Putting profits first is the most effective and sustainable way for companies to make a positive impact on the lives of the poor.
A steady flow of profits, however modest, will then allow companies to tackle riskier growth opportunities with greater social impact. It’s smarter to aim first for smaller-scale, incremental sales opportunities that stand a better chance of success. Some companies may find that the map warns them away from launching headline-grabbing ventures. With the map, companies can design and undertake ventures that match their resources and financial expectations-and make profits, too. To help companies ensure that their ventures are built for success, we have developed an “opportunity map”: a framework, drawn from our experience and research in Africa, Asia, and Latin America, that uses these two key challenges to organize bottom-of-the-pyramid opportunities by their cost and complexity. Companies that underestimate these hurdles miscalculate the resources, innovation capabilities, and time involved, and project teams end up poorly equipped to accomplish the task. It requires companies to focus on business fundamentals and start their ventures with a rigorous understanding of two key challenges in low-income markets: changing consumers’ behavior and changing the way products are made and delivered. Profitably selling to the bottom of the pyramid is difficult, but it can be done. It can command resources and be sure of continued support from both the corporate headquarters and the country office. Compared with a social responsibility project, a profitable business stands a better chance of being able to increase its scale and impact. Profits are critically important for ventures targeting the bottom of the economic pyramid-the more than 4 billion people who individually earn less than $1,500 per year. Overstretched and disillusioned, many switch gears and reconstitute their ventures as break-even social investments that are destined to remain small.
Preoccupied with their social missions, companies have optimistically taken on challenging projects, only to be surprised when weak consumer demand and obstacles such as bad roads keep revenues low and costs high. If they choose wisely, they can make profits and advance their social missions at the same time.ĭuring the past decade, many multinationals have come up short trying to make a profit by solving the pressing needs of low-income communities. The authors present examples of each type and explain that companies can pursue multiple opportunities simultaneously.
At the other end of the spectrum are frontier-market ventures to develop new products, conquer competitors’ markets, expand into greenfield markets, develop new business models, or create altogether new markets. In the middle are opportunities in growth markets: efforts to redesign products, extend distribution channels, or create new ones. At the simplest end are targeted marketing opportunities in mature markets. To help companies see how these challenges affect various business prospects, they have developed an “opportunity map” that classifies opportunities along a spectrum from the least complex and resource-intensive to the most. The authors cite two main challenges in selling profitably to the bottom of the pyramid: changing consumers’ behavior and changing the way products are made and delivered. That’s the contention of the authors, who say that a steady flow of profits from manageable ventures will pave the way for later investments in more-ambitious socially beneficial projects. The best way for companies to improve the lives of the world’s poorest people-those at the bottom of the pyramid-is to focus first on doing good business, not just on doing good.
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