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

Tuesday, March 13, 2012

It might seem counterintuitive, but setting your sights on the world’s four billion poorest people can be remarkably lucrative. Just ask Suneet Singh Tuli. The CEO of wireless-device manufacturer DataWind Ltd. says his Montreal-based company’s revenue could soar from less than $10 million last year to more than $300 million next year, thanks to the stripped-down tablet computer it developed to sell in India: “It’s an astonishing rate of growth.”

His management team figured that if they could offer tablets for a price similar to the $30 to $60 that most cellphones cost in India, they could sell enormous numbers of tablets there. (Indians buy 15 million cellphones per month.) DataWind has pulled off this feat, selling bare-bones tablets for $60 a pop at Indian retailers. The company already has sold 100,000 units at $47 each to India’s government, which in turn sells them to students for $35—and ultimately plans to sell tens of millions more. Tuli says DataWind already has more than 1.5 million pre-orders from individual Indians and could move five million units this year.

By whittling down the price as low as possible, DataWind has put its tablets within reach, not only for affluent Indians but also the endless ranks of the poor. Many poverty-stricken Indians are willing to part with a large chunk of one month’s income for a tool they can use to help educate themselves and their families. Data­Wind is now discussing deals similar to the one in India with governments in Thailand, Sri Lanka, Turkey and Brazil.

DataWind is one of many rich-country companies finding gold at the “bottom of the pyramid” (BoP), a term popularized by the late University of Michigan business professor, C.K. Prahalad. In his influential book, The Fortune at the Bottom of the Pyramid, Prahalad contended that Western firms could make life better for the poor and boost their own bottom lines by treating the poor as a vast consumer market. How vast? The World Resources Institute, a Washington, D.C.-based think-tank that advocates market-based approaches to reducing poverty, estimates the four billion people with individual purchasing power of less than US$3,000 per year make up a US$5-trillion consumer market. (Adjusting for purchasing power reflects the fact that a dollar buys a lot more in poor countries.)