BOP Report(Bottom of the Pyramid)

15. How to Get Started: The Conceptual Framework for BOP Innovation

Corporations can approach the BOP opportunity from a number of directions. Here are three important aspects of the BOP innovation framework developed by C. K. Prahalad and Stuart Hart.

1) Challenge Core Beliefs and Embedded Assumptions about Poor People and Markets

These assumptions include: what poor people “really” need and desire and how they consume; perceived barriers to market entry such as distribution hurdles and other transaction costs; and deep-seated feelings and fears about non-Western cultures and countries. Education and training will be required to build skills, competencies, and new “mental maps” of what is and is not possible in these markets. Western companies in particular need to check their reflexive “West knows best” attitude and ask themselves what they might stand to learn from other markets and people.

2) Innovate Business Designs from the Bottom-Up

Many current business models in many industries were configured for a different market space and time and will not work as well in the BOP context. As a consequence, new business designs need to be created that are better suited to these specific conditions. The challenge of innovating from the bottom-up, however, will be the creation of sustainable and robust new business ideas and technologies that can “cross over” to the developed world. How do you marry quality, low cost, sustainability, and profitability simultaneously? How do companies tap the latent demand for products and services that are badly needed in these markets? In part, perhaps, by beginning the innovation process with the following points in mind:

Rethink technology platforms and their supporting business models. This might include radical innovations, or a mix of high-tech and low-tech solutions. The end result: simpler, better, more accessible, cheaper, and cleaner technologies.

Focus on meeting functional needs and services, not just producing more product. This will require identifying new sources of value through a demand-side lens. It may also require unlearning existing product profiles and developing a beginner’s mind to product innovation.

Focus on capital efficiency, not just labour productivity. The latter is less important where labour is cheap and abundant and people need employment. In most BOP cases, there is zero working capital involved, which is an inspiring achievement.

Explore shared use/access models that disaggregate access from ownership but widen the consumer base. The result: increased asset productivity. Think of a community of users instead of a single user in a BOP world.

Replace assets with information. For instance, cell phone services now provide weather, soil, and pricing data to framers in rural markets. They are also procurement vehicles.

Shift from a “bigger is better” economies of scale mentality. Instead, think about marrying world-scale capabilities with more distributed small-scale operations.

Focus on different metrics. Managers are trained to concentrate on margins, but unit volume sales are often more relevant for BOP markets.

Tap into diverse knowledge sources across disciplines. Learning to see old problems in a new light may come from a different perspective or practice.

3) Invest in a Business Ecosystem

Enable marketspace creation in collaboration with other groups, institutions, and stakeholders. New business designs are unlikely to succeed without a broader, four-pronged strategy, which includes creating buying power (through increased access to credit and income generation); shaping aspirations (through consumer education and sustainable development choices); tailoring to local solutions (through bottom-innovation and targeted product development); and improving access (through novel approaches to creating distribution systems26 and enhancing communication links). Of course, if companies and institutions get this right, it will create a virtuous circle of market creation, thus ensuring them customers in the future, which was an unquestioned assumption up until now. But this will require nothing less than a “new mode of international engagement, sharing resources and skills on a global scale.” This, in turn, will require a completely new attitude toward risk by all stakeholders.

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