Wednesday, April 4, 2007

Money To Be Made

On Tuesday, I made a visit to University of Michigan Ross School of Business to hear a special lecture given by long-time business professor and consultant, CK Prahalad. A legend and "guru" for so many years, (even when my dad had him in class twenty years ago), CK has devoted the later part of his years in developing new strategies for doing business with the poor. In February 2006, CK published The Fortune at the Bottom of the Pyramid, a widely-popular source on how to alleviate poverty through profitable new business ventures.

While I got lost in some of CK's professorial terminology, I found CK's speech to be, overall, quite fascinating. It definitely widened my perspective on how big money can actually be made through businesses that are geared to the world-class poor, and the obligation for big-businesses to be pro-active in developing new products and services, while maintaining social responsibility. So for companies willing to take the challenge, I think they ought to start-off by initiating their own in-house departments that are specifically geared to this new market. i.e. "Team for the Emerging Poor."

But, here's what I found most illuminating:

  • The traditional question to globalization asks, "Is globalization good or bad for the poor?"
  • This question should now be re-phrased to,"How do we make globalization work for the poor?"
  • At the Bottom of the Pyramid (world's lowest poverty level), the unrealized market potential $5 trillion.
  • In Asia, it's $95 billion.
  • Companies that have shown success at B.O.P:
    • Frito Lay - In India, regular packaging, yet flavored with local curry powders
    • McDonalds - Low cost, veggie burgers
    • BP - new village cooking stoves
  • The "normal" business model views business as: "price minus cost equals profit."
  • The "new" business model views business as: "price minus profit equals cost."
    • By fixing your projected profit, products such as the $100 MIT laptop can be made feasible.
Lastly, I thought it would be appropriate to include a 2005 TedTalks video featuring Jacqueline Novogratz, who is the CEO of the Acumen Fund, a third-world venture capital program that is putting a lot of CK's teachings into practice. (CK also mentioned that the other top pioneers of social change were: The Bill and Melinda Gates Foundation and

Check it out:

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