Next Generation Business Strategies for the Base of the Pyramid: New Approaches for Building Mutual Value

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“Anyone interested in the challenges and opportunities faced by the low-income people must read this well-researched book. At a time when intellectual discourse on this important topic is urgently needed, London’s and Hart’s book combines a wealth of experience in the corporate setting with a deep understanding of economics. Needless to say, we are in the midst of multiple global crises threatening the well-being of all. This book is an attempt to give capitalism new strategies for responding to those crises.”

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Overview

“Anyone interested in the challenges and opportunities faced by the low-income people must read this well-researched book. At a time when intellectual discourse on this important topic is urgently needed, London’s and Hart’s book combines a wealth of experience in the corporate setting with a deep understanding of economics. Needless to say, we are in the midst of multiple global crises threatening the well-being of all. This book is an attempt to give capitalism new strategies for responding to those crises.”

--Muhammad Yunus, Head of Grameen

“This book demonstrates that the most socially useful business models to serve the Base of the Pyramid are those which are created for the market they seek to serve, incorporating appropriate green technologies and innovation-oriented strategies in venture development. Such ventures can go on to achieve the higher purpose of BoP businesses: poverty alleviation.”

--Ratan Tata, CEO, Tata Industries

“More than a decade ago, C.K. Prahalad and others first opened our eyes to the huge opportunities inherent in Base of the Pyramid markets. This book captures the thinking of the last 10 years and confirms that those opportunities are greater than ever. As such, it is a fitting tribute to Prahalad and his fellow pioneers--and an essential read for anyone wishing to understand and capitalize upon the real potential of BoP marketplaces.”

--Paul Polman, Chief Executive, Unilever

“A crucial and most creative re-framing of the BoP debate: The authors look at the world’s poor not just as four billion more consumers, but also as a source of talented entrepreneurs--potential business partners ready to enter the formal economy to put their assets to work and lift themselves, and their countries, out of poverty.”

--Hernando de Soto, Institute for Liberty and Democracy

“The Base of the Pyramid is a big breakthrough idea that risked being captured as the new conventional wisdom. This clever book by scholars and practitioners averts that by taking the deeply original insight to the next stage. A fitting tribute to C.K. Prahalad.”

--Lord Mark Malloch-Brown, Former Administrator, United Nations Development Programme

“Ted London’s and Stuart Hart’s insightful book explores with a fresh lens the challenges facing the economies and communities of the BoP, and offers long-term solutions based on joint value-creation rather than ‘fortune-seeking.’ Today’s businesses must engage with these communities on a deeper level, to ensure equal understanding of the culture’s needs, how to educate BoP business owners, and to uncover ways to move forward--with sustainability as a top priority. This book makes an invaluable contribution to that end.”

--Fisk Johnson, CEO, S.C. Johnson

During the last decade, first-generation “Base of the Pyramid” (BoP) ventures focused primarily on “finding a fortune at the BoP“ by selling existing goods to and sourcing familiar products from the world’s four billion poorest people. Many of these initiatives did not scale, and some failed outright. But through that experience, crucial lessons have been learned. Innovators are now succeeding--thanks to a more sophisticated and nuanced approach based on “creating a fortune with the BoP.”

In this book, co-editors Ted London, Stuart L. Hart, and other leading BoP thought and practice leaders show how to apply these second-generation BoP innovations, techniques, and business models. You’ll learn how to build successful business ventures, create sustainable business ecosystems, design new technologies with the BoP in mind, and even transform entire sectors through collaborative entrepreneurship. Key lessons to be learned include

Roadmaps for Success

• A roadmap for venture development

• Patient capital and innovation for the BoP

Strategic Opportunities

• The “Green Leap” and the BoP

• Turning BoP needs into markets

Effective Implementation

• Understanding the BoP at the micro level

• Reframing design for the BoP

• Scaling up BoP ventures

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Product Details

  • ISBN-13: 9780137047895
  • Publisher: FT Press
  • Publication date: 11/26/2010
  • Pages: 249
  • Sales rank: 808,494
  • Product dimensions: 5.90 (w) x 9.00 (h) x 1.00 (d)

Meet the Author

Ted London, co-editor, is a Senior Research Fellow at the William Davidson Institute (WDI) and a member of the faculty at the University of Michigan’s Ross School of Business. At WDI, he directs the Base of the Pyramid Initiative, a program that champions innovative ways of thinking about more inclusive forms of capitalism. At the Ross School, he lectures on the opportunities and challenges inherent in developing new business models to serve BoP markets. An internationally recognized expert on the intersection of business strategy and poverty alleviation, London focuses his research on designing enterprise strategies and poverty-alleviation approaches for low-income markets, developing capabilities for new market entry, building cross-sector collaborations, and assessing the poverty-reduction outcomes of business ventures. His numerous articles, chapters, reports, and cases emphasize creating new knowledge with actionable implications. His article, “Making Better Investments at the Base of the Pyramid,” (Harvard Business Review, 2009), for example, offers a pioneering perspective on listening to the voices of the world’s poor to enhance mutual value creation. Over the past two decades, London has also directed and advised dozens of leadership teams in the corporate, non-profit, and development sectors on designing and implementing market-based strategies in low-income markets. Prior to his arrival at the University of Michigan, London served on the faculty at the University of North Carolina, where he also received his Ph.D. in strategic management. Before that, he held senior management positions in the private, non-profit, and development sectors in Africa, Asia, and the U.S.

Stuart L. Hart, co-editor, is the Samuel C. Johnson Chair in Sustainable Global Enterprise and Professor of Management at Cornell University’s Johnson School of Management. He also serves as Distinguished Fellow at the William Davidson Institute (University of Michigan) and is Founder and President of Enterprise for a Sustainable World. Hart is one of the world’s top authorities on the implications of environment and poverty for business strategy. He has published more than 70 papers and authored or edited seven books with over 5,000 Google Scholar citations in all. His article “Beyond Greening: Strategies for a Sustainable World” won the McKinsey Award for Best Article in the Harvard Business Review for 1997 and helped launch the movement for corporate sustainability. With C.K. Prahalad, Hart also wrote the path-breaking 2002 article “The Fortune at the Bottom of the Pyramid,” which provided the first articulation of how business could profitably serve the needs of the four billion poor in the developing world. His best-selling book, Capitalism at the Crossroads, published in 2005, was selected by Cambridge University as one of the top 50 books on sustainability of all time; the third edition of the book was published in 2010.

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Read an Excerpt

Next Generation Strategies for the Base of the Pyramid Businesses:Foreword

Y.C. Deveshwar

Chairman

ITC Limited, India

A few weeks ago, when Stuart Hart and Ted London asked me to write the foreword for this book, I must confess that I was of two minds. I am familiar with their work and have great regard for their talent and intent. But ever since The Fortune at the Bottom of the Pyramid was published, there has been a deluge of conferences, debates, and discussion papers on the subject of the base of the pyramid (BoP). It seemed that everything that could be discussed about the subject’s theoretical underpinnings as well as about the handful of corporate examples that characterized this approach was already in the public domain. I was therefore hesitant in adding some more print to this effort.

As I read through the manuscript of this book though, I sensed a welcome change in approach. Far from merely examining opportunities to make a fortune “at” the base of the pyramid, Hart and London and their co-authors had collaborated to highlight the need to create fortunes “for” and “with” the base of the pyramid. This fresh approach was significantly aligned with our own efforts at ITC, over a decade and a half, to co-create sustainable and inclusive societies through innovative business models. A “Triple Bottom Line” approach that has enabled ITC to help create sustainable livelihoods for more than 5 million people, a corporation that is carbon positive, water positive, and waste recycling positive, and a top ranking economic value creator in the Indian economy. It is because of this compatibility between ITC’s perspective and the broad ideas presented in this book that I am happy to contribute these introductory thoughts, and to support the efforts of Hart, London, and their co-authors in providing thought leadership in an area of immense importance to societies globally.

It has taken more than a century of material wealth creation to realize that the economic model pursued by the world for so many years is terribly inadequate in creating equitable and inclusive societies. In the last 50 years alone, world GDP has multiplied 60 times. Yet, two-thirds of the world lives in poverty, with more than a billion people in acute deprivation and hunger. UNDP reports have estimated that the top 10 percent own 85 percent of household assets, while the bottom 50 percent own just 1 percent of these assets. Other estimates suggest that the top 10 percent account for 65 percent of world’s consumption while the bottom 50 percent consume just 2.5 percent. This disparity is indeed a serious threat to the progress of mankind. It is also a source of social unrest across the world, creating a dangerously vulnerable society. Unstable societies make economic progress unsustainable, and we can only ignore this basic economic fact at our considerable peril.

A century of economic progress also took place with significant apathy toward the need to conserve and replenish the earth’s precious natural resources and living systems. In the last half-century alone, the world lost one-fourth of its top soil, one-third of forest resources, more than one-third of global bio-diversity, and witnessed the extinction of many species. Continuing degradation of land, forest, and water resources progressively undermines precious life-support systems, leading to the phenomena that we witness today in global warming, and consequent droughts and floods. Today’s inhabitants of the planet inherited a 4 billion-year-stock of natural capital. In less than a century, in the name of material progress, this natural capital has been ravaged. As a result, we have an unenviable global ecological footprint that will demand the equivalent of resources of two earths to support an anticipated global population of 9 billion by the mid 2030s. We cannot afford this luxury as we have only one planet—to live together, or perish together.

These threats underscore the undeniable fact that “economic development” and “sustainable development” are not necessarily the same thing. Nor is sustainable development only about creating green economies. Progress and development is also about creating sustainable and inclusive societies. Economic growth models must therefore sub-serve a larger need to create greater societal value, and not material wealth alone. That, in turn, requires a far larger focus on the creation of sustainable livelihoods. Given the magnitude of this task on a global scale, this is indeed a formidable challenge for economies around the world today.

The 4 billion people who constitute the base of the pyramid are, by definition, among the poorest in the world. An overwhelming majority of this population live in developing or low-income countries. Predominantly living off the land, they are also the most vulnerable to problems arising out of environmental degradation, including climate change. In the best of circumstances, they are served by inefficient and fragile market systems. At worst, they are at the mercy of exploitation by market intermediaries. Either way, they are trapped in a vicious cycle of poverty. An approach that views this disadvantaged population only as a market for low-cost, low-value products and services contributes precious little to improving their lives or their future. It only implies a “race to the bottom” to garner a small share of a deplorably small wallet. A more enduring and meaningful approach lies in co-creating new economic opportunities that empower them and build their capacity to earn meaningful livelihoods—in essence, increasing the size of their wallets, and integrating them into the economic mainstream. It is this creation of a fortune “with” and “for” the base of the pyramid that will ensure a secure and sustainable future for our planet.

The question is: Can business play a meaningful role in catalyzing this process of sustainable and inclusive development? I firmly believe that it can. Private enterprises, through their operations, have a large number of touch-points in society that constitute the front line of engagement with civil society. Their physical presence in communities around their catchments gives them an opportunity to directly engage in synergistic business activities that can create sustainable livelihoods and add to preservation of natural capital.

In the years ahead, moreover, growing civil society awareness and tougher regulations will compel businesses to adopt sustainable business practices that not only deliver unique customer value propositions, but also enable a twin impact: ensuring a positive environmental footprint and creating sustainable livelihoods. It is my deep conviction that both the competitiveness and profitability of firms in the future will increasingly depend on their relative ability to adopt such sustainable business practices. Corporations of the future will have to innovate strategies to deliver high levels of triple bottom line performance. Their capability to do so will not only define the sustainable corporations of tomorrow, but also create the foundations of a more secure society for future generations.

Our experience at ITC convinces us that it is eminently possible to create larger societal value with business innovations that foster an inclusive and sustainable future. At the heart of ITC’s innovative strategies lies the creation of unique business models that synergize long-term shareholder value growth with that of enhancing societal capital. These business models are supplemented by community-based CSR projects that enhance the quality of life of people in rural India.

A much-celebrated example is that of ITC’s e-Choupal, described in this book as well. Leveraging the power of Internet and digital technology, ITC’s e-Choupal has today become an internationally recognized model of rural transformation, benefiting more than 4 million farmers. By providing farmers with a rich repertoire of agri-based interventions, it not only addresses the core needs of farmers in terms of infrastructure, connectivity, price discovery, and market access, but also provides a significant boost to farm productivity through customized best practices in sustainable agriculture. This has helped transform villages into vibrant economic communities by raising incomes and co-creating markets. Similarly, a strategy to source pulp from renewable plantations, in spite of the availability of cheaper imports, has led to the creation of livelihood opportunities for thousands of poor tribals and marginal farmers. An intensive R&D programme in ITC developed high-yielding, disease-resistant clonal saplings which are today grown by farmers—even on wastelands— providing a huge green cover through forests on nearly 110,000 hectares. In the process, it has created 48 million persondays of employment opportunities. These innovative business models have not only enhanced the competitiveness of the businesses, but have simultaneously created immense value for rural communities. The deep engagement of e-Choupals with rural communities has also enabled ITC to contribute to the creation of sustainable livelihoods by building community assets. ITC’s Integrated Watershed Development initiative has helped create freshwater potential covering over 54,000 hectares in water-stressed areas. In addition, the company’s integrated animal husbandry services have reached out to more than 400,000 milch animals, creating avenues for non-farm based livelihoods. More than 200,000 children in rural India have received supplementary education, and more than 20,000 women entrepreneurs have been created through approximately a thousand self-help groups. In addition, several partnerships with state governments have also been formed, to deliver quality projects of high social value through intensive public-private-people partnerships.

I firmly believe that innovation in corporate strategies and an abiding vision to serve a larger societal purpose can significantly transform the future and mitigate many of the sustainability threats discussed earlier. New entrepreneurs, as well as progressive companies, have a great opportunity today to contribute meaningfully to building a secure and sustainable future. So far, open innovation models have synergized the efforts of internal resources, supply chain participants, and even customers to co-create new products and services.

To my mind, the need of the hour today is to encourage innovation in corporate strategies and business models that will enable companies to co-create, with local communities, opportunities for sustainable livelihoods, as well as enrichment of natural capital. At the same time, society—including customers, investors, and media— need to be made more aware of the tremendous change they can bring about by encouraging a preference for responsible companies. Innovations will be required to devise a rating system that can provide credible information to civil society to enable them to make an informed choice. Such innovations will spur the creation of a market for responsible and sustainable practices. It will also make sustainability a value proposition that companies will embed in their offerings to society. That will go a long way in creating a sustainable economy for future generations and a secure planet that will continue to nurture and nourish the billions of its inhabitants. I do hope that future innovation will awaken the world to such a promising tomorrow.

I want to compliment the distinguished authors of this book, once again, for collaborating to find engaging solutions that can build new hopes for the many in the base of the pyramid. I also join you in paying my tribute to the late C.K. Prahalad, who helped begin the journey.

My very best wishes in this endeavor.

Y.C. Deveshwar

September 2010

© Copyright Pearson Education. All rights reserved.


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Table of Contents

Acknowledgments xvi

About the Authors xvii

Dedication to C.K. Prahalad xxiii

The Big Picture by C.K. Prahalad xxvi

Foreword by Y.C. Deveshwar xxxiii

Introduction: Creating a Fortune with the Base of the Pyramid 1

Ted London, William Davidson Institute & Ross School of Business, University of Michigan; and Stuart Hart, Johnson School of Management, Cornell University

The introduction, by co-editors Ted London and Stuart Hart, conveys the core message of the book: that the next generation of BoP business strategies won’t be about “finding a fortune at the base of the pyramid,” but rather, about “creating a fortune with the base of the pyramid.” The shift from “fortune-finding” to “fortune-creating” has implications for how BoP ventures are organized, and how their strategies are conceived and implemented. Co-editors London and Hart introduce the three core sections of the book--Roadmaps for Success, Strategic Opportunities, and Effective Implementation--and explain how the contents of each can help venture leaders approach the challenges and opportunities of BoP markets.

PART ONE: ROADMAPS FOR SUCCESS

Chapter 1 Building Better Ventures with the Base of the Pyramid: A Roadmap 19

Ted London, William Davidson Institute & Ross School of Business, University of Michigan

Ted London’s chapter addresses how venture leaders can maximize the chances that their business development efforts in BoP markets will succeed. Which business practices should guide your efforts--and which ones should you be sure to avoid--as your venture moves through the stages of designing, piloting, and scaling? How do you craft initial business models, effectively test these approaches, and create sustainable competitive advantage? Using the perspective of “creating a fortune with the base of the pyramid,” London provides a set of guiding principles (a “roadmap”) that answer these and other critical questions relevant to both existing and start-up BoP ventures.

Chapter 2 Innovation for the BoP: The Patient Capital Approach 45

Robert Kennedy, William Davidson Institute & Ross School of Business, University of Michigan; and Jacqueline Novogratz, Founder and CEO, Acumen Fund

Co-authors Robert Kennedy and Jacqueline Novogratz explain how social entrepreneurs and “philanthrocapitalists” are changing the BoP landscape by connecting innovative business approaches to “patient capital”--money that is expected to generate returns over a longer period than is typical of (say) venture capital. They identify four types of innovation that are proving critically important to success in operating in BoP markets, and show how a range of enterprises are applying these approaches in the field.

PART TWO: STRATEGIC OPPORTUNITIES

Chapter 3 Taking the Green Leap to the Base of the Pyramid 79

Stuart Hart, Johnson School of Management, Cornell University

Can the BoP teach the “ToP” (the “top of the pyramid”) anything? Author Stuart Hart says “yes.” In the old BoP model, Western entrepreneurs sought to sell goods and services to the BoP with little regard to environmental consequences. Today, Hart argues, the next generation of entrepreneurs are trying to develop distributed, smallscale, “small-footprint” products and services that are more appropriate to the BoP context--and may well point the way toward better models for the ToP, as well.

Chapter 4 Needs, Needs, Everywhere, But Not a BoP Market to Tap 103

Erik Simanis, Center for Sustainable Global Enterprise, Johnson School of Management, Cornell University

Market creation, argues author Erik Simanis, is fundamentally different from market entry. And although the BoP is a “basket of compelling needs,” it is not yet a “market” in the traditional sense of that term. As a result, entrepreneurs in the BoP context have to think in terms of market creation--and understand how to achieve that end in a uniquely challenging context. The wise venturer in the BoP space, Simanis writes, learns how to frame the value proposition and manage the innovation process (through seeding, base-building, and growth and consolidation) in ways that align business strategy with BoP opportunity. Through a sustained case study involving a soy-protein product, Simanis illustrates how to stay on track while building markets with the BoP.

Part Three: Effective Implementation

Chapter 5 A Micro-Level Approach to Understanding BoP Markets 129

Madhu Viswanathan, University of Illinois, Urbana-Champaign

“The devil is in the details,” as the old saying goes. In this chapter, Madhu Viswanathan makes the case that BoP markets have to be understood at the ground level--from the bottom up--if a venture is to succeed in those marketplaces. What are the marketplace-relevant characteristics of poverty? In the one-to-one interactional marketplaces of the BoP, the boundaries between “human” and “economic” issues tend to get blurred, long-term relationships tend to trump short-term ones, “rich networks” make up for resource constraints, and consumption and entrepreneurship can be two sides of the same coin. BoP entrepreneurs, therefore, have to concretize, localize, and “socialize” their products and services.

Chapter 6 Reframing Design for the Base of the Pyramid 165

Patrick Whitney, Institute of Design, Illinois Institute of Technology

By enabling breakthrough products, issues of design have come to the fore in the industrialized world, which is leaving behind economies of scale for economies of choice. Contrasting the Apple iPhone with the Chotukool refrigerator, author Patrick Whitney explores the provocative question of whether strategic design techniques that have proven themselves at the top of the economic pyramid might also prove useful--in identical or modified forms--when applied to base of the pyramid markets. His answer is “yes”--albeit with some important caveats.

Chapter 7 BoP Venture Formation for Scale 193

Allen Hammond, Ashoka

Social enterprises do good works. But unless they achieve a significant scale, they aren’t in a position to serve millions of BoP customers, or to help reshape economies. Author Allen Hammond argues for a combination of both bottom-up and top-down enterprise formation to better reach and serve BoP markets, and explains how that productive mix can be accomplished. Additionally, he suggests, BoP entrepreneurs can build business ecosystems (rather than stand-alone ventures) to support scale. Hammond explains how “hybrid” organizations can serve that purpose--and provides insights from a real-world example.

Conclusion: A Continuing Journey 217

Ted London, William Davidson Institute & Ross School of Business, University of Michigan; and Stuart Hart, Johnson School of Management, Cornell University

Co-editors Ted London and Stuart Hart look at “the journey ahead”--both in terms of the future of BoP-oriented ventures, and in terms of the research that needs to be done to help advance our understanding of the field, which ultimately will help those BoP-oriented ventures succeed. They present--and begin the debate about--five core assumptions that underpin the BoP domain, which collectively help set the BoP agenda of tomorrow.

Appendix: Attendees from 2009 Conference: Creating a Shared Roadmap 233

Index 239

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Preface

Foreword

Y.C. Deveshwar

Chairman

ITC Limited, India

A few weeks ago, when Stuart Hart and Ted London asked me to write the foreword for this book, I must confess that I was of two minds. I am familiar with their work and have great regard for their talent and intent. But ever since The Fortune at the Bottom of the Pyramid was published, there has been a deluge of conferences, debates, and discussion papers on the subject of the base of the pyramid (BoP). It seemed that everything that could be discussed about the subject’s theoretical underpinnings as well as about the handful of corporate examples that characterized this approach was already in the public domain. I was therefore hesitant in adding some more print to this effort.

As I read through the manuscript of this book though, I sensed a welcome change in approach. Far from merely examining opportunities to make a fortune “at” the base of the pyramid, Hart and London and their co-authors had collaborated to highlight the need to create fortunes “for” and “with” the base of the pyramid. This fresh approach was significantly aligned with our own efforts at ITC, over a decade and a half, to co-create sustainable and inclusive societies through innovative business models. A “Triple Bottom Line” approach that has enabled ITC to help create sustainable livelihoods for more than 5 million people, a corporation that is carbon positive, water positive, and waste recycling positive, and a top ranking economic value creator in the Indian economy. It is because of this compatibility between ITC’s perspective and the broad ideas presented in this book that I am happy to contribute these introductory thoughts, and to support the efforts of Hart, London, and their co-authors in providing thought leadership in an area of immense importance to societies globally.

It has taken more than a century of material wealth creation to realize that the economic model pursued by the world for so many years is terribly inadequate in creating equitable and inclusive societies. In the last 50 years alone, world GDP has multiplied 60 times. Yet, two-thirds of the world lives in poverty, with more than a billion people in acute deprivation and hunger. UNDP reports have estimated that the top 10 percent own 85 percent of household assets, while the bottom 50 percent own just 1 percent of these assets. Other estimates suggest that the top 10 percent account for 65 percent of world’s consumption while the bottom 50 percent consume just 2.5 percent. This disparity is indeed a serious threat to the progress of mankind. It is also a source of social unrest across the world, creating a dangerously vulnerable society. Unstable societies make economic progress unsustainable, and we can only ignore this basic economic fact at our considerable peril.

A century of economic progress also took place with significant apathy toward the need to conserve and replenish the earth’s precious natural resources and living systems. In the last half-century alone, the world lost one-fourth of its top soil, one-third of forest resources, more than one-third of global bio-diversity, and witnessed the extinction of many species. Continuing degradation of land, forest, and water resources progressively undermines precious life-support systems, leading to the phenomena that we witness today in global warming, and consequent droughts and floods. Today’s inhabitants of the planet inherited a 4 billion-year-stock of natural capital. In less than a century, in the name of material progress, this natural capital has been ravaged. As a result, we have an unenviable global ecological footprint that will demand the equivalent of resources of two earths to support an anticipated global population of 9 billion by the mid 2030s. We cannot afford this luxury as we have only one planet—to live together, or perish together.

These threats underscore the undeniable fact that “economic development” and “sustainable development” are not necessarily the same thing. Nor is sustainable development only about creating green economies. Progress and development is also about creating sustainable and inclusive societies. Economic growth models must therefore sub-serve a larger need to create greater societal value, and not material wealth alone. That, in turn, requires a far larger focus on the creation of sustainable livelihoods. Given the magnitude of this task on a global scale, this is indeed a formidable challenge for economies around the world today.

The 4 billion people who constitute the base of the pyramid are, by definition, among the poorest in the world. An overwhelming majority of this population live in developing or low-income countries. Predominantly living off the land, they are also the most vulnerable to problems arising out of environmental degradation, including climate change. In the best of circumstances, they are served by inefficient and fragile market systems. At worst, they are at the mercy of exploitation by market intermediaries. Either way, they are trapped in a vicious cycle of poverty. An approach that views this disadvantaged population only as a market for low-cost, low-value products and services contributes precious little to improving their lives or their future. It only implies a “race to the bottom” to garner a small share of a deplorably small wallet. A more enduring and meaningful approach lies in co-creating new economic opportunities that empower them and build their capacity to earn meaningful livelihoods—in essence, increasing the size of their wallets, and integrating them into the economic mainstream. It is this creation of a fortune “with” and “for” the base of the pyramid that will ensure a secure and sustainable future for our planet.

The question is: Can business play a meaningful role in catalyzing this process of sustainable and inclusive development? I firmly believe that it can. Private enterprises, through their operations, have a large number of touch-points in society that constitute the front line of engagement with civil society. Their physical presence in communities around their catchments gives them an opportunity to directly engage in synergistic business activities that can create sustainable livelihoods and add to preservation of natural capital.

In the years ahead, moreover, growing civil society awareness and tougher regulations will compel businesses to adopt sustainable business practices that not only deliver unique customer value propositions, but also enable a twin impact: ensuring a positive environmental footprint and creating sustainable livelihoods. It is my deep conviction that both the competitiveness and profitability of firms in the future will increasingly depend on their relative ability to adopt such sustainable business practices. Corporations of the future will have to innovate strategies to deliver high levels of triple bottom line performance. Their capability to do so will not only define the sustainable corporations of tomorrow, but also create the foundations of a more secure society for future generations.

Our experience at ITC convinces us that it is eminently possible to create larger societal value with business innovations that foster an inclusive and sustainable future. At the heart of ITC’s innovative strategies lies the creation of unique business models that synergize long-term shareholder value growth with that of enhancing societal capital. These business models are supplemented by community-based CSR projects that enhance the quality of life of people in rural India.

A much-celebrated example is that of ITC’s e-Choupal, described in this book as well. Leveraging the power of Internet and digital technology, ITC’s e-Choupal has today become an internationally recognized model of rural transformation, benefiting more than 4 million farmers. By providing farmers with a rich repertoire of agri-based interventions, it not only addresses the core needs of farmers in terms of infrastructure, connectivity, price discovery, and market access, but also provides a significant boost to farm productivity through customized best practices in sustainable agriculture. This has helped transform villages into vibrant economic communities by raising incomes and co-creating markets. Similarly, a strategy to source pulp from renewable plantations, in spite of the availability of cheaper imports, has led to the creation of livelihood opportunities for thousands of poor tribals and marginal farmers. An intensive R&D programme in ITC developed high-yielding, disease-resistant clonal saplings which are today grown by farmers—even on wastelands— providing a huge green cover through forests on nearly 110,000 hectares. In the process, it has created 48 million persondays of employment opportunities. These innovative business models have not only enhanced the competitiveness of the businesses, but have simultaneously created immense value for rural communities. The deep engagement of e-Choupals with rural communities has also enabled ITC to contribute to the creation of sustainable livelihoods by building community assets. ITC’s Integrated Watershed Development initiative has helped create freshwater potential covering over 54,000 hectares in water-stressed areas. In addition, the company’s integrated animal husbandry services have reached out to more than 400,000 milch animals, creating avenues for non-farm based livelihoods. More than 200,000 children in rural India have received supplementary education, and more than 20,000 women entrepreneurs have been created through approximately a thousand self-help groups. In addition, several partnerships with state governments have also been formed, to deliver quality projects of high social value through intensive public-private-people partnerships.

I firmly believe that innovation in corporate strategies and an abiding vision to serve a larger societal purpose can significantly transform the future and mitigate many of the sustainability threats discussed earlier. New entrepreneurs, as well as progressive companies, have a great opportunity today to contribute meaningfully to building a secure and sustainable future. So far, open innovation models have synergized the efforts of internal resources, supply chain participants, and even customers to co-create new products and services.

To my mind, the need of the hour today is to encourage innovation in corporate strategies and business models that will enable companies to co-create, with local communities, opportunities for sustainable livelihoods, as well as enrichment of natural capital. At the same time, society—including customers, investors, and media— need to be made more aware of the tremendous change they can bring about by encouraging a preference for responsible companies. Innovations will be required to devise a rating system that can provide credible information to civil society to enable them to make an informed choice. Such innovations will spur the creation of a market for responsible and sustainable practices. It will also make sustainability a value proposition that companies will embed in their offerings to society. That will go a long way in creating a sustainable economy for future generations and a secure planet that will continue to nurture and nourish the billions of its inhabitants. I do hope that future innovation will awaken the world to such a promising tomorrow.

I want to compliment the distinguished authors of this book, once again, for collaborating to find engaging solutions that can build new hopes for the many in the base of the pyramid. I also join you in paying my tribute to the late C.K. Prahalad, who helped begin the journey.

My very best wishes in this endeavor.

Y.C. Deveshwar

September 2010

© Copyright Pearson Education. All rights reserved.

Read More Show Less

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