Innovating at the bottom of the Pyramid

When thinking about what to write in my first blog, I decided to write about a person whose views have did inspire me the most in recent years. This was C. K. (Coimbatore Krishnarao) Prahalad (1941 – 2010). Especially two publications, The Fortune at the Bottom of the Pyramid (2002). Eradicating Poverty through Profits and The New Age of Innovation: Driving Cocreated Value Through Global Networks, (2008, met M.S. Krishnan).

In a series of short video’ s,  Prahalad @ MSM Opportunities at Bottom of the Pyramid , this approach is explained by Prahalad, at a visit to the Maastricht School of Management. Prahalad pointed out that a lot of ‘poor’ people, in Roosevelt’ s terms the forgotten man at the bottom of the economic pyramid, either have money or the earning potential. He therefore, suggests to reverse the common pricing policy. Instead of determining the price by adding a margin to the costs, he asks what price-quality ratio will be acceptable for these people at the bottom of the pyramid. His example was the development of a rubber foot which was affordable for much more people than the sophisticated mechanical version of Western hospitals (as the loss of a foot is more common in developing countries). Of course, the functionality of this rubber version are less than the mechanical foot, but it satisfied the basic requirements (walking, running climbing) and it’s life expectancy in bad circumstances was longer. The profit is then in the amount of products sold, or selling a 10 dollar product at a 1 dollar margin to 1000 people earns you a larger profit than selling a 1000 dollar product at a 100 dollar margin to 9 people.

Another example is the Tata Nano, a car developed to make driving affordable for all, based on two principles: -1- the engineers worked to do more with less; -2- open innovation through collaboration (Business Week Feb 2008). A project which was not completely successful was the “100dollar laptop” of the One Laptop Per Child (OLPC)-project (http://one.laptop.org/). Although there is a cheap computer available, the price still is around the $200.- , but the design philosophy is similar to that of the Tata Nano.

In the New Age of Innovation, Prahalad also talks about innovation through collaboration, but now because he thinks that it will not be possible to maintain an advantage without working together in satisfying the consumer demands. It is access to resources what counts, not ownership. This is the r=g part of innovation. On the consumer side, he states that the firm has to see every consumer as unique, setting n=1 . Value is based on unique, personalized experiences of consumers, where the individual is central.

What has this to do with education and especially online distance learning. Well, Prahalad himself takes the example of TutorVista, an organization who teaches American children using qualified but cheap tutors from all over the world. The fast changes in both the supply of technology as the usage of the possibilities transform the present day business models. MOOCs, xMOOCs and other kinds of free online education (http://openlearn.open.ac.uk/, http://www.openculture.com/freeonlinecourses, http://www.saylor.org/ ) will influence the way education is given. If an educational organization will not participate in the Open Educational Resources-movement, its students will compare the courses given with the courses available at different places at the internet: “I did not understand accounting when it was teached at our university, but then I found this course at http://www.accountingcoach.com/ or Coursera. Even educational organizations who act in ‘splendid isolation’ will be influenced by the existence of ODL-courses.

Update:

See for an interesting blog on affordable tablets:how-a-20-tablet-from-india-could-finish-off-pc-makers-educate-billions-and-transform-computing-as-we-know-it

 

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