New Strategies for Social Innovation: Market-Based Approaches for Assisting the Poor by Steven G. Anderson

Author:Steven G. Anderson [Anderson, Steven G.]
Language: eng
Format: epub
Tags: Public Policy, Political Economy, Social Services & Welfare, Social Science, Political Science, NGOs (Non-Governmental Organizations), Social Work, Poverty & Homelessness, General
ISBN: 9780231537384
Google: E9E3BAAAQBAJ
Goodreads: 35136152
Publisher: Columbia University Press
Published: 2014-08-26T00:00:00+00:00

BOTTOM OF THE PYRAMID DEVELOPMENT

Many interesting examples of BOP development can be found in the literature on development, suggesting a bottoms-up etiology of this approach. However, the most influential intellectual articulation of the BOP approach has been presented by business professor C. K. Prahalad, principally in the book Fortune at the Bottom of the Pyramid (Prahalad, 2005).1 This work created a basic framework upon which other BOP variations have built or refined, so I will begin by describing Prahalad’s characterization of BOP development before considering some important variations that have evolved from his work.

The pyramid described by Prahalad refers to the income distribution and related purchasing power of the world’s population. As a pyramid suggests, world income distribution is highly skewed, with smaller numbers of people with very high incomes at the top and a broad base of the world’s poor—about four billion people—at the bottom of the pyramid. Many subsequent renditions of BOP development have viewed the term “bottom” as somewhat pejorative or condescending to the poor, and consequently have instead referred to the “base” of the pyramid. Nonetheless, the emphasis on product development for these persons, who have incomes of no more than two dollars per day, is consistent regardless of the terminology employed.

Prahalad argues that corporations and other capitalists traditionally focus on production for the relatively small number of consumers at the top of the pyramid, based on the assumption that profits are maximized by obtaining high returns on each unit sold. This drives a production process centered on higher-end or luxury goods, and likewise typically fosters considerable attention to style and other nonfunctional features in product design. In terms of global development, this production focus has promoted models in which capitalists primarily seek global expansion to find cheaper labor pools to produce goods for the more well-off. For example, the well-known multinational corporation ventures into China, Vietnam, and other developing countries to produce goods for faraway developed world consumers personifies the global impact of top of the pyramid production.

Although top of the pyramid production tendencies may lead to labor exploitation in some low-income communities, Prahalad contends that the traditional critique of capitalistic exploitation of poor communities is largely misplaced. Rather, the more fundamental problem from his perspective is that capitalists ignore poor consumers in their decision making about product development, and in so doing strip them of access to products. Producers do so largely because of the aforementioned emphasis on profit per unit thinking.

Prahalad consequently argues that a key strategy for improving the well-being of the poor is to get business interests actively involved in poor markets. He contends that it is possible to do so because of the very large numbers of untapped consumers who reside at the bottom of the pyramid. This allows the possibility of making reasonable profits by selling high volumes of goods with low per unit price margins, as opposed to depending on lower volume but higher per unit profit margins. This can be accomplished by clearly focusing on basic product

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