The Base of the Pyramid Protocol:

Co-Venturing at the BoP

Greening of Industry Network

Waterloo. Ontario
June 16, 2007 Stuart Hart
Erik Simanis
Duncan Duke
 Agenda

The BoP Protocol:

1. Background - The Why and What
2. Implementing the Protocol – The How
3. Building a New Capability – The How
4. Q&A
 The Business Sense of BoP Strategy
I. New Market:
> $15,000/yr Tier Massive & growing under-
1 served market
~800 million
(Prahalad & Hart, 2002;
Tiers Prahalad 2004; Hart 2005)
$3,000 - 15,000/yr
2&3
~1.5 billion II. Radical Innovation:
Incubation site for
“disruptive Tier 1 technologies”
(Hart & Christensen, 2002)

< $3,000/yr
Tier 4 III. Competitive Pre-emption:
Breeding ground for next-gen,
global-scale competitors
~4.0 billion (Christensen, Craig, & Hart, 2001)

Global Population
Per Capita Income (PPP)
The MNC: Traditional Customer Base

“Tip” of the
Income Pyramid
> $15,000/yr Cost structures, business
models, & research
methods based on a
“Western infrastructure”
The
“Base” of the “ToP”
Resource
Pyramid Customer
85% of Global Resources
The BoP: Serving a Different Customer

Less than $3,000 per year

“Base” of the The

Income Pyramid “BoP”
Customer Will require
cost structures,
business models,
& research methods
“Tip” of the
15% of
resources
based on a different
Resource infrastructure.
Pyramid
Many Companies are Beginning to
Experiment with the BoP
Nutristar, Nutridelight (nutritional drink), Pur (water purifier)

Hindustan Lever (detergent for the poor in India and Brazil), Annapurna
(iodized-Salt for the poor)

Making solar power affordable (India)

Banco Real, microcredit in Brazil

Vodacom community services in South Africa, joint venture between Vodafone

and Telkom SA

Solar powered digital camera in India and community information systems

Program in South Africa to help entrepreneurs enter the supply chain and profit
from new business ventures.

Water for all program to periurban areas in Brazil

 First Generation BOP Strategy:
“The Child With a Hammer”

• BOP 1.0 • BOP 2.0

– Different price point – Deep dialogue
– Redesign packaging – Putting the last first
– Low cost production – Build capacity
– Extended distribution – Leapfrog solutions
– Partner with global – Ecosystem of local
NGOs partners

“Selling to the Poor” “Creating Mutual Value”

 The BoP Presents:

NOT a marketing problem

The “Sachet Mindset”
• Food & Nutrition and FMCPs

NOT a technology problem

The “Killer Ap Mindset”
• Water Purification, Distributed Energy and ICTs

…but a Business Model challenge

 You can’t solve a
problem using the same
mindset that created it.

How do you “imagine”, pilot, and scale

business models for a BoP infrastructure if
your past and current business is ToP?
 Co-Create the Business!

Engaging the BoP differently…

Customers Partners

Clients Colleagues

Requires a New Strategy &

Venturing Process…
Co-Venturing
 The BoP Protocol is a
co-venturing process
that enables MNCs to…

Forge lasting partnerships with income-poor

communities through mutual dialogue and joint
learning
• Co-create new businesses embedded in the local
cultural and physical infrastructure that creatively
marry the community’s resources, technologies &
capabilities with those of the MNC

• Co-create new BoP markets that recognize and

derive genuine value from the business’ products
and services
BoP Protocol™: A Collaborative Venture
Sponsored By:
Cornell University
University of Michigan
William Davidson Institute
The World Resources Institute
The Johnson Foundation

Generous Support From:

DuPont
Hewlett Packard
SC Johnson
Tetra Pak

www.johnson.cornell.edu/sge
www.bop-protocol.org
 BoP Protocol™: Project Overview
2006 and Beyond
2003-2004
Executive Protocol
October 2004 October 2005 Education Refinement

Research
On
Workshop I Workshop II Full Scale
Development Designing Refining Implementation
Methodologies The The with Candidate
and Protocol Protocol Companies
BoP Strategies Dupont/Solae: India

Protocol Protocol
Version 1.0 Version 2.0
• Participatory Rural Appraisal (PRA)
and Field Guide
• Rapid Assessment Process (RAP) Pilot Test:
• Quick Ethnography SC Johnson
• Empathy-based Design Kenya
 BoP Protocol: Overview
Co-Generated Business Concept Co-Constructed Business Model

“Opening Up” “Building the

Ecosystem”
Launch a non-business specific
immersion guided by two-way Deepen commitment among the
dialogue and humility to catalyze company, community and other
generation of new business partners in order to construct
concepts the business model
New Market
Creation

“Enterprise Creation”
Evolve the business structure & build
the market base through staged and
flexible resource commitments

Locally-Embedded Business
BoP Protocol: MNC Initiatives

The SC Johnson Company

• Launch Date, June 2005, Kenya

The Solae Company (Dupont)

• Launch Date, April 2006, India
 BoP Protocol: Pre-Field Activities

Identifying deeply
embedded & attuned
community-based
organizations
Local
Partner
Identification

Snowball Matching
Inculcating shared
Networking geographies with
ethic & developing
common base firm’s strategic
of skills Team Community intent
Formation & Site
Preparation Selection
 Pre-Field: SC Johnson, Kenya
II. Team Selection
I. Site Selection

NYOTA, Nakuru District

III. Partner Selection

KIBERA, Nairobi
 Pre-field activities challenges

Corporate leadership

• Local corporate members on field team

• Buy-in from top & mid level management

• Corporate knowledge & capabilities

available to team
 BoP Protocol: Core Processes

Phase I
Opening Up
Business
Concept
Co-Generation

Building
Deep
Dialogue
Project
Collective
Phase III Entrepreneurship
Community Phase II
Enterprise Development
Development Building the
Co-Creation
Creation Ecosystem
Building Logic Building
The Market Shared
Base Commitment

Flexible New Business

Business Capability Model
Co-Creation Development Co-Construction
 Phase I: Opening Up

Business Phase I
Concept
Co-Generation Opening Up
Building
Deep
Dialogue

Collective Project
Entrepreneurship Community
Development Development
Co-Creation
Logic
Building Building
The Market Shared
Enterprise Base Commitment Building the
Creation Ecosystem
Flexible New Business
Business Capability Model
Co-Creation Development Co-Construction
 Opening Up
Attracting a
committed and
representative group

Project Community
Development

Building
Deep Dialogue

Building trust & critical

openness by practicing
humility
 Opening Up
Generating actionable
ideas that harness partner
capabilities & meet
local needs
Business Concept
Co-Generation

Collective
Entrepreneurship
Development
Creating an innovation
platform & shared business
language through joint
exploration of needs &
resources
 Opening Up
“Community-Based Cleaning & Waste
Management Company”
• 9 “Taka ni Pato” youth groups committed to building a business in Nairobi’s
slums with the support of an SCJ & CFK management team
• Offer a diverse set of cleaning and pest control services direct to homes
and businesses in Nairobi’s slums
• Provide suites of services that bundle SCJ products like Pledge®, Glade®,
Toilet Duck® and Baygon® along with existing youth services (e.g., garbage
collection and carpet cleaning)

SCJ Business Model Innovation

“ToP” Business “BoP” Business
SELL: Cases of Product Service
ENABLE: Distribution Micro-Enterprise
MANAGE: Retail Trade Community Partners
 Opening up challenges

Partners
• Local embedded community partner
• New organizational identity for community members

Capabilities
• It’s not development + business, it’s doing
business differently
• Build & practice a co-creation logic
 Phase II: Building the Ecosystem

Opening
Up
Business
Concept
Co-Generation

Building
Deep Phase II
Dialogue Building the
Collective Project Ecosystem
Entrepreneurship Community
Development Development
Co-Creation
Logic
Building Building
The Market Shared
Enterprise Base Commitment
Creation
Flexible New Business
Business Capability Model
Co-Creation Development Co-Construction
 Building the Ecosystem
Building Shared
Commitment Building an organizational
foundation and a strong
group identity

Developing shared Project Community

vision of the business & Development
commitment to joint action
 Building the Ecosystem
New Capability
Using Action Learning to
Development
evolve the value proposition
and brand from the ground up

Business Model
Co-Construction

Using Action Learning to

Develop Organizational &
Business Skills
Business Model Development:
CCS Pilot Business Model
CYE
CCS OBJECTIVES
BUSINESS
SERVICE LEVELS
• •Self-defined
IDENTITY
Services grouped into
“suites” that
• Flexibility
Community include:
forowned
business
evolution
Garbage
• Partnering withCollection
an MNC
Indoor Cleaning
Pest Control & IPM
Screening Windows
Wall repair & painting
Outdoor (grass cut,
garbage, drains)
• Pricing: Flexible by group
 Building the ecosystem challenges

Constructing the business model

• Engage broader community

• Business model is not a plan

Manage expectations
• Community members – income & status

• MNC – business model & scale of impact

 Phase III: Enterprise Creation

Opening Up
Business
Concept
Co-Generation

Building
Deep
Dialogue
Project
Phase III Collective Community
Entrepreneurship Development
Enterprise Development
Co-Creation
Creation Logic Building Building the
Building
Shared Ecosystem
The Market
Commitment
Base
Business
Flexible New
Model
Business Capability
Co-Construction
Co-Creation Development
 Enterprise Creation

Collective
Entrepreneurship
Development

Building The
Market Base

Deepening business to
community linkages… Jointly
evolving the value proposition
 Enterprise Creation
Flexible Business
Co-Creation

New Capability
Development
Building a platform for growth &
expansion... Evolving an organizational
structure around the business
 Enterprise Creation
Group: Tuff Gong
•Basic spraying service
•Lowest prices /high volume
•Serving other slums

Community: Mitumba
 Enterprise Creation

MECYG, in Mathare •Contracts for entire buildings

•Cleaning common areas & toilets
•Larger teams
 Enterprise creation challenges

Maintain flexibility
• Flexible organizational structures

• Directed evolution of NGO partners’ roles

Build organizational capabilities

• MNC – manage a business model incubation space
 BoP Protocol:
Discovery versus Creation

• Discovery-Based BoP • Creation-Based BoP

– “Target” the unmet – Be humble; begin with
needs in the BoP an open mind
– Estimate the size of – Spark competitive
the market imagination
– Adapt current products – Co-develop something
and technologies new
– Extend current – Build new business
business model via model on trust and
structural innovation social capital
– “Scale up” – “Scale out”
See: Alvarez, S. and Barney, J. (2006) “Toward a Creation Theory of
Entrepreneurial Opportunity Formation” Working Paper
 Beyond The Public-Private Partnership
“Public-Private Partnerships” “Co-Venturing”

Joint Entrepreneurs
The Business
MNC Driver BoP
MNC Community
Unique Capabilities Unique Capabilities
& Resources & Resources
BoP Broker &
NGO Gov’t
Representative

NGO Gov’t
BoP Business Model
Community Inputs Relationship
Facilitators
+ Relatively familiar partnership structure (MOU) - High role uncertainty; unknown goals & ends
+ Amenable to planning, managing & monitoring - Can’t plan or control an unknown future
+ Scale Up is imaginable & feels attainable - Unpredictable business model outcome

- Limited community capability development + Deep capability development of community

- Incremental Innovation of Business Model + Frame Breaking Business Model Innovation
- Competitive Advantage: Highly Replicable + Competitive Advantage: Hard to Replicate
 Beyond The Public-Private Partnership
“Public-Private Partnerships” “Co-Venturing”

Joint Entrepreneurs
The Business
MNC Driver BoP
MNC Community
Unique Capabilities Unique Capabilities
& Resources & Resources
BoP Broker &
NGO Gov’t
Representative

NGO Gov’t
BoP Business Model
Community Inputs Relationship
Facilitators

+ Amenable to planning, managing & - Cannot be planned, predicted or

monitoring
• Feels familiar
- Low degree competitive advantage &
community capability development
• Incremental business innovation
forecasted
• Feels uncomfortable
+ High degree competitive advantage &
deep community capability development
• Embedded Business Model Innov.
Building a New Corporate Capability

Native Capability
• Engage with marginalized groups and
communities in mutual business partnership
• Build long-term relationships of trust and
understanding with BoP communities
• Creatively marry MNC capabilities and
technologies with those of BoP communities
• Evolve the business model from the ground up
The Base of the Pyramid Protocol
Co-Venturing at the BoP

Greening of Industry Network

Waterloo. Ontario
June 16, 2007
Stuart Hart
Erik Simanis
Duncan Duke
 Enterprise Creation

Group: Bunker •Comprehensive & labor

intensive services
•Higher prices / lower volume
•Higher end of market

Community: Makina (in Kibera)