Who can take advantage of Bottom of the Pyramid


The obvious inspiration of this post is late professor C K Prahalad’s (he expired on 16th April at the age of 69) book The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits. However, the real trigger is the very interesting post The Collapse of Complex Business Models by Clay Shirky. The post contains multiple anecdotes but the one about how and why of ATT failed to get into the web hosting business around mid 90s caught my eye. Here is an excerpt:

“…The ATT guys had correctly understood that the income from $20-a-month customers wouldn’t pay for good web hosting. What they hadn’t understood, were in fact professionally incapable of understanding, was that the industry solution, circa 1996, was to offer hosting that wasn’t very good. This, for the ATT guys, wasn’t depressing so much as confusing … For a century, ATT’s culture had prized—insisted on—quality of service … ATT, like most organizations, could not be
good at the thing it was good at and good at the opposite thing at the same time…”

There has been many refutation of Prahalad’s proposition but all of them have come from the perspective similar to ATT.

[Update: Here is another example from India published in HBR – What Poor Countries Can Teach Rich Ones About Health Care]

If you look at the mobile scenario in India & China, your doubts will be answered. Here are some interesting statistics. [ARPU = Average Revenue per User]

Stats 1: China Mobile has the world’s largest subscriber base. Though it’s ARPU (around USD 8.00 per month is 1/5th of its western counterparts, it operates its business at higher margin, around 51% – Global Mobile Data Market Update 2009 (March 31, 2010)

Stats 2: Though India is outpacing China in terms of actual number of subscribers added per month by a factor of 2, ARPU in India is even lower than that of China – India’s Mobile ARPU on the Slide

Stats 3: Except for Vodafone in India, all the major mobile service providers in India and China are local companies.

You can see the complete presentation in – Global Wireless Data Market 2009 Update Mar 2010 Chetan Sharma Consulting

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For 33 years, Prahalad ended all his MBA and executive education courses with this exhortation – The Responsible Manager – worth reading.

 


Comments
One Response to “Who can take advantage of Bottom of the Pyramid”
  1. showbiz says:

    Sad to hear about Prahlad. He was a guru. Nice article.

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