In the last decade, C.K. Prahalad and others have argued that the 4 billion people living on less than $2 a day--a group in society that wields trillions of dollars in economic power--is a major, untapped market (Prahalad, 2006). Indeed, there is mounting evidence that the world's poorest people are not only viable producers for a host of products and services, but they also are eager consumers of the basic necessities of the developed world--from mobile phones to soap to banking and insurance products.
Recognizing this opportunity, a number of multinational companies launched initiatives to explore the untapped market potential at the base of the economic pyramid (BOP). These multinationals, however, are not focused solely on developing new markets. They are becoming aware, through the efforts of some government organizations, NGOs and philanthropic organizations, that an effective way to eliminate poverty is to provide the poor with access to markets and credit, meaningful goods and services, and opportunities to enhance their skills and business practices. By exploring BoP opportunities, these companies also can have a positive impact on the lives of the poor.
Given the global financial crisis and the ever-expanding gap between the rich and the poor, we may be at the nexus of a major societal shift. A shared view is developing across diverse constituencies that the poorest of the world are a source of abundant resources rather than a societal burden. This is an ideal time to bring diverse players together to experiment with innovative approaches to pressing challenges.
By joining forces, the commercial and nonprofit sectors can work together "to enable the poor, especially the poorest, to create a world without poverty" (Grameen Foundation, 2008). From this vantage we explore five lessons learned from organizations that actively are engaged in work at the base of the pyramid and the implications for human resource leaders working in these companies.
Lesson 1: The BoP Has Consumers and Producers
The first shift in thinking that needs to be made is how we define people at the BoP. The consumer's goal in this space is to secure affordable food, housing, health care, economic livelihood, education and other essential products and services. In pursuit of these goals, the BoP customer has a few key concerns:
1. easy access to known, needed goods at affordable prices;
2. solutions to daily life challenges; and
3. the opportunity to participate in economically productive activities.
Organizations serving the BoP market strive to accomplish these tasks:
1. generate revenue from existing products;
2. develop new products to meet new market needs; and
3. be good global citizens by using their products and expertise to help solve fundamental social problems.
To meet the needs of the BoP market, companies will need to pursue relationships with local delivery providers, social development players, entrepreneurs, government officials and potential customers.
Beyond an enormous untapped consumer market, those at the lowest levels of the global economy can be effective and viable producers, contributing real economic value to themselves and their business partners. A stunning example is the Indian dairy cooperative, Gujarat Cooperative Milk Marketing Federation (GCMMF), which operates under the brand name Amul (GCMMF, 2009). Poor rural farmers sell the daily output of their few buffaloes to the cooperative of which they are part owners. The cooperative takes care of everything else, from picking up of milk in the village to manufacturing and marketing the end products.
The scale of the business is impressive: 2.7 million producers are responsible for a daily output of more than 10 million liters of milk that accounted for more than $1.3 billion in sales in 2008. Individually, these poor producers would not have access to efficient markets, but when their production capacity is combined they are powerful--GCMMF is India's largest food products marketing organization.
It is difficult to see a group needier or more removed from our traditional notions of producers or consumers than beggars in Bangladesh. Yet micro-lender Grameen Bank saw things differently. In his Nobel Prize acceptance speech, Grameen Bank founder, Muhammad Yunus, recounts:
"Three years ago we started an exclusive programme focusing on the beggars. Loans are interest-free; they can pay whatever amount they wish, whenever they wish. We gave them the idea to carry small merchandise, such as snacks, toys or household items, when they went from house to house for begging. The idea worked. There are now 85,000 beggars in the program. About 5,000 of them have already stopped begging completely. The typical loan to a beggar is $12." (Yunus, 2006)
Lesson No. 1 teaches us that the poor of the world should not be viewed only through the lens of charity.
[ILLUSTRATION OMITTED]
Lesson 2: Public/ Private Partnerships Create Opportunities at the BoP
Inspired by the work of Yunus and Grameen Bank, Grameen Foundation (GF), a U.S.-based nonprofit that has supported the global microfinance industry since the mid 1990s, provides products and services that enable microfinance institutions to use both microfinance and technology to grow and reach ever greater numbers of the world's poorest.
Sometimes called "banking for the poor," microfinance gives very poor people around the world access to credit and other financial services to empower them to pull themselves out of poverty. Relying on their traditional skills, entrepreneurial instincts and hard work, microfinance clients, mostly women, use small loans (usually less than US$200) and other financial services to run small businesses. GF has developed deep business partnerships with BoP customers and organizations serving the BoP. The foundation intends to change mindsets and challenge conventional wisdom by demonstrating to the private and public sectors that these alliances can benefit all parties involved by creating meaningful self-employment opportunities that improve lives.
Wireless Reach
One example is how Qualcomm, the large telecommunications company, works in partnership with Grameen to provide phones to poor people. The initiative started in 2006 with an initial grant from Qualcomm's Wireless Reach initiative that enabled Grameen Foundation's Technology Center to test the feasibility of expanding its successful Village Phone program to Indonesia. Based on the pioneering work of the Grameen Village Phone in Bangladesh, Village Phone and Village Phone Direct extend the benefits of affordable telecommunications access in a sustainable, profitable and empowering way.
Designed to create profitable micro-franchise telecommunications businesses owned and run by poor entrepreneurs, these Village Phone Operators (VPOs) operate their businesses in rural villages where no telecommunications services previously existed. They rent the use of the phone to their community on a per-call basis. The VPOs provide affordable rates to their patrons while earning enough to repay their loans and earn profits that allow them to make investments in their children's health, nutrition and education, and in other business ventures.
In July 2008, GF, Qualcomm's Wireless Reach initiative, a local telecommunications operator and microfinance partners launched Indonesia's first Village Phone program. This program has created more than 137 new businesses in West Java and Banten, all owned and operated by women. Going forward, the partnership will focus on developing the capacity of wireless telecommunications and microfinance institutions by expanding the program to at least 1,000 new Village Phone businesses, reaching up to 500,000 poor Indonesians who currently do not have access to telecommunications services.
This collaboration has evolved into a successful public/private alliance where Qualcomm and GF have been able to combine expertise and experience to spur innovative business solutions for the poor. It also is enabling both organizations to meet their missions.
For Qualcomm, this alliance is a good fit with its Wireless Reach initiative, which supports programs and solutions that bring the benefits of 3G connectivity to developing communities globally. For GF, the relationship with Qualcomm provides a multiplier effect for the limited resources it has to invest.
Grameen-Jameel
In 2003, GF formed a unique partnership with Abdul Latif Jameel Group, a Saudi conglomerate, to support the growth and impact of microfinance across the Arab world. Poverty is an endemic problem in the region, where an estimated 75 million people live on less than $2 a day. This alliance was consolidated in 2007 to form Grameen-Jameel Pan-Arab Microfinance Limited (Grameen-Jameel), a for-profit company headquartered in Dubai, UAE. Jointly owned by GF and Bab Rizq Jameel Limited, a subsidiary of Abdul Latif Jameel Group, Grameen-Jameel is modeled after the social business enterprise concept promoted by Yunus. It reinvests all of its profits into the business rather than distributing dividends. Grameen-Jameel's vision is to reach 1 million new active microfinance clients in the Arab world by 2011 by forming strategic partnerships with microfinance institutions (MFIs) that share its values.
http://www.entrepreneur.com/tradejournals/article/205989766_1.html
Recognizing this opportunity, a number of multinational companies launched initiatives to explore the untapped market potential at the base of the economic pyramid (BOP). These multinationals, however, are not focused solely on developing new markets. They are becoming aware, through the efforts of some government organizations, NGOs and philanthropic organizations, that an effective way to eliminate poverty is to provide the poor with access to markets and credit, meaningful goods and services, and opportunities to enhance their skills and business practices. By exploring BoP opportunities, these companies also can have a positive impact on the lives of the poor.
Given the global financial crisis and the ever-expanding gap between the rich and the poor, we may be at the nexus of a major societal shift. A shared view is developing across diverse constituencies that the poorest of the world are a source of abundant resources rather than a societal burden. This is an ideal time to bring diverse players together to experiment with innovative approaches to pressing challenges.
By joining forces, the commercial and nonprofit sectors can work together "to enable the poor, especially the poorest, to create a world without poverty" (Grameen Foundation, 2008). From this vantage we explore five lessons learned from organizations that actively are engaged in work at the base of the pyramid and the implications for human resource leaders working in these companies.
Lesson 1: The BoP Has Consumers and Producers
The first shift in thinking that needs to be made is how we define people at the BoP. The consumer's goal in this space is to secure affordable food, housing, health care, economic livelihood, education and other essential products and services. In pursuit of these goals, the BoP customer has a few key concerns:
1. easy access to known, needed goods at affordable prices;
2. solutions to daily life challenges; and
3. the opportunity to participate in economically productive activities.
Organizations serving the BoP market strive to accomplish these tasks:
1. generate revenue from existing products;
2. develop new products to meet new market needs; and
3. be good global citizens by using their products and expertise to help solve fundamental social problems.
To meet the needs of the BoP market, companies will need to pursue relationships with local delivery providers, social development players, entrepreneurs, government officials and potential customers.
Beyond an enormous untapped consumer market, those at the lowest levels of the global economy can be effective and viable producers, contributing real economic value to themselves and their business partners. A stunning example is the Indian dairy cooperative, Gujarat Cooperative Milk Marketing Federation (GCMMF), which operates under the brand name Amul (GCMMF, 2009). Poor rural farmers sell the daily output of their few buffaloes to the cooperative of which they are part owners. The cooperative takes care of everything else, from picking up of milk in the village to manufacturing and marketing the end products.
The scale of the business is impressive: 2.7 million producers are responsible for a daily output of more than 10 million liters of milk that accounted for more than $1.3 billion in sales in 2008. Individually, these poor producers would not have access to efficient markets, but when their production capacity is combined they are powerful--GCMMF is India's largest food products marketing organization.
It is difficult to see a group needier or more removed from our traditional notions of producers or consumers than beggars in Bangladesh. Yet micro-lender Grameen Bank saw things differently. In his Nobel Prize acceptance speech, Grameen Bank founder, Muhammad Yunus, recounts:
"Three years ago we started an exclusive programme focusing on the beggars. Loans are interest-free; they can pay whatever amount they wish, whenever they wish. We gave them the idea to carry small merchandise, such as snacks, toys or household items, when they went from house to house for begging. The idea worked. There are now 85,000 beggars in the program. About 5,000 of them have already stopped begging completely. The typical loan to a beggar is $12." (Yunus, 2006)
Lesson No. 1 teaches us that the poor of the world should not be viewed only through the lens of charity.
[ILLUSTRATION OMITTED]
Lesson 2: Public/ Private Partnerships Create Opportunities at the BoP
Inspired by the work of Yunus and Grameen Bank, Grameen Foundation (GF), a U.S.-based nonprofit that has supported the global microfinance industry since the mid 1990s, provides products and services that enable microfinance institutions to use both microfinance and technology to grow and reach ever greater numbers of the world's poorest.
Sometimes called "banking for the poor," microfinance gives very poor people around the world access to credit and other financial services to empower them to pull themselves out of poverty. Relying on their traditional skills, entrepreneurial instincts and hard work, microfinance clients, mostly women, use small loans (usually less than US$200) and other financial services to run small businesses. GF has developed deep business partnerships with BoP customers and organizations serving the BoP. The foundation intends to change mindsets and challenge conventional wisdom by demonstrating to the private and public sectors that these alliances can benefit all parties involved by creating meaningful self-employment opportunities that improve lives.
Wireless Reach
One example is how Qualcomm, the large telecommunications company, works in partnership with Grameen to provide phones to poor people. The initiative started in 2006 with an initial grant from Qualcomm's Wireless Reach initiative that enabled Grameen Foundation's Technology Center to test the feasibility of expanding its successful Village Phone program to Indonesia. Based on the pioneering work of the Grameen Village Phone in Bangladesh, Village Phone and Village Phone Direct extend the benefits of affordable telecommunications access in a sustainable, profitable and empowering way.
Designed to create profitable micro-franchise telecommunications businesses owned and run by poor entrepreneurs, these Village Phone Operators (VPOs) operate their businesses in rural villages where no telecommunications services previously existed. They rent the use of the phone to their community on a per-call basis. The VPOs provide affordable rates to their patrons while earning enough to repay their loans and earn profits that allow them to make investments in their children's health, nutrition and education, and in other business ventures.
In July 2008, GF, Qualcomm's Wireless Reach initiative, a local telecommunications operator and microfinance partners launched Indonesia's first Village Phone program. This program has created more than 137 new businesses in West Java and Banten, all owned and operated by women. Going forward, the partnership will focus on developing the capacity of wireless telecommunications and microfinance institutions by expanding the program to at least 1,000 new Village Phone businesses, reaching up to 500,000 poor Indonesians who currently do not have access to telecommunications services.
This collaboration has evolved into a successful public/private alliance where Qualcomm and GF have been able to combine expertise and experience to spur innovative business solutions for the poor. It also is enabling both organizations to meet their missions.
For Qualcomm, this alliance is a good fit with its Wireless Reach initiative, which supports programs and solutions that bring the benefits of 3G connectivity to developing communities globally. For GF, the relationship with Qualcomm provides a multiplier effect for the limited resources it has to invest.
Grameen-Jameel
In 2003, GF formed a unique partnership with Abdul Latif Jameel Group, a Saudi conglomerate, to support the growth and impact of microfinance across the Arab world. Poverty is an endemic problem in the region, where an estimated 75 million people live on less than $2 a day. This alliance was consolidated in 2007 to form Grameen-Jameel Pan-Arab Microfinance Limited (Grameen-Jameel), a for-profit company headquartered in Dubai, UAE. Jointly owned by GF and Bab Rizq Jameel Limited, a subsidiary of Abdul Latif Jameel Group, Grameen-Jameel is modeled after the social business enterprise concept promoted by Yunus. It reinvests all of its profits into the business rather than distributing dividends. Grameen-Jameel's vision is to reach 1 million new active microfinance clients in the Arab world by 2011 by forming strategic partnerships with microfinance institutions (MFIs) that share its values.
http://www.entrepreneur.com/tradejournals/article/205989766_1.html
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