Bottom of the Pyramid
(C.K. Prahalad)

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Alleviate world poverty. Do not treat the poor as victims or as a burden. Explanation of Bottom of the Pyramid of C.K. Prahalad. ('02, '05)


  

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Bottom of the Pyramid

What is the Bottom of the Pyramid? Description

The bottom of the (economic) pyramid consists of the 4 billion people living on less than $2 per day. For more than 50 years, the World Bank, donor nations, various aid agencies, national governments, and, lately, civil society organizations have all done their best, but they were unable to eradicate poverty.

 

Aware of this frustrating fact, C.K. Prahalad begins his book: "The Fortune at the Bottom of the Pyramid" with a simple yet revolutionary 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.

Prahalad suggests that four billion poor can be the engine of the next round of global trade and prosperity, and can be a source of innovations. Serving the Bottom of the Pyramid customers requires that large firms work collaboratively with civil society organizations and local governments. Furthermore, market development at the Bottom of the Pyramid will also create millions of new entrepreneurs at the grass roots level.
 

Prahalad presents his new view regarding solving the problem of poverty as a Co-Creation solution towards economic development and social transformation (figure), of which the parties involved are:

  • Private enterprises
  • Development and aid agencies
  • Bottom of the Pyramid consumers
  • Bottom of the Pyramid entrepreneurs
  • Civil society organizations and local government

12 Principles of Innovation for Bottom of the Pyramid Markets

Prahalad provides the following building blocks for creating products and services for Bottom of the Pyramid markets:

  1. Focus on (quantum jumps in) price performance.
  2. Hybrid solutions, blending old and new technology.
  3. Scaleable and transportable operations across countries, cultures and languages.
  4. Reduced resource intensity: eco-friendly products.
  5. Radical product redesign from the beginning: marginal changes to existing Western products will not work.
  6. Build logistical and manufacturing infrastructure.
  7. Deskill (services) work.
  8. Educate (semiliterate) customers in product usage.
  9. Products must work in hostile environments: noise, dust, unsanitary conditions, abuse, electric blackouts, water pollution.
  10. Adaptable user interface to heterogeneous consumer bases.
  11. Distribution methods should be designed to reach both highly dispersed rural markets and highly dense urban markets.
  12. Focus on broad architecture, enabling quick and easy incorporation of new features.

Origin of the Bottom of the Pyramid. History

Before his 2005 book, Prahalad published two articles regarding this framework about alleviating poverty:

  • Jan 2002: The Fortune at the Bottom of the Pyramid (Strategy+Business), with Stu Hart
  • Sep 2002: Serve the World's Poor, Profitable (Harvard Business Review), with Allen Hammond

Usage of the Bottom of the Pyramid. Applications

  • This framework provides an impetus for a more active involvement of the private sector in building the marketing ecosystems for transforming the Bottom of the Pyramid.
  • Helps to reconsider and change long held beliefs, assumptions and ideologies.
  • Provides clues on developing products and services for Bottom of the Pyramid consumers.

Strengths of Bottom of the Pyramid thinking. Benefits

The biggest strengths of the Bottom of the Pyramid approach by Prahalad is, that it helps to reconsider and change long held beliefs, assumptions, and ideologies, which are all based on and are supporting victim- and burden thinking:

  • There is money at the Bottom of the Pyramid: it is a viable market.
  • Access to Bottom of the Pyramid markets is not necessarily difficult. Unconventional approaches such as the Avon ladies approach may work.
  • The poor are very brand-conscious.
  • The Bottom of the Pyramid market has been connected (mobile phones, TV, Internet).
  • Bottom of the Pyramid consumers are very much open towards advanced technology.

Assumptions of the Bottom of the Pyramid. Conditions

  1. The poor can not participate in the benefits of globalization without an active involvement of the private sector and without access to products and services that represent global quality standards.
  2. The Bottom of the Pyramid market provides a new growth opportunity for the private sector and a forum for innovations. Old and tried solutions cannot create markets at the Bottom of the Pyramid.
  3. Bottom of the Pyramid markets must become an integral part of the work and of the core business of the private sector. Bottom of the Pyramid markets can not merely be left to the realm of Corporate Social Responsibility (CSR) initiatives.

Book: C.K. Prahalad - The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits -

 

Bottom of the Pyramid Special Interest Group


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Bottom of the Pyramid Forum

Recent User Comments
Vervy - India Bottom of Pyramid People? "Which class of people come under BOP?"    0
India - Bivore Sarawgi BOP and Communication "If the bottom of the pyramid is not connected with communication tools and media, how can marketers position their product to the BOP consumers (keeping in mind crisis of resources for further investments)?"    0
Lily Houston - USA Responsibility of International Corporations "Large corporations such as Nestle and Exxon mobile have traditionally supplied raw materials with a low price from developing countries, but they have shown only little amount of co-operation with local associations and governments. The global economical downhill hits harder on people at BOP who just were able to taste luxury of westernization. As if in Dante´s play the poorest become more vulnerable while the richest hardly care anything else than environmental agreements and their own benefits. Large corporations and the European Union should carry more responsibility, minimize the export of cheap European food products to Africa and build networks with BOP organizations. We cannot talk about markets without real activity. Speculation and idealism do not make sense if we don't do anything by ourselves either."    3
Prachi Saini - India Redesigned Water Lifting Device and Park Equipment "I have redesigned traditional hand-pumps and park equipments to work together. The result is water lifting device which are twice as efficient as manual water pumps and have minimal operational costs. These instruments can save 2-3 hours from a villagers life and cut pollution substantially. Moreover, they will utilize rural youth and give them a way to contribute to village's economic growth. I would like to market and produce them in India (or any other market) Can you tell me the direction i should take now. Where would i be able to find investors? sincerely prachi"    3
 - NL 20 Gateway-Hubs "To capture the gigantic opportunities and to deal with the immense complexities of the many emerging markets, C.K. Prahalad and Hrishikesh Bhattacharyya recommend in strategy+business 50, Spring 2008, pp24-29) that large multinational corporations should consider to move to a gateway-hub structure of 20 (or so) gateways in countries that best serve as hubs to nearby regions.
Instead of decentralized models with a single HQ, 4 or 5 regional offices and seperate country managers (bureaucratic and unnecessarily complex portfolios) or centralized models with 1 unified approach (one size does not fit all), the gateway-hub structure reduces the tension between global integration and local responsiveness. The 20 hubs can be split up in 10 for industrialized countries (US, Japan, Germany, UK, France, Italy, Spain, Canada, Australia, the Netherlands) and 10 for the emerging markets (China, India, Brazil, Russia, Mexico, S-Korea, Indonesia, Turkey, S-Africa and Thailand).
The executive committee of such a firm would contain the leaders of all hubs."		    -2
Best User Comments
Nikash Anand - India BOP as brand conscious "The people at the Bottom of the Pyramid are referred to as brand conscious and at the same time they are price sensitive. How should these two factors go together?"    40
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Compare with the Bottom of the Pyramid:  Diamond Model  |  Cultural Dimensions  |  Strategic Intent  |  Co-Creation  |  Business Process Reengineering

 

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Copyright 2009 12manage - The Executive Fast Track. V10.4 - Last updated: 7-11-2009. All names tm by their owners.



  ● Padom (China) We are All Idealists "As you mention, how to balance the poor and the profits of the rich? It puzzles me so much..."

  ●  (Netherlands) Register an account "The first thing you should do is to Register an account. If you enter a forum comment this allows people to reach you. Let me know once you have registered and I will create the link to your profile."
  ● Rachel Ngan (Philippines) Water pumps "I dont know much. However you can start your search on the asian developement bank (Adb). Its mission is to help end poverty here in Asia and the Pacific. When you mentioned Water pumps... it reminded me of Fiji who will find that useful. Adb might be able to point you to right direction or what NGO to aprroach. Its not a definite direction but its a start. Good Luck Prachi!"
  ● Karen Lewis (U.S) Exporting Ideas From BOP "There seem to be a lot of discussion about transporting ideas to the BOP nations but hardly any on exporting the entrepreneurial ideas from the BOP nations. Having been born and raised in a developing country, I realized that many people because of limited resources found innovative ways to do things. Underserved nations are reservoirs for countless ideas. I think part of the effort to eradicate poverty should involve greater collaboration in this front as well. Who would know better about a country and its potential more than its nationals who have the market intelligence; as a matter of fact they are the market intelligence."


  ● Aditi (India) BOP as Brand Conscious "If people at the Bottom of the Pyramid are brand conscious and at the same time price sensitive, then they have a good chance to play with different kinds of products widely available in the market today. Definitely, if a product is branded, we assume it's a good product in terms of quality as well. But customers can also find good products on the market at reasonable rates if they make the small effort to broaden their horizon. For example in the garment industry, we find good products at reasonable rates at many stores such as Pantaloons, Vibe, etc."
  ● Abraham Easo (India) Brands not necessarily expensive "Why should brands be expensive? When you spread the brand across a very large number , branding costs should come down on a per capita basis. Moreover, cheaper alternatives can also be developed."
  ●  (USA/India) Brands help compare goods "Brands help consumers compare similar goods carrying the same price. Even the cheapest goods like match box or salt are branded. So it is wrong to say that BOP customers are not brand conscious. Another example is beedis (cheap cigarettes) usually consumed by BOP members. We have many brands of beedis. So in my opinion brand consciousness and price consciousness are not supplementary but complementary decisions."
  ● Ankit Malik (India) BOP is Brand Concious Because They Want to Change "BOP are attracted to the upper layers of the piramid thus they like to copy them. Hence they are brand concious. They can spend a major share of their earnings for this passion."