Bottom of the Pyramid Spurs More Indian Ideas

Monday, April 6, 2009

We have the Nano, we have mastered the art of low-cost surgery, we know how to engineer sports utility vehicles at a fraction of the cost of a multinational corporation, we send spacecraft to the moon and launch satellites at a third of the cost, we have the world’s cheapest mobile phone, we’re the world’s IT champs… So why haven’t we been able to devise cost-effective ways of delivering education and healthcare to the majority of our people?

This is the short point that C K Prahalad repeated at the Confederation of Indian Industry’s India@75 presentation last week. He likes to call it the “bottom of the pyramid approach” and expressed surprise that it hasn’t achieved for India’s social infrastructure what it has for business enterprises.

Business developments since Prahalad wrote his book in 2005 have slightly negated his theory. The “bottom of the pyramid” on which businesses have focused is actually the bottom of the middle class pyramid. For instance, as much as we fete the Nano for expanding the car market to people who couldn’t afford one before, the Tata group is not looking at converting poverty into an opportunity as Prahalad had prescribed. Ratan Tata said as much at the Nano launch last month — “I am not in this for philanthropy,” he told reporters.

Like any shrewd businessman, Tata has spotted the opportunity in those segments of the middle class known as aspirers and climbers — people who are beginning to earn higher incomes as a result of faster economic growth and aspire to the accoutrements of middle class living. These are among the fastest-growing sections of the middle class, so consumer goods companies can ignore them only at their peril.

Still, the idea of leveraging India’s innovative capabilities for healthcare and education delivery systems is a good one, especially given the country’s abysmal social indicators.

Despite this, the concept hasn’t been applied in critical mass by any political party in power — not even the Bharatiya Janata Party which did much to evolve the liberalisation agenda when it was in power and prides itself on its IT-savviness.

Source: Business Standard (link opens in a new window)