global bop ll summit in brazil

Copyright Stuart L. Hart 2011Copyright Stuart L. Hart 2013

BoP 2.0Pushing the Boundaries

Stuart L. HartS.C. Johnson Chair in Sustainable Global Enterprise,

Cornell UniversityAdjunct Professor, University of Vermont

President, Enterprise for a Sustainable WorldFounder, Emergent Institute, Bangalore India


“Until now, globalization has been driven by the west and imposed on

the rest”

The World Turned Upside Down

The Economist, 2010


What Has Changed?

Wealthy>$20,000 800

Emerging

Middle Class

(MoP)

$2.000-20,000 1,700

Base of the

Pyramid (BoP)(Prahalad & Hart, 2002; Hart & Christensen, 2002;

London & Hart, 2004; Prahalad & Hammond, 2002)

<$2,000 4,500

Saturation of

current markets

Cost barriers;

Environmental

tipping points

New technologies,

products & business

models


I = P x A x THuman

ImpactPopulation Affluence

(Consumption)Technology

1.5 5 17.5

Do the Math


Moving Technology to the Denominator

I = P x AT

T= 10x? 20x? 40x?Biggest Business Opportunity in the History of the World


Two Levels of Sustainability

Focus on Existing:

products

processes

suppliers

customers

shareholders

Characteristics:

Incremental

Continuous Improvement

Rationalizes Industry

Strategies for

Greening

Focus on New:

technologies

markets

partners

needs

stakeholders

Characteristics:

Discontinuous

Creative Destruction

Restructures Industry

Strategies for

Beyond Greening

Stuart L. Hart (1997) Beyond Greening: Strategies for a Sustainable World

Copyright Stuart L. Hart 2011Copyright Stuart L. Hart 2013 Prahalad and Hart, Strategy + Business, January 2002


Growing Momentumin the BoP

1998 2002 2004 20092000

Prahalad &

Hart Draft

BoP

LL

“Fortune at

BoP”

WRI

ConferenceMI & Cornell

Conference II

2013

Hybrid Value

Chains

Growing

Inclusive

Markets

Opportunities for

the Majority

Sustainable

Livelihoods

Pro-Poor

Business

Business Against

PovertySocial

Business

Social

Entrepreneurship

Base II

Conference

2013

Regional

MeetingBoP Global

Network Summit

2012

Social

Enterprise Inclusive

Business

Green

Leap


• Most corporate initiatives in the BoP have been focused exclusively on “business model innovation”:

– Lowering a product’s unit cost (e.g. sachets)

– Reducing costs by outsourcing production to developing country partners

– Extending product distribution into slums and rural areas

– Partnerships with NGOs for “on-the-ground” capability

Result: Child With a Hammer

“Selling to the Poor”

First GenerationBoP Strategies


What Have We Learned?

The Tyranny of the

“BoP Product” Mindset

The Tyranny of the

“Unmet Needs” Mindset

The Tyranny of the “Green

is Expensive” Mindset

“Write the Unfinished

Symphony”Co-create a fortune WITH the BoP

“Think Like a

Mountain”Build a wide value proposition

“Take the

Green Leap”Sustainability from the bottom up


Need = DemandAffordability = Purchase

ToP– “Create needs in existing markets”

BoP– “Create markets from existing needs”

The Tyranny of“Unmet Needs”


Why Have TheseTaken Off?


The Unfinished Symphony

Symphony No. 8 in B Minor, 1822


The ChotuKool

Godrej and Boyce

“The Category Buster”


The Base of the Pyramid Protocol:Toward Next Generation BoP Strategy

2nd Edition2008

Erik Simanis

Stuart Hart

Duncan DukeCornell University

Justin DeKoszmovszkyS. C. Johnson & Son, Inc.

Patrick DonohueEnterprise for a Sustainable World

Gordon EnkPartners for Strategic Change

Michael GordonUniversity of Michigan

Tatiana ThiemeCambridge University

www.bop-protocol.org

Co-Creation By Design


During the last decade, first generation

“Base of the Pyramid” (BoP) ventures

focused primarily on “finding a fortune

at the BoP” by selling products to the

world’s four billion poorest people. Many

of these initiatives did not scale, and

some failed outright. But through that

experience, crucial lessons have been

learned. Innovators are now succeeding

thanks to a more sophisticated and

nuanced approach based on “creating

a fortune with the BoP.”


Thinking Like a Mountain

The Rifle Shot“Targeting low cost

products to BoP

customers” Creating Wide and Compelling

Value Propositions


Creating Mutual Value

Income

Capability

Purchasing Power

Food

Water

Nature’s Services

Ties to the Land

Roots

Social Ties

Community

Meaning

Sustainable

Development

Social/Cultural

Economic

Environmental


Through the Funnel

Population

Poverty

Inequity

Pollution

Depletion

Degradation

“Clean Tech”

“Base of the

Pyramid”


Clean Technology Base of the Pyramid

•Technology Focused

•Environment as driver

•Base of the Pyramid?

•Business Model Focused

•Poverty as driver

•Environment?

Two Different Worlds


Taking the Green Leap

Clean

TechnologyBase of the

Pyramid

The

Green

Leap


Driving Innovation from theBase of the Pyramid

=+


Vacuum TubeSolar Thermal


Next GenerationBoP Strategy

BoP 1.0• BoP as producer/consumer

• Deep listening

• Reduce price points

• Extend distribution

• Derivative product technology

• Arm’s length relationship via NGOs

BoP 2.0• BoP as business partner

• Deep dialogue

• Expand imagination

• Marry capabilities

•New, sustainable technology

• Direct, personal relationships

“Structural Innovation” “Embedded Innovation”


www.emergentinstitute.net


Next GenerationEntrepreneurship


CorporateIntrapreneurship


The OrganizationalChallenge

Strategy•BoP Leadership Team

•Business model R&D

Structure•Separate entity

•Report to senior executive

Systems•Longer time frame

•Learning metrics

Processes•Leverage existing capabilities

•Team with external partners

People•Attract internal entrepreneurs

•Protect from career risk


“The next 20 years will not look anything like the last 20…”

Chris Martenson (2010)

The Crash Course


The BoP Global Network


Size Matters

How big is the BoP?

Are there different segments?

Do you have to include the poorest?

How big are the returns?

Are market returns realistic?

Do you have to reward investors?

How big is a BoP venture?

Are there different growth objectives?

Do you have to scale up to count?

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=fgo3X43evWt44M&tbnid=1IYBqw-l-zAguM:&ved=0CAUQjRw&url=http://www.mathsisfun.com/geometry/pyramids.html&ei=KghcUpvfGeOIyAHuo4CgBg&bvm=bv.53899372,d.aWc&psig=AFQjCNF7nrMbErD15d1b9aDeKdAgTkTkng&ust=1381849483843193


Contested Terrain

Intra vs. Entre

Are BoP entrepreneurs preferred?

Can corporations create the white space?

Urban vs. Rural

How do villages and slums differ?

Do you have to include both?

Social vs. Environmental

Is poverty reduction enough?

What about environment when it comes to impact?


Stuart L. [email protected]

www.stuartlhart.com www.e4sw.org

11/15/2013 33

mailto:[email protected]

http://www.e4sw.org/

global bop ll summit in brazil

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