1. business and industrial

Bottom of Pyramid
Social challenge or business opportunity
Global Economic Pyramid
source : IFS/World Bank
Distribution of income divides our world into a pyramid
$20,000/Annum
1.0bn
Exchange
market
Top of the Pyramid
1.5bn
People
Subsistence
market
$2,000/Annum
1.2bn people
[$2-5/day]
Sub BoP 1
$725/Annum
1.6bn people
[$1-2/day]
Sub BoP 2
$365/Annum
1.2bn people
[ ~$1/day]
Sub BoP 3
Business solution for societal needs
Poverty
market
Bottom of the Pyramid
Blue Oceans
despite poverty BOP is sizeable economy
• Disfranchised from global progress and economic prosperity
• Lacks access to basic amenities like drinking water, health, medicine, education
Yet
• About $4.3 trillion economy in 2008; ignored by private sector
• $40bn ICT market (2008) [IFS : The next 4 billion]
Business solution for societal needs
Pyramid to a diamond
dynamic shifts will create different landscapes
Changes in GDP Segments 2025 – 2050
Business solution for societal needs
Charity is not sustainable solution
Private sector can deliver social change using business-as-usual
"If we stop thinking of the poor as victims, but rather as
resilient and creative entrepreneurs as well as valueconscious consumers,
a whole new world of opportunity will open up."
- Late Prof. C.K. Prahalad
Author of The Fortune at the Bottom of the Pyramid
Business solution for societal needs
How?
Philanthropy, zero profit, social business and profit maximization
Economic objective
Models that directly
impacts and
enhances company’s
core businesses
Social
business
The Foundation:
Resources dedicated
to address wider
societal issues
Business led
approach
Sustainable business
and social approach
turning challenges
into opportunities
Philanthropic
approach
Social objective
6 | Novartis | Social Business | Business Use Only
Social Business in healthcare sector
proof of concept
 Novartis Pharmaceuticals forayed into social business
translates healthier families) in 2007 in India
(Arogya Parivar,
 About 835 million live in far flung villagers and 65% of population lacks
access to essential medicines (WHO)
 Yet a $2bn market (2008) expected to grow to $5bn by 2015 (McKinsey)
 Innovation attained breakeven in 3 years and led to large social scale
social impact
 is now a leading case study at Harvard Business School on shared
value creation
 Attracted 11 industry followers
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Initial market challenges
consumer misbeliefs and health a low priority
 Mistrust in modern medicine and delay treatments due to loss of daily wages
• Dog bite treatment - spray chilies
• TB treatment : using witch craft
 Easier to find Coke than a pill for fever or pain
 10% of monthly expense on tobacco and alcohol but less than 6% on health
 Fragmented distribution & weak health capacities/capabilities of providers
 ….many more
8
Some questions to enter BOP
Key principles to define early
 Which poor patients to serve – the poor in urban areas or rural villages?
 What investment would be required to develop this new customer segment?
 How traditional “go-to-market” strategy needs to evolve to reach the new
segment
 How to align the new business model with its other business activities without
causing conflict or disruption
 How to manage and staff the new business operating in different environment
 Could it ever be scalable?
 Would it be sustainable, i.e. profitable enough to continue expanding?
Business solution for societal needs
4 A of marketing for BOP
Awareness and development efforts are key
Community education
Awareness
• Health awareness
• Physician education
Accessibility
Patient awareness
• Last mile distribution
• Health camps inside villages
• Capacity development through microfinance
Adaptability
Physician education
• Cross divisional portfolio of Novartis medicines
• Localization: team, brand name, marketing inputs etc
Affordability
• Small packs: but equitable price points (some of the OTC range)
• Affordable price - not differential pricing
Health camps
Awareness leads to demand and creates a market
social efforts funnel into commercial output
S
O C I
T SOCIAL
E A
A
M
L
HEALTH EDUCATION
HEALTH EDUCATION
C
Meetings
11
M E
T E
R C I
A M
A
BUSINESS
AVAILABILITY
AVAILABILITY
Collection
Collection
Distribution
Doctors’ Education
Doctors
& Loans
from
Education
&
MFIs
Health Camps
with doctors
Health Camps
with city
doctors
L
M
Referral
Cards
Referral Cards
Distribution
Health
Awareness
Meetings
Community
O
Drug
Drugcompliance
Compliance
loans from
MFIs
Medicine supplies &
Medicine
Loans
fromsupplies
MFIs to
& loans from
pharmacies
MFIs to
pharmacies
Arogya Parivar footprint
Large scale
 Across 10 states
 Team of 540 on field serving
 33,000 villages: 79 million
people
 54000 doctors and pharmacies
 ….. & growing!
12 | Sandoz APAC | Anuj P | Jan 24 2013 | Bottom of Pyramid | Business Use Only
Current footprint
Operational in India, Kenya Vietnam & Indonesia
India
Kenya
Vietnam
Indonesia
Since 2007
Since Mar 2012
Since Nov 2012
In pre-rollout stage
10 states
18 Counties
13 Provinces
3 Regencies
(Kabupaten)
Conflicts and benefits of social business
Conflicts
• Offers lower return – can be opportunity loss
• Needs time to break even
• Lower literacy and gender inequality are barriers to
consumption
• Product adaptations may be needed, and could
cost lot
Benefits
• Saves philanthropic funds and co-delivers social
goals (CSR + Business)
• Delivers growth for company and significant future
market investment without losing money
• Gains respect from regulatory and communities,
esp. for companies in volatile environment
• Profits through volumes (Unilever case)
Some other innovations
many have found treasures at BOP
 Unilever: Shakti in India (35% of sales in India!! (ref: HBS case study), safe water,
hand washing
 P&G: safe water
 DSM: nutrition through fortification
 Novo Nordisk: diabetic care
 Pepsi / Coke: water, co-distribution of medicines in Africa
 Intel India: handheld devices for rural health and government support
programs
 Vodafone Africa: sms for life for malaria treatments
 Safaricom Kenya: m-paisa banking the unbanked
…….many more
Business solution for societal needs
Some key lessons learned
Through experience
 Poor also pays, if counseled
 Trust builds over time through word of mouth and not
media
 Distribution, retail capacities are weak: need out of box
thinking
 An informal market, difficult for large corporations
 Possible to break even, could take about 3 to 5 years
 Generates significant social and reputational impact
Business solution for societal needs
Organizational support
To ensure right support
 Must sit inside business for real operational support
 Clear impact measurement metrics are critical
 Needs support from top, but eventually local buy-in a must
 Must align well with core operations
 Initial investments ideally from corporate until certain scale
and returns attained
 Different incentives for social business, combining matrix
of commercial and social returns helps
Business solution for societal needs
Conclusion
Doing well by doing good
 Poor is a customer too; ‘fishing, and not fish’
 Private sector can embed social goals in core growth strategies
 Investment for future, without losing money
 Earns respect and strengthens relations with government and
communities
 Challenges are opportunities in disguise!
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