HSE Marketing and PR
Base of the Pyramid – innovations for the underprivileged
Published Sep 29. 2008
Over a half of the world’s population lives on less than five euros a day. Development aid and charitable contributions have failed to significantly improve the situation, and poverty continues to be one of the most pressing global problems. The Base-of-the-Pyramid (BOP) approach represents one possible solution and relies on innovative cooperation to eradicate poverty.
This model is founded on the idea that low-income consumers should be included in corporate business activities as partners and innovators, replacing the traditional consumer or producer perspective. This cooperation enables the development of business activities and markets that would simultaneously benefit both companies and underprivileged communities.
Professor Prabhu Kandachar and a number of other noted speakers attended the international conference “Sustainable innovations at the base of the pyramid” at the Helsinki School of Economics on September 26-27, 2008. The conference addressed innovative, socially and ecologically sustainable solutions to reduce poverty. Inspirational examples were introduced by organizations such as Nokia, GrameenPhone, ABB, UNDP, and Phillips Design.
The base has potential
Professor Kandachar of the Netherlands’ Delft University of Technology has extensively researched the development of user-centric products and services for emerging markets and explains why the base of the pyramid is worth investing in.
– A large number of Western companies have expressed interest in developing markets due to the rapidly increasing number of consumers. By meeting the needs of these consumers, companies can further assist the growth and development of the local economy, which in turn facilitates the alleviation of poverty.
This operational plan to reduce the number of people at the base of the pyramid has been received with great enthusiasm by academia, the corporate sector, NGOs, and governments alike. The actual work is still in the early stages of development and formation, as innovations are needed in a number of different sectors.
Professor Kandachar is familiar with academic and corporate cooperation in BOP projects.
– Students and companies have worked together to develop achievable innovations in, e.g., improving drinking water quality, tool efficiency, and health care. The best innovations combine technological, social, and commercial expertise.
From idea to reality
How are such innovations apparent in practice? Bank microloans serve as an early example. This type of loan is targeted to those individuals who do not meet the criteria needed to access to traditional lines of credit. Granting microloans facilitates entrepreneurship for the underprivileged and simultaneously offers banks the opportunity to increase their business activities.
– The microloan is an excellent social innovation. For example, Mexican banks have been very pleased with the success of the system, as 99% of borrowers pay back their loan, comments Kandachar on the functionality of the innovation in practice.
An even more hands-on example of such innovations is a shampoo designed to work best when used with cold water. Developing markets possess huge potential for similar products that have been designed with needs of impoverished and underprivileged environments in mind.
– Instead of multinational companies offering cheap copies of their products to developing markets, they should consider cooperative innovations that genuinely benefit both the company and the consumer, professor Kandachar summarizes the central idea of the BOP approach.
Photos: front page Johanna Liukkonen, conference Aino Huovio
For more information:
www.hse.fi/bop
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