I met C K Prahalad only once, in India. He gave a riveting talk to a standing room only crowd of students, faculty, and administrators at the Indian School of Business (ISB) in Hyderabad where I spent a year on sabbatical leave from UCLA Anderson School. I did not take notes. But I remember almost everything from that talk to this day because it has deeply influenced my research, teaching and initiatives in microfinance.
He showed that the poor living in the slums of Dharavi in Mumbai, India, paid more, much more, for almost everything than most other people in Mumbai who were not so poor. Why? Largely because the poor could afford to buy only small quantities at any given time and the mechanisms for delivery of small quantities were not efficient. I am sure many others before him have noticed that the poor pay more and have cried out -- "unfair" -- but it was his genius to use these glaring statistics as a challenge to businesses to think out-of-the-box and devise efficient strategies to serve the poor without sacrificing the profit motive.
What? Is it really possible to produce and market to the poor -- at prices they can afford -- and yet remain profitable? He challenged even the largest multinational corporations to innovate and think differently. He argued that the key to understanding this was scale -- he reminded us that roughly five billion of the world's population was below the radar screen of major corporations He introduced the term "Bottom (or the Base) of the Pyramid" -- BOP -- that has since become part of the lexicon of management thinking. Bringing billions of people into the folds of market economy not only is socially desirable, these people represent a huge market segment that would likely get even more important economically and socially in the long run. What a crazy, remarkable, brilliant idea!
Prahalad's focus on serving the poor, but yet staying profitable, is not based simply on ideology. The argument is that the business idea must be economically viable or else it will never reach billions of people because charity, aid and subsidies are limited. Moreover, the competitive forces propel businesses to innovate in ways that are often not seen in programs funded by subsidies however laudable their intentions and goals might be. He did suggest, however, that synergies exist between the local knowledge and local access of socially-conscious nonprofits and the global scale and large resources of profit seeking large corporations.
Prahalad was a strong proponent of the use of Information and Communication Technology (ICT) in addressing the needs of the poor. In his talk at ISB, he showed an unforgettable picture of a young man carrying a mobile telephone and going from client to client on his bicycle. What a creative fusion of old-fashioned mobility provided by a bicycle with that of transmission of information using satellites! Today, the reach of mobile phones even in many poor parts of Africa has reached a level that makes delivery of many banking and financial services feasible and economically viable. Financial Access at Birth (FAB) campaign, launched by a group of us that includes academics, social entrepreneurs, executives and philosophers, has an imprint of many of these remarkable ideas of Professor C K Prahalad that he will be remembered by, for many years to come.
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