Poverty and Profit

Dr. C.K. Prahalad, the beloved Indian management guru, was an extremely original but also productive thinker. ‘I am not interested in best practices but in next practices,’ he said recently. Last Friday Prahalad died in San Diego, age 68, still initiating new theories. He was considered one of the world’s top management thinkers. We owe him many wise insights on doing better business – so today’s Topic of the Week is dedicated to Prahalad.

Prahalad introduced the concept of ‘core competencies’ which led many companies to outsource. He challenged the supremacy of balance sheet thinking in management. He called that ‘company-anorexia’. Companies that think they’ll get the job done by dramatically cutting costs are ‘mean, lean but stupid’, he said. You need more than efficiency to survive – you need creativity and vision, he believed.

His book The Fortune at the Bottom of the Pyramid that catapulted him to rock-star-like fame brought a new market into the limelight: the billions of poor people who only have a few dollars a day to spend. He challenged multinationals to sell them services and products instead of despising them. Because there are millions of poor people, they form an enormous market, he reasoned. In his view, providing goods and services to the poor was a way of fighting poverty. In the developing world, Prahalad’s words materialised with companies selling small bags of washing powder. And even home appliances could be purchased over 24 months.

Not everyone agreed with Prahalad that there is fortune at the bottom of the pyramid. What is your opinion?