Bottom of the Pyramid Is Not Only About Low-cost Products, Says Stuart Hart

Wednesday, June 22, 2011

BANGALORE: It has been a little more than a decade since the late management guru C K Prahlad and Cornell professor Stuart Hart introduced the concept of the fortune at the bottom the pyramid. It deals with how companies can profitably target the huge mass of consumers at the low-income and below the poverty line (BPL) level. Hart now admits that the concept has not been entirely successful as both the developers of the concept as well as companies misread the opportunity. In an interview with TOI, Hart discusses why bottom of the pyramid (BOP) 1.0 in its original version needs to now evolve to BOP 2.0 by learning from the mistakes made in the past.

How do you rate the success of your BOP model?

I think Prahlad and I were perhaps the first ones to identify and vocally articulate that a huge market opportunity lies at the base of the pyramid. Though we were initially not taken seriously, companies have now warmed up to the idea. We see a host of corporate initiatives in India and across the globe addressing this market segment.
Having said that, apart from areas such as microfinance and rural telecom , there are no substantial success stories we can talk off. Though we all now have understood the market potential at the BOP, we have not approached the market correctly. Learning from these past mistakes I have now developed a BOP 2.0 protocol.

What are the failings and what changes does BOP 2.0 incorporate?

I think we looked at catering to this segment of the market with low cost products. However many of these products have been designed by companies at in-house R&D centres without understanding the needs of the customer. Companies are typically attuned to creating demand at the higher end of the market. Understanding the needs of the bottom segment keeping in mind the socio-economic and political fabric of the target market is vital.
The new BOP 2.0 protocol proposes to co-create products with poor communities. This could be done by creating a committee to develop products with various stakeholders including the community representatives , NGOs and company officials. It also proposes to do this with sustainable technologies that preserve the environment and natural resources.

Source: The Times of India (link opens in a new window)