A Philosophy for Developing Products and Services for the Bottom of the Pyramid
- Sep 23, 2009
The BOP, as a market, challenges the dominant logic of MNC managers (the beliefs and values that managers serving the developed markets have been socialized with). For example, the basic economics of the BOP market are based on small unit packages, low margin per unit, high volume, and high return on capital employed. This is different from large unit packs, high margin per unit, high volume, and reasonable return on capital employed. This shift in business economics is the first surprise to most managers. As we observed in Chapter 1, “The Market at the Bottom of the Pyramid,” creating the capacity to consume—the single-serve and low unit pack revolution at the BOP—can be the first surprise for product developers trained in the West. “How can anyone make money at $0.01/unit price at retail?” is often the question. Similarly, in the West, product developers often assume that the required infrastructures for the use of products exist or that Western infrastructure can be made economically viable and will function properly in these markets. In a developed market, access to refrigerators, telephones, transportation, credit, and a minimum level of literacy can all be assumed. The choice of technologies is not constrained by the infrastructure. However, in BOP markets, the quality of infrastructure can vary substantially, especially within a country as vast as China, Brazil, or India. What is available in Shanghai or Mumbai is not an indication of the infrastructure in the hinterlands of China or India. For example, the supply of electricity can be quite erratic and blackouts and brownouts are common. Advanced technology solutions, such as a regional network of PCs, must coexist with poor and indifferent electrical and telecom infrastructures. Hybrid solutions that integrate backup power sources with PCs are a must, as are customer interfaces. For example, India boasts more than 15 official languages and 500 dialects, and 30 percent of the total population is illiterate. How then can we develop user-friendly interfaces for products that the poor and the illiterate can understand and utilize? Surprisingly, illiteracy can lead to acceptance of the state-of-the-art solutions. For example, illiterate consumers can “see and hear,” not read. Therefore, video-enabled cell phones might be more appropriate for this market.
These challenges are not isolated conditions. Involvement in BOP markets challenges assumptions that managers in MNCs have developed over a long period of time. A new philosophy of product development and innovation that reflects the realities of BOP markets is needed. This philosophy must represent a different perspective from those that we have grown accustomed to in serving Western markets.
Based on my research, I have identified 12 principles that, taken together, constitute the building blocks of a philosophy of innovation for BOP markets. In this chapter, we discuss each of these principles with specific illustrations drawn primarily from the detailed case studies of successful innovations at the BOP included in this book.
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