Money at the bottom of the pyramid

Empowering the ‘poor’ makes a lot of business and economic sense.

I WAS in Jakarta recently watching how two competing companies make money, lots of it, from the poor, literally. In a city of 30 million people, many lived from hand to mouth. Money is tough to come by.

To survive a metropolis like Jakarta, one has to find every conceivable source of income. The city is clogged with traffic. The macet (“traffic jam”) is legendary.

Thus comes the logic of opportunity. A transportation crisis must not go unnoticed. Grab and Go-Jek provided that opportunity.

And it benefited all – the founders of both companies, the drivers, the users and, more importantly, the economy as the whole.

In Jakarta particularly, the rivalry between Grab and Go-Jek is more riveting for drivers as both companies are donning green uniforms.

In the case of Indonesia, ojek (motorcycle-taxi drivers) are nothing new.

The founder of Go-Jek, Nadiem Makarim, was thinking outside the box.

The challenges were formidable initially. He started a handful of ojek drivers to start his venture. Today, he has 18 on-demand services.

Go-Jek, like Grab, is a success story worth looking into.

Grab is a KL-born venture. It has acquired giant e-hailing company Uber in South-East Asia.

For Grab and Go-Jek, this is a region of 650 million people and a combined GDP of RM11 trillion.

It is perhaps one of the last growth areas in the world.

Of course poverty is still rampant. Many have never seen a credit card before, not to mention doing business online.

But learning from Jack Ma, brilliant entrepreneurs and tech-savvy young men and women are learning how to utilise a treasure trove of data of people largely ignored so far as potential customers.

Imagine how Alibaba has allowed millions of Chinese to use its app, Alipay, to buy goods and services. Mobile-payment method is going to be the “Next Big Thing” in poorer regions. The Internet is changing how the poor are doing business too.

The truth is the “poor” have a voice now in purchasing goods and getting services.

Not surprisingly, South-East Asia is the new turf war for companies offering super apps. Customers are now having their preferences heard.

Companies like Grab and Go-Jek are offering more than just hailing services, but food delivery, digital payments, and in the case of Go-Jek in Indonesia, even grocery shopping, hairstyling, housecleaning and massage. Yes, that too!

Air Asia has made flying affordable to millions. Now everyone can fly.

Back then, with every ringgit you pay the airline, 40% would go to ticketing agents. With the Internet, companies like Air Asia are able to discard the agents’ cut. Flying is a lot cheaper.

Giant companies like Facebook too realised the importance of acknowledging the power of the masses (read: the poor). Inevitably, it is also facing the rich world, poor world dilemma.

The growth for the rich world has somewhat stagnated. The users’ growth is in the poor world.

The moral of the story, ignore the poor at your own peril.

The founders of Grab, Anthony Tan and Tan Hooi Ling, and Go-Jek’s Makarim learned about the opportunities tapping the potential among the poor when they were in Harvard Business School.

Legend has it that they enrolled in a class, “Business at the Base of the Pyramid” (B-BoP) taught by Michael Chu. It was an eye-opener for them.

The concept was first mooted by management scholar C.K. Prahalad in the book he co-wrote with Stuart Hart.

The idea is simple: there is a profitable consumer base at the bottom of the wealth pyramid. The wealth pyramid is such that as you go further up, the number becomes smaller.

But advertisers and marketers are targeting this segment. Very little attention is given to those at the bottom of the pyramid.

The bottom of the wealth pyramid sees the largest but the poorest socio-economic group. In a standard measurement to define poverty, many lived on US$2.5 (RM10)aday.

But there are 2.7 billion people “down there.”

Prahalad argues that businesses and governments must now look at the group not as a burden or victim but as value-demanding customers and potential entrepreneurs.

He believes the poor today will move upward to become the middle class of tomorrow.

He encourages businesses to look at new business models for them. This theory certainly has its detractors.

But the fact remains, empowering the poor makes a lot of business and economic sense.

Jack Ma has proven that millions have benefited from his system. Grab and Go-Jek too have benefited from venturing into areas untrodden by companies obsessed with those at the top of the wealth pyramid.

In the case of Indonesia, ojek have been part of its capital’s backdrop since time immemorial.

But Go-Jek provides them a new opportunity, legitimacy, even rebranding the vocation.

It is a whole new and proud beginning for the Pak Ojek!

Johan Jaaffar was a journalist, editor and for some years chairman of a media company, and is passionate about all things literature and the arts. The views expressed here are entirely his own.