Beruflich Dokumente
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EDITED BY
B.N. Dastoor
February 2011 Purely Prahalad: Business Wisdom from the Late Dr. C.K. Prahalads Thoughts Edited by B.N. Dastoor Published by Ahmedabad Management Association Core-AMA Management House Torrent-AMA Management Centre ATIRA-AMA Centre for Textile Studies Dr. Vikram Sarabhai Marg, Ahmedabad 380 015, India ama@amaindia.org, www.amaindia.org Shilp Gravures-AMA Media Outlet Printed by N.K. Printers, Rakhial, Ahmedabad
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Foreword
Every January, as we welcomed a new year, we at AMA would eagerly await the visit of Management Guru Dr. C.K. Prahalad. Most unfortunately, he left us suddenly for his heavenly abode, and AMA will never be the same again without his great contribution to the overall growth of management education. This book is published as a mark of respect, love and gratitude for Dr. Prahalad. I am sure, this collection will greatly benefit entrepreneurs, business leaders, managers, as also teachers and students of management. I thank our own Shri B.N. Dastoor for his skill and speed in preparing this very useful book. January 2011 Pankaj R. Patel President, AMA
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Preface
During his visits to Ahmedabad, for fourteen long years, Dr. C.K. Prahalad had enlightened us with his lectures, seminars, workshops, free-flowing discussions, and interviews. This attempt to collect the important glimpses of Dr. Prahalads business wisdom, expresses Ahmedabad Management Associations deep gratitude for his salutary contribution in the exciting and dynamic field of management. I consider myself very fortunate to be assigned the task of presenting Dr. Prahalads thoughts in a concise form. B.N. Dastoor
The author is a Motivational Trainer specialising in Sales and Marketing. He is an author and columnist and presently involved in several social and educational assignments. Email: baheramgor@yahoo.com
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Contents
Foreword Preface 1. Next Practices and Not Best Practices 2. Leveraging India 3. Fortune At the Bottom of the Pyramid 4. Quotable Quotes Leaders of India Inc. Speak
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Best practices lead to agreement on mediocrity. I do not have much interest in best practices. Because all of us benchmark each other, we gravitate toward mediocrity in a hurry. What we really need to ask is What is the next practice? so that we can become the benchmark companies and benchmark institutions around the world.
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Inauguration of Golden Jubilee Management Convention. Seen are M/s. Janak Parikh, Rajiv Vastupal, Dr. Prahalad and Venkat Chengavalli
Sustainability
Sustainability can be the next quality challenge. Its going to drastically reduce cost and increase consumer acceptance. Dont look at sustainability as compliance and regulation, but an opportunity for breakthrough innovation.
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2. Does it maintain and improve functionality? It is not just about lower cost. In fact, both of them together 3. Does it make it difficult for incumbents to react? In other words, you do not want other people to be able to copy what you have done rapidly. 4. Is it sustainable? Is it based on logical internally consistent business principles? 5. Does it enlarge the size of the market?
Thinking Differently
Going there is about thinking differently, not being just efficient. We have to be efficient, but we have to develop a distinct point of view about opportunities and disruptive business models. We cannot play the game by other peoples rules, we have to invent our own rules.
Staying Afloat
My one mantra to stay afloat during the manufacturing slowdown is that this is the good time to become even more efficient. I always say that the only trees that dont fall during the storm are those that have seen the drought, because their roots go very deep.
Creative Solutions
There is no challenge which is impossible. The more ingrained the thought process, the more creative solution it demands. So, the real trick lies in finding out such thought processes and then dealing with them.
Helping People
If you are honest about helping others, rather than showing how smart you are, things are very easy. But the important thing is that people should realize that you care about them, you want them to
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succeed. As long as they understand that, people will accept innovative approach.
Problems Vs Trajectory
You need to differentiate between problems of the moment with the long term trajectory The most important challenges are, how can we become technically agile and directionally consistent. No economy goes uninterrupted.
Managing Volatility
The world will be witnessing extreme volatility, be it in the political, economic or the regulatory environment. For example, the price of oil went from $60 to $145 to $45 in one year; same with commodities. We need to have the capacity to manage volatility in addition to quality, cost, scale and speed as sources of competitive advantage. It requires the capacity to scale up and scale down quickly and the ability to anticipate we also need to learn to shift people rapidly to new opportunities.
Creating a Surplus
If you dont make a surplus, how will you have the money to do anything for others? So, it is important
Continuous Change
I am not interested in a charismatic leader approach to innovation. Companies need continuous changes not just episodic breakthroughs.
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Organizational Legacies
Organizational legacies can erode the capacity of a company to innovate and create value. Even mergers and acquisitions bring with them disparate systems.
People Participation
Co-creation reduces risk because consumers are already involved in thinking through what they want. But that doesnt mean that you dont have ideas of your own. You got to check the prototypes.
It also reduces time and investment because more people and suppliers participate in development.
Being Flexible
Raw materials may still be important in some industries like oil, but in most industries you can get raw materials. Technology and capital is freely available now it is becoming possible to hire global talent. The real differentiating factor is the ability to be flexible to change. We need resilient, flexible processes we need analytics. I need to be able to understand the behaviour of a customer among 100 million. I need large database and analytics to focus on the behaviour and needs of an individual.
Value-based Pricing
Value-based pricing is a strategy under which price is set depending on how much the product or service being offered is worth to the customer. This obviously differs from the conventional cost-plus pricing model where things like the actual cost of product, competitors prices, or the historical price, are taken into account.
Organizational Orphan
The change to value-based pricing needs changes to the underlying structure of business processes as well as changes in the way managers in the industry are socialized, and in the way they keep score of personal success. That is not happening because it is one thing understanding the need to
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change and another implementing it Business processes are not easy in any company few managers want to be responsible for it, much less pay attention to it. It is often an organizational orphan.
Next Vs Best
Best practices lead to agreement on mediocrity. I do not have much interest in best practices. Because all of us benchmark each other, we gravitate toward mediocrity in a hurry. What we really need is to ask what is the next practice, so that we can become the benchmark companies, benchmark institutions around the world.
Human Currency
People and employers are changing their relationships to meet the new economy. Human beings are the new form of currency and valuation in companies.
Excitement Vs Satisfaction
Satisfied employees dont mean anything. Excitement is what creates energy and innovation. Democratise information, change the game, and leverage the resources. Five year budgets do not equal strategy. We can imagine the future we want to create. Aspirations excite people.
Talent Management
Talent management connects social and technical business processes. Without understanding who is doing what, without having the business processes in place to understand the social aspects and focus on the individual, talent management cannot occur.
Discontinuous Change
We are in an era of discontinuous change. We are no longer talking about fine tuning or improving the organizations efficiency. We are talking about nothing less than reinvention reinventing the business in fundamental ways.
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Reinventing Business
Reinventing (the business) requires a new skill mix and new ways of approaching the business. It may require different business models. It may also require different people.
Looking Outside
The same people who are socialized with the standard way of doing business, and who understand a certain recipe for how to manage, cannot change very quickly and become the inventors of the new business models. Look outside your basic industry for people who can thrive in the new environment.
Experimental Learning
(To see the big picture and their place in it) you train people. You do it by getting people with different functional background to work together on common tasks under time pressure. You do it by getting them to achieve goals, where they must understand what the other person can contribute and why the other persons contribution is important. The learning has to be experimental, not intellectual.
Quality-Speed-Innovation
the search for talent has gone well beyond cost arbitrage. Lowering costs is still a concern but it should be coupled with the need for better quality, speed and innovation.
Freeing Talent
Companies (should) pull together teams of people from all around the globe based on their skills, attitudes and experiences to work on specific projects. (There should be) a breakdown of the traditional hierarchial systems in which business, functional and geographical groups owned people.
Creating Values
Hi-tech is no longer the privilege of only the rich. If industry boundaries are cracking up, and social networks are emerging, it must have something to do with value creation. And it must change the very locus as well as sources of innovation.
Micro-innovators
Instead of a small group of people thinking about innovation, you can have three billion people not only being micro-producers and micro-consumers, but micro-innovators. This cannot happen overnight. But everybody has an opportunity to contribute to innovation.
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Co-creation
Co-creation by definition is voluntary. You cant force a person to co-create with you. And cocreation is about experience and experience is always contextual and personal. You have this experience and you have your own reference groups to give meaning to that experience.
Inspiring Individuals
Rather than calculating the number of people to fire in order to become competitive, companies should be asking How can we create the sense of purpose, possibility and mutual commitment that
will inspire ordinary individuals to feats of collective heroism! reengineering individuals can do more for competitiveness than reengineering processes.
The Goal
The goal is to fundamentally reinvent existing competitive space or invent entirely new competitive space in ways that amaze customers and dismay competitors.
Organizational Transformation
The organizational transformation challenge faced by so many companies today is, in many cases, the direct result of their failure to reinvent their industries and regenerate their own strategies of a decade or more.
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organization, this is a great challenge. Traditionbound companies like Xerox and Sears suffered because they did not know about the perspectives, outlooks and goals of their competitors.
Shouldering Blame
Who takes the blame when a company suffers from competitive failure? When a leading Japanese company runs into financial difficulties, the top
management takes the biggest pay cut, while the first line people take the smallest. This approach puts the blame on the people at the top who failed to anticipate and respond to the winds of change.
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Zero Tolerance
Managers are critically concerned with the cost and speed of change, knowing that quality must never be compromised A system supporting millions of users and collaborators requires zero tolerance for errors in matters of regulatory and financial compliance these expectations wont change methodologies used for developing new applications. Changes to existing applications must have six sigma quality built in.
Corporate Challenges
These are: (a) Set the challenge in the context of the strategic intent. (b) Describe with honesty, the nature and magnitude of the challenge. (c) Specify precisely the improvements to be made within a time frame. (d) Establish procedures to measure and link every employees contribution to the overall challenge. (e) Encourage the employees to innovate and go beyond their usual roles in the organization.
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competition for the future and competition for the present, namely the prospect of making an impact, rather than the certitude of immediate financial returns.
Portfolio of Competencies
It is important that top managers view the firm as a portfolio of competencies, for they must ask given our particular portfolio of competencies, what opportunities are we uniquely positioned to exploit? The answer points to opportunity arenas that other firms, with different competence endowments, may find difficult to access.
creating new intellectual capital; where senior managers believe they know more about how the industry works than they actually do, and where what they do know is out of date.
Important Issues
Competition within todays industry structure raises issues such as: What new features should be added to a product? How can we get better channel coverage? Should we price for maximum market share or maximum profits? Competition for tomorrows industry structure raises deeper questions such as: Whose product will ultimately win? Which standards will be adopted? How will coalitions form and what will determine each members share of the power? And most critically, How do we increase our ability to influence the emerging shape of a nascent industry?
Agile Systems
We need to focus on global standards of quality, transparency, interoperability, compliance, speed and cost. But we must also provide space for the
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local operation to be flexible What must be global, and therefore non-negotiable, and what can be local is a critical consideration in building flexible business processes and agile systems.
Foresight Vs Hindsight
Traditionally, managers depend on experience gut feel, if you will. Most often a gut feel and intuition are important, but in a fast-changing competitive environment, experience of the past is less valuable. Foresight, not hindsight is of value.
Challenging Orthodoxies
Flush with success, challengers often forget the most basic rules of corporate vitality. To be a challenger once, it is enough to challenge the orthodoxies of the incumbents; to be a challenger twice, a firm must be capable of challenging its own orthodoxies To reinvent its industry a second time, a challenger must regenerate its core strategies. It must reconceive its definition of the marketplace, redraw the boundaries of the firm, redefine its value propositions, and rethink its most fundamental assumptions about how to compete.
Opportunity Horizon
However unappealing a companys present situation, it is unlikely to abandon the past for the future unless it has created for itself an alluring vista of future opportunities an opportunity horizon that presents a compelling alternative to simply reliving yesterdays success. To give up the bird in the hand, a company must see a dozen birds in the bush. The future must become just as vivid and real as the past.
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Business Processes
In a rapidly changing competitive environment, business processes cannot be stale. The dynamics of an industry dictate the rate of change in business models and strategy. Business processes must keep pace with this rate of change in the strategy of the firm. More important, business process capability may suggest new ways of competing.
Producing Urgency
Any company that drives forward while looking at the rear view mirror will, sooner of later run into a brick wall. The goal of making the brick wall apparent to employees is not to create a sense of anxiety. Anxiety is immobilizing. The goal is to produce a sense of urgency. Urgency comes when everyone knows there is a brick wall out there, but that the wall is far enough away. So there is still time to turn the wheel and avoid the crash.
Transparent Assessment
In a global firm, it is hard to know where talent is. Talent is, by definition, non-hierarchical Further, the ability to effectively work in a crosscultural team may not be very transparent. So the first step in developing and understanding of how to mobilize task-specific teams is building a process for transparent and objective assessment of the skills, attitudes, and experiences of all people.
Measuring Capability
You can get an accurate reading of a firms capabilities by subtracting the percentage of profits that derive from its historical endowments, from its total profits. The remaining profitability indicates the firms ability to manage and exploit
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Rewards of Leadership
Being the first often carries a risk of failure, particularly when the leader fails to understand the precise nature of the emerging opportunity and allows the companys financial commitment to take the drivers seat. The leader must learn quickly and inexpensively the precise nature of the customer demand, the suitability of the new product or service concept, and the need for adjustments in the strategy.
Strategic Intent
There are three tests of any strategic intent direction, discovery and destiny. The strategic intent turns into reality when everyone in the organization understands how his/her contribution is crucial to the achievement of the intent. Everyone
in the company must find the goal emotionally compelling and how his or her job is linked with the attainment of the goal. Strategic intent must be personalized for everyone.
Strategic Architecture
The top management must set very clear corporate challenges that make everyone focus on the next key advantage or capability to be constructed. Strategic architecture determines the exact nature of these challenges, one at a time. For example, the next cycle time, the next cost reductions, the next penetration in a new market, the next learning new technology and so on. The top management keeps on providing people with a clear view of the next advantage to be constructed.
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gravity and defy it by building a plane with a question How do we make the benefits of globalization reach to all micro consumers, micro producers, innovators and micro entrepreneurs.
We agree with Dr. Prahalad that choice is where dignity starts, and that the world will change only when we view truly lowincome individuals as full participants in their local economies and communities, rather than as passive recipients of charity.
Jaaqueline Novogreats CEO, The Acumen Fund
Emotional Energy
Corporate challenges aim at the acquisition of new competitive advantages by identifying the local point for capability building. This happens when emotional energy is generated from enthusiasm for the organizations strategic intent. Every employee must feel a deep sense of responsibility for the success of the firm and must understand how his contribution will help the firm succeed.
Empowering Employees
It is only when specific challenges are identified that employees feel empowered Setting corporate challenges require great honesty and humility on the part of top management. The top management must honestly portray the magnitude of the challenge and freely admit their part of the responsibility for poor performance. Each employee
must be made to feel free to challenge corporate orthodoxies in say, standard operating procedures or workflow design or bureaucratic procedures.
Democratizing Commerce
Democratizing commerce is steadily gaining ground. Private sector is entering into a collaborative partnership with civil society, governments and philanthropists. Six conditions apply: 1. Respect individuals and their rights. 2. Focus on market-based solutions.
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3. Ensure scalability of solutions. 4. Through information technology and organization, reduce the rich-poor, urban-rural divide. 5. Focus on innovation and entrepreneurship. 6. Devise ecologically sustainable solutions.
Derisking Ambition
Being ambitious is not equivalent to taking big risks. Many companies believe that risk-taking is necessary to grow and to innovate. Calculated risk must be taken, but by definition, ambition means stretching an aspiration and then derisking ambition. Rather than making heroic investment, the company should use its tools of resource leverage for derisking heroic ambitions.
Breakthrough Innovation
Traditionally we tend to glorify one person for some breakthrough innovation, generally in a product. But as companies get bigger, this one person may
provide the environment, but the actual work would have to be done by hundreds of people.
Essential Analytics
(For putting in place a strategic intent), along with changing the employee mindset, factors like IT systems and analytics also come into play. Analytics are essential as they enable the company to offer relevant options to each customer and make future recommendations on the basis of the data gathered.
Evolution Vs Revolution
Setting up an innovative capability will not happen overnight. I do not believe in revolution but a fast evolution. Revolutions involve great risks and costs,
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while evolutions give you time to adjust and make course corrections.
Changing Relationships
The biggest breakthrough that needs to happen is for companies to realize that the relationship between the company and consumers is fast changing.
Re-examining Today
While telling employees that what they have done so far was correct, they also need to be told that processes and skills are not separate from the external environment. Once the external factors change, companies need to re-examine whether what they are doing will be right for the next round as well.
Customization
Companies will need to interact with their customers so closely that they actually co-create value with them on an individual basis (N=1). Think of Google. They have 100 million customers all of whom can, for instance, create their own music portfolio. These are products that allow customers to use and customize them for their own individual purposes. At the same time, companies will resource the goods and services needed to develop new offerings from anywhere in the world (R=G).
N=1, R=G
The equation, N=1, calls for a level of customer intimacy that can only be achieved with extensive use of deep analytical technology. The second, R=G, requires supply chain and logistics expertise that allows companies to source goods and services efficiently and effectively from anywhere.
Running a Marathon
I am not interested in a charismatic leader approach to innovation. Companies need continuous changes not just epidemic breakthroughs. It is like a marathon runner, with the difference that you divide the distance into metres.
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Lowering costs is a concern, but it is coupled with the need for better quality, speed and innovation. Talent can no longer be trapped in boxes in the organizational charts.
N=1, R=G
You need shorthand and N=1 and R=G are not equations. N=1 is a short hand way of saying one customer experience at one time and R=G is about resources accessed from multiple, global vendors.
Delivering Value
A company delivers value by giving each customer a unique personalized experience (N=1), but to make that possible, the company ought to have access to multiple resources, both global and local (R=G) from several vendors.
Over 3.5 billion people are getting connected through cell phones and PCs. The second is digitalization and the ability to move information seamlessly across multiple devices and the dramatic reduction in the cost of computing and communication. The third piece is the convergence of industry and technology boundaries. Today your cell phone is a telephone, a computer, a camera, a watch, a radio and may be a TV. The fourth is the emergence of social networks. These four drivers together enable the emergence of new competitive dynamics. However, 90% of the thinking on innovation is still very much firmcentric, product-centric.
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Value is shifting from products to solutions to experiences. In this new world B2B and B2C will converge. No company has all the resources it needs to create unique personalized experiences. All companies will, therefore, have to access talent, components, products and services from the best source. Then comes flexible systems which are a prerequisite and must be developed. And finally, specific models must be developed to enable organizations to focus on one consumer from the millions.
Managing Talent
Talent management connects social and technical business processes. You need IT and analytics to achieve data management. Without understanding who is doing what, and without having the business practices in place to understand the social aspects and focus on the individual, talent management cannot occur.
Importing Talent
Talent is about competitiveness, so we should focus on importing great talent rather than losing jobs. The global search for talent changes the way we manage companies.
Creating a Mismatch
Creating a mismatch by design where aspirations
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are ahead of resources is fundamental to innovation and entrepreneurship. Resource constraints is not the problem, innovation constraint is.
Thinking Differently
Going ahead is about thinking differently, not being just efficient. But you have to be different. You have to develop a distinct point of view about opportunities and disruptive business models. We cannot play the game with other peoples rules, we have to invent our own rules.
Disruptive Models
To understand disruptive business models, five criteria are critical. 1. Does it radically alter the economics of the industry? 2. Does it maintain and improve functionality? It is not just about lower cost, it is about improving functionality. In fact, both of them go together
if your know what to do. 3. Does it make it difficult for incumbents to react? You do not want other people to be able to copy what you have done rapidly. They will find it difficult because they have to forget what they have learnt, and they have to readjust their asset base in order to compete with you. 4. Is it sustainable? Is it based on logical internally consistent business principles? 5. Does it enlarge the size of the market?
Value Creation
Almost all traditional views of strategy have been very elitist when it comes to value creation. The assumption is that the top managers develop strategy and everyone else implements it. I dont think this is the correct answer.
Reinventing Business
We are in an era of discontinuous change. As a result, we are no longer talking about fine tuning or improving the organizations efficiency. We are talking about nothing less than re-invention reinventing the business in fundamental ways. Reinvention requires a new skill mix and new ways of approaching business. It may require different business models. It may also require different
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people. Companies have been looking outside their basic industries for people who can thrive in the new environment.
boundaries Find and explore opportunities Redeploy core competencies Consistently delight customers Explore new competitive space Build banner brands
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may prove toxic. Dismantling bureaucracy without a clear sense of direction could prove chaotic. Empowerment without direction is anarchy.
Balancing Act
For balancing demands of innovation and efficiency, managers must start with a point of view of how they want to compete and drive change day by day, meeting by meeting, report by report. They should not forget that making business processes strategic to results require managerial, cultural and technological change.
Leveraging Resources
Some firms are capable of extracting greater learning from each additional experience. Some firms are more efficient at learning. The capacity to mine ideas for improvement and innovation from each and every incremental experience is a critical component of resource leverage.
Borrowing Resources
Borrowing the resources from other sources is yet
another way of achieving resource leverage. Through alliances, joint ventures, inward licencing and use of subcontractors, a company can avail itself of skills and resources residing outside the firm. Borrowing also involves internalizing of skills by learning from the partners.
Internalization
Acquiring an entire firm is not always a good idea. Internalization is often a more efficient way of acquiring new skills. When you acquire a firm, you also pay for the skills you already have or for skills that are less strategically valuable. In an acquisition, the problems of cultural integration and policy harmonization are more complex.
Basis of Entrepreneurship
Entrepreneurship is open to everybody. Knowledge, courage and determination, and not inherited wealth are the basis of entrepreneurship. Everyone can identify with the new entrepreneurs their
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starting points, their family backgrounds, their early struggles, their pursuit of education, their belief in themselves, their capacity to ignore constraints and the creation of new business models.
Co-creating Solutions
For building a co-creation platform for collaboration with others, the managers need to learn to co-opt both consumers and civil society as also other institutions. They must learn to cocreate solutions because gaining local knowledge, accessing specialized overhead, gaining trust and becoming locally relevant is not easy. The managers will have to develop collaborative and integrative capacity the capacity to integrate the contributions of multiple players into a collective whole.
does not value the past. It focuses on the future and the sustainability of the business models that firms use. A clear and unambiguous articulation of the strategic direction of the company is crucial to gain the confidence of consumers, employees and the investors.
Good Governance
Openness and transparency are critical. Good governance matters. Openness to customers, suppliers, employees and investors and willingness to share information and engage in an open dialogue is critical to building trust and respect.
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connected to the global network of collaborators and competitors. Leadership is increasingly a combination of intellect, administrative savvy and morality.
M/s. Rajiv Vastupal, Rajiv Mehta, Janak Parikh and Dr. Prahalad
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Global leaders will be expected to develop crosscultural sensitivity. They must live with and thrive on ambiguity. Markets, technologies, competitive arrangements are changing so fast that detailed predictions are not easy or feasible. Thinking, acting and enabling others to act will become critical.
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Leveraging India
The industrial infrastructure around the world is in a state of turbulence. Opportunities as are available today come once in a lifetime. India must seize the moment. Let us not waver and let it
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M/s. Janak Parikh, Dr. Prahalad, Sunil Shah, Rajiv Mehta and D.J. Radia
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pass. The time for decisive leadership is now. Trust the young the 25-30 year olds to lead the way. Let us give them their space and get out of their way.
LEVERAGING INDIA
Aspirational Products
The Indian consumer is quite aspirational. It doesnt matter what income level he is at, he wants aspirational products. So brands are quite important contrary to the common perception that brands are only important for the top of the pyramid. But there has to be constant value.
Opportunities Galore
We have failed to recognize that every minute 30 Indians are leaving the villages to come to some city. Every city in the country will have 50 per cent of its citizens living in slums. We need to build at least 300 new cities. Imagine what building 300 new cities in the next 15 years means for our country. It is the most massive construction opportunity that we have. Connecting all these with infrastructure will provide an enormous opportunity for growth, for innovation.
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Imagination Vs Resources
The real challenge is to recognize that entrepreneurial transformation is not about resources, it is about imagination and its aspirations. All entrepreneurs start with low resources, and high aspirations. India has low resources but we should get high and global aspirations. We can then leverage resources and change the game.
Create a Sandbox
We need to focus on six constraints: market based solutions, social equality and development, procreation and collaboration, scale, new price performance levels, and ecologically sustainable development. If we accept these and create a sandbox, we can get the conversation going in communities, in businesses, civil society, politicians
and bureaucracies.
Magnificent India
India can be a major player in shaping the emerging world order through economic strength, technological vitality and moral leadership. In 2022: India will have worlds largest pool of trained manpower 200 million graduates (16%) and 500 million trained, skilled workforce (40%). Worlds leader in industry and commerce 30 of the Fortune 100 companies from India. It would account for 10 per cent of world trade. It will be a source of global innovation new businesses, new forms of organization, new technologies.
Shared Aspirations
Since Poorna Swaraj in 1929, India has never had a national aspiration which every Indian can share. A shared aspiration is fundamental for changing India. As a country, India must have high and shared aspirations.
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Aspirations Vs Resources
The question we should not ask is, do we have the resources. If aspirations are higher than resources, you will innovate and thereby change the game. The issue is not resources but the balance between aspirations and resources. It is the conscious misfit between aspirations and resources that create innovation and entrepreneurial energy.
Recognizing Researchers
We should start looking at basic research as an integral part of innovation. We must celebrate the
achievements of researchers as we do for Bollywood stars. After all, people need recognition. A country will get only that kind of people who you recognize.
Sharing Aspirations
We need to let aspirations live outside the benchmark of our resource base and share it with the rest of our brotherhood. A shared aspiration is the key for changing India. And to do this, we have to leverage resources by getting more for every person and every rupee spent.
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strongly focusing on education and skill building. We need to create 10 million jobs annually. Taxing the rich and subsiding the poor wont help. We have to create inclusive growth by creating sustainable opportunities.
leverage the resources of others rather than assume that all resources have to be inside the company. Once you start with the new perspectives or a managerial lens, you see change in innovation patterns all across.
Customer Preferences
Companies that do not make the transition to N=1 and R=G can go on momentum for quite some time especially in a country like India which is growing so rapidly that supply is not yet keeping pace with the demand. You can get away with it for some time. The sooner we learn how to do N=1 and R=G, the better. Old approaches will work if you are only competing inside the country in a supply constrained environment. Globally, variations based on customer preferences, biases, behaviour will be the order of the day.
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Confidence Vs Arrogance
Some Indian companies have become arrogant due to their initial success. It is necessary to be confident but retain humility. Indian companies still have miles to go.
the basement, we have to worry about the structure at the top skills, attitudes, opinions, preferences of managers and their values.
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what we will think of a development opportunity, as 700 million additional people come into the workforce as micro-producers and microconsumers.
pyramid, 800 million Indians can become a major source of breakthrough innovations. 5. India must focus on the flowering of arts, science and literature. 6. India must become the worlds benchmark on how to cope with diversity.
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willing to force change in the status quo. India has always responded to leaders who combined vision with personal integrity.
Global Aspiration
India has low resources, but we better get high aspiration, a global aspiration. We will then
leverage our resources and change the game. The real challenge is to recognize that entrepreneurial transformation is not about resources. It is about imagination and its aspirations.
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M/s. Yatindra Sharma (Past-President, AMA), Dr. C.K. Prahalad, and Prof. Balakrishnan
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The four billion people who constitute the bottom of the pyramid are not a monolith. For those who want to engage in this opportunity, there is no single universal definition of the bottom of the pyramid. The definition must fit the focus for productive engagement. We can choose to serve any segment of the four blin ilo.
FORTUNE AT THE BOTTOM OF THE PYRAMID
The Concept of BOP
The concept (bottom of the pyramid) was introduced to draw attention to the 4-5 billion poor people who are unserved or underserved by the large organized private sector, including multinational firms.
Engine of Innovation
four billion micro consumers and micro producers constitute a significant market and represent an engine of innovation, vitality and growth. This is a new category for all be it managers, governments, or civil society organizations.
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Defining BOP
The four billion people are not a monolith. For those who want to engage in this opportunity, there is no single universal definition of the Bottom of the Pyramid. The definition must fit the focus for productive engagement. We can choose to serve any segment of the four billions.
Consumers Right
The next big challenge for humanity is to get everybody not just the elite, to participate in globalization and avail of its benefits. So, do you want to get world class products, not luxury products, at affordable prices and with multiple choices? That is the consumers right.
6. Focus on building a logistics infrastructure that includes manufacturing that is sensitive to prevailing conditions. 7. While designing products and services, consider the skill levels, poor infrastructure and difficulties in servicing remote areas. 8. Find innovative ways to educate the customers on product usage. 9. Develop products that can perform in hostile environment. 10. Given the heterogeneity of the consumers, research the interfaces. 11. Ensure that innovations reach the consumer. 12. While developing products, focus on the platform so that new features can be easily incorporated.
Radical Innovation
Right pricing and right business model will get you a huge market poor people adopt technology rapidly. They have no problem with advanced technology and there is money to be made you need radical innovation and model products and services.
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Sophisticated Poor
Consumers are very discerning when it comes to big-ticket items theyll be a lot more conservative and look at the best value They are willing to pay more for things that have better value The Indian consumer is a much more sophisticated consumer even if he is poor.
Customer Behaviour
Companies can go on a momentum for quite some time in a country like India which is growing so rapidly that supply is not yet keeping pace with demand you ca get away with it for some time If you are only competing inside the country in a supply constrained environment, old approaches will work. On the other hand, as supplies catch up with demand, it will hurt you as people start saying, I want to have an influence on what happens. Globally, variations based on customer preferences,
Personalized Service
Your friendly neighbourhood kirana store owner knows exactly what your needs are! Your database is in his head. He knows whether you are creditworthy, whether you have upgraded your soap brand and the eating habits of your family members. So, he gives you an incredible personalized service. This personalized service (can) be combined with the efficiencies of mass production.
Working Together
Large private sector firms and civil society organizations are learning to work together in a collaborative fashion. There is a growing recognition that marrying the local knowledge of a nongovernment organization with the global reach of a multinational firm can create unique and substantial solutions.
Poverty Alleviation
The private sector cannot solve all the problems (of poverty alleviation), but can bring technical and financial resources, the disciplines of organization, accountability and entrepreneurial drive to bear on the problems.
Escaping Poverty
Even (for grossly destitute, deprived people) our goal should be to build capacity for people to escape
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Critical Constraints
Awareness, access, affordability and availability are the key ingredients to market development at the bottom of the pyramid. It is useful to start with an innovation sandbox, a set of critical constraints that must become non-negotiable in the development process. The innovation sandbox must be specific to the firm, its target segment, and the business.
Lifestyle Measures
One should not measure the customer segments by income alone, because it hides the interesting
transitions that are taking place in the market. It is better to use lifestyle measures (LSMs) of the bottom of the pyramid consumers their aspirations and preferred lifestyles. Individuals make choices that do not necessarily follow our perceptions of what an individual should do at his or her income level. A slum dweller aspires for a TV, a farmer invests in cattle without improving his residence.
Advanced Technology
Advanced technology is critical for ensuring the quality of products or service delivered. More importantly, advanced technologies, wisely deployed, reduce the overall costs, if the investments can be leveraged.
Social Transformation
I am impressed by the social transformation that is taking place in markets where private and public sectors are involved. BOP consumers adapt to new
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technologies, experiment and find innovative applications. Barriers to communication are breaking down. They are getting access to legal identify and so can benefit from the opportunities and social interactions. And finally, the very social fabric of society is being changed by organized, empowered, networked and active women.
Breakthrough Innovation
I think the bottom of the pyramid is not something you do when you dont have anything else to do. The bottom of the pyramid is breakthrough innovation. It is not something you do because of guilt. You do it because it is the right thing to do for being innovative and creating breakthroughs in your business.
Entrepreneurship Drive
Preconditions for entrepreneurial drive in BOP are: (i) new channels of access to consumers, (ii) access to world class technology, (iii) growth in per capita income, (iv) availability of consumer credit (v) price-performance changes. These will increase focus on entrepreneurship and alleviate poverty.
Importing Competitiveness
I continuously keep arguing in the US that you are not exporting jobs to India. You are importing competitiveness from India. There is a huge difference between the two ways of thinking. If you think you are exporting jobs, then you have to worry about Buffalo versus Bengaluru. On the other hand if you are importing competitiveness, it is a good job to keep it in Bengaluru, so that you can compete on a global basis.
Entrepreneurial Drive
Development of skills, quality, processes, project management skills and so on are very important. They represent tremendous entrepreneurial drive. There are 3000 companies only in Bengaluru which are less than 20 million dollars in sales. That is the key. This is the entrepreneurial drive.
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Is it a big widely recognized problem in India? Will it affect a wide range of businesses? Is there an opportunity to leapfrog? Are there any real winners in this game, any established leaders? If not, why cant I be the one? Will it change the economics of the industry?
Dont treat your customers as stupid. Dont forget that the bottom of the pyramid market has triggered the growth of telecom, retail, FMCG and banking industries in India. Consumers in this market can dump you because of lower switching costs.
Aspirations at BOP
The Indian consumers are quite aspirational. It doesnt matter what economic level they are at but they want aspirational products. So brands are quite important contrary to the common perception that brands are only important for the top of the pyramid. But there has to be consistent value.
Quality is Critical
A lot of consumers, even those at the bottom of the pyramid, are willing to pay for quality.
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Therefore, companies have to learn that quality is a critical component of the brand premise.
Role of Women
A well-understood but poorly articulated reality of development is the role of women. Women are central to the entire development process. Access to economic independence can change the long tradition of suppression of women and denial of opportunities.
Price-Performance Structure
While attempting to innovate BOP markets, one must focus on products and services. Serving BOP market is not just about lower prices. It is about creating a new price-performance structure.
advanced technologies blended with the existing and rapidly evolving infrastructure.
Scalable Solutions
As BOP markets are large, solutions must be scalable and transportable across countries, cultures and languages. Solutions must be designed for ease of adaptation in similar BOP markets.
Acquiring Trust
The sophistication and demand of the BOP markets have surprised managers who are used to developed markets. It is not just about making cheaper versions of products sold in developed markets. The managers must acquire local knowledge and local trust before they develop markets be it micro consumers or micro producers. They must learn, learn rapidly.
Co-opting Consumers
The managers need to learn to co-opt both consumers and civil society and other institutions to create a co-creation platform. They must learn to co-create solutions because gaining local knowledge, accessing specialized overheads,
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gaining trust and becoming locally relevant is not easy. The managers will have to develop collaborative and integrative capacity the capacity to integrate the contributions of multiple players into a collective whole.
Changing Mindsets
The biggest challenge to managers who are trained
to serve existing markets effectively is to change their mindsets when they approach BOP markets. The managers have to forget traditional ways of approaching the business and develop a new and innovative approach. The goal is to build new markets, organize the unorganized markets, build new ecosystems and create new business modes.
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Focusing on BOP
India can become a source of innovations if we recognize the needs of the poor the bottom of the pyramid. There is a potential market of 500
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million Indian who are not currently serviced by the organizated sector. Focusing on the bottom of the pyramid will force us to think of substantial development, new price-performance levels.
Quotable Quotes
There is no challenge which is impossible. The more ingrained the thought process, the more creative solution it demands. So, the real trick lies in finding out such a thought process and then dealing with it.
QUOTABLE QUOTES
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The thought process that you are resource constrained, that you cannot lead, that we have to look at the best practices and so on are very deep rooted. So once you understand them you have to construct methods by which you can keep a check on it.
People should realize that you care about them, you want them to succeed. They will then accept innovative approaches.
Purely Prahalad
Quotable Quotes
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Business need to recognize that they are a social institution that operates with a social license from the community.
If you are honest about helping others rather than showing how smart you are, things are very easy.
You need to differentiate between problems of the moment with long term trajectory.
The catch lies in how we can provide the most innovative products to customers at a very affordable price.
Business leaders need to do good, not by philanthropy, but by enlarging the scope of business, making it more inclusive. The traditional approach to poverty alleviation assumed that we, the elites, have to tell the poor what to do. While we must enforce global standards, global technology and the global ability to organize, we also need to have local responsiveness. Cocreation is an integral part of serving. The last century was all about marketization of politics and getting individuals share their voice about how they are governed. The next big challenge for the humanity is to get everybody, not just elite, to participate in globalization and avail of its benefits.
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Democratize commerce. People who have access to information will not tolerate inequality. No business can sustain itself if there is no value created for the customer. If both parties do not get value, there is no transaction. Some 30 years ago, there was a lot of debate about whether quality will increase cost. What did we find? That if you deeply understand quality and you put methodology in place, costs automatically come down. It is the consumers right to get world-class products, not luxury products, at affordable prices and with multiple choices. And the producer must get fair wages for his efforts and fair returns for his creativity. The opportunities are immense in the era of globalization. The surge in connectivity, digitalization, convergence and social networking have opened new doors for entrepreneurial boom.
Traditionally, companies fragment their brands to compete for share of segment. Like the Japanese, you must promise the best price-performance trade off the best value at whatever price point you buy.
Purely Prahalad
Quotable Quotes
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The watch-word for the would-be engineers of the modern corporation are devotion, empowerment, focus, entrepreneurship, personal accountability and customer-focus.
Quality and alignment of business processes to strategy and business models can become a source of competitive advantage.
We always assume that we are researching the customer. But it is the customer who is researching the brands and companies.
The core competence that support product leadership is the foundation of corporation. The banner brands is the roof. Between the foundation and the roof are the various businesses each resting on a shared foundation and each supporting a common roof. The emancipation of women is an important part of building markets at the bottom of the pyramid. Empowered, organized, networked and active women are changing the social fabric of the society.
Flexible business processes can create the capacity to develop new business models and strategy.
Early in the pursuit of new competitive space, the most critical resource is not cash, but management
talent.
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The goal is not just to focus on a few things at a time, but to focus on the right things, to target those activities that will make the biggest impact in terms of customer perceived value. Some firms approach alliances and joint ventures with the attitude of a teacher, others do it with the attitude of a student.
Dividing meagre resources across a wide range of medium-term operational goals is a recipe for mediocrity across a broad front.
Technology is increasingly stateless. It moves quickly across borders in the form of scientific papers, foreign sponsorship of research, cross-border equity stakes, international conferences and so on. Unlearning most often takes place before learning can begin.
Industry foresight comes when senior executives in a company are able to empathize with basic human needs.
Having imagined a future, a company must find a path that leads from today to tomorrow.
Wealth creation can be a legitimate activity. Wealth fairly and openly acquired must be respected.
Purely Prahalad Quotable Quotes
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If you dont know where you are going, going faster doesnt help.
Leadership is about the future and about change. Leadership is about hope too.
S. Ramadorai Vice Chairman, Tata Consultancy Services It is time the nation introduces next practices in governance by looking inward and not outside, for inspiration We should create a Centre for Clean Governance. Dr. Prahalad espoused a six-pronged strategy to be on par with the developed nations in 2022. We must innovate to create a 500 million skilled workforce and leverage technology for uplifting the poor primarily by providing education and imparting skills. Jamshyd N. Godrej
CMD, Godrej and Boyce Manufacturing
Dr. Prahalad's belief that manufacturing was the core strength of the country is the turning point in making it a manufacturing hub in the last decade. As the nation stood on the cusp of sustainability requiring enormous changes, Prof. Prahalad's theories would provide the interface and influence legislation on sustainability. Gopal Srinivasan
Chairman, TVS Capital Funds
The greatest strength of Prof. Prahalad was that he was truly humane.
D. Sudaram
Prof. Prahalad was the driving force behind Pureit, a solution to provide safe drinking water at low price and Shakti, a project of empowering rural women by distributing FMCG through them. Prof. Prahalad travelled to remote interiors to interact with the women for further research. Shridhar Mitta
Cofounder, B4e Inc.
Prof. Prahalad inspired me to set a world-class testing facility in India and become a role model to the world. Prof. S. Sadagopan
Director, Indian Institute of Information Technology
Prof. Prahalad dared to be different and was extraordinarily committed. P.R. Venkatarama Raja
Vice Chairman, Ramco Systems
Prof. Prahalad's repeated message was, "You are responsible as leaders to lead the country into a future full of unknowns." Arvind Srinivasan
Administrator, Arvind Eye Hospital
Prof. Prahalad was an alchemist who picked up all base metals and turned them into precious ones by working on the collective wisdom of individuals.
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4. Face to Face with Dr. C.K. Prahalad (Top Management Forum) (January 5, 2001) 5. India as a Source of Innovation (January 6, 2001) 6. Rapid Growth: The Imperative for India (June 29, 2002) 7. India of My Dreams (December 26, 2003) 8. Learning to Lead (January 31, 2005) 9. Changing the Rules of the Game in the Global Industries (February 7, 2006) 10. Advance in Science and its Impact on Strategy
(December 28, 2006)
12. Globalizations of Indian Firms: Innovation or Imitation? (February 25, 2008) 13. Global Crisis: Is There an India Advantage?
(February 17, 2009)
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