Science & Technology Studies Framework for Bottom of the Pyramid Business Strategy Assessment_Vijit Sunder_MSc Global Health Scholarly Paper 2014

SCIENCE AND TECHNOLOGY STUDIES FRAMEWORK FOR BOTTOM OF THE PYRAMID BUSINESS STRATEGY ASSESSMENT

Vijit Sunder ([email protected]) MSc Global Health, specialization in Innovations

McMaster University & Maastricht University July 31, 2014

Framework STS CONCEPTS

Vijit Sunder – Scholarly Paper

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INTRODUCTION: Bottom of the Pyramid market innovations has received rising attention both as a lucrative

untapped business opportunity and driver for eradicating poverty. In Global Health, many of the

key issues colleagues in this field grapple with, for example malnutrition, poor sanitation and

inadequate healthcare services is also closely linked with the obstacle of alleviating the

economic misery of the poor (Pervez, Maritz, & De Waal, 2013). Innovations targeted for the

Bottom of the Pyramid (BoP) market presents an inclusive capitalistic approach to solving

Global Health issues and alleviating poverty by framing the poor as a neglected and

underserved market ripe with profitable venture opportunities (Prahalad, 2010).

However, profits have been elusive for many businesses and entrepreneurs at the Bottom of the

Pyramid market (Karamchandani, Kubzansky, & Lalwani, 2011). The BoP market presents its

own unique set of challenges that force enterprises to adjust their traditional business strategies

applied for the higher and middle income population market (i.e. top and middle of the pyramid

market segments) or for these enterprises to create innovative business strategies tailor-made

for the BoP Market (Karamchandani, Kubzansky, & Lalwani, 2011). The businesses and

entrepreneurs that are able to innovate and disrupt traditional business strategies are the ones

likely to introduce and profit from innovations in the BoP market (Working with the Bottom of the

Pyramid: Success in Low-Income Markets, 2007).

In the academic field of Science and Technological Studies (STS), the relationship between

society and scientific/technological innovations is investigated extensively. STS attempts to

answer how values of a society (i.e. social, political and cultural) impact the adoption of

innovations into a society and vice versa. The abundant catalogue of literature in STS yields

crucial insights into how to make innovations work for the poor. Yet, based on a review of


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related literature, research into BoP market so far lacks a comprehensive STS framework that

supports businesses and entrepreneurs to systematically assess their business strategies for

developing and implementing their innovation for the BoP market.

The objective of this scholarly paper is to fill the gap in the literature for BoP markets on a

framework applying insights from Science and Technology Studies to assess the strengths and

weaknesses of business strategies for the innovation process of products targeted for the BoP

market.

The practical purpose for this scholarly paper is to provide businesses and entrepreneurs

seeking to target innovations for the BoP market with a STS framework they can utilize to

innovate, critically evaluate or refine business strategies. In doing so, the aspiration is that more

businesses and entrepreneurs will be able to realize the untapped market opportunity at the

BoP pyramid and this will then propel the progress of reducing poverty and creating innovative

products to solve Global Health issues.

CONTENTS OF SCHOLARLY PAPER

1. Bottom of the Pyramid Market Background (page 4-17)

2. Addressing Assumptions to Profit-Driven Market Based Approach (page 16)

3. Science & Technological Studies Framework for Business Strategy Analysis (page 18-33)

4. Application of Science and Technology Studies Framework: (page 34-36)

Case Studies on Bottom of the Pyramid Market Success and Failure


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BOTTOM OF THE PYRAMID MARKET BACKGROUND

Before discussing the STS framework and its application for analyzing business strategies for

the BoP market, it is important to review how attention to BoP became popularized and the

characteristics of this specific market. Understanding this will provide a context of the logic

behind private sector firms pursing the BoP Market.

Ground Breaking Origins. The seminal publication of the initial article in 2002 and later the

bestselling book in 2004 titled The Fortune at the Bottom of the Pyramid by C.K Prahalad was

responsible for creating a new wave of strategic business thinking and debate on incorporating

four billion low-income people, approximately two-third of the world’s population which

constitutes the bottom of the economic pyramid, into the formal global market economy

(Hammond et al., 2007). The inclusive capitalism premise proposed by C.K. Prahalad in his

seminal work advocates for a profit driven market based approach to poverty reduction

(Hammond et al., 2007).

In The Fortune at the Bottom of the Pyramid, Prahalad had initially only considered the role of

multinational corporations to compete at the bottom of the world’s economic pyramid (Prahalad

and Hart). It is important to note however that the proposition that the private sector can play an

important role in addressing the needs of the poor while earning profits also apply beyond

multinational corporations to all firms participating in the private sector, for example large

national companies, mid-size companies, small start-up enterprises and entrepreneurs

(Karamchandani, Kubzansky, & Lalwani, 2011).

The World Economic Pyramid. The distribution of wealth and purchasing power of the

different segments of the world’s populations can be captured visually in a pyramid as shown in


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Figure 1. This figure is taken from Prahalad’s’s book The Fortune at the Bottom of the Pyramid

(Prahalad, 2010).

Figure 1: World Economic Pyramid

Tier I represents the affluent segment of the world’s population, this segment is composed of

middle and upper income individuals in developed countries plus wealthy elites from the

developing countries (Prahalad & Hart, 2002). Tier 2 and 3 represents poor individuals in

developed countries and the rising middle-income individuals from developing countries

(Prahalad & Hart, 2002). Tier 4 represents the bottom of the pyramid, which is the focus of

Prahald’s work and the subsequent generation and discussion of business strategies targeted

for the BoP market by industry and academia.

The Call for Tier 4 Focus. Prahald asserts that firms in the private sector have been missing

out on profitable venture opportunities by neglecting the Tier 4 segment and only focusing their

attention developing products and meeting consumer needs for the Tier I, 2 and 3 segment of

the economic pyramid (Prahalad & Hart, 2002).


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Prahalad lists six general misconceptions that the private sector must change to appreciate the

commercial value and market potential of the Tier 4 segment in his seminal article, The Fortune

at the Bottom of the Pyramid.

Ø Misconception One: The cost structure of our enterprise does not allow us to profitably

compete at the bottom of the pyramid and target the poor as consumers

Ø Misconception Two: There is no demand by the poor as consumers for products, we

market to Tier 1, 2 and 3 segments of the economic pyramid.

Ø Misconception Three: Innovations in Science and Technology is only appreciated and

demanded by consumers in Tier 1,2 and 3 segments. Tier 4 consumers are content with

previous generations of scientific and technological advancements.

Ø Misconception Four: It is the government and nonprofits responsibility to meet Tier 4

needs. BoP is not important for contributing to the long term sustainability and viability

for our business

Ø Misconception Five: Managers are not motivated to address business challenges with

humanitarian dimensions to it

Ø Misconception Six: It will be difficult to find and hire talented managers who want to

work in BoP market and target the Tier 4 segment. Human capital is only motivated in

developing and delivering innovations for the Tier 1,2 and 3 segment of the economic

pyramid.

(Prahalad & Hart, 2002)

Other academics like Martinez and Carbonell (2007) also reflect Prahald’s stance on the need

for the private sector to refute its misconceptions about low-income individuals at the Tier 4

markets. Martinez and Carbonell (2007) lists three additional misconceptions that need to be

overcome to draw attention to the market potential at the BoP.


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Ø Misconception Seven: The poor do not have enough money; the return on the

investment for targeting the poor as consumers and developing products for the BoP is

too low

Ø Misconception Eight: The poor’s consumption is only restricted to products that serve

their basic needs/necessities. The poor would never purchase “luxury” items.

Ø Misconception Nine: The poor would only purchase cheap products as consumers

(Martinez & Carbonell, 2007)

Martinez and Carbonell (2007) argue that even though for an individual, the income earning is

low, the joint purchasing power of the poor is large if the private sector takes into account the

accumulated purchasing power of poor families and communities at large. Secondly, Martinez

and Carbonell (2007) state that the poor do buy luxury items like a television or gas stove if they

can afford it and if it will improve their quality of life or enjoyment.

In their critically acclaimed book titled Poor Economics, Banarjee and Duflo (2011) provide

examples through evidence based randomized control trials and observations on how the poor

think and make decisions on issues that affect them such as healthcare, education, food,

finance, etc. In Poor Economics, the authors provide evidence that would support Martinez and

Carbonel’s statement and debunk the assumption that the poor do not buy luxury items. As the

authors state “Generally, it is clear that things that make life less boring are a priority for the

poor. This may be a television, or a little bit of something special to eat or just a cup of sugary

tea ” (Banerjee & Duflo, 2011, pp. 37). The authors cite an example of an interview they

conducted with a poor family man named Oucha Mbarbk in a remote village in Morocco. When

visiting his home, the authors noticed he had saved up his earnings over many months to

purchase a television, a parabolic antenna and a DVD player (Banerjee & Duflo, 2011). When

asked why he didn’t use that saving to buy more food even though him and his family is short on


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food, he replied laughingly “Oh, but television is more important than food!” (Banerjee & Duflo,

2011, pp. 36). For Oucho and many others, luxury purchases like televisions offer the poor to

indulge in the consumer pleasures of the market (Banerjee & Duflo, 2011). The implication of

this finding is that there is demand by the poor for products traditionally targeted for Tier 1,2 & 3

by the private sector. The authors’ conclusion from their field studies with the poor like Oucho is

that there is a strong counterintuitive trend for the poor to increase the purchase of luxuries (e.g.

better tasting food with low nutritional content or television) and reduce money spent on

necessities with their additional income/earnings (Banerjee & Duflo, 2011).

Lastly, Martinez an Carbonel (2007) debunk that the poor only purchase cheap things by stating

that in contrary the poor usually pay much higher prices than middle and upper class consumers

do for the same goods/services because of factors like the inability to obtain bulk discounts and

greater expenditure of resources like time. An example is for poor living in remote rural areas,

they will have to expend a greater effort through time and transportation costs to travel to a

distant hospital or clinic for a treatment compared to a middle to high income individual(s) living

in close proximity to healthcare services (Hammond et al., 2007). Martinez states that for

enterprises with economies of scale and efficient supply chains, there is market potential in the

Tier 4 segment for providing “quality goods at affordable prices and with attractive margins”

(Martinez & Carbonell, 2007, pp. 51).

“The company that is searching for new markets and business opportunities may find

means of commercial revitalization and ethical commitment by concentrating on the most

disadvantaged” (Martinez & Carbonell, 2007, pp. 51)


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Market Potential at the Bottom of the Pyramid. Four billion people representing a majority of

the population from developing countries in Africa, Asia, Eastern Europe, Latin America and the

Caribbean characterize the BoP market. Review of literature on BoP will yield different criteria

used to characterize this bottom of the economic pyramid (Pervez, Maritz, & De Waal, 2013).

The commonly used criterion for the bottom of the economic pyramid is the population segment

which represents individuals with per capita income that is less than $2 per day based on

purchasing power parity (Prahalad, 2010; Hammond et al., 2007; Subrahmanyan & Gomez-

Arias, 2008), or the equivalent of $3,000 or less per annum in purchasing power parity (Pervez,

Maritz, & De Waal, 2013).

Due to the sheer volume of individuals at the bottom of the pyramid, Prahalad appraises that if

this population segment were to be incorporated into the global market economy, the BoP

market would represent a multitrillion industry (i.e. accumulated purchasing power of Tier 4) for

the global private sector. Conservative measures from researchers like Subrahmanyan and

Gomez-Arias (2008) state the potential of the BoP market to be $ 5 trillion.

The industry report, Working with the Bottom of the Pyramid: Success in Low-Income Markets

published by Dansk Industri, a trade and employers association for the Danish companies

provides a detailed look into how Danish Industries can enter the untapped and uncontested

market opportunities in the BoP market. This report provides strong evidence via statistics that

support the conservative measures by researchers like Subrahmanyan and Gomez-Arias (2008)

at $ 5 trillion.

Detailed look into the data to characterize the $5 trillion market potential at the BoP are provided

in this industry report by categorizing data into regional markets, sector markets and income

distribution within the BoP population segment. The report also presents a convincing case


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through its BoP business model to support the argument that the private sector should consider

and pursue market opportunities at the BoP.

A notable table presented in this industry report is included in this scholarly paper (refer to

Figure 2) to provide the reader with a simple overview of the distribution of BoP population,

income and market size globally (Working with the Bottom of the Pyramid: Success in Low-

Income Markets, 2007).

Figure 2: BOP Population, Income and Market Size - Source: Dansk Industry Report

As seen in figure 2, BOP population constitutes an overwhelming portion of the population in

different regions of the world. The volume of poor is enormous and in regions, notable in Africa

and Asia, the BOP share of total market is worth the attention from the private sector.

Appendix A of this scholarly paper lists other detailed graphs/tables from the Dansk Industri’s

Industry report that will be of interest to the reader to get a further look into the characteristics of

the BoP market.


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Win-Win Scenario. Prahalad and those in agreement with the argument for incorporating the

Tier 4 segment into the Global market economy assert that by doing so, it is a win-win scenario

both for the poor and for the private sector (Prahalad, 2010).

Traditionally, the development community has primarily served the needs of the bottom of the

pyramid. The problem framing inherent in the traditional approach is the poor is regarded as a

population segment that requires the assistance of aid, governmental programs and charity in

order for them to meet their needs, because they are unable to meet their needs on their own

resource-wise (Hammond et al., 2007). Common solutions under this problem framing include

subsidies, handouts and increase in governmental funding, national and international for public

investments in programs and policies to reduce poverty (Hammond et al., 2007).

In contrast to the traditional development approach, the profit driven market-based approach

frames the problem that the poor is a population segment that is unable to meet their needs

because they have been neglected by the private sector due to misconceptions. Consequently,

their lack of integration into the global market economy limits the poor to access goods and

services they require to meet their needs and access to economic opportunities to lift

themselves out of poverty (Hammond et al., 2007).

Advocates for the profit driven market-based approach state that unlike the traditional

development approach, the poor is not perceived as a population segment that is helpless, in

need for assistance and unable to participate in the market because of their lack of personal

resources (Gifford, 2010). Advocates argue that “being poor” should not be misconstrued with

the idea that this population segment is precluded from commerce and market process (Gifford,

2010). Instead, the profit driven market-based approach perceives the poor as consumers and

producers that can take advantage of economic opportunities to meet their needs and escape


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poverty by participating in a competitive, efficient and inclusive market (Gifford, 2010; Hammond

et al., 2007).

By integrating the poor into the global market economy, advocates assert that the utilization of

the vast private sector resources for this market at the BoP will generate a host of innovative

products created specifically to fulfill the unmet needs of the consumers (i.e. the poor) and

improve the economic conditions of the local community of the Tier 4 segment through market

forces (e.g. foreign direct investments, creation of new market niches, employment creation for

the poor, etc) (Gifford, 2010). Additionally, advocates of a market-based approach to poverty

reduction bolster their argument by citing cases provided by the school of thought from

researchers like William Easterly and Dambisa Moyo on the inefficiencies and unsustainability

of the traditional approach to alleviate poverty and address international development/global

health challenges (Esau, 2012).

For the private sector, the Tier 4 segment would represent a Blue Ocean. Blue Ocean is a term

coined by Kim and Mauborgne in their 2005 business strategic management book Blue Ocean

Strategy. Kim and Mauborgne (2005) classify markets broadly into two categories: Red Ocean

and Blue Oceans. Red Ocean is all existing industries operating in a well-known and

competitor-saturated market space (Kim & Mauborgne, 2005). The objective of a firm in Red

Ocean is to compete with rivals to gain a greater market share and fight for existing demand

(Kim & Mauborgne, 2005). On the contrary, the Blue Ocean represents the unknown and open

markets with no existing industries, thus no competition (Kim & Mauborgne, 2005). Thus the

firm in a Blue Ocean focus is not on fighting over demand and market share, instead the firm’s

objective is to explore this uncontested market space and create demand by developing

innovations in technologies and products (i.e. goods and services) ((Working with the Bottom of

the Pyramid: Success in Low-Income Markets, 2007 ; Kim & Mauborgne, 2005).


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Tier 1, Tier 2 and Tier 3 have been the primary focus of the global private sector and as more

firms enter and compete for demand from these population segments in existing industries, the

market space gets crowded which in turns means the potential for growth and profits are

reduced for a firm (Working with the Bottom of the Pyramid: Success in Low-Income Markets,

2007). Advocates for the private sector to focus on BoP market say that because the BoP

market represents the characteristics of a Blue Ocean, private sector firms that can innovate

both in terms of products and business strategies for this market will reap the benefits over their

competitors’ decision on not pursuing this market (Working with the Bottom of the Pyramid:

Success in Low-Income Markets, 2007).


published by Dansk Industri (2007) provides a detailed explanation into why BoP are Blue

Oceans for the global private sector and the commercial benefits of pursuing this market. The

content from this industry report is summarized into a table format in this scholarly paper.

Benefits Detailed Explanation

Vast Market Size The BoP market is composed of 4 billion underserved consumers, 72 % of

the world’s population, and a purchasing power of $5 trillion. This market is

neglected by the global private sector and thus there is a shortage of

innovative products to meet this market segment’s needs and demands.

Granted the profit margins would be low for an individual consumer,

however because of the sheer volume of this market, firms that are able to

tap into this market space will see profits driven by volume over high profit

margins.

High Growth The BoP market is a source for new future growth. In regions like Africa,


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Potential countries are experiencing 5% economic growth and it is expected that the

economic growth in regions with a large BoP population like Africa, Asia,

Latin America and Eastern Europe will continue to increase in the future.

Forecasts state that consumers are expected to move up Tiers (e.g. 4 to 3)

as these regions experience growth. By creating new markets in BoP now,

private sectors can establish, expand and build on these markets as the

economic growth in these regions increase.

Uncontested

Market

Because the global private sector primary focus has been on the Tier 1, 2

and 3 population segments, this market is characterized as a Red Ocean

because of the intense saturation of competitors fighting over demand and

market share in this market space. The BoP market are considered Blue

Ocean because this market space is characterized by little to no

competitors serving the needs and supplying the products to meet the

demands of the consumers.

Cost-Saving

Opportunities

If the private sector firm is willing to adjust their business strategies to

incorporate local suppliers and distributors for their product development

and distribution process for the BoP, these firms can then take advantage of

the lower cost structures and production costs in developing markets.

Innovations

Incubator

Targeting the poor as consumers in the BoP presents an opportunity for

private sector firms develop and innovate novel products, technologies and

business strategies to gain a competitive advantage in the global market

economy.

Innovating for BoP also carries important opportunities for reverse

innovation for a private sector firm. Reverse innovation refers to the process

of developing products/innovations in developing regions and then


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repackaging and distributing these innovations as low cost products to

developed markets, thus creating new demand through pricing and creating

new market opportunities for population segments in Tier 1, 2 & 3 (Trimble,

2012).

Figure 3: Benefits for the Private Sector to target Bottom of the Pyramid Market

The President of Inter-American Development Bank, Luis Alberto Moreno summarizes the

argument for the Win-Win Scenario for the poor and private sector through profit driven market

based approach succinctly in few sentences below (Hammond et al., 2007).

Challenges and Obstacles. TK Hammond et al., 2007

Challenges. The BoP markets offer a unique set of challenges that differs from the ones

encountered in the developed markets. In order for private sector firms to be successful at the

BoP, they must reconsider their traditional strategic approaches and not only innovate with their

products but also with their business strategies in order to overcome the unique set of

challenges in these low income markets.

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“Like consumers everywhere, the poor are constantly looking for products and services that

improve their quality of life at an affordable price. The poor are also vital producers and

distributors of an immense range of goods. Companies that are smart enough to tailor their

offerings to the needs of low-income consumers and entrepreneurs will thrive in the 21st

century”

Luis Alberto Moreno,

President of Inter-American Development Bank

(Hammond et al., 2007, pp 154)

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published by Dansk Industri (2007) and Harvard Business Review’s article Is the Bottom of the

Pyramid Really for You? (2011) provide a detailed explanation into the challenges for a private

sector in pursuing the Bop Market. The content from these two sources is summarized into a

table format in this scholarly paper.

Challenges Detailed Explanation

Uncertain Cash

Flow & Cash

Strapped Consumer

Consumers at the BoP have very limited purchasing power individually

and live in a day-to-day uncertainty in terms of income generation. This

poses a challenge because upfront payment of products is often not

feasible for the consumer

Geographic,

economic and

cultural proximity

Private sector firms not located in proximity to the local community of the

BoP consumers will face challenges in terms of deciding marketing

strategies because communication barrier created by distance.

Creating Demand Due to limited accessibility to various communication mediums,

consumers have a lower product awareness and understanding to

maximize product functionality. Private sector firms must think of

innovative ways to raise awareness and educate consumers regarding

the firm’s products

Undeveloped

business

ecosystems

BoP markets are characterized by weak physical, regulatory and

institutional infrastructures. This presents numerous challenges for firms

during production, packaging, storage and distribution of their products

Figure 4: Challenges for the Private Sector to target Bottom of the Pyramid Market


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ADDRESSING ASSUMPTIONS TO PROFIT-DRIVEN MARKET BASED APPROACH Prahalad’s pioneering work advocating market based approach as a solution to solve problems

and meet the needs of the BoP led many in the academic and industry circles to side with this

perspective, however there were also opposition. Aneel Karnani, an associate professor of

strategy from Ross School of Business, University of Michigan is a vocal critic of Prahalad’s

proposed approach. Select papers like the “Bottom of the Pyramid Strategy for Reducing

Poverty: A Failed Promise” and “Fortune␣at␣the␣Bottom␣of␣the␣Pyramid:␣A Mirage” from Karnani

argue the irresponsibility of the libertarian free-market movement for poverty alleviation (Karnani

2006; 2009).

Karnani (2009) states that Prahalad’s romanticized view of the poor as “resilient and creative

entrepreneurs and value-conscious consumers” is empirically false and this type of thinking is in

fact harmful for the poor. He emphasizes that there needs to be legal, social and regulatory

mechanism to protect the poor because they are vulnerable as consumers (Karnani 2009).

Karnani stresses that the BoP proposition by Prahalad neglects the critical role of the State in

poverty reduction. Karnani does not dismiss the benefits of the role of the private sector on

poverty alleviation, he acknowledges the vital role private sector plays. Instead he argues that

the focus should be less on the free market economy and instead on how the State can build

local and global capacity to solve problems and meet the needs of the poor (Karnani, 2009).

With that being addressed, the scope of this scholarly paper is not to analyze and conclude on

the debate on which approach is appropriate for poverty alleviation and the degree a private

sector or a State should play in addressing the problems of the poor. The objective of this

scholarly paper is to provide a Science and Technological Studies Framework that can be

applied during the profit-driven market based approach.


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SCIENCE AND TECHNOLOGICAL STUDIES FRAMEWORK FOR BUSINESS MODEL/STRATEGY ANALYSIS The Beginnings of the Framework. During an exchange term at Maastricht University, the

author of this scholarly paper enrolled himself in the innovations elective track for his Master of

Science in Global Health program. There, he was introduced to the academic field of Science

and Technological Studies (STS). This academic field exposed the author to concepts on the

co-relationship between technological innovations and society, and on how to use this co-

relationship in the context of making innovations work for the poor.

While completing his coursework, the author found an opportunity for the private sector firm that

is interested in the BoP market to utilize the concepts from STS for business strategy

development and assessment. After a review of related literature for business strategies for the

BoP market, examination of case studies on private sector firms that are succeeding and failing

in this market space, the author found from his literature review that there was no explicit

framework linking concepts on enabling innovations for the poor from STS studies with business

strategy for the BoP Market.

The purpose of the Framework is for private sector firms or entrepreneurs to look at each stage

of the innovation process for their product targeted at the BoP market, apply STS concepts to

either

1. Develop a business strategy for their product appropriate for different stages of the

innovation process in the context of BoP Market

2. Assess the strength of the business strategy for the individual stages and overall

innovation process in the context of BoP Market


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Conceptualizing the Innovation Process. The conceptualization of the innovation process

differs from one private sector firm to another and from one literature source to another.

Based on the review of literature sources, cross-analyzing the commonalities of the various

conceptualization of the stages in the innovation process, the innovation process is

conceptualized in the following manner.

Figure 5: Conceptualization: Stages in the Innovation Process

STAGES IN THE

INNOVATION PROCESS

PRODUCT CONFIGURATION

KNOWLEDGE TRANSFER


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1. Need(s) Identification: Involves the business strategies utilized to explore potential

unmet needs and demands at the BoP

2. Pre-market Analysis: Involves the business strategies utilized by the private sector firm

to understand the market environment their potential target consumer is located in

before product launch.

3. Product Development: The business strategies involved in developing potential

product ideas and the chosen product to meet consumer needs and demands.

4. Product Testing: The business strategies involved in testing the product on a sample

population before product launch. Purpose of testing is to validate if product meets the

criteria formulated from consumers needs identification and pre-market analysis.

– Product Configuration: Product Testing is closely coupled with Product

Development since it provides vital information required to make decision if the

product needs to be configured during product development.

5. Product Distribution and Marketing: Involves all the business strategies associated

with the distribution and marketing activities required to raise awareness and

accessibility of products for target consumers. Product Distribution and Marketing also

refer to the Product Launch.

6. Post Market Analysis: Involves the business strategies utilized by the private sector

firm to understand the success of creating demand for the product (e.g. sales, rate of

adoption, etc) among target consumers and the market environment post product

launch.

– Knowledge transfer: Conducting Post Market analysis provides useful data the

private sector can utilize to ..

i. Further understand consumer needs

ii. Refine their business models/strategies

iii. Configure products further


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…. to better supply consumer demand and increase profits or create new market

opportunities.

It is important to note that this innovation process conceptualization is the author’s personal

perception of the process and it may not capture the true sequential stages of the innovation

process a given private sector firm undergoes when developing products for the BoP products.

Bearing that in mind, the purpose of the innovation process conceptualization provided in this

scholarly report is to explicitly demonstrate through a framework on how to apply STS concepts

to develop or assess business strategies for each stage of the innovation process. Even if the

innovation process is conceptualized differently, the concepts in the STS framework remain

consistent and can be applied accordingly to different interpretations of the stages in the

innovation process.

Principle from STS. The principle message academics from STS field proclaim is that when

developing products, whether it be goods, services or interventions for the poor, it is not

sufficient to focus only on the technology of the innovation itself (Leach & Scoones, 2006). It is

also vital for organizations and individuals to focus on the community the innovations will be

used in because the local social, political and cultural values of the community the poor live in

play an influential and significant role in the extent of the acceptance of the innovation by the

poor (Leach & Scoones, 2006). In short, local context needs to be carefully and critically

analyzed to enable innovations to work for the poor.

Addressing an Inconsistency. In terms of applying literature from STS to business strategy

development and analysis, there is an important inconsistency that needs to be addressed. The

literature from STS that was reviewed for this scholarly paper was primarily written in terms of


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how scientific and technological products can be transferred to the poor better through the

innovation process via

i. State measures like policy and public programs

ii. Healthcare/Clinical Institutions

iii. Non Governmental Organizations

iv. Scientific institutions and the culture of how research is conducted

For those literature sources mentioning the private sector, the emphasis was on how the private

sector as an actor fits into the overall innovation process for a State to transfer innovations to

the poor. For example, Public-Private Partnerships and how this relationship between the State

and private can allow for the successful development and uptake of innovations for the poor

(Leach & Scoones, 2006; Jasanoff, 2004; Jasanoff 2007; Bijker 2009;).

Thus there is an inconsistency in terms of the reviewed STS literature’s lack of focus on the

private sector’s internal innovation process and this scholarly paper’s intense focus on the

internal innovation process of the private sector. On a positive note, it is important to note that

the concepts for transferring innovations to the poor remain consistent in both circumstances.

For this scholarly paper, STS concepts in the reviewed literature were critically evaluated to

judge its applicability for the internal innovation process for a private sector firm. The concepts

that were appropriate in the context of a private sector’s internal innovation process were

reformulated into a Science and Technological Framework for Business Strategy Analysis.


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Presenting the Science and Technological Framework For Business Model/Strategy Analysis.

Stages in the

Innovation Process

STRENGTH OF BUSINESS STRATEGIES

Need(s) Identification The needs of the BoP are homogenous

among all populations in this market

segment.

The needs of the BoP are

heterogeneous and vary from one local

society to another.

Pre-market Analysis: Statistical data is primarily dependent

upon when assessing the market and

for pre-product development. Analysis

done only on the technology itself.

Ethnographic information is given equal

importance with statistical data. Analysis

done on both the co-relationship

between technology and society.

Product Development Development of product occurs in a lab

isolated from local society context.

Development of product occurs in a lab

embedded in the local society context

Product Testing The BoP population regarded as

consumers and outside of the

innovation process

The BoP population regarded as

consumers + business partners and

embedded within the innovation process

Product Distribution and

Marketing:

Marketing and distribution methods that

work for one local context will work for

another local context

Socially responsible and locally reflexive

marketing and distribution methods.

Post Market Analysis Statistical data regarding business

strategic success is primarily gathered

to analyze (e.g. volume of sales and

profits).

In addition to the statistical data,

ethnography studies are conducted to

analyze how the local society and

innovation is impacting each other.

Figure 6: STS Framework for Business Model/Strategy Analysis

STS CONCEPTS FOR BoP MARKETS

WEAK STRONG

Diffusion Model

Translation Model


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The STS Framework presented provides an analysis tool private sector firms and entrepreneurs

can utilize when developing or assessing their business strategies for transferring innovations to

the BoP market. The business strategies for each stage in the innovation process will fall along

this STS Spectrum depending on the interpretation of the degree the business strategy aligns

with a translation or diffusion model.

Strength of Business Strategy based on STS Models. According to the STS literature

reviewed, the approach for the development and implementation process of innovations for the

poor can be categorized into these two models. These two models also describe the overall

process on how innovations reach the end users (i.e. the poor in the context of this scholarly

paper) (Blume and Rose, 2003; Rogers, 2003).

Prominent academics like Bijker, Leach, Scones and Jasanoff from STS and Global Health

propose that the diffusion model is the traditional approach utilized by organizations during the

innovation process and these academics argue that this approach is ineffective (2006; 2004;

2007; 2009;). It is ineffective because the diffusion innovation process yields products that do

take into account the local social, political and cultural context (Leach & Scoones, 2006;

Jasanoff, 2004; Jasanoff 2007; Bijker 2009;). By not taking the local context into consideration,

the products for the BoP will face high resistance and low acceptance by the end users, the

poor at the BoP (Leach & Scoones, 2006; Jasanoff, 2004; Jasanoff 2007; Bijker 2009;).

Alternatively, these academics propose that the translation model needs to be the new

approach public and private organizations should adopt strategically during their innovation

development and implementation process (Leach & Scoones, 2006; Jasanoff, 2004; Jasanoff

2007; Bijker 2009;). The reason is as these academics argue, the translation model takes into

account the local social, political and cultural context (Blume and Rose, 2003; Leach &


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Scoones, 2006; Jasanoff, 2004; Jasanoff 2007; Bijker 2009;). By taking the local context in

consideration, the products for the BoP will face low resistance and high acceptance by the end

users, the poor at the BoP (Blume and Rose, 2003; Leach & Scoones, 2006; Jasanoff, 2004;

Jasanoff 2007; Bijker 2009).

In terms of the STS framework for business strategy analysis, if the business strategy has

elements that aligns with the STS concepts from diffusion model of transferring innovations to

the poor, the weaker the strategy is. If the business strategy has elements that align with the

STS concepts from the translation model of transferring innovations to the poor, the stronger the

strategy is.

Detailed Look: Diffusion versus Translation. Before describing how the strength of the

business strategy for a specific stage in the innovation process varies depending on the STS

concepts for BoP markets, a detailed look into the overall model of diffusion and translation is

needed. This understanding will provide the reader with an understanding of how the innovation

stage specific STS concepts fit under the overall arch of the two models, diffusion and

translation.

Figure 7: Diffusion Model of innovations

Transferability to the Bottom of the Pyramid

Local Society

(End Users)

Private Sector (R&D LAB)

Innovation

Diffusion


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The diffusion model seen in Figure 7 is the classic top-down linear approach to the development

and implementation process for an innovation targeted for the poor (Blume and Rose, 2003). In

this model, the innovation is developed within the confines of the Research and Development

Laboratory of the private sector firm, which is isolated from the local society in which the

innovation is to be implemented in (Blume and Rose, 2003). The premise of a top-down process

of the diffusion model is that only the Natural and Technical Sciences is taken into account

when developing the scientific and technological innovation (Blume and Rose, 2003). The

Social Sciences is neglected during the development and implementation process for an

innovation in the diffusion model. As Bijker, Leach, Scones and Jasanoff argue, the neglect of

the Social Sciences inherent in the diffusion model is detrimental to the innovation process

because the local political, social, cultural issues surrounding the technology and its end users

is not taken into consideration during the innovation process (2006; 2004; 2007; 2009;).

By ignoring the local context, these academics argue that organizations fail to strategize and

incorporate vital information needed to enable the innovations to work for the end users (i.e. the

consumers at the BoP) in their local community plus gain acceptance for that innovation by the

end users (Blume and Rose, 2003; Leach & Scoones, 2006; Jasanoff, 2004; Jasanoff 2007;

Bijker 2009;). In the diffusion model, once the innovation is developed in the confines in the

private sector firm’s research and development laboratory, the innovation is communicated

through certain channels over time until the end users in a society adopt it (Rogers, 2003). This

implementation process described is referred to as diffusion. In the diffusion model, it is

assumed that once the innovation is developed, the end users will passively accept the

innovation (Rogers, 2003).


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Figure 8: Translation Model of innovations Transferability to the Bottom of the Pyramid

The translation model seen in Figure 8 is the alternative bottoms-up, participatory approach to

the development and implementation process for an innovation targeted for the poor. In this

model, the innovation is developed with the Research and Development laboratory of the

private sector firm embedded within the local society in which the innovation is to be

implemented in (Blume and Rose, 2003). This does not necessarily mean the physical location

of the facilities for the development and implementation of the product has to be in local society,

for example the village.

Having the laboratory of the private sector firm embedded within the local society means the

local political, social, cultural issues surrounding the technology and its end users is critically

analyzed during the innovation process (Blume and Rose, 2003). This is the STS principle that

academics like Bijker, Leach, Scones and Jasanoff propagate for when transferring global

innovations in Science and Technology to the poor (2006; 2004; 2007; 2009;). Jasanoff coins

this STS principle as co-production; “Science[technology] and Society, in a word, are co-

produced, each underwriting the other’s existence” (Jasanoff, 2004).

Local Society (End Users)

Innovation

Private Sector (R&D LAB)

Translation


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In the translation model, the end users are active agents in the innovation process (Blume and

Rose, 2003). The end users appear at the start of the process and continue to play a vital role

during the entire development and implementation process in innovations (i.e. start to finish)

(Blume and Rose, 2003). Agent refers to the ability to bring about change through actions (May

2013). Unlike the diffusion model, end users do not passively accept the innovation but play a

key role in the development and implementation of the scientific and technological product. By

allowing end users to be an active agent, private sector firms can minimize and raise

acceptance for the innovation among the end users since the end users have invested

resources (e.g. time and knowledge) to the final product (Blume and Rose, 2003).

STS framework àStages in the Innovation Process

For each of the stages, an in-depth look is provided below.

STS Concepts à Need(s) Identification. A strategy that falls under the diffusion model

considers the needs of the BoP to be homogenous among all populations. This means that

there is a perception that a problem framing in one local society will be the same in another

local society (Leach & Scoones, 2006). For example, if a firm is looking to develop an innovation

regarding malnutrition, the perception is the needs (i.e. problems) of the end user in a village in

Kolkata, India is the same as the needs (i.e. problems) of the end user in a shanty town in

Pacifico de Villa, Peru. This type of problem framing would lead to a business strategy in

developing innovations regarded as “big hit” technologies, which are solutions assumed to be

applicable anywhere at anytime (Leach & Scoones, 2006).

Academics against the diffusion model like Leach and Scones argue that the “tendency towards

universalized views of poverty problems means that technical fixes can miss their mark badly if

we ignore poor people’s own perspectives and concerns” (Leach & Scones, 2006, pp.15).


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Leach and Scones (2006) point out three points that point out the weakness of the diffusion

model.

1. Problems vary from one local society to another because the ecologies and practices

developed in that region for the poor to sustain their livelihoods are highly diverse. Also

within the local society itself, the different interactions between social and ecological

conditions will vary producing multiple needs and variation of problems (e.g. regions,

localities and community specific problems).

2. The strategy for big hit technologies may cause firms to miss out on the opportunity to

investigate localized tried and tested “old technological solutions” in different societies,

allowing them to adapt these technologies further to develop an innovation for a specific

local society

3. The assumption of this model on focusing solely on the technical aspect of the

innovation and not on the social aspects will mislead the firms on the true underlying

nature of the problem. This will cause firms to develop innovations that are ineffective

solutions because of incorrect understanding of the problem. For example, malnutrition

may not be solely due to the nutritional content of the food item itself, it may be due to a

local society’s eating habits, food preferences, infrastructure problems or political issues.

Strategies that acknowledge that the needs of the BoP are heterogeneous and vary from one

local society to another are stronger. The translation model allows the innovation process to be

rooted in local circumstances and local realities (Leach & Scoones, 2006). According to Leach

and Scones (2006) effective strategies are those that “enable local perspectives and

experiences – those of people whose lives consist of ‘getting by’ in absolute poverty – to help

shape spending priorities” (Leach and Scones, 2006, pp 26) and needs the firms choose to

address.


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STS Concepts à Pre-Market Analysis. In the diffusion model, because the social science is

not given significance, market analysis approach would primarily look at statistical data (i.e. hard

figures) on a problem (Yates Doerr, 2014). For example, for the malnutrition problem, a strategy

approach would be to rely on numbers like the number of people malnourished and the amount

of nutritional quantity an individual at the BoP consumes typically in a day. Also analysis for

potential solutions would only look at the technical aspects of the innovation itself. For example,

for the malnutrition problem, the costs regarding the technology itself like increasing nutritional

content of the food item is only taken into consideration.

In the translation model, ethnographic information is given equal importance with statistical data

in business strategies. For example, for the malnutrition problem, in addition to statistical

research, a strategy approach would be to utilizing ethnographic research methods like

interviews and video diaries to collect local stories to find out the end users perspective on the

malnutrition problem (Yates Doerr, 2014). This ethnographic information would then allow a firm

to better assess the true underlying causes of the problem, evaluate and adapt their proposed

technological solutions accordingly to the local context (Yates Doerr, 2014).

STS Concepts à Product Development & Product Testing. In the diffusion model, since the

end users are assumed to passively accept the innovation, strategies for product development

and product testing places the poor outside of the innovation process. This means there are

limited avenues for the end users to actively configure the development of the product by

sharing their local knowledge, perceptions and expertise with the Research and Development

team (Blume and Rose, 2003). Product testing strategies also has a heavy focus on the viability

of the technology itself and not on the viability of technology within the local society of a targeted

BoP segment (Leach & Scoones, 2006). Product configuration only takes into account the

technical aspect of the technology. In the diffusion model, the poor are placed at the end of the


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innovation process as consumers who passively accept the innovation developed and tested in

a laboratory isolated from their local societal context (Blume and Rose, 2003).

In the translation model, the end users are active agents in the entire innovation process, thus

strategies for product development and product testing will ensure the poor are embedded

within the process (Blume and Rose, 2003). This means there are multiple avenues created by

the firm for the end users to actively configure the development of the product by sharing their

local knowledge, perceptions and expertise with the Research and Development team (Blume

and Rose, 2003). Business strategies under the translation model emphasize methods to

increase BoP engagement and for a co-participatory approach. In addition to the viability of the

technology itself, product-testing strategies also gives equal significance to investigating the

viability of the technology within the local society of a targeted BoP segment (Leach & Scoones,

2006). Product configuration takes into account both the technical and social aspect of the

technology. In the translation model, the poor are actively engaged in the innovation process

and also play a dual role as business partners as their contribution are valued and they co-

create the product with the private sector firm in a laboratory embedded within the local societal

context (Blume and Rose, 2003; Michelini, 2012; Leach & Scoones, 2006).

STS Concepts à Product Distribution and Marketing. In the diffusion model, the inherent

quality of not analyzing the social, political and cultural context of the local society of the end

users would lead to framing business strategies with the assumption that one strategy

applicable in one context will work for another (Leach & Scoones, 2006). For example, a private

sector firm operating under the diffusion model would uncritically assume the business

strategies implemented for distribution and marketing targeted at a village in Kolkata, India

would be applicable the same way for a shantytown in Pacifico de Villa, Peru. In terms of

distribution, because the private sector is not heavily focused on the social circumstances of the


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community the end users live in, distribution strategy is focused primarily on using existing

infrastructure to distribute products and lowering costs as much as it is feasibly possible. For

marketing, strategies are solely focused on increasing sales volume and profits through

maximizing customer reach.

In the translation model, because the social, political and cultural context of the local society is

investigated thoroughly and given importance, business strategies for marketing and distribution

are designed to be socially responsible and locally reflexive. Locally reflexive means that the

private sector is attentive to the notion that business strategies for one local context may not

necessarily work for another local context; it is important to critically evaluate the proposed

business strategy under a specific local context (Leach & Scoones, 2006). Because the private

sector firm is attentive of the social conditions of the end user, private sector firms also have a

sense of social responsibility in addition to achieving the bottom line. Examples of business

strategies under the translation model are to build local capacity, invest to improve

infrastructure, raise awareness through education and build partnerships with local government,

partners, distributors & nongovernmental organizations (Marthi, 2014). These strategies listed

seek to improve the local social conditions of the end users in addition to achieving business

strategic objectives (e.g. extending distribution, minimizing costs and maximizing profits)

(Marthi, 2014). In the translation model, private sector firms must be willing to invest in providing

opportunities for the poor to alleviate themselves from poverty and related global health issues

while striving to achieve profits.

STS Concepts à Post Market Analysis. In the diffusion model, once the innovation is

launched in the market, business strategies typically focus on collecting and analyzing statistical

data regarding how successful the firm was in in terms of meeting strategic financial goals for

the BoP market (Yates Doerr, 2014). These statistical data will then be used to develop


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financial projections for future business strategies through knowledge transfer. Examples of

statistical data include: customer reach, volume of sales, profit margins and demographics of

buyers of the product.

In contrast, the translation model, in addition to collecting statistical data to assess how well the

firm did in meeting strategic financial goals for the BoP, the private sector firms also conducts a

post market ethnographic studies to investigate how the local social, political and cultural

context have changed once the innovation has been accepted by the end users (Yates Doerr,

2014). As well, the stories behind the numbers are investigated further (Yates Doerr, 2014).

Studies on the stories behind the numbers seek to answer questions like are the number of

consumers buying the products using the product for its intended function, if not, why and what

factors led them to misuse the innovation (e.g. insecticide-treated mosquito nets used as a

wedding veil or fishing net in some BoP regions) (Yates Doerr, 2014). Thus business strategies

for post-market assessment ensures there is a combination of stories and statistics to get a full

understanding on the results of the business strategy and information required for knowledge

transfer for future business strategies.


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APPLICATION OF THE SCIENCE AND TECHNOLOGICAL STUDIES FRAMEWORK CASE STUDIES ON BOTTOM OF THE PYRAMID MARKET SUCCESS & FAILURE

Literature for BoP market is abundant in case studies analyzing private sector firms that have

succeeded and failed on their strategies utilized during the innovation process. After reviewing

the literature, an exemplar paper was chosen to apply the STS framework to provide a further

insight into the business strategies of the case studies discussed in the paper.

The paper chosen is Reinventing strategies for emerging markets: beyond the translational

model by researchers Ted London and Stuart Hart. This paper was published in the Journal of

International Business Studies in 2004. The paper is an explanatory analysis of successful and

unsuccessful business strategies to enter low-income markets in emerging economies by

multinational corporations.

London and Hart provide two case studies. First case detailing the failure of Monsanto at the

bottom of the pyramid; second case detailing the success of Unilever at the bottom of the

pyramid. The case study description from the London and Hart’s paper is included in Figure 9

(London & Hart, 2004).

Utilizing the STS framework, further explanatory analysis can be conducted on the case studies

by applying STS concepts to answer why Monsanto was unsuccessful while Unilever was

successful at the BoP (London & Hart, 2004).


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Figure 9: Monsanto and Unilever Case Studies – Source: Journal of International Business Studies

Case Study Analysis using STS Framework. Starting with Monsanto. Applying the STS

framework, it is evident that Monsanto’s business strategies aligned with the diffusion model.

While patenting seeds were the norm for genetic engineering in the context of developed

markets, Monsanto assumed incorrectly that this strategy is applicable for the local context of

emerging markets. Not accounting for the local social context and placing the end users, local

farmers at the end of the innovation process, Monsanto failed to incorporate the local cultural

tradition of the local farmers. The local cultural tradition is the farmer’s reliance on saved seeds

for next planting seasons (London & Hart, 2004). Also the stigma against Genetically modified

foods and Monsanto not developing socially responsible marketing strategies to raise

awareness and promote open dialogue led to high resistance and low acceptance for their


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innovations among the nongovernmental organizations and end users. The case study of

Monsanto illustrates the weakness of the inherent quality in the diffusion model of only focusing

on the technology itself and neglecting the social aspects surrounding the technology. Thus the

STS concepts of the diffusion model provide further explanation into why the business

strategies of Monsanto led to the firm’s failure in the BoP market.

In contrast, by applying the STS framework, it is evident that Unilever’s business strategies

aligned with the translation model. Unilever developed and implemented socially responsible

and locally reflexive distribution strategies. They did this by building local capacity (e.g.

supporting local entrepreneurs) and building partnerships with local partners to distribute their

products through local performers and village street theatres (London & Hart, 2004). Unilver

business strategies also placed significance in investigating the social context surrounding the

innovation itself. This is why they ensured their employees spend time living in these markets

and creating avenues for the end user to become an active agent embedded within their

innovation process. This allowed Unilever to incorporate and leverage local consumer insights

and preferences to develop and implement an innovation with high acceptance and low

resistance in the BoP market. Thus the STS concepts of the translation model provide further

explanation into why the business strategies of Unilever led to the firm’s failure in the BoP

market.


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CONCLUSION

The scholarly paper ‘s objectives were twofold …

1. To link insights from Science and Technology Studies (STS) with Business Strategy

Assessment for each innovation stage of a product/service targeted for the Bottom of the

Pyramid market

2. Provide private sector firms and social entreprenneurs with a practical framework to

assess past, current and future business strategies during the innovation process for low

income markets.

The methodology to develop this Science and Technology Studies Framework for Business

Strategy Assessment of Innovations for the Bottom of the Pyramid was to first conceptualize the

internal innovation process of a private sector firm. The author’s conceptualization of the stages

in an innovation process can be seen in Figure 5, page 19. Next, STS concepts on how to make

innovations work for the poor were critically examined. After investigating the STS concepts,

those deemed appropriate for a private sector firm’s internal innovation process was

reformulated into an overall framework for business strategy assessment at each innovation

stage (refer to Figure 6, page 23).

The framework utilizes a spectrum to assess the strength of the business strategy for each

stage of the innovation process based on two STS models: Diffusion and Translation. Those

business strategies for an innovation stage that aligns with a diffusion model is assessed to be

weak and those business strategies that align with a translation model is assessed to be strong.

The diffusion model is weaker compared to translation model based on the arguments

presented by STS scholars. The broad strokes from the argument from STS scholars is that the


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diffusion model results in high resistance and low acceptance from end users for the innovation.

In contrast, translation model is stronger because it leads to low resistance and high acceptance

from end users for the innovation. The finer explanation into this argument presented by the

STS scholars in provided on pages 24-28.

Finally, the practicality of the STS Framework for Business Strategy Assessment of Innovations

for the BoP was tested by applying it on a case study on two multinational corporations

operating at the Bottom of the Pyramid. Utilizing the STS framework, it was evident why one

company was unsuccessful while the other was successful at the BoP. The corporation that

failed in realizing return at the BoP implemented business strategies aligned under the diffusion

model. In contrast, the business strategies that align with the translation model was a driving

factor for the success of the other corporation.

Thus the value of the Science and Technology Studies Framework for Business Strategy

Assessment of Innovations for the Bottom of the Pyramid is that it provides a systematic

assessment tool to gain explanatory insights for predicting and reflecting on the effectiveness of

business strategies when developing and delivering innovations for the Bottom of the Pyramid

market segment.


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REFERENCES

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London, T., & Hart, S. (2004). Reinventing strategies for emerging markets: beyond the transnational model.Journal of International Business Studies, 35, 350-370. Retrieved June 1, 2014, from http://responsiblebop.com/BOP%20Database/reinventing-strategies-for-emerging-markets-beyond-the-transnational-model/

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APPENDIX A

Graphs and tables from the Dansk Industri’s Industry report characterizing the bottom of the

pyramid market. (Working with the Bottom of the Pyramid: Success in Low-Income Markets,

2007).


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Science & Technology Studies Framework for Bottom of the Pyramid Business Strategy Assessment_Vijit Sunder_MSc Global Health Scholarly Paper 2014

Documents

pyramid bop market

pyramid market innovations

bop market karamchandani

pyramid market karamchandani

pyramid market segments

bop markets

underserved market ripe

adoption of innovations