- Introduction to The Fortune at the Bottom of the Pyramid, Revised and Updated 5th Anniversary Edition
- The Role of the Private Sector
- Who and What Is the Bottom of the Pyramid? What Have We Learned?
- Bottom of the Pyramid as a Business Opportunity
- Key Lessons from Experiments
- Business and the New Social Compact
- Democratizing Commerce: The Challenge for the 21st Century
- Endnotes
This chapter is from the book
This chapter is from the book
This chapter is from the book
Who and What Is the Bottom of the Pyramid? What Have We Learned?
There is a lot of discussion on what the Bottom of the Pyramid market is and who constitutes that market. The original definition of the Bottom of the Pyramid was based on a simple premise. The concept was originally introduced to draw attention to the 4-5 billion poor who are unserved or underserved by the large organized private sector, including multinational firms. This group, until recently ignored by the private sector, could be a source of much needed vitality and growth. The assumptions influencing the focus on the Bottom of the Pyramid were also explicit: “Four billion poor can be the engine of the next round of global trade and prosperity. Serving the Bottom of the Pyramid consumers will demand innovations in technology, products and services, and business models. More important, it will require large firms to work collaboratively with civil society organizations and local governments. Market development at the Bottom of the Pyramid will also create millions of new entrepreneurs at the grass root level—from women working as distributors and entrepreneurs to village level micro enterprises (page 2 in the original book).
Needless to say, four billion people cannot be a monolith. They represent extreme variety—in their levels of literacy, rural-urban mix, geographical mix, income levels, cultural and religious differences, and every other conceivable basis for segmentation. This extreme variety does lead to multiple perspectives on the Bottom of the Pyramid. The Bottom of the Pyramid is like a kaleidoscope. No single view illuminates the total opportunity. Every twist helps focus on a specific facet of the opportunity or problem. This variety supports major disagreements among scholars and practitioners on what constitutes the Bottom of the Pyramid. Moreover, the term Bottom of the Pyramid evokes different images. Not surprisingly, readers tend to attribute their own definition to the idea. I called it the Bottom of the Pyramid because that was the reality as I saw it. The goal was to ensure that the rich—the top of the pyramid—could be sensitized to those who are less fortunate. Some did not like the idea of the bottom of the pyramid; they called it the Base of the Pyramid—a bottom-up view.5 Segmenting the 4 billion was not far off. Some talked about the Next Billion.6 Some focused on the Next 4 Billion.7 Some focused on the Bottom Billion.8 Some tried to get back to the old ways of categorizing the market as A to E; categories C, D, and E constituting the BOP. There is also significant debate on who are at the Bottom of the Pyramid—people living on less than $2/day? Less than $1/day? What about people earning more than $2/day but still in poverty without adequate access to world class (not the same as luxury) goods and services? The extensive study by World Resources Institute/International Finance Corporation has given granularity to the composition of the next 4 billion by country and by income level. It has also shown that Bottom of the Pyramid consumers account for $5 trillion in Purchasing Power Parity terms.
The Bottom of the Pyramid debate has led to new perspectives on the opportunity. There is a focus on the Middle of the Pyramid, or the aspiring middle class. A recent study by the Economist concluded that half the world can be classified as the emerging middle class; defined as a population living on $2–13 at 2005 Purchasing Power Parity prices. They have discretionary income and spend on education, health, energy, transportation, and personal care. This market by some estimates includes 2.6 billion people in 2005 and is rising fast. Asia alone is expected to have approximately 60 percent of the global middle class.9 Many firms now classify the Bottom of the Pyramid market as “emerging consumer markets” or just emerging markets. Obviously this is a more emotionally neutral term. More important, this view of Bottom of the Pyramid markets—the emerging consumers—shows the respect and the commitment of managers in large firms who have spent time and resources to understand this opportunity. This is a significant change from the position even five years ago.
We can draw multiple lessons from the heated debates about what constitutes the Bottom of the Pyramid during the last five years:
There is a clear recognition that four billion micro consumers and micro producers constitute a significant market and represent an engine of innovation, vitality, and growth. This is a new category for all—be it managers, governments, or civil society organizations. We need to understand it. It is clear, however, that this emerging market will force a fundamental rethinking of our approach to business.
The 4 billion people who constitute the Bottom of the Pyramid are not a monolith. For those who want to engage in this opportunity, there is no single universal definition of the Bottom of the Pyramid that can be useful. The definition must fit the focus for productive engagement. For example, micro-finance organizations in India might have a different definition of the poor from ones in Kenya or Brazil or the USA.
We can choose to serve any segment of the 4 billion. No institution—a firm or nongovernmental organization—needs to serve all of the Bottom of the Pyramid. They can pick and choose. Serving the “next billion” is as legitimate as serving “the bottom billion.”
There is a segment of the 4 billion who are so destitute, so deprived, and so consumed by war and disease that they need other forms of help. Government subsidies, multilateral aid, and philanthropy are all legitimate tools to deal with this segment. Even here, our goal should be to build capacity for people to escape poverty and deprivation through self-sustaining market-based systems.
Active engagement at the Bottom of the Pyramid markets requires a new and an innovative approach to business. Retrofitting business models from the developed markets will not work.10
I believe that the debate of what the Bottom of the Pyramid is will continue. But the world of business is moving beyond definition. The concept of the emerging consumer allows each firm to decide which segment of the Bottom of the Pyramid it wants to serve. Some firms, such as Unilever that have a long history of working in developing markets, now focus on “Straddling the Pyramid”—participating across the entire spectrum of opportunities often with the same category of products. It is fair to say that the idea of the Bottom of the Pyramid as an opportunity has taken root. Does this mean that it represents a viable business?