Posted by: havishm | March 26, 2008

BOTTOM OF THE PYRAMID – A FAÇADE OR A PATH FOR THE FUTURE ??

I attended a lecture recently given by Prof. C.K. Prahalad. It revolved around the topic of the ‘bottom of the pyramid’ debate (it wasn’t a debate per se – it was a one sided lecture). But anyhow, the point is that it remains a much – talked about and strongly debated topic in management circles.

For the uninitiated, the ‘bottom of the pyramid’ (hence referred to as b.o.p.) is a term that was coined by Franklin D. Roosevelt, the then – U.S. president way back in 1932, about the time when the great depression was affecting the country (and the world at large) adversely. Adversely is an understatement of sorts !! But anyhow, he coined this phrase ‘b.o.p.’ which refers to the common lower – income – group individual. In common usage today, it refers to the 4 billion people living on less than $2 a day. This was co – defined by Prof.C.K. Prahalad back in 1998.

                So anyhow, what was propounded was that government, businesses etc. should stop looking at this segment as victims but rather as entrepreneurs and consumers.

THE CONSUMERS IN THE FUTURE??

The ‘b.o.p.’ theory argues that businesses have so far not realised the potential that lies in the ‘b.o.p.’ sector and tapping this market is the way to look ahead for businesses. All these people offer a huge potential (and profitable) market. Now the theory postulates a very impressive scenario – of a huge profitable and as yet mostly untapped market – offering endless opportunities for businesses. But is it really as good as it sounds? Or is it just a large scale gimmick? Prof. C.K. Prahlad has been acknowledged the world over for this theory of his – and sure it does sound good on face value – the issue is whether it is just an exaggeration of a few successful ventures or can it really be replicated by everybody else also.

                This one particular case Prof C.K. Prahalad showed us comes strongly to mind. These guys corroborated with people at the IIS (Indian Institute of Science) and came out with a design for a stove that works on biomass pellets. This stove has been pretty successful and has been selling like hot cakes (literally). In fact a slightly modified version has managed to replicate the success over in Africa also.

BRACE UP – THERE ARE THINGS TO CONSIDER !!

Now the whole thing was pretty motivating. But there are several important considerations which cannot be overlooked.

•1.       Prof C.K. Prahalad said in one of his slides that focus on ‘b.o.p.’ markets always lead to breakthrough innovations. –  what remains unclear though is whether these innovations are new technologies or merely using existing technologies in the ‘b.o.p.’ sector?

  • 2. He also said that middlemen can be weeded out from the whole process or chain. –  what is important to consider is whether removing he middlemen is necessarily a good idea or not. After all, are the middlemen themselves not a part of the ‘b.o.p.’ sometimes, or marginally better off themselves vis – a -vis the ‘b.o.p.’ segment?

 There are several varied opinions which other scholars have. Some feel that we should look at ‘b.o.p.’ people as producers rather than consumers. Some others feel that we should look at the same segment as innovators.

THE PARADOXICAL CONCLUSION

Now just like an excellent thriller, the end is a cliffhanger. We find that a theory which envisages to be simplicity personified turns out to be a paradox.

                – the paradox is that very few of these efforts ever see the light of the day (due to lack of interest, lack of funding et al). But the few that do become successful create so much impact and create so much noise that we all stand up and take notice.

                All the failed attempts somehow just seem to evade our attention.

To sum things up though , I’ll be candid to admit that this theory has been fantastically successful in some cases e.g. micro credit, agriculture etc. But we also have to realize that it would be foolish for businesses to depend on this theory as a sure shot way for success. There is no way that success can be guaranteed. Out of every 100 attempts, only a handful ever sees the light of the day.

                – After all it is always easy to talk big about social responsibility and ethics and other stuff like that after you make you make your first million and/or after you gain recognition!!  Otherwise it just seems like a fantasy!!

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Responses

  1. Well i wasn’t able to attend the ceremony at IILM, LOdhi Road. But I like the theory of B.O.P proposed by Prof. C.K.Prahlad. I would be very keen to know about this theory in detail. I really appreciate ur efforts

  2. Havish, this is a brilliant summary of the talk and sums up the thesis neatly. The book by Prof. C K Prahlad is illustrative of these concepts and I’m sure you would find it an interesting read.

    The focus on entrepreneurs at village and town level seems to be the next area of thrust and might change the economics of our country for the better.

    Best of luck.


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