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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One of the more satisfying experiences at year’s end is reaching out to clients, partners and colleagues to thank them for their business and their stalwart support.  It’s even sweeter this time while reflecting on an entire decade going back to the early days of my business.

We come from different cultures and work backgrounds, but what binds us together is an abiding interest in bringing value to our customers, and clearing the hurdles that come with that mandate.  My mission has been to gain a deeper understanding of  what customers need and designing solutions for delivering it. My commitment to that mission is stronger than ever.

I can’t say for sure what’s next in business trends — no one can — and I’m not offering my top ten predictions. But, if past is prologue, we’ll need to be more imaginative, collaborative, and courageous than ever.  We can and we will, because we must.

Every project offers a fresh opportunity to do something that’s never been done before, and there’s nothing more thrilling that that.  I’m excited about new projects on the horizon waiting to be cracked.

Looking back, trips to developing regions like the sub-Sahara are reminders that we who are fortunate to be doing what we enjoy must recognize the steeper challenges faced by others. We’re obliged to devote a fair portion of our time and resources to reducing the suffering of others.

So, there’s much to be done.  Let’s get on with it…

I wish you a Healthy and Prosperous New Year!

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Nearly every day, I work with colleagues who are eight or more time zones away. I’ve been doing this, with few interruptions, since the ‘80s. Back then, “geographically distributed” projects were run only by multinational corporations.  Times have changed.

Global markets have become more interdependent, and collaboration across borders is now commonplace, even at smaller companies.  Businesses know that they have to team up with companies in other regions to compete in the global “value creation” race*.

But a lot of companies struggle with this. In a June, 2009 survey by TMA World, 82% of respondents rated the performance of their company’s “global, virtual” teams as either ‘moderate’ or ‘poor’.  Yet nearly all of those surveyed said that global teams were ‘very important’ to their organizations.

The reason for this disconnect is that going global is a relatively new undertaking for lots of businesses. Many organizations simply haven’t “re-calibrated” for a global marketplace, and they don’t have all the pieces to support a successful global strategy.

“Expert” Advice?

There’s no shortage of advice from experts on how to improve cross-cultural business performance. Their recommendations — depending on what they’re selling — range from adopting more robust collaborative tools to receiving cross-cultural training.  Smart tools and interventions do have their place, but the missing piece at a lot of organizations is experienced talent, particularly at the leadership level.

Organizations interested in thriving on a global stage need leaders with high-level experience in regions where they’re operating, or at least in culturally similar markets.  This is particularly true for companies working in developing regions where business conditions are undergoing rapid change.

The Virtues of Seasoned Leaders

Leaders with relevant international business experience can bring dexterity to handling cultural differences in communications styles, approaches to completing tasks, and ways of handling conflict which can become magnified over the life of a project.

At a tactical (project) level, seasoned leaders with strong relational skills can recognize whether a breakdown in a project stems from a misunderstanding due to cross-cultural differences or from another source.  Seasoned leaders can take proactive steps to help their team to avoid the risks of cross-cultural misunderstanding.

In addition to interpersonal skills they’ve acquired, seasoned leaders can provide context to projects in developing regions where laws, commercial practices, and attitudes toward business are in flux.

Seasoned leaders can bring a rich perspective to multinational projects. Most of us who enjoy working in other markets are deeply interested in these regions. We become intimate with each country — its landscape, history, and politics. We devour every obscure book and report for the sheer joy of learning more, and we’re energized by putting the knowledge to practical use.

Lasting Value

Internationally-seasoned leaders can steer a steady course over the inevitable bumps and around the unexpected curves of cross-cultural projects.  The positive impact can extend across the organization long after the project or campaign has ended. They can help to shape their organization’s culture by passing on their knowledge to the next generation of leaders.

Courses in cross-cultural relations can inform your workers about handling cultural differences. But, there’s no substitute for having leaders who’ve managed high-level assignments in relevant foreign markets. My advice is this: Be sure to add international seasoning to the mix.

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As always, I’d love to hear your views.  What opportunities and challenges do you see in the global economy, and how do they affect you?

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* In their ’08 book, The New Age of Innovation, C.K. Prahalad and M.S. Krishnan use the term R = G (Resources = Global) to describe collaboration across cultures as an imperative: “All firms will access resources from a wide variety of other big and small firms—a global ecosystem”. (I discussed the book here.)

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Want more info on this subject? Here are some recommendations from broad to narrow in focus:

I’d previously recommended Fareed Zakaria’s book, The Post-American World (W.W. Norton & Co., ’08) which makes a compelling case for the rise of developing countries in an increasingly interconnected economy.

Parag Khanna’s book, The Second World: Empires and Influence in the New Global Order (Random House, 2008), makes a compelling case for understanding the world from the standpoint of Second World countries. I reviewed Khanna’s book  here.

For a variety of books about doing business in cross-cultural settings, check out the resources at Intercultural Press.

INSEAD professor Horacio Falcao discusses how to avoid the pitfalls of cross-cultural negotiations featuring this short video on the subject.  (When do we underestimate vs. overestimate the impact of cross-cultural differences?)

Related post: International Rules of Engagement, April, 15, 2009, and various posts on Emerging Markets topics.

What resources would you recommend?

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For those interested in delivering their services to emerging markets, BusinessWeek provides an informative piece on Cisco’s EM strategy. The piece provides a glimpse of the company’s ambitious model for expanding its global footprint.

The story doesn’t delve into exactly how Cisco collaborates with emerging players aross geographic and cultural differences, etc.  Often cultural disparities plague global alliances. I wondered how Cisco’s people engage their counterparts in emerging markets?  Has Cisco developed a collaborative model for bridging the cultural gaps that often hamper global service initatives?  These are my questions…

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In my lifetime, conditions have grown immeasurably better, freer and more prosperous for a majority of humanity, yet hand-wringing about the miserable remains the reflex mode for most coverage of planet earth.

Nowhere more so than in Africa, from which I’d just returned when the e-mail landed. During a short stay in Ghana, which will hold free elections in December, Vodafone had bought a majority stake in Ghana Telecom for $900 million (entering a fiercely competitive mobile-phone market) and I’d heard much about 6 percent annual growth, spreading broadband and new high-end cacao ventures.

Accra, the capital, is buzzing. Russian hedge funds are investing. New construction abounds. Technology enables people in the capital to text money transfers via mobile phone to poor relatives in the bush.

I think most of Cohen’s points are well taken. He doesn’t mention the discovery of oil off Ghana’s coast and the country’s fiber projects or the investments being made by multinationals in the country’s business infrastructure.  The business climate in the region is improving, albeit in successive approximations.  The country’s services sector — chiefly teleco and financial services — are contributing to Ghana’s high annual growth rate.  Inflation is a growing concern, but so far it’s been manageable.  The process leading up to this December’s election should be interesting.  So far so good.

It’s also true that Africa’s success stories aren’t newsworthy to many news consumers.  We mostly hear about war, corruption, disease and rampant poverty.  On this point, I recommend Charlayne Hunter Gault’s “New News Out of Africa: Uncovering Africa’s Renaissance,” — it’s  chiefly about South Africa, but pertinent to the problem of media coverage across the continent.

If Ghana’s political environment remains stable and forward-looking, the country will be in a position to contribute even more of its stalwart intellectual capital to a “globalized” resource (R=G) community in the coming years.  So, even if the global media is fixated on the region’s challenges, the numbers will support a different story.  So look for Ghana and other gazelle nations of the sub-Sahara to lead the way.

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