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The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid
Robert Katz, 20 Mar 07
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A decade ago the "base of the pyramid" idea (BOP) was so controversial and fringe that it took years for BOP pioneers C.K. Prahalad and Stuart Hart to find a publisher for their white paper, The Fortune at the Bottom of the Pyramid. Eventually, strategy+business ran the article in their Winter, 2002 issue.

Five years later, BOP thinking has arrived. Prahalad and Hart are both best-selling authors, and their work has been used by many major corporations and development agencies. But despite the growing momentum for BOP theory and practice, to date there has not been strong emperical evidence to back them up.

That changes with The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid. The joint World Resources Institute/IFC report is based on household income and consumption survey data, allowing WRI researchers - myself included - to measure BOP size and scope for the first time.

The Next 4 Billion presents data in 8 important sectors, drawing on household surveys in 110 countries for income and a subset of 36 more for expenditures. The report and its data are available at the Next 4 Billion website. Supporting data are available on WRI's EarthTrends environmental information portal, and a BOP discussion on NextBillion.net has been going since 2005.

BOP Size and Scope

The data show that the BOP is a $5 trillion annual market--much bigger than previously thought, and largely unserved by business and enterprise.

For example, half of BOP health care spending is on pharmaceuticals, much higher than in more affluent countries. This is especially the case in rural areas, where access to clinics is often limited. Companies should see these data as evidence of demand (and willingness to pay) for quality, low-cost drugs and efficient distribution systems. They may also suggest that for-profit franchise models could provide efficient, sustainable healthcare delivery to the BOP.

Using private sector strategies to address poverty is an idea whose time has come. NextBillion.net and Worldchanging.com have been central resources for the BOP community to develop strategies, models, and ideas. With The Next 4 Billion, that community for the first time has empirical data that show the true size and scope of the BOP.

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Comments

How similar is BOP to "The Long Tail"? On the one hand, BOP deals with the poor, and "The Long Tail" deals with small, niche markets regardless of wealth. On the other hand, both deal with markets which have previously been considered not worth the effort to serve.


Posted by: Michelle on 21 Mar 07

BOP and Long Tail...apples and oranges. Both fruit, but they don't taste the same. I don't want to be glib about it, because there are similarities. The main similarity is that which Michelle indicates: both call for companies to serve previously-ignored market segments. How to do that is where it starts to diverge.

The BOP theory states that one way of bringing the 4 billion low-income, underserved people better services is to develop products that you sell at high volume, but low prices. The Long Tail, meanwhile, calls for products to be sold at low volume but to specific niches, and that by collecting these niche products in one central marketplace (eBay, Amazon), a company can profit. Similar but different.

That's just one example. The BOP theory is growing up lately, to go way beyond just the poor-as-consumers angle. This is an opportunity for companies and NGOs to add value throughout their systems. I'm happy to expand on this, maybe in a future WC post? Any interest?


Posted by: Rob on 21 Mar 07

Serving the unserved with a blend of high-tech, high-touch is Mark Bent, a former US Marine and state department diplomat and founder of SunNight Solar. Mark's product is a solar-charged flashlight, BoGo Light.

BoGo = Buy One, Give One. You buy one solar-powered flashlight (that charges in the day for use at night) and you choose where to donate another -- Africa, US Troops worldwide, or other charitable organizations.

This product was designed to replace dangerous kerosene night lamps in African villages with no energy grid. Mark's business model will surely be a b-school case study for BOP in the near future. www.bogolight.com


Posted by: Tony Cecala on 6 Apr 07

Thanks Tony. I actually purchased a Solar Task Light through SunNight Solar (the Houston company that owns BoGo) and really like the results. A BOP case study in the making, indeed.


Posted by: Rob on 6 Apr 07



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