TECH TALK: Good Books: Capitalism at the Crossroads

Stuart Hart originated the Bottom of the Pyramid ideas with CK Prahalad. His recently published book: Capitalism at the Crossroads: The Unlimited Business Opportunities in Solving the World’s Most Difficult Problems therefore comes with high reader expectations.

Hart writes in the prologue: In a single lifetime, the human population will have grown from two billion to eight billion. This growth is truly unprecedented. Never before in human history has a single generation witnessed such explosive change. It seems self-evident, therefore, that the policies we adopt, the decisions we make, and the strategies we pursue over the next decade will determine the future of our species and the trajectory of our planet for the foreseeable future. That is an awesome responsibility, to say the least. It is also a huge opportunity.

One of the chapters has a discussion on HLL:

Unilever’s Indian subsidiary, Hindustan Lever Limited (HLL), provides an interesting glimpse of the development of native capabilities in its efforts to pioneer new markets among the rural poor. HLL requires all employees in India to spend six weeks living in rural villages, actively seeks local consumer insights and preferences as it develops new products, and sources raw materials almost exclusively from local producers. The company also created an R&D center in rural India focused specifically on technology and product development to serve the needs of the poor. HLL uses a wide variety of local partners to distribute its products and also supports the efforts of these partners to build local capabilities. In addition, HLL provides opportunities and training to local entrepreneurs and actively experiments with new types of distribution, such as selling via local product demonstrations and village street theaters.

By developing local understanding, building local capacity, and encouraging a creative and flexible market entry process, HLL has been able to generate substantial revenues and profits from operating in low-income markets. Today more than half of HLL’s revenues come from customers at the base of the economic pyramid. Using the approach to product development, marketing, and distribution pioneered in rural India, Unilever has also been able to leverage a rapidly growing and profitable business focused on low-income markets in other parts of the developing world. Even more important, through its new strategy, HLL has created tens of thousands of jobs, improved hygiene and quality of life, and become an accepted partner in development among the poor themselves.

I agree with the comment made by Simon London in a review for the Financial Times: If you read a lot of business books, some of Harts case studies will seem a little stale. Inevitably, Hindustan Lever crops up. So does Cemex, the Mexican cement group used to illustrate everything from leadership genius to innovation…Still, there is much here to admire. Two hundred pages are hardly enough to solve the worlds ills, but they are plenty to sketch out the nature of the management challenge.

Tomorrow: Communities Dominate Brands

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Rajesh Jain

An Entrepreneur based in Mumbai, India.