What the Folks at the Bottom of the Pyramid Can Teach Us

There was an article in Harvard Business Review last week by Deepa Prahalad entitled “Design Lessons from the Consumer at the Bottom of the Pyramid.” Deepa is the son of C.K. Prahalad, who, along with Stu Hart and Clayton Christiansen, popularized the notion of the base of the pyramid, meaning the economic stratum containing the poorest people on the planet. The idea is that this population should be far more than the object of compassion or a target for altruistic handouts, rather it should be seen as a breeding ground for innovation as well as an important and viable market in itself with tremendous growth potential.

Although the term has been floating around the business world for over a decade, Prahalad feels that only the outermost surface of the reality behind it has been scratched. As one example of a successful foray into this world, GE’s portable electro-cardiogram device has received a lot of attention. It was developed for the third world environment, but its low cost, portability, and ease of use have combined to make it a big hit back home as well. Another one I wasn’t familiar with is the Chotukool, a $69 portable refrigerator that runs for hours on a battery, using a solid state cooling device instead of a compressor. Don't be surprised if you see one at your next tailgate party.

Prahalad is saying that these bottom of the pyramid markets are not that easy to enter, but that they provide a kind of usability stress test from which only low-cost, value-rich products can emerge successfully.

This is because the poor are used to a highly personalized consumer experience and a highly collaborative design process (from local artisans or from things they make themselves). The fact that many more households are multi-generational in these areas (a trend that is also growing back home), makes it that much more difficult to sell a product that is anything less than an inherently logical purchase.

The second lesson deals with a business model that is flexible enough to deal with income volatility and reassuring enough to overcome the buyer’s anxiety about spending money in an uncertain world. He cites the example of Hyundai’s 2008 Assurance program that offered to buyback the cars with no penalty in the event of a job loss.

Finally, he talks about the insights gained in areas like India, where highly educated workers are manning call centers and developing comprehensive knowledge bases about first world consumer pain points. This could easily become a spawning ground for innovation. Most of these people who grew up under rugged circumstances, learned early on to think on their feet. They might just be in a position to leverage those skills in developing lucrative solutions to “high class problems” in faraway lands.

All this is to say that the developing world is becoming an increasingly interesting place that is well worth paying attention to, where you can found countless examples of what I like to call “bottoms-up innovation.”

I happened to speak with Stu Hart about some of these issues a few weeks back and he said,

It’s not really an R&D problem. It’s more of an imagination problem as far as commercialization strategy goes. Companies need to get people out there into the underserved rural areas, the urban slums and shanty towns and then co-develop business models around these technologies, optimizing the technologies for a value proposition in those communities, and then teaching people in those communities in the creation and development of the business. That’s a different kind of strategy and a different kind of capability from what multinationals currently possess. These opportunities are in unfamiliar geographies and demographics and are therefore seen as high risk, strange, etc.

But the bottom-up innovators that are beginning to prosper in India and China, such as Shinri Ebikes, will soon be turning their attention to the global market; they do not have this problem.

Successful companies in the future will be those grounded in the fulfillment of a basic human need, implemented in a sustainable way as a win-win both for the producer and for all the stakeholders involved in the creation, consumption and disposal of the product over its entire life cycle and across the entire value chain. Bottoms-up value models will have an inherent advantage because they emerge from a deeply rooted synthesis of a basic need and an organic capability. Think of a tree. Because of the way it expresses its uniqueness in concert with what Janine Benyus calls the nine laws of nature, it is inherently sustainable. This is the direction that bottoms-up value companies are starting to take and all indications are that it will serve them well.

RP Siegel is the co-author of the eco-thriller Vapor Trails, the first in a series covering the human side of various sustainability issues including energy, food, and water.  Like airplanes, we all leave behind a vapor trail. And though we can easily see others’, we rarely see our own.

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