Big Fortunes from Small Change at the Bottom of the Pyramid

I’ve just returned from a conference on one of the most exciting and dynamic areas in global business.

No, it’s not information technology, biotechnology, or even clean technology, though all three could play a role.

The conference title: Eradicating Poverty Through Profit. It’s focus: the so-called “bottom (or base) of the pyramid.”

The BOP, as it’s become known in some circles, refers to the world’s 4 billion poorest citizens -- two thirds of the global population -- whose per-capita purchasing power in U.S. dollars is less than $1,500, the minimum considered necessary to sustain a decent life. The essential message of the conference, sponsored by the World Resources Institute and held in San Francisco, is that this swath of the population, traditionally ignored by businesses, especially multinational corporations, for their lack of buying power, actually represents a huge market opportunity for companies that know how to address it.

This notion isn’t exactly new. The BOP concept has been kicking around for roughly five years, and articles in business journals began appearing about three years ago. Some of the stories have been well-told -- of Grameen Bank, for example, which provides credit to the poorest of the poor in rural Bangladesh. At last count Grameen had 3.7 million borrowers, reached into 46,000 villages, and was changing countless lives while making a decent profit.

Also common are tales of small, scrappy firms in developing countries that beat out multinational competitors in creating markets, because the locals had more innovative products, pricing, and distribution systems that the stodgy big guys did not. And there are stories of firms both large and small making a profit selling life’s essentials at pennies apiece to those who might otherwise lack access to them -- and doing so profitably.

What is new about the BOP world, and was evident at the WRI event, is how it seems to be nearing a critical mass. The roster of 1,000 or so attendees included a blue-chip roster of multinationals -- BP, Citigroup, DuPont, HP, Intel, Microsoft, Nike, Procter & Gamble, SC Johnson, Shell, Visa, Vodafone, and others -- along with a passel of NGOs, government officials, and World Bank and United Nations types from around the world. Such a gathering would have been unheard of just a couple years ago.

What’s equally impressive is that the BOP movement -- and I think you can safely call it a movement -- unlike the environmental or corporate social responsibility movements, has flourished on a purely voluntary basis. There are no regulatory mandates and few activist campaigns that have pressured companies to join in. Largely as a result, there’s a sense of excitement, born of the rapid, organic growth that has brought all of these souls together to share their discoveries, experiences, and successes.

Also noteworthy is how companies operating in the BOP arena can find themselves not just in new markets, but in new businesses. An oil company may find itself selling agricultural products or services; a financial services firm may find itself building and operating hospitals or schools. Some of this has to do with being good neighbors -- a prerequisite for creating and maintaining stable operations -- but some of these unlikely ventures make money.

Not that there aren’t huge challenges. Among the cross-cutting issues: high start-up costs for many projects, and the paucity of available funding; getting the business models right for each project and country; handing off operations to local management in the right way and at the right time; finding good partners, whether NGOs, government officials, or local merchants. And the common refrain: This is hard stuff.

Indeed it is. But it is also among the more rewarding arenas of business today, a way for companies to inject creativity and passion into their operations, build significant new markets, and create enormous economic, environmental, and social value in parts of the world that had once been written off.

It isn’t often these days that one can get excited about the fate of the planet and its citizens. For a fleeting couple of days this month in San Francisco, that excitement was palpable.