THE

FORTUNE
AT THE BOTTOM
OF THE PYRAMID
ERADICATING POVERTY THROUGH PROFITS
C K PRAHALAD
 Innovation
 Need for Innovation
 How to Innovate
 Incremental
 Suggestion Scheme, Kaizen, 5 S, Lean, Six Sigma,
TQM
 Breakthrough
 Benchmarking, Six Sigma, TOC, Thinking Hats,
TRIZ
 Radical
 TRIZ, BOP, Disruptive, Medici Effect, Blue Ocean
 Process
 Product
 Business Model
At the bottom of the
pyramid
 Consists of 4 billion people
 Living on less than $ 2 per day
 400 million people in India constitutes the
bottom of the pyramid
Purchasing Power Population
Parity in US dollars
> $20,000 75 - 100
Tier1

in
$1,500 - $20,000
Millions
1,500 – 1,750
Tiers 2-3

$1,500

Tier 4
4,000

<$1,500
Tier 5
 Exploitation of poor people by Private sector.
 Rural population was primarily poor & urban
population was relatively rich.
 Private sector businesses , especially MNCs
logic about BOP.
ASSUMPTIONS
 The poor are not our target
customers. They cannot
afford our products
 Poor do not have use for
products sold in developed
Markets
 Only developed countries pay
for technological innovations
 BOP market is not critical for
long term growth of MNC’s
IMPLICATIONS
 Our cost structure is a given
hence we cannot cater to the
BOP market
 We are committed to form
over strategy. Hence there is
no market in BOP
 BOP does need advanced
technological solutions.
Therefore BOP cannot be a
source of innovation
 BOP markets are at best an
attractive distraction
 Aid Agencies

Politicians, public NGOs, civil society

policy BOP latent 4-5 billion
organizations
establishments consumer opportunity

Private sector, including MNCs

 There is money at BOP.
 Access to BOP markets.
 The BOP markets are Brand – Conscious.
 The BOP market is connected
 BOP consumers accept advanced technology
readily
 Create the capacity to consume
 The need for new goods and services
 Dignity and choice
 Trust is a Prerequisite
 Huge market potential
 4 to 5 billion underserved people
 Economy of more than $ 13 trillion PPP
 The needs of the poor are many

Thus, the case for growth opportunity in the

BOP markets is easy to make.
 A philosophy for developing products &
services for the BOP
- small unit packages
- low margin per unit
- high volume
- high return on capital employed
 Price Performance
 Innovation : Hybrids
 Scale of Operations
 Sustainable Development : Eco-Friendly
 Identifying Functionality : Is the BOP different from
Developed Markets?
 Process Innovation
 Deskilling Of Work
 Education Of Customers
 Designing for Hostile Infrastructure
 Interfaces
 Distribution : Accessing the Customer
 BOP markets essentially allow us to challenge the
Conventional Wisdom in Delivery of Products and Services
 Some BOP markets are very large and
attractive
 Local innovations can be leveraged across
other BOP markets
 Some innovations from the BOP markets will
find applications in developed markets
 Lessons from the BOP markets can influence
the management practices of global firms
Developing a Fine-tuning the
unique traditional
approach to approach
BOP markets
and learning
from the
experience
 Micro encapsulation of iodine in salt – in India
has found market in other BOP markets in
Africa especially in Ivory coast, Kenya &
Tanzania.
 Micro-financing by Grameen Bank in
Bangladesh.
 Jaipur foot
 Aravinda Eye Care
 Capital Intensity
 Sustainable Development
 Innovations
“I think we have to recognize that a whole lot of
potential is going to come out of the bottom
of the pyramid”
Chanda Kochhar, Executive Director
Retail Banking, ICICI Bank
“to identify and support initiatives designed
to improve the capacities of the poorest of
the poor to participate in the larger
economy”
“poor do pay for the services rendered to them
and they ought to be viewed as consumers
rather than passive beneficiaries”
 The Direct Access, Bank-led Model
- Catalyzed by the merger with Bank of
Madura.
- Utilizes its power to promote and grow
SHGs.
 Indirect Channels Partnership Model
-Looks to leverage current infrastructure and
relationships of MFIs and NGOs.
 Self Help Groups
- 15 to 20 members
- from same village
- married
- between the ages of 20 and 50
- existing below poverty line
 Each member contributes Rs 50 to a joint
savings account
 Leader responsible for collection and opening
up of savings account in the bank.
 The savings are converted into fund.
 Used for emergency lending to an individual
within the group.
 Eligible for loan after one year of formation.
 Number of SHGs increased from 1500 in 2001
to 8000 in 2003.
 ICICI has utilized its financial expertise to
fashion a model that is economically viable.
 ICICI has positioned itself as socially
conscious corporate citizen.
 Helps ICICI’s bargaining power with the RBI
and other government institutions.
 Information centers linked to the internet.
 Connects subsistence farmers with large
farms,current agricultural research and global
markets.
 Operated by local farmer called sanchalak.
 Information provided by samyojaks.
.
 Virtual integration of supply chain.
 Results in better yield through better
practices.
 Farmers benefit by realizing better prices
 Better information content.
 Better information timing
 Transportation cost
 Transaction duration
 Weighing accuracy
 Professionalism and dignity
 Disintermediation savings
 Freight costs
 Quality control
 Risk management
 Largest retail chain in Brazil.
- 330 stores
- 10 million customers
- 20,000 employees
 Sells electronics, appliances and furniture.
 Individuals stratified into five basic economic
classes: A,B,C,D and E.
 C,E and D considered to be the BOP – 84% of
the total population of Brazil.
 Represents significant purchasing power in
Brazil’s economy – at 41% total spending
capacity.
 70% of Casas Bahia’s customers have no
consistent income.
 Carne or passbook system – allows customers
to make small installment payments for
merchandise.
 Payment schedules ranges from 1 to 15
months.
 Financed sales are responsible for 90% of all
sales volume.
 Credit score system for customers.
 Largest cement manufacturer in Mexico,
second largest in USA, and the third largest in
the world.
 Manufactures and sells raw cement, ready-
mix concrete, aggregates and clinker.
 High level of commitment to customer
service and satisfaction.
 Means “savings/property today”
 Launched in 1998
 Enables very poor to pay for services and
building materials to make and upgrade their
homes.
 Provide poor families looking for better
quality of life through households by offering
good quality cement and raw materials at
reasonable prices.
 Offer access to credit.
 Position Cemex as a responsible corporate
citizen.
 Is it as easy as he makes it sound?