Introduction: Creating a Fortune with the Base of the Pyramid
- Nov 9, 2010
by Ted London, William Davidson Institute & Ross School of Business, University of Michigan; and Stuart L. Hart, Johnson School of Management, Cornell University
- The introduction, by co-editors Ted London and Stuart Hart, conveys the core message of the book: that the next generation of BoP business strategies won’t be about “finding a fortune at the base of the pyramid,” but rather, about “creating a fortune with the base of the pyramid.” The shift from “fortune-finding” to “fortune-creating” has implications for how BoP ventures are organized, and how their strategies are conceived and implemented. Co-editors London and Hart introduce the three core sections of the book—Roadmaps for Success, Strategic Opportunities, and Effective Implementation—and explain how the contents of each can help venture leaders approach the challenges and opportunities of BoP markets.
The way we frame the opportunities and challenges in front of us matters. In fact, it can be one of our most important choices. When we rely on an established framing, our ideas generally evolve in linear, incremental, and increasingly predictable ways. But when we use a new lens on an old problem, we allow creativity back into the process, and this can enable us to make major leaps forward.
Stated slightly differently, when we reconsider our fundamental, often taken-for-granted assumptions, we can help stimulate the emergence of new ideas and approaches. This is true in many human endeavors, and the base (bottom) of the pyramid (BoP) domain is no exception. The BoP domain comprises a broad range of business models, developed by or in partnership with the private sector, and specifically designed to target the poorest segments of society as consumers, producers, and entrepreneurs.
And yet much of the current thinking in this domain, as well as much of the action in the field, seems tethered to a set of assumptions whose time may have passed. For many, their perspective of the BoP domain remains wed to the concept of “finding a fortune at the BoP.”
This way of thinking certainly was valuable in generating early momentum, but holding onto this view for too long has limited our collective creativity and impact. Fortunately over the past few years, aspects of a new perspective have begun to emerge, which collectively has the potential to transform the BoP opportunity space. We feel the time has come to connect these emerging ideas together in one place. Hence this book, which offers a fundamentally different starting premise for those companies, nonprofits, social entrepreneurs, and development agencies interested in developing ventures to serve the BoP.
Simply put, we contend that successful BoP business development requires a change in framing to creating a fortune with the BoP.
Next-Generation BoP Strategies
Since the BoP domain’s initial articulation as “The Fortune at the Bottom of the Pyramid” over a decade ago, interest in the BoP as a market segment, business strategy, and poverty alleviation approach has gained considerable momentum.1 During that time, a growing number of organizations operating in the business and development sectors launched new BoP ventures and initiatives. With many observers predicting—especially in the wake of the global financial crisis—that the developed world will suffer a prolonged period of slow growth well into the foreseeable future, more and more companies and development agencies are exploring the opportunity to develop self-sustaining—and better yet, scalable—business models to serve BoP markets.2
Most BoP business activity and associated intellectual energy, however, remains centered on the prospect of selling products to a seemingly massive and previously ignored and underserved market.3 Practice and research focus on the role of companies and nonprofit organizations in developing new distribution channels to reach low-income markets and new technological solutions to address unmet needs. This first generation of “fortune-finding” approaches could be described as business to four billion.
With some notable exceptions, many of these first-generation BoP ventures have yet to achieve substantial scale. A number have failed, others remain local or regional in character, and a few have been converted into philanthropic endeavors because the financial upside remained elusive.4 Serving the BoP, it now seems clear, involves more than simply providing low-cost products and extended distribution reach to a hitherto untapped market—one that is passively waiting to be discovered by observant entrepreneurs and business leaders.
Over the past few years, a second generation of approaches with a markedly different orientation and value proposition has emerged. Framed more accurately as business with four billion, this “fortune-creating” perspective emphasizes co-creating new business models, technology solutions, and value propositions with the BoP. This more nuanced view of BoP venture strategy extends and enhances our thinking about market development, innovation, capability requirements, and cross-sector partnerships. Most recently, this work suggests that efforts to co-create BoP ventures can also provide important avenues for poverty-alleviation and green-technology agendas.5 Yet this second generation of BoP business strategies still remains “hidden” from many BoP leaders in the for-profit, nonprofit, and development communities who have yet to shed the old framing.
We assembled the set of essays in this book to help accelerate the transformation in the way the BoP is viewed from a “fortune-finding” to a “fortune-creating” mentality.6 Our goal is to share some of the latest thinking in this still-emerging perspective for the BoP domain. Based on the idea of creating a fortune with the BoP, we have made our best effort to provide useful material for existing and emerging leaders committed to developing better BoP ventures, as well as for those in development and policy-makers interested in the potential social value resulting from these enterprises.