BoP 2.0
Pushing the Boundaries
Stuart L. Hart
S.C. Johnson Chair in Sustainable Global Enterprise,
Cornell University
Adju...
“Until now, globalization has been
driven by the west and imposed on
the rest”
The World Turned Upside Down
The Economist,...
What Has Changed?
Saturation of
current markets
>$20,000

$2.000-20,000

<$2,000

Wealthy

Emerging
Middle Class
(MoP)

80...
Do the Math

I=PxAxT
Human
Impact

Population

7.5 1.5

Affluence
Technology
(Consumption)

5

1
Copyright Stuart L. HartH...
Moving Technology to the
Denominator

I=PxA
T

T= 10x? 20x? 40x?
Biggest Business Opportunity in the History of the World
...
Two Levels of Sustainability
Strategies for
Greening

Strategies for
Beyond Greening

Focus on Existing:

Focus on New:

p...
Prahalad and Hart, Strategy + Business, January 2002

Copyright Stuart L. HartHart 2011
Copyright Stuart L. 2013
Growing Momentum
in the BoP
Pro-Poor
Business
Opportunities for
the Majority

Social
Enterprise
Social
Entrepreneurship

1...
First Generation
BoP Strategies
• Most corporate initiatives in the BoP have been
focused exclusively on “business model i...
What Have We Learned?
The Tyranny of the
The Tyranny of the
The Tyranny of the “Green
“Unmet Needs” Mindset “BoP Product” ...
The Tyranny of
“Unmet Needs”

Need = Demand
Affordability = Purchase
ToP– “Create needs in existing markets”
BoP– “Create ...
Why Have These
Taken Off?

Copyright Stuart L. HartHart 2011
Copyright Stuart L. 2013
The Unfinished Symphony

Symphony No. 8 in B Minor, 1822

Copyright Stuart L. HartHart 2011
Copyright Stuart L. 2013
The ChotuKool

Godrej and Boyce
“The Category Buster”

Copyright Stuart L. HartHart 2011
Copyright Stuart L. 2013
Co-Creation By Design
Erik Simanis
Stuart Hart
Duncan Duke

The Base of the Pyramid Protocol:
Toward Next Generation BoP S...
During the last decade, first generation
“Base of the Pyramid” (BoP) ventures
focused primarily on “finding a fortune
at t...
Thinking Like a Mountain

The Rifle Shot
“Targeting low cost
products to BoP
customers”

Creating Wide and Compelling
Valu...
Copyright Stuart L. HartHart 2011
Copyright Stuart L. 2013
Creating Mutual Value
Economic

Income
Capability
Purchasing Power

Sustainable
Development
Food
Water
Nature’s Services
T...
Through the Funnel
“Clean Tech”

Pollution
Depletion
Degradation

Inequity
Poverty
Population

“Base of the
Pyramid”
Copyr...
Two Different Worlds

Clean Technology

Base of the Pyramid

•Technology Focused
•Environment as driver
•Base of the Pyram...
Taking the Green Leap

Clean
Technology

The
Green
Leap

Base of the
Pyramid

Copyright Stuart L. HartHart 2011
Copyright ...
Driving Innovation from the
Base of the Pyramid

+

=

Copyright Stuart L. HartHart 2011
Copyright Stuart L. 2013
Vacuum Tube
Solar Thermal

Copyright Stuart L. HartHart 2011
Copyright Stuart L. 2013
Next Generation
BoP Strategy

BoP 1.0

BoP 2.0

• BoP as producer/consumer

• BoP as business partner

• Deep listening

•...
www.emergentinstitute.net

Copyright Stuart L. HartHart 2011
Copyright Stuart L. 2013
Next Generation
Entrepreneurship

Copyright Stuart L. HartHart 2011
Copyright Stuart L. 2013
Corporate
Intrapreneurship

Copyright Stuart L. HartHart 2011
Copyright Stuart L. 2013
The Organizational
Challenge
Strategy
•BoP Leadership Team
•Business model R&D

Structure

Systems

•Separate entity
•Repo...
“The next 20 years will not look
anything like the last 20…”
Chris Martenson (2010)
The Crash Course

Copyright Stuart L. ...
The BoP Global Network

Copyright Stuart L. HartHart 2011
Copyright Stuart L. 2013
Size Matters
How big are the returns?
Are market returns realistic?
Do you have to reward investors?

How big is the BoP?
...
Contested Terrain
Intra vs. Entre
Are BoP entrepreneurs preferred?
Can corporations create the white space?

Urban vs. Rur...
Stuart L. Hart
slh55@cornell.edu
www.stuartlhart.com
www.e4sw.org

11/15/2013

Copyright Stuart L. Hart 2013
33 Copyright ...
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Global BOP LL summit in Brazil.

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Global BOP LL summit in Brazil.

  1. 1. BoP 2.0 Pushing the Boundaries Stuart L. Hart S.C. Johnson Chair in Sustainable Global Enterprise, Cornell University Adjunct Professor, University of Vermont President, Enterprise for a Sustainable World Founder, Emergent Institute, Bangalore India Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  2. 2. “Until now, globalization has been driven by the west and imposed on the rest” The World Turned Upside Down The Economist, 2010 Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  3. 3. What Has Changed? Saturation of current markets >$20,000 $2.000-20,000 <$2,000 Wealthy Emerging Middle Class (MoP) 800 Cost barriers; Environmental tipping points 1,700 Base of the Pyramid (BoP) New technologies, products & business models 4,500 (Prahalad & Hart, 2002; Hart & Christensen, 2002; London & Hart, 2004; Prahalad & Hammond, 2002) Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  4. 4. Do the Math I=PxAxT Human Impact Population 7.5 1.5 Affluence Technology (Consumption) 5 1 Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  5. 5. Moving Technology to the Denominator I=PxA T T= 10x? 20x? 40x? Biggest Business Opportunity in the History of the World Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  6. 6. Two Levels of Sustainability Strategies for Greening Strategies for Beyond Greening Focus on Existing: Focus on New: products processes suppliers customers shareholders technologies markets partners needs stakeholders Characteristics: Characteristics: Incremental Continuous Improvement Rationalizes Industry Discontinuous Creative Destruction Restructures Industry Stuart L. Hart (1997) Beyond Greening: Strategies for a Sustainable World Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  7. 7. Prahalad and Hart, Strategy + Business, January 2002 Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  8. 8. Growing Momentum in the BoP Pro-Poor Business Opportunities for the Majority Social Enterprise Social Entrepreneurship 1998 Prahalad & Hart Draft Hybrid Value Chains Social Business Business Against Poverty Inclusive Business Growing Inclusive Markets Sustainable Livelihoods Green Leap 2000 2002 2004 2009 2012 2013 2013 BoP LL “Fortune at BoP” WRI Conference MI & Cornell Conference II Regional Meeting Base II Conference BoP Global Network Summit Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  9. 9. First Generation BoP Strategies • 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” Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  10. 10. What Have We Learned? The Tyranny of the The Tyranny of the The Tyranny of the “Green “Unmet Needs” Mindset “BoP Product” Mindset is Expensive” Mindset “Write the Unfinished Symphony” “Think Like a Mountain” “Take the Green Leap” Co-create a fortune WITH the BoP Build a wide value proposition Sustainability from the bottom up Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  11. 11. The Tyranny of “Unmet Needs” Need = Demand Affordability = Purchase ToP– “Create needs in existing markets” BoP– “Create markets from existing needs” Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  12. 12. Why Have These Taken Off? Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  13. 13. The Unfinished Symphony Symphony No. 8 in B Minor, 1822 Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  14. 14. The ChotuKool Godrej and Boyce “The Category Buster” Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  15. 15. Co-Creation By Design Erik Simanis Stuart Hart Duncan Duke The Base of the Pyramid Protocol: Toward Next Generation BoP Strategy Cornell University Justin DeKoszmovszky S. C. Johnson & Son, Inc. Patrick Donohue Enterprise for a Sustainable World Gordon Enk Partners for Strategic Change 2nd Edition 2008 Michael Gordon University of Michigan Tatiana Thieme Cambridge University www.bop-protocol.org Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  16. 16. 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.” Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  17. 17. Thinking Like a Mountain The Rifle Shot “Targeting low cost products to BoP customers” Creating Wide and Compelling Value Propositions Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  18. 18. Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  19. 19. Creating Mutual Value Economic Income Capability Purchasing Power Sustainable Development Food Water Nature’s Services Ties to the Land Environmental Roots Social Ties Community Meaning Social/Cultural Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  20. 20. Through the Funnel “Clean Tech” Pollution Depletion Degradation Inequity Poverty Population “Base of the Pyramid” Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  21. 21. Two Different Worlds Clean Technology Base of the Pyramid •Technology Focused •Environment as driver •Base of the Pyramid? •Business Model Focused •Poverty as driver •Environment? Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  22. 22. Taking the Green Leap Clean Technology The Green Leap Base of the Pyramid Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  23. 23. Driving Innovation from the Base of the Pyramid + = Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  24. 24. Vacuum Tube Solar Thermal Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  25. 25. Next Generation BoP Strategy BoP 1.0 BoP 2.0 • BoP as producer/consumer • BoP as business partner • Deep listening • Deep dialogue • Reduce price points • Expand imagination • Extend distribution • Marry capabilities • Derivative product technology • Arm’s length relationship via NGOs •New, sustainable technology • Direct, personal relationships “Structural Innovation” “Embedded Innovation” Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  26. 26. www.emergentinstitute.net Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  27. 27. Next Generation Entrepreneurship Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  28. 28. Corporate Intrapreneurship Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  29. 29. The Organizational Challenge Strategy •BoP Leadership Team •Business model R&D Structure Systems •Separate entity •Report to senior executive •Longer time frame •Learning metrics Processes People •Leverage existing capabilities •Team with external partners •Attract internal entrepreneurs •Protect from career risk Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  30. 30. “The next 20 years will not look anything like the last 20…” Chris Martenson (2010) The Crash Course Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  31. 31. The BoP Global Network Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  32. 32. Size Matters How big are the returns? Are market returns realistic? Do you have to reward investors? How big is the BoP? Are there different segments? Do you have to include the poorest? How big is a BoP venture? Are there different growth objectives? Do you have to scale up to count? Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  33. 33. 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? Copyright Stuart L. HartHart 2011 Copyright Stuart L. 2013
  34. 34. Stuart L. Hart slh55@cornell.edu www.stuartlhart.com www.e4sw.org 11/15/2013 Copyright Stuart L. Hart 2013 33 Copyright Stuart L. Hart 2011

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