Customer Reviews

The Fortune at the Bottom of the Pyramid, Revised and Updated 5th Anniversary Edition: Eradicating Poverty Through Profits

5 star:		(16)
4 star:		(13)
3 star:		(13)
2 star:		(0)
1 star:		(1)

 

 

This is a difficult book to evaluate especially since it is built around an earlier one, reprinted in the original with cases and affidavits added. It is really two books, one successful and one weak. The original was published in 2004 and made a powerful case that challenged much of the conventional thinking about economic and social development. It wasn't perhaps as original as it claimed in its argument that the two billion people at the "bottom of the pyramid" were both an opportunity for enlightened capitalism, a source of energy and creativity, and a breakout opportunity to bootstrap business growth that would substantially reduce poverty. But it did draw attention to a way of thinking that got away from the top-down, infrastructure-focused programs that the World Bank and development agencies had funded with very limited success. It was part of a shift in view that saw the poor not as uneducated, lazy and needing wise guidance but as entrepreneurial, receptive to new ideas and able to build effective business initiatives on the ground.

If you (or your students - this is very much textbook type didactics) are unfamiliar with what has been happening in Asia and Africa via the combination of large companies like Coca Cola, Cemex and Unilever meeting the consumer needs of the poor and small domestic businesses thriving in market and job building, then this is still a good book and one that has many truly exciting examples in it. Since it was first published, microfinance has grown as a widespread and very effective model for stimulating and funding village entrepreneurship. Mobile phones have created new markets in handling remittances and managing cash among poor families. The basic case Prahalad made in 2004 holds up well today.
If you know the field at all, it is a disappointing book, not helped by the cumbersome expansion of the new material, little of which adds much. There are some major forces he neglects or finesses, especially the huge burden of corruption and rule of force of rich landowners, tribal leaders, and government. Water, transportation, and electricity are downplayed or ignored. The issue of replication of successes, generalizability of experience, and infrastructures is barely addressed. Too often, a single innovation is overstated in its impacts and general applicability; an example is e-governance in an Indian state which presents where the 2004 presentation shows a distinctly successful but limited "dexperimental" program. In 2009, it is standard practice -- Web site service and information access. The key question is what happened between 2004 and 2009. Did it grow? Become embedded in the social fabric? Stall? All we get is the 2004 material which includes a list of impediments to full adoption and impact. There's no follow up review for 2009. The book is a series of short stories, interesting in themselves but little more than moral fables. It is not the blueprint for transforming life at the bottom of the pyramid that is its claim and goal. I'd recommend Easterley's White Man's Burden as a far more comprehensive and solid coverage of the core issues, that is very compatible with Prahalad's view but has far more depth and Africa Rising, a book similar to this one and sharper in focus. The New India, written by one of the nation's most successful entrepreneurs, is much more comprehensive in its coverage of context and as practical in its recommendations for action. This book is no longer definitive and there are many more timely and relevant other published works.

The book is a harder read than the material warrants. It is best described as cumbersome. The writing lacks pace and flair. It's solid and free of tendentious academese or business popspeak, though. The details in the cases are well laid out. By coincidence, one of the examples came out of my own consulting work in the company, where I was a fairly close adviser to the CEO for ten years and Prahalad captures accurately how my simple idea was turned into a powerful program of social innovation. I mention this only because I can vouch for the reliability and responsibility of the book's description.

I am a great admirer of Prahalad, whose contribution to thought leadership in the management field has been very strong and sustained. But the task at hand is to assess the book as a book. I'd rate it as a four star college textbook, but only a two-star book for the general reader or for the specialist. I wish I could be more positive but at the end of reading it, I felt that I'd had to plough through it a little laboriously and that I did not get a sense of a crisp and clear analysis and set of lessons. I admire the writer and respect the work that has gone into the book. But in thinking about would I recommend it to my friends, colleagues and students, I reluctantly say no.

It appears that many of the reviews for this book are actually based on the original version. This review is based specifically on the hard cover 5th Anniversary Edition. The core argument, that money can be made given the proper business model while catering to the world's poorest, remains the same. In the updated edition, the original text remains intact but a few more chapters are added in the beginning and additional follow-up is provided for the original case studies.

Overall, I believe that this book delivers an excellent value. The book's binding and material are of high quality, and the inclusion of a CD with supplemental material (additional case studies) and videos is greatly appreciated. More importantly, the subject matter, while not quite revolutionary anymore, provides an insightful framework into a new way of doing business.

The term "emerging markets" seems almost like a clichéd catch phrase, but this book takes an honest and detailed look into what an emerging market is and what it takes to be successful in one. It offers a rare level of depth and perspective that acts as an enabler to ponder viability and strategy for potential services in the future. While I don't necessarily agree with the author on all points, especially the seeming omission of the high-risk nature and relatively hostile environments where the members of the bottom of the pyramid are found, the part that resonated most with me is the drive towards a common form of social justice. It should be noted that even Bill Gates said that it might not always be possible to make money serving the bottom of the pyramid, but a proxy to profits might simply be recognition.

A minor gripe I had with the book is that it didn't feel immediately accessible to me. While the overall structure is sound (first stating what the author believes are the keys to success in emerging markets, and later showcasing successful companies in various case studies that embodied the various points), the book reads like a matter-of-fact textbook and assumes you already have knowledge in this area. Also, the generous usage of acronyms was mildly annoying at times, but the index was useful in clarifying.

I don't think this book is supposed to be a specific guide to how to make your riches serving the poor, or how to capitalize on the growing ranks of middle class as predicted by the author. Rather, through varied tales of success, it dares us to dream.

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About the included CD:

The primary benefit of the CD is that it includes 3 additional case studies:
The EID Parry Story
Innovations in Energy: E+Co's Investment in Tecnosol
Citizen Centricity: E-Governance in Andhra Pradesh

For the additional case studies, text is provided (in PDF format), and amounts to about 100 additional pages. There are also short video clips ~4-5 minutes in length (in WMV format) for each of the original and additional case studies.

The videos are somewhat inconsistent in overall presentation and content, and appear to be produced by different people. If you're going to watch the case study videos, I recommend watching them first before reading as they only provide a cursory view of the case study material. I found that the videos helped by giving a summary of what's to come and put faces on the people being discussed. On a side note, interlacing artifacts are present in the videos, and voices can be hard to hear at times.

The CD is thankfully not DRM'ed so you can copy the contents to your hard drive or flash drive (in case you want to use it on a computer without a CD drive, or just for ease of use).
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Published System Requirements:

To view all the content on this CD, you will need to use a computer with one of the following operating systems and configurations loaded with the software listed below:

Operating Systems and Configurations
* Windows 2000 or Windows XP, with a Pentium(r) 4 processor at 1.3GHz or better, 256MB RAM memory, video card with 8MB dedicated memory, and 16x~ CD-ROM; or
* Mac OSX, with a G4 or G5 processor, 256MB RAM memory, video card with 8MB dedicated memory, and 16x~ CD-ROM.

Software
* Windows Media Player, Version 9 or newer. Available for download from Microsoft
* Adobe Acrobat Reader, Version 5 or newer. Available for download from Adobe

What more can be written about the wonderful book? Perhaps a meta-analysis of some of what Prahalad argues and demonstrates and some of the anti-government responses that seem to be gleeful in having their views that government can't solve problems supported might be helpful in gettting the author's message across. For one, of course the answer lies in ourselves, Dear Horatio, and not in starry-eyed government, but consider what government HAS done that mirrors/mimics some of the self-help solutions proposed and reported on by the author. Providing 'mini-loans' for self-sufficiency by a private entity is a great idea. But how different is that from the G.I. Bill that allowed hundreds of thousands of G.I.' to get college educations after WW II? Or consider low-interest mortgages provided to G.I.'s as an incentive toward self-sufficiency. Are these government programs that focus on investment any different from the loans and technical help private entities provide that Prahalad cites and explores in his book? You can have good government and bad government; you can also have good banks and bad banks, and if anyone in the U.S. doesn't think so at this point in time, they must have been in a coma for several years.

I believe this book provides its greatest inspiration in the author's metamorphosis from an academic who taught economic theory -- even economic theory that purportedly addressed the end to poverty -- to a 'hands on' in the trenches perspective. In other words, he realized that theory isn't enough. You have to know human nature, culture, and values. If you do, and Prahalad did, then an economic incentive program can be successful, regardless of the entity that sponsors the program. In other words, Prahalad's contribution is that he took it upon himself to understand people and how they respond individually and en masse to their circumstances.

How can you make a profit by selling your products and services to the poor? By giving the poor the ability to grow rich (and not just in terms of money).

Prahalad's insightful book takes this idea and explores it from a business strategy perspective. By the end you will have the tools to actually make it happen.

This book will increase your ability to sell your products and services in places you wouldn't ordinarily dream of. And it will enable you to change the world in the process.

This book when it was originally published, ushered in a lot of thinking and planning on how to serve the people who are poor and considered to be at the economic bottom of the pyramid. The bottom of the pyramid is defined in this book to be people who earn less than $2 per day on average and therefore are not the typical consumers that most companies tend to target. This edition of the book is a reprise of it, five years later.

It would not do to simply reprint the exact same book as the economy moves fast and what made sense at one time, may not be valid any more five years later. On the other hand, some things would not have changed. So, how do you combine both possibilities into one? The approach taken here is to reprint the original book, but also add to it numerous updates. So, for instance, there is a brand new introduction section that speaks of the evolution and practical results that happened in the interim. Also, the book had case studies when originally published and each of these case studies has been updated via a short additional set of paragraphs. Finally, the original book listed attempts being made by several companies to already serve this segment of the population, so a whole new section was added in which the CEOs or executives in charge of those divisions added their own words to what took place over the five years that have passed. In this way we can read the original thoughts and see how they evolved as practical experience came in over the interim.

For those who are not familiar with the original work, the author, C.K. Prahalad posits that there is an economic pyramid in effect throughout the world. While most of the companies in the world tend to compete for the attention and money of the upper parts of the pyramid because of the relative affluence of that segment, there is actually a lot of money to be made by serving those people who are at the bottom of that same pyramid. While a consumer who subsists on $2 per day cannot be expected to purchase multiple luxury items, there are so many of them, that the economic returns of serving their needs are immense, and in many cases larger than serving the affluent. Looking beyond the self interest of the company, there is also a societal benefit because allowing capitalism to move downwards like this engages the entrepreneurial capacity and drive of that many more people, which tends to improve their lives much more than governments and charities can, and moreover, those improvements tend to be much more sustainable.

One of the weakest aspects of the book is the concentration of examples and stories in India. While this is understandable in a sense - the Indian society is relatively open, accessible, and immensely large - it is somewhat curious why there are limited examples of this approach in other countries. Could it be that the Indian cultures are particularly amenable to these ideas where other societies might not be as successful? This is not to say that there are not some examples from other countries (Casas Bahias in Brazil, Cemex in Mexico) but the vast majority of case studies are Indian - and even these tend to concentrate in one or two states.

I was most interested in reading the various case studies and trying to understand how all of society benefited - the concern being that maybe these are just new ways of "exploiting" the poor. There is not a clear cut picture in that regard. In some cases, it is clear that the implementation of these ideas merely acted to shift the economic benefits from one group to another (see the description of e-choupal where the kinds of middlemen who benefited changed). However, the book does try to make the claim that most consumers that have had access to these ideas have benefited. I could see only one case where that was clearly the case and that was the newest case study - Jaipur Foot. On the other hand, even in that case, the majority of the beneficiaries are essentially receiving charity (most of the patients do not pay for their treatments, and would not have gotten them otherwise. This does tend to make one question the sustainability of this effort.

One irritating aspect unfortunately was that the author decides to use a lot of three letter acronyms that he creates in this book. So, the folks that he looks to server are referred to as BOP (Bottom Of the Pyramid) - which is OK, but then he goes on to talk about MNC, TGC, and more. There are some areas of the book where the quantity of acronyms is so dense that you need a separate sheet expanding them all to try and follow the text. That is an unfortunate practice and habit that the editors should have eliminated.

To summarize, the idea is very interesting and I was interested to read how it was implemented and benefited the people at the bottom of the pyramid. The picture that emerges is mixed at best and the book also misses the opportunity to tie in some other efforts made towards the same population (Grameen Bank is mentioned once or twice but not in depth). Finally, the almost exclusive focus on India makes this a less successful and powerful book and idea than it could have been.

C.K. Prahalad's The Fortune at the Bottom of the Pyramid lays out rather clearly the vast and ever growing bottom of the economic pyramid of the world where billions of people are in need of many things. Any one of those needs is a reason to create a market and grow economies. Be it in energy, or food, or textile, or what haven't you, these needs somehow must be satisfied, thus creating a fortune. There is really one impediment for a healthy economic process to take hold: corruption. Prahalad discusses the topic on numerous occasions. Elimination of corruption and bringing in accountability are paramount to the success of a capitalist system. Only this way, what Prahalad calls Transaction Governance Capacity, can be achieved to enforce rules and achieve adequate transparency in business transactions.

This book also comes with a CD and numerous case studies by Prahalad's students that present businesses' way to satisfy needs and generate surplus for their growth and sustainability.

The Fortune at the Bottom of the Pyramid has become a standard text in only five years and it is likely that most people who read it are required to do so in an academic setting. That is a shame because the content deserves a wider audience.

The basic premise is that there are more than four billion people living in extreme poverty around the globe that represent a low-cost, high-volume market that can be served in a profitable manner while their lives are improved. Other aspects of integrating these people into the global capitalist economic system are discussed as well.

Some examples are making it possible for people living in slums to build decent housing, making vision-restoring eye surgery affordable for even the very poor, and decreasing disease through encouraging the use of soap and good hygiene in places where many people come in contact with raw human or animal sewage daily.

These case studies are the heart of this book and are by far the most interesting part. The included CD contains videos on each case study as well as three additional complete case studies for a total of thirteen and it is fascinating to actually see and hear some of the people involved. Additional subtitles would be helpful in places, however.

This revised version seems to have new material of varying degrees of interest and usefulness grafted onto, rather than integrated into, the older information. The updates on the case studies, although mostly brief, are confirmation of the usefulness of the information in the book. Some of the other new content is less essential, such as the CEO comments. There are some scattered but noticeable errors. Overall, the problems of form are severe enough to detract from the usefulness of the content. This book could really stand to be completely re-written and -edited into a more fluid and cohesive text and that will likely happen with the next edition.

While reading it, I couldn't help but think about E. F. Schumacher's 1973 classic Small Is Beautiful: Economics as if People Mattered, which touches on some of the same issues but in a very different manner. I would recommend that anyone interested in business and economics as applied to the billions living in poverty read both Small Is Beautiful and The Fortune at the Bottom of the Pyramid but that they read Small is Beautiful FIRST.

Not a new model but this indeed can work wonders. Very nice read. Thumbs Up!!

Helping out the worlds poorest (those earning less that $2 a day) has been a goal of many wealthy countries for decades with generally disappointing results. Assistance can often be a double edged sword that creates a cycle of dependency. The author states that the secret to helping the poorest or the `Bottom of the Pyramid' is not in handouts but through the involvement of private companies. I'm fine with that idea and I think that simply throwing money at the problem has clearly been a failure but I can't exactly say I'm sold on the implementation. Despite their individual poverty their collective volume makes the BoP a tantalizing target and I suppose introducing the poor to consumerism will allow them to move up the financial ladder. In order to target the poor, companies will need to set a price-improvement of between 30 and 100 times. An example the author uses is cataract surgery which in the west costs between $2500 and $3000 would need to be prices at $50 to be affordable to the poorest and one company in India, Aravind Eye Care System, charges $25. I have read some articles that confirm the incredibly cheap medical care in India but I have to wonder how many other businesses could possibly reduce their prices between 30 and 100 times. The other problem is the environmental cost of several billion more people becoming empowered consumers. The author simply waves this off saying technology will make it all sustainable.

Later in the book is a section where the author presents CEO reactions to previous editions of the book. Basically it was a chance for CEO's to praise the author and brag about their own company's interactions with the BoP. I found little of value in this section.

The final section of the book features case studies of companies and their interactions with the BoP. First up is a thirty page case study of an Indian company named Jaipur Rugs. What I don't understand is the point of it all. Jaipur Rugs is a company that sells high end rugs to the middle and upper class not the BoP. They do employ poor workers but so do lots of companies. This section just drags on as we learn details about the company including organization charts, salaries, materials used in producing rugs, the process involved in producing rugs. Why do we need to know all this information? The point seems to be that a well organized company does well and by promoting within they can raise people up from the BoP but what does that have to do with the rest of the book. The next company was Casas Bahia, a Brazilian company. I actually found this one creepy when they talked about the `customer education process'. It kind of reminded me of the debate about whether payday lenders and rental companies like Rent-A-Center empower the rich or trap them. Speaking of lending there is a large section on micro-lending which I know is seen as a way of opening up opportunities for the poor but again that is the same argument used by lenders in the U.S. sometimes referred to as predatory lenders. The author describes micro-lenders as very benign and altruistic and the lendees as having almost miraculously low rates of default but I just don't think that the wealthy nations of world got to where they are through borrowing.

For the altruistic the most painful admission might be that the success or failure of a group more likely comes from within the group. This argument is used by people to justify their own ambivalence but that doesn't necessarily make it false. It just seems to me that encouraging consumerism and debt in the poor might be a recipe for disaster and encouraging companies to target the poor could possibly have some less than desirable results. The book seemed to be slanted very much towards getting money from the poor more than improving their lot in life. It's nice to hear that farmers can grow their crops better when they are connected to the internet and can monitor the weather but even in India most people are not farmers. The bigger problem with the book, however, is that I found much of it to be very dry and boring and often I couldn't figure out what the point was. The title of the book implies that there's money to be mined from the poor but what does that have to do with Indians using soap to prevent diarrhea or iodizing salt. Is the point that a healthy Indian is a better consumer or is it that preventing diarrhea is a great marketing tool to sell to the BoP? India is sort of an easy target for success because as a society they have a great degree of emphasis on eduction. Let's see these ideas turn around a society with less emphasis on education. Involving corporations may well be a better solution than simply tossing money at the problem but I still haven't a high degree of faith in success.

This is a valuable book that puts forward a formal framework to work with, and specific and detailed case-studies. However, some examples are outdated, and the book lacks specific, forward looking predictions and analyses.

This book is invaluable because it brought to the fore, first in 2002 via two articles co-authored by CK Prahlad and published in Strategy+Business and the Harvard Business Review, and then in book form, in 2004, in a structured manner with an academic rigor, the reasons for corporations to stop trying to sell "to" the poor, and instead work to "co-create" innovative products and services that were actually affordable, reliable, and usable. The Bottom of the Pyramid, or "emerging consumer markets" or just "emerging markets" as these are "more emotionally neutral terms" often surprise managers "who are used to developed markets" ... "by the sophistication and demands of the Bottom of the Pyramid markets." [page 13]

It is not just about the benefits that a huge market of "micro-consumers" can bring to corporations, it is equally about bringing the benefits of technology and sophisticated products and services that can help lift millions of people out of poverty that should motivate people.

This updated, 5th anniversary edition is divided into five parts:
1. "A new introduction outlines the progress in the BOP agenda since the publication of the book in 2004."
2. "In Part II, which was part of the original 2004 edition (left unchanged), we develop a framework for the active engagement of the private sector at the BOP."
3. "... contains letters from CEOs of major corporations supporting the approach"
4. "... describes cases, in a wide variety of businesses..."
5. "... contains the videos tha accompany the case studies..."

Good though the book is, some counterexamples come to mind when reading the book. I will list three examples, one of each kind:

Incorrect Example
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CKP credits Airtel with building the microcredits and distribution network that helped enable the 400 million strong mobile customer base in India today. However, that is not quite correct. The distribution network had existed for decades - via the corner shops selling cigarettes, biscuits, and candies that have been around by the millions, on every street in every city and town and village in every corner of the country, for decades. Airtel and other mobile vendors did not create this infrastructure. They simply partially re-purposed this network.

Outdated Example
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Amul is also cited; but Amul created this network for collecting milk from individual farmers more than 30 years ago. CK Prahlad's BOP theory may be used to explain this remarkable success, but its success was more the result of individual genius and government backing than corporate involvement.

Missing Example
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The Nano car from the Tata group was announced in 2008, and launched in 2009. It costs a little over US$2,000 (the cheapest Toyota in the US starts at $12,350, and the cheapest Hyundai starts at $9,970) and has the potential to bring the benefits of personal, safe transport to Indian families at or near the bottom of the pyramid in India, and possibly elsewhere. Will it succeed? Or fail because of logistical issues? It would have been fascinating to read CKP analyze this nascent revolution and bring his formidable intellectual prowess to analyze, make suggestions, and prognosticate on the Nano's success. Put it on paper, and watch events prove him right, or wrong. Or at least help in making it a success.

If inclined to read more on related topics, I would recommend the following books:
- The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good
- Everybody Loves a Good Drought: Stories from India's Poorest Districts
- Banker To The Poor: Micro-Lending and the Battle Against World Poverty

I would recommend this book to anyone wanting to get started on understanding how to build products and services for large, under-served, emerging markets.