Part 1. Review of Chapter 1: The Market at the Bottom of the Pyramid

CK Prahalad, in his book “The Fortune At The Bottom Of The Pyramid” has brought up the concept of a socio-economic pyramid according to which the entire society can be divided into five parts or five tiers: Tier 1 where Purchasing Power Parity is more than USD 20,000, Tier 2 and 3 where PPP is in the range USD 15,000 – 20,000, Tier 4 with PPP of USD 1,500 and the lowest segment Tier 5 with PPP less than USD 1,500. Since the population in the Tier 4 and 5 is more double the population in the upper parts of the pyramid, this signifies a huge potential. This segment needs to be tapped, but not in the traditional ways. Prahalad emphasized on the role of the individuals and private sector in this movement that he initiated about 14 years back. Talking of the “inclusive capitalism”, he says, “…private sector competition for this market will foster attention to the poor as consumers.” He also challenges the traditional myth that rural population is primarily poor and the urban population is primarily richer, which, he claims, is not the truth.
Though I completely agree with his philosophy and respect the amount of research that he has put into this book, I still feel that the first chapter has created more questions in my mind than it has answered. In a way, that was disappointing, but at the same time, I think he might have intentionally done so, or maybe my questions will be answered in the subsequent chapters as I read on.
The first conflict that this chapter has created is: Will it do any real sustainable good to the society if we encourage our BOP consumers to spend all that they earn that day? In this chapter, Prahalad has argued that there is enough money at the BOP. He claims that the total GDP of 9 developing countries put together is $13 trillion (PPP adjusted) and that represents a huge potential for big companies and MNCs to invest in. It is true that currently, the BOP population is spending more if adjusted for the poverty penalty, but do we really want to uplift this market segment or try to compete for sucking this market off all the blood it has? If the current income is completely converted into current expenditure, won’t this sector be helpless in times of need? Microfinance and micro-credit have come up as very useful options for the poor, but they do not come in handy for the people who do not use them for creating a personal business. Also, Prahalad says that the poor might not want to spend on sanitation and clean water but they do spend on luxurious items and that’s where the companies should try to tap in. The conflict here is that whether he proposes a social entrepreneurship model or a business entrepreneurship one because the former will try to reverse the situation while the later will try to tap the situation as it is without paying a heal to the overall goodwill of the BOP segment.
The second major issue that I see with Prahalad’s argument on supply chain is: Is it economically viable to sell the products beyond Dharavi slum of Mumbai, India? Though this question has been answered in the book, the argument seems to be rotating only around the big cities which are expected to have the density of urban poor to the tune of 15,000 per hectare by 2015. He has also mentioned about the Shakti project of HLL in India which empowers the women to be entrepreneurs in their own power. But how feasible is it to tap into the markets that are far away from even the nearest towns and are sparsely populated, like the people in the North Eastern states of India or the ones residing in the hills of Himachal Pradesh in India or the ones living in the Siberian desert of Russia. Though they have been counted in the 3 billion strong potential customer base, there is no way the companies can reach there without a support from the government in terms of subsidies and tax exemption. All in all, it doesn’t make an economic sense because those dispersed markets do not have a critical mass to support an economic project. For such markets, we need to come up with some other models that are economically viable in the long run.
The third issue with this chapter is about the confusion that it creates about ITC’s e-choupal program in India. After reading this chapter, it becomes very confusing to decide whether e-choupal is a philanthropic initiative taken by ITC as a part of its CSR or is it a business model as well which is benefitting the farmers to as great an extent as it is doing to ITC. If it’s a philanthropic initiative, I think Prahalad has been a bit confused because he contradicts what his own statement that “charity might feel good, but it rarely solves the problem in a scalable and suitable fashion.” If it’s just a charity, it prevents other companies to compete for technological advances in this sector. But, if it’s a business model as well, no clarification has been given on it in the chapter. I look forward to read about it in the second part of the book that has the case-study on ITC e-choupal.
Though these arguments might seem to be a criticism of the well known professor, arguments like these will certainly end up with a better model for the overall development of the BOP and the entire pyramid.

Arun Sharma

Delhi: A long way to go.

It’s really difficult to understand the relevance of the claims made by Mr. Kalmadi and Ms. Sheila Dixit about ‘successfully’ holding the Commonwealth games in Delhi next year. We do not have the stadia ready to play, we do not have the audience to watch sports apart from Cricket, we do not have the roads to carry the tourists across the city and we do not have the buses to do so. In such a case, how do we make the claims to hold Commonwealth Games in India and are bold enough to bid for Olympics.
A short stint of 4.5 months in Dubai was enough to change my perception on India Shining. A GDP growth rate of 6% and the ability to fight the inflation did not have any impact on the actual condition of India. Through this post, I do not intend to criticize and re-criticize the government for its failure in bringing up the talent to the forefront, but I’ll pick up three most grieving problems faced by Delhi to attract foreign tourists and businesses. I end this blog with three recommendations for the government and the citizens to start the change process and give a speed to it.
The first and the foremost factor is the portrayal of the image of India. I landed at New Delhi IGI Airport and the first sight was old, stressed out baboos sitting at the immigration counter, handling the foreign tourists and creating the proverbial first impression on them. The moment I came out of the airport, the scene outside was even worse. There was a long queue at the pre-paid taxi counter that was shattered itself. After standing in queue for 15 minutes, I got the receipt for the taxi but no taxi number and nobody to tell me where to get the taxi from. As if that wasn’t enough, the taxi itself was in a broken condition with foam coming out of the seats, rear view mirror missing and seat belt just tied at one end. And if you get a chance to travel by train in the morning, you’ll see people doing their chores besides the railway tracks making India the butt of the joke.
The second serious problem faced by Delhi today is the road traffic control system. Delhi-NOIDA express way was created to showcase India’s prowess in the road transportation but despite the wide, high-speed roads, the toll-gate has done the damage by making the cars wait for long times. Though I am proud of the DMRC project in the city, but the traffic hassles that it has been creating for the last 6-7 years have been a major headache. The temporary roads that have been built as bypass to the metro-line have been built in a very bad condition as if the responsibility for travelling on temporary roads lies with the drivers and not with the authorities. At traffic lights, it becomes evident that there’s no lane system existing in Delhi, whatever are the claims of the Delhi traffic control authorities.
Third major problem faced by Delhi is the safety of its citizens, especially at night. Every other day, we read a couple of news of murder in some corner of Delhi or a rape in the other. Night life is pathetic, to say the least, in Delhi and the only reason is the security issue. People don’t feel safe to come out of their houses at night, even for a walk. And foreigners are the least protected of the entire lot because of their naiveté about India.
Given these basic problems, apart from the administrative, bureaucratic and sports issues, how does Delhi claim to be in control of the situation and sure enough to be able to hold the Commonwealth games in 2010?
Coming to the solution part, there are three basic things that Delhi needs to focus on, rather than beating around the bush with same old policies leading to absolutely nowhere.
The first thing that Delhi needs is the role clarity between the Center government’s responsibilities and the State government’s. Not long ago, the state and central governments were from different parties and one could see a constant blame game going on between the two for the responsibilities of the safety of citizens, public transportation, power supply, water supply and other basic infrastructural facilities. Even now, it’s not clear whether the Indian Olympics Association (IOA) needs to tighten the state government for certain facility requirements or the Center govt. Before we move on to ensure a Developed Delhi, we need to sit for a while and draw clear lines of responsibilities.
The second important step to be taken by the Indian government is to ensure a better road network and a planned expansion of the same. Just like the Andhra Pradesh government, Delhi govt needs to take some bold steps to expand the road network within the city at a much faster pace than it has been doing. Roads in Old Delhi need to be broadened and new roads to be added, even if it means purchasing the land from the residents of the area. The Delhi-Gurgaon flyover system was planned to take on the traffic for next 20 years, but it has already been clogged up with traffic jams and long queues. Proper traffic planning needs to be put into place before mindlessly creating new roads. The BRTS system has faced so much resistance from the local public because this system created another barrier in the already bad traffic condition of the capital. A centralized support system for the public transportation should be set in place to help the non-residents of Delhi. In the nutshell, the master plan for the city or Delhi Vision 2020 should be created for Delhi and every department should be aligned to work towards the same.
My last recommendation to the Delhi government will be to shift as fast as possible from the man-oriented governance system to e-governance. I really appreciate the Bhagidari initiative of Delhi govt. under the supervision of Ms. Sheila Dixit, but this initiative needs to be more inclusive in approach. E-governance should not only be focused at the citizens or residents of Delhi, but it should also be targeted at making the stay of the tourists as comfortable as possible. E-governance should help the citizens to fill in the bills online, file complaints against public offices, get to know the bus routes, know about the decisions of the government, know about the plans for Delhi’s development, rules and regulations prevalent in Delhi and other needed support for the residents of and visitors to Delhi.
I think these three solutions will form the base for the Delhi government to start its further development towards proving itself as the capital of the next super-power of the world. Once developed in Delhi, the same model can also be implemented in other cities in India that suffer the problems similar to New Delhi’s.
But before putting it all on the government, I must say that nothing can be fruitful if the citizens of the country will not support the system. Any initiative of the government needs an encouragement and acceptance in right spirit by the residents. Only then will we be able to create a Shining Delhi and Shining India.

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.

The Art of Loving

Ah! So finally here’s a topic that’s close to my heart and hopefully yours as well- The Art of Loving. Love is a word that has different connotation for everyone. It might be the smile of a dear friend for one while it can be the blessings of the parents for the other. Love might be a lot of money for me but for you, it might be a smiling baby calling you Maa. And pretty obviously, love for a teenaged guy can be the girlfriend (or girlfriends, whichever is applicable!) or the boyfriend (if you are in US!). Don’t the Emotions seem to have one thing in common- the power of defying the logic? Why is love not logical? Why is it an Art?
Before we discuss why is Love an Art, let’s try to understand Art first. R.G. Collingwood was of the view that “art expresses emotions, and that the work of art therefore essentially exists in the mind of the creator.” Emotions are the outputs of complex algorithms running in billions of the neurons in our minds interacting with each other through trillions of dendrites sending electric pulses that represent the impact of the previous experiences and the state of mind. Huh! But what is Art? Collingwood has already said that “Art expresses emotions.” So, in effect, Art is the output on canvas, of complex algorithms running in billions of the neurons in our minds interacting with each other through trillions of dendrites sending electric pulses that represent the impact of the previous experiences and the state of mind. Wow! Now when we know what an art is, let’s try to find out why is love an art?
Not that quick buddy, there are some more questions lined up for you. Don’t worry, you’ll find your answers from these questions only. Why do you cross countries for just a kiss? (Trust me, people do that!) Have you ever noticed a mother talking to her infant baby in babbles that have no meaning at all in Logical terms, but still Loving it to the best? Isn’t it easy to say those three words (“I Love You”) to girlfriend than your wife? (Married readers will agree with me.) Now the million dollar question: Why is Love an Art? And why did I choose my topic as The Art Of Loving? Try answering the questions above and discuss it with your friend and you’ll find some different answer, for sure. And that’s the reason we do not have 2+2=4 in love. In love, 2+2 can be 8 (naughty minds!) or 2. Love amplifies itself when its receiver- the heart- receives the positive signals. Love develops an unknown connection with someone whom you never knew and didn’t have any prior information about. Love isn’t a technology that you can buy and use. Neither is it a science where you can calculate the right amount of smile and the body language that you would use to develop a particular kind of relation with someone (not necessarily the opposite sex). Love is abstract and love is shapeless. It has no boundaries, no definitions and no characteristics. It happens at the click of a moment and then lives there deep in your heart forever.
And that it happens to everyone in different ways, is the reason why it’s an art.

Copyright © 2009, Arun Sharma. All Rights Reserved

Go and Vote

http://www.youtube.com/watch?v=uNPzXw648hA

No Criminals Please!!!

A brilliant campaign by Times of India- LeadIndia, has forced me to tell you people about it. For long period now, we've been crying about the fate of India whose administration is governed by a group of criminals, black-marketeers, uneducated but cunning politicians. But when was the last time when we realised that the reason for this entire thing was none other than we ourselves? Had we opted to vote for the right person, or atleast to vote, the situation would've been entirely different. I am really amazed to find that all political parties have been tying to vow the youth power this time and this was predicted atleast 5-10 years back that India will be a nation of youth by 2010. This clearly signifies that the youth of this country have to take up the responsibility now to take this nation ahead of all the other super-powers of the world. And that's possible only if our policies are in place which in turns depends upon the people who formulate them.
As the campaign has put it very rightly that we don't expect the political parties to put up statesmen to govern us but the least they can do is to prevent criminals from entering the politics. I don't know about other parts of the country, but my state Punjab has a tainted chief minister and deputy chief minister and I'm very ashamed of this. These crorepatis have accumulated so much of wealth using corrupt means and methods. But still we vote for them and never care about how they create the policies for our benefit and development. It's high time that we wake up and let them know that they don't deserve to be our representatives any more.
I urge everyone of you to be a part of this campaign and spread the word to everyone around you.
Every Vote Counts!

www.nocriminals.org