Excavating Prahalad?s pyramid

Tuesday, December 18, 2007

“Profitable Business Models and Market Creation in the Context of Deep Poverty: A Strategic View”, by Christian Seelos and Johanna Mair, IESE, published in Academy of Management Perspectives, November 2007.

It?s vast, it?s untapped and it could just be what fuels 21st century market growth. But it will require a radical rethink of existing sales strategies.

Marketing to the poor: sounds like a loss leader, until you get aggregating. CK Prahalad?s landmark research revealed a potential $13 trillion market among those at the so-called “bottom of the pyramid” (BOP). But how to access the world?s lowest-income customers? Using two established case studies (Grameen Bank and Waste Concern), this award-winning paper seeks to answer just that.

Executives will be relieved. The complexities around getting a BOP proposition up and running have understandably dampened many a company?s enthusiasm. New supply chains, new resources, new capabilities, new alliances ? new everything, in essence ? was the advice to multinational firms.

Christian Seelos and Johanna Mair take the sting out of the BOP tail. Existing capabilities and current local BOP models can be leveraged to build new poor-focused markets, they argue. And with sufficient returns to make it all worthwhile. The trick, they say, is to scale down those hurdles that prevent companies implementing BOP models.

How so? First step: identify an existing organisation operating successfully at the pyramid?s bottom. Step two: give it scale through existing corporate capabilities. Step three: just start building from there. Two is tough; identifying existing BOP organisations isn?t easy. But find them early and first-mover advantages could be yours. Note for practitioners thinking of entering an underdeveloped market: flick to table 4 in the appendix for invaluable practical advice as well as conceptual pointers.

Source: Ethical Corporation (link opens in a new window)