Blogspot - Understanding the Base of the Pyramid (BOP) for Inclusive Business in Zimbabwe
The Base of the Pyramid or BOP, as they are known, have the immense potential to become a huge market base for any business. However unlocking the potential in this market does not occur without innovation. This is so because this market segment is governed by a different set of dynamics in comparison to the conventional middle class and high end markets.
The concept of BOP was first introduced by Stuart L. Hart and C.K. Prahalad in 2002 in their widely acclaimed article, "The Fortune at the Bottom of the Pyramid". The idea behind the BOP suggests that the best way to meet the needs of the poor is through a profit driven market-based approach. There are tremendous benefits for companies if they choose to serve the highly under-served and less competitive markets at the BOP. At the same time there are significant benefits for the poor in terms of poverty reduction, increased productivity, and empowerment. Companies interested in exploring the opportunities at the BOP should look for solutions in the form of new products and new business models that can provide products and services at affordable prices. ( extracted from report by Confederation of Danish Industries; Working with the Bottom of the Pyramid).
It is of paramount importance that a company invests some time and resources in understanding the nature of the BOP market which they intend to work with; this can either be done through direct investment from the company or identify a partner for support with outsourcing consultancy services, for example SNV-Zimbabwe has designed what is called the Inclusive Business Scan, whose sole purpose is to assist private sector companies with a desire to have a deeper understanding of how their intended business model will work.
This brings me to the Zimbabwean context which is a country in which the concept of Inclusive Business is making in roads in private sector development. Assistance from the Ford Foundation has enabled the establishment of an Inclusive Business Forum, which shall be profiled in future write ups, this platform has enabled the sharing and dissemination of knowledge on Inclusive Business, of which is a business model that has a deliberate emphasis on working with the BOP in a win-win relationship.
The BOP is characterized by spontaneous but yet well thought out decision making process, this is a rare combination but it exists in the BOP. In Zimbabwe the most prevalent business models that work with the BOP are contract farming and what is of note is that the BOP will not always use your products in the way that you did not intend for them to be used e.g. smallholder farmers working as producers of raw materials, will often divert inputs intended for a commercial crop, to enhance the production of their food security crops. This however does not call for the abandonment of a relationship, but it entails a need for understanding of what the smallholder farmers would prioritize, and then in turn making a deliberate effort to address that need, whilst simultaneously addressing the capacity needs of the smallholder, which will enlighten them on the importance of delivering on their contractual agreement.
A greater proportion of the BOP communities are driven by consumptive tendencies, where by what comes first is household needs before they go commercial, this also aligns with their hand to mouth survival strategies. The BOP consumers buy as per need, they will never hold excess stock of a particular product because they live on a day to day basis. In order for a company to succeed with this market segment, these patterns and behaviors cannot be ignored, because the success of a model is hinged on these dynamics.
There are numerous examples of BOP based business models these can also be seen on www.inclusivebusiness.org.zw . To sum it all up, private sector embarking on BOP dependent market business models should consider investing time and resources in understanding the BOP, because this could make the difference between a successful and a challenging business model.
Waddilove Sansole - 18 June 2014