Solutions at the Base of the Pyramid

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A new call to action is rising from the corporate world. “If we wait for a policy enabling environment, we will be waiting a long time,” says Stuart Hart, Professor at Cornell University and Director of the Indian Institute for Sustainable Enterprise. “It is our job as innovative entrepreneurs to design and develop new models. The problem with the government is that it can create incentives; however, it cannot create new models.”

The world’s problems are social and environmental and they are mostly centered in the developing world. The world’s problem solvers are entrepreneurs at the base of the pyramid, the two to three billion people living in low-income countries. Their businesses will play a crucial role in improving human conditions around the globe.

Corporations are embracing their new role as the world’s leading problem-solvers. This emergent trend was on vivid display at the Rio+20 conference on sustainable development last week. It seems that corporations are becoming more conscientious about adding sustained social value. They are increasingly quick to acknowledge their responsibility to make reasonable use of both human and natural capital.

At the same time, companies understand that the success of their business models depends on prevailing policy frameworks and the attendant incentive structures created. This dependence on policy is especially applicable to business models that tackle social or environmental problems in the developing world. Markets in the developing world are fragile and turbulent, hostile conditions for any entrepreneur. To develop business models that thrive in the rough and tumble of emerging markets, entrepreneurs must be persistent and creative.

Professor Hart, predicts that there will be an explosion of entrepreneurial innovations in renewable energy technology, inclusive health, affordable housing and clean drinking water supply infrastructure. Ideas aimed at solving the world’s problems will come from local entrepreneurs, at the base of the pyramid (BOP).

Stuart Hart believes that large corporations can work with entrepreneurs at the base of the pyramid to solve the globe’s pressing problems.

Understanding this new momentum at the BOP is important. First, from a business perspective, the BOP constitutes an enormous untapped market potential — the unfulfilled needs of almost a third of the world’s population. Will we see a rise of new markets at the base of the pyramid in the next few years? According to Hart, market competitors that do not engage with the BOP market within the next few years will cease to exist — simply because crucial innovations will derive from the BOP and trickle up.

Second, innovations will come from local entrepreneurs, those entrepreneurs that are familiar with the market environment in which they operate. They understand local market conditions and cultural attitudes. Most importantly, they know the needs and wants of their neighbors. This is crucial. It allows them to create a value proposition that makes sense in the local market. Herein lies the most significant advantage of local entrepreneurs compared to corporations. Unfortunately, the entrepreneurial potential in local markets often remains underdeveloped. Potential entrepreneurs fail to develop a financially viable business concept, to accumulate the necessary financial resources and to stay afloat in unstable market conditions.

To develop the entrepreneurial potential at the base of the pyramid, Stuart Hart has built the Indian Institute for Sustainable Enterprise. This institute aspires to provide local entrepreneurs with the necessary tools for developing a robust business concept. The overall objective is to empower local entrepreneurs at the base of the pyramid to tackle the problems in their communities. It brings together experts from the corporate world with local entrepreneurs to combine business expertise and local knowledge. If the Institute succeeds, it will represent a considerable step towards a world of greater opportunities. It would empower people at the base of the pyramid to develop their own markets, according to their needs and desires.

In the following interview, Professor Stuart Hart outlines how entrepreneurial innovations spur solutions to societal and ecological problems at the base of the pyramid.

“Dive in!” According to Stuart, “It’s about doing it – now.”

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