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C.K. Prahalad 1
India @ 75
C.K.Prahalad
Paul and Ruth McCracken Distinguished University Professor
The University of Michigan
September 23, 2007
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C.K. Prahalad 2
My Vision for India @ 75Actively Shape the Emerging World Order
Through
Economic Strength
Technological VitalityMoral Leadership
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C.K. Prahalad 3
The Potential of India
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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
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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
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C.K. Prahalad 6
If this is the Prize, How do We get at
it?
Do We have to Start with Some
Principles?
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C.K. Prahalad 7
Principle Number # 1:
The Essence of Entrepreneurial
Transformation
Situation A Situation B
Resources Low High
Aspirations High Low
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Principle Number # 1
Aspiration > Resources
Aspiration
Leverage
Resources
Change the Game
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Principle # 2: Fold the Future In
2007 2017/22
Extrapolation
Budgeting Orientation
Fold the Future in
InnovationOrientation
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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
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C.K. Prahalad 11
Principle # 3:
Focus on NextPractices
Well Known
Practices
Best
Practices
Next
Practices
AmplifyWeak Signals
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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
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C.K. Prahalad 13
All three principles are based on
developing aDistinct Point of Viewabout Opportunities
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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
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C.K. Prahalad 15
The Emerging Context:2005- 2017/22
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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?
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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
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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+
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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)
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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
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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
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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 ?
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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
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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)
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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
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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%)
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Dense Urban Dwellings (Slums) will become the
Dominant habitat for Humanity
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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
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The Changing Value Equation
Performance (Functional+ Emotional)
Price
BOP
Middle Class
Rich
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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
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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
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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
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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
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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
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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
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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
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HDI vs. PPP (2001)
$-
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
0 20 40 60 80 100 120 140 160
Human Dev. Index, 2003
PPPpercap
ita,
2002
PPP (2001)
HDI vs. PPP equation
Human Development Index (HDI) vs.
Purchasing Power Parity (PPP)
Focus on Individual Lack of focus on Individual
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My Takeaways:
1. Human Development is not about More Resourcesbut less Corruption in the Deployment of Resources
2. Good Governance (less corruption) leads to HighLevels of GDP/Capita; not the other way around
3. Focus on Human Development (Focus on Individuals)and not Groups Rights Leads to Rapid EconomicDevelopment (GDP/Capita)
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C.K. Prahalad 39
India as a Developed Nation:
What is the Trajectory?
GDP/Capita$ 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
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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
?
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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
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What Impact Does Poverty Alleviation
have on the Environment?1 Billion Micro Consumers
Urbanization
Creation of New Jobs- Micro producers
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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 !
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Sustainability is multi-dimensional:
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BOP Experiences Environmental Impacts First
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The Impact on Ecosystems
Data and Analysis from World Resources Institute
How ecosystems have changed
Millennium Assessment Findings
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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
How ecosystems have changed
African AIDS Action
Millennium Assessment Findings
How ecosystems have changed
Millennium Assessment Findings
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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
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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
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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
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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?
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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
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The Sandbox for Economic Development
Market Based
Global Scale
Innovationswithin
These Constraints
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The Sandbox for Economic Development
Market Based
Global Scale
Accountability for
PerformanceBusiness,
Politicians,
Civil Society,
Bureaucrats
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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?
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The Poor of India are Ready for this
Journey:
Are The Leaders Ready?
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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
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Transformation Requires:
Imagination
Passion
CourageHumanity
Humility
IntellectLuck !