Author’s note: small editorial change in final sentence of paragraph 3. Many apologies for the oversight).
Readers of this blog are probably well aware of the concept called “base of the pyramid”, originally advanced by Prahalad, Hart and others in the latter part of the 1990s, and the early part of this decade. At heart, it is an economic model that uses an analogy (the world economic system visually represented by a pyramid) in order to describe the world’s population in terms of tiers of the world economic pyramid.
At the apex lie middle and upper class members of developed nations, and at the base, the four billion poorest people, with an annual per capita of less than $1500. What the “base of the pyramid” model proposes is to completely upend usual multi-national business’ common practice, which is to ignore this market, due to the perception that it is not a viable market for most present business models.
Supporters of the base of the pyramid model have argued that this segment of the world represents an incubator for potentially disruptive technologies. Supporters have proposed that utilizing base of the pyramid markets to then springboard business models that will then be enable those models to travel well to high-income modelsmarkets, as well as potentially creating new revenue streams in non-traditional markets.
Indeed, this model has been advocated by critics of the Washington Consensus, who challenged its “trickle-down” model assumptions, which assume that top-down investment will result in economic gains trickling down the world economic ladder (or pyramid). Yet, has this model been any more successful?
While companies like Nike and Hindustan Lever have attempted ventures that would capture consumers within the base of the pyramid, there has yet to be a breakthrough venture or technology developed for the base of the pyramid that was successful in capturing that marketplace, let alone jumping up levels within the economic pyramid model.
In tomorrow’s post, we’ll take a look at some reasons as to why this may have occurred, and what base of the pyramid 2.0 looks like.
Photo Credit: Ahmed Rabea via Flickr’s Creative Commons