Measuring the Base of the Pyramid

By Rob Katz

A decade ago the “base of the pyramid” idea (BOP) was so controversial and fringe that it took years for BOP pioneers C.K. Prahalad and Stuart Hart to find a publisher for their white paper, The Fortune at the Bottom of the Pyramid. Eventually, strategy+business ran the article in their Winter, 2002 issue.

Five years later, BOP thinking has arrived. Prahalad and Hart are both best-selling authors, and their work has been used by many major corporations and development agencies. But despite the growing momentum for BOP theory and practice, to date there has not been strong emperical evidence to back them up.

That changes with The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid. The joint WRI/IFC report is based on household income and consumption survey data, allowing WRI researchers to measure BOP size and scope for the first time.

The Next 4 Billion presents data in 8 important sectors, drawing on household surveys in 110 countries for income and a subset of 36 more for expenditures. The report and its data are available at the Next 4 Billion website. Supporting data are available on EarthTrends, and a BOP discussion on NextBillion.net has been going since 2005.

BOP Size and Scope

The data show that the BOP is a $5 trillion annual market–much bigger than previously thought, and largely unserved by business and enterprise.

For example, half of BOP health care spending is on pharmaceuticals, much higher than in more affluent countries. This is especially the case in rural areas, where access to clinics is often limited. Companies should see these data as evidence of demand (and willingness to pay) for quality, low-cost drugs and efficient distribution systems. They may also suggest that for-profit franchise models could provide efficient, sustainable healthcare delivery to the BOP.

Using private sector strategies to address poverty is an idea whose time has come. NextBillion.net has been a central resource for the BOP community to develop strategies, models, and ideas. With The Next 4 Billion, that community for the first time has empirical data that show the true size and scope of the BOP.

The Next 4 Billion would not be possible without the support of the International Finance Corporation and the Inter-American Development bank, both of whom provided financial support for and substantive engagement on its underlying data and methodologies. Intel, Microsoft, the Shell Foundation, and Visa provided additional support.