BoP 2.0: Pushing Boundaries

BoP 2.0
Pushing the Boundaries
Stuart L. Hart
S.C. Johnson Chair in Sustainable Global Enterprise,
Cornell University
Adjunct Professor, University of Vermont
President, Enterprise for a Sustainable World
Founder, Emergent Institute, Bangalore India
Copyright Stuart L. HartHart 2011
Copyright Stuart L. 2013

“Until now, globalization has been
driven by the west and imposed on
the rest”
The World Turned Upside Down
The Economist, 2010


What Has Changed?
Saturation of
current markets
>$20,000

$2.000-20,000

<$2,000

Wealthy

Emerging
Middle Class
(MoP)

800
Cost barriers;
Environmental
tipping points

1,700

Base of the
Pyramid (BoP)

New technologies,
products & business
models

4,500

(Prahalad & Hart, 2002; Hart & Christensen, 2002;
London & Hart, 2004; Prahalad & Hammond, 2002)


Do the Math

I=PxAxT
Human
Impact

Population

7.5 1.5

Affluence
Technology
(Consumption)

5

1

Moving Technology to the
Denominator

I=PxA
T

T= 10x? 20x? 40x?
Biggest Business Opportunity in the History of the World

Two Levels of Sustainability
Strategies for
Greening

Strategies for
Beyond Greening

Focus on Existing:

Focus on New:

products
processes
suppliers
customers
shareholders

technologies
markets
partners
needs
stakeholders

Characteristics:

Characteristics:

Incremental
Continuous Improvement
Rationalizes Industry

Discontinuous
Creative Destruction
Restructures Industry

Stuart L. Hart (1997) Beyond Greening: Strategies for a Sustainable World


Prahalad and Hart, Strategy + Business, January 2002


Growing Momentum
in the BoP
Pro-Poor
Business
Opportunities for
the Majority

Social
Enterprise
Social
Entrepreneurship

1998
Prahalad &
Hart Draft

Hybrid Value
Chains

Social
Business

Business Against
Poverty

Inclusive
Business

Growing
Inclusive
Markets

Sustainable
Livelihoods

Green
Leap

2000

2002

2004

2009

2012

2013

2013

BoP
LL

“Fortune at
BoP”

WRI
Conference

MI & Cornell
Conference II

Regional
Meeting

Base II
Conference

BoP Global
Network Summit


First Generation
BoP Strategies
• Most corporate initiatives in the BoP have been
focused exclusively on “business model innovation”:
– Lowering a product’s unit cost (e.g. sachets)
– Reducing costs by outsourcing production to developing
country partners
– Extending product distribution into slums and rural areas
– Partnerships with NGOs for “on-the-ground” capability
Result: Child With a Hammer
“Selling to the Poor”

What Have We Learned?
The Tyranny of the
The Tyranny of the
The Tyranny of the “Green
“Unmet Needs” Mindset “BoP Product” Mindset
is Expensive” Mindset

“Write the Unfinished
Symphony”

“Think Like a
Mountain”

“Take the
Green Leap”

Co-create a fortune WITH the BoP

Build a wide value proposition

Sustainability from the bottom up


The Tyranny of
“Unmet Needs”

Need = Demand
Affordability = Purchase
ToP– “Create needs in existing markets”
BoP– “Create markets from existing needs”

Why Have These
Taken Off?


The Unfinished Symphony

Symphony No. 8 in B Minor, 1822


The ChotuKool

Godrej and Boyce
“The Category Buster”


Co-Creation By Design
Erik Simanis
Stuart Hart
Duncan Duke

The Base of the Pyramid Protocol:
Toward Next Generation BoP Strategy

Cornell University

Justin DeKoszmovszky
S. C. Johnson & Son, Inc.

Patrick Donohue
Enterprise for a Sustainable World

Gordon Enk
Partners for Strategic Change

2nd Edition
2008

Michael Gordon
University of Michigan

Tatiana Thieme
Cambridge University

www.bop-protocol.org


During the last decade, first generation
“Base of the Pyramid” (BoP) ventures
focused primarily on “finding a fortune
at the BoP” by selling products to the
world’s four billion poorest people. Many
of these initiatives did not scale, and
some failed outright. But through that
experience, crucial lessons have been
learned. Innovators are now succeeding
thanks to a more sophisticated and
nuanced approach based on “creating
a fortune with the BoP.”


Thinking Like a Mountain

The Rifle Shot
“Targeting low cost
products to BoP
customers”

Creating Wide and Compelling
Value Propositions

Creating Mutual Value
Economic

Income
Capability
Purchasing Power

Sustainable
Development
Food
Water
Nature’s Services
Ties to the Land
Environmental

Roots
Social Ties
Community
Meaning
Social/Cultural


Through the Funnel
“Clean Tech”

Pollution
Depletion
Degradation

Inequity
Poverty
Population

“Base of the
Pyramid”

Two Different Worlds

Clean Technology

Base of the Pyramid

•Technology Focused
•Environment as driver
•Base of the Pyramid?

•Business Model Focused
•Poverty as driver
•Environment?


Taking the Green Leap

Clean
Technology

The
Green
Leap

Base of the
Pyramid


Driving Innovation from the
Base of the Pyramid

+

=


Vacuum Tube
Solar Thermal


Next Generation
BoP Strategy

BoP 1.0

BoP 2.0

• BoP as producer/consumer

• BoP as business partner

• Deep listening

• Deep dialogue

• Reduce price points

• Expand imagination

• Extend distribution

• Marry capabilities

• Derivative product technology
• Arm’s length relationship via
NGOs

•New, sustainable technology
• Direct, personal relationships

“Structural Innovation” “Embedded Innovation”

www.emergentinstitute.net


Next Generation
Entrepreneurship


Corporate
Intrapreneurship


The Organizational
Challenge
Strategy
•BoP Leadership Team
•Business model R&D

Structure

Systems

•Separate entity
•Report to senior executive

•Longer time frame
•Learning metrics

Processes

People

•Leverage existing capabilities
•Team with external partners

•Attract internal entrepreneurs
•Protect from career risk


“The next 20 years will not look
anything like the last 20…”
Chris Martenson (2010)
The Crash Course


The BoP Global Network


Size Matters
How big are the returns?
Are market returns realistic?
Do you have to reward investors?

How big is the BoP?
Are there different segments?
Do you have to include the poorest?

How big is a BoP venture?
Are there different growth objectives?
Do you have to scale up to count?


Contested Terrain
Intra vs. Entre
Are BoP entrepreneurs preferred?
Can corporations create the white space?

Urban vs. Rural
How do villages and slums differ?
Do you have to include both?

Social vs. Environmental
Is poverty reduction enough?
What about environment when it comes to impact?


Stuart L. Hart
slh55@cornell.edu
www.stuartlhart.com
www.e4sw.org

11/15/2013

Copyright Stuart L. Hart 2013
33 Copyright Stuart L. Hart 2011

BoP 2.0: Pushing Boundaries

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