Next generation business strategies for the base of the pyramid: new approaches for building mutual value

Acknowledgments xvi About Authors xvii Dedication to C.K. Prahalad xxiii Big Picture by C.K. Prahalad xxvi Foreword by Y.C. Deveshwar xxxiii Introduction: Creating a Fortune with Base of Pyramid 1 Ted London, William Davidson Institute & Ross School of Business, University of Michigan and Stuart Hart, Johnson School of Management, Cornell University introduction, by co-editors Ted London and Stuart Hart, conveys core message of book: that next generation of BoP business strategies won't be about finding a fortune at base of pyramid, but rather, about creating a fortune with base of pyramid. 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 three core sections of book--Roadmaps for Success, Strategic Opportunities, and Effective Implementation--and explain how contents of each can help venture leaders approach challenges and opportunities of BoP markets. PART ONE: ROADMAPS FOR SUCCESS Chapter 1 Building Better Ventures with Base of Pyramid: A Roadmap 19 Ted London, William Davidson Institute & Ross School of Business, University of Michigan Ted London's chapter addresses how venture leaders can maximize chances that their business development efforts in BoP markets will succeed. Which business practices should guide your efforts--and which ones should you be sure to avoid--as your venture moves through stages of designing, piloting, and scaling? How do you craft initial business models, effectively test these approaches, and create sustainable competitive advantage? Using perspective of creating a fortune with base of pyramid, London provides a set of guiding principles (a roadmap) that answer these and other critical questions relevant to both existing and start-up BoP ventures. Chapter 2 Innovation for BoP: Patient Capital Approach 45 Robert Kennedy, William Davidson Institute & Ross School of Business, University of Michigan and Jacqueline Novogratz, Founder and CEO, Acumen Fund Co-authors Robert Kennedy and Jacqueline Novogratz explain how social entrepreneurs and philanthrocapitalists are changing BoP landscape by connecting innovative business approaches to patient capital--money that is expected to generate returns over a longer period than is typical of (say) venture capital. They identify four types of innovation that are proving critically important to success in operating in BoP markets, and show how a range of enterprises are applying these approaches in field. PART TWO: STRATEGIC OPPORTUNITIES Chapter 3 Taking Green Leap to Base of Pyramid 79 Stuart Hart, Johnson School of Management, Cornell University Can BoP teach ToP (the of pyramid) anything? Author Stuart Hart says yes. In old BoP model, Western entrepreneurs sought to sell goods and services to BoP with little regard to environmental consequences. Today, Hart argues, next generation of entrepreneurs are trying to develop distributed, smallscale, small-footprint products and services that are more appropriate to BoP context--and may well point way toward better models for ToP, as well. Chapter 4 Needs, Needs, Everywhere, But Not a BoP Market to Tap 103 Erik Simanis, Center for Sustainable Global Enterprise, Johnson School of Management, Cornell University Market creation, argues author Erik Simanis, is fundamentally different from entry. And although BoP is a basket of compelling needs, it is not yet a market in traditional sense of that term. As a result, entrepreneurs in BoP context have to think in terms of creation--and understand how to achieve that end in a uniquely challenging context. wise venturer in BoP space, Simanis writes, learns how to frame value proposition and manage innovation process (through seeding, base-building, and growth and consolidation) in ways that align business strategy with BoP opportunity. Through a sustained case study involving a soy-protein product, Simanis illustrates how to stay on track while building markets with BoP. Part Three: Effective Implementation Chapter 5 A Micro-Level Approach to Understanding BoP Markets 129 Madhu Viswanathan, University of Illinois, Urbana-Champaign The devil is in details, as old saying goes. In this chapter, Madhu Viswanathan makes case that BoP markets have to be understood at ground level--from bottom up--if a venture is to succeed in those marketplaces. What are marketplace-relevant characteristics of poverty? In one-to-one interactional marketplaces of BoP, boundaries between human and issues tend to get blurred, long-term relationships tend to trump short-term ones, rich networks make up for resource constraints, and consumption and entrepreneurship can be two sides of same coin. BoP entrepreneurs, therefore, have to concretize, localize, and socialize their products and services. Chapter 6 Reframing Design for Base of Pyramid 165 Patrick Whitney, Institute of Design, Illinois Institute of Technology By enabling breakthrough products, issues of design have come to fore in industrialized world, which is leaving behind economies of scale for economies of choice. Contrasting Apple iPhone with Chotukool refrigerator, author Patrick Whitney explores provocative question of whether strategic design techniques that have proven themselves at top of economic pyramid might also prove useful--in identical or modified forms--when applied to base of pyramid markets. His answer is yes--albeit with some important caveats. Chapter 7 BoP Venture Formation for Scale 193 Allen Hammond, Ashoka Social enterprises do good works. But unless they achieve a significant scale, they aren't in a position to serve millions of BoP customers, or to help reshape economies. Author Allen Hammond argues for a combination of both bottom-up and top-down enterprise formation to better reach and serve BoP markets, and explains how that productive mix can be accomplished. Additionally, he suggests, BoP entrepreneurs can build business ecosystems (rather than stand-alone ventures) to support scale. Hammond explains how hybrid organizations can serve that purpose--and provides insights from a real-world example. Conclusion: A Continuing Journey 217 Ted London, William Davidson Institute & Ross School of Business, University of Michigan and Stuart Hart, Johnson School of Management, Cornell University Co-editors Ted London and Stuart Hart look at the journey ahead--both in terms of future of BoP-oriented ventures, and in terms of research that needs to be done to help advance our understanding of field, which ultimately will help those BoP-oriented ventures succeed. They present--and begin debate about--five core assumptions that underpin BoP domain, which collectively help set BoP agenda of tomorrow. Appendix: Attendees from 2009 Conference: Creating a Shared Roadmap 233 Index 239