College of Business: University of Illinois at Urbana-Champaign

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Mapping Out New Markets


4/1/2007

To Madhu Viswanathan, understanding the 4 billion people who live in poverty and the potential they represent as consumers and entrepreneurs is all about life lessons first, business lessons second. That’s because, as Viswanathan puts it: “Unless you understand the life circumstances of those living in subsistence, you cannot design quality products for them.”

As a researcher who has spent almost a decade studying the implications of poverty and literacy on marketplace behavior, he’s passionate about what can be done to make a difference. As an associate professor of business administration at Illinois, he’s also encouraging that passion in his students through “Product and Market Development for Subsistence Marketplaces,” a new two-semester course, co-taught by Ali Yassine, an assistant professor in industrial and enterprise systems engineering. The course focuses on business principles and product development that will serve the world’s poor.

“We have to envision the kind of world we want to live in,” says Viswanathan. “For me, that means conducting research, educating students, and developing curricula that has the potential to open people’s minds and improve circumstances for those living in subsistence. For my students and the business community, I hope that means seizing the opportunity to lessen poverty and find sustainable solutions.”

The View from the Bottom

Getting a handle on how businesses can meet the needs of subsistence markets means starting with a new frame of reference. “The way I see it,” says Viswanathan, “the economists are like the planes flying at 30,000 feet. My interests have always been at ground level.” His micro-level approach is based on a bottomup understanding of market development that he’s formulated through his work with low-literate, low-income consumers, and it’s at the heart of the curriculum he and Yassine have developed for their course.

“The bottom-up approach begins with understanding how individuals live, how the buyers, sellers, and markets behave, how literacy and income impact their circumstances, and what it means to live in subsistence,” explains Viswanathan.

Between the economists’ top-down approach and Viswanathan’s bottom-up approach is the research of C.K. Prahalad, a professor at the University of Michigan, and Stuart Hart, a Cornell University professor. Their work provided the intellectual impetus that Viswanathan believes is extremely valuable in its own right and yet complements the other two approaches. Plus, it has provided substantial exposure for the idea of developing the subsistence marketplace.

“Prahalad and Hart are leading management thinkers,” he says. “They have brought intellectual attention to this topic in a way that no one else has been able to.”

And that’s why students in Viswanathan and Yassine’s course study their work, a basic premise of which is understanding the value at the bottom of the pyramid. From a numbers perspective, the concept is simple and straightforward. The top of the pyramid consists of the nearly 100 million people with the highest incomes. At the bottom of the pyramid are the 4 billion people who live on less than $2 a day. Despite the differences in spending power, the sheer number of consumers represents significant market potential for businesses willing to think creatively. And, according to Viswanathan, those businesses that collaborate with the consumers and potential entrepreneurs at the bottom of the pyramid have an opportunity to make a difference as well as a profit.

Charting a Course

For Viswanathan, the opportunity to make a difference started by examining the behavior of low-literate consumers in the United States. His research eventually took him to India, where he interviewed buyers and sellers to learn how lowliterate, resource-poor, subsistence markets operate.

“I am really trying to understand the psychology—the life circumstances in subsistence that affect participation in the marketplace and the economic realm,” he says. “As soon as I went there [India] and began my research, I started thinking in terms of ‘Is there a give-back here?’”

That give-back came in the form of an educational consumer and entrepreneurial literacy program that was developed for people who cannot read or write—a program that has been offered on a small scale in urban and rural areas in south India. This emphasis on marketplace literacy complements other educational efforts, such as those that focus on microfinancing. Together, these efforts empower individuals to participate in the marketplace and engage in mutually beneficial exchanges. Another give-back is through the subsistence marketplace initiative aimed at developing and disseminating knowledge about these issues.

The goals are straightforward: create knowledge about these marketplaces, stimulate research on the topic, and give back to the people with affordable, quality products and direct marketplace literacy education. But something was missing: teaching. Encouragement from College of Business Dean Avijit Ghosh led to the conception of the new “Product and Market Development for Subsistence Marketplaces” course.

“The dean said, ‘Why don’t you start with a course,’” says Viswanathan. “This is the best thing that could have happened—to be able to teach a course that is a direct product of my research is just an amazing opportunity.”

In the fall of 2005, Viswanathan teamed up with Yassine, whose research deals with the interdisciplinary issues of development and managing complex engineering systems, and together they began to lay the foundation for the new course.

“Subsistence-based marketplaces are an important, though often overlooked, piece of the global economy,” says Ghosh. “Educating our students while simultaneously helping subsistence communities thrive benefits everyone.”

The support of Ghosh, the College, and the University was an integral part of this process. Viswanathan and Yassine received fellowships from the Academy for Entrepreneurial Leadership and grants from the Hoeft Technology and Management Program to fund the course, and Illinois Business Consulting promoted the course through informational sessions. Establishing the curriculum for such an interdisciplinary, underrepresented topic, however, was difficult.

“Avijit gave us great advice—Start small with engineering and business students, and go from there,” says Viswanathan

The result is a unique course—not just because of the subject matter, but also because of the integrative, cross-discipline approach to teaching and the philosophies behind the lessons. Business and engineering students work together in a two-semester course sequence with the option to spend ten days in India for hands-on research and immersion into the subsistence environment. Then, working with established companies, students create a business plan and develop a product prototype by the end of the second semester.

“The cross-discipline, collaborative nature of this course is an example of the innovative work that happens in this College and at this University,” says Ghosh.

Immersion Excursion

Viswanathan believes that for students to truly understand how a business can be successful in the subsistence environment they must first understand the environment and the plight of the people. “When dealing with subsistence markets, conventional notions of research and practice or even of what is considered rational may have to be set aside,” says Viswanathan. “You don’t know how it is until you immerse yourself with the specific purpose of understanding.”

The first five weeks of the course are spent doing just that. The class explores subsistence marketplaces through analysis of qualitative interviews conducted by Viswanathan, analysis of videos, and wideranging discussions of poverty, literacy, and culture. After participating in a simulation of life in poverty conducted by Robin Orr from the University’s Office of Extension, students write first-person accounts of people’s lives and build models of what poverty is, the consequences of living in it, and of needs, products, and markets interactions.

Over the next six weeks, students learn the general principles of buyer and seller behavior, market research, marketing, and business elements for subsistence marketplaces through case studies and a range of guest speakers including social workers, technologists, and entrepreneurs. According to Viswanathan, these exercises lead to an understanding of principles for subsistence markets. In parallel, students work on product ideas for specific companies in group projects.

“The bottom-of-the-pyramid philosophy is difficult to execute because it requires a lot of change in terms of thebusiness model, distribution, product development process, and organizational structure,” says Margretta Angdjasrin, an M.B.A. student enrolled in the course.

But it was the January trip to India that provided the ultimate immersion experience. While there, students visited rural and urban areas near Madras to conduct both group and one-on-one interviews with buyers and sellers about specific product ideas, and they observed various facets of subsistence marketplaces. And although the students were there to learn about the buyers, sellers, and how the markets operate, Viswanathan reminded them that they could learn from them, too.

“You can’t think of subsistence contexts as just markets,” says Viswanathan. “If you do, perhaps you miss the point. They are also markets and individuals to learn from. If we can design an affordable cell phone that works in these adverse conditions—it pushes you, but in the end, we have a quality product at an affordable price that may be lead to innovations in other markets as well.”

In addition to the nearly five days of interviews and observations, the group visited the Indian Institute of Technology, the GE Research Center, the Microsoft Research Center, and the Indian Institute of Science. Each program or center is working on technological initiatives for subsistence marketplaces.

“The trip gave us a good overview of India, from poor communities to rich individuals, from big corporations to small entrepreneurs, and from technical institutions to non-governmental organizations,” says Angdjasrin.

Products with a Soul

When they returned to campus, it was time for the students to put the immersion into action through product development by brainstorming product possibilities, creating business plans, and building prototypes with the help of sponsoring companies Motorola, Kraft, and Unilever.

According to Yassine, who is overseeing this segment of the course, one group is working on a product idea that would connect the poor to the Internet. Another group is designing packaging for a new ready-to-drink beverage to be introduced to the rural poor, and the last project deals with providing poor, young children with health facts through information technology.

“The cross-discipline structure of this course has been quite helpful,” says Michael Bloem, a graduate student in electrical and computer engineering. “The business student in my group is helpful in the development of our business plan, the industrial design student comes with a great wealth of knowledge regarding product development, and our engineers are coming in handy as we’re working on a prototype.”

Viswanathan agrees. “We’ve got unbelievable talent in this class,” he says. “If you have that desire to learn and the idea that what you are doing can actually benefit somebody beyond making a profit, that makes everything worthwhile. Trent Garner, a graduate student in industrial design, has described this as designing ‘products with a soul.’ That’s extremely gratifying to hear. I want the University to be at the forefront of this initiative. And with this course, I believe we are already there.”

UIUC College of Business