"The Fortune At The Bottom Of The Pyramid"

I just finished reading this book written by C.K Prahalad. It’s about how Governments, NGOs and the corporate sector can work together to eradicate poverty. We think that serving the low segment of the markets brings little or no profits. The poor are always not the targeted customers; our usual assumption is that they can’t afford our products or services. On the contrary, with innovation, companies can make lots of money from selling their products and services to the so called Bottom Of The Pyramid ‘BOP’ customers.

The fact is there are 4 billion people in the world who live on far less than $2 a day. And this 4 billion people actually represents 80% of humanity! We always see call for money to help the 4 billion poor and the cry is so constant. Most of the time we think that various aid agencies and governments should tackle this issue. However as we enter the 21st century, poverty remains one of the world’s most daunting problem.

The book changed my perceptions that the very poor actually represent resilient entrepreneurs and value-conscious consumers. The key towards eradicating poverty is to achieve a sustainable win-win scenario where the poor are actively engaged and, at the same time, companies providing products and services to them are profitable. This collaboration between the poor, NGO’s, governments and large firms can create the largest and fastest growing markets in the world.

I read today in bernama quoting Prof Ungku Aziz how he considers the current PM different from his predecessors due to his ambiguous priority for the dejected rural people. "Abdullah has also come out with a noble aim with the help of his Cabinet members in redressing the imbalance of rural poverty," said Prof Ungku Aziz. In a way, this is an example of how we put the whole burden of alleviating poverty in this country on the Governments shoulder. Governments can provide various grants, training opportunities, conduct business programs and other noble ways to bring them out of the poverty cycle. But what about the role of the corporate sector? Surely they have a part to play in the fight against poverty? I don’t think the corporate sectors contributions to the poor should only be reported as part of their CSR initiatives. In fact, with the right business models and processes, the BOP could be a major contributor to the company’s bottom line.

The truth is, at the ‘BOP’ the so called demand and supply economic curve haven’t really intersected. The corporate world never treated this segment as profitable and the customers in the segment never really trusted companies as they think that the companies are only interested to make profit out of their subsistence income. Furthermore, they always feel that companies are only interested to serve customers at the top of the pyramid where the profit margin is. They feel that they haven’t got any opportunity to access the products and services consumed by the middle class with better purchasing power. Now if they have access to products and services equal to the developed world, we are not only enabling dignity and choice through markets, but we are opening up opportunities for this segment to evolve and climb up the pyramid.

The book tells readers how we can equate the demand from the BOP markets and the supply coming mostly from the 1st world markets. The organization structure, business model and processes today are developed to serve the segments with better purchasing power. So the trick in doing business in the BOP market is to innovate. It is interesting to read how a private eye hospital in India had made tremendous profits from providing eye care services. A cataract operation may cost $3500 per operation in the US, but in India, it only costs the patient a mere $50. The Aravind Eye Hospital uses the most modern equipment available in any facility in the world and still with only 40% paying customers, the hospital remained profitable and debt free. They managed to cut down their costs by its ability to use the equipment effectively, as it specializes only in eye care and every doctor and nurse team performs an average of 50 surgeries per day. Other success stories ranging from micro-financing facilities, energy resources, agricultural services, information technology, health care, retailing are well illustrated. Now I know how we can bring these services to people who earn less than $2 a day and the company can still make a hefty profit.

The underlying impact is great. With collaboration from all sectors, the market oriented system can be used to develop wealth in the BOP market. Alleviating poverty doesn’t rest on the governments shoulders alone. Social transformation of the very poor is about the number of people who believe that they can aspire to a middle-class lifestyle. The question is how we can bring this middle-class lifestyle to the poor. C.K Prahalad wrote that our best allies in fighting poverty are the poor themselves. Their resilience and perseverance must give us courage to move forward with entrepreneurial solutions to the problem. He believes that with bold and responsible leadership from the private sector and civil society, world poverty and deprivation elimination is possible by the year 2020.

Very interesting book I must say. It gives fresh thinking about emerging markets. The private sector can be put at the center of development, as a real engine of services for the poor. It all boils down to innovation. Read this book if you want to know more about fighting poverty with profitability.