In 2002, two men authored an article in Strategy+ Businessthat inspired companies around the world to see business opportunities where they had once only seen problems.
“The Fortune at the Bottom of the Pyramid,” it was called. One - C.K. Prahalad, a well-known business strategist - went on to write a book by the same name. The other was Stuart Hart, a professor at Cornell University’s business school and a prominent adviser to the corporate sector on sustainable development and environmental issues. The second edition of his book Capitalism at the Crossroads: Aligning Business, Planet and Humanity hit stores last month, with a foreword from former US vice- president Al Gore.
Hart sat down with Mintto discuss a wide range of issues, from climate change to terrorism and what corporations will look like in 50 years. Edited excerpts:
What’s your best piece of advice to the top managers of companies based here?
Don’t follow the herd.
It’s tough to play the existing game of the Americans or the Europeans or the Japanese. It’s pretty hard to beat them at their own game. Not impossible, but pretty hard. The low labour costs approach - you don’t learn a lot that will help you out-compete them for the top of the pyramid business.
You have to figure out how you can serve the under-served population of the country and in India, that’s three-fourths of the population. There are 700 million people who are under-served, poorly served and, in some cases, exploited. How can we learn to serve them and serve them in a way that isn’t going to create environmental meltdown in the country?
If India, from a public policy point of view, can set that as a challenge and if Indian companies see that as something that’s worthwhile and presents them the kind of growth opportunity they need, then from my perspective, you learn a set of skills that stand you in very good stead globally. You can then take that set of skills and go anywhere around the world and serve those other four billion people no one else does.
Since you first wrote about the base of the pyramid, a lot of the companies have taken your advice and targeted more efforts there. How have they done?
Like anything, this is an evolutionary process that changes over time. I would say that when we came up with the topic, CK and I, and first started—it took us four years to get it published—the first motivation was to make a case as to why this is an attractive potential market and put it in language the corporations would understand. I think we’ve been moderately successful. Not surprisingly, you see the criticisms and a backlash around that very idea. It goes something like this, ‘Oh my God. These large corporations, this is just the next form of corporate imperialism, looking to sell products that poor people really don’t need, taking what little money they’ve got out of their pocket so they can profit off the backs of the poor.’ It’s not like we hadn’t thought about this or the people at the companies haven’t thought about this.
That very much is the next phase of this. I call it moving from Bottom of the Pyramid 1.0 to Bottom of the Pyramid 2.0. The first, 1.0, was structural innovation and a leap for many large companies in itself, just creating products the poor could afford. It was a big stretch by itself, smaller sachet packaging, sourcing raw materials locally, localized production, mom-and-pop distribution. They didn’t have any of those things in place before.
Now they have a channel to pump products through. They may or may not be the right products. The process used may or may not have been very inclusive.
What could they do better?
That’s what BOP 2.0 is about, it’s getting people from these companies out into rural areas, out into slums. Take the metaphor of a child with a hammer. Instead of looking for more nails to pound, even if they are smaller nails, you put the hammer down and go in without preconceived notions of what the products are. You go in with an open mind. The company comes with a platform of capability but they have to look to establish a collegial partnership... with people in rural areas or shantytown communities and jointly figure out, ‘What should the new business be?’
BOP 2.0: Stuart Hart (above) says companies should have a collegial partnership with people in rural areas and shanty-town communities.
We have a project going in India with DuPont and one of their businesses in and around Hyderabad. It has generated a new rural business and a new slum business in Hyderabad. It was jointly decided upon what the business is, rather than just assuming you already know what the products are and pumping them through a channel that already exists.
The new edition of your book touches on terrorism. How does the base of the pyramid play into that? Why should the corporate sector be concerned with it?
The consequences of not addressing the challenges that we face - environmental deterioration and destruction and growing poverty and inequity - the combination of those two things have real consequences both for rich people and poor people and how they interact. One of the consequences is more terrorist behaviour and the growth of an anarchist movement. You see it already and not just in the Middle East.
Populist and anti-capitalist movements are growing throughout the world, not all of them containing religion-based terrorism. I see them stemming from the same root cause. In order for organized terrorist movements to take root and flourish, it requires tacit support by a lot of people. How you create that support is for a lot of people to feel alienated, humiliated and like they have no other way out. It’s the core problem of the base of the pyramid. You’ve got growing numbers of people that don’t have many options. Nihilist movements offer a way out.
Is India paying enough attention to climate change? What should the role of the corporate sector here be?
India is not paying enough attention to climate change. But then again, who is? Certainly not the United States or China. The big actors that really need to be on this one just aren’t doing as much as they should be, which is why I come back to the corporate sector. In the US, there is something called the US Climate Action Partnership. Large corporations and NGOs have banded together to try to put pressure on the government to do something and I find it deliciously ironic that’s the case.
The corporate sector is just in the best position to really drive this agenda. In many respects, they have the most to gain.
If they can think about it in creative terms, there is enormous business opportunity there. It only helps them if they can pressure the government to create a framework that speeds that process. We’re seeing them take a stand that’s about creating tomorrow’s opportunity and not protecting yesterday’s advantage.
You’ve also said capitalism is in the midst of its next great transformation. What do you think companies around 50 years from now will look like?
I’m not sure I have that kind of a crystal ball. But I think that the companies 50 years from now that are thriving will be the ones that figure out how to get to clean technology or the next generation of technology, that leave very little trace and figure out how to engage humanity, shrink the inequity that exists. Yeah, there is still a pyramid, but maybe it will start to look more like a diamond.