The Bottom of the Pyramid Strategies

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The BoP  (Bottom of the Pyramid) strategies offer opportunities to poor people in emerging countries as well as in developed countries. These strategies are often developed by international groups and even though they can be controversial at times, they are quite capable of enhancing performances in small to medium enterprises. 

David MENASCE specializes in social business ventures. He focuses notably on the contributions made possible by companies in their fight against poverty.  As the person in charge of the course “New Business Models at the base of Pyramid” (which is part of the HEC – Social Business), he is the adjunct director of the “Revue Francaise de Gestion”.  He is also a graduate of HEC and of IEP in Paris. He leads the consulting firm AZAO which specializes in BOP strategies.

At an APM meeting he described his views on the phenomenon:

What are the views on the strategies related to BoP?

« In our world, there are 4 billion consumers who survive on less than a few dollars per day. These people have to find companies enabling them to purchase low-priced products in a market context, not in a charitable context. »  CK Prahalad

For example, let’s talk about India. The middle class there represents a part of the population that is relatively poor: 50% of the families earn less than $2.70 per day and 90% of these families survive on less than $5.00 per day.

50% of the population in India belongs to the middle class according to the guidelines provided by OCDE (daily income is between 10 and 100%). The Indian market, therefore, is potentially a social conquest to be accomplished by a transfer of competence which will allow the population to access jobs and to develop a sense of enterprise.

What are the initiatives ?

The middle class there represents a part of the population that is relatively poor: 50% of the families earn less than $2.70 per day and 90% of these families survive on less than $5.00 per day.

50% of the population in India belongs to the middle class according to the guidelines provided by OCDE (daily income is between 10 and 100%). The Indian market, therefore, is potentially a social conquest to be accomplished by a transfer of competence which will allow the population to access jobs and to develop a sense of enterprise.

Danone Communities

Already present in Africa, India, Bangladesh and Cambodia, Danone Communities finances social business projects which are mainly concerned with nutritional problems. Financial and technical assistance is demonstrated in the Naandi Community Water Services which offers access to low-cost potable water.

M Pesa

Through the use of the Kenyan operator Safaricom, M Pesa is a money transferring system service using cellular phones. The client is able to deposit and/or to transfer money using a prepayment system. M Pesa is now an affiliate of Kenya Telkom and Vodafone. It was initially developed by Sagentia before becoming part of IBM.

These initiatives rest on the concept of Frugal Innovation which is a split from a complicated engineering process and a step toward a more economical, simplified system.  In this manner, innovation is re-discovered: it is re-defined and simplified to produce a ‘good-enough’ product.

Innovation Frugal becomes a major player in a global and competitive environment, in the manner of Celtel, the African success story.  Celtel was founded in 1998. it is now operating in Zambia, Sierra Leone, the Congo, Malawi, Gabon, RDC, Chad, Burkina Faso, Niger, Ouganda, Tanzania, the Sudan and Kenya. It was purchased by Zain in 2005, for $3.4 billion, then sold to Bharti Artel in 2010.

« I have great respect for our traditional competitors, but we know how to keep ahead of them. They will never be able to bring General Electric down.  This is not the case concerning today’s emerging enterprises. These could totally modify the market in the developed countries.  Innovation at the Bottom of the Pyramid is not an option, it is an obligation. »  Jeff Immelt – CEO General Electric

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