Fortune at the Bottom of the Pyramid

Knowledge@Wharton writes about CK Prahalad’s forthcoming book “presents 11 in-depth case stories from India, Peru, Mexico, Brazil and Venezuela. They range from salt to soap, banking to cell phones, healthcare to housing.”

At the core of Prahalads argument for targeting the worlds poorest as a potential market is the sheer size of that market an estimated 4 billion people constituting two-thirds of the worlds population. More importantly, the market will grow to an estimated 6 billion people within 40 years because the bulk of the worlds population growth is occurring among the poor.

A central point in The Fortune at the Bottom of the Pyramid is that the effort to help the poorest people can be successful across different countries and different industries ranging from health care and finance to fast-moving consumer goods and energy. The exceptions, Prahalad notes, are countries that are essentially lawless, like Somalia and the Congo, and industries that are among the most basic, particularly some of the purely extractive industries that employ many people but have little incentive or ability to empower them. Otherwise, Prahalad says, his approach can work 90% of the time.

He expects this book to resonate with a wide audience, including executives at large companies, business school professors, students, and government and development agencies. This is the first time that someone has put together a coherent point of view on why the private sector can be an integral part of development and social transformation, he says. He notes, too, that he has served on a United Nations Commission under U.N. Secretary-General Kofi Annan to examine private sector developing. The commission is scheduled to issue its report soon. Already, he says, this kind of thinking is having an impact.

when technology has been made available to them, Prahalad has found residents of the bottom of the pyramid to be readily accepting of technology. In Bangladesh, women entrepreneurs with cell phones do a brisk business renting out the phone by the minute to other villagers. Indeed, Prahalad finds in the spread of wireless devices proof of the size and viability of the market at the bottom of the pyramid. By the end of 2003, for example, China had an installed base of 250 million cell phones. The market for wireless devices in India stood at about 30 million installations and was growing at the rate of 1.5 million handsets per month.

Where connectivity exists it is resulting in major efficiencies in traditional occupations. Within three months of the installation of personal computers in some Indian villages the farmers there were making decisions about planting based on futures prices being quoted on the Chicago Board of Trade. In Kerala, India, satellite-based images of fish shoals are downloaded on village PCs and read and interpreted by women who then direct their husbands where to fish. The husbands, after a day of fishing, use their cell phones to check prices at various ports along the coast to obtain the highest bid for their catch.

To Prahalad, all these examples are evidence that there are market solutions to the problem of poverty.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.