New game, newer rules

Written by Rajiv Tikoo | Updated: Sep 30 2007, 07:14am hrs
The annual sales of 10 largest MNCs are more than the combined GNP of 100 poorest countries. Though MNCs, numbering 60,000, account for 25% of the global economic activity, they employ less than 1% of the worlds labour force. At the same time, the gap between the rich and the poor is widening. In 1960, the richest 20% accounted for 70.2% of the global GDP and the share of the poorest 20% was 2.3%. In 2000, the richest quintile accounted for 85% of the global GDP and the poorest, 1.1%.

Evidently, economic growth has not benefited all of us. Nor has it been equitable or just. Everyones socio-economic status may have improved, but so have disparities, even more glaring in the light of growing aspirations.

The bottomline is that the current economic model has not delivered well for so long and its no use tinkering with it and making incremental changes to look for solutions to increasing problems of poverty and environmental sustainability.

Businesses may not be the cause of all problems, but they can be part of solutions. In fact, the approach should be the other way round. Solve societal problems in a sustainable way and profitably. Profits and sustainability are not mutually exclusive. The approach calls for a paradigm shift in thinking and creating sustainable solutions by people and for people.

Stuart L Hart builds brick by brick the case for sustainable enterprises in his revised edition of Capitalism at the Crossroads. In addition to the known and often quoted studies of ITCs e-Choupal and HLLs Shakti project, the Cornell management professor cites illuminating new case studies.

A few of the inferences are too simplistic though. For example, the example of Ladakh without an insight into the politics of the region and the times is inappropriate. Similarly, the success of n-Logue as a rural Internet service provider in India is debatable.

But it doesnt matter even if it appears at times that he is filling his big picture of a sustainable world by using facts, figures and case studies. What is important is that one of the worlds top authorities on the implications of sustainable development and environmentalism for business strategy has a vision and a sustainable business case for it, which has been validated time and again with the help of pilot studies as well as successful business ventures from all over the world. Of course, passing the tests of replicability, scalability and sustainability over a longer period of time will be the real challenge.

He doesnt only talk, but also makes you think with his blueprint of the Base of the Pyramid (BoP) Protocol Initiative. It goes beyond first-generation greening and sustainability. Its also a generation ahead of exploring the bottom of the pyramid markets through locally-sourced raw material and small packaging in sachets thrust on the unreached markets by enterprising sales forces. The BoP 2.0 version is about living with communities without any preconceived notions, being one of them, identifying the needs in the local milieu, co-discovering practical solutions using natural resources and leveraging corporate competence to co-produce and co-deliver products/ services in a sustainable way, thereby striking a win-win partnership with communities that lack appropriate and affordable solutions to water, energy, transportation and financial services in the first place.

The model is about disruptive innovation at the base of the pyramid, which notches up early successes before forcing its way up to the top of the pyramid and rewriting the rules of the game. In fact, it is about inventing a new game.

And the turning point was when he co-authored with C K Prahalad the article, The Fortune at the Bottom of the Pyramid (2002), on how businesses can engage profitably with four billion of the poorest people. Now he is trying to strike out on his own with the vision that is getting loftier, filled with details and hopefully sustainable.