Rob Katz

New Paper: “Fortune at the Bottom of the Pyramid – An Alternate Perspective”

If you plan to take Labor Day weekend to brush up on BOP reading (perhaps in advance of next week’s “Business to Four Billion” conference), then you’re in luck. Naturally, I’ll point curious readers to our Resources page, and also to the recent papers by Aneel Karnani (a BOP critic). And, as of today, I’ll add Anand Kumar Jaiswal to the list as well.

Professor Jaiswal is the author of a working paper entitled, “Fortune at the Bottom of the Pyramid – An Alternate Perspective.” He is based out of the Indian Institute of Management – Ahmedabad, and sent me a link to his paper along with the following message:

[My] paper argues against viewing the poor as [only] consumers, as suggested by Prahalad or only as producers, as suggested by Karnani. Drawing from the unethical exclusion and inclusion perspective, it contends for selective consumption by the poor. I hope this paper will be of interest to visitors of NextBillion. [The] paper aims to extend the ongoing debate and contribute to better understanding of BOP.

I was understandably excited when I received this note. (Yeah, this stuff excites me, what can I tell you?) In any case, I have had a read through and my initial reaction is a bit mixed. To be sure, Prof. Jaiswal hits on some key points, especially regarding Prof. Prahalad’s case studies in the 2004 Fortune at the Bottom of the Pyramid book. I found it particularly interesting to read about the history behind Hindustan Lever’s sachet approach (they launched the initiative not to hit on a new market, but to prevent themselves from being out competed by Nirma.)

He also (rightly) points out how most – if not all – of Prahalad’s case studies are taken from the “emerging” economies (Brazil, Mexico, South Africa, India, China), and not from more poor countries such as Pakistan, Tanzania, Nicaragua, etc.

That said, history has not stood still in the intervening years – there are tens, if not hundreds more case studies out there documenting real benefits derived by and with the BOP in conjunction with the private sector. Many of these studies document work ongoing in places like Kenya, Pakistan, Nicaragua, El Salvador, Bolivia, the Philippines, Indonesia, etc. The BOP is not just a “fad” in emerging economies, as Prof. Jaiswal insinuates.

Furthermore, he wades into the murky waters of measuring the size of the BOP. In doing so, he uses traditional poverty statistics and publicly available World Bank data – not a bad approach, but one that has been improved upon by the recent The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid report by World Resources Institute and International Finance Corporation. At the very least, he could have looked at the report before making an ill-informed argument about the true size of the BOP.

(Side note: No, the BOP market is not $13 trillion per year, as C.K. Prahalad once asserted. It is more like $5 trillion per year, based on a peer-reviewed methodology developed by WRI and IFC. Prahalad didn’t have access to these data, so he can be forgiven for the mistake. But it is equally wrong to use these insufficient data to recalculate the size of the BOP – as both Karnani and now Jaiswal have done)

Regardless of the measurement issue, I think that Jaiswal adds a lot to the BOP debate. His paper is a must-read as you prepare to go to Michigan next week for the conference, and I would encourage you to download it from the REPEC web site.

Thanks to Prof. Jaiswal himself for providing notice and a link to the paper.