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The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits
Read the following excerpt from Private Sector and Progress at the Bottom of the Pyramid During 2004-2009. Five years is not a long time to evaluate the diffusion of an idea; much less its impact on the ground. It has been less than five years since the book The Fortune at the Bottom of the Eradicating Poverty Through Profits was published. The first article on the subject appeared in 2002. At the time, the proposition that the private sector had a critical role to play in alleviating global poverty was generally met with skepticism. The idea that they could have the greatest impact through creating profitable businesses serving the 5 billion people who represented the “invisible, unserved market” was even more radical. I am profoundly grateful for the people in government, nongovernmental organizations, and large corporations who were willing to listen and experiment. The poor, of course, have long been hungry for change. Their enthusiasm and insights have been a huge inspiration to me. We are a long way from solving the problem of global poverty. But I find reason to be optimistic that the conditions for creating significant and sustainable change are emerging rapidly. First, the idea that the private sector can and should be involved in creating market-based solutions for the world’s poorest consumers is gaining credibility. The market success of some multinationals that have taken up the challenge has created momentum. Respected business leaders such as Bill Gates championing the cause of creative capitalism has also contributed to a shift in perception.
430 pages, Kindle Edition
First published July 26, 2004
295 people are currently reading
4841 people want to read
About the author
C.K. Prahalad
41 books50 followers was the Paul and Ruth McCracken Distinguished University Professor of Corporate Strategy at the Stephen M. Ross School of Business in the University of Michigan, USA.
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February 10, 2020
This is a book to unlearn a few things and learn a lot of new concepts. If we keep the statistics aside, then it is a book that challenges its readers to see beyond the conventional logic. Read the complete review here https://wp.me/p6rxcY-3b.
April 1, 2017
A bolded statement on the first page of Chapter 1 reads:
This quote is a good leaping-off point for the root problems in the book.
1) By “sustainable win-win scenarios”, Prahalad refers to sustainability of profit. Whether these corporate profit motives are environmentally sustainable is not seriously considered. Whether it impacts the ability of social structures or culture to be sustained is ignored.
2) By “where the poor are actively engaged”, he means, “in choosing which products they want”. They are not involved in the decision of whether the companies will come, in whether communities will be inundated with marketing, in whether the MNC’s will attempt to drive smaller local entities out of business And that’s a deeper issue than, “Do you like the 1-rupee packaging or the 2-rupee packaging?”
3) In “the companies providing products and services to them are profitable”, Prahalad admits that the goal is to extract money from poor communities. Note that the money removed from the poor community will be greater than the cost of the products and services given to the community. Where will the poor get this money? Only by working for outside employers and distributors who will also profit off of their labor and goods – once again, extracting more value out of the poor than the poor receive in return. Once you have captured the poor in a corporate cycle, you’ve got them in a cycle of money extraction, where the corporation has a structural advantage that ensures the profit margin is always flowing towards the corporation and away from the poor at every step.
A few similarly troublesome statements follow quickly:
Prahalad also discusses the “poverty premium” paid by the poor. But this premium only comes into play when the poor have already lost the ability to produce and are being exploited by outsiders. An Indian villager doesn’t need to pay a huge premium on credit to a loan shark until he is made to believe that he must buy high-cost products and services from outside the village. They don’t go into debt for water and rice and building supplies if they are producing their own.
Those are just a few representative statements from the opening pages. I’m bothered by his focus on market penetration of corporate culture into the most remote villages and tribal communities, his love of single-serving packages which are a wasteful mess, his pushing of credit for the poor (which means extracting money from poor communities in the form of interest), his negative view of the lives the poor lead without access to multinationals, his condescending view of small businesses, his naïve view of health (where, for example, corporate single-serving ice cream and pizza products are given as examples of contributing positively towards the health of the poor).
That’s briefly some of the issues with theory. But how does it look in practice? An interesting aspect of the book are the 9 detailed case studies that form half the book. I’ll take a brief look at each case.
Casas Bahia: The business model is to convince poor people to take out loans in order to pay for furniture and appliances they otherwise can’t afford, “selling them dreams” of cabinets and televisions. A huge amount of money is spent on advertising, which is described as focusing on famous personalities and using the exploitation of emotion. A stated “growth opportunity” at this point is pushing small- to medium-sized regional stores out of business. One stated reason they target the poor is because the poor are forced to take out loans from them, so Casas Bahia profits off of both the sale and the interest, while wealthier consumers pay in cash and thus can’t be exploited as profitably.
CEMEX: Sells the poor a product at huge profit margins, up to 45%. At the same time they are running a “savings program” for the poor where the poor must pay 12.5% of their savings in operational costs. The “biggest challenge” for the program is retaining their customers by convincing them to get new and bigger expansions – once again, selling them the material dream for the company’s profit.
HLL #1: Effective iodine in salt is a good thing. But again the pursuit of profits clouds it. At the point described in the story, HLL was keeping their life-saving iodinization process a secret, instead of letting other companies use it, so they could exploit the profit advantage for longer. And the “positive” salt example is a small, misleading part of HLL’s overall campaign to profit off the poor – HLL makes far more money selling the poor candy than it does selling them salt, but the book used the salt example because it sounds philanthropic. Soft drinks and tobacco are also major parts of their portfolio, almost certainly more profitable than the salt. So while HLL does extract money from the poor in exchange for selling them healthier iodized salt, at the same time it is extracting far more money from the poor selling them other things that make their lives worse.
HLL #2: A second attempt to highlight a “positive” product from HLL, antibacterial hand soap. Again, it mostly ignores that HLL spends more money pushing far less beneficial products, like the “Fair and Lovely” skin whitening crème that has become the face of India’s “white skin is better” beauty movement. They abuse self-help groups, supposedly an empowerment tool, in order to teach brand awareness and pull market share from local producers. But the worst part of this particular chapter is that their supposedly “health-promoting” anti-bacterial soap is not healthy at all. Triclosan, the agent used, has long been known to be basically useless in improving hand cleanliness. In fact, while providing no measurable benefits, it has been linked to irritation, allergies, and the development of resistance in microbes, as well as resulting in environmental damage in places where it has built up in wastewater. Triclosan has now been banned in soap in the United States, and HLL finally removed it from their soap last year, 15 years after the campaign started and 10 years after this book was written. They had been profiting off of a false claim of “healthy soap” at the expense of the poor. Now they plan to add a different, equally unproven anti-bacterial agent in order to avoid the negative publicity of Triclosan.
Jaipur Foot: Probably the best example of true service to the poor in the entire book. To date, more than 1.3 million Indians have benefitted from this prosthetic, with the real possibility that 90% or more would never have had a useful prosthetic otherwise. BMVSS, who constructs all materials and provides the service, is incredibly efficient, spending only 4% of its budget on overhead and 89% directly on patient services. Care for patients is holistic and loving – those who come are housed on site, eat together with other patients in a warm setting, and are treated respectfully in a process meant to ensure that they can have their prosthetic made and fitted in the span of a single day.
But “Jaipur Foot” is produced by BMVSS, a nonprofit charity which charges its patients nothing. There are no “profits” here, no fortune to be made. The for-profit prosthetic enterprises sell far more expensive prosthetics and spend huge amounts of their budget on marketing, helping far fewer and wealthier people. Why it is included in this book, I’m not sure.
Aravind Eye Care system: Also does great work…but it’s not profiting off the bottom of the pyramid either. The hospital chain gives 70% of its operations for free, financing them via the other 30% of the operations, which are paid by wealthier clients. So there’s no “fortune” being extracted from the bottom of the pyramid, even if it is a fantastic example of efficient management and commitment to service.
ICICI Bank: This is one of the less obviously exploitative examples in the book. They are taking an inefficient, expensive process, and using their resources and experience to make it a more efficient process, thereby creating savings for both the poor who utilize the programs and profits for the corporations who have now taken their business. Whether the move is helpful for the poor in the long run is still debatable. When a bank encourages a poor community to take out loans, it profits off those loans via the collection of interest. That extra interest must come from the community, which then is asked to produce more and more revenue in order to keep up with the ever-larger interest payments for the ever-larger loans that the bank encourages them to take out. If the community cannot produce enough extra revenue (and all local communities shuttling profit to outside interests eventually exhaust their own resources), then community members will be forced to take jobs from business interests outside the community in order to gain enough cash to pay. This is a major factor behind the urbanization of the globe - the constant forcing of rural lenders into default. In the “ideal” business world, the economy grows exponentially forever. In the real world, there are limits to how many resources can be extracted and how many new things can be monetized. At best the community sees growth until all of its resources are depleted and its local economy crashes, those who took out loans default and lose everything to their creditors, or community members compete with each other for the few high-paying sources of income available, with those able to access them paying off their loans and growing wealthier, and those unable to pay their loans defaulting and growing poorer. And all the while, the bank succeeds in profiting off of interest, off of money flowing OUT of the community. None of this is to the long-term benefit of the community.
ITC e-Choupals : Similarly to ICICI, it showcases an improvement in efficiency at the cost of a community’s long-term stability. The mandi system is unnecessarily inefficient and exploitative, no doubt. But while improving efficiency can help the farmer get 2.5% more money for his soybeans, it does not do a great deal to improve the long-term prospects for the farmer’s life. The farmer is still producing a cash crop for an outside corporation, so that the outside corporation can profit. If the farming is sustainable, soil fertility is being maintained or improved, and the community is self-sufficient, then great! Sell off your excess soybean production so that outsiders like ITC can profit off of it. But the truth is that most of the farming is not sustainable, soil fertility is being lost, and the community is losing self-sufficiency…and all the while ITC encourages those trends to keep going until the land collapses and cannot produce anymore. Then ITC can just move over to profiting off the next farmer, while the farmers have nowhere to go. Whether ITC is using the e-Choupals to get a foodhold in the community and promote tobacco, for which advertising by several other means is banned, is an open question. It is unlikely that ITC, which makes 80% of its profits off of tobacco, would take the health of the community into consideration while making such decisions.
Voxiva: Seemed irrelevant. Their profits come from government contracts, not from the bottom of the pyramid. Some of their projects indeed benefited the bottom of the pyramid, but only then because the government paid for it. Even more often, their contracts benefitted the military, because that’s what the government wanted to pay for.
What is needed is a better approach to help the poor, an approach that involves partnering with them to innovate and achieve sustainable win-win scenarios where the poor are actively engaged and, at the same time, the companies providing products and services to them are profitable.
This quote is a good leaping-off point for the root problems in the book.
1) By “sustainable win-win scenarios”, Prahalad refers to sustainability of profit. Whether these corporate profit motives are environmentally sustainable is not seriously considered. Whether it impacts the ability of social structures or culture to be sustained is ignored.
2) By “where the poor are actively engaged”, he means, “in choosing which products they want”. They are not involved in the decision of whether the companies will come, in whether communities will be inundated with marketing, in whether the MNC’s will attempt to drive smaller local entities out of business And that’s a deeper issue than, “Do you like the 1-rupee packaging or the 2-rupee packaging?”
3) In “the companies providing products and services to them are profitable”, Prahalad admits that the goal is to extract money from poor communities. Note that the money removed from the poor community will be greater than the cost of the products and services given to the community. Where will the poor get this money? Only by working for outside employers and distributors who will also profit off of their labor and goods – once again, extracting more value out of the poor than the poor receive in return. Once you have captured the poor in a corporate cycle, you’ve got them in a cycle of money extraction, where the corporation has a structural advantage that ensures the profit margin is always flowing towards the corporation and away from the poor at every step.
A few similarly troublesome statements follow quickly:
The poor cannot participate in the benefits of globalization without an active engagement and without access to products and services that represent global quality standards.Is it true that preservative-filled wheat starch, corn syrup based foods that meet “global quality standards” are better than the food the poor were able to grow and cook themselves before they were pushed off their land by agribusiness and had their local variety constricted by corporate domination of the local markets? Have the poor always stuffed their cows with antibiotics, their crops with pesticides, their soap with Triclosan? Are the cheap plastic goods of globalization better than the things they made themselves?
The poor present a ‘latent market’ for goods and services."Latent market" means there are needs which the poor currently meet via their own resources, but with the right marketing, corporations can convince them to rely on corporate products instead.
private-sector competition for this market will foster attention to the poor as consumers. It will create choices for them. They do not have to depend only on what is available in their villages.The poor are to be seen as “consumers”, not people, and attention focused on how to manipulate them into consuming corporate products. Over time, they will be transitioned into consumers, rather than the producers they once were, and since corporations have advantages of marketing, scale, and political power, village-sourced products that compete with those of the MNC will soon no longer be made.
Free and transparent private-sector competition, unlike local village and shanty-town monopolies controlled by local slum lords, can transform the “poor” into consumers.Assumes that poor people are helpless weaklings controlled by slum lords until the corporations come with their gifts of “free and transparent private-sector competition” to save them by transforming them into corporate consumers.
Prahalad also discusses the “poverty premium” paid by the poor. But this premium only comes into play when the poor have already lost the ability to produce and are being exploited by outsiders. An Indian villager doesn’t need to pay a huge premium on credit to a loan shark until he is made to believe that he must buy high-cost products and services from outside the village. They don’t go into debt for water and rice and building supplies if they are producing their own.
Those are just a few representative statements from the opening pages. I’m bothered by his focus on market penetration of corporate culture into the most remote villages and tribal communities, his love of single-serving packages which are a wasteful mess, his pushing of credit for the poor (which means extracting money from poor communities in the form of interest), his negative view of the lives the poor lead without access to multinationals, his condescending view of small businesses, his naïve view of health (where, for example, corporate single-serving ice cream and pizza products are given as examples of contributing positively towards the health of the poor).
That’s briefly some of the issues with theory. But how does it look in practice? An interesting aspect of the book are the 9 detailed case studies that form half the book. I’ll take a brief look at each case.
Casas Bahia: The business model is to convince poor people to take out loans in order to pay for furniture and appliances they otherwise can’t afford, “selling them dreams” of cabinets and televisions. A huge amount of money is spent on advertising, which is described as focusing on famous personalities and using the exploitation of emotion. A stated “growth opportunity” at this point is pushing small- to medium-sized regional stores out of business. One stated reason they target the poor is because the poor are forced to take out loans from them, so Casas Bahia profits off of both the sale and the interest, while wealthier consumers pay in cash and thus can’t be exploited as profitably.
CEMEX: Sells the poor a product at huge profit margins, up to 45%. At the same time they are running a “savings program” for the poor where the poor must pay 12.5% of their savings in operational costs. The “biggest challenge” for the program is retaining their customers by convincing them to get new and bigger expansions – once again, selling them the material dream for the company’s profit.
HLL #1: Effective iodine in salt is a good thing. But again the pursuit of profits clouds it. At the point described in the story, HLL was keeping their life-saving iodinization process a secret, instead of letting other companies use it, so they could exploit the profit advantage for longer. And the “positive” salt example is a small, misleading part of HLL’s overall campaign to profit off the poor – HLL makes far more money selling the poor candy than it does selling them salt, but the book used the salt example because it sounds philanthropic. Soft drinks and tobacco are also major parts of their portfolio, almost certainly more profitable than the salt. So while HLL does extract money from the poor in exchange for selling them healthier iodized salt, at the same time it is extracting far more money from the poor selling them other things that make their lives worse.
HLL #2: A second attempt to highlight a “positive” product from HLL, antibacterial hand soap. Again, it mostly ignores that HLL spends more money pushing far less beneficial products, like the “Fair and Lovely” skin whitening crème that has become the face of India’s “white skin is better” beauty movement. They abuse self-help groups, supposedly an empowerment tool, in order to teach brand awareness and pull market share from local producers. But the worst part of this particular chapter is that their supposedly “health-promoting” anti-bacterial soap is not healthy at all. Triclosan, the agent used, has long been known to be basically useless in improving hand cleanliness. In fact, while providing no measurable benefits, it has been linked to irritation, allergies, and the development of resistance in microbes, as well as resulting in environmental damage in places where it has built up in wastewater. Triclosan has now been banned in soap in the United States, and HLL finally removed it from their soap last year, 15 years after the campaign started and 10 years after this book was written. They had been profiting off of a false claim of “healthy soap” at the expense of the poor. Now they plan to add a different, equally unproven anti-bacterial agent in order to avoid the negative publicity of Triclosan.
Jaipur Foot: Probably the best example of true service to the poor in the entire book. To date, more than 1.3 million Indians have benefitted from this prosthetic, with the real possibility that 90% or more would never have had a useful prosthetic otherwise. BMVSS, who constructs all materials and provides the service, is incredibly efficient, spending only 4% of its budget on overhead and 89% directly on patient services. Care for patients is holistic and loving – those who come are housed on site, eat together with other patients in a warm setting, and are treated respectfully in a process meant to ensure that they can have their prosthetic made and fitted in the span of a single day.
But “Jaipur Foot” is produced by BMVSS, a nonprofit charity which charges its patients nothing. There are no “profits” here, no fortune to be made. The for-profit prosthetic enterprises sell far more expensive prosthetics and spend huge amounts of their budget on marketing, helping far fewer and wealthier people. Why it is included in this book, I’m not sure.
Aravind Eye Care system: Also does great work…but it’s not profiting off the bottom of the pyramid either. The hospital chain gives 70% of its operations for free, financing them via the other 30% of the operations, which are paid by wealthier clients. So there’s no “fortune” being extracted from the bottom of the pyramid, even if it is a fantastic example of efficient management and commitment to service.
ICICI Bank: This is one of the less obviously exploitative examples in the book. They are taking an inefficient, expensive process, and using their resources and experience to make it a more efficient process, thereby creating savings for both the poor who utilize the programs and profits for the corporations who have now taken their business. Whether the move is helpful for the poor in the long run is still debatable. When a bank encourages a poor community to take out loans, it profits off those loans via the collection of interest. That extra interest must come from the community, which then is asked to produce more and more revenue in order to keep up with the ever-larger interest payments for the ever-larger loans that the bank encourages them to take out. If the community cannot produce enough extra revenue (and all local communities shuttling profit to outside interests eventually exhaust their own resources), then community members will be forced to take jobs from business interests outside the community in order to gain enough cash to pay. This is a major factor behind the urbanization of the globe - the constant forcing of rural lenders into default. In the “ideal” business world, the economy grows exponentially forever. In the real world, there are limits to how many resources can be extracted and how many new things can be monetized. At best the community sees growth until all of its resources are depleted and its local economy crashes, those who took out loans default and lose everything to their creditors, or community members compete with each other for the few high-paying sources of income available, with those able to access them paying off their loans and growing wealthier, and those unable to pay their loans defaulting and growing poorer. And all the while, the bank succeeds in profiting off of interest, off of money flowing OUT of the community. None of this is to the long-term benefit of the community.
ITC e-Choupals : Similarly to ICICI, it showcases an improvement in efficiency at the cost of a community’s long-term stability. The mandi system is unnecessarily inefficient and exploitative, no doubt. But while improving efficiency can help the farmer get 2.5% more money for his soybeans, it does not do a great deal to improve the long-term prospects for the farmer’s life. The farmer is still producing a cash crop for an outside corporation, so that the outside corporation can profit. If the farming is sustainable, soil fertility is being maintained or improved, and the community is self-sufficient, then great! Sell off your excess soybean production so that outsiders like ITC can profit off of it. But the truth is that most of the farming is not sustainable, soil fertility is being lost, and the community is losing self-sufficiency…and all the while ITC encourages those trends to keep going until the land collapses and cannot produce anymore. Then ITC can just move over to profiting off the next farmer, while the farmers have nowhere to go. Whether ITC is using the e-Choupals to get a foodhold in the community and promote tobacco, for which advertising by several other means is banned, is an open question. It is unlikely that ITC, which makes 80% of its profits off of tobacco, would take the health of the community into consideration while making such decisions.
Voxiva: Seemed irrelevant. Their profits come from government contracts, not from the bottom of the pyramid. Some of their projects indeed benefited the bottom of the pyramid, but only then because the government paid for it. Even more often, their contracts benefitted the military, because that’s what the government wanted to pay for.
August 15, 2011
There may be a fortune at the bottom of the period, but pushing greater consumptive forces onto the poor is not the answer to eradicating poverty. I would like to think that one day the pyramid model could be turned into a diamond, with the majority of the world's population being middle class. But for this to ever be possible, we must empower the poor, not profit from them. I understand that profits introduce discipline and expand market scale, but there is something fundamentally wrong with the notion of making profits from the poor. We need private markets to grow wealth for the poor, rather than extract it. We need private markets to encourage the poor to save and invest, rather than expend. We need private markets to improve the lives of the poor, rather than keep them impoverished.
Good private market forces direct money into poor regions and leave the poor in a positive net position. Good examples of private sector sustainable initiatives detailed in this book that empower the poor include: the Aravind Eye Care System which provides free world leading eye care services to the poor, compensated by fees from more wealthy patients; Amul dairy initiative in India that provides local small scale cow farmers with access to national milk markets; and EID Parry in India that uses internet technologies to enhance agricultural practices and exchanges.
Negative private market forces extract money from poor regions and leave the poor in a negative net position. Poor examples include: Casas Bahia that provides an alternative financing model for the poor to get access to retail goods; and Cemex that provides an alternative financing model to build housing extensions. Both of these companies provide access to important services to the poor, but they should be provided at marginal cost.
Hindustan Level Limited may justify its profitable endeavors that for instance allow iodized salt and anti-bacterial soap to reach the poor, which are important products that help to improve overall health and productivity. However, ultimately no private good or service will ever be a panacea to the problems in developing regions of the world. Therefore the private sector must also actively engage the public sector and civil society to help transform and genuinely improve the lives of the poor. If the private sector intends to target the poor, it must be to genuinely benefit the poor, not profit from them.
Good private market forces direct money into poor regions and leave the poor in a positive net position. Good examples of private sector sustainable initiatives detailed in this book that empower the poor include: the Aravind Eye Care System which provides free world leading eye care services to the poor, compensated by fees from more wealthy patients; Amul dairy initiative in India that provides local small scale cow farmers with access to national milk markets; and EID Parry in India that uses internet technologies to enhance agricultural practices and exchanges.
Negative private market forces extract money from poor regions and leave the poor in a negative net position. Poor examples include: Casas Bahia that provides an alternative financing model for the poor to get access to retail goods; and Cemex that provides an alternative financing model to build housing extensions. Both of these companies provide access to important services to the poor, but they should be provided at marginal cost.
Hindustan Level Limited may justify its profitable endeavors that for instance allow iodized salt and anti-bacterial soap to reach the poor, which are important products that help to improve overall health and productivity. However, ultimately no private good or service will ever be a panacea to the problems in developing regions of the world. Therefore the private sector must also actively engage the public sector and civil society to help transform and genuinely improve the lives of the poor. If the private sector intends to target the poor, it must be to genuinely benefit the poor, not profit from them.
January 23, 2013
It can get a bit repetitive and probably could have used more editing, but the ideas are worthwhile.
July 23, 2013
This is an interesting book with ideas for alleviating poverty, by shifting the way that we think about helping the poor. As we see them as consumers - a potential market - and focus on creating goods and services that they need at the right price we will help them and be forced to innovate and come up with better ideas that will help even more people.
I admit there is a lot more I need to understand about business and economics in order to really understand each of the ideas and examples in this book, but the main idea of working together with governments, NGOs and private sector firms in developing the bottom of the pyramid (BOP) market is an interesting idea. There are many ideas about innovation, product development and distribution, transparency, laws and corruption, communication, teaching and changing attitudes and practices....then several specific examples where progress is being made - in health care, food production, governance, housing, financing and other basic needs. Some interesting work and ideas.
Here area a few quotes from the book:
"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. Four billion poor can be the engine of the next round of global trade and prosperity. It can be a source of innovations. Serving the BOP consumers will demand innovations in technology, products and services, and business models (p. 1)."
"The BOP, as a market, provides a new growth opportunity for the private sector and a forum for innovations....BOP markets must become an integral part of the work of the private sector (p. 6)."
"The task of converting the poor into consumers is one of market development (p. 16)."
"When the poor are converted into consumers, they get more than access to products and services. They acquire the dignity of attention and choices from the private sector that were previously reserved for the middle-class and rich....Private-sector firms approaching the BOP market must focus on building trust between themselves and the consumers (p. 20)."
"we have identified the immediate benefits of treating the poor as consumers as well as the poverty alleviation process that will result as businesses focus on the BOP. It is clear that the consumers (the poor) benefit, but do the private-sector businesses benefit as well? The BOP market potential is huge: 4 to 5 million underserved people and an economy of more than $13 trillion PPP. The needs of the poor are many...the private sector must learn to innovate (p. 21)."
"Success in BOP markets will break existing paradigms. All examples in this book challenge conventional wisdom. They challenge the current paradigms in innovation and product and service delivery in fundamental ways (p. 43)."
"Unless we are willing to discard our biases, this opportunity will remain invisible and 'unattractive (p. 46).'"
"Unlike most people who retire to a quiet life, Padmashtree Dr. G. Venkataswamy, saw his leaving the the head of the Department of Ophthalmology, in 1976, as an opportunity to face a challenge that personally troubled him....eradicate needless blindness...in his home state (p. 265)."
"The number of people living on less than $1 per day in India is significantly greater than the entire population of the United States. From a social perspective, this is a humanitarian pandemic. From an economic perspective, these people represent the bottom of the pyramid (BOP). From a commercial perspective, these individuals are not considered a viable market given their minuscule purchasing power. Do the poor of India represent an opportunity for a large, organized financial services company (p. 289)?"
"'Banking with the poor has undergone a paradigm shift. It is no longer viewed as a mere social obligation. It is financially viable as well (p. 315).'"
I admit there is a lot more I need to understand about business and economics in order to really understand each of the ideas and examples in this book, but the main idea of working together with governments, NGOs and private sector firms in developing the bottom of the pyramid (BOP) market is an interesting idea. There are many ideas about innovation, product development and distribution, transparency, laws and corruption, communication, teaching and changing attitudes and practices....then several specific examples where progress is being made - in health care, food production, governance, housing, financing and other basic needs. Some interesting work and ideas.
Here area a few quotes from the book:
"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. Four billion poor can be the engine of the next round of global trade and prosperity. It can be a source of innovations. Serving the BOP consumers will demand innovations in technology, products and services, and business models (p. 1)."
"The BOP, as a market, provides a new growth opportunity for the private sector and a forum for innovations....BOP markets must become an integral part of the work of the private sector (p. 6)."
"The task of converting the poor into consumers is one of market development (p. 16)."
"When the poor are converted into consumers, they get more than access to products and services. They acquire the dignity of attention and choices from the private sector that were previously reserved for the middle-class and rich....Private-sector firms approaching the BOP market must focus on building trust between themselves and the consumers (p. 20)."
"we have identified the immediate benefits of treating the poor as consumers as well as the poverty alleviation process that will result as businesses focus on the BOP. It is clear that the consumers (the poor) benefit, but do the private-sector businesses benefit as well? The BOP market potential is huge: 4 to 5 million underserved people and an economy of more than $13 trillion PPP. The needs of the poor are many...the private sector must learn to innovate (p. 21)."
"Success in BOP markets will break existing paradigms. All examples in this book challenge conventional wisdom. They challenge the current paradigms in innovation and product and service delivery in fundamental ways (p. 43)."
"Unless we are willing to discard our biases, this opportunity will remain invisible and 'unattractive (p. 46).'"
"Unlike most people who retire to a quiet life, Padmashtree Dr. G. Venkataswamy, saw his leaving the the head of the Department of Ophthalmology, in 1976, as an opportunity to face a challenge that personally troubled him....eradicate needless blindness...in his home state (p. 265)."
"The number of people living on less than $1 per day in India is significantly greater than the entire population of the United States. From a social perspective, this is a humanitarian pandemic. From an economic perspective, these people represent the bottom of the pyramid (BOP). From a commercial perspective, these individuals are not considered a viable market given their minuscule purchasing power. Do the poor of India represent an opportunity for a large, organized financial services company (p. 289)?"
"'Banking with the poor has undergone a paradigm shift. It is no longer viewed as a mere social obligation. It is financially viable as well (p. 315).'"
June 21, 2010
This is a book with fresh, innovative ideas towards the eradication of poverty. It doesn't rail against capitalism and its exploitative instincts nor does it look at the world's poor with a condescending 'poor you' attitude. The basic proposition that the author makes is 'if we stop thinking of the poor as victims or as a burden and start recognising them as resilient and creative entrepreneurs and value-conscious consumers, a whole new world of opportunity will open up'. Though the author shows by real-world examples of businesses making profits by designing and selling goods to the poor of the world, his main interest is in how this will help in the reduction of poverty of these consumers. He believes that this is a much better way than pinning one's hopes on corporate social responsibility or charity or big government driven aid programs. The book has a number of case studies of how big companies in India, Brazil, Mexico etc have successfully engineered products for this 'bottom of the pyramid (BOP)' customers and how it helps the poor to better their lives.
Prahlad makes the following assertions about the BOP market from his experience:
There is money at the BOP for consumption; it is a connected and networked market; it accepts advanced technology readily if it is seen to be of practical use for them;it is brand-conscious too.
Prahlad believes that companies need to innovate for the BOP market. They cannot simply peddle the same product that they develop for the richer market. He specifies 12 principles of oinnovation for the BOP markets:
1. Quantum jump in the price-performance ration is needed.
2. Hybrid solutions are required using scalable, existing and emerging technologies
3. Solutions must be scalable for adaptation to different countries, cultures and languages in order to be profitable.
4. Solutions must conserve resources by eleminating, reducing and recycling waste
5.Product development must be done with deep understanding of functionality, not just form.
6. Process innovations are just as crucial as product innovations in BOP markets
7. BOP markets are poor in skills. Product design must focus on poor skills, infrastructure and difficulty of access.
8. Education of customers on product usage is key.
9. Products must work in hostile environments of noise, unsanitary conditions and consequent abuse
10. Research on interface is crucial given the nature of the customer population.
11. Innovations must reach the consumer.
12. Product developers must focus on the broad architecture so that new features can be easily incorporated.
Using these principles CK Prahlad describes the many innovative products that were developed by ICICI bank, Hindustan lever, Cemex and other companies. The book gives hope about improving the state of the poor thru 'inclusive capitalism'. It is devoid of ideology and judgement.
If at all there is one weak chapter in the book, it is about corruption in governance in poor countries. Prahlad describes an e-governance project in India as a mitigation of corruption. However, coming from India myself, I feel that he has not grappled with this problem adequately. E-governance may help a bit. But there are many government initiated poverty-alleviation programs where the low level bureaucrats and other govt employees exploit the urban and rural poor by appropriating their wages, not paying their wages on time and appropriating the foodgrains which are to be given to them. Corruption and kickbacks at the level of the poor is a substantial percentage of the total amount of money involved. So, poor nations need to find innovative ways to protect the poor from the petty bureaucrats and government employees as much as from corrupt politicians.
The book is an easy read and it gives hope and a substantial 'feel good'effect. I would recommend it to anyone interested in third world poverty and its alleviation.
Prahlad makes the following assertions about the BOP market from his experience:
There is money at the BOP for consumption; it is a connected and networked market; it accepts advanced technology readily if it is seen to be of practical use for them;it is brand-conscious too.
Prahlad believes that companies need to innovate for the BOP market. They cannot simply peddle the same product that they develop for the richer market. He specifies 12 principles of oinnovation for the BOP markets:
1. Quantum jump in the price-performance ration is needed.
2. Hybrid solutions are required using scalable, existing and emerging technologies
3. Solutions must be scalable for adaptation to different countries, cultures and languages in order to be profitable.
4. Solutions must conserve resources by eleminating, reducing and recycling waste
5.Product development must be done with deep understanding of functionality, not just form.
6. Process innovations are just as crucial as product innovations in BOP markets
7. BOP markets are poor in skills. Product design must focus on poor skills, infrastructure and difficulty of access.
8. Education of customers on product usage is key.
9. Products must work in hostile environments of noise, unsanitary conditions and consequent abuse
10. Research on interface is crucial given the nature of the customer population.
11. Innovations must reach the consumer.
12. Product developers must focus on the broad architecture so that new features can be easily incorporated.
Using these principles CK Prahlad describes the many innovative products that were developed by ICICI bank, Hindustan lever, Cemex and other companies. The book gives hope about improving the state of the poor thru 'inclusive capitalism'. It is devoid of ideology and judgement.
If at all there is one weak chapter in the book, it is about corruption in governance in poor countries. Prahlad describes an e-governance project in India as a mitigation of corruption. However, coming from India myself, I feel that he has not grappled with this problem adequately. E-governance may help a bit. But there are many government initiated poverty-alleviation programs where the low level bureaucrats and other govt employees exploit the urban and rural poor by appropriating their wages, not paying their wages on time and appropriating the foodgrains which are to be given to them. Corruption and kickbacks at the level of the poor is a substantial percentage of the total amount of money involved. So, poor nations need to find innovative ways to protect the poor from the petty bureaucrats and government employees as much as from corrupt politicians.
The book is an easy read and it gives hope and a substantial 'feel good'effect. I would recommend it to anyone interested in third world poverty and its alleviation.
July 29, 2010
Refreshing approach to foreign development. Prahalad (who died recently) takes the viewpoint that developed, free-market countries got where they are through private-sector innovation. Sidestepping the vicious political debates around foreign aid, he instead lays brick after brick of solid case studies showing where multi-national corporations were able to transform developing economies by simply studying them and creating products suited to the people there. He shows how this process also transforms a company, teaching them to be leaner, more efficient, and to rethink every aspect of what they do. The book builds a solid foundation of evidence that for-profit corporations can alleviate poverty, empower women, provide affordable healthcare, and improve government transparency.
The second half of the book is composed of in-depth case reports that provide additional detail on the examples described in the book. Most of them are written by Prahalad's students, and for some reason don't appear to have been proofread extensively. I was slightly disappointed by that oversight, but the material itself is fascinating.
Take a break from the blackboard-economy theories of the government bureaucrats and read about some on-the-ground, tangible ideas that are changing the world. It's refreshing.
The second half of the book is composed of in-depth case reports that provide additional detail on the examples described in the book. Most of them are written by Prahalad's students, and for some reason don't appear to have been proofread extensively. I was slightly disappointed by that oversight, but the material itself is fascinating.
Take a break from the blackboard-economy theories of the government bureaucrats and read about some on-the-ground, tangible ideas that are changing the world. It's refreshing.
March 24, 2023
As much as I appreciate new approaches to addressing chronic underdevelopment and poverty, this ain't it. By trying to turn the world poor into a massive new market for large multinational corporations and investor groups, the bottom of the pyramid seeks to hook the world's underresourced into becoming mini-consumers. This is just a new twist on tired neo-liberal economic theory. After forty years working against this stuff it saddens me to see yet another "bold solution" that merely increases profits for existing well-off companies. Go back to the drawing board. Or better yet, burn the drawing board and start with a clean slates. I agree with one thing however. True community development stars at the bottom - but it should be generated from the bottom, as well.
May 27, 2018
At first I was sceptical as it sounded like some rich guys (like Gates) will come and solve Bob's (sorry, BOP) problems, but as it appears, companies inside those countries are solving the problems themselves and are inventing what they need (well, because high end tech is privatized by Rentier-circus societies from the U.S. and Europe, i.e., "the saviors"). Then, I though, let it be, I'll give it four stars, because it's still interesting and makes me think a bit. And also, let's not forget, someone paid taxes in EU and they started to dig a trench near our house so we will be able to waste more water through that new drainage. And we aren't Bobs anyway. Doesn't feel so though, where is 100k/ year from my extensive programming?
July 14, 2011
This is a book about how "western" firms can do business in subsistence markets, especially in the very poor parts of the world where the average income is in the hundreds of dollars a year. The focus naturally is towards developing large nations like India, China and others, such as Brazil or Russia (together the BRIC nations). The key intuition here is that firms need to think about what they do differently and develop their products differently if they are to succeed. The punchline is that this involves finding ways to substitute for the infrastructure that is missing in many of these settings but which is too expensive for individual firms to provide themselves, due to collective action problems. For example, how to get milk regularly collected and processed from thousands of small farms so that the milk remains healthy and drinkable on the one hand and that dairy farmers who provide the milk get paid and supported on the other. How to provide medical services throughout a rural area in a country where doctors are very scarce (hint: use advanced imaging and telecommunications technology).
The message is that this sort of business can be done, profits can be made, and markets grown through this types of ventures. This also has the benefit of providing an infrastructure to the country and helping improve the lives of thousands - or even tens of thousands - of poor individuals in these countries. This book is thus a descendant of the "small is beautiful" literature of Schumacher and others and a precurser of the green movement - with a message of "doing well by doing good".
The book is written is the style of a Harvard Case book or an HBR article, which means that the message is carefully managed and a bit overwritten with the prevailing trade talk. It is a good example of the style, but reading these books sometimes demands an acquired taste. A big benefit of the book is that it provides a large number of case studies to illustrate the points (and provide cases for instructors wanting to use this book in class).
The key insights of this approach are both interesting and clever. The author, who recently passed away of an unexpected illness, was a well known strategy professor at Michigan who was a legend among CEO on the executive training circuit. While it was long and a bit repetitive in spots, the story is plausible and engaging.
The message is that this sort of business can be done, profits can be made, and markets grown through this types of ventures. This also has the benefit of providing an infrastructure to the country and helping improve the lives of thousands - or even tens of thousands - of poor individuals in these countries. This book is thus a descendant of the "small is beautiful" literature of Schumacher and others and a precurser of the green movement - with a message of "doing well by doing good".
The book is written is the style of a Harvard Case book or an HBR article, which means that the message is carefully managed and a bit overwritten with the prevailing trade talk. It is a good example of the style, but reading these books sometimes demands an acquired taste. A big benefit of the book is that it provides a large number of case studies to illustrate the points (and provide cases for instructors wanting to use this book in class).
The key insights of this approach are both interesting and clever. The author, who recently passed away of an unexpected illness, was a well known strategy professor at Michigan who was a legend among CEO on the executive training circuit. While it was long and a bit repetitive in spots, the story is plausible and engaging.
March 29, 2015
Bottom of the Pyramid or BOP is widely used in development circles and was first defined by Prahalad in an article which eventually grew into this book. The BOP refers to the billions of people who are living on only a couple dollars a day and thus have very little individual consuming power, but summed up across billions the opportunity is massive. Prahalad saw an enormous opportunity for businesses to focus on this group of people which he believed could simultaneously make profits and improve the lives of billions. Prahalad refers to many interesting case studies which are detailed in the appendix (actually making up a good deal of the page count). The book is not going to win any literary prizes but this is a foundational text for those interested in development and Sustainability.
A couple other points worth mentioning:
-When Prahalad first proposed the BOP business strategy in 1998, it was quite revolutionary for most international businesses to focus on such poor consumers. So rapidly has it been accepted that many readers will find his proposals to be yesterday's news.
-Prahalad was a business school professor. He proposed this idea as a business idea for businesses to make more money. He is not critiquing the market model or proposing a new charity model. What he is saying is that this business model could also make people's lives better.
-As with all authors he oversells his ideas but I never came away thinking he thought this was a cure for the world's problems.
-He only superficially touches on some of the Sustainability problems with the BOP approach: vast increases in waste generation (b/c of smaller packaging); out competing of local business by BOP focused trans-nationals; reducing cultural diversity to just name a few.
Check out my reviews of Sustainability books
A couple other points worth mentioning:
-When Prahalad first proposed the BOP business strategy in 1998, it was quite revolutionary for most international businesses to focus on such poor consumers. So rapidly has it been accepted that many readers will find his proposals to be yesterday's news.
-Prahalad was a business school professor. He proposed this idea as a business idea for businesses to make more money. He is not critiquing the market model or proposing a new charity model. What he is saying is that this business model could also make people's lives better.
-As with all authors he oversells his ideas but I never came away thinking he thought this was a cure for the world's problems.
-He only superficially touches on some of the Sustainability problems with the BOP approach: vast increases in waste generation (b/c of smaller packaging); out competing of local business by BOP focused trans-nationals; reducing cultural diversity to just name a few.
Check out my reviews of Sustainability books
January 3, 2018
The concept was very simple and good for companies who were not at all thinking about the poor, but I think that this book was a bit outdated when I read this. Because (a) companies do focus on profits from poor now (b) the notion of profits is no more the only factor for improving business or the lives of poor people. In fact, I would not like such an approach anymore in this heavily capitalist world because it doesn't ensure the benefit of the poor, but rather benefits of the company - which might not be a good for an equal society.
Some takeaway points I had written/borrowed (I can't recall right now):
The poor cannot participate in the benefits of globalization without an active engagement and without access to products and services that represent global quality standards. They need to be exposed to the range and variety of opportunities that inclusive globalization can provide. The poor represent a “latent market” for goods and services. Active engagement of private enterprises at the BOP is a critical element in creating inclusive capitalism, as private-sector competition for this market fosters attention to the poor asconsumers. It creates choices for them. They do not have to depend only on what is available in their villages.
A quote which was very influential:
"When the poor are converted into consumers, they get more than access to products
and services. They acquire the dignity of attention and choices from the private sector
that were previously reserved for the middle-class and rich."
Some takeaway points I had written/borrowed (I can't recall right now):
The poor cannot participate in the benefits of globalization without an active engagement and without access to products and services that represent global quality standards. They need to be exposed to the range and variety of opportunities that inclusive globalization can provide. The poor represent a “latent market” for goods and services. Active engagement of private enterprises at the BOP is a critical element in creating inclusive capitalism, as private-sector competition for this market fosters attention to the poor asconsumers. It creates choices for them. They do not have to depend only on what is available in their villages.
A quote which was very influential:
"When the poor are converted into consumers, they get more than access to products
and services. They acquire the dignity of attention and choices from the private sector
that were previously reserved for the middle-class and rich."
May 7, 2014
Excellent study on how markets can be generate welfare.
C. K. Pralhad presents an interesting study into how the Bottom-of-the-Pyramid markets are a rich source of market expansion. The symbiotic relationship that Dr. Prahalad has elaborated upon will benefit both the people at the BOP, as well as the companies seeking to expand here.
This is not a book on political science. It is book focusing on solutions to develomental issues. It presents a detailed study of several cases from across the world. The entire IInd section is dedicated to such cases studies. For the uninitiated, the videos of the case studies can be found at -
http://www.youtube.com/watchv=79JOHMr...
For a counter-view, check out this TED talk -
http://www.youtube.com/watch?v=_l2_3y...
The next time someone goes into the cliched and naive narrative of how the markets are inherently anti-welfare, ask them to read this book.
The implications of Dr. Prahalad's theories are enormous, given the way the global economic and human development indices are stacked at the moment. Just as a quick insight - Dr. Prahalad deviates from the usual story of a "trickle-down" growth leading to prosperity; he suggests a much more focused and proactive role for the market at the BOP.
A very stimulating read. Do not accept it blindly; subject it to inquiry. But this is a gold-mine of new ideas.
C. K. Pralhad presents an interesting study into how the Bottom-of-the-Pyramid markets are a rich source of market expansion. The symbiotic relationship that Dr. Prahalad has elaborated upon will benefit both the people at the BOP, as well as the companies seeking to expand here.
This is not a book on political science. It is book focusing on solutions to develomental issues. It presents a detailed study of several cases from across the world. The entire IInd section is dedicated to such cases studies. For the uninitiated, the videos of the case studies can be found at -
http://www.youtube.com/watchv=79JOHMr...
For a counter-view, check out this TED talk -
http://www.youtube.com/watch?v=_l2_3y...
The next time someone goes into the cliched and naive narrative of how the markets are inherently anti-welfare, ask them to read this book.
The implications of Dr. Prahalad's theories are enormous, given the way the global economic and human development indices are stacked at the moment. Just as a quick insight - Dr. Prahalad deviates from the usual story of a "trickle-down" growth leading to prosperity; he suggests a much more focused and proactive role for the market at the BOP.
A very stimulating read. Do not accept it blindly; subject it to inquiry. But this is a gold-mine of new ideas.
April 20, 2013
An elderly uncle of mine (my father called him Shachi da, I never got to know his real name) once went to Banaras just to read The Bhagwat Gita in its unabridged form under the supervision of a sadhu.
I find myself fortunate to work for my present client as I would not have been able to appreciate this book if I read it before I worked here. To appreciate this book you need to be in a particular frame of mind. Thanks to my work, I am in such a frame of mind.
I paid special attention to the chapter on ICICI as it was related to the line of business that I am presently involved in. However what touched me most is the story on the Jaipur Foot. Its scary to believe that there is a country that goes by the name Cambodia where there are as many land mines as there are people. The book had many such startling facts. The e-choupal story of ITC was also interesting as I would never have known the plight of the Indian farmers and the reason for such penury otherwise.
This adds up to my list of non-fiction book list and I am happy to reflect that it has been a good addition. At times it felt like a text book but guess what, I liked it that way. The reason could be that I haven't had the luxury of reading a text book since a long time. The pity is that nobody shall ask me to read a text book ever again.
I find myself fortunate to work for my present client as I would not have been able to appreciate this book if I read it before I worked here. To appreciate this book you need to be in a particular frame of mind. Thanks to my work, I am in such a frame of mind.
I paid special attention to the chapter on ICICI as it was related to the line of business that I am presently involved in. However what touched me most is the story on the Jaipur Foot. Its scary to believe that there is a country that goes by the name Cambodia where there are as many land mines as there are people. The book had many such startling facts. The e-choupal story of ITC was also interesting as I would never have known the plight of the Indian farmers and the reason for such penury otherwise.
This adds up to my list of non-fiction book list and I am happy to reflect that it has been a good addition. At times it felt like a text book but guess what, I liked it that way. The reason could be that I haven't had the luxury of reading a text book since a long time. The pity is that nobody shall ask me to read a text book ever again.
July 30, 2011
For anyone looking for concrete examples as to how to follow a practical route to improving the lives of the poor, the case studies in this book are great. Prahalad is at his theoretical best here, putting together a simple blueprint which is extrapolated from the collective examples and experiences with a number of cases in a number of countries.
The main issue I have with the book is the overarching emphasis on capitalism as a way out of poverty. One of the main tenets of the argument used by Prahalad is that the poor aspire to be better off, and all we have to do as good capitalists is to provide them with the consumer goods and services which they crave. This will (as a great by-product) improve their lives. However, the book never questions this basic assumption, and does not look at the relevance of capitalism to these new 'bottom of pyramid' markets.
In my view this is a huge mistake. Getting consumer goods to the poor may seem like a good thing to do, but the environmental consequences (of the additional resources needed to provide these goods) as well as the fact that the poor, once they are middle class, will fall into the middle class trap of wanting to be upper class, is not addressed at all.
The main issue I have with the book is the overarching emphasis on capitalism as a way out of poverty. One of the main tenets of the argument used by Prahalad is that the poor aspire to be better off, and all we have to do as good capitalists is to provide them with the consumer goods and services which they crave. This will (as a great by-product) improve their lives. However, the book never questions this basic assumption, and does not look at the relevance of capitalism to these new 'bottom of pyramid' markets.
In my view this is a huge mistake. Getting consumer goods to the poor may seem like a good thing to do, but the environmental consequences (of the additional resources needed to provide these goods) as well as the fact that the poor, once they are middle class, will fall into the middle class trap of wanting to be upper class, is not addressed at all.
February 5, 2015
This book gives a effective picture of the reality at the bottom of the pyramid. What irks most people is that this book talks too much about how to sell to the poor than about how to uplift them.
Yet... After reading it i have got quite a few insights at what can be done to get the poor out of poverty. While i disagree with Prahlad whose writing implies that the increased use of shampoo in rural india is an indicator of development.. private organisations have certainly helped make inroads into these regions which have bought along infrastructure and development here even though it was done to sell more shampoos.
Some examples cited by the author are really very inspiring. It is important to uplift people at the bottom of the pyramid in a sustainable way. Mere charity can't help here. People need to be empowered. Project Shakti by HLL, Arvind eye care centre, ITC e-choupal are cases really worth a read. Also, i was surprised to know that SHG- Self help groups was first concieved by Bank of Madura. Every individual working at the bottom of the pyramid must realize the importance of this financial vehicle.
All in all this book is a must read for anyone who plans to work in any domain aiming at eradicating poverty
Yet... After reading it i have got quite a few insights at what can be done to get the poor out of poverty. While i disagree with Prahlad whose writing implies that the increased use of shampoo in rural india is an indicator of development.. private organisations have certainly helped make inroads into these regions which have bought along infrastructure and development here even though it was done to sell more shampoos.
Some examples cited by the author are really very inspiring. It is important to uplift people at the bottom of the pyramid in a sustainable way. Mere charity can't help here. People need to be empowered. Project Shakti by HLL, Arvind eye care centre, ITC e-choupal are cases really worth a read. Also, i was surprised to know that SHG- Self help groups was first concieved by Bank of Madura. Every individual working at the bottom of the pyramid must realize the importance of this financial vehicle.
All in all this book is a must read for anyone who plans to work in any domain aiming at eradicating poverty
March 1, 2008
The content was okay but the writing and particularly editing was the worst I've ever seen. There were sections that appeared to have each paragraph written by a different person and then slapped together without an editor's review. The same paragraph would appear consecutively with just a word change or two (this happened in two spots). Topics would be introduced, only to be re-introduced slightly later. Acronyms would never be defined. The same info would be covered over and over again but with each new appearance the author treated it as if it had never been discussed previously. It was so bad that it was hard to concentrate on the content while watching for the next editing blunder.
June 4, 2008
While the author had some interesting ideas, he didn't sell me on the idea that large multinational corporation targeting extremely poor populations is good for the poor. I can certainly see the benefit for the corp but not for the people in poverty. Some distribution techniques might help a person here and there, but not as a solution to poverty in itself.
Most of his examples were nonprofits or in one case, Grameen Bank, which while being a for profit business, it was designed with a social motive in mind, not to make money, but to break even and help the poor. Not a common corporate structure. However, this book did lead me to Banker for the Poor, which was an excellent read.
Most of his examples were nonprofits or in one case, Grameen Bank, which while being a for profit business, it was designed with a social motive in mind, not to make money, but to break even and help the poor. Not a common corporate structure. However, this book did lead me to Banker for the Poor, which was an excellent read.
This entire review has been hidden because of spoilers.
May 6, 2017
'Fortune' came with a certain reputation and it certainly didn't live up to it. In fact, the word 'Fortune' in the title is a misnomer for nowhere does the author tell you how much money the featured entities make by serving the financially weak. And that makes the book just an appeal to the society's collective conscience, and not the strident call to action one had expected. The congratulatory messages from CEOs of the featured companies seem more like a returned favour than a meaningful endorsement. Disappointing.
March 23, 2009
I liked this book because it helped me view the world's poorest population in a different light -- no more victim mentality, but rather as a huge market opportunity for companies willing to serve their unique needs. It's not easy and doesn't work in every case, but still interesting. Book is a bit dry, but full if interesting case studies that were new to me (and I read a lot of these types of books).
May 28, 2009
This is a book that every emerging markets business development leader should read. With that said, the case studies are the few successful entities out of the many others that fail. This is a good introduction to how some of the business models work in a limited income-source setting.
May 4, 2010
I really liked the concept of "fortune at the botoom of the pyramid". The examples were very interesting and varied as well.
What bogged me down was the long, bland, typical "professor"ish narration... it was just too boring.
What bogged me down was the long, bland, typical "professor"ish narration... it was just too boring.
March 16, 2011
It's was ok. Multi-nationals can really make fortune from the so called poor countries, but this author did not talk much on 'how' to actually get the fortune.
August 25, 2019
A visionary's idea
On the one hand this book is endorsed by Microsoft's Bill Gates and Former Secretary of State Madeleine Albright. That ought give the prospective reader some idea of its value. On the other hand, it might be asked, what kind of book is this that purports to tell businessmen how to make money by selling goods and services to the poorest people on earth? After all, the poorest people that have any disposable income at all make something like two dollars a day.
First question then is, how big is the market at the bottom of the pyramid (BOP)? Prahalad writes that China's per capita gross domestic product of $1000 really represents a dollar purchasing power parity (PPP) several times that, resulting in a $5-trillion dollar economy. He sees the Indian economy as being worth about $3-trillion in PPP terms. (p. 10) It's easy to see that even the apocryphal "two dollars a day" multiplied by two, three or four billion or so results in a whole lot of money.
The second thing that might be asked is, is it really moral for the business world to turn its considerable powers of inducement and persuasion on people who have so little to begin with? What kind of person would aim to exploit those least able to afford the exploitation? The answer given persuasively by Prahalad is that by making products and services available to the poor, two good things will happen. First is the fact that goods and services hitherto unavailable to the poor will actually become available. Second, these products and services will increase their standard of living and allow them to "acquire the dignity of attention and choices from the private sector that were previously reserved for the middle-class and rich." (p. 20)
How might this work? Presently people in the poorest neighborhoods in the world ironically often pay a premium for what little goods and services they get. Prahalad points out that this is because they are paying a "poverty penalty" which is the "result of inefficiencies in access to distribution and [because of] the role [played by]...local intermediaries." By "local intermediaries" he means the line of middlemen--some traditional, some corrupt, some both--that presently stand between the poor and their products and services. These middlemen add no value but have their hands out and therefore artificially increase prices for the people at the BOP. Products using modern distribution methods will undersell the old ways.
Prahalad emphasizes targeting products precisely to the needs of the poor. BOP people are "value-conscious by necessity," he argues, and contrary to what might be assumed are "very brand-conscious." They are interested in "aspiration products"--brand names--since these products symbolize a higher standard of living and a better way of life. We can see this in our own poor neighborhoods where brand icons like Nike and Sony are almost worshiped. Prahalad notes that the "poor have unpredictable income streams. Many subsist on daily wages and...tend to make purchases only when they have cash and buy only what they need for that day." Consequently a good marketing strategy is to offer "single-service packaging--be it shampoo, ketchup, tea and coffee, or aspirin..."
This may work I believe if, and only if, the products that big business makes available to the people at the BOP really do improve the quality of their lives. If they are persuaded to buy, say, cigarettes which they would not otherwise buy, clearly this will not improve the quality of their lives. If they are persuaded to buy soft drinks and other artificial "foods" consisting of empty calories, it's doubtful that they will benefit.
But is all of this more "globalization trickle down"?--that is, the rich get richer and the poor get--well, somewhat less poor? Prahalad believes that turning the people at the BOP into consumers will raise their standard of living and in the long run eradicate poverty. He uses the phrase "creating the capacity to consume" as a means to this end.
The unstated assumption behind Prahalad's idea (and the consumptive economy in general) is that there is great wealth in the world that only needs to be created by human ingenuity, and then efficiently distributed by the capabilities of the modern corporation. If we can find an energy source as cheap as oil and make a smooth transition to an oil-less economy, I think there is a good chance that Prahalad's vision will be realized. However, if we don't solve the coming energy problem, Prahalad's idea will gather dust and decay like so many abandoned SUVs alongside roads that we can't afford to repair.
In a sense then, this could be a visionary book well ahead of its time.
--Dennis Littrell, author of “The World Is Not as We Think It Is”
On the one hand this book is endorsed by Microsoft's Bill Gates and Former Secretary of State Madeleine Albright. That ought give the prospective reader some idea of its value. On the other hand, it might be asked, what kind of book is this that purports to tell businessmen how to make money by selling goods and services to the poorest people on earth? After all, the poorest people that have any disposable income at all make something like two dollars a day.
First question then is, how big is the market at the bottom of the pyramid (BOP)? Prahalad writes that China's per capita gross domestic product of $1000 really represents a dollar purchasing power parity (PPP) several times that, resulting in a $5-trillion dollar economy. He sees the Indian economy as being worth about $3-trillion in PPP terms. (p. 10) It's easy to see that even the apocryphal "two dollars a day" multiplied by two, three or four billion or so results in a whole lot of money.
The second thing that might be asked is, is it really moral for the business world to turn its considerable powers of inducement and persuasion on people who have so little to begin with? What kind of person would aim to exploit those least able to afford the exploitation? The answer given persuasively by Prahalad is that by making products and services available to the poor, two good things will happen. First is the fact that goods and services hitherto unavailable to the poor will actually become available. Second, these products and services will increase their standard of living and allow them to "acquire the dignity of attention and choices from the private sector that were previously reserved for the middle-class and rich." (p. 20)
How might this work? Presently people in the poorest neighborhoods in the world ironically often pay a premium for what little goods and services they get. Prahalad points out that this is because they are paying a "poverty penalty" which is the "result of inefficiencies in access to distribution and [because of] the role [played by]...local intermediaries." By "local intermediaries" he means the line of middlemen--some traditional, some corrupt, some both--that presently stand between the poor and their products and services. These middlemen add no value but have their hands out and therefore artificially increase prices for the people at the BOP. Products using modern distribution methods will undersell the old ways.
Prahalad emphasizes targeting products precisely to the needs of the poor. BOP people are "value-conscious by necessity," he argues, and contrary to what might be assumed are "very brand-conscious." They are interested in "aspiration products"--brand names--since these products symbolize a higher standard of living and a better way of life. We can see this in our own poor neighborhoods where brand icons like Nike and Sony are almost worshiped. Prahalad notes that the "poor have unpredictable income streams. Many subsist on daily wages and...tend to make purchases only when they have cash and buy only what they need for that day." Consequently a good marketing strategy is to offer "single-service packaging--be it shampoo, ketchup, tea and coffee, or aspirin..."
This may work I believe if, and only if, the products that big business makes available to the people at the BOP really do improve the quality of their lives. If they are persuaded to buy, say, cigarettes which they would not otherwise buy, clearly this will not improve the quality of their lives. If they are persuaded to buy soft drinks and other artificial "foods" consisting of empty calories, it's doubtful that they will benefit.
But is all of this more "globalization trickle down"?--that is, the rich get richer and the poor get--well, somewhat less poor? Prahalad believes that turning the people at the BOP into consumers will raise their standard of living and in the long run eradicate poverty. He uses the phrase "creating the capacity to consume" as a means to this end.
The unstated assumption behind Prahalad's idea (and the consumptive economy in general) is that there is great wealth in the world that only needs to be created by human ingenuity, and then efficiently distributed by the capabilities of the modern corporation. If we can find an energy source as cheap as oil and make a smooth transition to an oil-less economy, I think there is a good chance that Prahalad's vision will be realized. However, if we don't solve the coming energy problem, Prahalad's idea will gather dust and decay like so many abandoned SUVs alongside roads that we can't afford to repair.
In a sense then, this could be a visionary book well ahead of its time.
--Dennis Littrell, author of “The World Is Not as We Think It Is”
March 27, 2021
Finding a fortune, or exploiting the poor? A review of Fortune at the Bottom of Pyramid by CK Prahalad
I feel that this is a good book on innovation, but not a great book on societal change per se. I feel that Prahalad takes for granted that while converting the Bottom of the Pyramid to customers is possible – in fact he makes a fantastic case for the “fortune” lying below, he needs to make a clearer link to the development of peoples – if not, it may read like an opportunistic sell to MNCs to extract wealth from the poor when the top of the pyramid becomes more and more competitive. Surely, the poor are not merely a blue ocean.
In this sense, I feel that this book needs to be read alongside Christensen, Ojomo and Dilon’s "The Prosperity Paradox" which basically talks about the direct/indirect impact of creating great products to sell to customers; in this case Indomie in Nigeria. Ojomo in his talk highlights this impact – the creation of jobs, the provision of basic nutrients at low cost, ripple effect on quality of life, etc. Though even this requires a long-term, more nuanced understanding of impact.
In the Philippines, for example, because many poor cannot afford bulk buys, they buy things in sachets. Yet the long-term repercussions are severe:
a. Many of the poor cannot learn to save, whatever is earned goes to what is necessary, even when clearly, buying in bulk saves more money in the long run.
b. Environmental impact is terrible in terms of creation of plastic waste. Even though this could be disputed, one just needs to look at the landfill in the Philippines to experience (not just understand) the impact
c. Addiction – in Laos, for example, the poor cannot afford good quality ingredients. MSG is used as excessively, and today, in Laos there is little cooking without excessive MSG. There are, of course health repercussions and longer-term consequences on taste, tradition and culture as well.
These nuances requires a view from the balcony, and not just the bottom, to make customer co-creation truly inclusive and not exploitative. While Prahalad picks “good” companies which seem to be ethical, there are as many companies that make money off the poor by selling them what they don’t need too – think alcohol, cigarettes, and gambling. In many ways they too create industries, job opportunities, etc – but at what cost? These companies too nail the logic that Prahalad suggests, perhaps even better than he describes in terms of “co-creation”.
However, as mentioned, this is still a decent book on product innovation - as in how to co-create with the poor, to provide them great products, and transform the satisfaction of the needs of the poor into competitive advantage for our own firms. Prahalad’s insights here are pretty interesting; some of which I highlight here, especially due to my own background in non-profit work:
a. The poor are willing to adopt (and upgrade) new ideas/new tech/new products, but what’s necessary is ease of use, and of course a competitive price point.
b. Deskilling is necessary – making things simpler to use makes the product and idea easier to spread.
c. Figure out payment modalities and supply chains for local realities and contexts.
d. Understand the needs of the poor to better serve their needs.
All in all, I'd consider this a great book on product innovation, but what is wise is to take the underlying assumptions with a pinch of iodine.
I feel that this is a good book on innovation, but not a great book on societal change per se. I feel that Prahalad takes for granted that while converting the Bottom of the Pyramid to customers is possible – in fact he makes a fantastic case for the “fortune” lying below, he needs to make a clearer link to the development of peoples – if not, it may read like an opportunistic sell to MNCs to extract wealth from the poor when the top of the pyramid becomes more and more competitive. Surely, the poor are not merely a blue ocean.
In this sense, I feel that this book needs to be read alongside Christensen, Ojomo and Dilon’s "The Prosperity Paradox" which basically talks about the direct/indirect impact of creating great products to sell to customers; in this case Indomie in Nigeria. Ojomo in his talk highlights this impact – the creation of jobs, the provision of basic nutrients at low cost, ripple effect on quality of life, etc. Though even this requires a long-term, more nuanced understanding of impact.
In the Philippines, for example, because many poor cannot afford bulk buys, they buy things in sachets. Yet the long-term repercussions are severe:
a. Many of the poor cannot learn to save, whatever is earned goes to what is necessary, even when clearly, buying in bulk saves more money in the long run.
b. Environmental impact is terrible in terms of creation of plastic waste. Even though this could be disputed, one just needs to look at the landfill in the Philippines to experience (not just understand) the impact
c. Addiction – in Laos, for example, the poor cannot afford good quality ingredients. MSG is used as excessively, and today, in Laos there is little cooking without excessive MSG. There are, of course health repercussions and longer-term consequences on taste, tradition and culture as well.
These nuances requires a view from the balcony, and not just the bottom, to make customer co-creation truly inclusive and not exploitative. While Prahalad picks “good” companies which seem to be ethical, there are as many companies that make money off the poor by selling them what they don’t need too – think alcohol, cigarettes, and gambling. In many ways they too create industries, job opportunities, etc – but at what cost? These companies too nail the logic that Prahalad suggests, perhaps even better than he describes in terms of “co-creation”.
However, as mentioned, this is still a decent book on product innovation - as in how to co-create with the poor, to provide them great products, and transform the satisfaction of the needs of the poor into competitive advantage for our own firms. Prahalad’s insights here are pretty interesting; some of which I highlight here, especially due to my own background in non-profit work:
a. The poor are willing to adopt (and upgrade) new ideas/new tech/new products, but what’s necessary is ease of use, and of course a competitive price point.
b. Deskilling is necessary – making things simpler to use makes the product and idea easier to spread.
c. Figure out payment modalities and supply chains for local realities and contexts.
d. Understand the needs of the poor to better serve their needs.
All in all, I'd consider this a great book on product innovation, but what is wise is to take the underlying assumptions with a pinch of iodine.
August 17, 2019
This is an inspiring book and a very timely read (it was written around 20 years back, but is super-relevant today). CK Prahalad shows the reader how corporations can work towards solving poverty. The book is not about grants or monetary aid. It's about strategies to create ecosystems which converts Bottom of pyramid population into micro-creators and micro-consumers. The author contends that BOP is a huge market opportunity. If corporations want to unlock this market , they need to understand the aspirations and reality of the BOP (Bottom-of-pyramid) customers. It's not just about delivering the same products at lower price point. It's about creating high-quality products, and market them to the consumers with right delivery vehicle, financing and partnerships. The book contains insightful case studies about companies in India and around the world, which have delivered pretty awesome products to BOP customers. It sheds light on ingenious strategies which aim to reengineer instead of reinvent the existing dynamics of consumer's world. It focusses on creating partnerships and leveraging existing ecosystem of NGOs, outreach partners, local governments and community.
CEMEX, a cement company leveraged ROSCAs prevalent in Mexico to let users create and save towards building their own home. Casas Bahia in Brazil created a system to let consumers buy consumer electronics on credit. Back home in India, HUL created product SKUs and distribution channels to serve BOP consumer. ICICI bank leveraged partnership with Mudra Bank to take financial products to rural market. ITC leveraged IT to create e-chaupal and empower a farmer take decision about selling their produce and order inputs for their farms.
This book was written in a time, when network connectivity was limited to tier-1 cities and there were media-dark areas. That means, a large fraction of population not connected to mainstream media. Reading it today, knowing that Jio has happened, every chapter sparks ideas and possibilities. This is an inspiring book because it gives framework for businesses to contribute to society, uplift the community and effect positive lasting change.
CEMEX, a cement company leveraged ROSCAs prevalent in Mexico to let users create and save towards building their own home. Casas Bahia in Brazil created a system to let consumers buy consumer electronics on credit. Back home in India, HUL created product SKUs and distribution channels to serve BOP consumer. ICICI bank leveraged partnership with Mudra Bank to take financial products to rural market. ITC leveraged IT to create e-chaupal and empower a farmer take decision about selling their produce and order inputs for their farms.
This book was written in a time, when network connectivity was limited to tier-1 cities and there were media-dark areas. That means, a large fraction of population not connected to mainstream media. Reading it today, knowing that Jio has happened, every chapter sparks ideas and possibilities. This is an inspiring book because it gives framework for businesses to contribute to society, uplift the community and effect positive lasting change.
February 4, 2021
Fortune at the bottom of the pyramid includes case studies of various companies that perform extremely well in markets that are ignored and forgotten by the best companies in the world. The book starts off with a company in mexico that builds houses for the poor, with support that extends over several years in EMI payments.
The books talks about Aravind Eye Hospitals in India and their ability to perform record number of operations and manufacture eye equipment at a fraction of the cost.
The example of wheel brand of washing powder, lifebuoy soap, Annapurna Iodized salt, Indian Tobacco Company ITC - E-Choupal, Jaipur Foot and other examples from the third world and the lessons derived from such a business model.
For example this model often allows for testing products in the BOP - Bottom of the Pyramid Markets before deploying them in the developed markets, thus lowering the expenses and the risks of failure.
Similarly, with proper research firms established in the third worlds where the products are deployed you can transfer these learnings from the bottom of the pyramid to the top fo the pyramid with very little investment and expenditure.
The books talks about Aravind Eye Hospitals in India and their ability to perform record number of operations and manufacture eye equipment at a fraction of the cost.
The example of wheel brand of washing powder, lifebuoy soap, Annapurna Iodized salt, Indian Tobacco Company ITC - E-Choupal, Jaipur Foot and other examples from the third world and the lessons derived from such a business model.
For example this model often allows for testing products in the BOP - Bottom of the Pyramid Markets before deploying them in the developed markets, thus lowering the expenses and the risks of failure.
Similarly, with proper research firms established in the third worlds where the products are deployed you can transfer these learnings from the bottom of the pyramid to the top fo the pyramid with very little investment and expenditure.
April 6, 2019
The Fortune at The Bottom of The Pyramid by C K Prahalad, is an interesting perspective, about the untapped potential of poor people living below 2 dollars a day, called BOP (Bottom of The Pyramid). Though the book is poorly edited and the stats are pretty old (prior to 2002) the case studies are thoroughly researched, in-depth and comprehensive. Case studies especially pertaining to Jaipur Foot, Aravind Eye Hospitals, ITCs e-choupal and other socially sustainable responsible entities make an interesting reading. Those commies and socialists who think MNCs are only there to exploit the poor and the panacea lies only in inefficient and corrupt PSUs and NGOs and 'profit' is a dirty word, must read this. Full of interesting ideas and concepts and a must read for all the management students.
January 19, 2023
This is a nice book and surely written on a less explored topic. The book really gives some nice insights on the pragmatic situations / needs for the BoP population. Also, uses some relevant examples like HLL , Voxiva, Casas bahia etc to emphasis on MNC's using some innovative ways and making it big in this potential global market.
The book brings into perspective some real perspectives hidden and unconsidered about the BoP markets, at the same time leaves you asking for more information. More than half the book is explaining in detail the multiple MNC examples of making it big. which might look too much to read. The writer could have spent some more energy on explaining the potentials or data based business potential etc to really live up to the title of the book.
A good read nevertheless, for sheer lack of books on this topic.
The book brings into perspective some real perspectives hidden and unconsidered about the BoP markets, at the same time leaves you asking for more information. More than half the book is explaining in detail the multiple MNC examples of making it big. which might look too much to read. The writer could have spent some more energy on explaining the potentials or data based business potential etc to really live up to the title of the book.
A good read nevertheless, for sheer lack of books on this topic.
February 2, 2020
Don't let the critics scare you off. Cynics may warn that Wharton professor CK Prahalad's book is a recipe for exploitation of the poor. Ie, seeing them only as a "market" for greedy capitalists.
A more charitable reading is that Prahalad may be onto something: eg, that market solutions involving the poor are much more likely to endure than paternalistic government programs that helicopter in funds to lift the poor from their condition.
He examines the underlying logic of these programs and offers alternatives based on a different foundation. The title is unfortunate. Rather than the "fortune" at the bottom of the pyramid, I prefer the "opportunity." But this is semantics. Great ideas and examples throughout.
Recommended.
A more charitable reading is that Prahalad may be onto something: eg, that market solutions involving the poor are much more likely to endure than paternalistic government programs that helicopter in funds to lift the poor from their condition.
He examines the underlying logic of these programs and offers alternatives based on a different foundation. The title is unfortunate. Rather than the "fortune" at the bottom of the pyramid, I prefer the "opportunity." But this is semantics. Great ideas and examples throughout.
Recommended.
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