CK Prahalad: Can you make profits and will the poor accept new technologies?
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| CK Prahalad, Author, Competing for the Future | |
Presumably being the most influential management thinker in the world that puts a bit of pressure on you?
Not really. I think of it as a big obligation rather than as a privilege. I think it’s a nice spot to be in, but it’s also a big responsibility because people might take you seriously.
Your book The Fortune at the Bottom of the Pyramid is now out in a new edition. Were you surprised at the impact the book has had?
In an interesting way I was. The thinking around the world before the book came out was that the poor are wards of the state. They need help, subsidies are the way to go. And so there had been a whole range of efforts by developmental economists, multilateral institutions, aid agencies, philanthropists that had gone on for 50 years. To be able to come and say there may be another way of solving this problem was quite radical.
I was never sure whether it was going to be an acceptable thesis, but surprisingly multilaterals, many NGOs, and a lot of companies have come to accept this. Aid agencies now ask are we creating a market-based system? Can we create transparency? Can we build capabilities? So, from that point of view it was a big surprise.
The second surprise for me is while ideas like core competence and co-creation have all become part of the lexicon, it took a fair amount of time. But, Bottom of the Pyramid or BOP has become part of the lexicon in a very short period of time. That is also good news. Five years on, I am surprised how many companies have small initiatives going and are starting to understand how to participate.
It was 2004 when you first published the book and you are now publishing a new edition five years on. What’s changed in those five years?
If you look at what has happened since the book, three questions that everybody had in their mind have been answered conclusively. One is there a real market? Can you make profits and will the poor accept new technologies? The revolution that wireless has brought, four billion people connected in the world, has proven that all this is possible. Certainly the poor are accepting new technologies whether it’s in sub-Saharan Africa, South Africa, Indian villages, Latin American villages, people accept new technology.
They are finding new applications. There is a huge market. Just in India alone they are putting 11 to 12 million new mobile phone subscribers per month, not per year but per month, demonstrating that if you hit the sweet spot suddenly this market is real, and most importantly, companies are making money, whether it’s Cell Tell, Safari.com, Airtell, Reliance, Globe in the Philippines. All of them are making money and more importantly the market capitalisation of these companies is real. There are four companies in India which didn’t exist 15 years ago and which now have a market capitalisation, in a depressed market, of $45 million. So those questions are being answered.
More interestingly for me is suddenly iconic innovations like the Tata Nano which is creating a inflection point in the global auto industry. Now, a $2,000 car does not mean that all poor people can afford it. But, maybe in India not a billion people but 300 million people can aspire to this. Tata Nano actually received $600 million in advances so people can take delivery of the car in 2011. Now, that is an interesting perspective on the global auto industry. Everybody is shutting down plants, giving concessions to people to buy cars, but in India people are giving Tata money so they can get delivery in 2011. There is something that is happening in this market that we ought to be sensitive to as managers, as practitioners, and also as academics.
In the new introduction you explicitly talk about the democratisation of commerce. Can you tell us exactly what that means?
I start with a broad philosophical perspective. The 20th Century was about political freedom. I recognise it is still a work in process. We are not there, but people recognise political freedom as a birthright. So now I ask myself, what is the big challenge for all of us in the 21st Century? It’s how to democratise commerce.
Think about core competence as an idea. Core competence is not about top management. It’s about ordinary workers, ordinary people and the worker community working together to create intellectual capital. It is essentially saying don’t underestimate the critical value added by ordinary people. It’s not all about the top guys. Now, the idea is widely accepted.
Then you move to the second idea of co-creation. Co-creation is about saying how do we empower consumers? How do you empower both suppliers and consumers so collectively we can create more value? Connecting with suppliers is now called connect and develop, or open innovation, but this idea has not suddenly happened. It is an old idea. Co-creation with consumers is happening all over the place and the new age of innovation is all about how to make it happen.
I want you to think -- that's the core competence idea. I want suppliers and consumers to think with me -- that is the co-creation idea. Then if you put the two together and go to the bottom of the pyramid, you are essentially saying how do I get all people in the world to have the benefits of globalisation, as consumers, producers, innovators and investors?
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