Part 2: Review of Chapter 2: Products and Services for the BOP

The second chapter of the book (CK Prahalad’s “The Fortune at the Bottom of the Pyramid”) talks primarily about the product innovation strategies that the companies should develop to serve the BOP customers. Prahalad emphasizes the fact that “the basic economics of the BOP market are based on small unit packages, low margin per unit, high volumes and high return on capital employed” as opposed to the top of the pyramid. To make the retailing for BOP consumers feasible, Prahalad suggests that the products and processes need to be developed through the process of innovation. For product innovation, he suggests twelve principles which are briefed below.

1. High price performance or value-for-money
2. Hybrid solutions with cutting edge technologies
3. Scalable and transportable solutions across countries
4. Effective resource utilization
5. Rethinking of functionality
6. Process innovations
7. Deskilling
8. Education to customers by creative media
9. Products for hostile environment
10. Research on interface
11. Accessibility of innovation
12. Rapid feature and functional evolution

Prahalad claims that these twelve principles cover all the industries but every industry might not find every step very useful. So, the companies or organizations that are targeting the BOP markets, should pick and chose the principles that are applicable to their particular industry.
Quite ironically, none of these principles seems to focus on collaboration among the private sector players to provide innovative solution packages to the BOP customers. Collaboration and Co-optation are the two important tools for marketing the products in the BOP markets. A television set cannot be marketed to someone in the Himachal mountains unless there is no electricity and Tv tower. Neither can mobile phone be sold to a person from the rural areas of Orissa where there’s no mobile network available. Mr. Vipul Nair, Consultant, Diamond Consultants said in an interview to UTVi, “…you need electricity to charge your mobile phone, if you want to use it. (But) when electricity has not reached a place, how will the mobile telephony?” So, rather than developing their own supply chains from scratch, companies should collaborate and sell their products through common supply chains. This innovation will definitely help the customers when they will get access to more products, but it’ll increase the efficiencies of the companies as well.
In his elaboration of the first principle, Prahalad mentioned that “Building the savings habit and giving them access to the basic building blocks of financial services must precede providing them with access to low-cost loans or rain and crop insurance.” I completely agree with this point and I pointed this out in the review of the first chapter as well. Rather than sucking the blood out of the poor, BOP customers, the companies should focus on developing the living standards and providing them with jobs, before turning them into potential loyal customers. But sadly, the cart is often put before the horse in the capitalist world.
One issue that I raised in the previous post and that has been further re-emphasized is that issue of defining the BOP market. Prahalad has been referring the entire Indian and entire Chinese market as the BOP market, throughout his literature. On the contrary, when he defined the BOP in the beginning, he defined it on the basis of PPP. How can this irony be resolved? What is the exact size of the BOP market? It’s necessary to know for the companies before venturing into the market.
While talking about the sustainable development, Prahalad says that the MNCs and other big companies are in real dilemma in concern with the packaging problem. The dilemma rises out of the fact that packaging is necessary to preserve the food but recycling is not possible because of poor recollection mechanism. I have a solution for this: The companies should start offering a little discount on the next unit of a product if customer returns the packaging of the previous pack. This will have two benefits. First, the collection will become much easier from the points of sale, rather than collecting them individually from the houses. Second, the customer loyalty to the product will also be maintained and increased. I really believe that this idea can work wonders if implemented properly.
A major anomaly in the explanation of principles is observed where CK Prahalad says that since most of the BOP markets are media black, companies need to find creative ways to educate them about the products. In the previous chapter however, while trying to emphasize that the BOP customers have money to spend, he mentioned that 85% of households living in the slums of Dharavi (Mumbai, India) have Tv at home. I don’t know which fact to trust and how to make an opinion about it.
The major disappointment has occurred from the fact that all the examples in Prahalad’s text revolve around the 7-8 case studies prepared by his students and most of them come from India. Aravind Eye Care, Jaipur Foot, ITC e-choupal, HLL's Shakti and ICICI’s retail banking are the only examples that Prahalad seems to have relied upon for his research. The motive of reading the book from a Harvard professor to get an over-view of the efforts being made by the governments, companies, NGOs and individuals across the globe, has not been fulfilled. But at the same time, it’s a good read for the Indians who did not know that these institutions actually occurred in India and have achieved the levels of innovation that only few in the world have ever achieved.