Book Review: Chapter 1 (The Market at the Bottom of the Pyramid)
Book: The Fortune at the Bottom of the Pyramid
Library Reference: None
Amazon Reference:
Quote: “All of us are prisoners of our own socialization. The lenses through which we
perceive the world are colored by our own ideology, experiences and established management practices. Each one of the groups that is focusing on poverty alleviation—the World Bank, rich countries providing aid, charitable organizations, national governments, and the private sector—is conditioned by its own dominant logic.”
-C.K. Prahalad
Learning Expectation:
In this chapter, I am expecting to learn who the markets at the Bottom of the Pyramid (BOP) are, referring to the title of the said chapter. Aside from this, I also want to know what the power of dominant logic is. I also want to know about the nature of the BOP markets and the concept of the market development imperative. Hopefully, by the end of this chapter, I will indeed achieve the knowledge I expect to gain from this.
Review:
Based on how I understood what I have read, the bottom of the pyramid refers to the poor people. If this is indeed the case, then I can think of the bottom of the pyramid as some kind of social structure wherein the rich people are on top, the middle-class are in the middle and the poor are in the bottom. It is like saying that the rich are the most powerful and ideal people to target as customers since they have the most capability to afford whatever we may have to offer. In my opinion, these three types of people should either be in equal positions or the poor should be on top of the pyramid. Aside from this, the reason why the poor are in the bottom of the pyramid is that they dominate the rich and the middle-class in number which I would very much agree on.
The poor outnumbers the rich people and the middle-class people. Among all of the topics I have read in this chapter, I would like to focus on the dominant logic which basically refers to the assumption in relation to the bottom of the pyramid. In dominant logic, there are 5 different assumptions that people have in relation to the bottom of the pyramid.
The first assumption states that we conclude that the poor are not our target customers for the reason that they would not be able to afford our products and services. In my opinion this would be a very wrong assumption and the reason why I say this is the structure of the pyramid itself. It is wrong because the poor outnumbers the rich people so one can have more opportunities to earn more money if they focus on the bottom of the pyramid instead of focusing on the few people at the top of the said structure whom they assume have the most capability to afford anything.
The second assumption is that the poor do not have any use for products sold in developed countries. This is also a wrong assumption in my opinion because it does not mean that these people are poor, they do not have use for items sold in developed countries. The only difference between the rich people and the poor people is the fact that the rich people lives a more fancied life and has more money while the poor work do not have that much money. Other than that, there is really not that much difference about these people, both of them has the same necessities, both are people and both have money no matter how much money they have.
Only developed countries appreciate and pay for technological innovations is the third assumption. I do not agree with this assumption. Based on observation, the poor have just as much interest in technology as a reach person or even more. On what I have observed, poor people are more engrossed to text messaging, surfing the Web, listening to mp4s, mp3 and gadgets alike. I think that is enough proof that the poor take up as much interest or even more in technological innovations as the rich people.
The next assumption is that the bottom of the pyramid markets is not critical for long-term growth and vitality of MNCs or multinational corporations. Again, I disagree with this because I believe that the BOP markets are most necessary for a corporation’s growth and vitality since they dominate the pyramid or in other words, they outnumber the rich and the middle-class in the structure of the pyramid.
The last assumption which I consider wrong is that intellectual excitement can only be found in developed markets and it is hard to recruit managers from the bottom of the pyramid. I consider this wrong too because in my point of view, finding a manager is not all about intellectuality, it is more on a person’s skill. A person from a developed market can be more intellectual that a BOP person but a person from the BOP market can be more skilful than a developed market person. To simply put it, we can never conclude that the people from developed markets are always better than those from the BOP market.
What I Learned:
By the end of this chapter, I learned that there are five different assumptions about the BOP markets and I have actually disagreed with all of these assumptions because it all says that there is no money in the bottom of the pyramid. Actually I think that most money can be found in the BOP and a lot of people fail to understand this sadly.
Integrative Questions:
1. What is the power of dominant logic?
2. What is the nature of the BOP markets?
3. What is the market development imperative?
4. Why did C.K. Prahalad say that trust is a prerequisite?
5. Why is it said that there is money at the Bottom of the Pyramid (BOP)?
Book Review: Chapter 2 (Products and Services for the BOP)
Book: The Fortune at the Bottom of the Pyramid
Library Reference: None
Amazon Reference:
Quote: “Addressing the market opportunity at the BOP requires that we start with a
radically new understanding of the price-performance relationship compared to that currently employed in developed markets. This is not about lowering prices. It is about altering the price-performance envelope.”
-C.K. Prahalad
Learning Expectation:
I hope to learn by the end of this chapter, the explanation to the quotation I have taken from the chapter because it interests me very much. Aside from this, I also want to learn the twelve principles of innovation for BOP markets. I also want to learn about how we can make the said principles.
Review:
This chapter primarily revolves around the twelve principles of innovation for BOP markets. These so-called principles are based on my understanding building blocks of a philosophy of innovation for the BOP markets.
The first principle is price performance. As C.K. Prahalad stated, price is an important part of the basis for growth in the BOP market. Price performance according to him not only focuses on the lowering prices. It is about creating a new price-performance envelope. In my opinion, this is quite a good principle because the BOP market is supposed to be businesses’ target market since they are many in number. The lower the price is, the more that they would buy, after all, the BOP market can also afford whatever the rich can afford, the only difference or question is when they will be able to get it.
The next principles are innovation: hybrids and scale of operations. I honestly do not get the whole idea of hybrids in innovation but based on how I understood it, the hybrids of innovation means making use of different innovation strategies to gain money and to approach the market. On the other hand, scale of operations means that solutions developed should be scalable and transportable across countries, cultures and languages since BOP markets are large.
The fourth and fifth principles are sustainable development: eco-friendly and identifying functionality. As named, eco-friendly, it means identifying if your business is eco-friendly or helps in the betterment of the environment. It means considering how our product or service will affect the environment. On the other hand, identifying functionality means identifying the difference between the BOP market and the developed market. By knowing this, on my opinion, would help in knowing what kind of products and services would be appropriate only for BOP market or developed market and what would be appropriate or suitable for both markets.
The sixth is process innovation and the seventh is deskilling of work. I do not really understand process innovation that much so I would not be able to explain it well enough while deskilling of work means not requiring that much from the BOP markets because there is a shortage of talent in the BOP market as stated by the author.
Education of customers and products must work in hostile environments are the next principles. Education of customers means having to educate customers in the product or service you offer in order for them to have an idea as to how it will benefit them and how they would be using these. Products must work in hostile environments because the BOP markets are usually located in such environments so obviously, it would be recommended to provide products that would be able to work in such conditions.
Research, innovations must reach consumers and product developers must focus on the broad architecture of the system. Research refers to studying things about BOP markets in order to know them better and to know how to deal with them and know what products and services you can offer to them. Sadly, I do not understand the last two innovation principles so I cannot explain it at all.
What I Learned:
By the end of this chapter, I learned that there are twelve innovation principles for BOP markets. I also learned how these principles would be able to help me know how to interface with the BOP market.
Integrative Questions:
1. What are the 12 principle of innovation for BOP markets?
2. How can we make the innovation principles happen?
3. What is deskilling of work?
4. What is scale of operations?
5. How is BOP different from developed markets?
Book Review: Chapter 3 (BOP: A Global Opportunity)
Book: The Fortune at the Bottom of the Pyramid
Library Reference: None
Amazon Reference:
Quote: “BOP markets can collapse the time frames taken for products, technologies,
and concepts to diffuse in the system. Many of the drivers of change and market
growth—deregulation, involvement of the private sector in BOP markets, digitization, ubiquitous connectivity and the attendant change in the aspirations of people,
favorable demographics (a young population), and access to credit—are
simultaneously present in BOP markets.”
-C.K. Prahalad
Learning Expectation:
For this chapter, I would like to learn about the BOP solutions for developed markets. I also want to learn about the concept of capital intensity and of course, I also expect to learn in this chapter how to live in a network of relationships.
Review:
The part of this chapter that caught my attention was the lessons for MNC from BOP Markets. These lessons are the capital intensity which according to the text is a critical element of success in the BOP markets.
The next lesson is sustainable development which means knowing how the said product or service would be affecting the BOP markets such as if they would be benefitting from it or not. Aside from that, sustainable development refers also to BOP markets being a great source of experimentation for this idea. A lot of things can be improved in the BOP markets and so, there are a lot of possibilities for sustainable growth and development. Another lesson is innovation because it forces new set of disciplines such as focusing on price performance instead of focusing on how you would earn a lot of money.
Basically, these lessons are related to the principles of innovation for BOP markets discussed earlier in chapter two of the same book. Anyway, another part of this chapter that caught my attention was the part about learning to live in a network of relationships. According to the author, MNCs working at the BOP must learn to live with a variety of relationships with large institutions. I agree with this very much because in order to be able to get to the BOP, you first have to truly understand its nature and the best way to understand this is by building a strong relationship with them.
What I Learned:
By the end of this chapter, I learned that there are lessons addressed to the multinational corporations or MNCs from the BOP markets which I did not really expect at the beginning to happen. Aside from that, I also learned that MNCs must learn to live in a network of relationships in order for them to be more effective.
Integrative Questions:
1. What are the BOP solutions for developed markets?
2. What are the lessons for MNCs from BOP markets?
3. What is capital intensity?
4. What are the costs of managing?
5. What is the basic unit of analysis?
Book Review: Chapter 4 (The Ecosystem for Wealth Creation)
Book: The Fortune at the Bottom of the Pyramid
Library Reference: None
Amazon Reference:
Quote: “A market-based ecosystem is a framework that allows private sectors and social
actors, often with different traditions and motivations, and of different sizes and
areas of influence, to act together and create wealth in a symbiotic relationship.”
-C.K. Prahalad
Learning Expectation:
In this chapter, I want to learn about market-oriented ecosystem and ecosystems for a developing country. Also, I want to learn about the sanctity of contracts, and of course, reducing inequities in contracts.
Review:
A market-based ecosystem is a framework that allows private sector and social actors, often with different traditions and motivations, and of different sizes and areas of influence, to act together and create wealth in a symbiotic relationship, C.K. Prahalad stated on this book. I took this out from the book because this is one of the most important things I learned in the entire book, The Fortune at the Bottom of the Pyramid.
Anyway, another thing I learned from this book is the ecosystems in a developing country. Based on how I understood this, this refers to ecosystems in a BOP country or market. Here I learned about HLL, the largest FMCG firm in India which is subsidiary of the corporation Unilever. Aside from this, I also learned about fast-moving consumer goods or also known as FMCG.
Honestly speaking, although this chapter was very short it was very clear and made its point well. I really like this chapter because it is detailed and well-explained which I think is quite hard to do considering that the topic and issue discussed is quite heavy.
What I Learned:
By the end of this chapter, I learned that about the ecosystems in a developing country and about market-based ecosystem. I also learned about reducing inequities in contracts and of course building governance capabilities among the poor.
Integrative Questions:
1. What is a market-oriented ecosystem?
2. What is the role of cooperatives?
3. How do you build governance capabilities among the poor?
4. What are the steps in the evolution of SHGs?
5. What is ITC?
Book Review: Chapter 5 (Reducing Corruption: Transaction Governance Capacity)
Book: The Fortune at the Bottom of the Pyramid
Library Reference: None
Amazon Reference:
Quote: “Most developing countries do not fully recognize the real costs of corruption and
its impact on private-sector development and poverty alleviation. The capacity to
facilitate commercial transactions through a system of laws fairly enforced is critical
to the development of the private sector.”
-C.K. Prahalad
Learning Expectation:
For this chapter, I would like to learn if the poor are really poor and I also want to learn about the ultimate paradox. I also want to learn about TGC. Other than this, upon scanning the contents, by the end of this chapter I expect to learn about the Andhra Pradesh e-Governance Story.
Review:
The first thing in this chapter that I have noticed was the discussion with the header “Are the Poor Poor?” This title is very interesting and the question was stuck in my head. Are the poor really poor? It is stated that the poor are poor because they lack resources. I agree with this. People are indeed poor but not only because they lack financial resource. People are poor because they also lack in other resources that could aid them in improving their situation. Based on my understanding, this is only one of the assumptions that people have because they think that knowing this would help in poverty reduction by aiding them.
In my point of view, even if I agree with the statement that the poor are poor because they lack resources, there are still other possible reasons as to why they are poor and it can also be dependent in the way that their minds run. Some poor people think that they are born poor and will die poor no matter how hard they try so they don’t try at all.
Aside from this, another thing that I have noticed in this chapter is the part about building TCGs. TCGs are about creating transparency and eliminating uncertainty and risk in commercial transactions. This is quite interesting because it is said that it is more than laws or regulations. By the way, TCGs stand for transaction governance capacity. It consists of laws, regulations, social norms and institutions. For me, it is good that people came up with such an idea as the TCG. If you eliminate uncertainty and risk in commercial transactions, it makes people believe it is safe and gain more trust. Another is the lessons from the Andhra Pradesh Experiment. The most important lesson here I think the equation wherein the cost of being inside the system when divided by the cost of being outside the system is less than or equal to one. In my understanding, the benefits of being inside the system are much greater than outside the system’s.
What I Learned:
By the end of this chapter, I learned about the transaction governance capacity. I have also learned about the different assumptions that people have with regard to whether the poor are indeed poor. Another is the conclusion that came up in relation to the said assumptions. Of course, I also learned about the Andhra Pradesh Experiment.
Integrative Questions:
1. What is the ultimate paradox C.K. Prahalad was referring to?
2. What is TGC all about?
3. What is the significance of the Andhra Pradesh e-Governance Story?
4. What are the lessons from the Andhra Pradesh experiment?
5. What is the significant role of TGC?
Book Review: Chapter 6 (Development as Social Transformation)
Book: The Fortune at the Bottom of the Pyramid
Library Reference: None
Amazon Reference:
Quote: “One of the common problems for those at the BOP is that they have no
“identity”. Often they are at the fringe of society and do not have a “legal identity”, including voter registration, driver’s license, or birth certificate. The instruments of legal identity that we take for granted—be it a passport or a Social Security number—are denied to them.”
-C.K. Prahalad
Learning Expectation:
In this chapter, I want to learn about development as social transformation. I also want to learn how BOP markets gain access to knowledge. Of course, from the quotation I took from the context, I am expecting how those in BOP, gain it identity. More importantly, I am expecting to learn how C.K. Prahalad has morphed the pyramid into a diamond, relating to the topic.
Review:
Development as a social transformation is an idea which I would consider as a crucial thought one must learn or know. I consider it as crucial because it had made three transitions in our thinking. Development as a social transformation actually thought us that the BOP, the poor are the ideal target market. The second is that the only way to serve a BOP market is through innovation. The third is that these innovations should come with increased TGC.
The first lesson that development as a social transformation thought made me realize that a lot of us have a misconception that we can never earn money in the BOP markets when in fact, most money will come from them. From the second lesson, I have come to the realization that innovation is the key to serving the BOP market. This, base on my understanding, means that we need to use different innovation strategies in order to get to the BOP markets and make a great impact. The third lesson of development as a social transformation is that these innovations should come with an increased TGC which I agree with. Innovation strategies should be innovations that reduces risk and ensures the market more trust.
What I Learned:
Generally speaking, I only discussed the idea of development as a social transformation because I consider it as the most crucial part of this chapter and so, I would say that I learned about the idea of development as a social transformation and I have also found out how the author have defended this idea through well explanation.
Integrative Questions:
1. How do those at the BOP gain access to knowledge?
2. How do those at the BOP gain identity?
3. How did C.K. Prahalad morphed the pyramid into a diamond? (The poor morphed into the middle class)
4. Why did C.K. Prahalad say that those at the BOP do not have an identity or a legal identity?
5. Why does C.K. Prahalad consider development as social transformation?
