The "Bottom of the Pyramid"

There's a conference here at Harvard Business School right now, on Global Poverty. To a large degree, it's also a conference on the "Bottom of the Pyramid" buzz that's been gripping the CSR Nation for the past couple of years. This concept was first proposed by C.K. Prahalad and Allen Hammond in an article (then a book), which essentially says that the way to alleviate poverty is to treat the poor as customers rather than as aid recipients, thereby bringing them the benefits of free markets. It's a good idea at the broadest level, based on the arguments that:
1) the poor currently lack access to many products (and a basic princple of economics is that voluntary transactions create economic value for both parties);
2) the poor tend to pay higher prices because distribution to their communities is scarce, and many of the poor lack the transportation to shop further from home); and
3) products are usually designed for the rich, and then sold with minor adaptations to the poor as a secondary market - rarely are products designed with the specific needs of the poor in mind.

The Bottom of the Pyramid ("BoP") theory also argues that businesses can and should make a profit by selling to the poor - that good opportunities have been left on the table due to a lack of dedication and imagination on the part of business leaders, and that uncovering these profits will have the important secondary benefit of helping lift the poor out of poverty. This concept has spread like wildfire among business leaders, and (perhaps because of the receptive audience) among CSR practitioners. It seems to me that business leaders are delighted to have both a new growth opportunity and a reason to say (and believe) that pursuing profits is a noble goal.

I agree with the general assertions that market creation is crucial to poverty alleviation, and that companies could have a role in this by concentrating on lower-income sectors. However, I cannot believe that targeting poor customers will always be to their benefit. For example, one story in the original article is of a company that makes penny candy for children in India; I fail to see why having children spend their parents' money on non-nutritional snacks (that will cause more dental problems than they can afford to fix) is somehow going to lift people out of poverty. In other cases (e.g., affordable artificial limbs and water purification systems), it seems reasonable to assume that companies have created social value. But there is no real focus on how to determine which ventures are good for the poor, and which are not - just an assumption that all are good. Everything is anecdotal, except for a few poorly-designed charts.

All these misgivings are thoughts from before the conference, and I hope to actually post something about the learning that's going on now. The participants are in fact moving well beyond what I just described, although with so many people in the room (over a hundred), it's difficult to discuss any one idea thoroughly. I'll say something more about it soon.