WEBVTT

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[sil.]

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Welcome.

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[non-English narration]

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The poor are saying for
over 50 years at least

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has the watts of the state
or NGOs or philanthropists.

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The poor have become a constituency

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and victims of an ideological battle.

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The poor have become a constituency,
not a problem to be solved.

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[music]

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So we need to examine our own biases,
our ideologically driven positions,

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our elitist view of the poor.

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Our inability to see them as
active valid conscious consumers,

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as active, capable, and
efficient producers.

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What we need is imagination,
organization, and new economic models.

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[music]

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If you stop thinking of the
poor as victims or as a burden,

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and start recognizing them as
resilient and creative entrepreneurs

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and value conscious consumers, a whole
new world of opportunity will open up.

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[music]

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Five billion new

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underserved consumers with
enormous collective spending power

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as opposed to individual spending power can
become the next engine of global growth.

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[music]

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India is selling

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five million new subscribers
for cell phones every month.

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So you cannot afford not to
be there, if you’re Nokia,

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or Motorola, or Samsung,
you have to be there.

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That is the reason why I
say, \"It is not an option

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but it is a strategic necessity.\"

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[sil.]

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All companies need to grow.

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All companies need to make profits. To grow

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you need to find new markets and new
consumers. You cannot continuously

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only serve a small consumer base.

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If you look at India from the marketplace
something else is happening.

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Urban markets are changing,
consumer spending is changing,

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and there’s a whole new
class of somewhere between

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50 to 100 million consumers
entering the consuming class

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which was not there 30 years ago,
that entering the consuming class.

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If we do not find value
propositions to serve them,

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these new consumers who are coming
into the… into the consuming class,

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somebody else will. And if
somebody else comes in,

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the… the…

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the mind of the consumer you’ve lost.

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[music]

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There’s a wide variety of companies
which are experimenting,

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which are discussing, which are doing things,
some of them more quietly than others.

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[music]

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AMD is developing a computer for the poor.
Microsoft is experimentally all over.

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What you see today is a lot of noise, a lot
of huffing and puffing on the train station.

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[non-English narration]

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The train has not left yet in my view,
but it’s getting ready to move.

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I believe once it starts moving,
it’s almost unstoppable.

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I expect five years from now

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we will not have this discussion, this
will be normal business, that’s my hope.

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So who is our consumer? Who bought our stove? So those
are people in the aged between 30 and 40 years old.

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Umm… The average family size is
between four and five members.

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Umm… We also saw that 42% of the households

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didn’t have any children yet probably. These
are people who bought the Philips stove.

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These are all people who bought the stove,
yes. We also saw that 24% of the women

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umm… has a job, what they do is farming, they
have a tea stall, or they do some tailoring.

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Uh… Seventy two percent of
the elder men had a job,

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typical jobs were farming and milk selling,
work at the factory, a shop owner,

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uh… government employee, or a truck driver.
The monthly household income

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uh… was between the 4,000
and 15,000 Indian rupees.

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Yeah. Eighteen percent of the Philip stove consumers
got to know about the product via their neighbors,

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but they also say that 100% said that their
neighbors asked about the new stove.

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It’s a word of mouth is very
strong and uh… in the villages.

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Again, what’s was the point that where
you said, you might use regular media,

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like TV, or like radio, but I mean, and
how far did really reaches the consumers

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that is to be seen whereas, I mean, the
root via the NGOs the demonstrations,

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the word of mouth might be a much more
effective way in order to inform the people

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and ultimately drive them
towards buying such a product.

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[sil.]

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[sil.]

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The first point is they like
the steel part very much.

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If you see this wood stove this is made of pure steel.
This comes from the traditional Indian liking that,

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they feel that steel is a robust
thing, it is a set, it can be cleaned,

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rubbed, and shiningness can be there all the time. An element
that has been there already traditional for a very long time,

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and… and stainless steel is durable. If you go into
a regular Indian kitchen, you see the same thing.

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If you look to the mix of grinders,
the jars that we are using

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so that builds on a rather consistent kind
of a view around this kind of a material.

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Yes. Yeah, it’s also aspirational value
because if you go to the really poorer homes,

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they usually have aluminium and then they’re always aspiring
to move up to steel, so steel is considered positive

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in the Indian kitchen. The smokeless
aspect was also liked by the people.

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They uh… The smokelessness, basically, from the position
of that, there was no soot deposition on the vessels.

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They were not black, so they
don’t have to rub it much more.

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And soot is not deposited on the
walls of their kitchens so that

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their kitchen looks comparatively clean.

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What Phillips is looking at is
for the next 15 years, 20 years,

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how can we create value
propositions and business models

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to serve communities and people that we
have not served in the last 100 years.

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That’s what we’re doing. So it’s
a 15 year, 10 year project.

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And it’s also something that you need to
do in order to survive in the future.

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Absolutely. If you don’t do it, you’re going to create
products only for markets which are growing at 2% and 3%.

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These markets are growing at 8%, 9% every
year. So to survive, you have to be there.

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[music]

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[sil.]

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I came from Philips company
and might knowing.

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Uh… So we are talking about
these two products now, okay?

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Umm… This is called uh… Uday, okay?

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Uh… It’s a rechargeable lantern
which uh… charge within four hours.

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If I’m putting it, it’s very easy to use.
Just press the button and it is on,

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okay? And for this, there is a
charging circuit is there at the back,

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you can charge it through this. And uh…

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if your family require light in the evening time,
they can just take it for four hours of charging

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and give you four to five hours of light.
Now this is second thing which is a torch

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which can get charge within one minute of
cranking. So you just crank it for one minute

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and it will give you light for uh…

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4 to… 30 minutes of light, okay? So
they’re… We are using LED into it.

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So one press, one LED. Second press, off.
Third press, three LED on.

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Fourth press, off. If I’m talking about
this bottom of pyramid approach,

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the top of the pyramid, we call it as an advanced
market where uh… the purchasing power of

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a consumer is more than
$10,000 US in a year.

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Earlier, uh… we never thought of approaching
the developing market, but let me

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uh… show you the population which reside in these markets.
We are talking about almost 500 million populations

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in advanced market. But if we’re
talking about emerging markets

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and developing market altogether, it’s
something like 5,500 million people.

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So it’s a huge population who are
staying in this market which has a

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uh… income of less than $1500 US.
So you can think of the business

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that this market can bring into uh… us. So
Phillips want to try and tap this market.

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[sil.]

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[music]

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There are typically three
assumptions that we make.

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One, that the poor people cannot
afford to pay the prices.

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We never say our cost
structures are out of control.

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We have to modify the cost structure. What
do we do, we protect the cost structure

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and walk away from a market opportunity.

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Second assumption people make is

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the poor people will not pay
attention to high tech.

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The evidence is exactly the opposite. Three billion
people out are willing to use cell phones.

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So they’re quite happy to accept new technology as
long as it allows them to make a better living.

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[music]

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Third assumption that we make is that all
innovations will come from the west.

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And this is also reasonably
arrogant assumption.

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[music]

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And don’t assume that the native
population, don’t have any spots.

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They lived for a long time somehow under those
circumstances, so they have their own smarts

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and start understanding their
logic on why they make choices.

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Once you start asking them why they make a sort of set
of choice, you’ll be amazed how deeply they have thought

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about the circumstance. So
poverty is not stupidity,

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poverty is lack of opportunity.

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[music]

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Yes, they will. Farmers especially
will be able to afford it.

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Once I have them in stock
I can start selling them.

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When it comes to buying

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I mean rural people are very brand conscious. They…
They would like to follow brands. They know that

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which category a branded product has to be
brought, which category they can just go away with

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a simple brand or a local brand. So in… in the sense
they know very well and they’ve calculated in mind that

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how much they can spend on a
particular category to buy the things.

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[sil.]

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They come to shops like this to see
the various brands and to discuss,

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talk about the rates. If they’re not satisfied, they go
to another shop. So they know exactly what they want?

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They know exactly what they want. And they know exactly
what kind of economical benefit they’ll achieve.

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[music]

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[sil.]

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[sil.]

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[sil.]

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A person the household may not be willing

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or able to pay 1,000 rupees
and buy the product.

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But if I can tell that household that
pay me 1 rupee a day or 3 a period

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which is 365 multiplied by 3 which
is more than a 1,000 rupees,

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they may be willing to take it.
So the same 1,000 rupee product

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becomes affordable because for a home

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that earns 10 rupees a day they may be willing to
pay for that light or the stove 1 rupee a day,

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but they cannot pay 1,000
rupees in the beginning.

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[sil.]

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[sil.]

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One might say the five billion
at the bottom of the pyramid

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they don’t have money to spend, so why
would they be of interest to corporate?

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See, that is where I think people have a,
such a limited view on market development.

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This is about creating the capacity
to consume rather than assuming that

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it’s capacity and then serving that market.
For example,

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we don’t do things uh… in emerging markets

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that we do obviously in developed markets.
We give everybody a credit card.

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What have we done? We have created
capacity to consume by giving access.

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We give mortgages and loans
for monthly payment.

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Therefore, people can afford to buy things then otherwise
cannot buy. Why can’t we take all the tools that we have

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and therefore create the capacity
there rather than behaving as if…

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if they would get a lot of
money then I can sell them.

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But we have a mental block and that is
the mental block I’m trying to remove.

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[sil.]

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[music]

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We need to understand that
because people are not rich,

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or because people are poor, that does
not mean they don’t have aspirations.

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And the person,

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my driver, the maid in my
house, the lady in the village,

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the daily work at the village, they have
aspirations as much as you and I have.

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[music]

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And sometimes we make mistakes, and transnational
companies make mistakes. By thinking, for example,

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if I think that what… they want an
iPod or they want an MP3 player

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to carry around, that may not
be their first aspiration.

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[sil.]

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[sil.]

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Our mental images

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that people are not willing to pay is
not true, people are willing to pay

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for the value that they need. The question
is getting the value proposition right.

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If I say the value as a wood stove, and I…
and I mentally think it’s a wood stove,

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I may be… I may not be right.
But if I define the value as

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how can I cook a meal for my family

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in one third of the time,

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and with only by using one fifth the fuel,

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if that is the value I’m selling, then
maybe she’s willing to understand,

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so it’s for the consumer insight comes.

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So it’s a full paradigm shift.

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When I buy a television set,
can I change it and say that

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I’m not going to sell the television set,
I’m going to sell the viewing experience

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per hour of viewing, so
I’m shifting completely

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to a pay per use model from
a sell the product model.

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So you need to understand and
design new business models.

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It’s not only the product design, but the business model
has to be designed and changed. And we’re learning.

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Are we perfect with? No.
Are we learning? Yes.

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[music]

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The challenge now for us is, is
not the product designed alone,

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now the question is how do you
distribute it across a country which is

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3,000 kilometers by 2,000 kilometers where the
road structure and the systems are still growing,

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and make it available to all these
households, 100 billion households.

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[music]

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We’re visiting almost uh… 100 kilometers

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away from uh… the city Madurai.
Uh… This is a place

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which is quite inaccessible, but uh…
we put the product in those markets

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where the accessibility is a big question
earlier. You can see the products

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which we usually uh… bring from our
depot in Madurai uh… to this office.

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So the local NGO has got
federations created,

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this federations stick the product, and they have
created the entrepreneurs like uh… this lady

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who is sitting beside me who take up
this product uh… and door-to-door

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uh… put up this product in the market.

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We were fortunate to get an NGO who has a
huge network of federations led by women.

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Micro enterprises and these
federations were having

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separate, separate groups of primary marketing group,
primary producer group, so these marketing group means

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ladies who are connected to mother NGO
are doing entrepreneurial activities.

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Therefore, I mean this connection with the NGO’s
gonna be rather than covering it regionally,

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it would be good at least to enlarge
it if not on the national scope,

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it leads at least a larger regional scale
because else we have to put so much more effort

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into getting it done. So Atul but I… it
shouldn’t go…. you all look into this

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and you will come with advice on with
which party we should go forward. Yes.

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The multinational companies in order to sell
the products and to learn about the market,

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they need help. And where are they going?
They’re going to

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the traditional adversaries
called the NGOs of civil society.

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Suddenly, I find civil
society and large companies

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are coming together quietly,
because civil society requires

00:38:45.000 --> 00:38:49.999
additions to that trust and
deep knowledge of the locality,

00:38:50.000 --> 00:38:54.999
they need this game and the investment
to leverage their knowledge.

00:38:55.000 --> 00:38:59.999
The large company with scale and knowledge…
investment capacity, reefs local knowledge,

00:39:00.000 --> 00:39:05.000
they’re finding a very interesting marriage
and that is how you get checks and balances.

00:40:20.000 --> 00:40:24.999
The NGOs who have been working with these
communities in that particular area

00:40:25.000 --> 00:40:29.999
understand the psyche and understand
the behavior of community people.

00:40:30.000 --> 00:40:34.999
So it’s not only a simply the issue of

00:40:35.000 --> 00:40:39.999
making a product which is
efficient and cost effective,

00:40:40.000 --> 00:40:44.999
but how do you finance it, how do you get the NGO
to come inside, how do you market the product.

00:40:45.000 --> 00:40:49.999
And if you get the equation right,

00:40:50.000 --> 00:40:58.000
volumes can just explode.

00:41:15.000 --> 00:41:23.000
[music]

00:42:00.000 --> 00:42:08.000
[music]

00:42:50.000 --> 00:42:54.999
Today, we (inaudible) 500
million (inaudible).

00:42:55.000 --> 00:42:59.999
That’s okay.

00:43:00.000 --> 00:43:04.999
There is poverty everywhere

00:43:05.000 --> 00:43:09.999
and opportunity everywhere figuring
out how to make money is not new.

00:43:10.000 --> 00:43:14.999
Let me give a local example here
in Burbank. A hundred years ago

00:43:15.000 --> 00:43:19.999
this was a very poor place in Poland.

00:43:20.000 --> 00:43:24.999
How did it change into the
textile industry? It is Philips,

00:43:25.000 --> 00:43:29.999
and its companies like that. So
suddenly (inaudible) becomes

00:43:30.000 --> 00:43:34.999
the electronic capital of this
region, not just a Poland

00:43:35.000 --> 00:43:39.999
and becomes the home of a global company.

00:43:40.000 --> 00:43:44.999
You don’t have to go very far right here

00:43:45.000 --> 00:43:49.999
in this part of the country, we have a
lesson it’s just only 100 years old,

00:43:50.000 --> 00:43:54.999
so that we forget where we came from. And I’m
saying why can’t we replicate it around the world.

00:43:55.000 --> 00:44:03.000
[music]

00:44:05.000 --> 00:44:09.999
There are, of course, also people who say, \"Okay, you want and the
end of the day your business when you want to sell products, right?\"

00:44:10.000 --> 00:44:14.999
You’re aiming for… No. No, no, no, no, no, no, no,
no. As a businessman I’m not selling product,

00:44:15.000 --> 00:44:19.999
as a businessman I am finding
a value from a consumer

00:44:20.000 --> 00:44:24.999
for which my consumer is willing to pay.
And by doing that, can I make a profit.

00:44:25.000 --> 00:44:29.999
The product is secondary.

00:44:30.000 --> 00:44:35.000
[sil.]

00:44:45.000 --> 00:44:53.000
[sil.]

00:44:55.000 --> 00:44:59.999
But at the end of the day, of course,
the one who’s making profit is

00:45:00.000 --> 00:45:04.999
Philips and the banks who give loans.
Absolutely. Absolutely. Nothing wrong in that.

00:45:05.000 --> 00:45:09.999
Tell me anything in the world that
has survived without making profits.

00:45:10.000 --> 00:45:14.999
[sil.]

00:45:15.000 --> 00:45:19.999
[music]

00:45:20.000 --> 00:45:24.999
All my work has been

00:45:25.000 --> 00:45:29.999
with the global companies historically.
So I look at them and

00:45:30.000 --> 00:45:34.999
I understand them and I say, they could be
extraordinarily interesting instruments

00:45:35.000 --> 00:45:39.999
of peace and progress if we can redirect

00:45:40.000 --> 00:45:44.999
their thinking to create
inclusive capitalism.

00:45:45.000 --> 00:45:49.999
So I had to draw attention

00:45:50.000 --> 00:45:54.999
to this group of people to say there is an
opportunity here for doing good and doing well.

00:45:55.000 --> 00:45:59.999
[music]

00:46:00.000 --> 00:46:04.999
And in order to show that this is

00:46:05.000 --> 00:46:09.999
a commercially viable operation rather than
typical corporate social responsibility

00:46:10.000 --> 00:46:14.999
or philanthropy, I had
to use the word fortune

00:46:15.000 --> 00:46:19.999
to say there is a real commercial opportunity
here. So there are two concepts here,

00:46:20.000 --> 00:46:24.999
commercial opportunity,
emerging consumer base,

00:46:25.000 --> 00:46:29.999
under serve large. It’s not
a game of charity at all,

00:46:30.000 --> 00:46:34.999
it’s a game of finding business models where transnational
companies can repackage their technologies,

00:46:35.000 --> 00:46:39.999
can repackage their value propositions

00:46:40.000 --> 00:46:44.999
and find a profitable way of serving
the 90% of the global population

00:46:45.000 --> 00:46:49.999
they’re not currently serving because that is where
the future is, that is the economy which is growing.

00:46:50.000 --> 00:46:54.999
Those are the people who is
purchasing powers(ph) are growing.

00:46:55.000 --> 00:46:59.999
The challenge for this century

00:47:00.000 --> 00:47:04.999
is to democratize commerce.
We must imagine a world

00:47:05.000 --> 00:47:09.999
which combines in equal
measure, economic development,

00:47:10.000 --> 00:47:14.999
and eradication of poverty,
ecological stewardship,

00:47:15.000 --> 00:47:19.999
and social justice. We must harness

00:47:20.000 --> 00:47:24.999
the forces of globalization
to create this outcome.

00:47:25.000 --> 00:47:29.999
In the task of this magnitude,
plenty will go wrong.

00:47:30.000 --> 00:47:34.999
There will be many surprises on the
way, but the journey’s exciting

00:47:35.000 --> 00:47:39.999
and the goal is noble. As
Mahatma Gandhi once said,

00:47:40.000 --> 00:47:44.999
\"Poverty is the worst form of violence.\"

00:47:45.000 --> 00:47:49.999
[music]

00:47:50.000 --> 00:47:54.999
We have to move forward
with and determination.

00:47:55.000 --> 00:47:59.999
What I like to suggest is
how can we create a world

00:48:00.000 --> 00:48:04.999
without imagining it. I do hope
that we can bring to this task

00:48:05.000 --> 00:48:09.999
our collective imagination,
passion, courage, humanity,

00:48:10.000 --> 00:48:14.999
humility, and intellect. We
cannot expect less of ourselves.

00:48:15.000 --> 00:48:20.000
Thank you all.