The highlight of the Networked World conference was the discussion of the “base of the pyramid,” the notion (which I discussed in a post here) that the poorest four billion people in the world represent the Next Great Market. The panel was the most high-powered of the day: C. K. Prahalad, NASDAQ’s Al Diamond, and Jim Moore, the head of Advanced Materials. There were several lessons from the session, and a couple unexpected things.

First, it’s clear that in order to succeed in this market, companies will need to rethink their metrics and strategies as profoundly as companies making the move into mass production and markets had to. (“What do you mean, we’ll make more money if we lower the price?”) High unit profits are out, as are conventional models of pricing.

Second, reading the base of the pyramid will require thinking of the poor differently: not as stupid or the losers in the Great Game of Globalization, but as people who often have demonstrated tremendous creativity in the face of tremendous obstacles and nonexistent opportunities. (The instinct to treat the poor as deserving, not of charity but their fate, is easy to come to when you believe you live in a meritocracy.) Prahalad made the case that we have to go from thinking of the poor as an intractable problem, to thinking of them as an opportunity, and finally to thinking of them as a source of innovation. (Not just as
innovators in products, or uses of products, but also in organizations. As an example of the last, consider the Nutan Tiffin Lunch Box Association. It moves 175,000 homemade lunches per day, picking them up from housewives, carrying them into Mumbai, then returning the boxes. It uses illiterate deliverymen who are taught to read a notation system written on the boxes, and has a near-perfect delivery record: “Better than Six Sigma,” Prahalad declared.)

Finally, multinationals have to do this because if they don’t, they can look forward to a generation of Indian and Chinese companies growing up in these markets, then moving into advanced nations. If you thought that the Japanese were tough, this reasoning goes, just wait until you’ve got competition from countries with billions of people. (Clayton Christensen has made precisely this argument, in fact.) This is a global competition version of the fear of ghetto superpredator, an updated, corporate multinational Yellow Peril story– though I don’t think Prahalad, or anyone else working in this space, intends it to sound quite that way.