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The Daily Sabbatical/CKGSB | Jul 31, 2013 | 9473 views

Bottom of the Pyramid and Beyond

Stuart Hart on the idea that revolutionized management thinking

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n the year 2002, C.K. Prahalad and Stuart Hart published a groundbreaking article in Strategy+Business magazine that introduced to the world the idea of the Bottom of the Pyramid (BOP). The idea, which says that the poor present a vast untapped business opportunity, and if companies serve the poor, they can help eradicate poverty and also make a profit, revolutionized business thinking.  Funnily though, before 2002, the idea had no takers: various management journals including Harvard Business Review didn’t publish Prahalad and Hart’s article for nearly four years because it didn’t have enough evidence in terms of multinational companies who had successfully experimented with the idea.

Years later, the idea caught on. Companies like Unilever, Cemex and S.C. Johnson came up with innovative business models to tap the so-called BOP markets in places like India, Brazil and Kenya.

Today more than a decade has gone by, and the idea has come in for some amount of criticism as well. Some of the most vocal critics, such as University of Michigan’s Aneel Karnani, have accused the model for being ‘exploitative’ and ‘imperialistic’, and for viewing the poor only as consumers.

Hart, one of the two proponents of the idea (Prahalad passed away in 2010), still stands by the original concept. However, he believes that the idea of BOP needs to evolve to something he calls BOP 2.0. Companies need to involve local communities in co-creation so that they create more innovative, relevant, sustainable—and lasting—products and solutions. In Hart’s words, “BOP 1.0 typically takes our mental models, our categories and transposes them to the base in a cheap form, affordable form. BOP 2.0 thinking begins with the premise that taking the product categories from the ‘Top of the Pyramid’ and transposing them down probably will fail, that you really need to think about new categories, it’s a way to generate new categories.”

Hart, the S.C. Johnson Chair in Sustainable Global Enterprise and Professor of Management at the Samuel Curtis Johnson Graduate School of Management at Cornell University, was in China recently. In this interview with CKGSB Knowledge’s Neelima Mahajan, Hart, talks about the evolution of the idea of the Bottom of the Pyramid and his work in building sustainable strategies.

Q. You and C.K. Prahalad came up with the concept of the Bottom of the Pyramid in 1998. When you look back at the idea now, especially since we have the benefit of hindsight and we have seen how companies have implemented it, what do you think of the idea as you originally conceived it? Would you change anything?
A.
The fundamental conception hasn’t changed at all. What C.K. Prahalad and I were trying to do in that original piece was really draw attention to the fact that prior to that there might be a financial or enterprise-based approach that could affect low-income people or poor communities. Microfinance preceded it. There certainly have been lots of NGOs that have been working their territory for a long time. We drew attention to the fact that large corporations could actually play a role. Prior to that, it just wasn’t on the radar screen. From the point of view of drawing attention to that potential opportunity, the original piece stands. The concept says that it’s possible for corporations to become engaged with the two-thirds of humanity that they had systematically ignored in the past, and to do so in a way that actually, one, generates innovation, and two, has the potential to actually lift the base, not exploit it. I stand by the original concept.

Q. The concept came in for a lot of criticism as well, particularly in 2006. A research paper by University of Michigan’s Aneel Karnani called the fortune at the Bottom of the Pyramid “a mirage” and accused the concept of propagating an imperialistic notion. To what extent is that a function of the concept itself, or is it something to do with execution?
A.
Aneel does raise some valid points. I would be the first to admit, and so would C.K. Prahalad if he were still alive, that you can always find examples of exploiters in any field. It’s not unique to BOP or anything else. But I didn’t find that critique particularly useful. If you look at cases where this hasn’t worked so well, who could dispute that? But if you look at other cases where there is an honest attempt to try to actually create a product or service of some kind, and why it hasn’t worked, I think we can learn some important lessons there and some of Aneel’s work points to some of things that I think are worth considering. But a blanket dismissal doesn’t make any sense.

One of the things we have learned from many of the early attempts to do this by large corporations, and probably some of the original ones, even where they were beginning to experiment with this when Prahalad and I first started writing the piece—like Hindustan Lever in India (the Indian subsidiary of Unilever, now known as Hindustan Unilever), they were reacting to what they perceived as threats coming from local companies, like Nirma in India (Editor’s note: Nirma is an Indian company that manufactures soaps and detergents). They were gearing up a competitive response, and I think there was a certain degree of mimicry. Other companies then began to see what Unilever was doing: the innovation of sachet packaging (Editor’s note: Unilever tapped BOP markets in India by offering low-income consumers products in sachets and single-serve packaging. By reducing the quantity, they were able to lower the costs) and there was a little bit of a pile-on effect.

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Comments (3)
Shiihii Solomon Sep 15, 2013
If u look back from where this guys are coming from, you will agree with me that it has been a fantastic journey but with difficulties because they were challenges concerning the whole concept of BOp. They never relented. Today it has caught the global flame. Finally the word will definitely become better if me and you seek to do something for the poor. They must be self sustainability in all our approaches.
Dr.a.jagadeesh Aug 9, 2013
August 8 is the birthday of the Great Management Guru Dr.C.K.Prahalad.

Here is a Tribute:

Coimbatore Krishnarao Prahalad (8 August 1941 – 16 April 2010) was the Paul and Ruth McCracken Distinguished University Professor of Corporate Strategy at the Stephen M. Ross School of Business in the University of Michigan.

He was renowned as the co-author of "Core Competence of the Corporation" (with Gary Hamel) and "The Fortune at the Bottom of the Pyramid (with Stuart L. Hart).
On April 16, 2010, Prahalad died of a previously undiagnosed lung illness in San Diego, California. He was 68 at the time of his death, but he left a large body of work behind.

Early life

Prahalad was the ninth of eleven children born in 1941 in to a Kannada speaking family inCoimbatore, Tamil Nadu. His father was a well-known Sanskrit scholar and judge inChennai. At 19, he joined Union Carbide, he was recruited by the manager of the local Union Carbide battery plant after completing his B.Sc degree in Physics from Loyola College, Chennai, part of the University of Madras. He worked there for four years. Prahalad called his Union Carbide experience a major inflection point in his life. Four years later, he did his post graduate work in management at the Indian Institute of Management Ahmedabad.

At Harvard Business School, Prahalad wrote a doctoral thesis on multinational management in just two and a half years, graduating with a D.B.A. degree in 1975.

Professorship and teaching

After graduating from Harvard, Prahalad returned to his master's degree alma mater, the Indian Institute of Management Ahmedabad. But he soon returned to the United States, when in 1977, he was hired by the University of Michigan's School of Business Administration, where he advanced to the top tenured appointment as a full professor. In 2005, Dr. Prahalad earned the university's highest distinction, Distinguished University .
Writings, interests, and business experience
In the earlier days of Prahalad's fame as established management guru, in the beginning of the 90's, he advised Philips' Jan Timmer on the restructuring of this electronic corporation, then on the brink of collapse. With the resulting, successful, 2–3 year long Operation Centurion he also frequently stood for the Philips management troops.
C. K. Prahalad is the co-author of a number of well known works in corporate strategy, including The Core Competence of the Corporation (with Gary Hamel, Harvard Business Review, May–June 1990) which continues to be one of the most frequently reprinted articles published by the Harvard Business Review.[9] He authored or co-authored several international bestsellers, including: Competing for the Future (with Gary Hamel, 1994), The Future of Competition (with Venkat Ramaswamy, 2004), and The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits (Wharton School Publishing, 2004). His last book, co-authored by M. S. Krishnan and published in April 2008, is called The New Age of Innovation.
Prahalad was co-founder and became CEO of Praja Inc. ("Praja" from a Sanskrit word "Praja" which means "citizen" or "common people"). The goals of the company ranged from allowing common people to access information without restriction (this theme is related to the "bottom of pyramid" or BOP philosophy) to providing a testbed for various management ideas. The company eventually laid off 1/3 of its workforce and was sold to TIBCO. In 2004, Prahalad also co-founded the boutique management consultancy, The Next Practice, to support companies in implementing the strategies outlined in The Fortune at the Bottom of the Pyramid. The company continues in operation today. At the time of his death, he was still on the board of TiE, The Indus Entrepreneurs.
Prahalad has been among top ten management thinkers in every major survey for over ten years. Business Week said of him: "a brilliant teacher at the University of Michigan, he may well be the most influential thinker on business strategy today." He was a member of the Blue Ribbon Commission of the United Nations on Private Sector and Development. He was the first recipient of the Lal Bahadur Shastri Award for contributions to Management and Public Administration presented by the President of India in 1999.

Honors and awards

• In 1994, he was presented the Maurice Holland Award from the Industrial Research Institute for an article published in Research-Technology Management titled "The Role of Core Competencies in the Corporation."]
• In 2009, he was awarded Pravasi Bharatiya Sammaan.
• In 2009, he was conferred Padma Bhushan 'third in the hierarchy of civilian awards' by the Government of India.
• In 2009, he was named the world's most influential business thinker on the Thinkers50.com list, published by The Times.
• In 2009, he was awarded the Herbert Simon Award by the Rajk László College for Advanced Studies (Corvinus University of Budapest).
• In 2010, he was posthumously awarded the Viipuri International Prize in Strategic (Technology) Management and Business Economics by Lappeenranta University of Technology.
• In 2011, the Southern Regional Headquarters of Confederation of Indian Industry (CII) was named as Prof C K Prahalad Center(Source: Wikipedia)

Dr.A.Jagadeesh Nellore(AP),India
Dr.a.jagadeesh Jul 31, 2013
Good post. It has become fashion to use the saying BOTTOM OF THE PYRAMID. Whether it comes from BOTTOM of the heart or not is another question. It can be easily seen that the Indian Railways from Second Class passengers is much much higher than the AC Passengers. This gives the answer for Business Venture between Bottom of the pyramid or top of the Cone!

Dr.A.Jagadeesh Nellore(AP),India
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