CK Prahalad’s Ideas For India Are Even More Relevant TodayBloombergQuintOpinion
Management guru CK Prahalad advocated seminal ideas that have stood the test of time like ‘Core Competence’ (1990) , ‘Competing for the Future’ (1994), and ‘The Fortune at the Bottom of the Pyramid’ (2004). This month marks his birth anniversary and serves as occasion to examine his ideas and his influence in this special series of articles.
As India’s seventy-second birthday approaches, I re-read Professor CK Prahalad’s speech ‘India @75’ delivered in 2007, at the India @60 celebrations in New York. I was curious to know whether his ideas for India to fulfill her potential were still relevant, given the amount of unexpected economic, political and social change in India in the past decade; and if they were, I thought this would be good to remind ourselves of them and re-commit to the strategic thrusts that he so elegantly laid out with his trademark clarity.
CK was no distant non-resident Indian, pontificating from foreign shores on what India ‘should do’. He pushed for change and progress, engaging various forums with his characteristic force of intellectual energy and compelling articulation, with ideas that were born out of his deep connect and understanding of India in terms of people, policy and business environments.
It will come as no surprise to those who know CK’s work that what he framed a decade ago is even more relevant today. This is because his ideas are rooted in the future, based on his mantra “Imagine the Future” and—the harder part—having imagined it, create it. They are not based on simplistic projections of the past nor are they divorced from the reality of the present or the factors that contributed to past success. He always focused on ‘what can be’ and how it could be made so, based on a deep and fundamental understanding on what the present is and why it is so.
To create the imagined future, he talked of the process of “folding it in”; and described it as many “small and clear steps which are directionally right”, and executed with “a sense of urgency and purpose”. These steps are what he called “next practice”, beyond best practice; and he urged not to “look outside for models” but to look within India and “draw deeply on Her genius” to create this next practice.
Pursuing Inclusive Growth
CK suggested “income mobility” as the goal and the metric to measure economic growth - giving people the opportunity to move up the income hierarchy, made possible through education, skilling, work opportunities. India created her aspirational, striving society after liberalisation because people saw enough evidence of income mobility. Young adults had opportunities which enabled them to earn more than their parents ever did and income mobility across generations was starkly visible – especially in the lower-income groups. Economists’ prescriptions today often revolve narrowly around the goal of meeting a GDP number and do not explicitly take people – outcome goals into account. The present government’s promise of ‘development’ and increased access to infrastructure, public goods and the modern efficient financial system, if executed well, will enable income mobility.
CK was sledgehammer clear when he said “inclusive growth is not about subsidies – it is about creating sustainable opportunities”.
Now for the second goal that he laid out – focus on improvement of lifestyle in place of obsession with raising income levels. Conventional thinking makes this seems impossible – how does one achieve lifestyle improvement without income raise?
The most obvious? With better access to amenities that earlier only the well off could have. LPG gas connections and better public transport, for example, are such a big hit with voters because they improve lifestyle and deliver productivity that improves income mobility. Again, the talk the government has is directionally correct, many (small) steps are taken too, the real momentum will hopefully come soon.
Reality Check On ‘Fortune At The Bottom Of The Pyramid’
It is here, in the context of achieving the goals of improving lifestyle and income mobility that CK’s thinking on the “fortune at the bottom of the pyramid” fits in. Before we go down this path, let us first settle the numerical question of whether there really is a fortune at the bottom of the pyramid. There absolutely is. It’s India’s trick of numbers. Lots of people earning a little bit each adds up to a lot. According to ICE360 data, the most rigorous household income-expenditure survey in India, the poorest 40 percent of India’s households, earning on average about Rs 20,000 per month, have 20 percent of India’s household expenditure. This is 58 percent of GDP! Every business’ favourite, the middle class—actually the richest 20 percent of households—has about 40 percent of India’s expenditure. But the 60 percent of households below it on the income ladder collectively have a slightly higher income and spend far more.
To create acceptable quality at affordable prices and at a cost that makes the company profitable is the challenge. Today’s modest income consumers have a high threshold of what performance they will accept; occasional use of LPG by their choice is ok, a better coal stove instead, is not. The idea of ‘profiting’ from the bottom of the pyramid has several people up in arms, but the people at the bottom of the pyramid who want improvement in lifestyle and productivity, have no issues with it. Cell phones, two-wheelers, LPG, refrigerators, invertors, air travel, computers, health care, housing are not luxuries or fashion statements in their opinion. Fortune at the bottom of the pyramid exhorts businesses to see their role as adding (consumers perceived) value to consumer and creating value for themselves.
Innovate For Inclusion
CK’s answer to this was the idea of innovating (product/service/pricing/delivery system whatever else) to change price-performance equations. He show-cased several by now well known Indian examples of this. “The $30 cataract surgery, the $0.01 sachet of shampoo, $100 computer, $25 hotel room, $2,500 car”. He was prescient when he said, “this process is going to be accelerated…… further supported by the changing nature of technology”. He once asked me to imagine “Angadia + Dabbawalla + internet” and how much more powerful it could be for India than FedEx. I didn’t quite see it then. But today, with the sharing economy rapidly increasing in a super fertile environment of improving digital access, it seems obvious.
Today, the costs of serving the low-income, high-aspiration, geographically scattered consumers have crashed with new business models and quantum decreases in cost structures, made possible with technology.
What CK wanted us to do was to build an inclusive India with lifestyle inequality being less than income inequality, achieved by changing the price-performance equations in ways that would be dramatic. That future is here now. If big business won’t or can’t run with it, there are many startups and challengers who are doing it and scaling in “small steps but with a sense of urgency” as CK wanted.
Finally, he talked as early as 1989, of the development of “world scale domestic markets” that “local firms” would exploit, as compared to the then existing model of global-scale catered to by multinationals. That future is here too. Almost $1.5 trillion of personal disposable income and a “similar income, similar attitudes” mass-market straddling rural and urban India is here. The Chinese seem to have understood this very well – and are busy mining the fortune at the bottom of the pyramid in India!
CK also forcefully called out governance as a core strategic thrust for India @ 75 to reach her potential. In his words, it is “social justice not socialism”, “basic principles (not rituals) as tie breakers when confronted with difficult decisions”, dealing with “corruption with the seriousness of treason” and of course the “focus on imagination vs a focus on resources”.
Also in this special series:
Rama Bijapurkar is an independent management consultant and author of ‘A never-before world: tracking the evolution of consumer India’.
The views expressed here are those of the author and do not necessarily represent the views of BloombergQuint or its editorial team.