Stuart Hart on the idea that revolutionized management thinking
In the year 2002, C.K. Prahalad and Stuart Hart published a groundbreaking article in Strategy+Business magazine that introduced to the world the idea of the Bottom of the Pyramid (BOP). The idea, which says that the poor present a vast untapped business opportunity, and if companies serve the poor, they can help eradicate poverty and also make a profit, revolutionized business thinking. Funnily though, before 2002, the idea had no takers: various management journals including Harvard Business Review didn’t publish Prahalad and Hart’s article for nearly four years because it didn’t have enough evidence in terms of multinational companies who had successfully experimented with the idea.
I’ve thought about it, and my colleagues Erik Simanis, Ted London and others have thought about this as sort of a BOP 1.0 version. One of the things we have learned from the first decade of activity is that simply coming up with a lower cost version or single-serve version, sachet-packaged version of current products, then seeking out distribution into rural areas or into slums with NGO partners, or outsourcing to NGOs, getting production costs down, is structural innovation. It’s important because for a large corporation thinking about this completely different business model, is a significant change.
Q. Moving on to your work in sustainability, most companies are caught in a very one-dimensional view of sustainability: one small initiative here, one small initiative there, and they think they have done their bit. How would you really rethink the idea of sustainability so that it includes a lot more than what companies are used to thinking about?
But we’re also reaching a point where that strategy now is reaching its limits purely from an economic and financial point of view. You can only strip so much cost out of a high-cost model as you step it down, that eventually you start to run into the limits. As you try to move further down the income pyramid, people simply can’t afford this stuff, or doesn’t really fit what they need. The first attempt was BOP 1.0, you just strip more cost out of it, put it in a sachet package. It hasn’t worked so well. Environmentally and from a purely financial affordability point of view, it does not (work well).
Q. You’ve often talked about China and India and how these two countries with their very unique environmental and social problems, might end up leading the transformation as far as green leap technologies are concerned.
[This article has been reproduced with permission from CKGSB Knowledge, the online research journal of the Cheung Kong Graduate School of Business (CKGSB), China's leading independent business school. For more articles on China business strategy, please visit CKGSB Knowledge.]