Monday, July 5, 2010

Energy and Bottom of the Pyramid in Canada: Book Club for Manitoba Hydro

Dr. Hari Bapuji

Recently, I facilitated a book club in which Manitoba Hydro executives discussed the book “Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits (FBoP).” This book, written by late CK Prahalad, makes a simple, but very powerful argument – this world is inhabited by over 4 billion people who earn less than $1,500 an year and strive for a better life. Collectively, their purchasing power is in trillions of dollars. So, companies can make profits by selling to them and by innovating new products/services in a process of co-creation with the poor. In doing so, companies not only can make profits, but also eradicate poverty.

Prima facie, the book FBoP is not relevant to a public sector organization operating in a developed world. But, the participants were very quick to realize that the ideas in the book can help transform organizations anywhere in the world. As one participant noted, although “the examples in the book are from the developing world, it is evident that energy is at the core of those examples. So, it is relevant to Manitoba Hydro.” In other words, if we think of the past and the present, FBoP is not appealing, but is highly useful if we think of the future that we can imagine and create.

The discussion was centered around five themes: (i) identifying new markets, (ii) protecting existing markets, (iii) increasing energy efficiency, (iv) creating new energy forms, and (v) improving organizational systems and processes. Each of these themes revealed several interesting insights.

I was very surprised to learn that there are communities in Northern Manitoba that are not connected through the grid and use diesel-generated power. The group on new markets shared ideas on how those markets can be served with alternative power sources because laying transmission lines is an expensive proposition. There was also a question on whether anyone living in this part of the world can be considered poor given that their income may be more than $1,500 an year. But, the group soon agreed that it was important to focus on the idea than go by strict definitions: “this is our bottom of the pyramid” said the group.

The discussion on protecting existing markets was very challenging given that Manitoba Hydro is in a monopoly situation. However, situations can change dramatically and drastically (contrast the current situation of MTS/Bell with that they faced a few years ago). Not surprisingly, the group talked about how their markets (particularly those outside of Canada) may be served by companies offering alternative and off-grid power.

The most interesting dilemma was raised by the group that discussed the issue of increasing energy efficiency. Prahalad argues that companies need to deliver products and services at a low-cost, yet at the highest quality (in doing so, he challenged the price-quality equation that we have grown accustomed to). But, Manitoba Hydro already sells power at the lowest rates. As a result, the users may not have any incentive to conserve energy. In other words, this group raised the possibility of an unintended consequence of low-price and high-quality: high consumption. So, companies need to find a way to make sure that consumption is reasonable. Otherwise, the products/services aimed at poor may make the planet unsustainable. Prahalad partially acknowledges this possibility and asks that the products/services aimed at the bottom of the pyramid be highly sustainable.

The group on creating new energy forms discussed about various alternative energies, such as wind, solar, battery, and bio. These energies could supplement the conventional energy sources, thus providing more and more cleaner energies.

To do more with less, organizations need to really rethink their systems and processes, argued the group that discussed organizational systems and processes. They raised some processes (even minor processes) that need not occur in an organization as frequently. Also, they argued that doing more with less would involve higher co-ordination and trust among the units. It was very evident from this discussion that companies in today’s era of global competition need to continuously re-design their systems and processes to eliminate waste and reduce inefficiency.

Overall, the discussion was very useful and generated many insights. I felt that if we had more time, the discussion could have further moved into areas like (i) markets outside of Manitoba, (ii) using non-profit partnerships to improve energy efficiency, and (iii) new products that could improve energy efficiency. That said, the purpose of discussion in a book club is not to go into particular areas or generate highly useful solutions, but to set off thinking in the directions that we do not normally think of. To that extent, it was an enriching experience for me.



1 comment:

Unknown said...

Since the world Environment day, I find that rediff.com (a news website in India) has been covering innovations that create energy solutions for the bottom of the pyramid populations. Check out the following inspirational stories:

http://business.rediff.com/slide-show/2010/jun/10/slide-show-1-he-plans-to-bring-solar-light-to-500-schools-in-north-east.htm#contentTop

http://business.rediff.com/slide-show/2010/jul/06/slide-show-1-he-is-lighting-up-villages-with-rice-husk.htm

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