B-Schools Find Their Base
Wednesday, August 15, 2007
The Base of the Pyramid theory is an especially attractive one, especially, if, like me, you believe that MBAs can make a huge dent in world poverty by developing business opportunities in developing regions. The idea, made popular by Hart and University of Michigan business professor C.K. Prahalad, is that companies should not ignore the combined purchasing power of an estimated four billion people who live in poverty throughout the world. A few days ago I heard from a former BusinessWeek colleague who is now studying for an MBA at Cornell University in New York.He was remarking on a recent story we ran on the increasing interest in courses on the ?Base of the Pyramid? economic theory (“On Campus, A Different Pyramid Scheme” http://www.businessweek.com/bschools/content/aug2007/bs2007081_122512.htm) as well as an accompanying interview with Cornell professor Stuart Hart, one of the founders of the BOP theory (“Cornell Professor Builds on His Base,” http://www.businessweek.com/bschools/content/aug2007/bs2007081_830078.htm).
“Did you know that my video view with [Stuart Hart] was one of the reasons I ended up here?” my friend, who?s interested in microfinance, wrote from Cornell. “I found the guy really personable and inspiring.”
The Base of the Pyramid theory is an especially attractive one, especially, if, like me, you believe that MBAs can make a huge dent in world poverty by developing business opportunities in developing regions. The idea, made popular by Hart and University of Michigan business professor C.K. Prahalad, is that companies should not ignore the combined purchasing power of an estimated four billion people who live in poverty throughout the world.
Indeed, some BOP proponents talk about the theory in almost mystical terms. “Corporate investment at the base of the pyramid could mean lifting billions of people out of poverty and desperation,” notes the course description for a BOP course at the University of Michigan, as cited by the Aspen Institute, an organization that tracks business and societal issues. Prahalad points out that China, India, Brazil, Mexico, Russia, Indonesia, Turkey, South Africa and Thailand alone are home to about three billion people and have a GDP in purchasing power parity of $12.5 trillion.
Not everyone is convinced that BOP ideas are the solution to ending to world poverty. Talking about the huge market that these impoverished consumers represent is one thing ? actually making money selling to them is another. A Microsoft executive told BusinessWeek last year that it?s not clear that companies can make money selling to the poor. And Michigan strategy professor Aneel Karnani says that the BOP concept is “fundamentally flawed” and won?t work. Plus, Karnani says, the size of the BOP market is exaggerated.
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