Bottom of the Pyramid and Beyond
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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