THE FORTUNE AT THE BOTTOM OF THE PYRAMID
ERADICATING POVERTY THROUGH PROFITS
C.K. PRAHALAD
REVISED AND UPDATED 5TH ANNIVERSARY EDITION
WHARTON SCHOOL PUBLISHING 2004/2010
Back cover: An Idea Can Change the World
v How to serve the world’s poorest people and make a profit
v New strategies and tactics for building winning businesses in today’s emerging markets
v New bottom of the pyramid trends in technology, healthcare, consumer goods, finance, and beyond
v Insights from top CEOs succeeding in emerging markets
v New and updated case studies – from Jaipur Rugs’ revolutionary supply chain to Reuters’ data services for farmers
Five years ago, C.K. Prahalad’s The Fortune at the Bottom of the Pyramid showed companies how they could reignite profits and growth by serving the world’s five billion poorest people. Hundreds of firms have successfully taken that path – building large, profitable businesses that are reducing poverty and eliminating human misery at the same time.
Now, Prahalad has updated his extraordinary book to reflect the lessons of the past five years: business-building strategies, techniques, and innovations proven to work in emerging markets. The fortune at the bottom of the pyramid: doing well by doing good or doing good by doing well!
Front cover
Inspired by C.K. Prahalad’s breakthrough insights in the original edition of The Fortune at the Bottom of the Pyramid, a wide variety of firms are identifying, building, and profiting from new markets among the world’s poorest people – while at the same time helping eliminate poverty and human misery. Five years after this book’s first publication, Prahalad’s ideas are no longer isolated instances of innovations. They are proven, widely practiced “reality.”
Now, in this 5th Anniversary Edition, Prahalad updates his book to give readers a picture of how this idea is being implemented in poor regions around the world.
Prahalad also offers an up-to-the-minute assessment of key questions such as: Is there truly a market? Is there scale? Is there profit? Is there innovation? Is this a global opportunity? Five years ago, executives could be hopeful that the answer to these questions would be positive. Now, as Prahalad demonstrates, they can be certain of it.
v Solving the unique problems faced by bottom of the pyramid customers. How to make a profit by helping people escape poverty and misery.
v Breakthrough forms of innovation for emerging markets. From rugs to cellphones, finance to energy, supply chains to state-of-the-art technology.
v Building new ecosystems for wealth creation. You can’t do it alone – but you can do it together.
v Scaling up to impact the enterprise – and society. Beyond “micro-businesses” and prototypes: large presence, large wins.
About the author
C.K. Prahalad is Paul and Ruth McCracken Distinguished Professor of Strategy at the Ross School of Business, the University of Michigan. He is a globally recognized management thinker. Times of London and Suntop Media elected him as the most influential management thinker alive today in 2007. He is coauthor of bestsellers in management such as Competing for the Future, The Future of Competition, and The New Age of Innovation. He has won the McKinsey Prize for the best article four times. He has received several honorary doctorates, including one from the University of London and the Stevens School of Technology. He has worked with CEOs and senior management at many of the world’s top companies. He is also a member of the Board of NCR Corporation, Pearson PLC., Hindustan Unilever Ltd., The World Resources Institute, and the Indus Entrepreneurs (TiE).
Preface by C.K. Prahalad
This book is a result of a long and lonely journey for me. It started during the Christmas vacation of 1995. During that period of celebration and good cheer, one issue kept nagging me: What are we doing about the poorest people around the world? Why is it that with all our technology, managerial know-how, and investment capacity, we cannot make even a minor contribution to the problem of pervasive global poverty and disenfranchisement? Why can’t we create inclusive capitalism? Needless to say, these are not new questions. However, as one who is familiar with both the developed and the developing world, the contrasts kept gnawing at me. It became clear that finding a solution to the problems of those at the bottom of the economic pyramid around the world should be an integral part of my next intellectual journey. It was also clear that we have to start with a new approach, a “clean sheet of paper.” We have to learn from the successes and failures of the past; the promises made and not fulfilled. Doing more of the same, by refining the solutions of the past – developmental aid, subsidies, governmental support, localized nongovernmental organization (NGO)-based solutions, exclusive reliance on deregulation and privatization of public assets – is important and has a role to play, but has not redressed the problem of poverty.
Although NGOs worked tirelessly to promote local solutions and local entrepreneurship, the idea of large-scale entrepreneurship as a possible solution to poverty had not taken root. It appeared that many a politician, bureaucrat, and manager in large domestic and global firms agreed on one thing: The poor are wards of the state. This implicit agreement was bothersome. The large-scale private sector was only marginally involved in dealing with the problems of 80% of humanity. The natural question, therefore, was this: What if we mobilized the resources, scale, and scope of large firms to co-create solutions to the problems at the bottom of the pyramid (BOP), those 4 billion people who live on less than $2 a day? Why can’t we mobilize the investment capacity of large firms with the knowledge and commitment of NGOs and the communities that need help? Why can’t we co-create unique solutions? That was the beginning of my journey to understand and motivate large firms to imagine and act on their role in creating a more just and humane society by collaborating effectively with other institutions.
It was obvious that managers can sustain their enthusiasm and commitment to activities only if they are grounded in good business practices. The four to five billion people at the BOP can help redefine what “good business practice” is. This was not about philanthropy and notions of corporate social responsibility. These initiatives can take the process of engagement between the poor and the large firm only so far. Great contributions can result from these initiatives, but these activities are unlikely to be fully integrated with the core activities of the firm. For sustaining energy, resources, and innovation, the BOP must become a key element of the central mission for large private-sector firms. The poor must become active, informed, and involved consumers. Poverty reduction can result from co-creating a market around the needs of the poor.
- This book is concerned about what works. I am focused on the potential for learning from the few experiments that are going right. These can show us the way forward.
- This book is about all the players – NGOs, large domestic firms, MNCs, government agencies, and most importantly, the poor themselves – coming together to solve complex problems that we face as we enter the 21st century.
- The process must start with respect for Bottom of the Pyramid consumers as individuals. The process of co-creation assumes that consumers are equally important joint problem solvers.
- New and creative approaches are needed to convert poverty into an opportunity for all concerned. That is the challenge.
This book is in five parts. In Part I, a new introduction outlines the progress in the BOP agenda since the publication of the book in 2004. It is an update five years later that confirms the growth and sustainability of the idea. In Part II, which was part of the original 2004 edition (left unchanged), we develop a framework for the active engagement of the private sector at the BOP. It provides the basis for a profitable win-win engagement. The focus is on the nature of changes that all players – the large firm, NGOs, governmental agencies, and the poor themselves – must accept to make this process work. Part III contains letters from CEOs of major corporations supporting the approach, while Part IV describes cases, in a wide variety of businesses, where the BOP become an active market and brought benefits, far beyond just products, to consumers. The cases represent a wide variety of industries – from retail, health, and financial services to agribusiness and government. They are located in Peru, Brazil, Nicaragua, Mexico, and India. They represent a wide variety of institutions working together – subsidiaries of MNCs, large domestic firms, startups, and NGOs. They are all motivated by the same concern: they want to change the face of poverty by bringing to bear a combination of high-technology, private enterprise, market-based solutions, and involvement of multiple organizations. They are solving real problems. The newest of these case studies, that of Jaipur Rugs, opens a new perspective on building global supply chains that benefits the BOP producers. Part V contains the videos that accompany the case studies (available on the CD and www.whartonsp.com/Prahalad).
- The BOP consumers get products and services at an affordable price, but more important, they get recognition, respect, and fair treatment. Building self-esteem and entrepreneurial drive at the BOP is probably the most enduring contribution that the private sector can make.
PART I: PRIVATE SECTOR AND POVERTY
PROGRESS DURING 2004-2009
PART II: THE ORIGINAL TEXT OF THE BOOK
Chapter 1: The Market at the Bottom of the Pyramid
Chapter 2: Products and Services for the BOP
Chapter 3: BOP: A Global Opportunity
Chapter 4: The Ecosystem for Wealth Creation
Chapter 5: Reducing Corruption: Transaction Governance Capacity
Chapter 6: Development as Social Transformation
PART III: CEO REACTIONS TO THE CONCEPT AND THE BOOK
PART IV: CASE STUDIES AND CEO COMMENTS
PART V: VIDEO CLIPS