What defines a Base of the Pyramid (BoP) business? Here at NextBillion.net, our goal is to identify and discuss sustainable business models that address the needs of the BoP. We have had many debates about the size, total income and expenditure of this group. NextBillion is currently hosting some debate about what development means. At the same time, we've been thinking about the role and importance of BoP businesses within the development community thanks to Michael Edwards' criticism of 'philanthrocapitalism'. But what exactly do we mean about when we talk about BoP businesses?Everything BoP is currently in fashion. The 'BoP business' term is catchy, but unfortunately it has no easy or clear-cut definition. That BoP business initiatives are currently so popular...
This is exactly the same question that was asked by the World Bank last year and I have recently had the chance to read their subsequent report “Unleashing India’s Innovation”. All in all it was an interesting reading with a complete analysis of the main innovation levers in the country, although sometimes I felt it was much too vague in its recommendations.India is becoming a global innovator for high-tech products and services. However, it is well-known that the country is underperforming relative to its real innovation potential. This is quite puzzling taking into account the fact that India's stock of scientists and engineers engaged in Research & Development (R&D) is among the largest in the world.(This post continues past the break; click "Read More" to...
When a Fortune 500 corporation says something, people listen. When the Fortune 500 company in question is Citigroup – in 2007, the world's largest firm – people REALLY listen. So when I received a phone call from Citigroup analyst Stuart Block earlier this year, I was all ears. Stuart – with fellow researcher Richard Reid – was calling because he had undertaken an ambitious base of the pyramid project. He and Reid set out to examine the market and share their findings with Citi's audience of expert analysts and customers. Naturally, I was intrigued. I know that the base of the pyramid concept has become mainstream over the past few years, but here I had a Citigroup researcher on the line, asking me how we came up with the figures in The Next 4 Billion report. This...
Most of NextBillion's visitors have heard about the current jump in food prices. These higher prices have already triggered responses locally in the form of riots in countries such as Haiti, Egypt and Bangladesh. The OECD and FAO have recently issued a report predicting that food prices have moved permanently to higher levels compared with past prices (the Financial Times offered an advance of the study's highlights some time ago). Although the reasons for this trend are beyond the scope of this post I suggest readers who are interested read this article. In this post, I would like to explore the likely effects of higher food prices on the budgets of Base of the Pyramid consumers. An argument widely heard these days is that such food rises at least might improve the plight of poor...
I am glad to announce the release of "Los Siguientes 4 Mil Millones: Tamaño de Mercado y Estrategia de Negocios en la Base de la Pirámide", the Spanish language version of WRI and IFC's milestone report "The Next 4 Billion: Market Size and Busines Strategy at the Base of the Pyramid". This report was made possible by the Network for Inclusive Markets, formed by WRI, Avina and Fundes, strong regional players in the BoP space. With 360 million people living at the Base of the Pyramid, Latin America presents itself with a vibrant market with enormous opportunities for market-based approaches to economic development. Los Siguientes 4 Mil Millones will hopefully serve as a tool for the Latin American business community to design creative business models that enable...
A quick announcement for readers who only caught bits and pieces of the sector scaling series we ran last week and others who just want to see all of the commentary in one place - we recently packaged all of the series in PDF format and posted it in our resources section. For those who haven't followed it: "Taking Base of the Pyramid Strategies to Scale is a series of eleven blog postings that debate a radical new approach to scaling BoP business models, which its proponents call a "transformative sector strategy." In the series, Al Hammond introduces the conceptual framework for this new development model and provides examples of the strategy in action from the Health and ICT sectors. Six BoP experts comment on the strategy in subsequent guest commentaries,...
This post is the last in a five part series on a radical new approach to scaling BoP business models, what we call a transformative sector strategy. In this segment, I address the six preceding guest posts that commented on this strategy and offer some concluding thoughts. I welcome these thoughtful comments on the transformative sector model I am proposing to scale service delivery to the BoP. Sagar Gubbi thoughtfully extends the sector-based scaling model. His examples illustrate the richness of potential solutions that are springing up and that can be learned from and replicated across a sector. I think he is correct that any transformative model will need adaptation to local conditions and policies. But mostly his examples encourage me in pushing ahead to implement the approaches I...
Guest blogger Francisco Mejía is a Principal in the Opportunities for the Majority Office at the Inter-American Development Bank (IADB), based in Washington DC. He currently leads the preparation of various transactions involving the financing of BoP projects in leading and innovative companies in Latin America and the Caribbean. Prior to joining the Bank, Francisco was the Director of the Center for Economic Development at the Universidad de los Andes in Bogotá, the leading economic think tank and research institution in Colombia, and consulted for various international organizations.Autor's note: The views expressed in this blog contribution do not necessarily reflect those of the IADB. In this post, Mejía responds to Allen Hammond's series on taking Base of the Pyramid...
Guest blogger John Paul is a Co-Founder and former Managing Editor of Nextbillion.net. He is currently finishing up his MBA at Cornell University, where he has focused on private-sector solutions to global poverty with the school's Center for Sustainable Global EnterpriseIn this post, Paul responds to Allen Hammond's series on taking Base of the Pyramid models to scale. This week, NextBillion.net will publish responses from a number of BoP experts and practitioners, followed by a concluding post from Hammond. By John PaulThe implementation of transformational sector strategies is a compelling idea, and has a number of comparative advantages over the traditional business-only approach. First, focusing on sectors takes a systems view of the problem, allowing for the identification...
Guest blogger Emily Fintel is Regional Representative for Strategic Initiatives at Fundación AVINA, one of the largest private foundations in Latin America. AVINA partners with civil society and business leaders to promote sustainable development through a network of twenty-one offices in eleven countries through the region, and has invested more than $350M in partners' initiatives since 1994. In this post, Fintel responds to Allen Hammond's series on taking Base of the Pyramid models to scale. This week, NextBillion.net will publish responses from a number of BoP experts and practitioners, followed by a concluding post from Hammond. By Emily FintelMy immediate reaction to Al's conversation with Jacqueline Novogratz of Acumen is that I too am haunted by the numbers. Within...
Guest blogger Sagar Gubbi is a technology graduate based in Bangalore with a deep interest in social and environmental sectors in India. He maintains a popular social entrepreneurship blog on Social Edge, and he is the co-founder of 'EcoForge', an investment advisory and consulting firm for social and environmental venture funds. In this post, Gubbi responds to Allen Hammond's series on taking Base of the Pyramid models to scale. This week, NextBillion.net will publish responses from a number of BoP experts and practitioners, followed by a concluding post from Hammond. By Sagar GubbiWhen I first read the BoP article by C.K. Prahalad and Stuart Hart three years ago, it triggered several thoughts in my mind and I remember having endless discussions with my friends on the...
Guest blogger Ryan Gunderson writes about sustainable, scalable solutions to end global poverty on his Riches For Good blog. A finance professional with an MBA from the University of Michigan's Ross School of Business and seven years of Fortune 500 experience, Ryan is transitioning to part-time work to allow him to pursue his goal of helping 1 million people out of $1-a-day poverty. He welcomes help in reaching his goal and can be reached at richesforgood@yahoo.com. In this post, Gunderson responds to Allen Hammond's series on taking Base of the Pyramid models to scale. This week, NextBillion.net will publish responses from a number of BoP experts and practitioners, followed by a concluding post from Hammond. By Ryan Gunderson "The biggest reason most poor people are...
Guest blogger Brian Trelstad is the Chief Investment Officer of Acumen Fund. Before joining Acumen Fund, Brian spent four years at McKinsey as a consultant in the healthcare and non-profit practices and as an editor of the McKinsey Quarterly. Prior to McKinsey, he worked as a case writer at Stanford University's Center for Entrepreneurial Studies and was the lead environmental staffer for President Clinton's AmeriCorps program. In this post, Trelstad responds to Allen Hammond's 4-part series on taking Base of the Pyramid models to scale. This week, NextBillion.net will publish responses from a number of BoP experts and practitioners, followed by a concluding post from Hammond. By Brian TrelstadAl Hammond's enthusiasm for the bigger picture is refreshing. His...
This post is the fourth in a five part series on a radical new approach to scaling BoP business models, what we call a transformative sector strategy. In this segment, I discuss the common characteristics that make BoP business models in different sectors scalable solutions.Searching for Transformational Models in New SectorsIf building the missing infrastructure could transform rural connectivity and health care, what about access to clean drinking water, especially for smaller rural and peri-urban communities? That's a proposition that WRI and Santa Clara University's Global Social Benefit Incubator are researching. There are some promising models in the field, such as Water Health International, that are beginning to scale. There are a number of additional enterprises, five of...
This post is the third in a five part series on a radical new approach to scaling BoP business models, what we call a transformative sector strategy. In this segment, I describe how this strategy could transform the health sector in emerging economies. Last Mile Health Care Delivery Talk to people in the rural communities of southern Mexico, in the new urban communities on the southern edge of Bogota, or in almost any village in rural Africa about getting decent access to healthcare, and their answer is the same: it usually costs more to get to a clinic, a doctor's office, even a pharmacy, than the cost of the service itself. In Bogota, most of the government-supported health services are in the north of the city, such that it can cost people in these new refugee communities a...
This post is the second in a five part series on a radical new approach to scaling BoP business models, what we call a transformative sector strategy. In this segment, I tell the story of a rural connectivity pilot project; an example of this new model for development in action. A Last Mile Model for Rural Connectivity Son Tay commune, Quang Ngai Province. I was sitting across a table in a remote rural outpost of Vietnam, negotiating (via a translator) with the manager of a local radio station about access to his tower. He asked a series of technical questions and seemed satisfied with the answers, but then he wondered aloud: "Can we get Internet access here?" He didn't just want it for the radio station, it emerged, but for the surrounding small community - even though...
This post is part of a five part series on a radical new approach to scaling BoP business models, what we call a transformative sector strategy. In this segment, I introduce the conceptual framework for this innovative poverty-alleviation model."It doesn't exactly keep me up at night, but I do think about it a lot." Jacqueline Novogratz, head of Acumen Fund, and I were talking about getting to scale - about expanding private sector business development and investment aimed at empowering and providing basic services to the poor to the point of making a real impact.I felt exactly the same, and I've had similar conversations with colleagues at Santa Clara University, at Ashoka, at private investment funds, and elsewhere. Ever since we finished our report on The Next 4...
All of us at NextBillion.net were both humbled and thrilled to see the New York Times Sunday Magazine draw on our work - and the work of many colleagues - to write an extended piece on the impact of cell phone usage in emerging economies. Sara Corbett's article follows Nokia researcher Jan Chipchase as he navigates the human terrain of countries like Ghana, Brazil and Uzbekistan, trying to figure out why a farmer in Kenya or a prostitute in Brazil is finding unique value in their cell phone. The article uses Jan's experience as a device for sparking a broader discussion on the potential for the booming cell phone market to increase incomes and quality of life among the BoP. What was most interesting about the piece is that the author poses her central theme as a question, not...
So what does it take to supply millions of households in emerging economies with clean renewable energy? We often talk about finance, new models, willing entrepreneurs. Kenneth Westrick, CEO of energy consulting group 3Tier says it's information.Really? Hard to believe this at a time when the development agenda is about doing, not thinking, and action over words. But in our conversation, Ken contended that what the renewable energy sector really needs right now to successfully tap BoP markets is a map. In particular, the online map that 3Tier launched on Monday - this technology will utilize the most recent available research to show in any given 5 km space anywhere in the world the viability of wind and solar energy based on how much sun or wind that area is exposed to on a...
As Robert Katz posted last week, a BoP Conference entitled “How to do Business at the BoP” was held on February the 27th in Madrid. The conference had pretty impressive speakers and visitors, since it was mainly directed at the corporate world. Robert was the first speaker of the day. He kicked off by explaining the reasons for BoP studies and briefly went through the three main penalties suffered by BoP customers: price, quality and access. After giving an overview of business strategies at the BoP, he presented “The Next 4 Billion” study and explained some of the most important conclusions that the study sheds light upon, such as the significant unmet needs in the ICT and Transport industries. The second part of the conference introduced several BoP case studies from different...
In "The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid," the authors analyzed several markets. However, only one market - financial services - was not estimated in terms of exact size and scope. Financial services can be a fiendishly hard thing to measure, but is at the same time a crucial tool to develop markets for BoP customers. In fact, financial markets often help other BoP markets flourish. Data measuring access and efficiency in financial markets are notoriously hard to come across in emerging countries, because most of these markets lie under the cover of informal economies.A new publication by the World Bank, Finance for All? Policies and Pitfalls in Expanding Access, tries to give an overview of the most recent advances and conclusions...
I had an interesting meeting today, during which one of the people I was speaking with brought up a talk given by Jonathan Schwartz last August. Schwartz - the CEO of Sun Microsystems - delivers a fascinating talk over about 25 minutes during which he relates important demographic and development trends to Sun's need to develop and implement a "base of the pyramid" strategy.(Full disclosure: during the speech, Schwartz mentions NextBillion writer and WRI Vice President Al Hammond by name, and cites data from The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid. What can I say - I'm proud that Fortune 500 CEOs are looking to Al and to our report in support of their emerging markets strategies.) read more...
Upon finishing The Power of Unreasonable People: How Social Entrepreneurs Create Markets That Change the World, three words came to mind: it's about time. Lately, I've felt that the social entrepreneurship movement has grown too large, encompassing too many sub-topics that don't necessarily relate to each other. With their new book, however, authors John Elkington and Pamela Hartigan manage to unite the wide-ranging discipline of social entrepreneurship, using sharp analysis, compelling anecdotes and an eye towards future study. Simply put, this book is a must-read for the 'social entrepreneurship' crowd – one that transcends the aforementioned sub-topics. As I read The Power of Unreasonable People, I decided to mark pages on which something unique appeared. ...
In a speech at Davos today, Bill Gates called for a more inclusive capitalism that "would have a twin mission: making profits and also improving lives for those who don't fully benefit from market forces." That is a major milestone in the evolving thinking of perhaps the most influential philanthropist of our time. In 2000, I organized a conference in Seattle on Creating Digital Dividends at which Mr. Gates, in a keynote address, famously said that "poor people don't need computers" and rejected a business approach to alleviating poverty. Within a year, however, he had changed his mind, and Microsoft became a leader in seeking ways to provide affordable services to low-income populations—in some small measure with WRI's help. The beginnings of a more...
Two new papers exploring the 'base of the pyramid' concept crossed my desk recently. We posted both of them to the Newsroom, but they also merit a slightly longer discussion. First, Jean-Louis Warnholz of the University of Oxford's Queen Elizabeth House has a new working paper out entitled "Poverty Reduction for Profit? A critical examination of business opportunities at the Bottom of the Pyramid." In his paper, Warnholz studies overarching BoP strategy and applies a new dataset - based on price survey data - to look deeply at the extent of a 'poverty penalty' at the BoP. Warnholz's paper merits a close read, especially for academic members of the BoP community. I will hold off on giving my impression of his paper - other than to say that it's...
What's in a name, a brand, a catchphrase? In some sense, everything. But a brand/name/phrase is only as good as the content behind it. So when U.N. Secretary General Ban Ki-Moon recently declared 2008 to be "the year of the 'bottom billion'," I paid attention - after all, Ban's declaration has the force of the U.N. behind it. Upon hearing this statement, my first thought was actually a question: if 2008 is the year of the 'bottom billion', does that preclude 2008 from being the year of the 'next billion' as well? I thought a lot about this, and came to believe that 'bottom billion' and 'next billion' need not be mutually exclusive. My conclusion is based partly on data: if there are 4 billion in the base of the pyramid, then...
In recent months, Boston Consulting Group's publications have tackled various aspects of BoP strategy, which Manuel and Julia have covered in detail. From a high-level point of view, this is a positive trend, reflecting growing interest among BCG's clients – large private sector corporations – in better understanding and exploring BoP markets. And from a branding perspective, I couldn’t be happier that BCG has chosen "Next Billion" as the catchphrase tying these publications together. BCG's most recent publication, Decoding the Next Billion Customers (PDF), briefly but jauntily describes six ways that BoP consumers are different from other consumer segments, and provides a few hints about what this means for those interested in developing products for and...
Santa Clara University is known in social entrepreneurial circles for its work helping to organize and judge the Tech Museum Awards – a showcase for social entrepreneurs, mostly from developing countries. Less well-known about the school is the Global Social Benefit Incubator, run by SCU’s Center for Science, Technology, and Society and a host of Silicon Valley volunteers. The GSBI, under the guidance of Professor Jim Koch, selects 15-20 enterprises from developing countries and provides an 8-month mentoring process. The mentoring culminates with an intensive 10-day process in Santa Clara, where entrepreneurs work with their mentors, other experts, and each other to prepare themselves to succeed upon their return home. Applications for the fully-funded 2008 class of entrepreneurs...
A recent Wall Street Journal article documents the demise of Nicolas Negroponte’s dream of a $100 "one laptop per child" for millions of schoolchildren in the developing world. (Thanks to Ethan Zuckerman for pointing it out.) To give Negroponte his due, the idea stimulated significant technology development and focused market attention on the need for low-cost computing devices for BOP markets. And from an engineering perspective, it's a magnificent machine. But the $100 price was never realistic; the market is dominated by small businesses and only secondarily by educational systems, and the project lacked a real business model, including such essential details as training and technical support. (We've written about OLPC's lack of training and tech support...
Over on The City Fix, author Benjamin de la Pena discusses what a post-car future might look like - and he thinks it looks like a pedicab. Also called cycle rickshaws, pedicabs are green (human-powered) alternatives to motorbikes and cars, to be sure. But are they a "bottom of the pyramid" business, as de la Pena suggests? Yes, BoP 'entrepreneurs' do rent/own and operate most pedicabs in the developing world. (Side note: check out this interesting article about the rickshaw bank.) To determine if they are really a BoP model, I asked myself - do pedicabs address the BoP penalty (price, quality and access)? I suppose pedicabs are a lower-cost alternative to car or motorbike ownership, a higher-quality transport option compared to walking, and a more accessible...