There was an interesting post last week on the HBR Blog Network. It posited that many companies focused on the bottom of the economic pyramid have failed because they’ve ascribed to a philosophy, based on C.K. Prahalad’s work, that they needed to “aim for low prices, low profit margins, and high sales volumes.” The author takes issue with this, saying companies are well – squeamish – about making anything but a low profit margin when selling to poor populations.
He’s right – “selling to the poor” isn’t a phrase that really inspires warm fuzzy feelings. But in this age when we aspire to create shared value – asking companies to develop innovative business solutions that solve social and environmental problems – what’s acceptable? There’s a thin line between a company with an economy-changing solution and a company that’s perceived to be price-gouging a vulnerable population.
This of course doesn’t mean that companies should step back from “shared value” challenges and opportunities for fear that it’s more moral/reputational trouble than it’s worth. It’s the future. But we could all probably do well to think carefully about the business models we’re advocating for and what their impacts can be.
Leela StakeLeela is a director who helps businesses innovate, collaborate and communicate to be more successful. She’s based in San Francisco, has worked in six Asian countries and is interested in the relationship between long-term business success and community prosperity.
Laura PalantoneLaura is a member of our corporate communications team and is based in New York.
James RobinsonJames is a director who brings ten years of experience working on CR strategy and communications in New York, Beijing, and Jakarta. He looks at how CR is employed as part of broader business strategy and has a particular interest in the evolving role of technology and innovation in managing social and environmental issues.
Julie JackA director in APCO's New York office, Julie works on corporate responsibility with a focus on business strategy and emerging issues and trends. Her currents interests and work focus on sustainable agriculture and supply chain management, the integration of CR and financial communications, and CR in the consumer goods space.
Ellen MignoniEllen is a senior director and helped build APCO’s global corporate responsibility practice. She works primarily with APCO’s corporate clients on business alignment and corporate responsibility, stakeholder engagement and partnership development, and communication and outreach.
Shared Value and the Bottom of the Pyramid
There was an interesting post last week on the HBR Blog Network. It posited that many companies focused on the bottom of the economic pyramid have failed because they’ve ascribed to a philosophy, based on C.K. Prahalad’s work, that they needed to “aim for low prices, low profit margins, and high sales volumes.” The author takes issue with this, saying companies are well – squeamish – about making anything but a low profit margin when selling to poor populations.
He’s right – “selling to the poor” isn’t a phrase that really inspires warm fuzzy feelings. But in this age when we aspire to create shared value – asking companies to develop innovative business solutions that solve social and environmental problems – what’s acceptable? There’s a thin line between a company with an economy-changing solution and a company that’s perceived to be price-gouging a vulnerable population.
This of course doesn’t mean that companies should step back from “shared value” challenges and opportunities for fear that it’s more moral/reputational trouble than it’s worth. It’s the future. But we could all probably do well to think carefully about the business models we’re advocating for and what their impacts can be.
Catogories Business Alignment/Integration and tagged C.K. Prahalad, HBR Blog Network, shared value
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