— By Vikash Singh (Acara Corps Fellow)
Did we know that a company could make a bigger profit by focusing on the market share consisting of people who earn less than $2 per day?
Did we realize that the world’s fastest growing market is at the bottom and not the top of the fortune pyramid?
Were we aware that nine countries including 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?
The answer is that we hadn’t and we didn’t, until UMich’s professor C.K. Prahalad came out with his work “The Fortune at the Bottom of Pyramid”.
“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. In 2002, The Fortune at the Bottom of the Pyramid ushered in a new level of consciousness in international business strategy. Although the idea of doing good and doing well was already well established, the anecdotal case by C.K. Prahalad and Stuart Hart that the four billion people each living on less than US$2 a day (the bottom of the economic pyramid or simply “BoP”) held the potential for immense profit captured popular imagination. Multi-national companies (MNCs) around the world launched initiatives to adapt and market their products and services to the world’s poor.
ACARA has aptly understood it and is trying to identify sustainable business opportunities based on above and at the same time being environmentally conscious in its approach.
However, the real fortune being sought is the simultaneous accomplishment of a trifecta of goals –corporate profit, relevant and sustainable social impact and local poverty alleviation. The impending questions are:
I. Securing Internal Support: How can companies gather data affordably in order to make a compelling business case and develop accurate projections?
II. Testing on a Budget: How can we run pilot programs at an affordable cost with low-margin business models?
III. Patience: How can we balance corporate pressures for profitability with commitments for impact in the community?
IV. The challenge of growth: How can we scale while adapting the product composition and its delivery mechanisms to the needs of each local community?
The assumption that the poor need to seen as a market, but one different from the conventional perception of a market, 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.
Professor Prahalad demonstrated 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.
As ACARA understands, Top of the Pyramid Approach may just lead to Sustainability BUT Bottom of the Pyramid leads to Sustainable Development
What is required is to undertake an analysis of the current BOP paradigm to support the development of a sustainable, participatory multi-stakeholder approach.
• From multi-nationals towards SME
• From single projects towards business models
• From market penetration towards sustainable development
• From technology push towards market pull
• From private sector /CSR initiative towards a participatory, bottom-up initiative
To a great extent, financially sustainable and integrated BoP business lines are the pinnacle of truly sustainable and strategic Corporate Social Responsibility. Answering the questions at the bottom of the pyramid may be the key to ushering in a new era of capitalism which generates profit, offers wealth-creation opportunities for the poor, spreads products to reduce sickness and spreads education around the world– welcoming billions of people to participate in a more inclusive, sustainable global economy. The thousands of little fires lit by corporations, entrepreneurs, academics, governments and non-profits may yet become a blaze that will change the world.