How strategy guru C.K. Prahalad is changing the way CEOs think

Wednesday, January 18, 2006

Take a cab ride through Bombay, and these are the scenes that will likely strike you first: raggedly dressed homeless families sprawled on blankets amid shacks. Traffic hopelessly clogged with every manner of soot-belching vehicle and wooden cart. Gaunt hawkers and beggars tapping on your window at red lights. For foreign visitors, such jarring images of poverty and desperation are hard to shake.

View those same streets through the eyes of C.K. Prahalad, however, and they become a beehive of entrepreneurialism and creativity. “I see the positives inside the muck,” says Prahalad as he settles his stocky frame into the back of a hired Tata Indica sedan to conduct a quick tour of Bombay. As the car crawls through congested Mohamed Ali Road, he notes that virtually every individual is engaged in a business of some kind — whether it is selling single cloves of garlic, squeezing sugar cane juice for pennies a glass, or hauling TVs.

On every block he points out the intriguing enterprises tucked into the nooks and crannies. With the world’s cheapest telecom rates, “all you need here is a phone and a $20 card to start a business,” he explains in his measured baritone. He notices a busy closet-sized shop charging a few pennies per page to send faxes. “That guy probably started with a single phone and then added a fax and printer. Now he has a self-contained communications center offering extremely low prices.” Such entrepreneurs, he contends, pioneered cheap pay-per-use services long before they became a fad in the West. The car stops at a small dry-goods shop. Prahalad bounds out and asks the owner to let him behind the counter. Tiny 5 cents single-serve containers of shampoo, soap, toothpaste, and other household goods dangle from the walls and ceiling. He notes the brands: Head & Shoulders, Lifebuoy, Pears, Colgate, Lux. “Low quality won’t sell,” he says.

By the end of an hour it’s hard to look at Bombay and its impoverished citizens in the same way. That’s exactly what Prahalad, 64, intended. The University of Michigan professor’s knack for being able to change people’s perceptions of the world around them has made Prahalad an incredibly influential corporate strategist. He has built a lucrative consulting career helping such multinationals as Citibank, Philips, and Philip Morris break out of ingrained mind-sets and craft new business models. Prahalad and colleague Gary Hamel helped spark a management revolution in the 1990s with their idea of “core competence,” which says that companies must identify and focus on their competitive strengths. Their 1994 book, Competing for the Future, is regarded as a classic. A decade later he co-wrote The Future of Competition, which argued that the traditional “company-centric” approach to product innovation is giving way to a world in which companies “co-create” products with consumers. That book gave Prahalad a reputation among designers. At the same time, he has been working to convince executives that today’s needy masses, so often dismissed as subsisting largely outside of the global economy, are actually its future. Prahalad’s 2004 work on that topic, The Fortune at the Bottom of the Pyramid, has been hailed as one of the most important business books in recent years and turned Prahalad into a celebrity in the field of international development.

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Source: Business Week Online (link opens in a new window)