[email protected]

8/4/2019 [email protected]

1/58

C.K. Prahalad 1

India @ 75

C.K.Prahalad

Paul and Ruth McCracken Distinguished University Professor

The University of Michigan

September 23, 2007


2/58

C.K. Prahalad 2

My Vision for India @ 75Actively Shape the Emerging World Order

Through

Economic Strength

Technological VitalityMoral Leadership


3/58

C.K. Prahalad 3

The Potential of India


4/58

C.K. Prahalad 4

What India can be in 20221. Worlds Largest Pool of Trained Manpower:

200 million college graduates (~16%)500 million trained, skilled workforce (~40%)Universal Literacy

2. Worlds Leaders in Industry and Commerce30 of Fortune 100 from India

3. India Accounts for 10 % of World Trade

A broad scope of products and services

4. India as a Source of Global InnovationsNew Businesses, New Forms of Organization,

New Technologies


5/58

C.K. Prahalad 5

What India can be in 2022

5. Focus on the Bottom of the Pyramid as aSource of Innovations for the World(Leaders in Health, Education, Energy,

Transportation, Sustainable Development for all)

6. A Flowering of Art, Literature, and Science( 10 Nobel Prize Winners from India)

7. A New Moral Voice for People Around the WorldIndia as a country where Universality andInclusiveness is widely practiced. India becomesthe most Benchmarked country for its capacity toaccept and benefit from its diversity


6/58

C.K. Prahalad 6

If this is the Prize, How do We get at

it?

Do We have to Start with Some

Principles?


7/58

C.K. Prahalad 7

Principle Number # 1:

The Essence of Entrepreneurial

Transformation

Situation A Situation B

Resources Low High

Aspirations High Low


8/58

C.K. Prahalad 8

Principle Number # 1

Aspiration > Resources

Aspiration

Leverage

Resources

Change the Game


9/58

C.K. Prahalad 9

Principle # 2: Fold the Future In

2007 2017/22

Extrapolation

Budgeting Orientation

Fold the Future in

InnovationOrientation


10/58

C.K. Prahalad 10

Principle # 2: Fold the Future In

20072017/22

*Clarity to Direction

*Willingness to Discover*Clear Milestones

*Speed and Stamina:

400 meters at a time but a Marathon


11/58

C.K. Prahalad 11

Principle # 3:

Focus on NextPractices

Well Known

Practices

Best

Practices

Next

Practices

AmplifyWeak Signals


12/58

C.K. Prahalad 12

Focus on Here and Now:Tactical,

Blocking and Tackling.

Focus on New Opportunities:Aspiration > Resources,

Folding the Future in,Focus on Next Practices

Thinking Differently about the Here and Now


13/58

C.K. Prahalad 13

All three principles are based on

developing aDistinct Point of Viewabout Opportunities


14/58

C.K. Prahalad 14

India: Potential Vs. Reality

1. Incrementalism will not work. We Need aRadical Rethink of Policies and Practices

2. Key to becoming a Developed Nation:

SharedCommitmentto GoalsCreativity and InnovationFocus on Entrepreneurship

3. The Essence of Entrepreneurship:Aspiration > Resources


15/58

C.K. Prahalad 15

The Emerging Context:2005- 2017/22


16/58

C.K. Prahalad 16

Agenda for the Session:

1. The Emerging Issues: 2007-2022

a. Abject Poverty to Income Inequality

b. Income levels to Life Style Measures

c. Unique needs to Universality of Aspirationsd. Affordability to BOP to Impact on Price-Perf.

e. Low Tech. to Universal Access to High Tech.

f. From BOP toStraddle the Pyramid

g. Provisioning Products and Jobs to Environment

2. The Emergence of a New Model of Development?


17/58

C.K. Prahalad 17

The Paradox of Rapid Economic

Development.

Rapid Movement of

People Away fromAbject Poverty

($ 1/day)

ChinaIndia

Increasing Income

Inequalities(e.g. G- Coeff.)

ChinaIndia

The Emergence of Social Tensions


18/58

C.K. Prahalad 18

Measures of Inequality:

Gini coefficient:USA China India Brazil S Africa

1985- 1986 41.6 22.4 32.0 59.3

1989- 1991 42.7 34.1 32.1 64.0

1995 -1996 45.0 39.0 33.8 60.21999 -2001 46.3 42.0 36.0 59.6

2006 46.9 47.0 39.5 57.2 59.0+


19/58

C.K. Prahalad 19

Measures of Inequality:

Gini coefficient:USA China India Brazil S Africa

1985- 1986 41.6 22.4 32.0 59.3

1989- 1991 42.7 34.1 32.1 64.0

1995 -1996 45.0 39.0 33.8 60.21999 -2001 46.3 42.0 36.0 59.6

2006 46.9 47.0 39.5 57.2 59.0+

GDP/capita PPP $ 43,555 7,600 3,700 8,600 13,000

2005 Rank in 8 81 121 69 126

HD Index (177)


20/58

C.K. Prahalad 20

Where Should Our Focus be

1. Increasing IncomeNumber out of abject poverty

2. Income Inequality:NationalRural- Urban

Within a State/ Region

Ethnic backgrounds

3. Income Mobility

Opportunities for Moving up

Hope


21/58

C.K. Prahalad 21

Inclusive Growth Means

1. Elimination ofAbject Poverty ($1/day?)

2. ReducingIncome Inequalities (G-coeff.?)

3. Eliminating unequal access to opportunities

4. ChangingLife Style inequalities

5. Reducing inequalities in Choice

6. Reducing inequalities in Share of Voice


22/58

C.K. Prahalad 22

Inclusive Growth Means

1. Elimination ofAbject Poverty ($1/day?)

2. ReducingIncome Inequalities (G-coeff.?)

3. Eliminating unequal access to opportunities

4. ChangingLife Style inequalities

5. Reducing inequalities in Choice

6. Reducing inequalities in Share of Voice

Redistribution of Wealth Vs. Wealth Creation ?

Public Policy Focus Vs. Entrepreneurship/Market Focus ?


23/58

C.K. Prahalad 23

Key Assumptions in My Thesis

Antidote to Poverty/Inequality:Wealth Creation and Growth

Wealth Creation and Growth:

Entrepreneurship and Innovation

Entrepreneurship and Innovation:

Good Governance , Reduced

Transaction Costs

Good Governance:

Shared Goals and Political Will

To Solve Persistent Problems


24/58

C.K. Prahalad 24

The Critical Question:

Is Globalization Good or Bad

for the Poor?

vs.How to Make Globalization Work

for the Benefit of All?

(e.g. India: Inclusive Growth ;

China: Harmonious Society)


25/58

C.K. Prahalad 25

Is Per Capita Income the Appropriate

Measure of BOP Opportunity?

1. Per Capita Income vs. Family Income

$ 2/day = $ 10/day (family of 5) = $ 3,650/year

$ 3,650/ Year is Rs. 146,000/Year

2. Is Life Style Measure a Better way to understand BOP?

How People Live (how they spend their income)notjust Where they Live

not just per capita Income Levels


26/58

C.K. Prahalad 26

Visualizing LSMsLSM 1-3 (25.8%) LSM 4-6 (23.3%)

LSM 7-9 (21.5%) LSM 10-12 (15.0%)

LSM 13-15 (9.4%) LSM 16-18 (4.0%)


27/58

C.K. Prahalad 27

Dense Urban Dwellings (Slums) will become the

Dominant habitat for Humanity


28/58

C.K. Prahalad 28

We see the Emergence of.

1. Urbanization and BOP:The Rural Urban Mix (Latin America vs. SE Asia)

2. The Emergence of Life Style Measures of BOPThe Emergence ofUniversality of Aspirations

The Poor in Shanghai, Mumbai and Sao Paulo

3. Rapid Increases in Income and AspirationsDemand for a higher quality of life at lower costs

Dramatic changes in Price-Performance Levels


29/58

C.K. Prahalad 29

The Changing Value Equation

Performance (Functional+ Emotional)

Price

BOP

Middle Class

Rich


30/58

C.K. Prahalad 30

Price-Performance Envelopes are

Changing Faster than anyone Expected

1. Transistors/chip 103 106 109

2. Decrease in size of

micro-devices 10-1 10 -6

3. Computing power 1011 1015

4. Cost per MIPs($1000) 1 1M

5. DNA sequencing cost

($/BASE PAIR) 10 0.05

6. Magnetic data storage 104 1011

(bits/dollar)

1970 80 90 2006

Source: Ray Kurzwell


31/58

C.K. Prahalad 31

The Changing Value Equation

Performance (Functional+ Emotional)

Price

Middle Class ?

Rich ?

BOP

$ 30 Cataract Surgery

$35 DVD Player$ 30 Cell Phone

$ 0.01 Shampoo in a Sachet

$ 2,000 car

$ 20 hotel Room


32/58

C.K. Prahalad 32

What are the Implications.

BOP Market:

New Price-Perf.

Levels for All

Explosive Growth

In Market Size,

Scale of Operations

Access to High

Tech. for all

Straddle the

Pyramid ?

Environmental

Demands


33/58

C.K. Prahalad 33

The Focus on Price-Perf. Forces

1. Scale: Local Responsiveness and Global Standards

2. Focus on Costs

3. Access to New Markets: Knowledge and Trust4. Technical and Social Insights

Emergence of aNew Social Compact for Business:

Collaboration with CSO; PrivatePublic Partnerships


34/58

C.K. Prahalad 34

Let us Look at Data From Around

the World

1. GDP/Capita in PPP terms( Source: World fact Book, 2002)

2. Human Development Index( Source: UNDP, 2003)

3. Quality of Governance: Corruption

( Source: Transparency International, 2002)

Selected 25 Countries from Very Rich to Very Poor


35/58

C.K. Prahalad 35

Human Development Index (HDI) vs.

Corruption Perception Index (CPI)

Dishonest

HD I vs . CP I

0

1

2

3

4

5

6

7

8

9

10

0 20 40 60 80 100 120 140 160

Human Dev. Index, 20 03

CorruptionPerceptio

nIndex,

2002

C P I ( 200 2 )

HDI vs . CP I eq ua t ion


36/58

C.K. Prahalad 36

C P I v s . P P P

$ -

$ 5 , 0 0 0

$ 1 0 , 0 0 0

$ 1 5 , 0 0 0

$ 2 0 , 0 0 0

$ 2 5 , 0 0 0

$ 3 0 , 0 0 0

$ 3 5 , 0 0 0

$ 4 0 , 0 0 0

0 2 4 6 8 1 0

C o r ru p tio n P e r cep t io n In d ex , 200 2

PurchasingPowerParity,2

002

P PP ( 2 0 0 1 )

C P I v s P PI e q u a t io n

Corruption Perception Index (CPI) vs.

Purchasing Power Parity (PPP)

HonestDishonest

India

USA

USA


37/58

C.K. Prahalad 37

HDI vs. PPP (2001)

$-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

0 20 40 60 80 100 120 140 160

Human Dev. Index, 2003

PPPpercap

ita,

2002

PPP (2001)

HDI vs. PPP equation

Human Development Index (HDI) vs.

Purchasing Power Parity (PPP)

Focus on Individual Lack of focus on Individual


38/58

C.K. Prahalad 38

My Takeaways:

1. Human Development is not about More Resourcesbut less Corruption in the Deployment of Resources

2. Good Governance (less corruption) leads to HighLevels of GDP/Capita; not the other way around

3. Focus on Human Development (Focus on Individuals)and not Groups Rights Leads to Rapid EconomicDevelopment (GDP/Capita)


39/58

C.K. Prahalad 39

India as a Developed Nation:

What is the Trajectory?

GDP/Capita$ 2,500 (PPP)

Rank inHDI

127/175

CPI Rank

2.7/10.0

2003

GDP/Capita$ 25,000 (PPP)

Rank inHDI

20/175

CPI Rank

7.0/10.0

2020


40/58

C.K. Prahalad 40

How do we Correct the Trajectory?

Commitment to Rights of the Individual,National Character, Universal Principles

Technologicaland

EconomicAccomplishment

Low

High

Low High

1947

2007

2022

?


41/58

C.K. Prahalad 41

What are the Prerequisites:

1. Change in Mental Models

2. Data Driven not Dogma Driven Debate

3. Individual Rights not Group Rights

4. Principles not Rituals

5. Corruption is Treated as Treason

6. Focus on Performance, Accountability

7. Imagination not Resources


42/58

C.K. Prahalad 42

What Impact Does Poverty Alleviation

have on the Environment?1 Billion Micro Consumers

Urbanization

Creation of New Jobs- Micro producers


43/58

C.K. Prahalad 43

The number of Category 4 and 5

hurricanes has almost doubled in the last

30 years.

Malaria has spread to higher altitudes in

places like the Colombian Andes, 7,000feet above sea level.

The flow of ice from glaciers in Greenland

has more than doubled over the past

decade.

At least 279 species of plants and animals

are already responding to global warming,moving closer to the poles.

Deaths from global warming will double

in just 25 years -- to 300,000 people a

year.

Global sea levels could rise by more

than 20 feet with the loss of shelf ice in

Greenland and Antarctica, devastating

coastal areas worldwide.

Heat waves will be more frequent and

more intense.

Droughts and wildfires will occur more

often.

The Arctic Ocean could be ice free insummer by 2050.

More than a million species worldwide

could be driven to extinction by 2050.

Global warming ishere !


44/58

C.K. Prahalad44

Sustainability is multi-dimensional:


45/58

C.K. Prahalad45

BOP Experiences Environmental Impacts First


46/58

C.K. Prahalad46

The Impact on Ecosystems

Data and Analysis from World Resources Institute

How ecosystems have changed

Millennium Assessment Findings


47/58

C.K. Prahalad47

Cultural

Non-material

benefits from

ecosystems

Regulating

Benefits obtained

from regulation of

natural processes

Provisioning

Goods produced

or provided by

ecosystemsPurdue University

WomenAid.org

LSUP

NASA

CEH Wallingford

Types of ecosystem services


African AIDS Action





48/58

C.K. Prahalad48

Capture fisheriesWild foodsWood fuelGenetic resourcesBiochemicals

Fresh water

Air quality regulationClimate regulationErosion regulationWater purificationPest regulationPollinationNatural hazard regulation

Spiritual & religiousAesthetic values

Bottom line: ecosystem service trends over past 50 years

Enhanced Degraded Mixed

CropsLivestockAquaculture

Carbon sequestration

TimberFiber

Water regulationDisease regulation

Recreation & ecotourism

Provisioning

Regulating

Cultural

How ecosystems have changedMillennium Assessment Findings


49/58

C.K. Prahalad49

Many Dimensions of Eco Systems will

become Stressed

1. Water:Quality of Water

Availability, access

Usage Mix: Agriculture, Industry, home

2. Energy

Fossil Fuels and Substitutes

Regressive to progressive Fuels

3. Health


50/58

C.K. Prahalad50

The Bottom Line..

Poverty Alleviation, Sustainable Development,

Inclusive Growth are Intimately Interlinked.

Our Current Developmental ModelsEnergy, Water,

Packaging, and Waste/capita- are Inappropriate

New Breakthrough Innovations is not an Option

The Emerging Markets must become a Source of Innovations


51/58

C.K. Prahalad51

Phase II of Indias Development

The Emerging Issues: 2007-2020a. Abject Poverty to Income Inequality

b. Income levels to Life Style Measures

c. Unique needs to Universality of Aspirations

d. Affordability to BOP to Impact on Price-Perf.e. Low Tech. to Universal Access to High Tech.

f. From BOP toStraddle the Pyramid

g. Provisioning Products and Jobs to Environment

The Emergence of a New Development Paradigm?


52/58

C.K. Prahalad52

What are the Dominant Themes:

2007-2015/2022

1. Primarily Market Based Solutions

2. Social Equity in Development

3. Rule of Law, Individual Rights

4. Scale

5. New Price- Performance Levels

6. Ecologically Sustainable Development

Embrace the Imperatives of Poverty Alleviation


53/58

C.K. Prahalad53

The Sandbox for Economic Development

Market Based

Global Scale

Innovationswithin

These Constraints


54/58

C.K. Prahalad54

The Sandbox for Economic Development

Market Based

Global Scale

Accountability for

PerformanceBusiness,

Politicians,

Civil Society,

Bureaucrats


55/58

C.K. Prahalad55

The Emerging World Order:

My View in 1989

USA,

Europe,

Japan

S.Korea,

Taiwan

FinlandSwitzerland

Local Firms Global Firms

Small

Domestic

Market

World

Scale

DomesticMarket

China

India,

Brazil

(2000)

ChinaIndia?


56/58

C.K. Prahalad56

The Poor of India are Ready for this

Journey:

Are The Leaders Ready?


57/58

C.K. Prahalad57

Thirukkural 619

Th ou gh fate s tan ds in th e w ay, s tren uou s effort yields ready fru it.Labor recom penses w hat fate denies ..

Thirukkural 619

Th ou gh fate s tan ds in th e w ay, s tren uou s effort yields ready fru it.Labor recom penses w hat fate denies .Thirukkural 619

Th ou gh fate s tan ds in th e w ay, s tren uou s effort yields ready fru it.Labor recom penses w hat fate denies ..

India as a Developed Nation: The Recipe


58/58

58

Transformation Requires:

Imagination

Passion

CourageHumanity

Humility

IntellectLuck !

Documents

[email protected]