C.K. Prahalad News & Articles

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E-commerce : The Bottom of Pyramid Approach
By Arvind Kumar

For centuries and most of the decades in the 20th century (i.e when computer was invented) access and communication was the tool of rich and ultra rich people, prohibitively expansive to ‘not so rich’ and ‘not at all rich’ people. All marketing research and development was focused on the 20% of the market based on the management principle 80:20, ignoring the vast 4 billion people who are at the bottom of the pyramid( read Fortune at the Bottom of Pyramid by C.K. Prahalad, Wharton Publishing).

In 1990s, Internet came along and change the paradigm of whole global market. Because here we have a great tool “Internet� a very efficient, very potent to penetrate the earlier thought impregnable market sec. For most if the time it is the exposure to the outer world and information is necessary to make any decision and growth of any section of society or part of world. Internet is playing that role very efficiently.

Internet is a Mass product. Here power lies in the hand of individuals, rich or not so rich(This terminology is taken from Fortune at the Bottom of Pyramid by C.K. Prahalad, Wharton Publishing).
General theory of market states
(i) Top end market is value driven.
(ii) Bottom end market is volume driven.

Through these two anomaly, we can clearly recognize that Internet companies are focusing on the second approach and that is what CK Prahalad call Bottom of Pyramid(BOP) approach in his path breaking book Fortune at the Bottom of Pyramid.

I can give a big list of such companies, but for instance take some shining stars of today Internet economy.
(i) ebay.com
(ii) aol.com
(iii) clickbank.com
(iv) Google.com

We will study the Mother of all search engine Google and its approach to BOP.

Lets compare the Google strategy and its behemoth competitors( well not today, but in formative days of Google when it matter most.) Google is a search engine based on Pay per click(PPC) approach to the internet economy. In formative days, Google done exactly what others thought and well recognized by the Gurus that the model is not viable and Google will be doomed to graveyard.

Most of Dot Coms or brick and mortar companies on internet were making money for advertising. They charge for the advertising space they provide to the advertiser and charge them for a fixed duration and also all these prepaid only. This approach was already imminently followed in TV advertising and to some extent very successful. Advertisers did not had any options. For them it was dark space to jump into. They did not had any control even after paying handsome sum for space on Net.

See the other side of the coin. The consumer( technically visitor) were not part of revolution. Even if they were, they were used to be only exploited for generating huge profit for firms operating on the Net.

Google came to foray with a refreshing style and a very uncommon approach to the market.
1. No Images on its main page. ( there is option available in other pages but not very popular.)
2. Tool and services for the common people.
3. Free for all( even sometime for advertisers also)

See where is the money? I guess 90% would not see any or many.

Google spread its wings on net through word-of-mouth marketing and keeping a intense focus on the common people using internet. In the process Google developed it owns marketing and revenue generation model with empowering the common people, who worship Google( I can be counted one of them).Google invented many new model which was never thought before.

(i) Google adsense

(ii) Google Adwords

(iii) Froogle ( similar to ebay.com but free for all.)

(iv) Google Search

Seeing deep into Google strategy and approach to net economy we can define two things.

(1) Focus on common people in big volume in terms of purchasing power

(2) In the process give more control in their hands, empower them to generate more purchasing power and habit to help yourself as well as the industry.

See two very bottom level examples.

(1) Jon Gales, the owner of the www.mobiletracker.net makes close to $5000 per month just by using Google adsense. Take notice, he is merely a happy go lucky child of 19 years.

(2) For small time people who want more sales to be generated for their small time business uses Google adwords and Froogle. Even if they do not any business product, they can sale someone else product and have a handsome money in exchange for working for someone else at their own home.

Does it make a company commercially viable? Do not ask me. Watch it.

Seth Gobin a well known online advertising consultant and former Yahoo employee, used to be dubious about Google’s prospect. Not anymore “ They have created the first new and effective Ad medium in last 50 years. It’s brilliant� He says.

Napolean hill, author of Law of success state in his book,� No man can rise to fame and fortune without carrying others along with him. It is simply can not be done.�

It takes continuous hard work with great series of innovation in product designe, process innovation and marketing and a long period to reach ( in mature economy or market) where Google is today.

Google 6 year $321mn

EBay 9 year $322mn

Yahoo 10 year $260mn

Amazon 9 year $114mn

In his book “ The fortune at the Bottom of Pyramid� C.K. Prahalad state,�…..what is needed is a better approach to help poor, an approach that involves partnering with them to innovate and achieve sustainable win-win scenarios where the poor are actively engaged and at the same time, the companies providing product and services to them are profitable.�

I accept common people on net are not poor. But see into deep meaning of C.K. Prahalad statement,�- ……where the poor are actively engaged and at the same time………..�. That’s what e-commerce model I am talking all about. They are not poor but they are active ready to change their buying behavior. Buying behavior change is the most awesome milestone still to reach in the e-commerce to really blast off the internet economy. According to Napolean Hill, you need to help the common internet folk to see what internet can do for them.

Gil Penchina, vice-president, eBay International state,� It’s all about getting more people on the system(eBay). People on net follow very simple system. They get online almost always because they want email, then they start reading news, then they shop. Once they value in shopping, they shop repeatedly. That’s when they realize they can sell too.�

By actively involving common folk they will get more trust into e-commerce. To achieve this amazing rate of growth, e-commerce community has to accept the “inclusive Capitalism� approach. Common Internet people need to be given a big opportunity to tap into the awesome big time opportunity on internet. According to CK Prahalad, to tap into BOP segment “ Trust is prerequisite�. Big corporate or small one need to build this bridge of trust to tap into this big volume market segment.

In case of Google, it is famous for it unconventional approach and infamously trusted for unorthodox management approach of its founders Lary Page and Sergey Brin. Google just do not comprise on integrity for profit in its search results. Its user can always trust Google for its integrity to receive full support from Google for their small or big business.

Am I seems too madly in love with Google? Believe m, I am not alone.