Base of the Pyramid (BoP) strategy has a few key tenets, one of which is the power of aggregated demand. Those living at the base of the economic pyramid may have little buying power on their own, but when they are pooled together, their consolidated demand amounts to a viable market.
Companies are increasingly aware of and planning around this aggregated demand approach, as we have seen through such examples as the William J. Clinton Foundation’s ability to bring down the prices of AIDS drugs through a guaranteed high volume of sales.
That said, there is a need for not only existing products and services, but even more so for innovation at the BoP – so what about aggregating demand in those cases? How do you assess the ability and willingness of the poor to pay for products and services that do not already exist, and how do you convince companies to take a risk on such a vast and fragmented market?
I asked myself this question while researching the myriad of innovative water filtration systems designed for the BoP. As I was getting ready to critique a few of the designs and business models, I realized that I wasn’t qualified to make those judgments. I have only had to use a water filtration system a handful of times, and I don’t know the numerous local realities well enough to criticize one design over another. However, the targeted population for these systems is geographically scattered, linguistically diverse, and resource-intensive to reach, so who would decide which innovations would move forward?
While many in the base of the pyramid movement have hoped that innovations to serve both developing and developed markets will come from BoP communities themselves, co-creation has been lengthy, intricate, complex and time-consuming. Hart and Simanis have invested countless hours in the field practicing their embedded innovation model, and although they have had numerous success stories, the businesses that have been created through this model are still primarily community-centric versus globally-reaching. As Al Hammond’s recent writings on transformative sector scaling have pointed out, “A number of community-initiated business models have produced good results, but they aren’t easily replicable and don’t scale.” Going from community to community and engaging each in participatory design may be the ideal for embedded innovation, but it is certainly not at the scale that is necessary to reach efficiency gains and profitability through aggregated demand.
So, how do we engage with and understand the needs of millions of geographically dispersed people? Part of the solution may come from the model of Internet-based networks that consolidate demand – which I was first introduced to through Pop!Tech’s curator Andrew Zolli.
Zolli spoke recently at Columbia Business School about forces shaping our society. One of the key determinants that he laid out was the power of networks. Zolli, who is known as an expert in global foresight and innovation, said that understanding networks will be an increasingly invaluable skill, and the power that networks yield will also grow in enormity.
He was not just referring to social networks or to personal networks, but also to technology-based demand networks. These are online communities that have been created to aggregate the demand of multiple users in order to attract events, boycott businesses, and even design new gadgets. He cited Eventful and CrowdSpirit as two leading examples of these technology-based demand networks. Thanks to the Internet, individual actors who would normally not yield much power on their own are able to connect virtually with people with similar demands and make something happen.
CrowdSpirit, though very much a start-up, is the type of platform that I feel could help bridge the divide between innovation and high-volume demand at the BoP. It was launched to “co-create” electronic gadgets through an online design community. In essence, innovators from anywhere can submit ideas to the site, and numerous people vote for their favorite designs and aspects and then agree to purchase the device if the producer adopts their preferences.
The inventor decides to go forward with the idea if he or she sees that there is sufficient demand. CrowdSpirit is built on community-based and participative design, and takes some risk out of the equation for the producer/inventor, since there’s an advance purchase commitment at the end of the R&D pipeline.
Although it is built for high-end electronics, the model is fascinating. The Internet is enabling people to overcome traditional boundaries and bringing together the voices of millions. In 1983 Pierre Bourdieu, an early economic sociologist, realized the power that could be created through networks of relationships, “enabling numerous, varied, scattered agents to act as one and overcome the limitations of space and time.”
That sounds like exactly the type of model that would work for the BoP, and with technology that Bourdieu could not imagine only two decades ago, it may be possible. In C.K. Prahalad’s latest book The New Age of Innovation, the author notes that “we have finally reached the point where the confluence of connectivity, digitization, and the convergence of industry and technology boundaries are creating a new dynamic between consumers and the firm.” He continues by observing that “today, instead of a small group of people sitting and thinking about innovation, you can have three billion people not only being micro-producers and micro-consumers, but micro-innovators…everybody has an opportunity to contribute to innovation.” I am certainly not saying that the ideal of participatory design and on-the-ground co-creation or the marrying of resources and shared risk should be scrapped altogether in favor of a tool such as CrowdSpirit, but perhaps more individuals could be brought into the conversation over a shorter period of time if we can use technological advances to enable these numerous, varied, scattered agents to act as one and have a voice in innovation.
An example of this more democratized design platform may be the collaborative competition put on by the Global Water Challenge and Ashoka’s Changemakers to find disruptive technologies and solutions to the water sanitation challenge. By sourcing design ideas from all over the world and opening up the judging to anyone with an Internet connection, Ashoka’s Changemakers may prove to be a leader in demand consolidation and technology-enabled participatory design. In a recent MIT Press article, Charlie Brown, Executive Director of Ashoka’s Changemakers, wrote that
“democratizing the processes of finding social solutions and judging their worth creates a market place where beneficiaries can spell out what they need and how they think those needs can be met, and where investors can play a more active role in selecting, refining, replicating and scaling up projects.”
As cell phone and broadband Internet penetration rates increase around the world, countless individuals are being brought into this vast network. But it is up to BoP-minded innovators to creatively ensure that this connection brings those people not only online, but also puts them first in line.
Grace Augustine is a research associate with the William Davidson Institute, an educational institute focused on researching and supporting organizations in emerging markets. She writes for the NextBillion blog and has an interest in economic development and clean technology for the world’s poorest citizens.