NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Is the Base of the Pyramid concept in need of a recharge? That’s what two of its founding fathers think. Along with some re-energizing, it’s a concept that could use some humility as well, say two of its early advocates.

It’s been 12 years since the idea was first spread that the world’s poor people should be considered an economic demographic worthy of tailored products, and that developing them could be done both for profit and for the benefit of the buyers. The idea was shared in the seminal 2002 article in the journal Strategy + Business called “The Fortune at the Bottom of the Pyramid,” and has flourished since, alongside financial inclusion, impact investing and similar efforts aimed at deploying commerce for the benefit of more than shareholders.

What has not accompanied the BoP concept’s rising reputation as an approach to business in developing countries is a critical mass of success stories. “We haven’t seen the explosive success we’ve all hoped for over the past 10 years,” said Stuart Hart, one of those founding fathers, at a panel discussion Thursday morning in Washington, D.C. Hart, a professor emeritus at Cornell University, and colleague Ted London, adjunct associate professor at the University of Michigan, convened the panel discussion to talk about how the movement has grown and where it should go next. What’s missing, says London, who also is the Senior Research Fellow and Director of Base of the Pyramid Initiative at the William Davidson Institute, is an industry-wide effort to establish what works, what doesn’t and what’s needed. The pair introduced a document they hope will set the agenda for progress, called “A Roadmap for the Base of the Pyramid Domain.”

London also considered the idea of “humility” when it comes to businesses large and small approaching the BoP by merely tweaking established business models and marketing campaigns for poor customers without in-depth research. He related the story of a successful senior executive in India, who after conquering the IT sector shifted his career focus toward developing BoP enterprises. While the move was well intentioned, the businessman went on to commit nearly every mistake in the book and the initiative ultimately floundered.

This introspection and evaluation comes at a time when many others at the intersection of commerce and development are doing the same thing. Development organizations and impact investors are asking what’s next now that microfinance is now mostly a for-profit activity. For instance, delight over the rapid take-up of Safaricom’s mobile money platform M-PESA in Kenya has given way to concerns about Safaricom growing into a monopoly. When the U.K.’s Department for International Development helped to fund M-PESA’s development it intended for Kenyans to benefit from it, not to bankroll it. Measuring success has been difficult. To be sure, it isn’t fair to expect a microfinance bank or a mobile money platform to solve everybody’s problems. But it’s also been difficult to find numbers that conclusively show that these tools definitely help to lift users out of poverty – that effort is ongoing, in hopes that hard numbers can complement a growing body of anecdotal evidence. For the BoP domain, its academic leaders hope that numbers will eventually show that their concept will mean more than commercial entities simply figuring out how to make money at the bottom of the pyramid. They want it done in a way that benefits the buyers of the products at the same time, and enables them to participate in the process or start businesses of their own.

At Thursday’s event, London and Hart described what they hoped would help BoP ventures to find demonstrable successes. A theme consistent throughout the panel and the report is the need for BoP ventures to become more inclusive. An initial era, in the early 2000s, aimed at proving the concept. That was followed by years featuring research, innovation and establishing products and businesses targeting the BoP. The next step should be inclusion, the professors said, including helping local entrepreneurs to develop homegrown solutions to economic problems.

London and Hart’s roadmap was authored along with Sateen Sheth, head of Project Implementation at the William Davidson Institute, based in Ann Arbor, MI. The document outlines a four-pronged approach, each containing specific research and support initiatives to be spearheaded by nonprofits and development agencies, such as the William Davidson Institute, the German development agency Deutsche Gesellschaft für Internationale Zusammenarbeit, the Grameen Foundation and others. The four categories for further study include how to scale up BoP enterprises, how to encourage supportive environments for entrepreneurs, how to improve the collection and sharing of data and analysis, and global training and knowledge.

The categories are encompassing yet overlapping, and sessions Thursday morning dedicated to discussing them helped illustrate the challenge that lies ahead in turning concepts into specific actions. The approximately 75 people in attendance came from a mix of government, nonprofits and the private sector, and separated into four groups for breakout discussions of each of the four elements of the road map. Discussion was wide-ranging amongst the group addressing the ecosystem building initiative, meant to address legal, regulatory and other issues impacting the environments in which entrepreneurs work. Debate ranged from whether local businesses are impacted by events at national or international levels, the difficulty of working with common funding sources such as USAID, and what the appropriate roles might be for some of the main actors involved, including development agencies, governments and commercial companies.

Matt Mossman is a self-employed development economics analyst and consultant based in Washington, D.C., specializing in African and Middle Eastern economies.