Prof. C.K Prahalad's talk at Stanford

Attended a talk by CK Prahalad yesterday at Stanford University. “Changing Lifestyles in Asian Countries: Opportunities for Entrepreneurs” presentation and discussion by:
  • C.K. Prahalad, Professor, Business School, University of Michigan
  • Jonathan Barker, Managing Principal, Center Street Advisors
  • Moderated by Richard Dasher, Director, US-ASIA Technology Management Center

The talk was about growth in India and China and opportunities for entrepreneurs that arise from it. While Jonathan Barker focused on China, Prof. Prahalad spoke about India.

Prof. Prahalad is an interesting and extremely articulate speaker. He spewed plenty of facts, figures, quotes and statistics like most B-school Profs. Some catchy ones:

  • 20M people travel by train everyday in India.
  • The cell phone is more reliable than the watch to keep track of time. A whole generation of people in India and China might growing not ever owning a watch but using the cell phone instead to serve the same purpose in addition to acting as a cell phone, of course.
  • Its easier to teach someone something totally new when they don’t have to unlearn what they have learned.
  • NGOs do very good work in India but they are never good at “scalability”.
  • A small town in Tamil Nadu is developing into a mostly cash less town (all transactions are done via credit card!).

He plugged the benefits of focusing on the “bottom of the pyramid” (which is the basis of his recent book “Fortune at the Bottom of the Pyramid”). According to him there is great opportunity for entrepreneurs in focusing on the bottom of the pyramid since it is a huge market. The challenge is to provide innovative products at a low cost (meaning: affordable to people in developing countries). He identified a bunch of potential sectors but given the shortage of time discussed only a couple of case studies – one from Hospitality sector and the another from Adult Education.

Hospitality: With 20M people traveling everyday in India by railways there has to be an opportunity for providing hotels at affordable prices. Most people can’t afford the conventional hotels. He was a consultant for a study that resulted in the new Indione hotels. These hotels apparently provide excellent quality rooms with internet access etc at an affordable price of around Rs. 900 ($20) per day. They studied the existing hotels and optimized resources to ensure that they can achieve high quality at a low cost. For example, the average Hotel employee per room is about 2.4, but in the IndiOne it is 0.8.

Adult Education: Next he discussed the example of adult education in Tamil Nadu and Andhra. Apparently, most adult education programs require proficiency in the 3Rs (Reading, Writing and Arithmetic). This requires some 400 hours (I think this was the number he mentioned) to achieve an acceptable level of proficiency, and most adults can’t and won’t make the time for it. So they said, “Why bother with all three aspects, lets just focus on Reading”. Then instead of following the conventional — learn alphabets, learn words, then learn reading” approach they developed a different strategy of seeing, hearing, then learning words and finally the alphabets”. All this learning involves computerized content so adults can learn at their own pace as well. TCS and NIIT have embarked on these programs and achieved great success in spreading literacy. However, the business impact of these programs were not discussed.

Audience Question: With all the opportunity being overseas and all jobs going overseas what does the future hold for the middle class here in the US? (there were other questions but this one stood out)

Jonathan Barker in response to this, said that a lot depended on leadership. The US needs to actively invest and explore new fields (like stem cell research) to continue its leadership position.

Prof. Prahalad, agreed with the challenge posed by “the 50 year old who needs to be re-trained” (Tom Friedman’s book apparently refers to it too). However, he said he is not too worried about the future of industry here in the US. He compared the present to the times in 80s when manufacturing was headed overseas. The naysayers said the US was doomed, though that never happened.

Questions like this one raised by this member in the audience are very common these days. But I am yet to hear a convincing answer from any of the experts to questions such as these.

The Irony: Both case studies were very interesting and helped re-reinforce Prof. Prahalad’s view that innovation and creativity can help take advantage of the large available market. Ironically both case studies were the result of efforts by large conglomerates like the Tatas. This is understandable, given that Prof. Prahalad’s “core competency” lies in consulting for large corporations.

In what way does this growth in developing countries translate to opportunities for entrepreneurs?The average Joe on the street with a cool idea will still have to struggle, can’t get very far and could eventually drown to the bottom of the pyramid! In theory yes there is opportunity whenever there is a large market, but in reality how can the small guy with the idea get ahead? The talk and discussion that followed didn’t quite address this issue. There is no question that the Tatas and Birlas will milk the bottom of the pyramid as more cars, cell phones, TV, refridgerators etc are consumed. It would have been far more helpful had there been some specific examples from one of these developing countries, of up and coming new companies/products that have combined innovation, smart business and bottom up growth to achieve success of a significant scale despite stiff competition from the big guys.

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