Khemka Forum Podcast Series: Transcript of the podcast with Stuart L. Hart, the Samuel C. Johnson Chair in Sustainable Global Enterprise and Professor of Management at Cornell University’s Johnson School of Management

Interviewer: Gaurav, The PRactice

Transcript

START

Gaurav: Stuart Hart, thank you so much for speaking to the Khemka Forum on Social Entrepreneurship.

Stuart: Well Gaurav, Thank you, it is a pleasure to join you and the rest of the group…

Gaurav: Stuart, since your seminal article on the fortune at the bottom of the pyramid, how has your thinking evolved with respect to your original idea?

Stuart: Gaurav, the original work on the fortune at the bottom of the pyramid with CK Prahlad, in some ways the title I think has given the work a certain trajectory. The original title of the piece was not ‘Fortune at the Bottom of the Pyramid’, it was ‘Raising the Bottom of the Pyramid’ and then a semi colon and then, Creating Sustainable Development was the sub title. But the actual title ‘Fortune at the Bottom of the Pyramid’ came from the editor and not from us. Interesting trivia fact. And again it came with the sense that this would be more provocative and it would get attention, and of course it did. CK’s book was later given the same title and I think that has been a big positive in many respects because it has got much attention but it also carries along a certain downside. And I say that one of downsides or perceptions or the assumptions, or the perception of some, that this whole notion, that the basis of this base of the pyramid business is really about just selling stuff to poor people that they don’t need. That there is a bag of money at the bottom of the pyramid and as capitalists we can go get it, we can extract it. And that of course was never the idea. You go back and read the original piece and see what CK and I did, that was not the spirit of it all. What I have found over the past six, seven, eight years that its really been important to take notion head on and focus on the idea of co-creation and co-generation of livelihoods. And what we’ve done is try to change the conversation, the narrative, the theme from finding the fortune at the base of the pyramid, which was never the intent, to creating a fortune with the base of the pyramid, which was always the intent, but really focused now on how do you create the management systems and on the ground strategy processes for doing that. Because it’s really about market co-creation that builds new business models and generates livelihoods as well as driving innovation and that’s the other piece of the puzzle. Over the past 10 years it has become clear to me, that in order for this notion of bottom up enterprise driven solutions to work, it absolutely has to be premised on the latest next generation clean technology for a whole lot of reasons. Number one people deserve nothing less than that, this is not about trickling down the old stuff that’s cheap. Number two, from the standpoint of global sustainability that the bottom of the pyramid is where we lead with what comes next first and then trickle it up, move it up, reverse innovation, frugal innovation whatever you want to call it

Gaurav: Let me dig in to that a little bit. I mean in your writings you have talked about how the real successful products for the BOP have been enabling products like telephony and microfinance and those products have certain characteristics that speak more to your original intent in the article. If I was to understand what you are saying, access to energy is another kind of one of these products, that it could be like telephony and microfinance a key enabler for the BOP and can get lot more private sector involvement.

Stuart: I think it does have a lot of the same properties as microfinance and telecommunications, but I think there has been a tendency to view it as an end product and to create a somewhat of a final retail perspective that we are selling solar panels or that sort of thing…to some degree that is what has got us into some trouble, right? Perhaps that’s why a lot of these ventures have not gone as far as they could have or should have gone. The metaphor I am using these days is that its all about writing that unfinished symphony that there is a tendency to write the entire symphony all the way to the last note and then try to sell it. When in fact with things like small scale distributable renewable energy I think it is very important to think of it as an unfinished symphony where you come in with potential and then engage in a process whereby people in the community itself in the space that you are looking to serve become co-participants in filling out and completing the rest of the symphony. That has a much stronger possibility than actually being pulled in a more significant way you end up creating demand-pull rather than technology push.

Gaurav: Let me just push you to go beyond the metaphor, I saw your recent blog on the unfinished symphony, do you have an analogous example of something like this has actually happened, the idea of co-creation?

Stuart: Again if you go back to the foundational examples of actual enterprises that have actually scaled that we end up back with microfinance and rural telephony and so on and so forth. I think they really are the most current examples of things that have scaled. I don’t know and can’t point anyone of you to any other recent examples of BOP enterprises that have really taken off by multinationals, by larger corporations or also in some cases are even by start ups. I think we are beginning to see some of that but it’s still early stage, and the jury is still out and it is important that we admit that to ourselves. In some instances people have placed greater expectations on this whole BOP business than that is reasonable. And when you think of it microfinance really extends back to ten years and then you have whatever form you want to call it social entrepreneurship, micro enterprise, and certainly base of the pyramid business and there is no reason to expect that will have multiple billion dollar plus smash hit home run successes in that space and time. You know when you consider how long it took the quality revolution to take around the world, three or four decades, I think its still early days. I don’t think we should be apologetic that we can’t point to a bunch of home run success stories. But we can point to some of these initiatives that have incubated in this way and have the potential to head in that direction. You look at some of the emerging small scale distributed point of use energy plays in India even the Durands and D.Lites and so on. They have been developed using some of the approaches I am describing and have the potential to move to scale in that way. You know the WaterHealths of the world, also the not in the energy space but in the water space there is a healthy dose of co-creation that was used in the early days, in India alright because of course WaterHealth have been around a long time before and reinvented and Acumen put money into it and certainly we can look around the world for emerging examples that have the potential to go to scale that way.

Gaurav: I think I am getting one of the themes that we are really at a nascent stage, a lot of us want to get into accelerating this growth, recognising that this has only been about ten years since many of these models have come to market. Let me quote you where you say we are drowning in perfecting good and clean technology, what we are not lacking in breakthrough technologies rather but in breakthroughs in how use them to take technologies to market?

Stuart: Actually a very real time pointed example I can bring in here. I’m involved in a new start up institute in India which is at least for now being called the Indian Institute for Sustainable Enterprise and the core premise of the institute is exactly what we are talking here, that we have a hole in the commercial space. I also did this blog called the doughnut hole and sustainable finance. I think there is a lot of activity around the social entrepreneurship concept which is figuring out how to get credit and financing into the hands of individual entrepreneurs on the ground right up from microfinance to social entrepreneurs. Do we need more, yes, I think that concept is reasonably well developed and on the other side you have a pretty well developed infrastructure of venture capital for clean technology venturing in, but still kind of the silicon valley model, the very conventional VC private equity model, but there is a growing area in between that really seeks to combine those two together this is the idea of green leaf of taking the next generation distributable clean technology and marrying it up to the on ground social processes, co creation processes that social entrepreneurs can bring to bear and generating these new green leaf businesses that way. We don’t have either the training place or the employee preparation that can happen that connects those things together, nor are there good financing mechanisms that can get those ventures off the ground. So this Indian Institute for Sustainable Enterprise is focused on trying to do all of those things. We look to create a new green leaf fund that is designed to finance these kind of ventures and we look to creating not only a capacity building program for entrepreneurs who want to do this but we will also look to pull together a patent thing, and technology thing, from universities, from corporations where thousands of these clean point of use distributable technologies sit on the shelf. What we would look to do with this institute is to really build a relationship with places like Cornell and MIT and Michigan as well as large corporations to gain access to some of these clean technologies that are just sitting there and bring them to the institute so that we can begin to interface them with the entrepreneurs and create the options and opportunities for those entrepreneurs and put these technologies into play with the cocreation process and to be able to do that, to be able to add to the technology with the entrepreneur and entrepreneurial capacity along with a new mode of financing then we may have the ingredients that may greatly increase the chances of these enterprises actually growing and thrive.

Gaurav: Thank you again for your time and thank you again for speaking to the Khemka Forum on Social Entrepreneurship

Stuart: My pleasure.

END