The HLL (now HUL) project “Shakti Amma” is a shining example of BOP innovation. Through no argument in his article can Karnani refute this movement’s success.
It is an example of woman empowerment, of developing local distributors, of developing skills, of tuning the market according to local needs. It is this concept that is building self reliance in the Indian villages. CKP is talking about a saving-consuming-earning cycle as the process to fight poverty. He emphasizes all these equally and says that “…create capacity to consume for themselves and their families.”

Karnani says the “single serve revolution is a dud”. But that’s the only way the poor can buy a product of higher quality. If the Single serve package is not available the poor might never be anywhere in the vicinity of buying a better product.

CKP does mention that rather than charging a premium for the smaller packs (as is generally the case) the company charges the same price as that of larger price. This clearly shows that even if per unit cost might be high the company isn’t charging a higher premium for the smaller unit.

The problem of lower penetration of the iodized salt lies not only in the price premium but also in the lack of education of the people. The HLL’s campaign of selling health through its soap brand lifebuoy met with success. This was done by spreading awareness by educating people against diseases like cholera. I believe this education for the iodized salt will encourage the poor to buy the salt which is crucial for their life.

Further, the fact that Unilever replicated the iodized salt in other markets of Africa with similar problems suggests that the solution generated in one place CAN be replicated in other countries’ BOP.

When Karnani mentions about the “Aravind eye hospital”, he must remember he is talking about a country like India. About the BOP market he says “The poor are often geographically dispersed (except for the urban poor concentrated into slums) and culturally heterogeneous. This dispersion increases distribution and marketing costs and makes it difficult to exploit economies of scale. Weak infrastructure (transportation, communication, media, and legal) further increases the cost of doing business. Another factor leading to high costs is the small size of each transaction.” He gave this reasoning to point out that there is no fortune at BOP. I believe it is Karnani who is undermining the efforts. Aravind eye hospital is not only an efficient organization rather it is an organization that has achieved efficiency and cost benefit through innovative processes where Karnani feel have no chance of fortune.

Completely rejecting the BOP does not fit well the success stories of several organizations. Karnani should talk about the empowerment due to e-Governance. He cannot ignore the telecom revolution that has swept India. Even the giants like Vodafone are entering the Indian market with the hope of huge growth. Innovation is driving the costs down. A brand new handset with some other cost benefits is now available for as low as Rs.800(about $5).Even this amount can be given in interest free installment. The companies ARE targeting the BOP.

I agree with Karnani when he concludes “Certainly the best way for private firms to help eradicate poverty is to invest in upgrading the skills and productivity of the poor, and to help create more employment opportunities for them. This is the win-win solution; this is the real fortune at the bottom of the pyramid.” However CKP ‘s 12 principles of innovation for BOP already mention the above argument quite emphatically. I guess stating Fortune at the BOP as a mirage is a great fallacy!!

And it seems ever-closer.

However, the fact is that the penetration of Annapurna salt among the poor is miniscule at best
How miniscule? Or to put it differently, “how many millions served”?

At a price premium of 250%, not too many poor people see it as a bargain
Is this a question of education or economics? Given that salt is a miniscule fraction of the food budget, Annapurna salt might be the right way to go. If the poor are not lapping it up, it might be because they don’t know. But innovation is innovation. It might be something tha might pay off in the longer term.

“Amul, a large diary cooperative, found an instant market …We doubt too many poor people living on less than $2 per day find this ice cream a bargain.
“Too many”? Hold the sarcasm please. And again, “how many millions served”? Let us see some freaking numbers. How many unique customers? How many estimated customers among the poor?

There is an enormous, emergent middle-class in India and China that was not present 20 years ago, and going forward, this part of the bottom of the pyramid will likely surge in numbers and, therefore, market size. About 10 million Indians are getting out of poverty and into the middle class every year. The purchasing power of the Chinese is also increasing very rapidly. I don’t this number is going to approach the size of the American market any time soon, but at least, companies will see huge *increases* in market size. So, whether you believe in the 15 years estimate or not depends on your own analysis of the growth of these markets. In some ways, the BOP principle is an idea whose time has come.

My own suspicion is that some level of governmental help might be needed to allow SMEs to grow. At least in the area of finance, it is clear that governmental restrictions on MNCs has helped credit to be available to segments of the population that would not have such access otherwise.

I agree with the “if you really want to create dramatic growth, you have to get this sector going” part.

However, reading the Chap 4 of the BOP book (CKP’s), it seems to me that CKP also agrees with it, but goes on to say the following:

“However, traditionally, the focus of both business and social developmental initiatives at the BOP has been on one aspect of the ecosystems for wealth creating at a time - social capital or individual entrepreneurs (the focus of so much of the microfinance efforts), small and medium enterprises (SMEs), or large firms (market liberalization or foreign direct investment). There have been few attempts to focus on the symbiotic nature of the relationships between various private sector and social institutional players that can lead to a rapid development of markets at the BOP.” (first paragraph)

May be I was nitpicking, or missing the devil in the details in my earlier comment, but now it seems to me that CKP’s BOP theme is not simply to view “poor people” as consumers but going beyond that and saying such and such an ecosystem is needed in order to make the poor people producers and entrepreneurs and “oh by the way Mr. MNC, you need to work with these poor people to put this ecosystem in place; it won’t happen if you don’t pitch in; and the reward for you is they can be a market you can tap into.”

Right or wrong? I think right:-) In fact now it seems to me that it was Karnani who was nitpicking, by looking only at a partial picture of the entire BOP message. ?? I don’t think CKP was saying so strongly that poor people should be treated as consumers only. He too was saying they are to be treated as producers and would-be entrepreneurs.

P.S. In fact I may even go on to say that put it this way, BOP and RISC have similar parallels, skinning the cat in similar ways. Comments?

Regards,
Crazyfinger

So if we see big picture the ending could be really happy if all decide to buy (useful ) stuff.
So it turns out to be matter of efficiency boost that poor can get throug consumption of Value Adding commodities. And list of such things can be stretched from roti maker , microwave , washing m/c , hair dryer (yes that can save 5 mins a day ) , a moped (hands down), why stop here ? why not a tractor for farmers ?
And now talking about lone sharks. Its very wrongful to picture ALL of them in black. and the lone shark rates are 4-15 % pm depending upon the RISK factor not just because they like to suck you dry.

Please correct me if I am wrong somewhere .