Bottom of the Pyramid

bottom of the pyramid = BOP

(Perhaps the concept of "Base of the Pyramid", used by worldchanging.org, is better as it avois the negative connotation of 'bottom')

Concept and movement which proposes that the world's poor are an effective market that can be both beneficial for companies and for the poor themselves.

Description

1.

From http://www.worldchanging.com/archives/006704.html:

"Base of the pyramid efforts aim at bringing the world's poorest people into the global economy by marketing goods and services to them which help better meet their needs. At its worst, this becomes a means of wringing micro-profits from the poor without in any meaningful way changing their circumstances. At its best, however, it brings transformative tools, from micro-finance and micro-insurance, to needed goods made available at an affordable price, into the lives of the poor.

Together, Social Entrepreneurship and base of the pyramid approaches illuminate a much broader trend, which is to treat entrenched social and sustainability difficulties as problems capable of solution through the conscious and context-sensitive application of innovation." (http://www.worldchanging.com/archives/006704.html)

2.

Monica Touesnard:

"determining the distinguishing characteristics of BoP enterprises became a key discussion topic at the inaugural BoP Learning Lab Global Network Director's Summit this past June. This global network of institutions is actively engaged in generating knowledge about BoP enterprise development. As such, defining what it means to be a BoP enterprise is critical.

In recent years, use of the terms "base of the pyramid" and "bottom of the pyramid" have proliferated quite impressively; however, their use remains inconsistent. Technically, BoP is a socio-economic designation for the four billion people whose annual income is less than USD $3260 (purchasing power parity) or, more broadly, the impoverished communities in which those people live.

People increasingly rubber stamp these low-income or underserved communities as "BoP markets," recognizing that there are business opportunities in these communities. Unfortunately, when organizations tout "BoP work," or use the terms "BoP business" or "BoP enterprise," it becomes unclear exactly what that means and how it is different from other business activity in low-income communities.

BoP enterprise development is, in many ways, a hybrid of traditional international development and business practices. International development organizations work to alleviate poverty in BoP communities using aid-based methods, while MNCs (multi-national corporations) conduct business in developing countries using proven methodologies for targeting the wealthy. Neither constitutes BoP business, although BoP enterprise development does indeed rely on elements of both, hence the philosophy 'creating businesses to alleviate poverty.' (http://www.nextbillion.net/blogs/2008/08/11/guest-post-what-defines-a-base-of-the-pyramid-business)

Characteristics

Monica Touesnard:

"The BoP Learning Lab Global Network has indentified several critical factors characterizing BoP businesses.

1. First and primarily, BoP enterprises are based on private-sector business models that are locally transformational. In other words, these businesses create mutual value for both the community and the enterprise, such as capacity building and wealth creation. Implicit in this is the expectation that the business will be partner-intensive to achieve the greatest success. Therefore, an MNC merely selling a product in sachets at a lower price point would not qualify as a BoP enterprise nor would the business model of selling or donating products to a non-profit to distribute for free or reduced prices. On the other hand, non-profits using private-sector methodologies to develop economic activities in low-income communities could potentially create BoP enterprises.

2. Next, an element of the Triple Bottom Line must be embedded in the business strategy – consideration of the environmental, societal, and economic impacts of the business practice. There must be motivation to improve the quality of life for the community; simply creating economic activity without regard for the local environment, community, or cultural impact is not in the vein of a BoP enterprise. Merely establishing factories to take advantage of cheap labor in developing countries would not meet these criteria, nor would the presence of local moneylenders.

3. Third, there must be the aspiration and potential for scale and replication. Indeed, the inability to grow and expand a business fails to meet the objective of transforming the local society and economy. As a result, most mom-and-pop shops, while important to the local community, would not be considered BoP businesses.

Strategies for successful implementation of BoP enterprises are increasingly popular, but to do this one must first know what the term implies. The BoP Learning Lab Global Network considers these features essential in distinguishing BoP enterprises from other business and development activities in low-income communities, and core to the branding of the BoP philosophy." (http://www.nextbillion.net/blogs/2008/08/11/guest-post-what-defines-a-base-of-the-pyramid-business)

Critique

Here's a critical approach to the movement and the concept:

Kareen Karnani writes that:

"Poor people – at the bottom of the pyramid (BOP) – represent a very attractive market opportunity. The 'BOP proposition' argues that selling to the poor can simultaneously be profitable and help eradicate poverty. This is at best a harmless illusion and potentially a dangerous delusion. This paper shows that the BOP argument is riddled with fallacies, and proposes an alternative perspective on how the private sector can help alleviate poverty. Rather than focusing on the poor as consumers, we need to view the poor as producers. The only way to alleviate poverty is to raise the real income of the poor."

Other critiques:

"Even the "base-of-the-pyramid" movement is undergoing its own internal shifts as a result of criticisms about its lack of social impact and failure to reach the poorest

• see Erik Simanis & Stuart Hart, The Base of the Pyramid Protocol: Toward Next Generation BoP Strategy, Cornell University Press, 2008 - downloadable from www.johnson.cornell.edu/sge/;

• and Stuart Hart's foreword to Prabhu Kandachar & Minna Halme, Sustainability Challenges and Solutions at the Base of the Pyramid: Business, Technology and the Poor, Greenleaf Publications [Sheffield], 2008).

More Information

BOP developments can be monitored at the Nextbillion.net blog.