The Fortune At The Bottom Of The Pyramid, Eradicating Poverty Through Profits, C. K. Prahalad, Wharton School Publishing, 2006
What does a book about eradicating poverty through new market development strategies have to do with the greening of business? As author C.K. Prahalad notes in his description of 12 principles for bottom of the pyramid (BOP) innovative business practices, if the four billion consumers at the BOP used as much packaging per capita as American or Japanese consumers, "the world could not sustain that level of resource use." Instead, to eradicate poverty without wreaking environmental havoc, companies must create products that meet the needs of the four billion poor without creating the resource waste associated with developed country markets.
"All innovations must focus on conserving resources: eliminate, reduce and recycle," Prahalad writes. "Reducing resource intensity must be a critical principle in product development, be it for detergents or ice cream."
Of course to create such reduced-resource products, companies have to want to serve the BOP consumers to begin with. And that is the core message of this book, which resulted from what the author describes as "a long and lonely journey" that began during a Christmas vacation in 1995 when Prahalad asked: "Why is it that with all our technology, managerial know-how, and investment capacity, we are unable to make even a minor contribution to the problem of pervasive global poverty and disenfranchisement?" The author's question pointed to an unorthodox conclusion that multinational corporations can make a huge contribution to eradicating poverty, if only they recognize the opportunity and pursue it creatively.
Initially, Prahalad's writings about the business opportunity among the world's poor was met with skepticism as being too radical. Politicians, bureaucrats, and managers in large domestic and global firms seemed to agree that the poor are wards of the state, not a market that businesses could work with, not a "latent market" for goods and services. But as the author's working paper on "The Strategies for the Bottom of the Pyramid" began circulating through the Web, a number of senior business people began reading it. Managers at Hewlett-Packard, DuPont, Monsanto and other corporations started a venture fund and dedicated senior managers' time to examine the BOP opportunity Prahalad was describing. Today, he is internationally recognized as a specialist on corporate strategy and is the Harvey C. Fruehauf Professor of Business Administration at the University of Michigan where he teaches BOP concepts and strategies. He also serves on several boards, including the board of the World Resources Institute.
The vision that a number of corporations have begun exploring with Prahalad is "the co-creation of a solution to the problem of poverty," with "entrepreneurship on a massive scale" as the key. The world's four billion people who live on far less than $2 a day are, writes the author, "resilient entrepreneurs and value-conscious consumers," and their poverty can be addressed through "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."
In describing the "global opportunity" that is offered by this market of four billion who have the same needs and desires as the well-off consumers of developed nations, Prahalad writes: "BOP markets are a great source for experimentation in sustainable development." In developing nations, "resources such as water, energy, and transportation are scarce and expensive." Manufacturers of automobiles and two-wheeled vehicles are finding that BOP customers are highly attuned to "the total cost of ownership and not just the cost of purchase." High energy efficiency -- or high miles per gallon -- is demanded, and similar water efficiency is important in BOP markets. At the same time, companies that market single-serve packets of shampoo or other products to BOP consumers must be aware of the possibility that this could create a problem; for example, in India more than 13 billion single-serve packets are sold annually, and the number is growing.
For many readers, the most intriguing section of Prahalad's book may well be the individual success stories that the author presents after describing the BOP market, principles, and other theoretical aspects of his concept. The author devotes the second half of his book to a dozen stories about companies that have taken seriously the challenge of serving the poor through creative new business practices and models and have achieved successful businesses in doing so. The ICICI Bank, India's second largest banking institution, is converting the poorest of the poor into customers; E+Co has brought clean and distributed energy to the poor in Nicaragua using local entrepreneurs; EID Parry has created Internet kiosks to provide on-line connections to farmers in Tamil Nadu villages. These and other stories demonstrate the author's point: BOP market opportunities are there for companies willing to learn about them and to work with local people in developing the markets.
Prahalad's colleague Stuart Hart, whose landmark book, Capitalism at the Crossroads, was recently reviewed in Inside Green Business, has identified the BOP as the most promising cutting-edge of sustainable development. Together, Prahlad's and Hart's books make a complementary pair that point to a growing recognition that corporations can have as great, or even greater, role than government in solving some of the world's most intractable problems.