Fortune at the Bottom of the Pyramid

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Introduction

Have to look at design for the BOP as a design challenge and NOT a charity case
BOP defined as people living on less than $2/day and number about 2 billion
We can’t assume we know what the poor want, only they know their needs
BOP customers get products and services at an affordable price, but most importantly they get recognition, respect, and fair treatment
Decision makers do not often hear the voice of the poor

3 keys to creating capacity to consume
o Affordability
o Access
o Availability

Chapter 1: The Market at the Bottom of the Pyramid

Stop thinking about poor as victims or a burden, and recognize them as creative entrepreneurs and value-conscious consumers
Need a win-win where companies profit and poor can afford goods + services
The poor actually pay a ‘poverty penalty’ of between 5-25 times the price that the rich pay for the same services
The poor have unpredictable income and make purchases only when they have cash and buy only what they need for that day and solutions need to take that into account

Chapter 2: Products and Services for the BOP

· Basic economics of the BOP market are based on: small unit packages, low margin per unit, high volume, high return on capital

· Principles of innovation for BOP Markets

o   Focus on price performance
o   Innovation requires emerging technologies creatively blended with existing infrastructures
o   Solutions must be scalable across countries, cultures, and languages
o   Innovations focused on conserving resources: eliminate, reduce, and recycle
o   Products must be based upon function, not just form
o   Innovative distribution methods
o   Deskilling work
o   Educate consumers on product use
o   Products must work in hostile environments and endure abuse
o   Research on interfaces

Chapter 3: BOP A Global Opportunity

There are four distinct sources of opportunity for a firm that invests into the BOP:
Some BOP markets are large and attractive on their own
Local innovations can be applied to other BOP markets
Some innovations can be applied to the developed world
Lessons from BOP markets can influence practices of global firms

Chapter 4: The Ecosystem for Wealth Creation

There should be a greater interdependence between the public and the private sectors in order to promote growth in the BOP

Chapter 5: Reducing Corruption

Make the process as transparent as possible in order to realize the real costs of corruption

Chapter 6: Development as Social Transformation

When the poor are treated as customers they can reap the benefits of choice, respect, and self-esteem and have an opportunity to climb out of poverty

Transforming the BOP into a market will require innovation
When a new ‘low-end’ product comes into a market it could be a step up from what people are currently using

Case Studies of Successes

Casas Bahia is a major electronics retailer in Brazil and has a market worth $1.2 billion (US) per year
Sears and Wal-Mart have both failed in this Brazilian market because they did not understand the needs of their customers
Their business model revolves around financing – between 1 and 15 month periods
90% of their sales are financed

Why This is Important

There have been successes with products and strategies targeted towards the people living on very little per day. It's a good reminder that any project has to be self-sustainable and not subsidized. A successful product that is affordable could improve lives for the better but the solution will require a new way of thinking and innovation; in one or many areas which is the challenge.

Source:
Prahalad, C. K.. The fortune at the bottom of the pyramid. Upper Saddle River, NJ: Wharton School Pub., 2005. Print.