Much of what I’ve posted in the past has been about management and leadership in resource-rich organizations in developed parts of the world. These are organizations that sell products and services to people who can afford cars, hotels, and washing machines. But what about management and leadership for economies at the base of the economic pyramid? Can we develop business leaders among the four billion people around the world living in poverty?
Many excellent examples exist of successful business management in these communities. Local entrepreneurs, in some cases with the help of multi-national corporations, have started companies that employ local people and provide products that local people can afford. Grameen Bank’s micro-credit program might be one of the most famous because the founder, Muhammad Yunus, received the Nobel Peace Prize in 2006 for the business opportunities Grameen had given to many local entrepreneurs throughout the developing world. Some other examples of success at the base of the pyramid (BoP) are:
- VisionSpring. Assisted by the William Davidson Institute, this NGO employs people in remote villages in India to bring desperately needed affordable vision care products to some of the poorest people in the world.
- BMVSS. Another NGO that since 1975, starting in India, has supplied a high quality prosthetic free of charge to poor people who have lost part of a leg due to accidents and land mines. Donations pay for the “Jaipur Foot,” which is made by local workers with local materials and costs only about $30 to $40 to produce.
- PRODEL. An organization for small-scale farmers in Ecuador that, with the help of AED, is assisting these farmers in creating business opportunities for themselves (for example, exporting coffee beans) and learning how to develop a stable economy.
- Acumen Fund. This is an investment vehicle that provides financing and management assistance to social ventures. Each recipient organization uses a business model to bring about social change in a developing nation.
Business development at the base of the pyramid can also be found in developed countries. Stuart L. Hart and Monica Touesnard report on a number of credit unions in the U.S. that are using innovations in financing to help poor people in their local communities.
In each of these situations, skills are required that are not typically taught in western business schools. According to C.K. Prahalad and Stuart L. Hart, in their article "The Fortune at the Bottom of the Pyramid,” being successful with this market requires a different set of abilities than are applied by western managers, particularly in large, multi-national corporations. They write this about BoP leaders:
Creativity, imagination, tolerance for ambiguity, stamina, passion, empathy, and courage may be as important as analytical skill, intelligence, and knowledge. Leaders need a deep understanding of the complexities and subtleties of sustainable development in the context of Tier 4. Finally, managers must have the interpersonal and intercultural skills to work with a wide range of organizations and people.
In addition to those skills, it appears that managers at the base of the pyramid need a wide range of competencies including:
- A mental model that the world’s poor are a viable market worth pursuing.
- The willingness and skill to engage all sectors in business development – multi-national corporations, governments, NGOs, tribes, religious institutions, and any other significant segments of local society.
- Respect for local people who might come from a different socio-economic background.
- Ability to collaborate with people who do not have literacy skills taken for granted in people who are higher on the economic pyramid.
- Ability to co-create business solutions with local people and institutions.
- Ability to bring innovation to western business models.
- Being open to experimenting and failing and changing an approach based on the data.
- Ability to adapt technologies to solving local problems.
- Having both local and global knowledge.
- Ability to learn from new cultural experiences.
Ted London, professor in the Ross School of Business at The University of Michigan and the William Davidson Institute (WDI), has begun to address some of these competencies. He teaches a class on base-of-the-pyramid business. According to the newsletter of WDI:
The course integrates concepts of strategy, international business, non-profit management, and poverty alleviation to stimulate the leadership skills and competitive imagination needed to create successful BoP ventures.
This kind of course is certainly important. It educates MBA students in a western university about BoP issues. However, we also need to find ways to develop managers among the people the BoP approach is intending to help.
Good management at the base of the pyramid is about more than jobs and higher incomes for poor people. It is not too grandiose to conclude that developing effective managers and leaders at the base of the pyramid is about world peace and prosperity. Prahalad and Hart say it this way:
…MNC investment at “the bottom of the pyramid” means lifting billions of people out of poverty and desperation, averting the social decay, political chaos, terrorism, and environmental meltdown that is certain to continue if the gap between rich and poor countries continues to widen.