photograph of two elephants, each with a person perched on its back,
winding their way through a forest in rural India. Professor C.K.
Prahalad likes to begin presentations by showing this picture to
the audience and asking them what they see.
Everybody looks at elephants running around in the northeastern
part of India, he says.
Thats one image. What theyre carrying is more
interesting. They are carrying electronic polling booths. In 2004,
India went through a massive election. Four-hundred-and-fifty million
people voted; 1.5 million polling boothsall of them totally
electronic. And we havent done that yet here.
This is a metaphor Prahalad likes to use to challenge common assumptions
about the developing world: When we look at the billions of poor
people in China or India or other developing nations, do we see
the elephantspoor technology and infrastructure, abject poverty
and disease? Or do we see the electronic voting boothsinnovation
and opportunity for technological leapfrogging? Understanding and
leveraging the business possibilities in serving the worlds
poor while giving them economic opportunity is the subject of Prahalads
latest book, The Fortune at the Bottom of the Pyramid: Eradicating
Poverty through Profit.
Seeing beyond the curve and identifying industry-changing strategic
concepts is nothing new for Prahalad. In 1994 he and Gary Hamel
changed how businesses conceive themselves by introducing the concept
of core competencies in their best-selling book, Competing
for the Future. At the time, BusinessWeek wrote that Prahalad may
well be the most influential thinker on business strategy today.
And he hasnt slowed down. In the last decade he has continued
teaching at the University of Michigans Ross School of Business,
consulted with some of the worlds top companies, written numerous
articles in business journals and started his own technology company.
In fact, The Fortune at the Bottom of the Pyramid was Prahalads
second book to come out in 2004. BusinessWeek identified his first,
The Future of Competition: Co-Creating Unique Value with Customers,
co-authored with Venkat Ramaswamy, as one of the years 10
best business books.
Lifting the Bottom of the Pyramid
Prahalad opens The Fortune at the Bottom of the Pyramid with a simple
proposition: 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. The new world Prahalad sees includes
profits for corporations and growing prosperity for the poor. Prahalads
goal is to turn the economic pyramid into a diamond, lifting the
bulk of the population into the middle class. Clearly hes
not tinkering around the edges of business and development strategies,
and he spends the rest of the book making a solid case for the viability
of his model, as well as outlining principles and guidelines from
the success stories he uses.
The basic argument of the book is that traditional development strategiescarried
out by governments and non-governmental organizations (NGOs)have
been ineffective in alleviating large-scale poverty, and that the
advanced business systems of the developed world havent tried
to engage the poor in a sustained and smart fashion. As a result,
despite all our technological and managerial capacity, the poorest
pay a premium for basic products and services (such as paying a
500 percent interest rate to local money lenders), and pervasive
poverty remains as large a problem as ever.
In the book, Prahalad sets about dismantling misconceptions, relating
examples from throughout the developing world across a wide range
of industry sectors (see inset: Case Studies) and identifying principles
for success. Rather than trying to sell stripped-down versions of
products and services designed for affluent western consumers, companies
need to reinvent what they offer in ways that deliver greater performance
at lower prices. Even more challenging, companies will have to create
markets at the bottom of the pyramid, not just enter themdeveloping
the range of conditions (an economic ecosystem, as Prahalad calls
it) that allow people to act as consumers. Even in the face of such
challengesin fact, because of themPrahalad asserts that
companies that successfully engage the bottom-of-the-pyramid market
will not only profit, but also reap the rewards of unprecedented
learning and innovation.
In December, at a conference organized by the World Resources Institute
in San Francisco called Eradicating Poverty through Profits,
green@work spoke with Prahalad about these concepts.
The subtitle of your book is a pretty bold statement of what
you think is possible. What do you think the rate of change can
I think countries that are moving in this direction, within my lifetime
will change the composition of poverty. For example, there are only
two countries that have a long shot at meeting the millennium developmental
goals. One is China, the other is probably India. Why is it happening?
It is because the private sector is actively engaged. It may happen
in South Africa, but it is more difficult. I believe that the more
we think about the private sector as a partner in the developmental
process, the more likely we are to win. But the more we keep it
out of the developmental process, the chances are higher that it
will not happen. Because weve tried that for 50 years. It
What puts companies is a position to take
advantage of the bottom-of-the-pyramid market?
I say you better pay attention to three A's: access, availability
and affordability. If you look at the ITC case or if you look at
the ICICI case (see inset: Case Studies), its all about providing
access to poor consumersto either financial services or global
markets. Making it affordable by fundamentally reducing the cost
of both the manufacturing and distribution of products and services.
And third, its easily available. You dont have to trek
40 miles to go and get it. If you look at Aravind Eye Hospital,
or if you look at Jaipur Foot, if you look at cardiac care, telecardiologyall
of them are breaking down the entire traditional system to make
sure at least those three tests are met. At the same time, you have
to create world-class capabilities.
I do not start with the assumption that you can have two levels
of quality in healthcare. The poor people need as good quality as
the rich people. They hurt just as much. You have to start by saying,
how do we get world-class quality, and at lowest cost possible?
In a funny way, if you think about, this is exactly what Wal-Mart
has done for the United States. Now everybody can buy a DVD player,
because its at $29 or $39. If it was at $500, fewer people
could afford it. Do they have to build a global supply chain; do
they have to source it in China and India and all over the world,
wherever they can get those costs, in order to serve American consumers,
and now increasingly global consumers? The answer is yes. And thats
exactly the process Im describing.
How do you then take the same ideasnot to large population
clusters, which is what is required for a Wal-Mart to workbut
to highly decentralized, dispersed population cultures so they get
the same benefits without necessarily having to change where they
live? I think thats the basic thesis. Actually, in America
it should not come as a surprise. The Singer sewing machine was
the first interesting (example). The rich people didnt need
sewing machines; the poor needed them. So you say its $100,
but you can give me $5 a month. Thats how they built a global
company. We have had long experience. Model T. Henry Ford made it
possible for ordinary people to buy a car as he built a global company.
So the question is, do we have the next wave of disenfranchised
poor people whom we want to bring into the markets, and create inclusive
You also talk about the forgetting curve, which is a bigger challenge
than the learning curve. Would you describe what you mean by that?
I think we are all creatures of our own socialization, and the lenses
through which we see the world depend on how we were socialized.
If we start by saying that poor people are not our customers, poor
people cannot pay for and use advanced technologies, poor people
have no use for the kinds of products and services we haveif
you start with those assumptionsyou dont see the opportunity
The fundamental task at the bottom of the pyramid is market development.
It is creating new markets, it is creating new consumers, it is
creating new products and services. Therefore, what we have learned
in working in a developed market like the United States or Europe
may become an impediment. For example, if I came and said, we have
to sell something at 1 cent at retail and make money, people are
going to say youre crazy. If I come to people and say we have
to give single serve because that is what will enable more capacity
to consume, and what we have done successfully is make bigger and
bigger packages, people are going to say thats against what
we do here. I look at it and say, it need not be, because the economic
rationale in the United States is, I dont want to go
very often to the store. I have enough cash so I can use cash as
a way to inventory convenience. The poor people in the developing
countries do not have cash, and therefore they have to have a method
by which they can access markets and not mind the frequent trips
to the store. So we have the same economic tradeoff, but from a
different starting point.
So to shift from how to create packaging that allows people inventory
convenience, to how to create packages that allow people the ability
to consume, even though they have to go more frequently, is a huge
shift. And once you have come to terms with it, we are smart enough
to find the ways of doing it. So the key is, I find, crossing the
mental barrier of our own socialization. That is why I say, selectively
forgetting our past is important. Not all of it, but selectively
Many environmentalists see consumerism as
a problem, yet you advocate turning the poor into consumers.
I think sometimes we tend to be somewhat elitist. The people who
are talking about consumerism (being) bad are the same people who
use shampoo, detergent, oil-guzzling cars, electricity like we are
using here, air conditioning. So my starting point is, lets
give them the choice and let them figure out what to do. Over a
period of time they will learn how to protect their own environment.
Single serve has come under tremendous criticism by environmentalists.
I say, OK, now that we have created the capacity to consume, the
large companies are not stupid. They are going to learn that if
they dont create the backbone for developing an ability to
have biodegradable packaging, theyre going to be under tremendous
pressure from public policy, from every possible basis. So theyre
going to find a way of developing it. So what I think we will see
is that we will increase the consumer base, we will create some
new problems of resource useresource abuseand we will
solve the problems as we go along. We have gone through exactly
the same in this country. We abused our rivers, and now we are trying
to do remediation. But the good news is that we were the first ones
to abuse and then do remediation. Now everybody else in the rest
of the world knows what can happen.
So take for example emissions from the automotive industry. The
toughest standards today are in China. Not necessarily well enforced,
but all new cars will have to comply. Thats tougher than what
is available in the United States. The same companies that are creating
cars in China to those standards will not do it here. And they complain
about California standards.
So will the biggest advances in sustainable
manufacturing and consumption come from the bottom of the pyramid,
and flow to the developed countries?
Absolutely. Actually, its going to start from there, because
we cannot manufacture products and services for such a large population
base without focusing on sustainability. So we will be forced to
bring green products to the bottom of the pyramid first. Therefore,
opening up the bottom of the pyramid has a natural advantage in
inventing technologies and solutions to our problems.
Once you bind yourself to a very complex base of limitations on
what you can and cannot do, then you start innovating. So I think
that theres a lot more vibrant experimentation on these issues,
because people are focused on the bottom of the pyramid, and therefore
I look at is as a major source of innovation. Not all kinds, but
a major source of it.
Along with new strategies and new models
of governance you suggest in your book, will there need to be new
ways of evaluating financial performance?
I dont believe that we need a new way. I agree that companies
have to be accountable for more than profits, on their environmental
record and so on. Having said that, profit is the engine, and I
dont think we should change that at all. Unless the company
is profitable, it cannot access markets to fund the growth. And
ultimately the consumers should benefit and so should the investors.
My thesis is about bringing the interests of the investors and the
interests of the consumers into focus, into total alignment. So
what the book is trying to do is build a harmonization of the interests
of the consumers who are being underserved, the interests of the
company that is looking for growth opportunities, and the interests
of shareholders who want value creation. It is all at the same time.
So I look at how every contradiction we have seen has been proven
to be wrong. Let me give you examples. Quality vs. cost. TQM solved
the problem. Then we said we cant have differentiation and
low cost. Mass customization solved the problem. You cant
have innovation and efficiency. We know it is possible today, when
you can innovate and be very efficient. The bottom of the pyramid
and sustainable development is exactly the same. You cant
create billions of new consumers and be profitable because they
dont have money? No. If you can create the capacity to consume,
you can grow dramatically. So I want this to be juxtaposed in what
we have done in other areas where we thought its not possible.
How big of a challenge will it be to institute
checks and balances to ensure that the poor actually benefit from
Its a huge challenge. Im not underestimating, because
that would be very Pollyannaish. The middlemen who have benefited
from asymmetries are not going to just disappear tomorrow. They
also have enormous political clout because they are the richest
people; because theyve been able to exploit. Im saying
it in a positive way, as a businessperson: Thats what they
did. They took advantage of a bad situation. Theyre not going
to go away. Having said that, what digital technologies are trying
to do is allow people to start conversations across villages, across
small towns; where people are saying, if youre getting money
at eight percent, why am I paying 10? If you are getting something
for X, why am I paying Y? And the connectivity is going to fundamentally
change the equation, because asymmetries can only be managed with
no information or very opaque systems. Therefore the development
of the cell phone and the PC and ubiquitous connectivity is going
to create a revolution that none of us can stop. That is what gives
Youve been focused on this for a long
time. How often are you surprised?
Actually, Im fascinated by the amount of innovativeness that
is possible. Thats what surprises me, every time. Its
always, why didnt I think about it? Because, people are doing
the most creative things, and what would have been impossible to
conceive five years ago is becoming quite normal. For example, five
years ago you would not have had a conference (like Eradicating
Poverty through Profit). There are more than 1,000 people,
and 50/50 from companies and the development community. The fact
that you are here. Five years ago we wouldnt have conceived
it--it would have been a separate meeting of civil society organizations
and maybe some developmental economists, but the business guys didnt
want to bother.
So what is most satisfying for me is, five years ago I was a voice
in the wilderness, and now it looks like it is the center stage.
And if that can happen in five years, we can transform our societies
fast. Because there is tremendous momentum that we can build with
success stories, role models, credibility. And that is the reason
for bringing these people here. They are not messing around at the
margins with 25 consumers; they are transforming the country with
millions of consumers. That is what I think we need. Out of the
1,000 people here, at least 200 people are going to say, why cant
I do it? Now imagine what happens if 200 people try and 10 people
succeed. We have transformed another 100 million people. That is
our goal. Make sense? And I think its a very simple agenda.
Not complicated, but one that can work.
We need 1,000 evangelists who will not just preach, but do, and
1,000 will lead to 100,000. It is like the idea of a tipping point.
Exactly the same.
What is your dream of what India and China
and South Asia will look like five or 10 years from now, as a result
of people embracing these ideas?
At least I can say for India, in five years no company operating
in India will talk about the bottom of the pyramid as if it is a
distinctly different market. When they talk about a market it will
automatically include what we call today the bottom of the pyramid.
And its already happening. Thats where I start in my
book. CSR is not sustainable. Business is.
Aravind Eye Hospitals
Aravind is a chain of eye-care hospitals in India that, thanks
to revolutionary workflow innovations, offers diagnosis, sight-restoring
surgery, and post-operative care for between $50 and $330. Its
pricing scale allows Aravind to offer care for free to the poor,
while operating the worlds largest eye-care system at
Casas Bahia is Brazils largest retail chain, selling electronics,
appliances and furniture mostly to the poor; 70 percent of the
companys customers have no consistent or formal income.
Casas Bahia serves this market profitably through an innovative
store credit program and a strong focus on customer service.
CEMEX Patrimonio Hoy
CEMEX is the largest cement manufacturer in Mexico and the third
largest in the world. In the late 1990s the company began a
program called Patrimonio Hoy (savings/property today)
to reach the low-income market in Mexico, offering access to
credit, quality building materials, strong customer service
and professional advice for family building projects. The program
allows the poor to build or expand their homes faster and at
higher quality, and opens the low-end market to other business
The second largest bank in India, ICICI Bank has developed new
business models for bringing banking services to the countrys
hundreds of millions of poor. In partnership with non-profits
and independent microfinance institutions, ICICI Bank has established
a network of nearly 10,000 village-based self-help groups that
develop local womens management capacity and administer
loans at rates much better than those offered by local money
lenders. The Bank is developing more innovative financial services
for Indias rural poor, including low-cost ATMs in rural
The Indian conglomerate ITC conceived its e-Choupal program
as a way to streamline and reengineer its purchase of soybeans
from rural farmers. With the recent deregulation of agricultural
product marketing, ITC installed Internet-connected kiosks in
rural towns so they could purchase directly from farmers. This
not only reduced transaction costs for both ITC and farmers,
but ITCs direct access to information from farmers and
farmers access to wider information (such as soybean futures
prices on the Chicago Board of Trade, weather forecasts and
expert agricultural advice) allow for better strategic decision-making.
Jaipur Foot is both a prosthetic foot design and an organization
that provides and services prosthetic feet and legs to some
16,000 poor in India each year. While prosthetic legs in the
United States cost an average of $8,000, the Jaipur Foot costs
only $30, can be fabricated and fitted in a single visit by
low-skill workers, and meets the more demanding performance
requirements of the rural poorsitting cross-legged, squatting,
walking on uneven ground and even climbing trees.
Discuss these concepts and learn more at www.nextbillion.net,
WRI's Development through Enterprise community Web site.