Addressing the market opportunity at the BOP requires that we start with a radically new understanding of the price–performance relationship compared to that currently employed in developed markets. This is not about lowering prices. It is about altering the price–performance envelope.

Price is an important part of the basis for growth in BOP markets. GSM handsets used to be sold for $1,000 in India. Not surprisingly, the market was quite limited. As the average price dropped to $300, sales started to increase. However, when Reliance, a cell phone provider, introduced its “Monsoon Hungama” (literally Monsoon Melee) promotion that offered 100 free minutes for a mobile, multimedia phone with an up-front payment of $10 and monthly payments of $9.25, the company received 1 million applications in 10 days. Of course, price is a factor. Equally important is the performance associated with the price. The applications available through the Monsoon Hungama offer, for a mere $10 downpayment, are quite incredible, including news, games, audio clips of movies and favorite songs, video clips, astrology and numerology, city guides, TV guides, stock quotes, and the ability to surf the Internet. The phone itself is very fashionable and state of the art, using CDMA technology.^[2] Today, India is the fastest growing wireless market in the world. During the last quarter of 2003, India was adding 1.5 million new subscribers per month! Both GSM and CDMA technologies are readily available, as are a host of features and pricing options. The regulatory process is also rapidly evolving. This milieu can be confusing at best. However, most value-conscious consumers do not seem to be concerned. There are so many comparisons of the alternate technologies, features, and payment schemes that are debated in newspapers, on TV and radio, and in magazines, that consumers are well-informed. Even those who cannot read tend to consult with others who can. Word of mouth is so powerful that the consumers seem to have found an efficient process—combining analyses offered by journalists, companies, consumer reports, and their friends—for evaluating the price–performance options available to them.

How can we provide a high level of price–performance to a consumer population that exists on less than $2 per day? The changes in price–performance that are called for must be dramatic. Let me illustrate. Consider a cataract operation. It can cost as much as $2,500 to $3,000 in the United States. Even most of the poorest in the United States can get access to this surgery through health insurance (Medicare and Medicaid). In other developed countries such as the United Kingdom, the nationalized health services pay the cost. Now, consider the poor in India or Africa. For these mostly uninsured individuals to even consider cataract surgery, it would need to be priced around $50, a fraction of what it costs in developed markets (about 50 to 75 times less than in the United States), and the quality of surgery cannot be any less. Variation in quality in restoring eyesight is unacceptable. For a successful cataract operation in BOP markets, the quality of surgery must also include postoperative care of semiliterate patients in very unsanitary environments. Commitment to quality in BOP markets must be broad-based: identifying patients for surgery, most of whom have had limited medical care in the past, much less visits to the hospital; preparing them for the procedure; performing the operation; and postoperative care. The Aravind Eye Care System, the largest eye care facility in the world, is headquartered in Madurai, India. Doctors at Aravind perform more than 200,000 state-of-the-art cataract surgeries per year. Their price is $50 to $300 per surgery, including the hospital stay and any complications in surgery. However, over 60 percent of Aravind’s patients get their surgeries for free with no out-of-pocket payments by patients, insurance companies, government, and so on. With only 40 percent of paying patients at such seemingly low prices, Aravind is nevertheless very profitable. The cost of the surgery, for all the patients taken together (paying and free) is not more than $25 for a basic cataract operation with intra-ocular lens (IOL).

Similarly, access to financial services for the poor provides a challenge to conventional wisdom. Saving with a bank is a new idea for most people at the BOP. They have hardly any savings to begin with and whatever they have they wear it on them (as jewelry) or keep under their mattresses. Simple steps such as saving $1 per week and starting an account with as little as $20 can provide the impetus to cultivating the savings habit among the poor. Building the savings habit and giving them access to the basic building blocks of financial services must precede providing them with access to low-cost loans or rain and crop insurance. How does a large global bank approach this market and provide world-class (if a limited range of) services starting with a $20 deposit? Citicorp started $25 deposit-based banking services, called Suvidha, in Bangalore, India. Suvidha was oriented toward the urban population and was entirely based on an ATM, networked, 24/7 model. In the first year, Citibank enrolled 150,000 customers. This was the first time a global bank approached consumers with a $25 deposit option. Now several Indian banks offer similar service, both branch-based and ATM-based, in both rural and urban areas.

BOP markets, be they in telecom, personal care, health care, or financial services, impose very interesting business design criteria. MNCs have to fundamentally rethink the price–performance relationship. Traditional approaches to reducing prices by 5 to 10 percent will not suffice. We should focus on an overall price–performance improvement of 30 to 100 times. This calls for a significant “forgetting curve” in the organization—an ability to discard traditional approaches to price–performance improvements. However, these efforts can be justified only if the markets are very large and global and the returns are more than commensurate with the risks. Although the margin per unit might be low, investor interest in BOP markets is based on expectations of a large-volume, low-risk, and high-return-on-capital employed business opportunity. BOP markets do represent an opportunity to create economic value in a fundamentally new way.

The BOP market opportunity cannot be satisfied by watered-down versions of traditional technology solutions from the developed markets. The BOP market can and must be addressed by the most advanced technologies creatively combined with existing (and evolving) infrastructure.

More than 70 million Indian children suffer from iodine deficiency disorder (IDD), which can lead to mental retardation. A total of 200 million are at risk. IDD in many parts of Africa is equally daunting. The primary source of iodine for most Indians is salt. Indians do eat a lot of salt, but only 15 percent of the salt sold in India is iodized. Iodine is added by spraying salt with potassium iodate (KIO3) or potassium iodine (KI) during manufacturing. Salt, to be effective as a carrier of iodine, must retain a minimum of 15 parts per million of iodine. Even iodized salt in India loses its iodine content during the harsh conditions of storage and transportation. Indian cooking habits account for further iodine loss. The challenge in India (and similar markets in Africa) is clear: How do we create iodized salt that will not lose its iodine content during storage, transportation, and cooking but will release iodine only on ingesting cooked food?

In an effort to address the immense iodine loss in Indian salt, HLL, a subsidiary of Unilever, recognized that chemicals can be protected by macro and molecular encapsulation. HLL first attempted macro encapsulation (similar to coating medicine with a covering). Although this process kept the iodine intact, it was difficult to guarantee the exact amount of iodine as the miniscule size of the salt crystals complicated the process. HLL thus decided to try molecular encapsulation. Called K15 (K for potassium, 15 ppm), the technology encapsulates iodate particles between inorganic layers, protecting iodine from harsh external conditions. The inorganic layers are designed to only interact with and dissolve in highly acidic environments (i.e., a pH level of 1 to 2, as in the stomach). Here, iodine is released only upon ingesting food, only negligibly before that. The tests to validate this technology under the harsh conditions of Indian spices and cooking methods required that the researchers resort to techniques developed by the Indian Atomic Energy Agency, using radioactive tracers. The tracers did not alter the chemistry of the iodine but could detect it throughout the simulated cooking process. To be marketable, though, the iodized salt so developed must also retain its attractiveness (whiteness, texture) and, needless to say, must be priced comparable to iodized salt using the traditional methods (ineffective as a carrier of iodine) and noniodized salt. The technical breakthrough in applying molecular encapsulation of iodine in salt is now a patented process. Unilever is already leveraging this innovation from HLL to other countries such as Ghana, Ivory Coast, and Kenya, where IDD is a problem.

The concept of hybrids appears in strange places. Consider that the dairy industry in India, Amul, is organized around 10,675 cooperatives from which it collects 6 million liters of milk. Amul collects milk from the farmers in villages by providing village collection centers with over 3,000 Automatic Milk Collection System Units (AMCUS)—an integrated milk-weighing, checking (for fat content), and payment system based on electronic weighing machines, milk analyzers, and a PC-based accounting and banking system for members. Amul makes 10 million transactions and payments in the neighborhood of Rs. 170 million. Payments can also be made instantaneously. This integrated electronic system sits in the middle of the traditional Indian village in the milk cooperatives. Many of the farmers feel that, for the first time, they have been treated “right”—the weighing and testing are honest, they are paid without delays, and they can now become part of the national milk network without leaving their villages.^[3]

It is easy to succeed in a limited experiment, but the market needs of 4 to 5 billion people suggest that the experiments must be commercially scalable.

NGOs and other socially concerned groups are by far the lead experimenters in BOP markets. For example, we can demonstrate that a combination of photovoltaic and wind-based energy systems can be built for less than $1,000, consistently deliver the necessary power, and be very acceptable as a single-family or village solution. However, how do you scale it to cover 1.5 billion people who live without access to grid-based electricity? What is involved in scaling these successful experiments? Can small local entrepreneurs and NGOs accomplish this transfer of technology across geographies?

Scale of operations is a prerequisite for making an economic case for the BOP. Given a stringent price–performance equation and low margins per unit, the basis for returns on investment is volume. Only a few BOP markets are large—China, India, Brazil, Mexico, and Indonesia. Most of the markets, such as the African nations, are poor and small. The prerequisite for scalability of innovations from these markets is that they are supported by organizations that have significant geographical ambitions and reach. MNCs are ideally suited for this effort. Further, size allows MNCs to make the necessary financial commitments behind potentially successful, innovative ideas. How can HLL leverage its learning, know-how, and “know-why” developed in marketing salt in India and take it to Nigeria, Chad, Ivory Coast, and China?

It is clear, therefore, that pursuing the promise of BOP markets will challenge the dominant logic of both MNCs and NGOs. MNCs will benefit from learning how to engage with NGOs and local community-based organizations to co-create new products, services, and business. NGOs will benefit from partnerships with MNCs, through which they can leverage MNC know-how and systems to scale innovations broadly.

The poor as a market are 5 billion strong. This means that solutions that we develop cannot be based on the same patterns of resource use that we expect to use in developed countries. Solutions must be sustainable and ecologically friendly.

Consider the use of water. In the United States, domestic use of water per capita is around 1932 cubic meters per person per year. In China, it is 491 cubic meters and in India, 640 cubic meters, respectively. There is not enough water available in most parts of the world to support demand.^[4] Even if it is available, the quality of water available varies from indifferent to poor. For example, in Chennai, India, there is an attempt to collect rainwater from rooftops and store it in wells. So far, scarcity has not altered usage patterns. Water usage continues to be a critical component of high standards of living in the Western world. The question that BOP markets will pose for us is this: Can we develop products that provide the same level of functionality with no or minimal use of water? For example, can we wash clothes without water? Can we refresh ourselves without a shower? Can we flush toilets without much water, as is done in airplanes? Can we recycle water for multiple uses within an apartment complex (in urban settings) and within a village (in rural settings) in a closed loop system? Can we conserve water in agriculture through innovative cultivation methods?

In the United States, each person generates 4.62 pounds of waste per day. If everyone in China adopted Western standards of waste per capita, there would be more than 5.5 billion pounds of waste per day.^[5] There are not enough places to dump this amount of garbage! Packaging can play a crucial role in the sustainable development of markets in the BOP. With 5 billion potential users, per-capita consumption of all resources, including packaging materials, can be crucial. Even recycling systems might not be practical as the rural markets are dispersed and waste collection for recycling might not be economically viable. At the same time, packaged goods are one way of ensuring product safety. The dilemma is real. So far, MNCs and others have not suggested a practical solution to the packaging problem, nor do we have a comprehensive approach to energy and water use. Water might get the attention of MNCs sooner than energy as the availability of quality water, even for human consumption, is becoming difficult in BOP markets and, in some cases, developed markets as well. The growth of bottled water is an indication of this trend.

The goal here is not to be alarmist. The BOP will force us to come to terms with the use of resources in ways that we have not so far. Whether it is in the use of fossil fuels for energy and transportation, water for personal cleanliness, or packaging for safety and aesthetics, ecological sensitivity will become paramount. I believe that more innovative, sustainable solutions will increasingly emerge from serving the BOP markets than from the developed markets.

Recognizing that the functionality required in products or services in the BOP market might be different from that available in the developed markets is a critical starting point. In fact, developers must start from this perspective and look for anomalies from their prior expectations based on their experiences with developed markets.

Take prosthetics as an example. The artificial limb, as a business and good medical practice, is not new. It has been around for a long time and every war, starting with the American Civil War, has given a boost to its usage. Lost limbs due to accidents, polio, or war, are common. India is no exception: There are 5.5 million amputees and about 25,000 to 30,000 are added each year. However, most of the patients needing prosthetics are poor and illiterate. For a poor Indian, regaining the ability to walk does not mean much if he or she cannot squat on the floor, work in the field, walk on uneven ground, and not wear shoes. As Mr. Ram Chandra, talented artist, sculptor, and inventor of the Jaipur Foot, the Indian alternative to traditional prosthetics, said, “Indians do not wear shoes to the temple or in the kitchen.” Jaipur Foot’s design considerations are based on unique functionality, specific to this market, and are easy to recognize, as shown in Table 2.1. The design requirements can be divided into two parts. Design must take into account the technical and medical requirements for various foot movements, but this is not enough. We can build a prosthetic that can perform all the functions required. However, if it is not within reach of the target customer—here the BOP patient—it does not help. Therefore, we need to superimpose the business requirements, not just appropriate prices, but how the individual is likely to use the prosthetic.

The design considerations isolated by the design team of the Jaipur Foot were uniquely oriented to BOP problems (e.g., in India, Afghanistan, Bangladesh, Pakistan, Cambodia, Congo, and Vietnam) in fitting prosthetics and are not the problems that designers would have to contend with in the United States. Functionality 1 describes the technical requirements that are unique to BOP consumers in India. Contrary to popular assumptions, this set of design parameters increased the required functionality of prosthetics compared to what is available in the United States or Europe. Functionality 2 describes the additional unique requirements at the BOP level. For example, farmers in the BOP must work in standing water in paddy fields for about eight hours every day. Vendors in the BOP must be able to walk long distances (about 8–10 km per day). Therefore, prosthetics for consumers in the BOP must be comfortable, painless, and durable. The poor cannot afford frequent replacements or hospital visits. They travel from all over India with their families to get treatment at Jaipur Foot but cannot afford boarding and lodging, much less stay for an extended time in a new location. The prosthetics must be custom-fitted in a day. From the perspective of Jaipur Foot, the prosthetics must be fitted with less than fully trained physicians, as there is a shortage of doctors and hospital space. The job of fitting a custom-developed artificial leg must be “deskilled.” On top of this, prices must be reasonable, as most clients are poor. They cannot afford the typical $7,000 to $8,000 per foot cost of prosthetics. At best they can afford $50.

This might appear to be a daunting and impossible task. How can one develop a prosthetic that is more advanced in functionality, for 1/200 of the cost, can be custom-fitted by semiskilled paramedics in one visit (one day at the clinic), and last for a period of four to five years? By accepting these prerequisites, the Jaipur Foot team, led by master craftsman Ram Chandra and Dr. P. K. Sethi, a trained physician, developed a prosthetic that meets all of the criteria for less than $30. This innovation has helped farmers to farm again and a renowned Indian classical dancer to perform onstage fitted with a prosthetic.

The needs of consumers in BOP markets might not be obvious either to the firms or to the consumers. Certainly, the consumers might not know what can be accomplished with new technology to improve their productivity. Managers need to invest the necessary effort to gain a granular understanding of the dynamic needs of these consumers.

India is a country with more than 1 million retail shops. Most of the shops are tiny (around 300–400 square feet) and cater to the immediate neighborhoods in which they operate. Despite space constraints, each might offer well over 4,000 stockkeeping units (SKUs). These stores stock unpackaged (e.g., rice, lentils, oils, salt) as well as packaged products that are both unbranded and branded. Most of the store owners are semiliterate and work long hours. The average sales volume per month is about Rs. 400,000 ($9,000) with very thin margins. Can these stores be possible targets for a state-of-the-art point-of-sale (POS) system? TVS Electronics, an Indian firm (and a part of the TVS group of companies), focused on this market as a potential opportunity for a POS system. To start, its engineers spent several weeks in the store observing operations and the store owners’ approach to management. More than 1,000 hours of video ethnography and analysis by engineers preceded the design of the POS system. The specification of the system was set as follows:

As of the end of 2003, TVSE machines were being field tested in more than 500 stores. The company already has on order more than 5,000 units in industries as varied as petrol stations, railway stations, and pharmaceutical outlets. The design of the POS and its cost structure allow TVSE to migrate this platform seamlessly to other applications.

A significant opportunity for innovation in BOP markets centers around redefining the process to suit the infrastructure. Process innovation is a critical step in making products and services affordable for the poor. How to deliver is as important as what to deliver.

We referred to the Aravind Eye Care System, a profitable institution where 60 percent of the patients are nonpaying patients and the remaining 40 percent pay about $50 to $300 for cataract surgery. What is the secret? The visionary founder of Aravind Eye Hospital, Dr. Venkataswamy (Dr. V as he is affectionately called), says he was inspired by the hamburger chain, McDonald’s, where a consistent quality of hamburgers and french fries worldwide results from a deeply understood and standardized chemical process. In-depth attention to inputs and process steps guarantees high-quality outputs. Dr. V has developed and standardized the Aravind process, in which the first step is more than 1,500 eye camps where the poor are tested for vision problems and those needing help are admitted. They are then transported to hospitals. This is different from the more popular on-site eye camps in villages and small towns in India. The conditions of sanitation and medical care in such camps cannot be controlled as well as they can be in specially designed hospitals developed for this purpose. In the Aravind process, technicians, often young women drawn from the local areas and trained in eye care only, supplement the work of doctors. Patient preparation and postoperative work are done by these technicians. Doctors perform only surgeries. The process flow allows a doctor and two technician teams to perform more than 50 surgeries per day. Because the process is so well developed, technicians and doctors are so carefully trained, inputs are fully controlled, and the system and values are rigidly enforced, Aravind boasts of an outcome rate that is among the best in the world. The IOL, part of the modern cataract operation, is manufactured at Madurai, the central hub of Aravind, and exported to multiple countries, including the United States.

Amul, the largest and best-known dairy in India, is yet another example. Amul, as a system, is one of the largest processors of raw milk in India. Milk collection is totally decentralized, yet Amul has innovated processes by which collection is reliable and efficient. Villagers, with a buffalo or two, bring their collection to the village collection center twice daily. The milk is measured for volume and fat content and the villager is paid every day. The collected milk is transported to processing facilities in refrigerated vans. Amul’s centralized, large, and highly efficient world-class processing facilities pasteurize and package the milk for retail consumption. Amul also converts raw milk into primary products—milk powder, butter, and cheese—and secondary products such as pizza, ice cream, and Indian sweets. Amul handles marketing and promotion for a very heterogeneous customer base centrally.

The Aravind and Amul stories appear to be very different, but they have many similarities. At the heart of their extraordinary success lie the process innovations they made. These can be visualized as shown in Figure 2.1. The genius of these innovations is the way these two groups—in such different industries—have maintained the local infrastructure of the villages and brought to them the most advanced facilities in their respective fields. Amul connects the farmer with two buffaloes to the national and global dairy market and gives him or her an identity. Aravind brings the world’s best technology at the lowest global cost to the poorest villager and gives him or her the benefit of eyesight and dignity. Neither starts with the idea of disrupting the lives of the poor. Both aim to improve the quality of the life of the poor profitably. Neither compromises on world-class quality. Both have, through careful consideration of process innovation, achieved the requirements we set forth for successful BOP innovations: price performance, scaling, innovative high-technology hybrids, and sustainable, ecologically friendly development.

Figure 2.1. Process innovations for the BOP.

In most BOP markets there is a shortage of talent. Work must, therefore, be deskilled.

One of the major goals facing the developing world and, by implication, the developed world is active surveillance of the spread of infectious diseases. The spread of Severe Acute Respiratory Syndrome (SARS) all across Southeast Asia and from there to Canada is a case in point. The World Health Organization (WHO) and Centers for Disease Control (CDC) recognize that active monitoring of the origination of these diseases in remote regions of the world is critical. Voxiva, a startup in Peru, created a system to monitor disease patterns. Peru suffered a devastating attack of cholera in 1998 in which more than 11,000 people perished. Peru offers a challenge for the active monitoring of diseases in the remote and mountainous regions where access to the Internet and PCs is scarce. Voxiva created a device-agnostic system. Health workers in remote areas can contact health officials in Lima, Peru, through wireless devices, landlines, or the Internet using a PC. More important, each of the health workers in remote areas was given a card with pictures of the progress of the disease. For example, the symptoms of smallpox over a period of time were captured in photographs. Anyone looking at a patient could relate the actual lesions on the patient to the corresponding picture and make a judgment on how severe the disease was. He or she simply had to telephone the central health authorities in Lima and identify the location and the severity of the case by mentioning the number of the picture on the card. The card, in a sense, was a way of capturing the knowledge of experts and identifying the stages of severity. With this simplified diagnostic process, health workers in the field need not be highly trained, nor do they need access to a complex communications network. They just need a telephone to call the health officials in Lima. Voxiva deskilled the diagnostic and surveillance problem in two ways: by reducing the need for a complex technology backbone for real-time communication as well as for diagnosis of the problem at the local, unskilled level.

Cemex, a Mexican multinational firm in the cement business, started a project called Patrimonio Hoy (Patrimony Now) to help the poorest people build their own homes. The poor in Mexico add, whenever they can, an additional bathroom, kitchen, or bedroom to their homes, endeavors that are very expensive. They often do not know exactly which materials are required. They often cannot afford to buy all the materials needed at the same time. For example, they might buy and store sand in the street, in front of their homes, until they can afford to purchase other materials. A significant amount of the materials would be wasted or lost. In response, Cemex started a program of savings for the poor. A group of three women could start the savings program and over 76 weeks they would save enough to buy a bathroom or a kitchen. The women knew before they started the savings program what kind of a room they could add, including its size, appearance, and materials needed to build it, including cement, steel, paints, tools, and so on. All of the necessities would come in a package and Cemex would hold it in storage until the customers were ready. Further, they provided technical assistance and advice on how to “do it yourself” with skilled technicians. Since the launch of this program, Cemex has helped more than 300,000 families build additions to their homes.

Innovation in BOP markets requires significant investments in educating customers on the appropriate use and the benefits of specific products and services. Given the poor infrastructure for customer access, innovation in the educational process is vital.

More than 40 percent of India is mdia-dark, so TV- and radio-based messages are inappropriate methods to reach these consumers and educate them on product and service benefits. Not surprisingly, in BOP markets, education is a prerequisite to market development. Consider, for example, the incidence of stomach disorders among children, especially diarrhea. More than 2 million children die of this malady every year, a totally preventable cause of death. The cure is as simple as washing one’s hands with soap before eating. HLL discovered that by this simple process, diarrhea-related fatalities could be reduced by at least 50 percent. Incidentally, HLL could also increase its volume of soap sold. However, the problem was how to educate people on the need for washing hands with soap and to convey the causality between “clean-looking but unsafe hands” and stomach disorders. HLL decided to approach village schools and educate children on the cause of disease and how to prevent it. HLL built simple demonstrations using ultraviolet dirt and bacteria detectors on “clean-looking hands.” The point was that washing hands in contaminated running water might give the appearance of cleanliness, but such water harbored invisible germs that cause the damage. They co-opted teachers and NGOs and used their own “evangelists” who went to village schools and spread the messages of cleanliness, washing with (HLL) soap, and disease prevention. The children often became the most educated in the family on hygiene and, therefore, began educating their parents. The children became the activists and the advocates of good and healthy practices at home and HLL reaped new profits.

In order to access and educate consumers at the BOP, more than a single format and approach is called for. Often, collaboration between the private sector firms, NGOs, the public health authorities (Ministers of Health), and the World Health Organization can be of great value. However, collaboration is not without its attendant problems. Although all of these organizations might agree on the broad agenda of improving public health, each has a slightly different approach and mandate (i.e., politicians are also very concerned about public image). As HLL learned, collaborating with local authorities and the World Bank can cause innumerable and unforeseen problems. Although this multiparty collaboration is difficult, collaborating with the ministers (and their bureaucracies) who have as their mandate better health can be a positive step. NGOs, which are also focused on improving the lives of the poor and have deep local knowledge, can be a great help, once they can accept a commercial solution (as opposed to a charity-based or government-subsidy-based approach) to the problem.

The methods used for educating consumers will also vary. In media-dark zones, billboards painted on walls have been a staple in most developing countries, as are truck-mounted demonstration crews with catchy jingles that attract crowds in villages. In the case of Aravind Eye Hospital, well-publicized eye camps in villages conducted with the cooperation of local enterprises, NGOs, and schools, are a good way to educate people on eye care and access patients who need surgery. Aravind has developed a strict procedure for holding these eye camps. They are used for preliminary examination of patients. All surgery is performed in specially designed hospitals.

The BOP markets exist in a hostile infrastructure. Design of products and services must take this into account.

Consider the design of PCs for a rural network application in northern India. ITC was building this network for connecting Indian villages in a seamless supply chain. E-Choupal, literally “the village meeting place,” was designed to enable the farm community and ITC to collaborate and have a constant dialogue. The PCs placed in the village had to work under conditions unthinkable in the West. For example, the voltage fluctuated between 90 and 350 volts against a rated 220-volt transmission. Sudden surges in the current were quite the norm. Early installations were burned out and rendered useless in a very short time. Further, the supply of electricity was very uneven, often available for only two or three hours per day. ITC engineers had to add to the installation an uninterruptible power supply system, including surge protectors and a solar panel that would allow at least three to four hours of uninterrupted, quality electricity to operate the system. For communication, they had to depend on the satellite network rather than regular landlines. All this added to the cost. However, without this complete system that can operate in the “hostile” village environment, the entire project would have failed.

Consider the provision of good-quality water for the BOP market. Water treatment must eliminate particulate pollution, microbes, viruses and cysts, and organic and inorganic compounds. In addition, if we can supply improved taste and nutrition, it could be a welcome benefit. Systems have been developed to eliminate the “bad stuff” from water, including simple filters to complex systems. However, “purified” water from these systems can still be parceled out in unhygienic containers and touched by unclean hands. The benefits of water purification can be totally offset by what can best be described as the “last step” problem: the last step from the purifier system to consumption. Part of the system design must include the way water is dispensed and stored immediately before actual consumption.

The design of the interface must be carefully thought through. Most of the customers in BOP markets are first-time users of products and services and the learning curve cannot be long or arduous.

In designing the POS system for grocery stores, one of the main considerations was the nature of the interface. For example, each store had its own terminology and there were no set standards. Further, each store, based on its clientele, had a particular portfolio of fast-moving items. The software architecture, therefore, had to be designed so that the system could be customized easily and rapidly for each store.

Interface design can also provide some interesting and unexpected surprises. For example, in the case of rural agricultural kiosks, EID Parry found that its customers prefer an English-language interface to their PCs rather than the local language (Tamil). Wireless customers in India and Bangladesh were able to take to the new technology more rapidly than expected. Indian housewives—rich and poor alike—are avid users of SMS messaging; on average they send 60 messages per day. Farmers in the ITC e-Choupal network, in a very short period of time, were sufficiently knowledgeable to navigate the Web to check on soybean prices at the Chicago Board of Trade or the latest cricket score. The BOP can be a source of surprises on how rapidly new technologies are accepted and assimilated.

The PRODEM FFP interface in Bolivia is yet another case of creative interface design. The retailer Elektra in Mexico caters to BOP customers and has also introduced fingerprint recognition as a basis for operating the ATMs in its stores so customers need not remember their nine-digit ID codes. The opportunities for innovation—iconic, color-coded, voice-activated, fingerprint and iris recognition (biometric–based) interfaces—are more likely at the BOP than in developed countries. How we interpret the future of interface design is critical and significant research is necessary.

Distribution systems that reach the BOP are critical for developing this market. Innovations in distribution are as critical as product and process innovations.

ICICI started as an institutional lender and has grown to become the second largest bank in India. Its move into retail banking started in 1997. As such, it is a newcomer and has had to compete with banks such as the State Bank of India with more than 14,000 branches and a 200-year history in retail banking. To compete, ICICI redefined distribution access; by moving away from the approach of building branches as the primary source of access to retail customers, ICICI was able to innovate. ICICI defined access through multiple channels. Today it is the largest PC-based bank in India with more than 5 million active PC banking customers. ICICI also has the largest and fastest growing base of ATMs in India. As of August 2003, it had an installed base of 1,750 ATMs. Further, in acquiring The Bank of Madura (which had built a strong base of rural distribution through self-help groups in southern India), it gained access to 10,000 such groups involving more than 200,000 customers. In addition to its own initiatives in building retail access, ICICI also formed partnerships with large rural marketers such as ITC and EID Parry to access farmers through their networks. Over a period of six years, through this unconventional approach to retail customer access—PCs, ATMs, self-help groups, NGOs, microfinance organizations, large rural marketers and their networks, Internet kiosk operators, and some traditional branches of their own—ICICI has a retail base of 9.8.million customer accounts and is growing at a rapid rate.

HLL, a subsidiary of Unilever, is a very well-established marketing powerhouse in India. HLL serviced urban markets through dealers and suppliers and boasted the best distribution access in India. However, the company found that it was unable to access remote villages through the traditional system. As a result, HLL started a program whereby village women are involved in distributing their products in villages that were not fully serviced by HLL’s existing systems of suppliers and dealers. The program, called Shakti, empowers women to become entrepreneurs. HLL’s CEO, M. S. Banga, believes that this additional arm of distribution will eventually provide coverage in the 200- to 300-million-person market at the BOP currently not served by existing systems.

Avon has been extremely successful in using direct sales in Brazil. Avon has built a $1.7 billion business based on direct selling. Avon representatives become experts who provide guidance to customers, minisuppliers, distribution channels, and providers of credit.^[6] Amway has had similar success in India and has built a direct distribution system covering more than 600,000 Amway representatives and a total revenue base of Rs. 500 crores ($110 million).

By its very nature, success in BOP markets will break existing paradigms.

All examples used in this book challenge conventional wisdom. They challenge the current paradigms in innovation and product and service delivery in fundamental ways.

For example, Jaipur Foot and Aravind Eye Hospital challenge the assumptions behind how health care can be delivered. By focusing on one disease and one major process, these great institutions have pioneered a way of gaining scale, speed, extremely high quality, and unbelievably low costs. Their systems are being replicated by others in India and around the world. For example, several hospitals in India are increasingly specializing in cardiac care. The cost of a bypass operation in India is now as low as $4,000, compared to $50,000 in the United States. In fact, Indian groups are now negotiating with The National Health System in the United Kingdom to fly British patients into Delhi and operate on them at lower costs, including travel, than they could in the United Kingdom without compromising quality of care.

BOP markets accept the most advanced technology easily. In the wireless market, CDMA coexists with GSM in India. Customers and operators see 3G as a viable alternative. Access to audio and video clips and news and stock quotes are considered basic services. These services are available at $10 down per handset and $0.02 per minute of long-distance calling. Building a customer base of 1 million new customers in 30 days also appears to be normal.

As the innovation for public health surveillance invented by Voxiva has demonstrated, innovations from the BOP can travel to advanced countries. Voxiva’s solution is now being used by the U.S. Food and Drug Administration (FDA), Department of Defense, and the Centers for Disease Control (CDC).

Energy innovator E+Co is demonstrating that it is possible to develop hybrid systems that are local, economic, and sustainable. Although not yet a full-fledged commercial success, this experiment is challenging current thinking about reliance on grid-based electricity.

Enabling people to buy by accessing markets creatively and designing affordable products for them breaks the long-held assumption that BOP markets are not viable. A wide variety of firms—HLL, Cemex, ITC, Amul, and ICICI—are demonstrating that this can be done profitably.

BOP markets break our traditional ways of thinking and acting. This might be their biggest allure and challenge alike. Unless we are willing to discard our biases, this opportunity will remain invisible and “unattractive.”