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.