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Invest time in languages and intercultural awareness. Focus on becoming part of global citizenry. In exchange for the opportunity to participate everywhere/anywhere in the world you have the obligation to do something productive, which will improve the world. ~C.K. Prahalad
Distinguished scholar and visionary
The distinguished business scholar, C. K. Prahalad, died unexpectedly last week of a lung ailment at the age of 69. His contributions to the pursuit of business strategy and innovation are unparalleled. He’s had an enormous influence on my work and that of my peers.
Dr. Prahalad was more than a celebrated management guru, he was a visionary. He redefined the way that a growing number of global businesses deal with developing markets, and he helped to shape a new economic paradigm.
The Indian-born Prahalad received his doctorate from Harvard and taught at the University of Michigan’s Ross School of Business, but he never strayed far from contemplating the social and economic issues that affected his native India.
A recurring theme in his work concerned the centrality of the customer in today’s global, interconnected marketplace. He urged business leaders to “co-create” or develop products in tandem with their customers.
During the much of his career, his focus was on corporate strategy at multinational enterprises. Among his notable works were “The Core Competence of the Corporation” (Harvard Business Review, May-June, 1990), and a 1994 book, Competing for the Future, both of which which he co-wrote with Gary Hamel.
The Bottom of the Pyramid
However, C. K. Prahalad is best known for his 2004 book, The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits. In that work, he argued that businesses stand to reap benefits from serving the world’s 
poorest people or those at “Bottom of the Pyramid” (BoP) who live on $2 or less per day and who comprise a majority of the world’s population.
“Four billion poor can be the engine of the next round of global trade and prosperity,” he wrote. “If we stop thinking of the poor as victims or as a burden and start recognizing them as resilient and creative entrepreneurs and value-conscious consumers, a whole new world of opportunity will open up.”
His view of serving consumers in emerging markets, or “inclusive capitalism”, was eye-opening for many business leaders who had long ignored the needs of the poor and, in so doing, missed important opportunities.
Accessible and affordable products
Dr. Prahalad identified several obstacles in serving BoP consumers. For example, he observed that poor consumers typically have unpredictable income streams and they subsist on daily wages. They tend to buy only when they have money on hand, and only what they need that day.
Accordingly, he pointed out that single-serve packaging, for items like shampoo, condiments, tea and coffee, and aspirin, is well suited to this population, noting that a single-serve revolution is sweeping BoP markets.
In order to make products accessible and affordable for BoP consumers, Dr. Prahalad challenged business leaders to re-think traditional value chains by determining which components can be outsourced and which need to be “centralized” to minimize costs while maintaining quality.
Dr. Prahalad also recognized that emerging markets are “laboratories” for innovation. He argued that reverse or “trickle up” innovation — goods and services made in and for developing markets — can transform industries in developed markets.
Examples of “trickle-up” innovations include micro-lending, mobile-banking (“M-banking”), low-cost mobile phones, low cost hotels, and even car manufacturing where Tata Motors’ Nano – a car made for Indian consumers that sells for $2,000 USD – is slated to be sold in developed markets.
Lessons learned
Western businesses have only begun serving BoP markets, but a growing number of us are learning from consumers and entrepreneurs in developing markets about how to restructure our own business models. The lessons we’re learning about lean manufacturing and virtual distribution chains from BoP markets are already transforming global markets.
The most profound change that we in the West have in serving BoP consumers is one of attitude. As we drop our assumptions and learn to better understand the needs of low income consumers, we’ll be able to tap the full measure of opportunities that Dr. Prahalad envisaged.
C.K. Prahalad spoke poignantly about how much the developed world can gain from serving and ultimately raising the living standards of people at the base of the Pyramid. He’s inspired my colleagues and me to see both developing markets and consumers through sharper, more accurate lenses, and we owe him an inestimable debt of gratitude. He’ll be sorely missed.
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As always I’d appreciate your perspective.
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Want more information about Dr. Prahalad? Here is the Times Of India’s eulogy.
This is an ’07 video clip featuring his discussion of “the good and not-so-good” news about globalization’s impact on the Bottom of the Pyramid.
This video features an interview with Dr. Prahalad via Thinkers50 which named him “the most influential business thinker in the world” in 2009. Here is his keynote address to the Acumen Fund Fellows Class of 2009.
I recommend Dr. Prahalad’s ’08 book, New Age of Innovation, co-written with M. S. Krishnan.
Finally, here are assorted posts on this blog referring to Dr. Prahalad and emerging markets opportunities and issues.
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Tags: base of the pyramid, C. K. Prahalad, Gary Hamel, Hindustan Unilever, inclusive capitalism, low income consumer, nano, philanthrocapitalist, poor consumers, prahalad, reverse innovation, Social Entrepreneur, Tata Motors, trickle up innovation
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