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The Great Leap: Driving Innovation From the Base of the Pyramid

By Clayton M. Christensen, Stuart Hart

Global companies today are struggling with a Catch-22. On one side is the legacy of the 1990s, when investors became accustomed to double-digit annual growth. While investors are no doubt revising their expectations now that the bubble has burst, they are not ready to give up on demands for rapid, steady growth in the companies they fund. This need to find new markets or products is in itself a huge challenge.

Add to that the second part of the dilemma: Antiglobalization demonstrations have made it apparent that if corporate expansion is seen to come at the expense of the poor and the environment, it will encounter vigorous resistance. This is not just an issue for a few thousand protesters. As multinationals unrelentingly seek new growth to satisfy shareholders, they increasingly hear concerns from many quarters about environmental degradation, labor exploitation, cultural hegemony and local autonomy. What is to be done? Must corporations' thirst for growth and profits serve only to exacerbate the antiglobalization movement?

On the contrary, a solution to this dilemma does exist. Companies can generate growth and satisfy social and environmental stakeholders through a "great leap" to the base of the economic pyramid, where 4 billion people aspire to join the market economy for the first time. This is not a question simply of doing the right thing in order to lift people out of poverty—although that will surely be a result of the leap we have in mind. From a senior executive's point of view, it's a matter of finding the most exciting growth markets of the future, an especially important task for major corporations considering that 69% of the S&P 500 had below-average growth in 1999 and that turnover in the S&P 500 has increased over the years to 10% annually. The majority of large companies seem to be mired in saturated markets that have few significant growth opportunities. The base of the pyramid is, so to speak, completely unsaturated.

Article available for purchase at MIT Sloan Management Review

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