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Published: January 10, 2002

 
 

The Fortune at the Bottom of the Pyramid

• Bridging. MNCs can be nodes for building the commercial infrastructure, providing access to knowledge, managerial imagination, and financial resources. Without MNCs as catalysts, well-intentioned NGOs, communities, local governments, entrepreneurs, and even multilateral development agencies will continue to flounder in their attempts to bring development to the bottom. MNCs are best positioned to unite the range of actors required to develop the Tier 4 market.

• Transfer. Not only can MNCs leverage learning from the bottom of the pyramid, but they also have the capacity to transfer innovations up-market all the way to Tier 1. As we have seen, Tier 4 is a testing ground for sustainable living. Many of the innovations for the bottom can be adapted for use in the resource- and energy-intensive markets of the developed world.

It is imperative, however, that managers recognize the nature of business leadership required in the Tier 4 arena. Creativity, imagination, tolerance for ambiguity, stamina, passion, empathy, and courage may be as important as analytical skill, intelligence, and knowledge. Leaders need a deep understanding of the complexities and subtleties of sustainable development in the context of Tier 4. Finally, managers must have the interpersonal and intercultural skills to work with a wide range of organizations and people.

MNCs must build an organizational infrastructure to address opportunity at the bottom of the pyramid. This means building a local base of support, reorienting R&D to focus on the needs of the poor, forming new alliances, increasing employment intensity, and reinventing cost structures. These five organizational elements are clearly interrelated and mutually reinforcing.

• Build a local base of support. Empowering the poor threatens the existing power structure. Local opposition can emerge very quickly, as Cargill Inc. found in its sunflower-seed business in India. Cargill’s offices were twice burned, and the local politicians accused the firm of destroying locally based seed businesses. But Cargill persisted. Through Cargill’s investments in farmer education, training, and supply of farm inputs, farmers have significantly improved their productivity per acre of land. Today, Cargill is seen as the friend of the farmer. Political opposition has vanished.

To overcome comparable problems, MNCs must build a local base of political support. As Monsanto and General Electric Company can attest, the establishment of a coalition of NGOs, community leaders, and local authorities that can counter entrenched interests is essential. Forming such a coalition can be a very slow process. Each player has a different agenda; MNCs have to understand these agendas and create shared aspirations. In China, this problem is less onerous: The local bureaucrats are also the local entrepreneurs, so they can easily see the benefits to their enterprise and their village, town, or province. (See “Profits and Perils in China, Inc.,” First Quarter 2002.) In countries such as India and Brazil, such alignment does not exist. Significant discussion, information sharing, the delineation of benefits to each constituency, and sensitivity to local debates is necessary.

• Conduct R&D focused on the poor. It is necessary to conduct R&D and market research focused on the unique requirements of the poor, by region and by country. In India, China, and North Africa, for example, research on ways to provide safe water for drinking, cooking, washing, and cleaning is a high priority. Research must also seek to adapt foreign solutions to local needs. For example, a daily dosage of vitamins can be added to a wide variety of food and beverage products. For corporations that have distribution and brand presence throughout the developing world, such as Coca-Cola Company, the bottom of the pyramid offers a vast untapped market for such products as water and nutritionals.

 
 
 
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Resources

  1. The concepts in this article were first articulated in 1998, and have been made available for discussion in a working paper. For more information, contact the authors.
  2. Stuart Hart, “Beyond Greening: Strategies for a Sustainable World,” Harvard Business Review, January–February 1997; Click here.
  3. C.K. Prahalad and Kenneth Lieberthal, “The End of Corporate Imperialism,” Harvard Business Review, July–August 1998; Click here.
  4. “Is the Digital Divide a Problem or an Opportunity?” Business Week Supplement, December 18, 2000
  5. Robert Chambers, Whose Reality Counts? Putting First Last (ITDG Publishing, 1997)
  6. Thomas L. Friedman, The Lexus and the Olive Tree: Understanding Globalization (Farrar, Straus and Giroux, 1999)
  7. Amartya Sen, Development as Freedom (Alfred A. Knopf, 1999)
  8. Hernando de Soto, The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else (Basic Books, 2000)
 
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