On Campus, a Different Pyramid Scheme

Classes that explore the controversial "base of the pyramid" economic development theory are proliferating at B-schools around the world

More B-school students than ever will be taking courses in "base of the pyramid" theory when they go back to campus this fall—an indication that the idea that economic development can come from selling products to the world's poor has gone from buzz to curriculum staple.

The base of the pyramid concept, which is not universally embraced, was developed by two B-school professors in the late 1990s, with the core idea that companies can make money by selling products to the world's estimated 4 billion poor people, while at the same time helping to wipe out global poverty. Companies started implementing business models based on this idea several years ago; business schools are just now beginning to catch up.

In the past two years there has been a sharp rise on B-school campuses in electives, specialized research institutes, student clubs, and internships focused on this topic, according to a June report from the Aspen Institute, a Washington (D.C.)-based nonprofit that has been tracking development issues in the B-school curriculum. "The growth in the number of schools with some content on the base of the pyramid has been tremendous," said Rich Leimsider, a senior program associate at the Aspen Institute. This, he adds, "Is the equivalent of lightning-fast change on business school campuses."

From South Africa to Spain

The Aspen Institute's Beyond Grey Pinstripes biennial report surveys 112 business schools in 21 countries. In 2001 only 13 schools offered classes with a focus on sustainability issues; by 2005, 60 schools had courses in the subject, the survey showed. Although 2007 data are not yet available from the report, preliminary data show a sharp spike in the number of courses being offered in this subject area, with dozens of schools this fall offering base of the pyramid electives or working the content into core courses, Leimsider said.

Business schools from South Africa to Spain are setting up special base of the pyramid learning labs and institutes devoted to the emerging body of academic work on the subject. Meanwhile, in the U.S., business schools from the University of Michigan's Ross School of Business to Cornell's Johnson School of Management have become hubs for students interested in studying the topic (see BusinessWeek.com, 8/15/05, "For the Poor, Help from MBAs").

"I think we're seeing the beginning of a trend as folks coming to business school are thinking more about societal issues and they are realizing it's important to consider a lot of viewpoints across the globe for business," said Ted London, director of the base of the pyramid initiative at the William Davidson Institute, an independent research institute specializing in emerging market economies, housed at Michigan's Ross School.

Helping People See

Nina Henning, who used to run a fair-trade, herbal body-care products company in Kathmandu, Nepal, is typical of a new type of student to emerge on B-school campuses in the past two years. "I used to believe that business was evil and that one could only do good for the world via the non-profit sector," Henning said. "I never thought I'd pursue an MBA because I didn't believe that positive social impacts could be achieved through work in the private sector."

She said her attitude changed as she watched her company evolve over the next five years. She ultimately made the decision to apply to Michigan because of its strong affiliation with the Davidson Institute, she said. She and her friends were elected on a base of the pyramid ticket as officers of Ross's Emerging Markets Leadership student club this year. Over her spring break, she visited University of Stellenbosch's base of the pyramid learning lab in South Africa, visiting the poor in nearby townships through a "base of the pyramid lens," she said. She is spending her summer in India working for a non-profit company that sells affordable reading glasses to low-income, rural consumers.

"I've been eager to get as much exposure as possible to base of the pyramid theory and on-the-ground projects," Henning said. "It's a new field and there are many unanswered questions about the best ways to create mutual value for base of the pyramid stakeholders and private sector companies.

A Futile Path?

It's easy to see why today's generation of socially conscious and global-minded business students are drawn to this topic, said Stuart Hart, a professor of management and chair of the sustainable global enterprise program at Cornell, and one of the early proponents of the base of the pyramid theory. "This is not philanthropy or the old aid-regime mentality where companies give things away to poor people. It's a new form of innovation and entrepreneurship," Hart said. "For a growing number of MBA students, this concept is enormously exciting. They just can't get enough of it." (For an interview with Hart, see BW.com, 8/2/07, "Cornell Professor Builds on His Base")

But some B-school professors are casting a wary eye on this development. Aneel Karnani, an associate professor of strategy at the Ross School of Business, is one of the most vocal critics of the base of the pyramid theory, which he calls "fundamentally flawed." He believes the economic potential of this market has been grossly exaggerated and that the world's poor should be producers, not consumers. Business school students could be going down an ultimately futile path, he said.

"It's a very seductive proposition and I think this is why the idea has become so popular," said Karnani, who is publishing a paper this summer in the California Management Review titled Fortune at the Bottom of the Pyramid: A Mirage. "This is wonderful that you can be rich and be a saint at the same time. The problem is that is doesn't work."

Students Take the Lead

At business schools, students are frequently behind the push for more base of the pyramid programs. Last year a small group of students at Vanderbilt's Owen Graduate School of Management approached Bart Victor, professor of moral leadership, and asked him if he would be interested in teaching a class about markets serving the world's poor. He accepted the challenge and designed an elective course called "Bottom of the Pyramid." He walked into class on the first day and was greeted by an overflowing lecture hall filled with 70 students. "I thought I was going to have 10 students in a small seminar talking about business and poverty, but it kind of exploded into this whole thing," Victor said.

Since that pilot class last year, the B-school students, in collaboration with students from the divinity school, founded "The Project Pyramid Global Poverty Alleviation Program," a student group dedicated to ending global poverty. They secured $250,000 in seed funding for the group and have become an influential voice on campus.

The students base their work on the teachings of Muhammad Yunus (see BusinessWeek.com, 12/26/05, "Nobel Winner Yunus: Microcredit Missionary"), a Vanderbilt graduate who received the Nobel Peace Prize in 2006 for founding the Grameen Bank, a microfinance institution based in Bangladesh. The group visited slums in Hyderabad, India last spring and plans to visit rural communities in Bangladesh on an upcoming trip this year. Every fall they organize the Project Pyramid Case Competition, a contest where students are encouraged to submit business plans that follow the pyramid philosophy.

"This is really a movement among students and it isn't just happening here at Owen. It's happening everywhere we turn our heads now, students are self-organizing and driving these things," Victor said.

Mosquito-Net Economy

With growing interest in this subject, people working in this field are in demand as guest speakers at business schools. Brian Trelstad, chief investment officer of the Acumen Fund (see BusinessWeek.com, 03/12/07, "A Do-Good Diary"), a social venture fund that takes an entrepreneurial approach to alleviating poverty, is frequently asked to talk at classes that offer electives in base of the pyramid theory. The subject is so popular that he says he could send someone from his fund to a B-school campus practically every week of the year.

During these visits, Trelstad often discusses some of the real-life issues that his fund grapples with, from how he gets a $6 mosquito net to to Africans living in poverty to how to provide affordable, clean drinking water to a rural community in India. Business school students show a keen interest in this topic because there are so many obstacles to be overcome when entering these markets, he said.

"People in business schools are typically interested in solving interesting problems," Trelstad said. "I think that the problems that our portfolio companies are wrestling with and the case studies that get written about us and our work are some of the most interesting problems that there are to be solved."