BOTTOM OF THE PYRAMID

Alleviate World Poverty. Do not treat the poor as a victim or as a Burden.

Explanation of Bottom of the Pyramid of C.K. Prahalad.

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 begin his book: "The Fortune at the Bottom of the Pyramid" with a simple yet revolutionary proposition: If we stop thinking of a poor as a victim 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 billions 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 create millions of new entrepreneurs at the grassroot level.

Prahalad presents his new view regarding solving the problem of poverty as a co-creations 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 jump in) Price Performance


2. Hybrid solutions, blending old and new technology


3. Scaleable and transportable operation across the countries, cultures, and languages


4. Reduced resource intensity: eco-friendly products


5. Radical product redesign from the beginning: marginal charges 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 use 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 2002 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 consider 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 strength 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 viable market

Access to Bottom of the Pyramid markets is not necessarily difficult. Unconvectional approaches such as the Avon Ladies approach may work

The poor are very brand - conscious

The Bottom of the Pyramid amrket 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:

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

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

Bottom of the Pyramid markets must become an integral part of the work and 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.

C.K. Prahalad, cprahalad@aol.com
C.K. Prahalad is the Harvey C. Fruehauf Professor of Business Administration at the University of Michigan Business School, Ann Arbor. He is also the founder and chairman of Praja Inc., a pioneer company in interactive event experiences, based in San Diego, California.