Posts Tagged ‘bop market creation’

Questioning the value of the term Base or Bottom of the Pyramid aka the BoP

Siim Esko wrote a short piece on his blog BoP Strategies after a conversation we recently had. Since much of his work focuses on the BoP in India and I’d just returned from the Kenyan tour, it was but natural for us to compare and contrast the challenges and the conditions of the lower income demographic in both these countries.  He refers to recent posts on when he starts:

Ashoka is targeting the top of the BoP with their Housing for All project, but they can still say they are targeting the base of the pyramid – those who can’t afford current housing solution, but who are not the poorest of the poor. But Aneel Karnani talks about the destitute poor and how the BoP is misconstrued. It’s apples and oranges.

Its apples and oranges indeed but by only referring to them as fruit, that is, the BoP, one tends to forget that this acronym actually refers to the more than 4 if not 5 billion of the entire planet’s population. And they are not all alike in any way, shape or form.  And that’s why I told him that I’m increasingly concerned about unqualified use of the general term BoP for this market.  Siim continues in his post:

There is much use for there being one definition for what we used to call the poor segment. But it seems like people get confused by the ‘bottom’ in ‘bottom of the pyramid’. In fact, it’s a rabbit hole and the rabbit hole goes deep.

We don’t take the whole World and consider that our market. You will never get VC funding with an idea like that. We zoom in on the continent, which can be divided into countries, which divide into regions, into areas. The people in different micromarkets have different buying behaviour, different wants and aspirations. And catering to those wants and needs is different. Selling snow mobiles in Helsinki is different than selling them in the north of Finland where Santa Claus lives. For one, it is entertainment, for the other, about survival. We know that. Think of the BoP in the same way – divided into tiny segments all over. Some marketing strategies are replicable across areas, income segments and sexes, but many are not.

And maybe the use of the term by an Ashoka in their own context of what they are trying to achieve – affordable housing or by Karnani in what he’s attempting to say may work but in the context of the entire global community of people who are increasingly focused on this space (that is, for example, the audience of a site such as a NextBillion) it implies that one BoP reference is the same as another. And why not, they are all the Base of the Pyramid you say?

Kenya is very different from India, and Africa from Asia. Yet due to the singular BoP label, the implications often are that one’s BoP experience with big bad messy India will prepare one for those in Kenya (or that success in a favela necessarily implies success in the basti). How different is this current situation from the early days of globalization and mass production of consumer goods across the world, based on the now debunked theory that Theodore Levitt espoused?

Any global advertising agency will tell you that localization and understanding regional differences is critical for the sales of your detergent or shampoo – the challenges that multinationals who rushed into India and China in the closing years of the previous century are well documented. Those hundreds of millions of middle class housewives were, in fact, nothing like Mrs Saunderson back in Toledo or Cincinnati, were they? So why, now, as we extend our reach down the income stream to the rest of the world’s population, are we on the point of making the same expensive errors of judgment and assumption?

In the early days of awareness creation, that here was a world changing opportunity to effect positive change and impact wellbeing, the concept of the 4 billion micro producers, consumers and creators at the base of the global economic pyramid was a valuable and compelling visualization. It captured the imagination of many and much good has come out of this – CK Prahalad has left us with a legacy.

However, as the BoP market matures and competition increases, it will only get more difficult if this single label continues to be used – it implies a single monolithic entity, segmentable only by “income” – in itself a challenging proposition in an environment where most are on irregular income streams from a variety of sources and unable for the most part to evaluate what their weekly/monthly/annual income may be, much less feel they have $2 or $3 or $5 to spend each day.  We see this in our work and we see it in the field.

If there are truly to be outstanding successes in this area, then perhaps its time to consider this market with the same degree of seriousness that advertising does its audience, regardless of whether you are making a profit, sustaining yourself or simply giving it all away.

Opportunity spaces vs ideas – business development for the BoP markets

Inaugural Issue of Entreprenuer magazine, photo taken in Kanpur India, Sept 13, 2009

Ideas or concepts are not the same as opportunity spaces or gaps in a particular market. Exploratory user research can identify opportunities for innovation, that is, either unmet needs or gaps in the existing ecosystem which could be filled by a product or service with the intent to create and provide value. On the other hand, actual ideas for new businesses or concepts for products or services may not be the immediate outcome of such exploration. While the insights from the field can act as waymarkers for new revenue generation opportunities, they are not the actual ideas or concepts themselves.

Imho, this conflation of the two – a concept or an idea and an opportunity space or gap in the existing market – gives rise to confusion about the goals or outcomes from field research, particularly in the short term or for the immediate results. It must be noted that even insights derived from observations are usually the result of data analysis and synthesis, best done with a team after the field research has been completed. Only after this can one say with any degree of confidence which gaps or behaviours observed would translate into potential opportunity spaces for innovation or new product development leading to sustainable and sustained revenue generation opportunities. Finally, the concepts or ideas can be generated within the constraints of this opportunity space.

The potential ‘market’ at the BoP is vast, complex and chaotic and too many needs go unmet that at first glance that it may seem opportunities are indeed available  for the picking and the possibility of fortunes immense.

The first critical challenge is to evaluate which of these potential areas offer value; a return on the customer’s investment, meagre though it may be.

The next is to evaluate the time and effort any new venture among BoP customers would require before it would start showing returns.

This is not a hit and run market.

Barriers to business with the ‘Bottom of the Pyramid’ : what can we learn from Mama Boi?

Jakarta, Indonesia March 2010

The Monitor Group has made available the complete HBR article “Is the Bottom of the Pyramid Really for you?” (PDF) where the authors frame the debate for multinationals questioning whether to consider entering this challenging though untapped segment of the global marketplace.  They list some of the common barriers faced by executives during their attempts to serve this demographic, the majority of whom live in the developing world:

  1. Uncertain cash flow.
  2. Gauging demand.
  3. Sales and distribution challenges.
  4. Disaggregated providers.
  5. Undeveloped Ecosystems.

Issues of demand and distribution as barriers are part of the undeveloped ecosystem – or rather, to reframe these barriers in the context of the local operating environment, all the points are elements of the informal markets that currently serve their customers needs.  They become barriers to entry for organizations accustomed to sophisticated information and delivery systems, that is, from their perspective, there is no pre-existing consumer market and one must then create entire value chains from scratch.

And yet, another way of looking at this would be to embrace rather than attempt to replace the elements of the informal ecosystems that exist. How can you leverage the characteristics of what makes them suit the needs of customers who live in conditions of uncertainty?  Flexibility, adaptability, improvization – all of these have been mentioned numerous times in as many reports and articles.  This PDF recommends in conclusion that the most successful companies have been those that have created new kinds of businesses:

The most encouraging business-model innovations at the bottom of the pyramid manage to surmount multiple barriers at the same time. They represent not incremental adaptations but new, groundbreaking, end-to-end strategies.

Leapfrogging conventional wisdom just the way technology has been leapfrogging the inadequate infrastructure in most these locales. But where can we seek the ways in which to inspire such innovation? Imho the challenge that also exists for all these multinationals and their esteemed consultants is that their frame of reference and understanding is so well grounded in the frameworks and structures of the formal economy in which they’ve trained and learnt to operate.

This slide presentation by Gerry van Dyck (source) offers some fascinating insights on informal markets from the perspective of global FMCG brands. Mr van Dyck’s key point being:

if the market woman can succeed in the fierce competitive environment in the unbranded produce sector to create loyal customers then it is possible to use them as a reliable ally in driving change among consumers

Why stop at simply using them as an ally – lets take the thought a step further and see if we can learn from this study on buyer behaviour in the informal sector. Here’s a snapshot of a slide from Mr van Dyck’s presentation:

In a crowded market with numerous shops all selling the same unlabeled, unbranded produce how does a customer differentiate and choose to purchase? Through relationships – personal interactions over time build a rapport between customer and shopkeeper and ultimately it is this bond that drives the purchasing decisions.  In other words, it is the people and the personalities that ultimately matter, not anonymous communications from faceless entities.

And that’s something I see very little mention of in all the fancy documents and presentations being made on how to address the undeniable opportunities available in this space – where are the people? And why aren’t they the starting point for innovation?

Visible sign of market creation for a product designed for social impact

Moneymaker pump, Nairobi Kenya June 2011

It struck me when I saw this Moneymaker pump by Kickstart on a street corner matatu stand in Nairobi while wandering around a market with Muchiri who was shopping for shoes. I’m giving this level of detail so you can see the context in which we spotted this classic and oft quoted example of a product designed for the ‘bottom of the pyramid’ (BoP or base of the pyramid) aka the lower income demographic. Its meant to assist in the alleviation of poverty by increasing the output of smalltime farmers.

We stopped to ask the man waiting with the pump what he was doing there – he was wearing a branded t-shirt with the product logo. Turns out he was on his way to deliver it to a new customer who had just purchased it.

This random sighting on the street to me is one of the best indicators of a product’s penetration and/or popularity. So often it happens, particularly in the design for social impact sector that the press release is often all there is to see or the product is showcased as a pilot program. I know that I’ve yet to hear about LifeTools in India via any mass media or notice its usage or mention by someone (and I’ve asked around in the target population segment in a couple of different locations) for example.  And that’s a huge company with a big marketing budget and India a major market.

Market creation (supported by customer education) is the biggest challenge/opportunity in these market segments.

Systems design lessons from challenging and demanding environments

The most common question posed by designers (at the Design Factory, in Finland) has been “What is different about designing for the BoP from the way I already design for mainstream consumers?”

Its a good question to ask, because it takes a systemic view of the user centered design process and methods being taught to them rather than focusing only on differences in features and attributes of tangible artifacts. This post is an attempt to grapple with developing a possible answer to their question and  starts with CK Prahalad’s framing of the traditional MNC approach vs his suggestions for the BoP approach.

The quality, efficacy, potency, and usability of solutions developed for the BOP markets are very attractive for the top of the pyramid. The traditional MNC approach and the approach suggested here—top of the pyramid to BOP and from the BOP to the top of the pyramid—are shown (above)

As the (foregoing) examples illustrate, the demands of the BOP markets can lead MNCs to focus on next practices. The BOP can be a source of innovations for not only products and processes, but business models as well. Let us start with the growth opportunities in local, stand-alone BOP markets first. ~ CK Prahalad via

Interpreting this in the context of design:

1. Consider the design of the entire ecosystem in a holistic manner rather than the product alone

The majority of industrial designers in studios and corporate departments around the world are tasked with the design of a specific product or application, isolated contextually, for the most part, from the larger ecosystem of the market primarily due to their experience of and immersion in the existing sophisticated marketing infrastructure. They have the luxury of access to information flows on packaging, distribution, supply chains and retail outlets as well as competing designs and this lets them focus on refining a particular product, package or UI.

This situation is almost reversed when it comes to the BoP consumer and the BoP markets. The paucity of information does not only hamper the BoP themselves but also those who seek to serve them. Furthermore, much of the market infrastructure is non existent or of a vastly different quality than that experienced in richer markets.  Factors such as income streams that are irregular and lack of financial tools such as consumer credit available for outright purchase are issues rarely considered during the design process but can and do influence the final outcome. Products designed in isolation may win awards but may never quite impact the quality of life in the manner they were designed to do so if their business model, pricing or payment plans, much less distribution or usage do not reflect the conditions of the operating environment.

2. Price as a rigorous design constraint, not simply a data point or the sole criteria for reverse engineering

The issue of pricing then, becomes mission critical in the design brief but not as a reason to compromise the design. That is, if the traditional MNC approach is top down, stripping features and degrading quality and lifespan achieve no purpose except risking the brand’s reputation. Instead, maximizing the constraints while minimizing utilized resources can be seen as a way to innovate for this demanding consumer segment by providing value through elegant design solutions that appeal yet offer a return on their investment.

3. Being aware of and questioning assumptions made

Whether its as basic as availability of electricity and running water or as subtle as the design interpretation of such underlying value propositions as “convenience”, the assumptions made about consumer buying behaviour, purchasing patterns and decision making or choice of brand or product cannot go undebated or unquestioned. A challenging environment, conditions of uncertainty or scarcity and the hardships of daily life managed on irregular incomes all serve to influence the value system and mindset of the target audience in ways we are not always able to immediately discern if we don’t flag our implicit assumptions as a potential stumbling point.

4. Nuances of local culture and society matter

These markets are not the already saturated mature ones of the “global village” with a blase attitude towards such throwaway things as the use of religious iconography on lunchboxes and t-shirts, still preferring to stand on their dignity and self respect over the sophisticated acceptance of perceived disrespect. Thus, nuances observed during user research that may be overlooked when considering different regions within the developed world may in fact be far more important in the context of BoP consumer markets and influence the user acceptance and adoption rate of the product or service. Choice of colours, features, tone and style of communication are some of the design elements so affected. Choosing to tread as delicately as a newcomer never hurts.

5. Think of them as your most demanding customer, not the helpless poor in need

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