Bottom of the Pyramid

Concept, Applications, Prospects

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FK - IITM

THE POOR BOON OR BANE?

Poor as a problem Poor as an opportunity a global market of 4.5 billion Poor as an active market Innovation and development of new technologies with usefulness to the poor Imagination Constraints

Poor as wards of State Old technologies that follow the West

Resource Constraints

Information Access as a valuable asset

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A Revolutionary Idea
C.K.PRAHALAD B.Sc degree in Physics from Loyola College, Chennai MBA at IIM-A Doctorate from Harvard Business School Taught at University of Michigans Business School (1977 2010) Core Competence & BOP his legacy to mgt. world
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Change the Mindset

The Poor of India are an Intractable Problem

The Poor of India form a Potential Market

The Poor of India can be A Source of Innovation

Poverty Alleviation, Subsidies

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Creating a New Market, Innovation, Growth

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What is BOP?
The Bottom of the Pyramid is the largest, but poorest socio-economic group. In global terms, there are 4 - 5 billion people who are largely excluded from formal markets, the group earns less than $2 per day and 60% of these 4 - 5 billion people live in China and India. Rural marketing agency MART, defines BoP as a daily wage earner who does not make more than Rs50 a day. Nearly a billion people in India are at the bottom of the pyramid.
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Features of BOP
BOP has money it is a viable market. Access is a little difficult & requires unconventional marketing effort. The poor are brand-conscious BOP market has is now connected (due to cell, TV & internet.)
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BOP is very open to advance technology. Firdaus Khan

IITM

The World Pyramid

Purchasing Power Parity (PPP) >$20,000 Tier 1 ~ 200 mil

Population in millions

$2000 to $20,000

Tier 2 & 3

~ 800 mil

less than $2000

Tier 4

~ 5000 mil

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Pyramid for India

Population in million
Purchasing Power

> 5 lakhs
3 to 5 lakhs

T1
T2 T3

10 mil 50 mil 150 mil

1 to 3 lakhs

50K to 1 lakh T4

200 mil

less than 50K

550 mil T5

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A NEW MINDSET, A NEW FRAMEWORK

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An Idea whose Time has come

The year 2010 saw many new innovations coming from corporations like Tata, Hindustan Unilever, Godrej & Boyce, Narayana Hrudayalaya, and Vortex among others who have been working on innovative offerings to the BoP. The concept has been to work on a design and product with prior knowledge of the cost rather than the other way round and providing high quality and value for money propositions. Eg: Tata Nano

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APPLICATIONS IN CONSUMER DURABLES SWACH

Swach range of water purifiers from Tata Chemicals. An attempt at meeting the necessity of purified water for the BoP at a price point as low as Rs.499 ($10). Potable drinking water without the need of electricity, which is a scarce resource in rural India.

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ANOTHER CONSUMER DURABLE CHOTUKOOL

Godrej & Boyce launched Chotukool. It provides all the functionalities of a normal refrigerator but runs on a battery, eliminating the need for continuous power supply. Price - Rs.3250, weighs just 3-4 kgs and works on just 20 parts as compared to over 200 parts in a traditional fridge. It is the ultimate game changer.

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APPLICATION IN HEALTHCARE - NARAYANA HRUDAYALAYA

Narayana Hrudayalaya, the world renowned Heart Institute set up an ultra low cost super-specialty 300 bed hospital near Mysore to provide medical treatments to BOP. The hospital has kept infrastructure to a minimum with the help of pre-fabricated material in the construction. The Hospital extended this cost cutting to provide medical services at a low cost wherein a heart operation which costs around Rs.2,00,000 will eventually cost Rs.50,000 to the end customer.

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Financial Inclusion
RBI studies show that only 54% adults in India have a bank account A business correspondent (BC), a bankappointed agent who comes to the village with an electronic handheld device connected to the bank, facilitates withdrawal of customers money, deposits and other transactions. GoI has decided to provide essential financial services like savings, credit, micro-insurance and remittance, for all villages with population over 2,000 by March 2012.
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APPLICATIONS IN BANKING - VORTEX

Vortex, a startup incubated at IIT Chennai, has been successful in making rural banking a reality The startup operates low cost electromechanical ATMs which are able to work at ambient temperatures of up to 50o Celsius unlike the traditional machines which are high on power consumption as well as need air conditioning system to keep it cool. The company has also introduced Solar ATM and Biometric ATM to cater to the needs of rural customers.
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E-GOVERNANCE PROJECTS
Central Bank of India is the nodal bank for implementing e-Shakti, the flagship project of Govt of Bihar. ICT based financial inclusion solution is adopted to record attendance, calculate wages & make payments to the MGNREGA beneficiaries. For providing citizen services at the doorsteps of a largely rural population, the Himachal Pradesh government has identified 3366 locations for setting up IT enabled Lok Mitra Kendras.
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RuPay Payment Gateway

Every transaction done using a debit or credit card issued by a domestic bank is routed through network switches owned by Visa or MasterCard, which are based outside the country. Avg. processing charge - Rs 300 crore per year. Rupay - a payment gateway that connects all the ATMs and points-of-sale terminals in India, designed to displace Visa & MasterCard. Aadhar enabled rupay cards by public sector banks to no-frills account holders.
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APPLICATIONS IN TELECOM NOKIA LIFE TOOLS (NOV 2008)

Nokia Life Tools Agriculture services provides information on seeds, fertilizers, pesticides, market prices, and weather via mobile phones. (Rs 30/month) Nokia Life Tools Education services aim to provide career and education services, including English language learning, GK, Exam preparations and results, as well as career information and tips. (Rs 30/month) Nokia Life Tools Entertainment services also has fun features, including astrology, news, ringtones and more.

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APPLICATIONS IN FMCG MARKET - NESTLE

Nestle India has launched two new products - Maggie Masala-ae-Magic and Maggie Rasile Chow. Nestle is pioneering low price concepts for the bottom of the pyramid, which seek to address the widespread concern about micro-nutrient malnutrition in India. Rasile Chow - low-cost, light meal fortified with iron, available at Rs4 a pack & Masala-aeMagic - taste enhancer containing iron, iodine and vitamin A available at Rs2 a pack Nestle also launched a nutrition education program for its target mkt, beginning with Dharavi in Mumbai.
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APPLICATION IN HOSPITALITY - GINGER HOTELS

The budget business hotel chain, Ginger Hotel from Indian Hotels a subsidiary of Tata Group targeted the bottom of the hospitality industry. These are smart budget hotels that provide no room service and target travelling salesmen.

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APPLICATION IN SOCIAL INITIATIVES - MILLEE

MILLEE i.e. Mobile and Immersive Learning for Literacy in Emerging Economies was a project by Dr. Matthew Kam from UC Berkley, launched in 2009. It used mobile gaming technology to enhance access to literacy among children of school-going age in the developing world. The games worked only with few phone models (Motorola Razr V3m). The team received support from Nokia in the form of 450 cell phones to reach out to rural children.

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GLOBAL APPLICATIONS
As Fortune reported on November 15, 2006, since 2005 the SC Johnson Co. has been partnering with youth groups in the Kibera slum of Nairobi, Kenya. Together SC Johnson and the groups have created a community-based waste management and cleaning company, providing home-cleaning, insect treatment, and waste disposal services for residents of the slum. 6 persons team spent 11 weeks in Kenya, working and living alongside their hosts and understanding the social and commercial ecosystem of Africas largest slum: Nairobis Kibera. Helped set up Taka Ni Pato (Trash is Cash) program , recyling and composting businesses in Kibera.
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PROSPECTS India as a BoP Innovation & Research Hub.

Changing the perception of India from a manufacturing and back-end process hub to a research and innovation hub. Private universities in India and corporations together are forming joint venture, which will enable growth in Research and Innovation in the coming years to come, making BoP market attractive not only in India but, through Indian innovations, worldwide. eg: Manipal University-Philips JV

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Mitticool
A refrigerator that does not require electricity and is made of clay. Conceptualized in 1997, Mitticool is developed by Gujarat based Manshuk Lal (who earlier worked as as a supervisor in roof tiles Manufacturer), and the product works on the basic principle of evaporation. Mitti Cool Refrigerator weighs 20 kg (height:18.5 and width of 11) and the way it works is very simple Water from the upper chambers drips down the side, taking heat from the inside gets evaporated, leaving the chambers cool.
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12 Principles of Innovation for BOP Markets

1. Focus on quantum jumps in price performance. 2. Hybrid solutions blending old & new technologies 3. Scalable & transportable operations across countries, cultures & languages. 4. Reduce resource intensity make eco- friendly products 5. Radical product redesign from the beginning, not just tweaking western products. 6. Build logistical & manufacturing infrastructure. 7. De-skill work. 8. Educate semi-literate customers in product use.
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12 Principles
9. Products must work in hostile environments noise, dust, unsanitary conditions, electric blackouts, etc. 10. Adaptable user interface to heterogeneous consumer bases. 11. Distribution methods should be designed to reach both highly dispersed rural markets & highly dense urban markets. 12. Focus on broad architecture, enabling quick & easy incorporation of new features.

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BOP = The Art of Positive Change

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OPPPORTUNITY AHEAD
Create & implement a new model for Free Internet . Create a Low Cost (less than the cost of TV) MultiFunction Information Appliance
Easy to Use Interface by Illiterate Users in Developing Economies

Develop capacity building programs to make 100% of the population eLiterate Develop programs to overcome language barriers
Create multi-lingual interfaces, spoken language interfaces and multi-lingual translation systems

Create the Infrastructure for Ubiquitous Access to Knowledge and Knowhow

Video Conference with experts on problems of health (Aids) or agriculture or other problems such pest control
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N-Logue: corDECT Village Kiosk

Consists of
Wireless corDECT wall-set for Internet and telephone, PC, dot matrix printer, battery back up, web-cam, speakers, microphone --- for Rs.50K

Local entrepreneur operates the kiosk These kiosks becoming community centers Expect cities to outsource their work to villages, making. Possibililty - Indian villages become the back office to Indian urban centers RTBI: Rural Technology Business Incubator
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CHALLENGES
The Market is Very Fragile: (Monsoons, Subsidies,.) Middlemen and Moneylenders Fragmented Experiments Lack of a Global database Traditional Ways of Thinking

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BOP or Developing Market?

While there is a general tendency to equate rural India to BoP market, here are some of the consumption numbers that will blow your mind 46% of the soft drinks sales, 49% of motorcycle sales, 59% of cigarettes sales, 53% of FMCG sales are from rural India. Close to 10% of Maruti Suzukis sales & 50% of Hero Honda s sales come from the rural market Rural India has a large consuming class with 41% of Indias middleclass and 58% of the total disposable income accounting for consumption. In 20 years, rural Indian Market will be larger than the total consumer markets in countries such as South Korea or Canada today, & almost 4 times the size of todays urban Indian market.

Can you dare to ignore this market?

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Thank you!

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