Bottom of the Pyramid

Concept, Applications, Prospects

6/10/2012

FK - IITM

1

THE POOR – BOON OR BANE?
• Poor as a problem • Poor as an opportunity – a global market of 4.5 billion • Poor as an active market • Innovation and development of new technologies with usefulness to the poor • Imagination Constraints

• Poor as wards of State • Old technologies that follow the West
• Resource Constraints

Information Access as a valuable asset
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A Revolutionary Idea
C.K.PRAHALAD •B.Sc degree in Physics from Loyola College, Chennai •MBA at IIM-A •Doctorate from Harvard Business School •Taught at University of Michigan‟s Business School (1977 – 2010) Core Competence & BOP – his legacy to mgt. world
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Innovation.Change the Mindset … The Poor of India are an Intractable Problem The Poor of India form a Potential Market The Poor of India can be A Source of Innovation Poverty Alleviation. Subsidies 6/10/2012 Creating a New Market. Growth 4 .

the group earns less than $2 per day and 60% of these 4 .What is BOP? • The Bottom of the Pyramid is the largest. Nearly ½ a billion people in India are at the bottom of the pyramid. • Rural marketing agency MART.5 billion people live in China and India. defines BoP as a daily wage earner who does not make more than Rs50 a day. but poorest socio-economic group. there are 4 . In global terms. 6/10/2012 Firdaus Khan IITM 5 .5 billion people who are largely excluded from formal markets.

• Access is a little difficult & requires unconventional marketing effort.Features of BOP • BOP has money – it is a viable market. • The poor are brand-conscious • BOP market has is now connected (due to cell. TV & internet.) 6/10/2012 • BOP is very open to advance technology. Firdaus Khan IITM 6 .

000 Tier 2 & 3 ~ 800 mil less than $2000 Tier 4 ~ 5000 mil 6/10/2012 7 .000 Tier 1 ~ 200 mil Population in millions $2000 to $20.The World Pyramid Purchasing Power Parity (PPP) >$20.

Pyramid for India Population in million Purchasing Power > 5 lakhs 3 to 5 lakhs T1 T2 T3 10 mil 50 mil 150 mil 1 to 3 lakhs 50K to 1 lakh T4 200 mil less than 50K 550 mil T5 6/10/2012 8 .

A NEW MINDSET. A NEW FRAMEWORK 6/10/2012 Firdaus Khan IITM 9 .

• Eg: Tata Nano 6/10/2012 Firdaus Khan IITM 10 . Godrej & Boyce. Hindustan Unilever.An Idea whose Time has come… • The year 2010 saw many new innovations coming from corporations like Tata. Narayana Hrudayalaya. • The concept has been to work on a design and product with prior knowledge of the cost rather than the other way round and providing high quality and value for money propositions. and Vortex among others who have been working on innovative offerings to the BoP.

6/10/2012 Firdaus Khan IITM 11 . • Potable drinking water without the need of electricity. which is a scarce resource in rural India. • An attempt at meeting the necessity of purified water for the BoP at a price point as low as Rs.499 ($10).APPLICATIONS IN CONSUMER DURABLES – SWACH • Swach range of water purifiers from Tata Chemicals.

It is the ultimate game changer. weighs just 3-4 kgs and works on just 20 parts as compared to over 200 parts in a traditional fridge.ANOTHER CONSUMER DURABLE CHOTUKOOL • Godrej & Boyce launched Chotukool. • It provides all the functionalities of a normal refrigerator but runs on a battery. • Price . eliminating the need for continuous power supply.Rs.3250. 6/10/2012 Firdaus Khan IITM 12 .

000 to the end customer. the world renowned Heart Institute set up an ultra low cost super-specialty 300 bed hospital near Mysore to provide medical treatments to BOP. 6/10/2012 Firdaus Khan IITM 13 . • The hospital has kept infrastructure to a minimum with the help of pre-fabricated material in the construction.NARAYANA HRUDAYALAYA • Narayana Hrudayalaya.50.00.APPLICATION IN HEALTHCARE . The Hospital extended this cost cutting to provide medical services at a low cost wherein a heart operation which costs around Rs.000 will eventually cost Rs.2.

000 by March 2012.Financial Inclusion • RBI studies show that only 54% adults in India have a bank account • A business correspondent (BC). micro-insurance and remittance. credit. deposits and other transactions. • GoI has decided to provide essential financial services like savings. for all villages with population over 2. 6/10/2012 Firdaus Khan IITM 14 . a bankappointed agent who comes to the village with an electronic handheld device connected to the bank. facilitates withdrawal of customer‟s money.

VORTEX • Vortex. a startup incubated at IIT Chennai. has been successful in making rural banking a reality • The startup operates low cost electromechanical ATMs which are able to work at ambient temperatures of up to 50o Celsius unlike the traditional machines which are high on power consumption as well as need air conditioning system to keep it cool.APPLICATIONS IN BANKING . • The company has also introduced Solar ATM and Biometric ATM to cater to the needs of rural customers. 6/10/2012 Firdaus Khan IITM 15 .

E-GOVERNANCE PROJECTS • Central Bank of India is the nodal bank for implementing e-Shakti. the Himachal Pradesh government has identified 3366 locations for setting up IT enabled Lok Mitra Kendras. • For providing citizen services at the doorsteps of a largely rural population. 6/10/2012 Firdaus Khan IITM 16 . the flagship project of Govt of Bihar. calculate wages & make payments to the MGNREGA beneficiaries. ICT based financial inclusion solution is adopted to record attendance.

designed to displace Visa & MasterCard.Rs 300 crore per year.RuPay – Payment Gateway • Every transaction done using a debit or credit card issued by a domestic bank is routed through network switches owned by Visa or MasterCard. processing charge . 6/10/2012 Firdaus Khan IITM 17 . Aadhar enabled rupay cards by public sector banks to no-frills account holders.a payment gateway that connects all the ATMs and points-of-sale terminals in India. • Rupay . which are based outside the country. Avg.

market prices. news. GK.APPLICATIONS IN TELECOM NOKIA LIFE TOOLS (NOV 2008) • Nokia Life Tools Agriculture services provides information on seeds. Exam preparations and results. including English language learning. (Rs 30/month) • Nokia Life Tools Entertainment services also has fun features. 6/10/2012 Firdaus Khan IITM 18 . pesticides. fertilizers. and weather via mobile phones. ringtones and more. including astrology. (Rs 30/month) • Nokia Life Tools Education services aim to provide career and education services. as well as career information and tips.

beginning with Dharavi in Mumbai.Maggie Masala-ae-Magic and Maggie Rasile Chow.APPLICATIONS IN FMCG MARKET .taste enhancer containing iron. • Nestle is pioneering low price concepts for the bottom of the pyramid. • Rasile Chow . light meal fortified with iron. iodine and vitamin A – available at Rs2 a pack • Nestle also launched a nutrition education program for its target mkt. which seek to address the widespread concern about micro-nutrient malnutrition in India. available at Rs4 a pack & Masala-aeMagic . 6/10/2012 Firdaus Khan IITM 19 .low-cost.NESTLE • Nestle India has launched two new products .

6/10/2012 Firdaus Khan IITM 20 . • These are smart budget hotels that provide no room service and target travelling salesmen. Ginger Hotel from Indian Hotels – a subsidiary of Tata Group targeted the bottom of the hospitality industry.APPLICATION IN HOSPITALITY .GINGER HOTELS • The budget business hotel chain.

launched in 2009. Matthew Kam from UC Berkley.MILLEE • MILLEE i. It used mobile gaming technology to enhance access to literacy among children of school-going age in the developing world. Mobile and Immersive Learning for Literacy in Emerging Economies was a project by Dr. • The games worked only with few phone models (Motorola Razr V3m). The team received support from Nokia in the form of 450 cell phones to reach out to rural children.APPLICATION IN SOCIAL INITIATIVES . 6/10/2012 Firdaus Khan IITM 21 .e.

and waste disposal services for residents of the slum. working and living alongside their hosts and understanding the social and commercial ecosystem of Africa‟s largest slum: Nairobi‟s Kibera. recyling and composting businesses in Kibera. 6 persons team spent 11 weeks in Kenya. 6/10/2012 Firdaus Khan IITM 22 . • Together SC Johnson and the groups have created a community-based waste management and cleaning company. insect treatment. 2006. since 2005 the SC Johnson Co.GLOBAL APPLICATIONS • As Fortune reported on November 15. providing home-cleaning. • Helped set up Taka Ni Pato (“Trash is Cash”) program . has been partnering with youth groups in the Kibera slum of Nairobi. Kenya.

• Changing the perception of India from a manufacturing and back-end process hub to a research and innovation hub. which will enable growth in Research and Innovation in the coming years to come.PROSPECTS India as a BoP Innovation & Research Hub. • eg: Manipal University-Philips JV 6/10/2012 Firdaus Khan IITM 23 . worldwide. • Private universities in India and corporations together are forming joint venture. through Indian innovations. making BoP market attractive not only in India but.

• Mitti Cool Refrigerator weighs 20 kg (height:18. leaving the chambers cool. and the product works on the basic principle of evaporation. 6/10/2012 Firdaus Khan IITM 24 . taking heat from the inside gets evaporated. Conceptualized in 1997.Mitticool • A refrigerator that does not require electricity and is made of clay.5‟‟ and width of 11‟‟) and the way it works is very simple – Water from the upper chambers drips down the side. Mitticool is developed by Gujarat based Manshuk Lal (who earlier worked as as a supervisor in roof tiles Manufacturer).

6/10/2012 Firdaus Khan IITM 25 . 4. not just tweaking western products. cultures & languages. 2. Scalable & transportable operations across countries. Focus on quantum jumps in price performance. 7. Build logistical & manufacturing infrastructure. De-skill work. Hybrid solutions – blending old & new technologies 3.12 Principles of Innovation for BOP Markets 1. Reduce resource intensity – make eco.friendly products 5. Educate semi-literate customers in product use. Radical product redesign from the beginning. 6. 8.

dust. electric blackouts. Focus on broad architecture. 11. 10. 12. 6/10/2012 Firdaus Khan IITM 26 . Adaptable user interface to heterogeneous consumer bases. enabling quick & easy incorporation of new features. etc. unsanitary conditions. Products must work in hostile environments – noise.12 Principles 9. Distribution methods should be designed to reach both highly dispersed rural markets & highly dense urban markets.

BOP = The Art of Positive Change 6/10/2012 Firdaus Khan IITM 27 .

OPPPORTUNITY AHEAD • Create & implement a new model for Free Internet . • Create a Low Cost (less than the cost of TV) MultiFunction Information Appliance • Easy to Use Interface by Illiterate Users in Developing Economies • Develop capacity building programs to make 100% of the population “eLiterate” • Develop programs to overcome language barriers • Create multi-lingual interfaces. spoken language interfaces and multi-lingual translation systems • Create the Infrastructure for Ubiquitous Access to Knowledge and Knowhow • Video Conference with experts on problems of health (Aids) or agriculture or other problems such pest control 6/10/2012 Firdaus Khan IITM 28 .

microphone --. Possibililty . dot matrix printer. web-cam.N-Logue: corDECT Village Kiosk • Consists of • Wireless corDECT wall-set for Internet and telephone.for Rs. speakers.Indian villages become the back office to Indian urban centers • RTBI: Rural Technology Business Incubator 6/10/2012 Firdaus Khan IITM 29 . making. PC. battery back up.50K • Local entrepreneur operates the kiosk • These kiosks becoming community centers • Expect cities to outsource their work to villages.

CHALLENGES      The Market is Very Fragile: (Monsoons.) Middlemen and Moneylenders Fragmented Experiments Lack of a Global database Traditional Ways of Thinking 6/10/2012 Firdaus Khan IITM 30 . Subsidies.….

59% of cigarettes sales. • Can you dare to ignore this market? 6/10/2012 Firdaus Khan IITM 31 . • In 20 years. & almost 4 times the size of today‟s urban Indian market. here are some of the consumption numbers that will blow your mind • 46% of the soft drinks sales. 49% of motorcycle sales. • Close to 10% of Maruti Suzuki‟s sales & 50% of Hero Honda „s sales come from the rural market • Rural India has a large consuming class with 41% of India‟s middleclass and 58% of the total disposable income accounting for consumption.BOP or Developing Market? • While there is a general tendency to equate rural India to BoP market. 53% of FMCG sales are from rural India. rural Indian Market will be larger than the total consumer markets in countries such as South Korea or Canada today.

Thank you! 6/10/2012 Firdaus Khan IITM 32 .