Point/Counterpoint: Two Views of C.K. Prahalad’s The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits
Manisha Desai
Associate Professor
Sociology, UI
Madhu Viswanathan
Associate Professor
Business Administration, UI
C.K. Prahalad, author of The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits, was on the University of Illinois campus April 21, 2006 deliver The Alan M. Hallene Lecture. The lecture, elucidating some of the book’s major points, was organized by The Hoeft Technology & Management Program. Prahalad enjoyed a full house for the lecture, largely of enthusiastic supporters, and took questions in the limited time following his presentation. In orderto continue that conversation with a larger audience and at more length, the editor invited the two authors to respond in a point/ counterpoint fashion to Prahalad’s ideas.
Manisha Desai
“If we stop thinking of the poor as victims or as a burden and start recognizing them as resilient and creative entrepreneurs and value-conscious consumers, a whole new world of opportunity will open up.”
Thus begins Professor Prahalad’s highly regarded book. The first half of the sentence thrilled me. Social activists and theorists for centuries have highlighted the resilience and creativity of poor people around the world. So it was heartening to read that management gurus now concur with this viewpoint. Having recognized the poor’s agency, however, it is immediately harnessed in the service of entrepreneurial activity and consumption. And the most revealing aspect is in the “world of opportunity” being opened up for global business. The poor and their poverty, then, provide newer markets and an avenue of profits. Or, as Professor Prahalad notes, the bottom line is that one can “do well by doing good.” That the focus of the book is not the poor is clear from the arguments, which are primarily directed at convincing corporations, large and small, why they should enter this market at the bottom of the pyramid; how they should innovate to reach this sector; and the rewards (both profits and social image) that can result from this focus.
Apart from an ethical objection to treating the poor as a means to the end of profit-making, what concerned me were Professor Prahalad’s assumptions and silences. Let me focus on a few main ones. First, an important ingredient of his poverty-elimination plan is entrepreneurship on a large scale. Many of his examples are drawn from women’s micro-credit programs. In the 1990s, development agencies promoted micro-credit programs as a panacea for empowering women. As scholars have shown, however, not all poor women are able or willing to be entrepreneurial. The continuing dominance of micro-credit programs despite evidence to the contrary is because poor women are a good risk. Their loan repayment rate is over 90 percent. Furthermore, most such
programs do not elevate women out of poverty, as they are competing in a saturated informal market. Moreover, their vulnerability to business cycles is left unexamined. This is an unfortunate omission because it is precisely this group that is likely to be disproportionately affected by economic downturns due to their lack/low level of savings and experience with capitalist dynamics. Professor Prahalad does address ways of creating other markets using information and communication technologies. But his focus on entrepreneurship as the way out of poverty is akin to everyone becoming doctors to stay healthy.
Second, in his chapter on e-governance in Andhra Pradesh, he discusses at length how Chief Minister Naidu decided to use technology to overcome corruption and to be accountable to its citizens and give them a voice. Yet, Professor Prahalad is silent on how the same government lost the elections on charges of corruption as well as its lack of response to the problems of farmers. Thousands of farmers in Andhra Pradesh have committed suicide in the last four years because, as government subsidies for fertilizers and pesticides declined in the era of newly adopted neo-liberal agricultural policies, they were unable to repay the debts they had incurred. In a tragic irony, the farmers used the same pesticides to kill themselves that they could not afford for their fields. The national government, which was similarly committed to neo-liberal policies, was also voted out of office in May 2005 as it was unable to deliver the promises of globalization to the poorest of the poor in India.
Third, the innovations recommended to turn the poor into consumers are problematic on social as well as environmental grounds. One innovation that Prahalad finds remarkable is the single-serving packets for products like shampoo, ketchup, and soaps. While single serving packets make the products affordable to the poor in the short run, in the long-run it is cheaper to buy in bulk. And while he acknowledges that such high volume production (after all, we are talking about serving four billion poor people) will increase energy consumption and environmental damage, he does not have sustainable strategies to address the issues. Among his more radical claims is that we can find ways to clean without water by using chemicals or gels. But producing those might still require water and energy, not to mention additional capital and land. Socially, he sees nothing wrong with promoting brand-conscious, aspirational consumption.
For, it is through consumption that he believes the poor will gain dignity and choice as well as an identity. If we truly wanted to give the poor dignity and choice we might want to ask them what kind of consumption they want and what kind of communities they would like to build, rather than pushing the brand-conscious consumption that does more for the producers than the consumers. This is particularly ironic given that the poor around the world have been organizing to demand and to imagine other possible worlds (www. worldsocialforum.org). As Gabrielle Dietrich noted in 1990, the problem with development is not giving a greater share of the pie to the poor, but the concept of the pie itself. We might want to frame the discussion in terms of rotis or bread.
Finally, despite his call to the corporations, the government, and to civil society to go beyond the power of dominant logic in relation to the poor and poverty reduction, Prahalad seems unable to go beyond the orthodoxy of the market. In fairness, he does say that it will take creative partnerships between all the three sectors mentioned above. But his creativity and innovation are all within the parameters of the market. While the neo-liberal consensus on the marketplace has been thoroughly critiqued for failing to reduce poverty, Professor Prahalad’s belief in the market reins supreme. While the private sector has a role to play in social transformation, I think that role should be in paying living wages to workers, paying workers for the unpaid labor of social reproduction (on which corporate profits are based), and investing in communities in which they operate rather than leaving behind broken communities as they move around the globe in their search for lower wages and higher profits.
Ultimately, Prahalad’s book fails to convince because in focusing on micro examples without linking them to the macro structures of global capitalism, what we are offered is not development as social transformation, but development as consumerism. And this proposition comes at a time when unbridled consumerism is being questioned both in the North and the South.
Madhu Viswanathan
C.K. Prahalad’s book has provided the scholarly impetus to study, from a business perspective, the “bottom of the pyramid”—that is, the world’s poor, living on less than two dollars a day and numbering many billions. In the last year, I have attended several presentations by Professor Prahalad and have been struck by his honesty, intellectual rigor, and commitment to this cause—or, perhaps more accurately, this “calling.” He has accomplished several goals with his work and through his zeal to convey this message to a variety of international audiences. Perhaps most importantly, when one of the leading management thinkers in the world brings the focus of business leaders to the world’s poor, it carries tremendous weight. Prahalad, along with Stuart Hart, is considered a pioneer in developing this broad area of enquiry and bringing it to the consciousness of academic researchers and business people. This is no small task and has required careful and concerted efforts over the last decade, from envisioning the approach, to coining the terminology, to taking the message to the worlds of business and academics. Much credit for these insights also belongs to recently evolving business practice and social entrepreneurship, which together have been driving the innovation that Prahalad’s book chronicles.
Prahalad points out what many have never really considered: that a market exists at “the bottom of the pyramid,” albeit a market with very different needs and characteristics than ones businesses usually consider. He discusses this market’s size and accessibility, one populated by brand-conscious, connected customers willing to accept new technology. He emphasizes that markets must be developed with people capable of consuming; that new goods and services must be imagined; that being conceived of as a consumer produces dignity and choice for the poor; and that developing trust between buyer and seller is imperative.
Further, Prahalad argues that addressing this market requires serious rethinking based on customer need. For instance, small unit packages, with low profit margins, high volumes, and a high return on the capital employed, work more effectively in this market than the “supersize” packaging common in industrialized countries. At base, Prahalad argues that considering the bottom of the pyramid as a market demands close attention to the poor’s specific needs and the distinct conditions of their lives. Innovation and imagination in engineering, product design, and marketing are key both to serving them and to making a profit.
India has already produced some notable successes through this strategy. The Jaipur Foot Company, for instance, developed new, on-site creation of prosthetic feet that can function in the hostile environments where India’s poor live and work, at a tiny fraction of the cost charged in other markets. ITC, one of India’s foremost private sector companies, has innovated by providing access to information for poor farmers through computers, which enables fair pricing and direct selling by removing exploitative middle-men from the supply chain. Unilever, an Indian Fortune 500 company, has innovated by reaching thousands of villages through resellers: poor women who are residents of these villages are trained to sell Unilever’s health and hygiene products.
The response to Prahalad’s work has been overwhelmingly positive. Some of the negative reactions, such as concern for exploitation by multinational companies, are very serious but do not really detract from Prahalad’s work as much as emphasize the need for business to function both responsibly and profitably at the bottom of the pyramid. In fact, this is what Prahalad is calling for, best summarized by the notion of making a profit while doing good.
Responsible businesses have an important role to play and there are many examples of such businesses. Thus, multinational companies are among the primary audiences for the book, as they have to realize the need to function in radically different environments and to recognize where they can serve the poor and do so responsibly and profitably. Multinationals bring with them tremendous resources and clout that could be channeled for the betterment of a sizable proportion of humanity. And some multinationals have led the way in this effort through responsible and profitable innovations requiring long-term investments and a vision for societal welfare.
Another criticism (again, not so much of Prahalad’s work but of some multinationals at the bottom of the pyramid) is that some of the products sold to the poor in single-use portions, such as personal care items (soap, shampoo) contribute to environmental degradation. There is little doubt that sustainable solutions need to be found for products sold to the large number of low-income consumers, and Prahalad emphasizes this issue. But the need to find these sustainable solutions applies to the entire market, not just the poor.
Some critics have also responded negatively to Prahalad’s terminology and language, such as his use of the word “fortune” in the title of the book, which sometimes concerns people about the potential for “exploitation.” People have also objected to the use of the phrase “bottom of the pyramid,” for a variety of reasons—using the term “bottom;” the metaphor of a pyramid and the interconnectedness it suggests when, in fact, these markets are often isolated; the creep in definition of the term “bottom of the pyramid” to include higher income individuals; the existence of many pyramids; and the indirect reference to the phenomena.
Certainly, precise language is crucial and usage needs to be nuanced over time, particularly to avoid being patronizing and insensitive. In fact, some of us at the University of Illinois have, instead, used the term “subsistence marketplaces” to describe this market. What Prahalad has done, however, is to start the conversation on the large stage that is the western world. His reaction to the objections to his terminology is typical and to the point. He argues that the approach he has taken has certainly worked in attracting attention (and there is no doubt about this), and that the terminology can be changed as long as the focus on the four billion people remains.
There are important, perhaps counterintuitive, collective benefits from Prahalad’s call to focus on the bottom of the pyramid. For example, benefits from understanding the bottom of the pyramid may flow to other markets, such as doing more with less and finding sustainable solutions to other challenges.
My own work in the past few years has focused on low-literate, low-income buyers and sellers and marketplaces in subsistence contexts. I mention this because I can speak directly to the impact that Prahalad’s work has had. The University of Illinois is at the forefront of this work and colleges including business, agriculture, and engineering are well poised to contribute to this new area of enquiry. In August, 2006, a conference on product and market development for subsistence marketplaces was jointly organized by the business colleges at Urbana-Champaign and Chicago, while a one-of-a-kind course on product and market development for subsistence marketplaces will be introduced this fall at Urbana-Champaign.
Prahalad should be applauded for bringing attention to and suggesting an innovative approach toward perhaps the single most important issue facing all of us at the dawn of the twenty-first century: improving the lives of the sizable proportion of humanity that lives at or near subsistence.

