Base of the Pyramid Innovation

When speaking about innovation, we usually think about the latest electronic gadget such as a tablet computer (ex. iPad2), a cellphone or even a car. Because this is culturally-based, the response would be different in other countries.  What very often doesn’t come to mind when speaking about innovation is base of the pyramid innovation (BOP innovation).

People at the “base of the pyramid” earn next to nothing.  A recent Harvard Business Review (HBR) article (“Segmenting the Base of the Pyramid”) categorized these individuals to earn $5/day or less.  Because of this, most companies pay very little attention to this market.  By no means is it small.  According to the HBR article, there are 1.4 billion people earning $3-5/day, 1.6 billion earning $1-3/day, and 1 billion earning even less.  That is a total of 4 billion people or 66% of the world’s population.

A few companies have been successful at reaching these consumers.  Yes, I did use the word “consumers” because they have needs just like the rest of them.  They may not have the same financial liquidity that we have, but they are very resourceful.  And they survive.  Companies like CEMEX, Mexico’s largest cement company, set up a program called Patriomonio Hoy, expressly targeting BOP consumers to help them build adequate homes.  Using an innovative system to incrementally pay for the building materials, CEMEX has had a very positive impact in these communities.  Probably the company that shined the spotlight and showed the opportunity with BOP communities is Grameen Bank.  Through the innovative use of microcredits, Grameen has radically changed access to financing so that very low-income could afford to purchase goods, build businesses, etc.

There is a tremendous opportunity for innovation at the base of the pyramid by creating not just products but also programs that satisfy the needs of very poor people and improve their lives in so many ways.  As they grow into mainstream consumers, those companies that have helped them in their humble beginnings will reap more than profits…they will earn their trust and their loyalty.  And that can’t be bought or couponed.

Let’s think about innovation beyond our borders…

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