C.K. Prahalad has done it again. He’s come up with an idea as radical as his and Stuart Hart's suggestion 5 years ago that there was significant value to be found in business engagement at the base of the pyramid. [Full disclosure: C.K. is a friend, a partner, and a WRI Board member.]
With apologies to the musical Oklahoma, what he and co-author Jeb Brugmann suggest is that the farmer and the cowman should be friends—indeed, even business partners. That the farmer (development NGOs and grassroots community groups) and the cowman (multinational companies) should be friends and partners goes against our preconceived notion of both groups. Moreover, C.K. suggests that in such partnerships and co-created value chains we find the elements of a new social compact that will benefit both the bottom line and the BOP.
If C.K. is correct, this is a transformative vision. His article suggests how to harness market forces and the power of civil society to bring tangible benefits and full citizenship in the global economy to 4 billion people. He points to lots of examples that show beneficial co-existence (stage 1), cooperation (stage 2) as corporate CSR and NGO enterprise development efforts overlap, and a few examples of full engagement (stage 3), where companies and NGOs create businesses together. And he argues that full engagement is the future.
Like the BOP idea itself, this will initially seem counter to the conventional wisdom and wrong for all sorts of reasons. Disagree with it if you like—but don’t ignore it.
What would this vision mean? If it led to widespread business partnerships between civil society and business, would that represent the co-opting of civil society—or a new, smarter development strategy? Would it mean a more sustainable NGO movement, not subject to the whims and fashions of philanthropy? Would we see businesses seconding up-and-coming execs to NGOs to gain experience? Would rural communities, and the NGOs that serve them, gain new and powerful corporate advocates for local empowerment via policy change? Would the co-created businesses provide an opportunity for the legion of socially-minded young MBAs? Clearly, it’s too early to call.
Based on our experience at WRI, we can say that the cocreation vision jibes with what we are seeing in our work on small- and medium-sized enterprises in the field and in our surveillance of the broader BOP market via NextBillion.net.
What does cocreation mean for the environment? Well, truly cocreated business models will have to be triple-bottom-line by their nature, as long as the NGO partners stay true to their roots (which is why co-opting is such a concern.) An example of this is a new, cocreated business operating in Bangladesh. Grameen Danone Foods Ltd is a 50:50 joint venture between the Grameen Bank (Muhammad Yunus') and the French multinational Groupe Danone. They have partnered to produce low-cost, high-nutriet yogurt products - a clear play at the BOP consumer market. What makes the model - based on what little we know - so cool is that they are doing it on the producer and distributor sides as well. First, Grameen Danone will source the yogurt inputs (read: milk) from hundreds of microenterprises. These microenterprises are, more often than not, 1 or 2 cows owned by a woman or family, which they purchased using a microloan. Furthermore, Grameen Danone plans to utilize a network of microentrpreneur-run stands and food kiosks to sell the yogurt. Best of all? Every serving of yogurt contains three times as many nutrients as the competition, costs less than $0.07 each, and comes in a 100 percent biodegradeable cup. Is cocreation the future? You could argue that it's already arrived, and that it takes "bright" and "green" to a whole new level.
If you don’t subscribe to the Harvard Business Review, this article is worth the paid download, or a trip to the local library to use the copy machine. For a bit of history, consider reading C.K. Prahalad and Stuart Hart’s seminal article in strategy+business, or an article a few months later in the Harvard Business Review.
I thought this entire 'BOP' idea had already been exposed as a mirage.
"Fortune at the Bottom of the Pyramid: A Mirage"
So why would the man who invented such a flawed idea and who represents such a mediocre ideology ever come up with a more interesting vision on development?
The BOP fantasy has never proved to work, and is a typical "liberal communist" idea. See:
"Nobody has to be vile"
Progressive forces consider it to be an enemy because it is the banality of co-optation at work. Righly so, I think.
You are not correct about the 'mirage' notion. Popular critiques regarding the BOP market have been relevant to the purchasing power of the people in the world living on meager daily incomes, the respective consequences of selling to this demographic or integrating them into networks of production.
The purchasing power issue hasn't been completely resolved. Honestly selling to the BOP and integrating them into production networks can have positive or negative consequences for the poor. Its generally good to sell poor people things that improve their quality of life, including numerous appropriate technoligies, health solutions, and certain services(but even this can have unintended consequences). However the BOP is also being looked at as an opportunity to offload useles crap like cigarettes, soft drinks, alcohol, television, popular western culture and other things that displace money that could be spent for the BOP's benefit.
There has much more academic work done on integrating the poor into networks of production. See Non-Timber Forest Products research on corporate-community partnerships for a well documented example. It can go both ways as well.
For as many good examples we see bad ones, sometimes from the same companies.
Thank you Marie and Jakub, for your thoughts. In the space of two relatively short comments, we see the wide range of views on the BOP theory and its practice. Clearly, I am a proponent of the theory and believe that the BOP are value-conscious consumers and entreprenurial producers - by necessity. When one faces a constrained set of choices (due to limited funds), each marginal dollar spent is worth more. The poor are not more irrational than the non-poor. In fact, Prahalad argues that the poor often make more rational decisions.
As to the "Mirage at the Bottom of the Pyramid" argument, I would encourage you to visit NextBillion.net, where Aneel Karnani and C.K. Prahalad engaged in a lively, cordial debate over their respective articles.
As to the offloading of useless crap, I would encourage you to think of the BOP as more than consumers. Right now, some of the most successful companies operating in low-income markets are selling diversions from reality in the form of television, alcohol, and cigarettes. I argue that a company selling opportunities instead of diversions - opportunity in the form of jobs, increased incomes, better quality services - would flourish. The BOP idea is more than just selling to the poor; it is a wholesale engagement strategy. There will always be TV, beer, and cigarettes - but they don't have to be everything.