BoP 101: A Review of “Must-Read” Literature for Those Interested in the Base of the Pyramid
Thanks to Francisco Noguera for his contribution to this post. Please note that the following should not be seen as an exhaustive compilation of everything that has been written about the base of the pyramid. I encourage NextBillion readers to comment and make suggestions to enrich this compilation of literature and resources.
As the leaves are starting to change, and the mornings are becoming a little more brisk, it is apparent that it is back to school season. In the spirit of this shift, I would like to offer up the following list of books, articles and cases that comprise what we here at NextBillion.net consider the essential pieces of base of the pyramid reading.
I often get questions from students and readers about simply where to start. There is so much out there, and although NextBillion has done a great job of posting reviews of works as they are published, this post is designed to give a high-level overview of the literature over time. Therefore, the following showcases some of the most pivotal pieces that have influenced and continue to expand the base of the pyramid idea.
Genesis of an Idea
In 1999, CK Prahalad, Professor at the University of Michigan Business School, and Stuart Hart, then Professor at the Kenan-Flagler Business School at the University of North Carolina, wrote the article that first introduced the world to the term BoP. It was titled “Strategies for the Bottom of the Pyramid: Creating Sustainable Development.” This article attempted to raise awareness of the world economic pyramid and the vastly untapped market of four billion people living on less than $1,500 PPP per capita income. Organizations that were already involved in serving BoP markets, for example Hindustan Lever Limited, were highlighted as examples of MNC BoP strategy.
Although the early BoP theory was presented primarily as a business strategy for MNCs, it also addressed the potential for poverty alleviation, as the paper stated that, “Foreign aid and charitable giving have not alleviated the problems for the world’s poor.” The paper called on MNCs to “recognize that the bottom of the pyramid poses a fundamentally new question: How do we marry low cost, good quality, sustainability, and profitability at the same time?”
Despite the fact that this seminal piece broke ground for the BoP movement, the idea did not really gain speed until it was picked up in 2002 by the Harvard Business Review. Al Hammond co-authored the article with Prahalad, and it was titled “Serving the World’s Poor, Profitably.”
A Shifting Tide
So why was there a three year lull between the original piece and the HBR article? Well, between 1999 and 2002 there were several books, articles, and discussions that may have shifted the business community’s openness to the BoP strategy. In the development space, scholars such as Amartya Sen and Hernando de Soto published outright challenges of what was then accepted as the traditional models of aid and development, and reframed the question of what was holding impoverished individuals back from reaching their full potential. They called on business to be part of the solution.
In 2000, the Millennium Development Goals were first established, as world leaders realized the reality of continued suffering despite years of international development spending. Fed up with government, the public began to call for the corporation to take on more of a role in sustainable development through what was termed Corporate Social Responsibility. The United Nations Global Compact, a voluntary initiative to promote socially and environmentally responsible business, was launched by the United Nations in 2000 as world leaders started to engage companies in deeper dialogue regarding their business practices.
Despite all of this pressure, companies were struggling to find the business case for most of their CSR activities, which were then framed as PR or risk-management strategies rather than strategies for top-line growth. The BoP theory, therefore, debuted on the world stage in 2002 as a potential strategy for business to alleviate global problems and tap into additional areas of growth–outside of the slowing top-of-the-pyramid markets.
The HBR article received a lot of attention, and both Prahalad and Hart decided to publish books on their somewhat divergent views of BoP theory: Those were Prahalad’s 2005 Fortune at the Bottom of the Pyramid and Hart’s 2005 Capitalism at the Crossroads; both are must-reads for anyone wanting to learn more about the foundation of BoP. The Fortune at the Bottom of the Pyramid introduces the reader to many stories of early BoP actors, such as CEMEX and E+Co, which are still referenced today as prototypical examples of successful BoP cases.
In Capitalism at the Crossroads, Hart addresses both poverty alleviation and the environment, as he asserts that “environmental and social concerns can be alleviated while spreading prosperity to those at the bottom of the pyramid.” Like Prahalad, Hart also draws on the real-world cases of organizations such as Grameen Bank to highlight his theories of linking profit to sustainability.
In August of 2006, University of Michigan professor Aneel Karnani posted a critique to the BoP theory on NextBillion.net. In the view of many, the fact that the BoP perspective attracted criticism was a good indicator that enough people were taking it seriously. In Karnani’s article, titled “Fortune at the Bottom of the Pyramid: A Mirage“, he claimed that Prahalad’s estimates of the BoP market size were wildly optimistic, and he suggested that what impoverished people really needed was employment, not additional products.
The basis of his article was a more traditional poverty alleviation strategy of raising the real income of the poor and it deserves a close read, alongside both Al Hammond’s and CK Prahalad’s responses. This debate is ongoing, and Karnani’s point of view has been adopted by a few other critics of BoP theory.
BoP Theory Subtopics: Driving Innovation, BoP as a Complementary Approach to International Development, Market Research
When one wants to move beyond these few seminal works that have mainly defined this space, it may be beneficial to take a deeper dive into one of the multiple BoP subtopics that have emerged over the years. As the field has expanded, so have the number of independent researchers that are carving their own niche areas.
One area that has been developed further by BoP originator Stu Hart, who is now at Cornell University and the William Davidson Institute, is the opportunity for business innovation through engaging with and building businesses with the poor. One of Hart’s early articles, titled “The Great Leap: Driving Innovation from the BoP“, was co-authored by Harvard innovation guru Clay Christensen. The piece discusses how emerging markets are ideal places to develop and incubate disruptive innovations.
In the quest for furthering the BoP perspective on business innovation in the field, Stu Hart and his team have now produced the second version of the “BoP Protocol.” Drawn from best practices and field experience from the team, this document has laid the foundation for MNCs to engage in co-creating social businesses with BoP communities. It is an essential read for business managers who want to embark on a BoP project or people with a general interest in the startup phase of BoP businesses.
Ted London, who is at the University of Michigan, has carved his BoP niche in the role of the BoP strategy as a complementary approach to international development. London, who has on-the-ground experience with development projects, co-authored one of the early BoP papers with Stu Hart, entitled “Reinventing Strategies for Emerging Markets.”? He has now gone on to consider the BoP strategy first and foremost as a means for poverty alleviation. He believes that we need to measure the social, economic, and relational aspects of communities that engage in BoP projects in order to understand the full impact.
One of his most recent works, which addresses this niche area is the “Base-of-the-pyramid Perspective on Poverty Alleviation.” According to London, this paper is driven by “the development sector coming under increasing pressure to explore new approaches to reducing poverty?. [and] a growing number of private sector and socially-oriented organizations viewing the poor’s unmet needs as untapped market opportunities.”
As London claims, it is true that many from within the international development community have also been calling for more accountability and more market-based approaches to development.? One of the most outspoken critics of aid-as-usual is William Easterly, and his 2006 book The White Man’s Burden may be of interest to those who see the BoP perspective as playing a role in this space.?
In terms of market research and quantification, WRI has created what is known as the most comprehensive document for defining and understanding BoP markets: The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid, published in 2007. This hard data – driven publication estimates both the size and composition of the BoP market. It should be read by anyone who is looking to better understand the particularities of the majority of the world’s consumers.
An Idea Turning to Practice: Finance at the BoP and Design for Social Impact
As the BoP idea has turned into practice in the field, noteworthy articles have begun to surface that address issues such as adequate financing, design at the base of the pyramid and new models for distribution.
One of the most interesting and noteworthy trends in the base of the pyramid space is the growth of different kinds of “social investment” capital. MIT’s Innovations journal outlined this topic in an article authored by Jacqueline Novogratz, founder and CEO of Acumen Fund, one of the pioneering organizations in this field. The article, titled “Meeting Urgent Needs with Patient Capital” talks about the changing world of philanthropy (another driving force for more market-based approaches) and Acumen Fund’s unique approach to investing in businesses at the BoP.?
It also gives a good overview of some of Acumen’s main investments. Novagratz says that, “capital invested in businesses seeking to deliver basic goods and services to the marginalized majority will require long-term commitments, a lot of management assistance, and sustained relationship building.” This article is very useful for understanding the new approach to investment in SMEs that serve the BoP.
As adequate capital has begun to enter this field, there has been an increased push for innovative organizations and moreover innovative products and services that address the needs and aspirations of those living at the base of the pyramid. In 2007, the Cooper Hewitt Museum in New York City hosted an exhibition titled “Design for the Other 90%“, which highlighted design-driven innovations in areas as varied and vital as water, healthcare, energy and housing for the poor. The book that summarizes the exhibition is worth your time if you are interested in seeing how design can, for example, change the way men and women transport water and thus attain dramatic improvements in their quality of life.
Design for the Other 90% is the brainchild of Paul Polak, a prominent figure in the space of entrepreneurial approaches to the challenges of poverty, who has revolutionized small scale agriculture through the design of affordable drip irrigation equipment at International Development Enterprises (IDE). His own book Out of Poverty describes the path of building his organization and provides valuable insights from the field, emphasizing the importance of listening to and becoming aware of the specific context and conditions surrounding those at the base of the pyramid.??
There are of course numerous other books, articles, and cases that highlight the growing adoption of the BoP approach. If you know of any additional pieces, feel free to comment on this post. Here are some in addition to those highlighted above:
The Power of Unreasonable People: How Social Entrepreneurs Create Markets That Change the World, by John Elkington and Pamela Hartigan
The 86% Solution: How To Succeed in The Biggest Market opportunity of The 21st Century, by Vijay Mahajan and Kamini Banga
Creating Value for All: Strategies for Doing Business with the Poor, by the Growing Inclusive Markets Initiative at UNDP
Business Basics at the Base of the Pyramid, by Vikram Akula, Harvard Business Review
Dialing for Development, by David Lehr, Stanford Social Innovation Review
Developing Native Capability, by Stu Hart & Ted London, Stanford Social Innovation Review
Making Capitalism More Creative, by Bill Gates, Time Magazine
Redefining Corporate Social Responsibility, by Michael E. Porter, Mark R. Kramer, and Simon Zadek, Harvard Business Review
Strategy and Society, by Michael E. Porter and Mark R. Kramer, Harvard Business Review?
Case studies and Additional documents