Recently in Poverty Alleviation Category

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The recent release of the 5th Assessment Report from the Intergovernmental Panel on Climate Change (IPPC), and last month's shattering of the 400 parts per million carbon dioxide milestone in the northern hemisphere reminded me once again of the perilous times that we live in.   The data reveal that the process of change in our climate system is happening even faster than predicted five years ago in the last IPCC assessment report:  more rapid melting of ocean ice in the arctic, accelerating loss of the Greenland and West Antarctic ice sheets, faster melting of the permafrost and mountain glaciers, rising ocean levels, dying coral reefs, more extreme storms and floods, more severe droughts, and longer and more intense wildfires.  

And we should keep in mind that, despite claims to the contrary, the scientific process is inherently conservative--it takes strong evidence for any results to be statistically significant and replication by others in order for any single study to stand up to scrutiny.  At the end of the day, science is really about rejecting competing hypotheses that might explain a particular phenomenon--a sophisticated game of "Last Man Standing," so to speak.

In a strange way then, science is a competitive process. Biased or poorly designed studies do not make it through the peer review process. Only the strong survive. As a Ph.D. who has spent most of the past three decades in academia, I can attest to this!  So, the claims made by some that the thousands of climate scientists from around the world involved in the IPCC process are either: 1. conspiring together; or 2. swayed by their left-left leaning political or ideological persuasions (a hypothesis yet to be tested), are simply preposterous: the scientific process itself mitigates against such tendencies.  This realization makes the most recent IPCC report even more foreboding.

Yet with a few notable exceptions (e.g. the current initiative in the US to issue carbon dioxide regulations for coal-fired power plants under the Clean Air Act), the release of this report has generated barely a whisper among the political leaders, policy makers and corporate executives around the world in a position to take real action.  The periodic issuance of these assessment reports from the IPCC has become the scientific equivalent of Chicken Little proclaiming that the "sky is falling."  Few still outright deny that the climate is changing.  Instead, the art of denial has now morphed into assertions that such changes are either: 1. Part of a natural cycle (i.e. not caused by human activity); 2. Not very significant; or 3. Potentially "beneficial" for humanity (see below for further explanation).

The first assertion simply does not hold up to scientific scrutiny.  Suffice it to say that the evidence is overwhelming that human activity is driving the bulk of the greenhouse gas loading of the atmosphere that we are experiencing.  Combustion of fossil fuels, emissions of methane from leaking natural gas pipes and wells, livestock, and melting permafrost, and deforestation (land clearing) for agriculture are clearly the culprits.

The second and third assertions simply reflect a lack of proper time perspective.  The problem is akin to the proverbial crash test dummies that we have all witnessed on television:  Seen in slow motion, as the car gradually crashes into the test wall, the dummies appear to be gently and peacefully moving forward into the steering wheel, airbags, and windshield as the front end of the car is gradually turned into an accordion.  It all seems innocuous enough to make one think that perhaps such a crash isn't so bad after all--until you see it in real time.  Viewed regular speed, the crash appears to be the abrupt and violent event that it really is--sudden, jolting, and catastrophic, for the car and the dummies!  

Given our short tenure on this planet, we humans are a bit like the crash test dummies in slow motion:  The changes that we see around us seem gradual enough that they do not seem particularly out of the ordinary--we've always had hurricanes, tornadoes, floods, droughts, and wildfires.  So, maybe we are just in a bad stretch.  Or even if this is the new normal, perhaps it won't be that bad:  warmer temperatures means longer growing seasons...etc.

But when we view this video in "real time"--that is in geologic time--then the changes that are happening are occurring in the blink of an eye, like the actual crash of the dummies.  As far as we can tell, the atmosphere and the climate of the earth have never changed this quickly before, in the history of the planet.  Not even close.  Sure, the climate has fluctuated wildly over the billions of years that life has thrived on our planet.  But the changes took place over millennia, not decades.  There was time for life to adapt.  We, unfortunately, are driving ourselves into the proverbial wall, but we can only see it happening in slow motion.  Time to clean out the head gear, humanity, or the next generation of dummies will not like how this crash video turns out.
For some time now I've been advocating ways for businesses, institutions, and individuals to heed the "Voice of the Planet."  Indeed, the future depends on it. Here's what we said a while back:

How do profit-seeking companies listen to the Voice of the Planet?  As my colleague, Sanjay Sharma and I suggest, start by drawing a clear distinction between "core" stakeholders--those visible and readily identifiable parties (like current customers and suppliers) with a stake in the firm's existing operations--and "fringe," or peripheral stakeholders.  Core stakeholders encourage us only to continuously improve what we already do.  Yet, answering the question of our time calls for disruptive, leapfrog innovation, which requires divergent thinking.  This means reversing the traditional stakeholder management model by learning to actively engage previously excluded voices from  the fringe-- the rural poor, urban slum dwellers, and advocates for nature's rights, just to name a few.

As I've explained before, the dominant model of business education and entrepreneurial development is broken.

Now, I'm happy to announce that I've joined forces with the University of Vermont to create a new Sustainable Entrepreneurship MBA  program (SEMBA). In essence, we're doing something about the "saddlebag" approach to sustainability that has permeated academic world for so long. Together with my colleague and friend Dean Sanjay Sharma, who I first met more than 15 years ago, we're taking action on our article, "Beyond 'Saddle Bag' Sustainability for Business Education" (Organization & Environment). It chronicles the history of how business schools have incrementally added courses in sustainability, corporate social responsibility and ethics in response to evolving societal demands.  What we're doing represents a bold new venture where a major university has sought to fundamentally reinvent business education and the MBA degree by addressing the environment, ethics, entrepreneurship, poverty and inequality.

SEMBA Director Willy Cats-Baril redesigned the traditional MBA program by focusing the new 45-hour credit program on sustainable business and entrepreneurship-focused curriculum. SEMBA consists of five modules: Foundations of Management; Building a Sustainable Enterprise; Managing Growth; Focusing on Sustainability; and a practicum on Sustainable Entrepreneurship in Action. We've called it the Sustainable Entrepreneurship MBA and, it's different - not an MBA-as-usual.  Here's why:

Accelerated: A one year program designed to get students back out there, inventing or reinventing their BoP enterprise as soon as possible.

Vermont DNA: Learn from, and develop relationships with, leaders from a master class of sustainable enterprises, including Ben & Jerry's to Burton Snowboards, Cabot, Green Mountain Coffee Roasters and Seventh Generation.

Global Access: Students will enjoy access to business and entrepreneurs around the world through our connection to the BoP Global Network.  The BoP Global Network includes Enterprise for a Sustainable World, India's Emergent Institute, and the BoP Global Network - a  vibrant community of academics and practitioners in 18 countries that engage in knowledge creation and dissemination about the theory and practice of creating sustainable businesses at the base of the economic pyramid.

Real World Immersion: Do meaningful, high-impact work with international partners that have on-the-ground access in emerging markets and the developing world. For example you can spend your practicum experience in India working with our partner The Emergent Institute in Bangalore, India. You will also be working with the Office of Technology Commercialization to bring the latest clean technologies to market.

Cutting-Edge Thinking and Practice: You'll be interacting with some of the leading thinkers and doers in the field of sustainable enterprise including professor Stuart Hart, Gustave Speth, and the Dean of the school Sanjay Sharma among others.

Multi-disciplinary: We've designed a unique curriculum delivered by passionate faculty from our School of Business, Department of Community Development and Applied Economics, and nationally ranked Rubenstein School of Natural Resources as well as the Gund Institute and Vermont Law School

Affordable, High-Value Investment: We're offering substantial scholarships to increase accessibility and opportunity at UVM, a school Bloomberg BusinessWeek calls "a top school for high salary grads."

Our aim is to build a global, action-learning ecosystem, enabling us to develop the next generation of leaders who will build, disrupt, innovate and reinvent sustainable businesses and enterprises in a world that demands it. 

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Will you join us?
Screen Shot 2014-03-05 at 9.38.20 PM.pngIt has now been more than a decade since C.K. Prahalad and I first published the article "The Fortune at the Bottom of thePyramid" which launched the "BoP" business movement.  Over the past decade, there have been fits and starts: many BoP ventures have failed; others have been converted to philanthropic programs; but only a few have taken root and gathered significant commercial momentum.
This has led some to conclude that the whole concept of enterprise-based solutions to poverty was flawed in the first place-- pronouncing variously BoP business as the latest form of corporate imperialism--focused merely on profiting from the poor; or a quixotic quest for the impossible--a misallocation of valuable investment capital.  

In reality, however, rumors of BoP's demise have been greatly exaggerated (to paraphrase Mark Twain).  Indeed, much has been learned over the 
past ten years and I believe that we are on the verge of taking the BoP business movement to the next level in the coming decade--a BoP 2.0 revolution.

One area of important learning has been the potential for incubating disruptive innovations and business models starting in the underserved space at the base of the pyramid and later having some of these innovations move up-market.  

Clay Christensen and I wrote about this over a decade ago (2002) in an article entitled "The Great Leap: Driving Innovation from the Base of the Pyramid."  The idea has caught on.  Over the past decade, a whole slew of new terms and buzzwords have arisen to describe this phenomenon, including trickle-up innovation, frugal innovation, and the latest incarnation--reverse innovation.  Vijay Govindarajan and his colleagues have led the way in developing the strategic logic for reverse innovation and documented a growing number of cases illustrating this approach from the corporate sector, beginning with GEs development of a low-cost, hand-held ultrasound device in rural India and China.

A key difference between reverse innovation and the earlier work on base of the pyramid strategy is the promise--even expectation--of large and profitable up-market migration for the innovations incubated in the underserved space:  GE's hand-held ultrasound device, for example, has "trickled up" to the US and other developed markets and now constitutes one of the fastest growing and profitable businesses for GE's Healthcare business.  

There is some good news and some bad news regarding this trend.  First the good news:  Reverse innovation provides an attractive internal logic for undertaking such innovation initiatives within large corporations:  Rather than simply focusing on the possibility of opening up new markets among the world's poor and underserved, reverse innovation offers the potential for having your cake and eating it too--by incubating innovations in the underserved space that can migrate up-market bringing new, disruptive,  affordable, and (potentially) more environmentally sustainable products and services.  Witness the growing "trickle-up" success in point-of-care medical devices, mobile telephony, and distributed energy technologies, for example.  Exciting stuff, to say the least.

But now for the bad news--there is a potential dark side as well:  The risk that corporations gradually come to view the world's slums and rural villages primarily as laboratories for incubating innovations for the rich.  The poor, in other words, come to be seen more as guinea pigs than as underserved people and communities with special needs and requirements--a place for corporations to force cost constraints on their innovation process enabling even higher returns in the eventual (ultimate) market at the top of the pyramid.

Should this scenario come to pass, it would represent a double tragedy.  Not only would this damage corporations' reputation and continuing right to operate, but the evidence is also mounting that few innovations incubated in the base of the pyramid space can easily travel up-market without significant modification, threat of imitation, or competitive reaction:  Frugal designs must be upgraded to appeal to the wealthy; low-cost innovations can often be easily imitated, and competitors with lower cost structures can enter as fast seconds after the pioneers have incurred all the development costs.  

Allow this to serve as a cautionary tale to all those large, incumbent corporations thinking reverse innovation is the magic bullet:  Focus on first things first--better serving and lifting those underserved at the base of the income pyramid.  Should some of these disruptive, lower cost, or environmentally sustainable innovations eventually lend themselves to application in the up-market, that is great news for the Corporations and the World.  But let us not look back in ten years and view reverse innovation as yet another classic example of the Law of Unintended Consequences.

The Real Job Creators

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The world is stuck in a prolonged downturn--growing inequity and a spiral toward environmental meltdown--and we can't seem to find a way to turn the corner.  Not surprisingly, there is much talk these days about job creators--in US politics as well as geopolitics. 

Two camps seem to dominate this debate.  The first camp advocates cutting taxes for the rich, under the assumption that their investment and spending will "trickle down" to everyone else.  The second camp wants to focus attention on the little guy--the small and medium enterprise (SME) sector, under the assumption that assistance for "mom and pop" enterprises will enable them to grow and flourish from the "bottom up." 

The reality, in my view, is that neither the "trickle down" nor the "bottom up" perspectives will get us out of the hole that we are in.

Some years ago (1978 to be exact) Filley and Aldag published a wonderful piece in the Academy of Management Journal entitled "Characteristics and measurement of an organizational typology."  In this article they empirically classified organizations into one of three types:  Administrative, Craft, and Promotional.

Administrative organizations are established enterprises that are run by professional managers using formal systems of reward and incentives.  At best, they generate slow, linear growth since they typically compete in established industries where unsustainable practices and bureaucracy reign supreme among incumbents.  And they produce few jobs, since their focus is on increasing labor productivity rather than employment.  Indeed, the corporate sector (the largest of the administrative organizations) makes up fewer than one percent of the world's enterprises and has actually shed jobs over the past decade, at least in the developed world.

Craft organizations comprise the vast majority of the world's enterprises which are created by their owners for the purposes of convenience or survival.  Most "mom and pops" fit into this category and their defining characteristics are informality and a desire for stability.  It should come as little surprise that the small shops and microenterprises of the world produce little in the way of job or employment growth since they are seldom started or run by real entrepreneurs.  Indeed, those at the low end of the income scale are typically entrepreneurs by necessity rather than choice:  Given the option, most would prefer a good job for a decent wage. Expecting the world's craft enterprises to somehow rescue us from our current malaise is therefore a false hope a best and a shibboleth at worst.

That leaves us with Promotional organizations, which constitute only a small fraction of the world's SMEs.  Promotional enterprises are started by entrepreneurs whose intention is to get big.  They are driven by a passion for achievement and will stop at nothing to realize this dream.  Most fail.  But the few (less than 10%) that succeed are the real job creators and growth engines for the future.

The good news is that promotional enterprises can come from anywhere in the world and need not be focused exclusively on the development and commercialization of new technology.  In fact, entrepreneurs focused on solving social and environmental problems through enterprise are some of the most passionate and driven people on the planet.  Our challenge (and the leverage point for the future) is therefore to devise ways to multiply the number and success rate of this new breed of promotional enterprise.  

iise.gifAs a co-founder of the new Indian Institute for Sustainable Enterprise, I aim to do just that--dramatically increase the number and success of entrepreneurs and intrapreneurs focused on socially inclusive and environmentally sustainable business development for the 21st century. 

To realize this vision, IISE has assembled a complete innovation ecosystem to foster the creation of tomorrow's distributed and sustainable infrastructure, including an education platform, incubator, investment fund, technology bank, cluster (social) network, learning laboratory, and field support system.

The flagship offering is the Post-Graduate trickleupo.gifCertificate Program in Sustainable Enterprise which aims to create nothing less than a new model of business and entrepreneurial development appropriate to the challenges we face in the 21st century.

The future lies in neither trickle down nor pure bottom up, but rather "trickle up." 

The real job creators will drive innovation from the base of the pyramid, creating the companies and industries of tomorrow and a more sustainable way of living for the world.

The Road to Rio +20

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Twenty years ago, in 1992, the first Rio Earth Summit took place in Brazil.  While it was convened amid great fanfare and high expectation, the only really lasting legacy was the creation of the World Business Council of Sustainable Development (WBCSD) and the christening of "eco-efficiency"--doing more with less--as a key private-sector based strategy for sustainable development.  The governmental negotiations produced a massive volume--"Agenda 21" but little concrete action.

Next week, the Rio + 20 Summit will convene, again in Brazil.  The past twenty years has produced some good news and some bad news.  First the good news: Eco-efficiency has become standard practice in large corporations everywhere and is now spreading to the world's small and medium sized enterprises as well. This is a major accomplishment and has significantly reduced the impact per unit of output in economic activity. 

Now for the bad news: we have not yet begun to actually slow or reverse the level of human impact on the planet.  Indeed, over the past twenty years, we have tripled the size of the global economy, added nearly two billion people to the world's population, and further intensified our ecological footprint on the planet.  Growth swamped eco-efficiency.  Today, the science is clear: we have overshot the carrying capacity of the planet and serious repercussions are now inevitable.

In 1997, I wrote an article that appeared in the Harvard Business Review entitled Beyond Greening: Strategies for a Sustainable World. The piece won the McKinsey Award in 1997 as the best article in HBR.   The article stressed that corporate eco-efficiency (greening) strategies aimed at incrementally reducing negative social and environmental impacts, while important, would not be nearly adequate to the challenge of global sustainability in the decades ahead.  Even then, it was clear that "beyond greening" strategies--leapfrog clean technologies, and business models that included and lifted the four plus billion poor in the developing world--would be essential if we were to fundamentally change the course of the global economy, and set it on a course to sustainability.

In the 1990s, people spoke in terms of the need for fundamental change over the next decade or two.  Indeed, the title of the WBCSD's inaugural book was "Changing Course."  Unfortunately, all we got was continuous improvement through eco-efficiency. 

As I prepare to leave for Rio next week, my hope is that this Summit can plant a new stake in the ground--the Beyond Greening Stake.  I will do everything I can to drive this agenda.

We are running out of time.

Strategies for sustainability are often counter-intuitive: No is really yes, up is really down. This is true for companies and countries alike. Over the past five years, for example, I have been working extensively in both China and India. The contrasts could not be more stark:

China: Five year plans, massive investment, rapid industrialization, infrastructure development, new town planning, national highway system, high-speed rail, new airports.

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India: Messy democracy, corruption, mass migration to cities, chaotic slums and shantytowns, poor infrastructure, inadequate roads, antiquated rail system.

Many point to China as the model, with its gleaming skyscrapers, maglev trains, freshly paved highways, and massive new towns. But will they regret it in a decade when the full impact of Peak Oil hits? Will many of these investments, so dependent on increasing consumption of fossil fuels, become like giant albatrosses?

It hit me on my most recent trip to India, where I am involved in founding a new Indian Institute for Sustainable Enterprise in Bangalore, that India's apparent ineptitude may turn out to be its "silver lining." With 600,000 villages, 700 million plus rural farmers, burgeoning slums, inadequate infrastructure, and a culture of transparency and entrepreneurship, India still has a chance to steer the country in a different direction.

India can draw upon all of its ancient knowledge and traditions while at the same time applying the best of the emerging clean and sustainable technologies to "leapfrog" to what comes next:

  • new urbanism
  • mass transit
  • sustainable agriculture
  • distributed generation
  • renewable energy
  • bottom-up entrepreneurship
  • IT-enabled development
  • inclusive wealth creation
India can take a "green leap" into future precisely because it has not used up all its seed corn on the "Old Way."

As we all know, the transformation to sustainability is the biggest business challenge--and opportunity--in the history of capitalism.

The New Dust Bowl

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dustbowl1.gifThe 1930s are best known as the time of the Great Depression, brought on by the Wall Street crash of 1929.  Most point to speculation, excessive debt, and an ensuing stock market bubble as the "cause" of the depression.  The Great Depression was accompanied by the Dust Bowl--a time when much of America's agricultural "Heartland" dried up and blew away, leading to massive unemployment, homelessness, and social upheaval (remember the John Steinbeck classic, The Grapes of Wrath?).

Few remember, however, that the so-called "Roaring 20's" were the time when the agricultural economy in the US actually began its steep descent.  In fact, the period immediately following World War I, represented the first large-scale application of mechanized farming practices in the World.  This was uncharted territory:  Never before had farmers used tractors and fossil fuels to cultivate increasingly large tracts of land to grow commodity crops for a burgeoning urban population.  Not surprisingly, there were unintended consequences.   In the free-for-all that ensued, farmers plowed and over-cultivated their way to oblivion, causing widespread soil erosion, loss of fertility, and ultimately, the Dust Bowl.

Some would say that the collapse of the farm economy was what made the Great Depression the decade long debacle that it became.  Only with the advent of the Soil Conservation Service and a whole set of other institutions aimed at regulating and improving industrial agricultural practice, did the situation turn around after the Second World War.

deadbull.gifFast  forward to the 2000s.  In 2008, the financial crisis, and the Great Recession struck.  Most point to speculation, excessive debt, and an ensuing housing bubble as the "cause" of the recession.  Few remember, however, that the 1990s were the time when academic finance and the financial services industry really took off.  Driven by deregulation and the rapid develop of distributed computational power, exotic financial products such as CDOs and derivatives became possible for the first time.

Just like mechanized farming in the 1920s, these new tools got out of hand.  In the free-for-all that ensued, financiers securitized and arbitraged their way to oblivion, causing widespread misery and wealth destruction. 

The question is:  where is the financial equivalent of the Soil Conservation Service? 

When will we create the global institutions required to regulate and improve the functioning of this new force of nature?  Until this happens, expect the New Dust Bowl to continue.
Since the dawn of the Industrial Revolution, economies of scale have ruled the day, with massive investments in power plants, pipelines, factories, transmission lines, dams, and highways to more efficiently serve the burgeoning consumption needs of the rising consumer classes. Industrial-era technologies (such as electricity, petrochemicals, and automobiles) were also closely associated with mass production, the assembly line, and centralized, bureaucratic organization, resulting in the rise of organized labor, worker alienation, and growing social stratification.

As we enter the second decade of the new century, however, the "dark satanic mills" of the Industrial Revolution are giving way to a new generation of technologies that promise to change dramatically the societal, economic, and environmental landscape. The information economy powered by the microchip has already begun to revolutionize society by democratizing access to information and empowering the repressed. Indeed, You-Tube, Twitter, and the rapid emergence of the "blogosphere" have spawned a bottom-up revolution in user-generated content.

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Increasingly, the technologies of tomorrow will be decentralized, distributed in character and disruptive to incumbent firms and institutions. It is much cheaper and more energy efficient, for example, to treat drinking water at the point of use, rather than transporting massive quantities of clean water through pipes from treatment plants only to have much of it leak out or be re-contaminated before it reaches its final destination.

Indeed, we are witnessing a dramatic reversal of the logic of scale--the new diseconomies of scale.

Think about it: Over the past decade or so, we have witnessed the rise of: distributed generation of energy, point of use water treatment, community supported agriculture, microbreweries, point of care healthcare, microfinance, and sustainable construction, to name just a few. Indeed, the term "nano" has become de rigeur.

Because existing players in the utility, energy, transport, food, water, and material sectors have so much to lose, however, it is enormously difficult for the entrepreneurs developing such distributed solutions to gain traction in established markets. Yet given their small scale and distributed nature, such clean technologies hold the potential to creatively destroy existing hierarchies, bypass corrupt governments and regimes, and usher in an entirely new age of capitalism that brings widely distributed benefits to the entire human community.

And rather than depending on national governments or paternalistic social engineers to design the future for the aspiring masses, these disruptive new technologies may be best brought forward through the power of capitalism--not the capitalism of the Industrial Revolution, which enriched a few at the expense of many, but rather a new, more dynamic form of global capitalism that will uproot established elites and unseat incumbents by creating opportunity at the base of the economic pyramid on a previously unimagined scale.

newcomen.gifWhen Thomas Newcomen pumped water out of an English Coal Mine with a makeshift steam engine for the first time in 1722, little did he know that he was giving birth to the defining characteristic of industrial capitalism for the next two centuries--the relentless quest for greater labor productivity.  By substituting coal for manpower, the English textile industry drove the industrial revolution and established the template--and "rules of the game"-- for all industrial enterprises to come.  From cars to chemicals to computer chips, the very concept of "productivity" came to mean producing more product with fewer person-hours of work.

This metric made sense in the 19th century, when coal (and other raw materials) were plentiful and people were relatively scarce.  Now, however, exactly the reverse logic applies--fossil fuels and other raw materials are increasingly scarce and people are relatively plentiful.  We now live with the paradox that increasing business productivity means fewer jobs (especially when economic growth slows), precisely at the time that we need productive employment the most.

Occupy Wall Street, the Arab Spring, the corruption crisis in India, the rural revolt in China--all of these growing social protest movements originate from the same source--a growing "opportunity crisis" driven by unemployment, underemployment, alienation, and humiliation.  The time has come, therefore, to overthrow the tyranny of labor productivity and graduate to a new definition for what it means to be "productive" in business.

wepeople.jpgIn the emerging economies of the world, this revolution has already begun.  ITC in India, for example, prides itself on creating livelihoods for the poor in the rural areas as part of its strategy for wasteland reforestation and agricultural productivity improvement.  Indeed, as commodity costs rise, it may make sense to redefine productivity--from capital intensity and labor efficiency to labor intensity and capital efficiency.  In the 21st century, "sustainable" enterprise must define success by the extent to which they create productive and fulfilling employment for the people of the world. 

Is business up the challenge?

Oil painting of Franz Schubert, after an 1825 ...

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When Franz Schubert wrote the first two movements of Symphony No. 8 in B Minor in 1822 (what would come to be known as the "Unfinished Symphony"), little did he know that he was modeling the behavior and skills needed to successfully create the markets of the future at the base of the world income pyramid in the 21st century.

In fact, a full decade after C.K. Prahalad and I first wrote the Fortune at the Bottom of the Pyramid (BoP), few large corporations have yet to realize the vast business potential of the world's four billion poor and underserved:  Most have either sought simply to sell stripped-down versions of their current products to the emerging middle classes in the developing world, or have abandoned the profit motive entirely and moved their BoP initiatives to the corporate social responsibility department or corporate foundation. 

Indeed, it is telling that, as we enter the second decade of the 21st century, the only real BoP business success stories come from the developing world itself--microfinance and mobile telephony for the poor.  Billion dollar companies like Grameen Bank and Grameen Phone in Bangladesh, Compartamos in Mexico, and CelTel in Africa still stand out as the few iconic examples of business success cited by BoP analysts and advocates from around the world.  In fact, no global conference on the topic is complete without significant reference to at least one of these "home run" examples.

This raises the question:  Is there something about microfinance and mobile telephony that has enabled such stunning success?  The answer is yes!  When you examine each of these industries closely, it quickly becomes apparent that each is really a means to an end, rather than an end in itself.  Indeed, microfinance and mobile telephony are not end products, but rather are enabling platforms that facilitate people to accomplish any number of tasks and deliver a wide range of functionalities.  They are, in short, the equivalent of "unfinished symphonies."

Microfinanciers and rural wireless service providers enable poor slum dwellers and villagers to figure out for themselves how best to weave these new services into their lives.  For these customers, this may mean mobile transfer of funds, communicating in code with a loved one, acquiring a third cow, accurate information on crop prices, or expanding a current micro-enterprise.  My colleague Erik Simanis calls these types of products and services value open since they enable people to complete the value proposition for themselves.

Unfortunately, most multinational corporations have chosen BoP strategies that effectively deliver finished symphonies with defined value propositions in the mistaken (though well-intentioned) belief that they know better than the poor themselves what their real needs are.  What works in the established markets at the top of the income pyramid, however, does not work so well in the emerging BoP space.

Time-tested marketing research methods (e.g. consumer surveys, focus groups, ethnographic studies) are excellent ways to uncover new opportunities in already established markets, where low cost or differentiation strategies rule and customers are already accustomed to paying money for service.  However, when it comes to serving the BoP, the challenge is not one of uncovering latent demand, but rather one of creating entirely new markets and industries, where only informality, self-provisioning or barter previously ruled. 

To effectively realize the vast business potential at the base of the pyramid, corporations must thus show a bit of humility.  Companies must come to view the poor more as partners and colleagues rather than merely clients or consumers.  Such an approach calls for deep dialogue (two-way communication) rather than just deep listening.  To realize this mindset shift requires the development of a new "native capability" which focuses on co-creating business concepts and business models with the poor, rather than simply marketing inexpensive versions of top-of-the-pyramid products to low income consumers.

The logic of co-creation does not, however, mean simply entering underserved communities with a completely open mind and no sense of business purpose or direction.  On the contrary, companies must clearly communicate what resources they bring to the table in the form of skills, capabilities, and technological potential; they must do so, however, without prematurely imposing a final product or technological solution.  The aim then is to marry corporate global best practices and technologies from the company with the local knowledge, skills, and aspirations of the local community--to complete the "unfinished symphony" together.

Done well, such an approach to BoP business development holds the potential to create entirely new product and service categories that are embedded in the actual context (rather than simply cheaper versions of existing products from the top of the pyramid).  Embedding also means creating "community pull" for BoP innovations, since they have been co-created with community members, rather than engaging in the expensive and time-consuming process of "social marketing" to educate and promote behavior change among the poor.

Over the past seven years, my colleagues and I have been focused on developing such an approach for companies to effectively co-create new markets in the BoP.  The approach is called the BoP Protocol.  We have now experimented with this approach in a half-dozen different business contexts in Asia, Africa, and Latin America, and have learned a great deal about how to engage local partners and communities in the dance of co-creation.

Many others have also embarked on similar learning journeys to unravel the keys to successfully creating the inclusive businesses of tomorrow that embrace all of humanity and end the scourge of poverty.  My colleague Ted London and I have gathered some of the most important emerging contributions in this regard in a new book, Next Generation Business Strategies for the Base of the Pyramid.

Our conclusion:  There is no "fortune at the bottom of the pyramid" waiting to be discovered.  Instead, the challenge for companies is to learn how to create a fortune with the base of the pyramid.  Franz Schubert's Unfinished Symphony in the 19th century may thus hold the key to a more inclusive form of capitalism for the 21st century.

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This page is an archive of recent entries in the Poverty Alleviation category.

Pollution Prevention is the previous category.

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