Indian Talent, Global Content
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Indian Talent, Global Content |
August 2008: What's in the breeze |
Book Review: Fortune at The Bottom of The Pyramid, C.K.Prahalad
Did you know that your company could make a bigger profit by focusing on the market share consisting of people who earn less than $2 per day? Have you realized that the world’s fastest growing market is at the bottom and not the top of the fortune pyramid? Did you know that nine countries-China, India, Brazil, Mexico, Russia, Indonesia, Turkey, South Africa, and Thailand - collectively have a GDP of $12.5 trillion, larger than the GDP of Japan, Germany, France, Italy, and the UK combined? What is it all about? The Fortune at The Bottom of The Pyramid provides you with these facts, while telling you why what you know about BOP markets is wrong. This book, for a refreshing change, is not about BPO, but BOP, the bottom of the pyramid, the real source of market promise. “Why is it that with all our technology, managerial know-how, and investment capacity, we are unable to make even a minor contribution to the problem of pervasive global poverty and disenfranchisement?” This profound question hits you only to leave you answerless. This is definitely a book which makes you sit up and think from the very beginning. Whether you're a business leader or an anti-poverty activist, this book shows you why you can't afford to ignore "Bottom of the Pyramid" (BOP). The man at the BOP is a consumer too University of Michigan Business School professor C.K. Prahalad challenges business's common beliefs about the world's impoverished and introduces readers to the Bottom of the Pyramid (BOP), an untapped market of more than four billion people, many of whom are seen as “poor” in the public eye. This is the market companies should be paying attention to, he says, even more so than the few rarified consumers at the high-profit pinnacle, or even the growing middle markets. In short, Pralahad’s vision “is not about philanthropy and corporate social responsibility”; but is centered around the idea that "If we stop thinking of the poor as victims or as a burden and start recognizing them as resilient and creative entrepreneurs and value-conscious consumers, a whole new world of opportunity will open up." That "simple proposition" begins a controversial new management book that is poised to become essential reading not just for the financial world but also in government offices. Constant innovation is the need of the hour According to the author, we need to find new and innovative approaches to rise to the challenge of this fast growing population. One of the assumptions that he makes is that the poor need to seen as a market, but one different from the conventional perception of a market. This assumption has some immediate consequences - all of the traditional business concepts are applicable but each and every one of those concepts needs to be applied from a distinct perspective. What results is a practical example of the application of innovative thinking and innovation to an intractable problem – How to cater to the more than 4-billion humans who do not form part of the target market of the organizations that are driven by conventional assumptions about products, services, value and needs. Prahalad demonstrates that the process of making products more affordable to the world's poor can provide substantial returns to create real partnerships and innovations for established companies. One such example quoted is Dharavi, an area in Mumbai, India whose claim to fame is that it is the largest single slum area in Asia. Its dwellers, not being property owners, do not spend a lot of money improving their living quarters. But they do spend money on luxury items-85 percent of households in this village own a television set, 75 percent own a pressure cooker and blender, 56 percent a gas stove, and 21 percent have telephones. Do the poor care about brand names? And if you thought that brand names are not a factor to members of this group, then think again. In fact, the author's research shows that brand consciousness among the poor is universal. Prahalad points out that companies who want to invest in BOP markets must make it part of their core business, and not make the mistake of considering it a corporate social responsibility initiative. On the contrary, this is real investment that takes attention, planning, and resources. It may seem improbable that companies can make money by selling to people who have limited purchasing power, but, as Prahalad demonstrates, companies that have actually bothered to try are flourishing. Prahalad concedes that change will not be easy, but he does present well-researched case studies and compelling reasoning for why the BOP is a market worthy of attention. The book brims with interesting facts and statistics. Some interesting cases + There are 5.5 million amputees in India. An additional 25,000 lose their limbs each year due to disease, accidents or other hazards. Most of these people live well below the poverty line and can afford neither a prosthetic limb (average cost = $7000) nor the subsequent replacements and hospital visits. How did Dr. P.K. Sethi along with craftsman Ram Chandra develop an effective prosthesis (cost = $30) that even enabled a professional dancer to further her career on stage? + The world’s leading cause of mental disorders and retardation is Iodine Deficiency Disorder (IDD). In India alone there are 70 million people who have IDD and another 200 million are at risk. How did Hindustan Lever Ltd, a branch of a multinational company, solve the problem and make a profit at the same time? + More than 24 million Mexicans earn less than $5 a day, hence they have been unable to get access to credit. How did this change so that the Mexicans could build affordable housing for themselves while the third largest cement manufacturer in the world, Cemex, continues to reap the financial rewards? + Blindness affects 12 million people in India. How could the Aravind eye care system serve more than a million patients and do it mostly for free, yet continue to be highly profitable? These are four examples of the provocative 12 in-depth case stories from India, Peru, Mexico, Brazil and Nicaragua that illustrate the world’s most exciting, and perhaps most lucrative market. Is it as easy as he makes it sound? A skeptic might question the rationality of Prahalad’s vision and goals. The truth is, as the author readily admits, that we have “a long way to go before the social transformation of inequalities around the world will be accomplished”. But being a long way from reaching that goal should not be a deterrent in working towards it. Indeed, if what is happening in the hi-tech industry is anything to go by, companies have no way but to find unique ways of servicing the BOP if they are to compensate for the trend of slowing growth in over-consumed developed markets. This book may not be superbly written but all the same, it is reeks of the indomitable force of detail and meticulous research. It challenges so many conventional theories about the poor and economically deprived, that it is sure to not only create a ripple in the world of finance but also generate some controversy. Yet, the ramifications of this book are just beginning. Globally, this is a movement in the making that will affect each and every human being in the broad sense. The book’s content is a challenge to the way in which we approach the world. And the responses to the challenges are illustrated by powerful and convincing examples. It is only a very obdurate mind that will not receive an dose of ground-breaking thinking and zeal for the opportunities that can be created by adopting an altered and innovative approach with respect to one’s business activities concerning the bottom or for that matter even the top of the pyramid. After all, what entrepreneur wouldn’t want to “save the world”, get famous and make some money while he is at it? 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