficult, if not impossible, to produce
large quantities of a particular design or product without
BUILDING THE BOP PRODUCER ECOSYSTEM
variations in quality or color. Fabindia undertook a two-
pronged approach to address this problem.
On the retail side, Fabindia sought to educate the
customers. Posters in retail stores informed customers
that subtle variations in color, texture, and finish were
unavoidable and indeed shaped the attractiveness and
uniqueness of handloom products. This policy continues
till today. For example, when we visited a store in Ban-
galore in 2008, we came across a poster that said:
Let’s not think of an irregular weave or print as a defect.
Handloom by definition means glorious uncertainty
when it comes to uniformity.
On the production side, Fabindia discovered that not
all causes of inconsistency lay in the fundamental char-
acteristics of craft production; some were traceable to
the poor infrastructural support available to handloom
artisans. For example, cases of color fastness were
traced to lack of adequate washing of fabric in the
dyeing phase in the case of artisans from drought-prone
areas of Rajasthan in Western India. Realizing that
washing facilities in that region were exorbitantly priced
because of scarcity of water, Fabindia directly negoti-
ated with washing units in those locations and made
them accessible to the artisans. Likewise, Fabindia ini-
tiated a policy of providing cash advances to their hand-
loom producers to help them tide over their inability to
obtain working capital and ensuring that they were able
to buy yarn and other raw materials without taking
recourse to usurious local moneylenders. Further, to
improve the marketability of the products, Fabindia
recruited designers to work closely with the artisans
during the design and production stage. Bissell summed
up Fabindia’s dual-pronged approach:
We are still going to tell the customer that what might
seem as defects are inherent to the hand-woven fabrics,
yet we want to ensure that the artisans are doing their
very best to ensure quality.
During this period, there was a growing realization
within Fabindia that their organizational structure and
processes needed to be better attuned to the constraints
of the producers, on one hand, and the demands of the
customers on the other. Accordingly, a series of adjust-
ments were introduced into Fabindia’s organization in
the early years of the 2000s. Central warehousing was
set up in New Delhi to meet country-wide retail store
requirements. This reduced the burden on artisans of
planning production and delivering merchandise to dif-
ferent outlets across the country and also ensured better
J PROD INNOV MANAG 41
2012;29(1):33–51
control by Fabindia over supplies. Also, for each pro-
duct category (men’s garments, ladies’ garments, rugs
and upholstery), a separate buyer was appointed. The
responsibilities of the buyer were to collate country-
wide requirements, distribute orders among artisans, and
liaise with designers to develop new products while
leveraging the varying ethnic traditions in different parts
of India.
Over these years, urban customers came to see the
classic yet contemporary “Fabindia look” coupled with
the freedom to mix-and-match the garments as an
opportunity to express their individual creativity and to
make their individualized style statement. The reasonable
prices of Fabindia’s garments and the distinctiveness of
the designs and fabrics, we found, led to the recognition
of Fabindia as an affordable fashion brand.
During this second phase in Fabindia’s evolving
engagement with handloom artisans, i.e., from 1992 to
2003, there was a substantial enhancement in the access
to market that Fabindia was able to provide the artisans.
Left stranded by the acquisition of Habitat, Fabindia
gradually opened stores in all the major cities in India. In
imbuing handloom garments with connotations of ethnic
fashion, Fabindia was able to attract a new generation of
customers who were unconcerned about the ideological
implications of wearing khadi garments. As the Fabindia
team discerned the emerging consumer preferences in
India, they also interpreted and communicated these pref-
erences to the artisans so that these insights could be
incorporated into the design and production cycle.
As Fabindia expanded its retail presence in India,
Bissell and his colleagues realized that exploiting
the potential for handloom sales in the domestic market
required a closer organizational engagement with artisans
to understand their constraints and identify specific
solutions. Their gradual acquisition of a “native capabil-
ity” (cf. London and Hart, 2004) in the handloom arti-
sans’ context helped them intervene more meaningfully
in handloom production systems leading to the provision
of access to organization for handloom artisans. By
assigning teams of designers and buyers to work with the
artisans, Fabindia sought to develop the contemporary
character as well as the production quality of the artisans’
output. Fabindia was able to leverage its growing retail
chain to represent the artisans’ unique abilities as well
as their difficulties to a new generation of customers
unfamiliar with the intrinsic inconsistency of handloom
production. Fabindia also adapted its organizational
structures to acquire a greater sensitivity to the con-
straints faced by artisans as well as their capability limi-
tations and to better address these constraints. Fabindia’s
42 J PROD INNOV MANAG
2012;29(1):33–51
head of marketing recalled how she had experienced Fab-
india’s concern for the interests of the artisans in her early
days in the company:
When I first came here, I refused to accept one shipment
of upholstery fabric because the sample was 2 shades
darker. I was promptly told by the Head Office: Look, the
poor man has spent 4 weeks weaving 50 meters of fabric.
Are you really sure you wouldn’t be able to sell it? I was
horrified. Why should I sell something that is not the best
to our customers; I was then gently told: The producer is
important as well.
Enabling Access to Ecosystem (2003–)
By 2003, Fabindia had reached a turnover of 473 million
Indian rupees (~USD 10 million) while partnering with
almost 11,000 artisans. Around this time, Bissell and his
colleagues decided to address a problem faced by all
handicraft retailers—the absence of recognition of handi-
crafts as distinctive, value-added products. Bissell said,
What was a revelation to me was that we had reduced our
product to a commodity. It was no longer a hand woven
craft, whose value lay in the craft! It was not just about
Fabindia, but about the precarious position of our crafts
in the market. I remember a cartoon, which showed a
T-shirt factory in China. The first set of T-shirts was bound
for a famous US discount retailer, the second for a well-
known brand with the appropriate logo embroidered on
the left hand side of the chest. Both T-shirts cost about 0.85
USD to make; the first was to sell for about 5 USD, while
the second one with the logo was to retail at 40 USD.
Having worked in the crafts sector for the past fifteen
years in India, I was struck by the point that the cartoonist
was making. The power of the brand to convince the
potential buyer to spend a large amount of money . . . was
a reminder of our failure to create value for our products.
Bissell and his colleagues realized that handloom
products needed a distinctive identity in the market to
distinguish them from machine-made garments and to
imbue handloom products with connotations of higher
value and specialized human skill. Such an initiative
required the cooperation of a large number of stakehold-
ers in the handloom industry. Fabindia worked with an
assorted group of craft retailers and activists to set up the
All India Artisans and Craft Workers Welfare Association
(AIACA). Established in 2003 with the objective of
expanding the domestic market for traditional craft prod-
ucts and improving the living conditions of artisans,
AIACA drove the Craftmark Initiative. Retailers of hand-
J. RAMACHANDRAN ET AL.
made products could now seek certification of their hand-
made processes and use the licensed “Craftmark” logo
to denote their product as a genuine Indian handloom
product. By 2009, 42 retailers of handicraft products
were using the Craftmark label, giving them a common
identity and a sense of community. The executive direc-
tor, AIACA, informed us,
We are not certifying quality at the moment. We are only
certifying that handmade processes have been followed
in the production process. Today all prominent craft
retailers such as Anokhi, Bandhej and Fabindia are
licensed users of Craftmark. They tag the logo onto their
merchandise.
While seeking wider recognition for and appreciation
of handloom products through the Craftmark initiative,
Fabindia continued to work on upgrading the capabilities
and skill sets of their handloom artisans. For example,
they found that the combination of a buyer to estimate
and specify demand requirements and a designer to
develop contemporary designs in keeping with those
requirements was not working effectively. Often, designs
could not be easily translated into products because of
production constraints peculiar to the handloom industry.
Fabindia’s designers, who were trained at the country’s
mainstream design and fashion institutes, were largely
unaware of the peculiarities of the fabrics and the
production methods used by the handloom artisans of a
particular region and, therefore, were not able to antici-
pate these problems. To address this challenge, Fabindia
created a cadre of “domain specialists” who would work
alongside designers in each of the firm’s product lines.
While the designer would be responsible for the “look” of
the product, the domain specialist would be responsible
for technical aspects of production, such as the function-
ality of the design, grading, fabric thickness, regional
idiosyncrasies, and so on. To ensure consistency in the
process, a product selection committee was instituted
with powers to supervise the work of designers and
domain specialists.
The growing popularity of the Fabindia brand—
declared the retail brand of the year in 2004 by one of
India’s leading business newspapers—prompted the firm
to extend the range of products retailed in its stores and
seek to interpret for their customers the symbolism and
ideology behind Fabindia products. Bissell reasoned:
We believe that the way we consume shapes the world we
live in. If you live what you believe and you believe in the
basic principles of rural employment, then you will end
up being a Fabindia customer.
BUILDING THE BOP PRODUCER ECOSYSTEM
Consequently, Fabindia started retailing organic foods
and a range of handcrafted, environment-friendly furni-
ture made by traditional artisans. The new range of prod-
ucts retailed by Fabindia was sourced from the same
communities with whom Fabindia had built up deep rela-
tionships over the past few decades. However, in expand-
ing its scope to cover organic foods as well as furniture,
Fabindia moved to engage not only with handloom
weavers in these communities but also with farmers and
woodwork artisans. Bissell and his colleagues believed
that the enlargement of the scope of handicraft products
retailed by Fabindia would enable them to partner with a
larger group of artisans, attune the larger group to con-
temporary market sensibilities, and develop a wider cus-
tomer base while retaining fidelity to their ideological
beliefs.
With their ventures into organic foods, handcrafted
furniture, and later, body care products, Fabindia began
to see itself as a lifestyle retailer with a country-wide
presence. Drawing up fresh plans for expansion, Fabindia
planned to set up 150 new retail outlets and to generate an
additional 100,000 local employment opportunities for
artisans. Fabindia’s head of systems explained the chal-
lenging task that this objective posed,
Handloom and hand crafted products in retail at such a
scale did not exist before. We were operating in an
uncharted territory and setting benchmarks.
This ambitious plan, however, confronted the inability
of the artisan communities to scale up their operations to
match Fabindia’s plans. Bissell and his colleagues came
around to the view that the viability of the handicrafts
sector, and indeed, uninterrupted growth for Fabindia
itself, was inextricably tied to the self-sufficiency and
financial independence of the artisan community.
Bissell and his colleagues then conceived of what have
come to be known as “Supplier Region Companies”
(SRCs). SRCs were designed as community-owned
enterprises set up in collaboration with artisan communi-
ties that would coordinate the operations of artisans,
weavers, and craft workers in a particular geography
(typically seven to eight districts with similar handicraft
traditions) and involve them as shareholders in the
enterprise. Each regional SRC would specialize in the
handloom and handicrafts traditions characteristic of
that region. The SRCs would provide access to common
facilities, implement standard systems for production and
delivery, train artisans, and consolidate supplies from
the regional cluster that they covered. Supplies for all
of Fabindia’s product categories—textiles, garments,
J PROD INNOV MANAG 43
2012;29(1):33–51
organic foods, body products, and furniture—from a par-
ticular region would be sourced through the regional
SRC. They would, in short, manage all the upstream
operations of the value chain leaving Fabindia free to
focus on the downstream operations. While Fabindia
committed to buy up a substantial portion of each SRC’s
production, the SRCs were free to sell their production to
any retailer. This gave the artisans significant freedom to
decide how to manage their production and distribution.
As the idea was rather radical, the Fabindia manage-
ment team wanted to make sure that the artisans under-
stood how their relationship with Fabindia would
undergo a change. The head of Fabindia’s investment
subsidiary (which was set up to manage Fabindia’s equity
stakes in the SRCs) recalled:
We made detailed presentations [to with artisan commu-
nities across the country] about the entire value chain.
We wanted to emphasise that greater margins come from
value addition. We wanted them to understand that
instead of supplying fabric, if they could turn out finished
garments, they could appropriate a larger proportion of
the value. We also wanted them to understand the costs
associated with retailing of the product and the signifi-
cant investment we are making toward it. Their response
was overwhelming.
As the SRC initiative started rolling out, Fabindia
planned on involving local artisan communities in setting
up 100 SRCs across the country. Each SRC had a Board
of Directors that included representatives from Fabindia
as well as local artisans from the region. As each SRC
took off, Fabindia took a 26–49% equity stake while local
artisans held at least 26% stake, and the rest was held by
employees of the SRC and external investors. Explaining
Fabindia’s longer-term objectives, the then head of the
investment subsidiary said,
The ultimate goal is to have them [SRCs] operate as
100% community owned companies. Our intention is to
consolidate the artisan community, support them, help
them find their feet and then gradually pull out—not to
treat them as subsidiaries. Fabindia will not increase its
stake beyond 49%. The Memorandum of Association of
the SRCs explicitly stipulates this.
The establishment of SRCs across the country was
expected to encourage Fabindia’s artisan partners to
actively engage in entrepreneurial activity and to seek
profits. Fabindia’s product selection committee centrally
determined monthly requirements and, depending upon
the region specificity of the requisite fabric, design, or
44 J PROD INNOV MANAG
2012;29(1):33–51
technique, allocated orders to the appropriate SRC. On
receiving an order from Fabindia, the SRCs would dis-
tribute the order among their members through a trans-
parent bidding process. For each order, SRC members
competed over individual chunks of orders and collabo-
rated across the entire scope of the order.
By mid-2009, more than a dozen SRCs were in opera-
tion. While the concept of the SRCs had much in
common with cooperative forms of organization, they
were devised as a hybrid of community-managed coop-
eratives and shareholder-owned corporations. During our
interviews, Bissell argued that cooperatives were com-
mendable for their community participation aspect, but
that such forms of organization discouraged entre-
preneurial behavior, were vulnerable to obstructionist
tactics, and did not create new, liquid assets for the poor.
They had, therefore, little impact with regard to poverty
alleviation. The SRCs were, on the other hand, designed
specifically with a view to creating liquid assets for their
members.
The primary distinction between the SRCs as for-profit
entities and cooperatives was that the SRC members were
shareholders who could realize the value of their stock by
means of a share valuation and trading mechanism. To
impart liquidity to the shares—the SRCs were, as yet,
not listed in any stock exchange—trading among the
members of the local artisan communities was arranged
twice a year, and, during this period, members could buy
or sell shares. Many of the SRCs had already declared
dividends thereby sharing the wealth generated with the
communities in which they were embedded. The prices
of shares in the SRCs had increased significantly. For
example, the share price for the Amroha SRC rose from
100 Indian rupees in 2007 to 250 Indian rupees in 2009.
The artisans themselves seemed optimistic about the
long-term gains that they expected from the SRC model,
although they acknowledged that they did not yet fully
understand the working of the SRC. When we asked a
master weaver if he hoped that his business would benefit
through his membership in the regional SRC, he said:
Hope keeps the world spinning! We hoped, that is why we
invested in the shares of the SRC. We have faith in Fab-
india. We have complete trust in them and they have
always done right by us.
During this current phase in Fabindia’s evolution, i.e.,
from 2003 onwards, Fabindia enhanced the quality of
access to market and access to organization for handloom
artisans. Fabindia enlarged the scope of its products to
include handcrafted woodwork, organic food items, and
J. RAMACHANDRAN ET AL.
organic body products. These diversification initiatives
helped Fabindia deepen its linkages in the communities
it worked with by linking up woodwork artisans and
farmers to nonlocal markets. Concurrently, Fabindia
sought to refine the quality of access to organization
that it gave to the artisans by instituting more context-
sensitive organizational structure and processes to
interpret market demand while reconciling it with
producer constraints.
During this period, the Craftmark initiative by Fabin-
dia convened competitors, collaborators, and nongovern-
mental agencies in the Indian handloom sector to agree
on a trademark of authenticity, thereby developing a
common differentiating label for handloom products in
the retail market. Moreover, small handloom producers
could now enjoy a greater degree of independence, if they
so desired, from large retailers by simply adopting the
Craftmark label—a growing brand and a valuable public
good for the handloom industry. By encouraging fresh
entrepreneurship, greater competition, and higher market
prices for handloom products, the Craftmark initiative
encouraged more BoP producers to take entrepreneu-
rial risk. Likewise, the creation of SRCs led to the
co-ownership of the business model by Fabindia and the
artisan communities and afforded the artisan communi-
ties a greater share in the value created through the sale of
handicraft products in nonlocal markets.
Together, the SRC network and the Craftmark initia-
tive facilitated the inception of a robust ecosystem con-
sisting of interdependent producers of a variety of goods.
The constituents of this ecosystem included the various
regional SRCs across the country, small as well as large
artisan entrepreneurs, a variety of nongovernmental orga-
nizations, independent artisan groupings with linkages to
individual SRCs, AIACA, and Fabindia itself as a key-
stone organization holding together the valued assets
of the ecosystem. The valued assets that enabled Fabindia
to play the role of a keystone organization were its brand
reputation, a nation-wide retail chain, five decades of
experience in the handloom industry, and the trust of the
diverse constituents mentioned earlier. The element of
trust, which is crucial for the effectiveness of any key-
stone organization, was consolidated by the participation
of Fabindia in the creation of Craftmark as a “public
good” brand that may compete with the Fabindia brand
in the handloom retail sector. It was also strengthened by
the independence granted to the SRCs from Fabindia
whereby the former could sell their output to any other
retailer (as long as there was no infringement of Fabindia
designs) while Fabindia itself provided them a guarantee
of merchandise purchase. By helping to magnify the scale
BUILDING THE BOP PRODUCER ECOSYSTEM
and scope of Fabindia’s retail operations and decentral-
izing collective representation and capability develop-
ment, the SRC initiative represented the enhancement
of access to market and access to organization through
the provision of access to ecosystem. Thus, Fabindia
emerged, during this phase as a keystone organization
holding together a nascent, diverse community-based
ecosystem centered on BoP producers spread across the
country.
Discussion
In examining the evolution of Fabindia and its engage-
ment with BoP artisan communities over five decades,
we found evidence that as Fabindia adapted to external
crises, changing environments, serendipitous opportuni-
ties, and new organizational goals, it enabled substantive
outcomes for the BoP producer communities it worked in
and, interestingly, reconceptualized the role played by the
BoP producers it engaged with.
As an export house during 1960–1992, Fabindia
enabled access to market for handloom artisans by
linking them up with buyers in foreign countries. As a
handloom retail chain during 1992–2003, Fabindia
continued to provide access to market (with a domestic
focus) but also enabled access to organization for hand-
loom artisans by facilitating capability development and
interpreting handloom work for nonlocal customers. In
recent years (2003–), as a nationally recognized brand for
handloom products, Fabindia facilitated access to eco-
system for thousands of handloom and other handicraft
artisans through two specific initiatives: Craftmark and
the SRC network.
Our discussions with artisans revealed how Fabindia’s
continued engagement with local communities not only
enhanced income levels for existing artisans but also
attracted others earning subsistence incomes who were
then trained in handloom work. Still others sought out
disappearing traditions of handloom in their families and
approached Fabindia with demonstrations of these dying
skills. Over time, these artisans emerged as collaborators
and competitors, as buyers and suppliers to each other,
recreating an artisan ecosystem and benefiting from
rising income levels. The shift toward a better life is
captured in the words of a master weaver we met in
Amroha:
When we were young, my brother and I would go to
school and make beedis [an indigenous cigarette in
which tobacco in rolled in dried leaves] later in the day.
My Uncle then got an order from Fabindia. He was not
J PROD INNOV MANAG 45
2012;29(1):33–51
able to complete the order. He told my father that I can’t
do this work—please take it under your name. He
informed Fabindia and transferred the order to us. We
did dyeing and bleaching on the cloth and started from
there. . . . We worked with our father. After a while, I set
up my own unit. I would also do my own delivery to
Fabindia. It was very nice. We would deliver our goods
and get paid by the evening! Bissell saab would say,
‘Don’t keep them waiting. . . . Pay them quickly so that
they can go back to work. . . . We depend upon them.’ . . .
In thirty years, a lot has changed. Our area is a lot more
developed. Now if you look at the children here, you can’t
tell the difference between the rich kids and the kids of
weavers . . . we are able to give our children a better life.
Going by the BoP literature, firms conceptualize BoP
constituents as either of two—consumer or producer. The
Fabindia case suggests that the label “BoP producer”
encompasses finer-grained conceptualizations that can
potentially be held by firms intervening in the BoP
context. During the first two phases of its evolution, Fab-
india held low entrepreneurial expectations from its BoP
producers. That is, Fabindia did not expect the BoP pro-
ducer to share the risk (e.g., capital risk and inventory
risk) specific to the business model and sought to exercise
substantive control over the output of the BoP producer.
In the ongoing third phase, however, Fabindia’s manage-
ment has relatively high entrepreneurial expectations
from its producers. Through the device of the SRC, the
BoP producers have taken over the responsibility for a
large part of the upstream risk (capital risk and inventory
risk) while also regaining control over their output
(as decision-making is decentralized onto the SRC). In
other words, BoP producers emerged as more entrepre-
neurial in the ongoing third phase of their engagement
with Fabindia.
The distinction between producers, based upon the
entrepreneurial expectations that the firm has of them, is
a nuance that is missing in the BoP literature, and the
terms “producer” and “entrepreneur” have often been
used interchangeably. Introducing the mechanism of the
firm’s entrepreneurial expectations allows us to focus on
the level of business model risk assumed by the BoP
producer. This, in turn, indicates the degree of BoP entre-
preneurship fostered by the said business model. Entre-
preneurial development enables economic and social
empowerment, thereby enhancing the ability of BoP com-
munities to control their lives (Xavier, Raja, and Nan-
dhini, 2007). While entrepreneurship—in the sense of
deploying capital and possessing full residual claims over
the earnings—is widely prevalent among the poor, it is
actually intimately tied to their consumption needs and
46 J PROD INNOV MANAG J. RAMACHANDRAN ET AL.
2012;29(1):33–51

Disruption of Engagement

Interpretation

Base of
Industry
Pyramid
Context
Context

Reconciliation

Ideological Economic
Centrality Symbiosis Disengagement

Experimentation

Innovative Management Practice

Deployment

Stabilization of Engagement

New to the “State of the Art”

Diffusion

Management Innovation

Figure 1. The Evolution of an Ongoing Relationship between a Firm and Base of the Pyramid Producers
Note: The outer dotted lines demarcate processes occurring within the ambit of the engagement between the firm and base of the pyramid
producers from those processes happening outside the said engagement. The inner dotted lines indicate coupled processes.

tends, therefore, to be sporadic and very small scale
(Banerjee and Duflo, 2007; Sridharan and Viswanathan,
2008). Kotler, Roberto, and Leisner (2006) argue that
unless the poor are provided the means to cope with
entrepreneurial risk, they will choose to invest in low-
risk, low-return activity rather than high-risk high-return
activity. The SRC initiative was critical to providing Fab-
india’s BoP producers the means to cope with entrepre-
neurial risk.
Based upon our case analysis of the evolution of the
engagement between Fabindia and handloom artisans
over five decades, we propose a process model (Figure 1)
that seeks to explain the persistence of the engagement
between a firm and BoP producers even as the contours of
the engagement keep evolving. The persistence of the
engagement is essential for the emergence of substantive
outcomes for BoP producers from the relationship
and provides a context for BoP-centric management
innovation. We illustrate the model with reference to the
emergence of SRCs.
In our model, the shift can be traced back to a dis-
ruption of the engagement, as perceived by the firm.
Around 2003, Bissell and his colleagues embarked upon
a plan to accelerate Fabindia’s retail store growth by
setting up more stores in more cities and in different
store formats. As Fabindia sought to expand on massive
scale, it found its weavers unable to meet the demands
being placed upon them by the expansion plan. Fabindia
also found that it needed to focus its energies on
the downstream activities, i.e., managing the Fabindia
brand, and its retail front-end operations. Accordingly,
Fabindia engaged in an interpretation of the challenge
posed by the opportunity perceived by them and the
crisis engendered by the inability of the artisan commu-
nities to scale up their production to keep pace with
Fabindia’s expansion.
BUILDING THE BOP PRODUCER ECOSYSTEM
In interpreting the environmental stimulus, the firm
in our model is mindful of both the industry context as
well as the BoP context of its relationship. The industry
context refers to the industry domain in which the firm
operates in the nonlocal market(s). The BoP context
refers to the peculiarities of the environment in which
the BoP producers subsist, in terms of their distinctive
needs, skills, and constraints (London and Hart, 2004;
Viswanathan, 2007). In the industry context, there was an
attractive opportunity because handloom products were
being increasingly regarded by Indian customers as lif-
estyle products, impelling Fabindia to expand both the
scale and the scope of their retail operations. However,
the BoP context specified constraints, such as the pro-
ducer’s lack of growth capital and an inability to rapidly
upgrade production capabilities. These constraints
restricted Fabindia’s ability to attend to the opportunity
presented in the industry context and rendered the current
form of Fabindia’s engagement with its BoP producers
untenable.
To bring about reconciliation between the opportuni-
ties presented by the industry context and the constraints
embedded in the BoP context, the firm’s management
needs to consider and appraise two definitive aspects of
their engagement with BoP producers. These twin aspects
are the degree of ideological centrality of the engagement
to the firm’s ethos and the degree of economic symbiosis
between the firm and the BoP producers. Ideological
centrality is the self-referential appraisal by the firm’s
management of the importance to the firm of engaging
meaningfully in the economic lives of BoP producers.
The firm’s management would need to ask themselves:
How central is the BoP engagement to our conceptual-
ization of ourselves as an organization? Does it define
who we are? Fabindia’s credo, written up in the early
days of the organization by its founder John Bissell, gave
a central role in the organization’s objectives to the main-
tenance of “a fair, equitable, and helpful relationship with
our producer.” Through the years, Fabindia’s initiatives
reveal an attempt to stay true to this ethos.
Economic symbiosis refers to the degree to which both
parties create value for themselves out of the engagement
such that neither could access the said value independent
of the engagement. The firm’s management would need
to ask themselves: How gainful, in economic terms, is the
engagement between ourselves and the BoP communities
we partner with? In the case of Fabindia’s engagement
with artisan communities, the element of economic sym-
biosis has only become stronger with the passage of time.
Artisan communities across India are now able to secure
better prices for their products and continually upgrade
J PROD INNOV MANAG 47
2012;29(1):33–51
their capabilities and skill sets because of their ties with
Fabindia. On the other hand, Fabindia itself is able to
sustain the authenticity of its alternate lifestyle appeal in
the minds of its customers because of its exclusive deal-
ings with makers of handicraft products. Clearly, the
engagement between Fabindia and artisan communities
exhibits a significant level of economic symbiosis.
Ideological centrality without economic symbiosis
may lead to transformation of the market-based interven-
tion into a nonmarket intervention, for example, in the
form of corporate philanthropy. Economic symbiosis
without ideological centrality may lead the firm to search
for alternate partners more appropriate to the changed
nonlocal market scenario or revised organizational goals.
In either case, a disengagement of the relationship
between the firm and the BoP producers may be expected.
However, ideological centrality coupled with economic
symbiosis propels the firm to look for innovative ways of
reorganizing the existing engagement while retaining the
partnership. As William Bissell explained,
The challenge for Fabindia is to produce world-class
textile products without resorting to capital-intensive
methods of production as that will leave out the artisans,
defeating the very purpose of our existence. Our fidelity
to our ideology does not constrain us—it brings out the
best in us.
When the engagement retains high significance in
terms of ideological centrality as well as economic sym-
biosis in spite of the changed circumstances, the firm may
seek to reorganize the terms of the engagement through
innovative management practices that can help to sustain
the engagement in a meaningful manner. This calls for a
phase of experimentation where the firm seeks out and
considers various alternative management practices and
examines their effectiveness with regard to the desired
objective of retaining the valued relationship. The concept
of SRC provides an illustration of an innovative manage-
ment practice. Through a process of experimentation,
whereby pilot projects were undertaken in a few districts,
Fabindia’s management devised the concept of the SRCs.
The SRCs represented a fusion of specific management
practices borrowed from the cooperative form of organi-
zation as well as from the corporate form of organization.
This innovative mode of organization seemed capable of
easing the pressure on Fabindia of investing in and man-
aging the upstream operations and freeing up Fabindia to
focus on the downstream operations.
As individual elements of the innovative manage-
ment practice are clarified, the practice undergoes full
48 J PROD INNOV MANAG
2012;29(1):33–51
deployment across all relevant points of interface in the
engagement. For example, when it appeared that the
distribution of orders by the SRC to local artisans may
lead to accusations of favoritism, a transparent bidding
mechanism was introduced. As the success of this
mechanism became evident, it was incorporated into
the subsequent rollout of SRCs across the country. The
deployment of the innovative management practice is
antecedent to the stabilization of the engagement on new
terms. Thus, following the rollout of the SRCs across the
country, Fabindia’s terms of engagement with the artisans
suggests a reconceptualization of the artisans as produc-
ers from whom Fabindia holds higher entrepreneurial
expectations than before.
It must be noted that the experimentation and deploy-
ment stages for the innovative management practice are
iterative as the firm tries out new ideas for managing the
engagement and testing them to find the appropriate solu-
tion. Also, when the innovative management practice is
new to the “state of the art” in management models, it
may, over time, be adopted by other organizations facing
similar challenges, leading to widespread diffusion of
the underlying management innovation (cf. Birkinshaw
et al., 2008).
Four points, worthy of closer observation, emerge
from this process model. First, the idiosyncrasies of the
industry context in the nonlocal market that the firm links
to the BoP producer play an important role in shaping the
evolution of the relationship over time. This point has
been neglected in the BoP literature. At the surface level,
Fabindia was operating in the “material” apparel retail
industry. However, a closer look suggests that, by virtue
of its ideological emphasis on protecting traditional arts
and the skill-based livelihoods of artisans, its guarantee
of authenticity, and its facilitation of personalized style,
Fabindia was seeking to imbue its products with symbol-
ism resulting in customer interpretation of the Fabindia
brand as “affordable fashion.” From this perspective,
Fabindia can be seen as operating in the realm of cultural
industries. Lawrence and Phillips (2002, p. 431) observe
that “managing in cultural industries . . . is not about
efficiently producing a product but about creating and
maintaining an organization that can produce and sell
meaning.” The challenge that firms in cultural industries
face is to develop organizational capabilities in managing
the symbolic aspects of products in such a way that they
are perceived as valuable by customers over an extended
period of time (Lampel, Lant, and Shamsie, 2000;
Lawrence and Phillips, 2002).
The move toward creating SRCs as intermediaries
between Fabindia and the artisan communities can, thus,
J. RAMACHANDRAN ET AL.
be viewed as an attempt at resolution of the contradiction
inherent in simultaneously infusing symbolism into the
downstream marketing and retail activities and efficiency
into the upstream craft-based production activities. The
SRCs not only helped Fabindia share upstream risk and
responsibilities with decentralized, artisan-centric orga-
nizations, but also benefited the artisans by enabling
them to access the higher value captured in symbolism-
driven downstream business activities. This is a point that
deserves closer attention and benefits from an analogical
reference. We have mentioned, earlier in this paper,
Daviron and Ponte’s (2005) “coffee paradox.” The
paradox refers to the dramatic fall in international coffee
prices received by developing country producers at a time
when coffee has emerged as an expensive and fashionable
drink among developed country consumers. They argue
that the explanation of the paradox lies in that the output
of coffee producers is evaluated on material attributes
while the output of speciality coffee retailers in devel-
oped countries is evaluated on symbolic attributes,
enabling the latter to entirely capture the value from the
retail of coffee drinks. The SRC initiative, on the other
hand, provided an innovative solution that shared the
symbolic value captured downstream with upstream
producers.
Second, while the literature has emphasized the
importance of mutual value creation, there is little con-
sideration of the dimensions of the engagement between
the firm and the BoP communities that influence its per-
sistence and renewal in the face of environmental change.
We suggest here that the reconciliation of the BoP rela-
tionship with ongoing environmental changes requires
the simultaneity of ideological centrality and economic
symbiosis. The salience of only one of these two elements
in the relationship suggests opportunistic mutual value
creation and may lead to the degradation of the relation-
ship under changed circumstances.
Third, the extant literature has concerned itself largely
with the BoP interventions of firms that already exist in
the formal economy and seek to create new engagements
with the BoP as consumers or producers. This may be
attributed to the dominant focus in the literature on the
activities of multinational enterprises and the challenges
they face in locating new markets or new sources of
supplies (Wheeler et al., 2005). The Fabindia case allows
us to propose an alternate, bottom-up concept of organi-
zation, i.e., the concept of the bridging enterprise. We
define the bridging enterprise as one that originates at the
intersection of the BoP communities that it works with
and the nonlocal markets that it serves. Such an enter-
prise, by definition, bridges the formal and informal
BUILDING THE BOP PRODUCER ECOSYSTEM
economies or local and nonlocal markets (Arnould and
Mohr, 2005; Hart, 2007; London, 2008). Further, the
strategies of the bridging enterprises would be expected
to reveal an “ingraining [of] product-relevant social good
in businesses . . . wherein customer and societal welfare
concerns permeate business activities and move to the
center of strategic planning” (Viswanathan et al., 2009,
p. 406).
However, in contrast to the typical intervening firm
discussed in the literature, the bridging enterprise does
not have a history of operation prior to its engagement
with the BoP. Moreover, while a bridging enterprise
inevitably contains social entrepreneurial elements,
not all social entrepreneurship ventures can be called
bridging enterprises because they may well be contained
wholly inside the BoP context. Indeed, the bridging enter-
prise is founded on a business model that makes media-
tion between the BoP context and the relevant nonlocal
market critical to its inception and, importantly, its con-
tinued existence. An important facet of such mediation is
the education that the bridging enterprise provides BoP
producers and nonlocal consumers about each other. (We
are grateful to an anonymous reviewer for drawing our
attentionto this point.) On one hand, Fabindia educated
urban Indian customers about the inherent uncertainty
and inconsistency of handloom production and, on the
other hand, educated handloom artisans about customer
expectations regarding acceptable levels of quality and
consistency. As the bridging enterprise straddles—right
from its inception—two distinct contexts of production
and consumption, it is in a unique position to act as
an interpreter and innovator for stakeholders across the
pyramid.
Furthermore, the bridging enterprise is not the same as
a keystone organization. A keystone organization—a
concept that exists in the literature—is a firm that is able
to provide leadership to a business ecosystem based on its
access to specialized knowledge that provides a common
platform for the varied interests of the members of the
ecosystem. A bridging enterprise—a concept we intro-
duce in this paper—is a firm that originates (in the sense
of having no prior history of operation) at the intersection
of BoP communities and nonlocal markets. A bridging
enterprise can act as a keystone organization only when it
is able to provide access to ecosystem for BoP producers
and other ancillary agents.
An important question that arises from the concept of
a bridging enterprise is as follows: How can the emer-
gence of such organizations at the intersection of BoP
communities and nonlocal markets be facilitated? Partly,
the identification of an opportunity that can be addressed
J PROD INNOV MANAG 49
2012;29(1):33–51
by a bridging enterprise is the product of serendipity,
ideological beliefs, and entrepreneurial inclination. These
elements are amply demonstrated in the establishment
of Fabindia by John Bissell, a buyer at Macy’s who, on a
trip to India, was struck by the paradoxical richness of
craft traditions and the economic poverty of the artisans
themselves. However, in spite of the happy confluence of
serendipity, ideological beliefs, and entrepreneurial incli-
nation, an idea for a bridging enterprise may die in the
absence of financial and strategic support at the inception
stage. An important role can be played here by an emerg-
ing breed of “social venture capital funds” that aim to
support innovative ideas about economic engagement
with the BoP (cf. Outlook Business, 2010). Indeed, Fab-
india itself sold an equity stake in 2007 to a social venture
capital fund, Wolfensohn and Co. LLC, to fund their
retail expansion.
Fourth, our case study provides evidence that the con-
ceptualization and deployment of innovative manage-
ment practices were crucial to the persistence of the
ongoing relationship between Fabindia and artisan com-
munities. In the early years, the adoption of the mix-and-
match retail format for garments rapidly expanded the
number of customers who were willing to buy handicraft
products because such a format lent itself to the articula-
tion of individualized style statements by customers.
Later, the constitution of designer-buyer-domain expert
teams in each product line enabled Fabindia to simulta-
neously address customer expectations while retaining
sensitivity to producer constraints. The SRC initiative
combined elements from the cooperative and corporate
forms of organization to create liquid assets for producers
and to provide them entrepreneurial opportunities while
leaving Fabindia free to focus on downstream value-
adding activities.
Our focus, in this paper, on innovative management
practices complements the dominant focus in the litera-
ture on innovation in product and process technologies.
In the extant literature, calls for disruptive innovation
involving the BoP have typically emphasized the devel-
opment and commercialization of radical new products
and services that provide high value to the customer at
considerably low costs to the producer (Anderson and
Markides, 2007; Hart and Christensen, 2002; Seelos
and Mair, 2007). Our orientation, however, was toward
management innovation (Birkinshaw et al., 2008). With
this orientation, we identified the innovative manage-
ment practices that emerged as Fabindia sought to
manage the interplay of ideological centrality and eco-
nomic symbiosis in its engagement with handloom arti-
sans. Each of these practices highlights the importance
50 J PROD INNOV MANAG
2012;29(1):33–51
of nurturing a BoP-centric mindset for firms seeking to
engage meaningfully and persistently with BoP produc-
ers (cf. London and Hart, 2004; Olsen and Boxenbaum,
2009). Recent contributions to BoP innovation have
argued for the need for firms to acquire “business
intimacy” with their BoP consumers by embedding
themselves in the BoP context and cocreating new prod-
ucts and services that deliver relationship-based value to
their BoP consumers (London and Hart, 2004; Simanis
and Hart, 2008). By shifting the research focus from a
snapshot view of an intervention to a dynamic view of
the ongoing engagement and from the BoP consumer
to the BoP producer, our study identifies a critical
role for innovative management practices in renewing
the engagement and in engendering sustained poverty-
alleviating outcomes for BoP producers.
Conclusion
Recent research on the BoP has led to calls for innovative
routes to poverty alleviation through mutually profitable
market-based interventions. However, progress in this
regard has been largely restricted to snapshot views of
BoP interventions and studies of technological innova-
tions directed toward the development of new products
and processes. We have sought, in this paper, to draw
the attention of researchers toward the dynamic of the
ongoing engagement between a firm and BoP producers
and the importance of innovative management practices
in sustaining these engagements. We conclude by high-
lighting a few promising directions for further research.
The threefold classification of substantive outcomes for
BoP producers—access to market, access to organization,
and access to ecosystem—can provide a useful basis for
future research on the efficacy of BoP interventions with
regard to poverty alleviation. It also would be interest-
ing to study how BoP producers tackle the adjustment
process as firms reconceptualize the relationship and how
their own expectations from the relationship change over
time. Indeed, the process model derived from our case
study puts the onus of attending to the disruption of the
engagement and of initiating the identification and
deployment of innovative management practices solely
on the firm. Case studies of engagements where the ini-
tiative with regard to such innovation was taken by BoP
producers would serve to complement our study and
refine the process model on the long-term persistence
of BoP engagements. Extensive field studies oriented
toward the evolution of the engagement over time can
help develop a body of knowledge useful to practitioners
J. RAMACHANDRAN ET AL.
complementary to the discussion of entry strategies into
the BoP detailed in Simanis and Hart (2008).
Management innovation, as a facilitator of substantive
poverty alleviation outcomes in the course of sustained
BoP engagements, needs to be studied in greater detail by
focusing on how it originates and is subsequently adopted
by other organizations with similar objectives. Our
process model provides a starting point for such research.
Future research needs also to look at not only how new
opportunities for mutual value creation between firms
and BoP communities are identified but also how the
value generated from such economic exchanges is shared
between the two and perceptions of fair play ensured
(cf. Toledo, Hernandez, and Griffin, 2010). Finally, the
utility of the bridging enterprise as an organizational form
needs to be examined in greater detail. We need to know
whether the bridging enterprise has any comparative
advantage, relative to other organizational forms such as
multinational corporations and nongovernmental organi-
zations, with regard to the development of innovative
management practices that sustain engagements between
firms and BoP producers. The bridging enterprise, born
at the intersection of BoP communities and nonlocal
markets, can provide a conceptual anchor for further
work on innovative management practices as a device to
initiate and sustain market-driven engagement with BoP
producers.
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