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The Opportunity At The Bottom Of The Pyramid – An Introduction

Raj Melville

Growing up in America you are inundated with requests to contribute to numerous charities. On TV, in your mailbox, you are flooded with images of the poor. According to World Bank statistics, over 1 billion people around the world live in extreme poverty with a daily income of less than $1 a day; another 1.5 billion live on less than $2 per day. Together this represents nearly half the world’s population living at the bottom of a pyramid with the affluent tip representing less than 100 million people with incomes of over $20,000 per year.

Though most of the past century, commercial interests focused on the attractive markets represented by the top of the income pyramid, while charities, NGOs and aid agencies were left to address the ‘problems’ of the rest of the pyramid. Until fairly recently, multinational corporations did not view the lowest levels of the income pyramid as large enough of a target for their products or services.

Now several home grown organizations from the developing countries are turning these ideas on their head. By focusing on the end consumer and tailoring novel products and services to meet their needs, these organizations have shown that solving a social issue and making money are not mutually exclusive. Some of the key approaches used by these organizations to address this market are:

-    Reengineering Organizational Processes:  Every year the Aravind Eye Care System does over 200,000 cataract operations, nearly half of them free, while keeping the average cost down to one hundredth of that in the US. It does this by streamlining the entire operation process and increasing the utilization of equipment. Doctors conduct over 2000 operations a year, over 6 times the national average. By focusing on an improved delivery model, the Aravind system was able to provide care to thousands who would otherwise not be able to afford it.

-    Building Affordable Financing Models: Most rural areas have to rely on local vendors and merchants to serve their needs. Recognizing the lack of financing alternatives for these local entrepreneurs, pioneers, like Prof. Muhammad Yunus, developed a group based lending model to provide small scale loans that were relatively more affordable than the money lender alternatives. Thirty years later, micro-finance institutions have proven that the poor are good credit risks with default rates much lower than that for conventional banks.

-    Leveraging Rural Networks: In Bangladesh, one of the most challenging economic environments, Grameen Phone, an innovative cellular phone company helped leapfrog rural communities into the wireless age. By providing ‘phone ladies’ in each village with a cell phone and a means to finance it, they were able to extend phone service to the village. By tapping into farmers’ needs for market information and expatriate villagers’ desire to call their families back home, Grameen Phone is now able to support over 280,000 village phone ladies.

-    Designing Local Solutions: Working with indigenous materials Ram Chandra, a local sculptor, and Dr. P. K. Sethi designed a prosthetic product fitted for local conditions and use. Today the ‘Jaipur Foot’ has revolutionized foot prosthetics in India. Hundreds of amputees can now get a ‘Jaipur Foot’ fitted in less than a day for around $30 (compared to over $8000 in the US).
By focusing on the social and cultural needs of the lowest layers of the income pyramid, these socially driven organizations have shown that there is indeed a ‘Fortune at the Bottom of the Pyramid”.

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