Bottom of the Pyramid as a Source of Breakthrough Innovations
01 Jan 2012-Journal of Product Innovation Management (John Wiley & Sons, Ltd)-Vol. 29, Iss: 1, pp 6-12
TL;DR: In this paper, the authors identify the bottom of the pyramid (BOP) markets as a new source of radical innovation and suggest that external constraints can be utilized to build an innovation sandbox within which new products and business models can be created.
About: This article is published in Journal of Product Innovation Management.The article was published on 2012-01-01. It has received 616 citations till now. The article focuses on the topics: Bottom of the pyramid & Frugal innovation.
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TL;DR: In this article, a review of 100 scholarly articles and 27 grey sources drawn from the period of the three Earth Summits (1992, 2002 and 2012), the authors address four specific deficiencies that have given rise to these limitations: the meaning of SOI, how it has been conceptualized, its treatment as a dichotomous phenomenon and a general failure to reflect more contemporary practices.
Abstract: This article is intended as a contribution to the ongoing conceptual development of Sustainability-Oriented Innovation (SOI) and provides initial guidance on becoming and being sustainable. We organize and integrate the diverse body of empirical literature relating to SOI and, in doing so, develop a synthesized conceptual framework onto which SOI practices and processes can be mapped. SOI involves making intentional changes to an organization’s philosophy and values, as well as to its products, processes or practices to serve the specific purpose of creating and realising social and environmental value in addition to economic returns. A critical reading of previous literature relating to environmental management and sustainability reveals how little attention has been paid to SOI and what exists is only partial. In a review of 100 scholarly articles and 27 grey sources drawn from the period of the three Earth Summits (1992, 2002 and 2012), we address four specific deficiencies that have given rise to these limitations: the meaning of SOI, how it has been conceptualised, its treatment as a dichotomous phenomenon and a general failure to reflect more contemporary practices. We adopt a framework synthesis approach involving first constructing an initial architecture of the landscape grounded in previous studies which is subsequently iteratively tested, shaped, refined and reinforced into a model of SOI with data drawn from included studies: so advancing theoretical development in the field of SOI.
817 citations
Cites background from "Bottom of the Pyramid as a Source o..."
...…serving new markets with novel, sustainable products and also making products and services available to communities disadvantaged or isolated for reasons of geography, infrastructure or income (Carrillo-Hermosilla et al. 2010; Prahalad 2012; Ray and Ray 2011; Viswanathan and Sridharan 2012)....
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...This is realized predominantly by organizations serving new markets with novel, sustainable products and also making products and services available to communities disadvantaged or isolated for reasons of geography, infrastructure or income (Carrillo-Hermosilla et al. 2010; Prahalad 2012; Ray and Ray 2011; Viswanathan and Sridharan 2012)....
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TL;DR: In this article, the authors bring together some of the latest scholarship from the marketing and information systems disciplines to advance theoretical developments on service innovation in a digital age, which challenges us to question conventional approaches that construe service as a distinctive form of socioeconomic exchange and to reconsider what service means and thus how service innovation may develop.
Abstract: Over the last decade, there has been an increasing focus on service across socioeconomic sectors coupled with transformational developments in information and communication technologies (ICTs). Together these developments are engendering dramatic new opportunities for service innovation, the study of which is both timely and important. Fully understanding these opportunities challenges us to question conventional approaches that construe service as a distinctive form of socioeconomic exchange (i.e., as services) and to reconsider what service means and thus how service innovation may develop. The aim of this special issue, therefore, is to bring together some of the latest scholarship from the Marketing and Information Systems disciplines to advance theoretical developments on service innovation in a digital age.
765 citations
TL;DR: In this paper, the authors developed a framework to facilitate customer engagement in service (CES) based on the service-dominant (S-D) logic for firms operating both in developed and emerging markets.
Abstract: We develop a framework to facilitate customer engagement in service (CES) based on the service-dominant (S-D) logic. A novel feature of this framework is its applicability and relevance for firms operating both in developed and emerging markets. First, we conduct a qualitative study involving service managers from multinational companies (MNCs) across the developed and emerging markets to understand the practitioner viewpoints. By integrating the insights from the interviews and the relevant academic literature, this framework explores how interaction orientation and omnichannel model can be used to create positive service experience. We also identify the factors that moderate the service experience, and categorize them as follows: offering-related, value-related, enabler-related, and market-related. Further, we also propose that perceived variation in service experience moderates the influence of service experience on satisfaction and emotional attachment, which ultimately impacts customer engagement (CE). From these factors, we advance research propositions that discuss the creation of positive service experience. One of the study’s key contributions is that MNCs can focus their attention on the moderators to ensure consistency in positive service experience, in an effort to enhance CE.
254 citations
01 Jan 2017
TL;DR: In this paper, the authors define three criteria for frugal innovation: substantial cost reduction, concentration on core functionalities, and optimised performance level, based on the results of a literature review and interviews with 45 managers from companies and researchers from different research institutes.
Abstract: Recently, the innovation management literature has witnessed a rising interest in the so-called frugal innovation. The term was initially discussed in the context of emerging markets, giving non-affluent customers opportunities to consume affordable products and services suited to their needs. However, the meaning of frugal innovation is fuzzy. Further, the increasing appearance of frugal innovation in developed markets challenges earlier definitions that often characterised frugal innovation particularly in the context of emerging markets. So far, it has not been clear what differentiates frugal innovation from other innovation types. Thus, we need criteria that make it possible to determine what frugal innovation is and what is not. In order to determine a clear definition, we choose a multimethod approach, conduct a literature review, and interview 45 managers from companies and researchers from different research institutes. On the basis of the results, we define three criteria for frugal innovation: substantial cost reduction, concentration on core functionalities, and optimised performance level. We contribute to the literature by refining the meaning of frugal innovation. We also enable organisations to better deal with the challenge of developing frugal innovation in both emerging and developed markets.
250 citations
Cites background from "Bottom of the Pyramid as a Source o..."
...First principles and approaches to develop frugal innovation have been published (Basu et al. 2013; Kumar and Puranam 2012; Lehner and Gausemeier 2016; Prahalad 2012; Prahalad and Mashelkar 2010; Radjou and Prabhu 2014)....
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TL;DR: In this paper, the authors examine the diversity of sustainable business models adopted by the largest global corporations over the period 2005-2014 and find that large capitalized firms have mostly adopted the environmentallyoriented archetypes, and to much lesser extent the societal and organizational ones.
179 citations
References
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Book•
05 Aug 2004
TL;DR: The Bottom of the Pyramid (BOP) market as discussed by the authors is the most exciting, fastest-growing new market in the world and it's where people least expect it: at the bottom of the pyramid.
Abstract: The world's most exciting, fastest-growing new market? It's where you least expect it: at the bottom of the pyramid. Collectively, the world's billions of poor people have immense entrepreneurial capabilities and buying power. You can learn how to serve them and help millions of the world's poorest people escape poverty.It is being done-profitably. Whether you're a business leader or an anti-poverty activist, business guru Prahalad shows why you can't afford to ignore "Bottom of the Pyramid" (BOP) markets.In the book and accompanying CD videos, Prahalad presents...Why what you know about BOP markets is wrong A world of surprises-from spending patterns to distribution and marketingUnlocking the "poverty penalty"The most enduring contributions your company can make Delivering dignity, empowerment, and choice-not just productsCorporations and BOP entrepreneurs Profiting together from an inclusive new capitalism "C. K. Prahalad argues that companies must revolutionize how they dobusiness in developing countries if both sides of that economic equation areto prosper. Drawing on a wealth of case studies, his compelling new bookoffers an intriguing blueprint for how to fight poverty with profitability." Bill Gates, Chairman and Chief Software Architect,Microsoft "The Bottom of the Pyramid belongs at the top of the reading list forbusiness people, academics, and experts pursuing the elusive goal ofsustainable growth in the developing world. C. K. Prahalad writes withuncommon insight about consumer needs in poor societies andopportunities for the private sector to serve important public purposes whileenhancing its own bottom line. If you are looking for fresh thinking aboutemerging markets, your search is ended. This is the book for you." Madeleine K. Albright, Former U.S. Secretary of State "Prahalad challenges readers to re-evaluate their pre-conceived notionsabout the commercial opportunities in serving the relatively poor nations ofthe world. The Bottom of the Pyramid highlights the way to commercialsuccess and societal improvement--but only if the developed worldreconceives the way it delivers products and services to the developingworld." Christopher Rodrigues, CEO, Visa International "An important and insightful work showing persuasively how the privatesector can be put at the center of development, not just as a rhetoricalflourish but as a real engine of jobs and services for the poor." Mark Malloch Brown, Administrator, United Nations Development Programme
2,932 citations
Book•
07 Oct 2008TL;DR: To compete in the big emerging markets, multinationals must reconfigure their resources, rethink their cost structures, redesign their product development processes, and challenge their assumptions about who their top-level managers should be, the authors say.
Abstract: As they search for growth, multinational corporations will have no choice but to compete in the big emerging markets of China, India, Indonesia, and Brazil. But while it is still common to question how such corporations will change life in those markets, Western executives would be smart to turn the question around and ask how multinationals themselves will be transformed by these markets. To be successful, MNCs will have to rethink every element of their business models, the authors assert in this seminal HBR article from 1998. During the first wave of market entry in the 1980s, multinationals operated with what might be termed an imperialist mind-set, assuming that the emerging markets would merely be new markets for their old products. But this mind-set limited their success: What is truly big and emerging in countries like China and India is a new consumer base comprising hundreds of millions of people. To tap into this huge opportunity, MNCs need to ask themselves five basic questions: Who is in the emerging middle class in these countries? How do the distribution networks operate? What mix of local and global leadership do you need to foster business opportunities? Should you adopt a consistent strategy for all of your business units within one country? Should you take on local partners? The transformation that multinational corporations must undergo is not cosmetic--simply developing greater sensitivity to local cultures will not do the trick, the authors say. To compete in the big emerging markets, multinationals must reconfigure their resources, rethink their cost structures, redesign their product development processes, and challenge their assumptions about who their top-level managers should be.
489 citations
"Bottom of the Pyramid as a Source o..." refers background in this paper
...They have a significant “forgetting curve” to overcome (Prahalad and Lieberthal, 1998)....
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Journal Article•
TL;DR: Moving beyond decades of mutual distrust and animosity, corporations and nongovernmental organizations (NGOs) are learning to cooperate with each other and are working together to create innovative business models that are helping to grow new markets and accelerate the eradication of poverty.
Abstract: Moving beyond decades of mutual distrust and animosity, corporations and nongovernmental organizations (NGOs) are learning to cooperate with each other. Realizing that their interests are converging, the two sides are working together to create innovative business models that are helping to grow new markets and accelerate the eradication of poverty. The path to convergence has proceeded in three stages. In the initial be-responsible stage, companies and NGOs, realizing that they had to coexist, started to look for ways to influence each other through joint social responsibility projects. This experience paved the way for the get-into-business stage, in which NGOs and companies sought to serve the poor by setting up successful businesses. In the process, NGOs learned business discipline from the private sector, while corporations gained an appreciation for the local knowledge, low-cost business models, and community-based marketing techniques that the NGOs have mastered. Increased success on both sides has laid the foundation for the cocreate-business stage, in which companies and NGOs become key parts of each other's capacity to deliver value. When BP sought to market a duel-fuel portable stove in India, it set up one such cocreation system with three Indian NGOs. The system allowed BP to bring the innovative stove to a geographically dispersed market through myriad local distributors without incurring distribution costs so high that the product would become unaffordable. The company sold its stoves profitably, the NGOs gained access to a lucrative revenue stream that could fund other projects, and consumers got more than the ability to sit down to a hot meal-they got the opportunity to earn incomes as the local distributors and thus to gain economic and social influence.
270 citations
"Bottom of the Pyramid as a Source o..." refers background in this paper
...Collaboration with NGOs, and with their help in building a village-level entrepreneurial network, was critical (Brugmann and Prahalad, 2007)....
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TL;DR: In this paper, a South African who lives in an impoverished, crime-ridden neighborhood of Johannesburg has no bank account, cannot order items from a distant store, and is sometimes robbed of her pay packet.
Abstract: expand its small house. Help arrives from a major industrial company in the form of construction designs, credit, and as-needed delivery of materials, enabling rapid completion of the project at less overall cost. In rural Madhya Pradesh, an Indian farmer gains access to soil testing services, to market price trends that help him decide what to grow and when to sell, and to higher prices for his crop than he can obtain in the local auction market. The new system is an innovation of a large grain-buying corporation, which also benefits from cost saving and more direct market access. A South African who lives in an impoverished, crime-ridden neighborhood of Johannesburg has no bank account, cannot order items from a distant store, and is sometimes robbed of her pay packet. She finds that a new financial service offered by a local start-up company allows her mobile phone to become a solution—her pay is deposited directly to her phone-based account, she can make purchases via an associated debit card, and she carries no cash to steal. In a small community outside Tianjin, China, a small merchant whose children have been repeatedly sickened by drinking water from a heavily-polluted river is distraught. He finds help not from the overwhelmed municipal government but from a new, low-cost filtering system, developed by an entrepreneurial company, which enables his family to treat its water at the point of use. Allen L. Hammond, William J. Kramer, Robert S. Katz, Julia T. Tran, and Courtland Walker
230 citations
Journal Article•
TL;DR: In 1994, when the software maker Knowledge Adventure decided to spin out a new venture, the founder Bill Gross expected the worst, but when KA let go of Worlds and gave its employees near total ownership, the company unleashed a new level of employee performance that led to the creation of economic value that more than made up for the equity KA had surrendered.
Abstract: In 1994, when the software maker Knowledge Adventure decided to spin out a new venture--Worlds, Incorporated--founder Bill Gross expected the worst. He had argued with the board that it was in KA's best interests to maintain a controlling ownership stake in Worlds, whose powerful new software technology had enormous revenue potential. But the board prevailed, and KA took only a 20% ownership in the new company, giving the rest to Worlds' employees. Within a year, the company's performance had surpassed all expectations, and instead of owning 80% of a $5 million business, KA owned 20% of a $77 million business. The arithmetic may have been counterintuitive, but the lesson was clear. When KA let go of Worlds and gave its employees near total ownership, the company unleashed a new level of employee performance. That, in turn, led to the creation of economic value that more than made up for the equity KA had surrendered. So compelling was this "new math of ownership" that Gross founded a new company, Idealab, on this principle. The company, which develops ideas for Internet-based businesses and seeds the most promising ones, takes no more than a 49% equity stake in the new ventures and gives at least 1% of ownership to each employee. For Gross, this radical approach to ownership is the key to inspiring stellar performances. In part, employee-owners are motivated by their potential to earn great financial reward. But the drama of ownership, he argues, is even more important. In that drama, employees become personally involved in the struggle to outdo the competition and emerge victorious.
81 citations