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Daily quantities are sold for daily needs in Nairobi's ever-growing slums.

Called the kidogo economy, Swahili for 'little', laundry detergent, margarine and anything else manufacturers haven't packaged in small boxes are divided and resold in tiny affordable sachets.

In this context of severe urban poverty, micro-enterprise isn't a buzz word. It's a lifestyle.

So it's appropriate that a solid waste management program here, coordinated by Worldbike, a non-profit that designs, distributes, and promotes load-carrying bicycles as a solution to development challenges worldwide, the local Soweto Youth Group and UN-HABITAT, the UN human settlements agency, runs on very small profits.

A door-to-door pick up service is only £0.17. If that's too pricey for their clients in the Soweto neighbourhood of Kibera, Nairobi's largest and most famous slum, you can drop off the rubbish yourself at the nearby collection centre for half the price.

Andrew Hall, Worldbike's project manager in Kenya, describes their goals as 'income generation, livelihood creation and essential service provision, but usually in the model they go hand in hand'.

Waste = livelihood

To accomplish this, they're developing sustainable solid waste management businesses for and in partnership with poor communities. 'People need solid waste management. That's an essential service,' Hall says. 'But we also want to do it in a way that creates livelihoods.'

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Bill Radke: The Internet address goes global. The company that acts as the world's clearinghouse for Internet domains is a California-based non-profit called ICANN. Reporter Kurt Achin says ICANN is about to help the Web speak the local language around the world.

Kurt Achin: Up until now, Internet users have had to type out web page URLs using the Roman alphabet.

But on Friday, ICANN's board -- meeting here in Seoul -- is expected to change all that, when it votes to introduce what's called "Internationalized Domain Names." Within a year or two, Web users will be able to type out their favorite Web addresses using Chinese characters, Korean hangeul, Arabic script, and so on.

Rebecca MACKINNON: The Internet is no longer dominated by English speakers anymore.

Rebecca Mackinnon is a Hong Kong University professor specializing in Internet governance. She says about one and a half billion people now use the Internet. Most are university graduates who are comfortable with the Roman alphabet. But the world's next online generation looks a little different.

MACKINNON: Really the next billion Internet users are increasingly going to be peasant farmers in far western China, who maybe didn't graduate from grade school.

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Around the world, four billion people live in poverty. And Western companies are struggling to turn them into customers.

For the past decade, business visionaries have argued that these people, dubbed the Base of the Pyramid, make up an enormous, untapped market. Some of the world's biggest, savviest corporations have aimed to address their basic needs—by selling them everything from clean water to electricity.

But, time and again, the initiatives have quietly fizzled out. Why? Because these companies were looking at it all wrong.

Put most simply: The Base of the Pyramid is not actually a market. True, those billions of low-income people have a lot in common. But they don't have two of the vital characteristics you need to have a consumer market. They haven't been conditioned to think that the products being offered are something one would even buy. And they haven't adapted their behaviors and budgets to fit the products into their lives. A consumer market is nothing less than a lifestyle built around a product.

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Few management thinkers have the ability to come up with one winning idea after another. C.K. Prahalad is a rare exception. He has the remarkable ability to be ahead of the times. Look at any of his key ideas — be it core competence, co-creation or the bottom of the pyramid — Prahalad’s influence on the study and practise of management has been immense.

It is no wonder then that for the second time in a row, the Indian-born management guru has earned the distinction of being the most influential management thinker alive according to the Thinkers 50, a biennial ranking of the top 50 business and management thought leaders in the world, brought out by the UK-based Suntop Media. Prahalad first topped the Thinkers 50 in 2007, unseating the formidable strategy don Michael Porter. Malcolm Gladwell, the author of Tipping Point, Blink and the more recent Outliers, came in at No. 2, while Nobel Prize winning economist Paul Krugman came in at No. 3.

The 68-year-old Prahalad is on an exciting new journey these days. Having been an avid researcher for almost four decades now, Prahalad is looking for new knowledge at the intersection of various themes he has dealt with. “My research [these days] is focussed on innovation opportunities that lie at the intersection of inclusive growth [i.e. the bottom of the pyramid], sustainability, connectivity [a theme explored in the books The Future of Competition and The New Age of Innovation] and globalisation [again, a theme explored in The Multinational Mission]. This intersection will provide opportunities for new governance systems, and an ability to manage volatility,” says Prahalad. He believes that emerging countries like India can take a leadership role here if we focus on this new frontier.

Prahalad’s ascendance to the top of the list signals the growing influence of Indian management thinkers, a trend that first showed up in the 2007 ranking when four Indians — Prahalad, CEO coach Ram Charan, Tuck School of Business’ Vijay Govindarajan and Harvard Business School’s Rakesh Khurana — made it to the top 50.

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Money transfer company Western Union believes in tapping fortune at the bottom of the pyramid.

The company is tying up with microfinance institutions (MFIs) and e-governance service providers to facilitate financial inclusion.

This marks a shift in its India game plan, to offer money transfer services through MFIs besides its current portfolio of India Post network, banks, retail and finance agents.

The Nasdaq-listed company has tied up with e-governance and IT solutions provider CMS Computers, which has government's mandate to roll out more than 17,000 e-governance locations across India.

"We are looking at multiple classes of trade to catapult growth. Synergies with MFIs and e-governance providers will transform financial service offerings in rural India," said Kiran Shetty, regional vice-president (India), Western Union.

The company is present in India through ten principal agents who in turn appoint sub-agents. CMS is the sub-agent to Paul Merchants Ltd, the flagship company of the Paul Group of Companies. Last year, overseas remittances into India touched $50 billion. By 2009-end, the number would reach $52 billion, according to World Bank estimates. The rally is fuelled by remittances into rural areas in Punjab, UP, Kerala, Rajasthan, Maharasthra, Andhra Pradesh, UP, Tamil Nadu and Karnataka, which contribute 60% to Western Union's business.

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Indian companies, long dependent on hand-me-down technology from developed nations, are becoming cutting-edge innovators as they target one of the world's last untapped markets: the poor.

India's many engineers, whose best-known role is to help Western companies expand or cut costs, are now turning their attention to the purchasing potential of the nation's own 1.1-billion population.

The trend that surfaced when Tata Motors' tiny $2,200 car, the Nano, hit Indian roads in July, has resulted in a slew of new products for people with little money who aspire to a taste of a better life. Many products aren't just cheaper versions of well-established models available in the West but have taken design and manufacturing assumptions honed in the developed world and turned them on their heads.

For the farmer who wants to save for the future, one Indian entrepreneur has developed what is, in effect, a $200 portable bank branch. For the village housewife, a wood-burning stove has been reinvented to make more heat and less smoke for $23. For the slum family struggling to get clean water, there is a $43 water-purification system. For the villager who wants to give his child a cold glass of milk, there is a tiny $70 refrigerator that can run on batteries. And for rural health clinics, whose patients can't spend more than $5 on a visit, there are heart monitors and baby warmers redesigned to cost 10% of what they do elsewhere.

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Five years ago, C.K. Prahalad published a book titled, The Fortune at the Bottom of the Pyramid, in which he argues that multinational companies not only can make money selling to the world's poorest, but also that undertaking such efforts is necessary as a way to close the growing gap between rich and poor countries. Key to his argument for targeting the world's poorest is the sheer size of that market -- an estimated four billion people. How has Prahalad's book -- a revised, fifth-anniversary edition of which has just been published -- affected the behavior of companies and the well-being of consumers in the years since its publication? Knowledge@Wharton checked in with the author for an update, including examples of specific companies that are implementing Bottom of the Pyramid strategies.

Below is an edited transcript of the conversation.

Knowledge@Wharton: In the five years since The Fortune at the Bottom of the Pyramid was published, what impact have your ideas had on companies and on poor consumers?

C.K. Prahalad: The impact has been interesting and profound in many ways -- much more than one could have expected. For example, several of the multi-lateral institutions -- The World Bank, UNDF [United Nations Development Fund], IFC [International Finance Corporation] and USAid -- have fundamentally accepted the idea that involvement of the private sector is critical for development.... I asked 10 CEOs of companies as diverse as Microsoft, ING, DSM, GSK and Thomson Reuters to essentially reflect on whether the book has had some impact on the way they think about the opportunities. Uniformly, everybody -- whether it is Microsoft or GSK -- essentially says not only that it has had some impact, but that it has changed the way they approach innovation and ... new markets.

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As a part of its strategy, to take the benefits of the future’s trading to farmers’ doorstep and reach out to every corner of India, The Tata Power Company Ltd, India’s largest Integrated Power Utility signed a Memorandum of Understanding (MoU) with Multi Commodity Exchange (MCX), India’s leading commodity exchange. Through this alliance, the benefit of the future price information will be spread to more than 2000 farmers across 25 villages of Maharashtra where Tata Power has its project and Corporate Social Responsibility (CSR) activities. The joint CSR initiative is named as ‘Sahyog’ (Partnership).

The objective of this alliance is to increase accessibility of spot and future prices of agricultural commodities traded on MCX and advisory services of water shed management by Tata Power. This information will empower farmers to take well informed decisions of crop selection as well deciding the time to sell their produce. The advisory services will educate farmers of better practices. 25 villages will be covered under this arrangement benefiting more than 2000 farmers. The partnership will roll out in Maval and Mulshi area around Pune during the month of October 2009.

Speaking on this development, Dr Gobind Baghasingh, Head-HR & CSR, The Tata Power Company Limited said, “Farmers are the driving force of the agricultural sector. We stand committed to various reforms that improve the economic power of farmers and are glad to be associated with MCX in implementing the same. Further on, we are looking at expanding the scope and reach of the program”

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Fifteen international economic development organizations have received grants in support of their work to expand small and growing businesses in developing countries. The grants-totaling US $447,000-were announced at the 2009 annual conference of the Aspen Network of Development Entrepreneurs in Glen Cove, New York.

The grants were the first awarded as part of the network's Capacity Development Fund, a US $1million effort to increase the productivity and effectiveness of organizations that provide investment, training and other resources to small and growing businesses in developing countries. Funding for the grants was provided by the Bill & Melinda Gates Foundation, The Lemelson Foundation and Shell Foundation.

Organizations selected to receive grants were Agora Partnerships, the Appropriate Infrastructure Development Group (AIDG), Alitheia Capital, E+Co., Endeavor, Fundacion Bavaria, IGNIA Partners LLC, Root Capital, Root Change, ShoreBank, TechnoServe, Inc., Universidad de Los Andes, VisionSpring, World Resources Institute, and Villgro.

Grants will support projects in developing countries ranging from Nicaragua to India to Nigeria.  One project, for instance, will bring six organizations together to conduct an in-depth analysis of U.S. investors and donors, providing insights needed to attract capital to the small and growing business sector.  Another project creates a platform for identifying high-impact investment opportunities in Africa, Asia and Latin America. Other grants will be used to develop tools to manage business plan competitions and to accelerate small and growing business in developing countries through peer-to-peer learning and mentorships.  For more information about the first fifteen organizations to receive grants, please visit: http://www.aspeninstitute.org/ande.

"Creating prosperity in developing countries is essential for our collective economic future.  Without enhanced entrepreneurship and thriving small and growing businesses, prosperity will only remain a lofty aspiration," said Randall T. Kempner, executive director, Aspen Network of Development Entrepreneurs. "These grants are vital because they will strengthen an emerging industry that is singularly focused on building businesses in the developing world."

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Bangalore: When Pune-based sanitation services provider Saraplast Pvt. Ltd started hunting for funds late last year, it was confident of attracting investors. The company had all its documents in place, a three-year track record of profits and a business model that it thought could be scaled up.

However, Saraplast was baffled when investors indicated that they did not think its business of operating portable toilets was a business at all, even in a country where 55% of the population is forced to defecate in the open because of lack of sanitation facilities.

Saraplast has 600 portable toilets installed across India, in areas with a paucity of sanitation services. The firm leases out these toilets to clients and provides waste evacuation services on site on a daily basis through its network of cleaning trucks.
“We are offering a solution to address the sanitation crisis we are facing, but everyone is extra conservative. Our business would not appeal to a regular VC (venture capitalist), who looks at pure returns,” says Rajeev Kher, chief executive, Saraplast. The bulk of the demand for Saraplast’s services comes from the construction industry, followed by tourism corporations, municipal councils and event organizers. It is now in talks with the New Delhi municipal authorities for providing portable toilets for the Commonwealth Games next year.

Saraplast is what is called a social enterprise, aiming to accomplish social or environmental goals, besides meeting financial benchmarks. The conventional wisdom has been that such ventures under-deliver on financial returns although they can eventually become self-sustaining.

The firm ultimately found an investor. Micro-venture capital fund Aavishkaar India Micro Venture Capital Fund backed the firm in August, taking a 21% stake for an undisclosed amount. Saraplast is not the only social enterprise to be funded by Aavishkaar, which has backed four such firms this year. The investor deal-making spree comes at a time when VC funding in the country has declined by 70% amid the economic downturn. In fact, Aavishkaar, which had struck four deals last year, plans to double its investment this year. It is set to announce three more deals in about a month.

When compared with conventional VCs, Aavishkaar is one investment short of this year’s most active VC firm, Helion Venture Partners. Conventionally, social venture funding is less than a fifth of VC funding in the country; there are only a handful of investors in the space and the size of these deals ranges between Rs10 lakh and Rs15 crore.

What makes social enterprise investors tick? New unconventional sectors with unproven return records, the recession-proof nature of these businesses, opportunities to invest at a very early stage, small-ticket deals and the social impact of such projects.

“We are trying to demonstrate a large number of deals at a very early stage. We are trying to create value by discovering new sectors which have social impact and can offer returns of 20%,” says Vineet Rai, chief executive, Aavishkaar. Another prominent firm that has been making deals throughout this year, but has remained silent, is Acumen Fund India, the Hyderabad-based arm of a global fund. The fund has so far made five deals, as many as it struck last year. These deals are a combination of follow-on and new deals.

The follow-on deals include Dial 1298 for Ambulance, which provides affordable ambulance services through an easy-to-remember telephone number, and Global Easy Water Products Pvt. Ltd, which sells micro-irrigation systems.

“We have a mandate of committing Rs30-50 crore every year in India and we are on track,” says Varun Sahni, director of Acumen Fund.

A number of long-term foreign social investors are looking at funding Indian firms in the next 12-18 months, Sahni says, although liquidity is an issue for companies looking for short-term working capital.

“Primarily, all funds believe in looking at the growth story, so be it drinking water, agriculture or education, there is a market size of 300-400 million people here,” he says.

Besides Aavishkaar and Acumen, other prominent players in India backing social enterprises include Omidyar Network, Song Investment Advisors and Bamboo Finance.

California-based Omidyar Network has backed social initiatives such as the Rural Development Institute and Unitus Equity Fund, as well as Quikr India Pvt. Ltd, an online classifieds company. It is stepping up its plans to support entrepreneurship in India. It has committed $30 million (Rs142.5 crore) to support global entrepreneurship, especially in India and sub-Saharan Africa. “The ultimate goal of the commitment is to improve the quality of life for more than 10 million people living at the base of the pyramid,” says managing partner Matt Bannick in an emailed reply.

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