Opportunity at the Bottom of the Pyramid ???

Opportunity at the Bottom of the Pyramid – CK Prahalad proposed the idea and many of us cashed upon it. The “Business Pandits” of the world like Mr. Prahalad, say that the opportunity exists in emerging markets like India and there too, in the rural markets of India. My point of dissatisfaction with this approach is with treating the rural population as target market and not as a means to ensure a fair distribution of wealth.
The major indicator of India’s financial intents is the Annual Budget of India. The Finance Minister of India, Mr. Pranav Mukherjee presented the budget on 6th July 10, 2009 and spelled out a budget that clearly revolved around the single point agenda of the upliftment of the Bottom of The Pyramid. Increased allocations for JNNURM (Jawaharlal Nehru National Urban Renewal Mission) and NREGS (National Rural Employment Guarantee Scheme) are just a few indicators of this approach. Another important step taken by government is to subsidize the communication infrastructure set-up in rural India to ensure a faster reach.
Any considerate citizen of India would’ve appreciated this approach of India, Inc. to pave a path for the rural population of India to reap the same benefits as the urban population. Infosys Chief Mentor, Mr. Narayan Murthy appreciated the Finance Minister by saying, “heart of the UPA is in Inclusive Growth.”1 Through budget focus on agricultural growth by fertilizer policy and credit availability to the farmers at low interest rate, it has been tried to create an equated society of India.
But then why at the end of the day, Sensex (Bombay Stock Exchange Index) fell by 6% in a single day? And why has every other person from the industry criticized the approach adopted by Indian government? Why has the approach of India to make a rich brother help his poor brother been criticized by the “Industry Experts”? Why did The Wall Street Journal regard this budget as “A Budget for Second-Tier Developing Nation”2 ? Why would The Financial Times pass judgments about the Finance Minister by saying, “one would expect him to at least balance the politics”3 ?
I see only one reason for this – Expectation of immediate gains. In May alone, the FII to the Bombay Stock Exchange went up by $ 4.14 bn4 on the hopes of immediate gains when their economies back home were not stable and needed the cash badly for revival. But excess “money attracts more money” is the rule. So, the business logic makes sense only when it adds to itself – doesn’t matter what the country needs. And they expected Indian government to pave a path for them to realize their short term objectives, which obviously did not happen and the stock markets plummeted.
There is a major problem with the idea that all these organizations agree with – the fact that the “Opportunity lies at the Bottom of the Pyramid” where everybody looks at them just as potential customers. Several NGOs work at the grassroot level to take the benefits of government policies to the real beneficiaries. Not to miss out that the corporate also contribute to this, but only from a single perspective of “Tapping the untapped markets” or being “Prime-movers in markets of no-competition”. Never has any business organization thought about the welfare of the society in general and not as customers.
Why I am so against the “mutual benefit” theory of the Corporate Social Responsibility? The reason is that there is always an Information Asymmetry in Urban-Rural interaction and hence, there cannot be an equal “mutual benefit” for the corporates and rural population. And in such a case, it is the prerogative of the government to provide essential infrastructure to the rural population (and urban poor) to bring them at par.
So, the opportunity indeed lies at the bottom of the pyramid but let’s not consider them just a Market but a part of the family that we left behind in the run for money.

References:

1 “FM did a good job: Narayana Murthy”, The Economic Times, http://economictimes.indiatimes.com/FM-did-a-good-job-Narayana-Murthy/videoshow/4744647.cms
2. “A Budget for a Second-Tier Developing Nation”, By PAUL BECKETT, JULY 6, 2009, The Wall Street Journal, http://online.wsj.com/article/SB124687522344399695.html
3. “India’s Budget lacks a reform agenda”, By John Elliott, July 6 2009, The Financial Times, http://www.ft.com/cms/s/0be648c2-6a2c-11de-ad04-00144feabdc0
4. “India is now flooded with $1billion per week”, by Swaminathan S Anklesaria Aiyar, June 7, 2009, The Times of India

Copyright © 2009, Arun Sharma. All Rights Reserved.

Corporate Social Responsibility: The Change Mechanism

During a training session, the trainer asked us to close our eyes and think about a machine. He asked us to think about its surroundings, its vicinity, the people around it and everything else around it. Then he asked us to open our eyes and tell him what each one of us saw. All of us had different answers for the machines but the answer for its vicinity was the same – a factory churning out smoke and filthy water. When asked about the people in the vicinity, most of us saw workers working on those machines in heat and sweat, but the owners sitting in air-conditioned rooms supervising the work from there.
I am not of the view that the companies have not changed from this scenario to a much better one, but what has not changed is the perception of a factory in the minds of the people. A common man still believes that a business house can never do any good to the mankind and the owners of the companies care only about the profits. To some extent this is true as well. To change this perception of the people about the companies, the leading business houses of the world have pioneered to become Corporate Citizens and perform Corporate Social Responsibility.
Bringing about a sudden change in the minds of people is very difficult. And what’s even tougher is to measure the magnitude of change that the efforts have brought about. For instance, it is difficult to measure how many voters in India voted due to the awareness created by Jaago Re campaign by Tata Tea. Similarly, it is not possible to measure the amount of Critical Thinking induced in the students of New York City by the iSchool initiative of Cisco.
So, how should the companies change the perception of people about the companies? I propose a three step process:
• Work with and work for the people
The mission statement of Shell reads as ‘To safely market and distribute energy and petrochemical products while offering innovative value added services.’ Similarly, the vision statement of Citi Institutional Consulting says, ”We believe that excellence in consulting requires client advocacy and stewardship, a passion for leading-edge investment solutions and the delivery of experienced consulting services in a way that helps us exceed our clients’ expectations every day.”1 Though there’s nothing wrong with this mission and vision, but none of them talks about the environment that they are operating in or the people whose lives are being affected by their operations but who are not their ‘clients’. To transform into a responsible Corporate Citizen, the first step is to orient the company towards a people-oriented organization that works to solve the problems of the society. For instance, the vision of Philips Electronics is, “In a world where complexity increasingly touches every aspect of our daily lives, we will lead in bringing sense and simplicity to people.”2

• Empower the down-trodden, don’t pity them
It has always been a notion among the people to HELP the down-trodden sector of the society as a part of the CSR initiative. Many organizations do this through donations to charities, direct donation to the people and sponsorship programs. But sadly, this category of initiatives doesn’t do any good to the society in the long run. Infact, they lay a foundation for a dependent community and hence a dependent country. As Ms. Sharmila Katre puts it, Corporate Social Responsibility is about empowerment, and does not mean ‘giving’ but ‘encouraging, developing, nurturing and sustaining’.3 Initiatives like ‘Cloth for Work’ and ‘School to School’ run by Goonj.. (www.goonj.info) in New Delhi are perfect examples of the type of CSR programs that should be executed by the corporate houses. These will not only empower the people at the bottom of the pyramid but also create a potential customer base or atleast a valid referral for the companies and thereby act as powerful change agents for the perception change discussed earlier in the article.

• Build a brand, not a trademark
Companies need to be very careful in assessing the impact of the projects taken up by them or the business deals undertaken by them. It takes years to build a brand that represents trust and confidence but one wrong move brings the process of change to a halt. Tata, for example, is undoubtedly the most trusted brand in India and represents the most philanthropic business house- Tata Sons. But Greenpeace International has claimed that the port being built by Tata Steel at Dhamra is a serious threat to the turtles’ nesting grounds and the issue has been done a serious damage to the image of Tatas in India.4 So, while trying to bring about a change in the perceptions of people, the organizations should carefully select the projects keeping all the stakeholders in confidence and working for the mutual benefit for all of them.
Corporate Social Responsibility as a business model is still in its nascent stages and is a developing form of business. Still, the seriousness of the regulatory bodies all over the world, the legislations and the corporate governance policies of the governments indicate that CSR will emerge as the major agent of change for the corporate image.
ARUN SHARMA

1. ‘Mission, Vision and Values’, Citi Institutional Consulting, http://www.citi.com/investconsulting/homepage/mission.htm
2. ‘Vision and Strategy’, Koninklijke Philips Electronics, http://www.philips.com/about/company/missionandvisionvaluesandstrategy/index.page
3. ‘CSR - Philanthropy or Empowerment’, by Sharmila Katre, Published on 'Third Eyesight' at http://thirdeyesight.in/blog/tag/corporate-social-responsibility/page/2/
4. ‘Don't let TATA terminate the turtles’, Greenpeace India, http://www.greenpeace.org/india/news/don-t-let-tata-terminate-the-turtles

Copyright © 2009, Arun Sharma. All Rights Reserved.