Base of the pyramid - The Sustainability Management Wiki

Authors: Hanna Schwuchow
Edited by: –
Last updated: May 11, 2026

Executive summary

The Base of the Pyramid (BoP) describes the largest, lowest-income segment of the global population and the market environments in which people experience chronic resource constraints and limited access to formal goods, services, and institutions. In contrast to aid-only approaches, the BoP concept frames poverty reduction as a shared challenge for business, government, and civil society by exploring how market-based initiatives can expand access, reduce “poverty penalties,” and create livelihood opportunities when they are designed responsibly.

The BoP literature has evolved through three main phases. BoP 1.0 emphasized low-income people as consumers and focused on profitability through affordable products and services, but it attracted criticism for overstating market potential and for risking exploitative or unsustainable consumption patterns. BoP 2.0 shifted toward co-creation and cross-sector partnerships, highlighting legitimacy, ethics, and mutual value creation with communities. BoP 3.0 further emphasizes sustainability and the role of BoP actors as producers and entrepreneurs, aiming to strengthen local capabilities and generate economic, social, and environmental value over the long term.

For organizations, success in BoP contexts depends on adapting business models to local realities rather than transferring “developed-market” solutions. A useful design lens is the 4A framework—awareness, affordability (including payment mechanisms), acceptability, and availability—combined with deliberate choices about value creation, value delivery, and value capture. Effective initiatives typically rely on partnerships (for local knowledge, trust, and last-mile delivery), frugal or inclusive innovation approaches (to fit severe resource constraints), and capacity building (to enable consistent adoption and use).

Finally, organizations should measure outcomes beyond sales and scale. The evidence base shows mixed results across economic, social, and ecological dimensions, and it highlights the risk of unintended harm if impacts are not tracked. Robust monitoring and evaluation—starting with clear stakeholder scope, context-specific indicators, baseline data where feasible, and iterative learning—supports better decision-making about whether, how, and where to scale BoP initiatives.

1 Introduction

Over the past decades, poverty alleviation efforts in developing countries have predominantly relied on aid-driven interventions implemented by governments, non-governmental organizations (NGOs) and charitable institutions.¹ ² While there is evidence suggesting that such interventions can contribute to poverty alleviation³,⁴, there is no clear consensus regarding the effectiveness of aid-based programs in driving long-term economic development.⁵ Despite decades of aid-based development efforts and global policy frameworks such as the Millennium Development Goals (MDGs) and the Sustainable Development Goals (SDGs), poverty remains one of the most persistent and critical barriers to achieving sustainable development. The SDGs, adopted by the United Nations (UN) in 2015, explicitly aim to eradicate extreme poverty in all its forms by 2030 (Goal 1: No Poverty).⁶

Yet, as of 2026, approximately 826 million people continue to live in extreme poverty, unable to secure basic necessities.⁷ While international frameworks have helped reduce poverty in some regions, progress has stalled in recent years, largely due to the COVID-19 pandemic, armed conflicts and climate change.⁸ These trends suggest that, under current trajectories, the international goals of eradicating poverty by 2030 are unlikely to be achieved.⁹

The limitations of aid-driven interventions and the persistence of global poverty have prompted the development of alternative approaches that move beyond conventional aid models. In 2002, Prahalad and Hart introduced the “Base of the Pyramid” (BoP) concept, a market-based framework that seeks to simultaneously generate business profits and contribute to poverty alleviation by integrating low-income populations into formal economic systems.¹⁵ Over time, the terminology evolved from “bottom” to “base” of the pyramid, reflecting a more inclusive and empowering view of the world’s poorest populations.³ Not only has the term shifted, but the BoP concept itself has undergone substantial evolution, from its early formulation as BoP 1.0 to more participatory, sustainability-oriented iterations known as BoP 2.0 and BoP 3.0.⁴⁶⁶¹⁴

Since its emergence, the BoP approach has attracted growing academic interest. However, critics have argued that most studies remain conceptual and theoretical, while empirical research on the successful implementation of BoP initiatives remains relatively underexplored.⁴ This article bridges this gap by linking the theoretical foundations of the BoP approach to a practical framework that helps companies develop and implement strategies for operating successfully at the BoP.

2 Theoretical foundations

This chapter outlines the theoretical foundations of this thesis by reviewing the current state of research on BoP markets and initiatives. It aims to establish a conceptual basis for the subsequent development of practical implementation approaches for companies engaging in BoP contexts.

First, Chapter 2.1 characterizes the BoP by introducing an income-based definition and discussing the structural and behavioral characteristics of BoP markets. Chapter 2.2 then examines the evolution of the BoP concept, tracing its development from the early market-oriented perspective in BoP 1.0 to the more collaborative approaches of BoP 2.0 and BoP 3.0.

Building on this conceptual background, Chapter 2.3 focuses on the configuration of BMs in BoP environments and discusses related themes that are frequently addressed in the literature, including sustainability, partnerships and innovation. Finally, Chapter 2.4 reviews research on the impacts and outcomes of BoP initiatives.

2.1 Characterization of the BoP

The objective of this chapter is to provide a comprehensive characterization of the BoP. The first part (Chapter 2.1.1) approaches the BoP concept from a poverty perspective. Building on this foundation, the BoP is further described in terms of its structural (Chapter 2.1.2) and behavioral characteristics (Chapter 2.1.3).

2.1.1 Poverty perspective on the BoP

This chapter characterizes the BoP through the lens of poverty. It begins by defining the concept of poverty and outlining different understandings of deprivation. Building on this foundation, the chapter introduces poverty lines as a methodological tool to measure poverty and traces the evolution of international poverty lines (IPLs) over time. These benchmarks are then used to estimate the current size of the BoP and to identify the BoP as a specific segment of the global population in current economic terms.

Understanding poverty

Before characterizing the BoP through the lens of poverty, it is necessary to clarify what is meant by the term poverty. Poverty has been defined in different ways across academic disciplines and has also changed over time. Early definitions focused on the inability to meet basic needs such as food and shelter. In this understanding, poverty was seen primarily as a lack of income needed to ensure physical survival, which reflects an absolute perspective on poverty.⁵ Over time, researchers began to argue that poverty cannot be understood only as a lack of income. Townsend (1983) introduced the idea of relative deprivation, suggesting that poverty should be understood in relation to the living standards of a specific society. From this perspective, people are considered poor if they do not have enough resources to participate in normal social life or to maintain what is seen as an acceptable standard of living.⁶

Building on this idea, Sen (2001) described poverty as a lack of capabilities, meaning limited opportunities to live the kind of life a person values. According to this view, poverty is not only associated with income, but also with restricted access to education, healthcare, social participation and other important aspects of well-being.⁷ As a result, poverty is now widely understood as a multidimensional phenomenon that includes economic, social and contextual factors, which often reinforce each other.⁸ Despite different definitions, most approaches agree that poverty limits people’s opportunities and their access to important resources necessary for human well-being.

Because poverty is such a complex concept, researchers have developed different approaches to measure it. One widely used method is the use of poverty lines, which provide a practical way to identify and compare poverty across countries and populations.

Poverty lines as measurement tool

Poverty lines are a fundamental tool for measuring and comparing poverty across different populations. They serve as thresholds to identify and quantify poverty, typically by determining who falls below a defined minimum level of income or consumption.⁹ A key distinction is made between absolute poverty lines, which define poverty based on a fixed standard of minimum basic needs and relative poverty lines, which are set in relation to the average income or consumption levels within a given society.¹⁰ Poverty lines provide a standardized and widely applied method for assessing poverty and are therefore frequently used in both research and policy contexts. However, a substantial body of academic literature has raised concerns regarding their limitations. Because poverty can be understood as a multidimensional phenomenon, reducing it to a purely monetary measure may risk overlooking important aspects such as access to basic services, social inclusion and individual empowerment.¹¹ ¹² Despite these critiques, poverty lines continue to play a central role in global poverty research, as they provide a practical and comparable metric that enables cross-country analyses.¹³

Since the 1990s, the World Bank has provided IPLs to measure and compare poverty across countries. These thresholds are expressed in purchasing power parity (PPP) terms, which adjust for differences in price levels between countries, allowing for cross-country comparisons of real income and consumption.¹⁴ Starting with a threshold of USD 1.00 per day (PPP), the IPL for measuring extreme poverty has been gradually revised to USD 1.25, USD 1.90, and most recently USD 3.00 per day in 2024, based on updated PPP data. In addition to this extreme poverty line, the World Bank also uses higher thresholds of USD 4.20 and USD 8.30 per day.⁶²

The extreme poverty line marks a threshold associated with a very low standard of living, reflecting the minimum level of resources required to meet basic needs in the poorest economies. In contrast, the higher poverty lines represent more moderate levels of deprivation and are better suited to assess poverty in countries with higher living standards.⁶³ Nevertheless, all these thresholds still represent different levels of poverty, differing mainly in their severity.

Poverty lines have also played an important role in defining the BoP segment, as they provide a standardized way to identify and classify low-income populations. Building on this foundation, the following section explores in more detail how the BoP can be defined through the application of specific poverty thresholds.

The BoP as a population segment

According to Prahalad and Hart (2002), the BoP refers to the poorest socio-economic segment of the global population, which is largely excluded from the formal economy and lacks access to basic goods, services and market opportunities.¹⁵ While they did not explicitly anchor the BoP concept in official poverty lines, their income thresholds closely align with commonly used international poverty benchmarks.

In their framework, Prahalad and Hart (2002) divide the global population into four income-based tiers. The top tier (Tier 1) includes individuals with annual incomes above approximately USD 20,000 (PPP), while Tiers 2 and 3 represent the emerging middle class, earning between approximately USD 1,500 and 20,000 (PPP) per year. The fourth and largest group, referred to as the Base of the Pyramid, includes individuals earning less than approximately USD 1,500 (PPP) per year (see Figure 1).¹⁵ However, their initial definition of the BoP remains somewhat ambiguous, as their income thresholds and population estimates vary across different publications. Initially, they estimated that around four billion people belonged to this segment, later revising this figure to four to five billion individuals living on less than USD 2 per day.¹⁵ ¹⁶ Even though many studies still cite and rely on Prahalad and Hart’s (2002) estimates, they often overlook subsequent changes in global price levels and poverty benchmarks. Therefore, this thesis draws on updated 2026 data and the most recent IPLs to reassess who can currently be classified as part of the BoP.⁶⁴

Figure 1: The world’s economic pyramid (own illustration according to Prahalad and Hart (2002)¹⁶)

According to 2026 World Bank data, 826 million people currently live in extreme poverty (< USD 3.00 per day). When broader thresholds are applied, approximately 1.47 billion people live on less than USD 4.20 per day and 3.68 billion on less than USD 8.30 per day.⁶⁵ Therefore, based on the updated IPLs (< USD 8.30 per day), approximately 3.68 billion people, or about 44.3 % of the world’s population, can currently be classified as poor or as part of the BoP.mfn]World Bank. Poverty and Inequality Platform (version 20260324_2021_01_02_PROD). https://pip.worldbank.org. (retrieved March 3, 2026).[/mfn]

While income provides an important basis for identifying the BoP, additional structural characteristics are necessary to better understand the living conditions of this population. The following section examines these additional dimensions in more detail.

2.1.2 Structural characteristics of the BoP

While poverty lines provide an important basis for identifying the BoP, they capture only one dimension of the living conditions faced by this population. A more comprehensive understanding of the BoP therefore requires considering contextual factors that shape BoP markets. These structural characteristics may help explain why BoP markets differ from higher-income segments and why firms often need to adapt their approaches when engaging with BoP communities.⁴ ¹⁷

Although the relevance of the BoP as a research domain is well established, its structural characterization remains comparatively underexplored.⁴ ¹⁸ Given this limited coverage, future research would benefit from a stronger focus on the structural dimensions and heterogeneity of BoP markets. Nevertheless, the following section reviews the literature to identify the key structural characteristics of the BoP and to provide a basis for the subsequent analysis.

One important dimension illustrating the heterogeneity of the BoP is its global distribution. As illustrated in Figure 2, most people living at the BoP are concentrated in South Asia (33.2 %), Sub-Saharan Africa (32.4 %) and East Asia & the Pacific (15.6 %). In contrast, regions such as Europe & Central Asia (1 %) and North America (0.2 %) contribute only marginally to the global BoP population.⁶⁶ This uneven distribution suggests that BoP markets are embedded in diverse geographic, cultural, institutional and religious contexts, which may influence the needs and preferences of BoP populations in complex ways.¹⁹ ²⁰ Even at similar income levels, households may face very different constraints depending on factors such as access to infrastructure or the availability of public services. For instance, an income level of approximately USD 2 per day may carry substantially different implications in developing economies, where such income may be insufficient to cover basic necessities, compared to developed economies, where government safety nets often provide at least partial support. These variations underscore that the BoP cannot be regarded as a uniform market segment and that a differentiated understanding is often required.²¹

Figure 2: Share of global population living in poverty (own illustration based on data by the World Bank (2026)⁶⁷)

However, differences in BoP markets do not only occur between countries but also within countries, where substantial disparities can be observed between rural and urban areas. In regions such as Asia and Africa, the BoP is predominantly concentrated in rural areas, whereas in Eastern Europe and Latin America, the urban BoP constitutes a larger share of the market.²² Although both rural and urban BoP segments share underlying economic vulnerability, they differ markedly in terms of their physical environments and socio-economic structures.²³ Rural BoP communities are typically located in remote areas with poor connectivity, limited public services and an economy largely dependent on agriculture. In contrast, urban BoP populations often live in informal settlements or slums, characterized by overcrowding and inadequate sanitation.²⁴ The literature frequently suggests that the urban BoP segment represents a more viable and potentially profitable market for firms seeking to engage with the BoP. Compared to its rural counterpart, the urban BoP is often more accessible and integrated into informal yet dynamic economic systems. In contrast, the rural BoP remains highly challenging, as it is geographically dispersed, severely impoverished, often underserved by infrastructure and marked by high levels of economic and political instability. These conditions may not only limit purchasing power but also increase operational risks and costs for companies.²⁵ ²⁶

Beyond spatial distribution, the demographic composition represents another important structural characteristic of the BoP. The BoP has relatively high population growth rates and a young age structure, resulting in faster expansion compared to higher-income segments. This dynamic makes the BoP a potentially significant economic segment in the medium to long term, especially in emerging economies with high population growth rates.¹⁷ ²⁷

These demographic dynamics are closely linked to the income opportunities available within many BoP contexts. Many BoP populations are strongly integrated into the informal economy, which has often been linked to their historical exclusion from the formal systems of global capitalism.²⁸ For a long time, low-income markets were mainly addressed by governments, aid agencies and non-profit organizations, with relatively limited participation from formal businesses.⁶⁸ According to recent estimates, approximately two billion people, around 60 % of the global workforce, are informally employed, with this figure rising to 90 % in developing countries.²⁹ The International Labour Organization (ILO) (2015) defines the informal economy as “all economic activities by workers and economic units that are – in law or in practice – not covered or insufficiently covered by formal arrangements […]”.³⁰ According to Kistruck et al. (2015), many BoP entrepreneurs operate in the informal economy due to weak formal institutions. In many BoP markets, formal registration provides limited protection or benefits while exposing entrepreneurs to significant risks and costs, leading many to remain outside the formal economy.³¹

Due to the high prevalence of informal employment, income at the BoP is often not only limited but also highly irregular. Many individuals rely on daily wages or casual labor, resulting in income volatility and economic insecurity. This variability in earnings further distinguishes the BoP segment and poses distinct challenges for stable consumption and long-term planning.¹⁹

Building on this structural understanding of the BoP, the following section shifts the focus to behavioral perspectives, examining how people at the BoP make purchasing decisions and which factors influence their preferences.

2.1.3 Behavioral characteristics of the BoP

To gain a deeper understanding of the BoP, it is important to examine not only its structural characteristics but also the behavioral patterns that influence how people at the BoP make economic decisions. As discussed in the previous section, the BoP represents a highly heterogeneous group whose decision-making is shaped by resource constraints and contextual challenges. Compared to people at the Top of the Pyramid (ToP), individuals at the BoP often face greater vulnerability due to factors such as limited education, inequality, mental health challenges and potential limitations in executive functions associated with prolonged exposure to poverty.³² Understanding these behavioral dynamics is important because they influence how people at the BoP engage with markets and participate in economic activities. Behavioral aspects therefore may have important implications for the design of BMs (see Chapter 2.3).

Despite the diversity within BoP markets, the literature identifies several recurring behavioral characteristics. Building on the review by Uttam and Rahul (2023)³⁴, this section outlines key behavioral aspects discussed in BoP research, including motivational drivers, information processing factors and adoption dynamics.

Motivational drivers

A key motivational driver of economic decision-making at the BoP is aspirational consumption. Aspirational consumption describes the tendency of resource-constrained individuals to seek access to goods and services that are typically associated with higher-income groups.³³ Such aspirations influence how individuals allocate limited resources. Srivastava et al. (2023) identify social comparison, well-being and astuteness as important factors influencing aspirational decision-making at the BoP (see Figure 3).³²

Figure 3: Aspirational consumption at the BoP (own illustration based on Srivastava (2023)³²)

Social comparison refers to the process through which individuals evaluate their own situation by comparing themselves with others.³⁴ Such comparisons may take place within communities, for example with friends or neighbors, or across socio-economic groups, where individuals compare themselves with higher-income groups (upward social comparison).

Srivastava et al. (2023), for example, find that individuals at the BoP may purchase second-hand branded products to signal belonging and social status.³² These findings indicate that decision-making at the BoP is not only influenced by price considerations but also by symbolic aspects such as trust, quality and social recognition associated with certain brands and products.³² ³⁵

At the same time, social comparison is not only related to status, but also to broader aspirations for improved well-being.³² Within BoP contexts, well-being is often constrained across economic, capability and relational dimensions.¹ These limitations shape how individuals evaluate opportunities and allocate scarce resources. Srivastava et al. (2023) show that the need for security and stability influences decision-making at the BoP. In particular, aspirations for improved future well-being may motivate investments in education and income-generating assets, reflecting the importance of future-oriented decision-making in BoP contexts.³²

Information processing factors

In addition to motivational drivers, decision-making at the BoP is influenced by how individuals process information in contexts characterized by resource constraints and uncertainty. The literature suggests that prolonged exposure to poverty may affect cognitive processes relevant to decision-making, for example through chronic stress, nutritional deficiency or exposure to environmental risks.³⁶

Earlier studies in some BoP contexts have highlighted the role of limited literacy and education in shaping how information is processed, for example through a stronger reliance on visual cues, familiar brands or trusted relationships.³⁷

More recent research has expanded this perspective by emphasizing the role of executive functions in shaping decision-making in BoP contexts. Executive functions refer to a set of higher-order cognitive processes that enable individuals to regulate their behavior and make decisions. These functions represent an umbrella term encompassing skills such as problem-solving, selective attention, reasoning, multitasking, decision-making and working memory.³⁸

Living under persistent financial pressure and uncertainty may place a strain on these capacities.³⁹ As a result, individuals in some BoP contexts may face greater difficulty processing complex information or evaluating unfamiliar alternatives. According to Mishra et al. (2021), this may influence how individuals interpret marketing information or assess product characteristics.⁴⁰

At the same time, research highlights that individuals at the BoP develop adaptive strategies to navigate these constraints. Srivastava et al. (2023) describe this as astuteness, referring to a form of practical intelligence that enables individuals to rely on experience and contextual knowledge when making decisions.³²

Adoption dynamics

These decision-making conditions become especially important in the context of innovation, where individuals must evaluate unfamiliar products and higher levels of uncertainty. Innovation adoption refers to the process through which individuals become aware of, evaluate and decide to use a new product or service.⁴¹ Given that innovation constitutes a central topic within BoP research (see Chapter 2.3.4), understanding adoption dynamics at the BoP is essential. Uttam and Rahul (2023) highlight that innovation adoption at the BoP differs markedly from that at the ToP, as it is influenced by a distinct set of contextual factors.³⁴

Research on innovation adoption in BoP contexts emphasizes the importance of social and relational influences in shaping the uptake of new technologies. Studies show that the adoption of innovations is influenced by factors such as lifestyle compatibility, social influence and trust. Hussain et al. (2019) demonstrate that social influence, particularly advice from trusted individuals, plays an important role in the adoption of mobile payment services.⁴² Similarly, Kansal (2016) finds that trust, together with perceived risk and cost, influences how individuals evaluate mobile banking services, which in turn affects adoption decisions.³⁹

The strong relevance of trust and social influence may be explained by the close social networks that characterize many BoP contexts. Decision-making is frequently shaped by community relationships and shared norms, as individuals rely on the experiences and recommendations of others when evaluating new technologies or services.³⁵ As a result, relational aspects may play an important role alongside economic considerations such as price or convenience.⁴³

Having described the BoP through poverty definitions as well as its structural and behavioral characteristics, the following section (Chapter 2.2) explores the evolutionary nature of the BoP concept and discusses its three main iterations.

2.2 Evolution of the BoP concept

The BoP concept has undergone a significant conceptual evolution over time. This chapter outlines this development, beginning with an overview of its initial formulation and theoretical foundations in BoP 1.0 (Chapter 2.2.1). It then examines the subsequent advancements represented by BoP 2.0 (Chapter 2.2.2) and, finally, BoP 3.0 (Chapter 2.2.3).

Each subchapter discusses the core issues and debates, dominant research themes and key criticisms associated with each phase of the concept.

2.2.1 The initial formulation of the BoP approach

The BoP concept emerged in the context of increasing globalization and growing international attention to poverty reduction during the 1990s.¹⁵ ⁴⁴ While many markets in the Global North had become increasingly saturated, multinational corporations (MNCs) began to search for new growth opportunities in other markets.¹⁵ ⁴⁵ At the same time, persistent poverty in regions such as South Asia and Sub-Saharan Africa highlighted the continued exclusion of large population segments from the benefits of economic development.¹⁴

This environment provided the backdrop for the initial formulation of the BoP approach in the early 2000s, which is commonly referred to in the academic literature as BoP 1.0. Introduced by Prahalad and Hart (2002), the concept argues that the lowest socio-economic segment of the global economic pyramid represents a largely untapped but potentially profitable market for MNCs.¹⁵ ⁴⁵ Although early academic research was still limited in scope, these foundational contributions had a significant influence on later scholarly work.⁴⁶ Scholars generally agree that the first iteration of the approach covers the period from 2002 to 2006.⁴⁶⁶¹ To better understand the initial BoP framework, the core debates and main research trends will be discussed in the following section.

2.2.1.1 Core debates and trends in research

The early BoP framework was based on the idea that MNCs could achieve profitability while contributing to poverty reduction. Within this first iteration, people at the BoP were primarily conceptualized as consumers, with the assumption that providing access to affordable and better-quality products and services would simultaneously create commercial value for firms and improve the well-being of low-income populations.¹⁵ ⁴⁵ ⁴⁷

One of the central concerns in early BoP literature was to demonstrate the relevance of the concept and to explain why MNCs should engage in BoP markets at all. Central to this argument was the assumption of substantial market potential at the BoP. Proponents argued that the significance of the framework derived primarily from the size of this largely untapped consumer segment. Prahalad and Hammond (2002) estimated the purchasing power of BoP consumers at approximately USD 1.7 trillion (PPP) annually.⁴⁸ Subsequent analyses suggested an even larger market size. Hammond et al. (2007) calculated that BoP consumers account for annual expenditures of around USD 5 trillion (PPP) across multiple sectors.²²

Beyond the sheer size of this market, early BoP literature also highlighted its strategic importance as a setting for developing and testing innovative business approaches. Scholars have suggested that BoP markets may provide firms with opportunities to test new approaches at comparatively low cost and to develop radical innovations that could ultimately transform competitive structures in global markets. The distinctive characteristics of these markets may push firms to design simplified and affordable products and services.⁴⁵ ⁴⁹ ⁵⁰ Since innovation management plays an important role across all three iterations of the BoP approach, it will be examined in greater detail in Chapter 2.3.4.

At the same time, early contributions highlighted that engagement in BoP markets could also generate benefits for low-income populations. A frequently cited argument in this context is the existence of poverty penalties.¹⁶ ⁵¹ This refers to the tendency of low-income populations to pay relatively higher prices or receive lower quality and accessibility when obtaining essential goods and services compared to higher-income groups. Such disadvantages often arise from structural conditions in BoP markets, including limited physical access to retail infrastructure or the necessity to purchase products in smaller quantities, which are often associated with higher unit prices.⁵¹ According to Prahalad (2005), firms can help reduce such inefficiencies by developing products and services tailored to the specific conditions of BoP markets.¹⁶

While early BoP literature emphasized the significant economic and developmental potential at the lower end of the income pyramid, it also sought to explain why many MNCs had long shown limited interest in these markets despite their potential. One of the key contributions of Prahalad and Hart’s (2002) original work was therefore to examine why, despite these possibilities, many MNCs had historically neglected BoP markets. They identified a set of prevailing assumptions or misconceptions, that helped explain this reluctance (see Table 1).¹⁵ ⁴⁷

Table 1: Perceived entry barriers for MNCs in BoP markets (own illustration based on Prahalad and Hart (2002)¹⁵; Prahalad and Hammond (2002)⁴⁷)

Assumption

Current cost structures are too high to consider low-income populations as viable target consumers.

People at the BoP cannot afford products and services designed for developed markets or have no use for them.

Advanced technologies are more likely to be valued in developed markets.

BoP markets are not relevant for the long-term viability of MNCs.

Business challenges with a humanitarian dimension are less appealing to managers and unlikely to attract strong internal support.

Talent and expertise are concentrated in developed markets, making it difficult to attract skilled managers to work in BoP environments.

To counter such misconceptions and demonstrate the feasibility of BoP markets, early contributions to the literature frequently highlighted business cases of multinational and domestic firms that had successfully entered low-income markets. These examples primarily served to provide anecdotal evidence of the commercial viability of BoP strategies, as well as their potential developmental benefits. One frequently cited case is the Brazilian retailer Casa Bahia, which by 2002 employed around 20,000 people and operated 488 stores in disadvantaged regions of the country. The company remained profitable by combining the sale of household products with access to consumer credit, thereby enabling customers with irregular incomes to make purchases.¹⁶

Finally, the initial formulation of the BoP concept was primarily concerned with establishing its basic rationale and relevance. Early contributions sought to demonstrate that a sizeable market existed at the lower end of the income pyramid and to highlight the potential advantages for firms that engaged with this segment. In their literature analysis, Kolk et al. (2014) conclude that the BoP 1.0 approach was largely practitioner-oriented, focused on a limited set of markets and companies and primarily portrayed people at the BoP as consumers.⁵²

2.2.1.2 Criticism and limitations

Although many authors supported the initial formulation of the BoP 1.0 approach, the concept was also widely criticized. Much of this critique focused on its strong emphasis on consumption, doubts about its actual impact on poverty reduction and concerns that local communities were not sufficiently involved in the development of BMs. In the following section, the main limitations and points of critique raised in the literature are outlined and discussed.

A central line of criticism questions the very foundations of the BoP concept. Karnani (2005), one of its most prominent critics, describes BoP 1.0 as “[…] at best, a harmless illusion and potentially a dangerous delusion” (p. 99).⁵³ His critique highlights both methodological limitations and questions about the true size and viability of the BoP market. He argues that Prahalad substantially overestimated the purchasing power of low-income consumers, thereby creating unrealistic expectations for MNCs seeking a “fortune” at the BoP. Such overestimation is problematic because it may encourage firms to invest in markets that are unlikely to deliver the promised returns.⁵⁴ This critique is closely linked to the lack of clarity regarding who belongs to the BoP segment. Estimates vary depending on whether the threshold is set at less than USD 1, USD 1.50, USD 2 or even USD 2.50 per day, leading to very different calculations of market size and purchasing power.⁵³ ⁵⁵ ⁵⁶

Critics have also highlighted socio-economic concerns. As noted earlier, the original formulation of the BoP approach largely portrayed people at the BoP as consumers. This perspective has been criticized for creating the risk that low-income households spend their already limited financial resources on products and services that may not correspond to their most urgent needs. Moreover, critics question whether the BoP 1.0 focus on consumption is sufficient to achieve meaningful and sustainable improvements in living conditions. They argue that simply integrating low-income populations into global markets as consumers does not necessarily address the structural causes of poverty and may therefore have limited impact on long-term development outcomes.⁵⁴ ⁵⁷

Besides socio-economic concerns, the BoP 1.0 approach has also been questioned from an ethical perspective. Ethical concerns focus on the fact that BoP 1.0 is primarily profit-driven and influenced by a Western perspective. Critics argue that this perspective equates market growth with sustainable development and assumes that developing economies will follow the same path as industrialized countries and adopt Western consumption habits. This assumption many scholars consider misleading and problematic.⁵⁸ ²⁸ ⁵⁹ Moreover, scholars emphasize that such approaches often overlook the capabilities and strengths of local organizations. Instead, they may promote top-down BMs that ignore local knowledge and pressure communities to adopt external values.⁵⁹

2.2.2 Reformulation of the BoP approach

In response to growing criticism and ongoing academic debates, the BoP concept evolved in the late 2000s. The revised approach, commonly referred to as BoP 2.0, sought to address the key limitations of BoP 1.0, especially its strong focus on low-income populations as consumers and its insufficient consideration of social aspects.⁴⁶

Simanis and Hart (2008) are among the key contributors to this reformulation. They argue that firms need to fundamentally adapt their strategies when operating in BoP markets. While BoP 1.0 is described as an “arm’s length” attempt to quickly access a new market, BoP 2.0 emphasizes the need for a deeper understanding of local conditions and closer engagement with BoP communities.⁶⁰

Overall, the period from 2007 to 2015 is commonly associated with the second iteration of the BoP approach.⁴⁶ ⁶¹ The following section outlines the main debates and research trends that characterize this reformulation.

2.2.2.1 Core debates and trends in research

The second iteration of the BoP approach has an emphasis on co-creation, partnerships and collaboration, combined with a clearer focus on mutual value creation and increased attention to ethical and social considerations, particularly questions of legitimacy, responsibility and fairness in the design and implementation of BMs.⁵⁷ ⁶⁰ ⁶² ⁶³

A central difference between BoP 1.0 and BoP 2.0 lies in how people at the BoP are perceived. In BoP 1.0, people at the BoP were primarily seen as consumers, whereas BoP 2.0 increasingly views them as active business and collaboration partners. This shift has important implications for how firms operate in low-income markets. If BoP communities are relevant actors in the value creation process, BMs can no longer be designed in a purely top-down manner. Instead, they need to be developed through co-creation, drawing on the local knowledge, capabilities and experiences of BoP actors in order to create context-specific solutions.³⁷ ⁶⁰ ⁶⁴ ⁶⁵

This perspective also helps explain why partnerships have become a central topic in the BoP 2.0 literature. Co-creation in BoP contexts usually requires the involvement of multiple actors, as no single organization has all the resources and knowledge needed to address the complex conditions of low-income markets. For this reason, scholars stress the importance of cross-sector partnerships between firms, NGOs, governments and local communities as a key mechanism for designing and implementing successful BoP BMs (see Chapter 2.3.3).⁶⁶ ⁶⁷

The underlying idea of this approach is the creation of mutual value. While this idea was already present in BoP 1.0, the literature increasingly stresses the importance of creating value with and for the BoP, rather than primarily extracting value from these markets.⁴ In this context, several scholars highlight the relevance of empowerment and capability development as important objectives of BoP initiatives. Drawing on Amartya Sen’s capability approach, research suggests that BoP strategies should contribute not only to market access but also to the development of skills and network opportunities within local communities.⁶⁸

During the development of the BoP 2.0 framework, several related concepts emerged that similarly emphasized the link between business activities and social impact. The emergence of concepts such as Creating Shared Value (CSV), which describes the idea that companies can create economic value while simultaneously addressing social problems, reflects the increasing attention given to the role of business in addressing societal challenges.⁶⁹

Another important concept that closely aligns with the BoP 2.0 debate is the notion of inclusive business, which is also commonly referred to as social business, pro-poor business or inclusive capitalism. This stream of research focuses on integrating previously excluded low-income populations into value chains and markets as producers, suppliers, distributors or consumers.⁶³ ⁷⁰ Taken together, these concepts illustrate that, alongside the growing establishment of the BoP approach, scholars increasingly recognize the potential of business as a catalyst for more inclusive and sustainable development.

Overall, the second iteration of the BoP approach reflects an important shift in perspective. While BoP 1.0 mainly focused on the idea of finding a “fortune at the BoP”, BoP 2.0 increasingly emphasizes creating this fortune together with the BoP population through collaboration and partnership.⁷¹

2.2.2.2 Criticism and limitations

Similar to BoP 1.0, the second BoP approach has also faced criticism, especially concerning potential risks of exploitation, the reinforcement of unsustainable consumption patterns and its limited development impact. These issues are discussed in the following section.

Karnani (2010) argues that the BoP approach, by mainly viewing people at the BoP as market participants and partners, may overlook legal, regulatory and social mechanisms needed to protect vulnerable groups. This limited role of regulation may increase the risk of exploitation and insecure working conditions. Additionally, he argues that such a market-oriented view of poverty reduction often underestimates the importance of public institutions in providing public goods and addressing structural inequalities. If these responsibilities are shifted too strongly to markets and firms, long-term poverty reduction may become more difficult.⁷² Building on this argument, Arora and Romijn (2012) observe that in many contexts poverty reduction activities have increasingly been taken up by private actors due to a reduced role of the state. While such initiatives may partly compensate for weak welfare systems, they may also reinforce inequalities and increase the dependence of low-income communities on private actors instead of strengthening public institutions.⁷³ Furthermore, the authors argue that the use of terms such as “new communities”, “participation” and “inclusivity” may obscure existing power imbalances in BoP initiatives. As a result, BoP strategies may appear as neutral management approaches, while underlying structural inequalities receive limited attention.⁷³

Another issue of concern relates to the limited empirical evidence on the emergence of sustainable consumption patterns among BoP consumers.⁴ ⁵² While Prahalad and Hart (2002) explicitly emphasized the importance of environmentally sustainable technologies and innovations in their foundational contribution¹⁶, subsequent research and practical experience suggest that translating this ambition into sustained consumption behavior remains challenging (see Chapter 2.4.3).

Finally, despite the initial expectations, empirical evidence shows limited support for consistent, large-scale positive outcomes for people at the BoP in both BoP 1.0 and BoP 2.0 (see Chapter 2.4). While there are some success stories, many ventures remain small in scale or fail to achieve meaningful empowerment.⁴

2.2.3 The latest formulation of the BoP approach

The third iteration of the BoP approach can be seen as a direct response to the limitations of the first and second iterations.⁵⁷ ⁷⁴ While BoP 1.0 and 2.0 helped to establish the link between poverty alleviation and economic opportunities, they often remained too narrow and did not sufficiently address the broader and more complex challenges related to poverty and development.

The emergence of BoP 3.0 should be understood in the wider context of global development debates in the mid-2010s, which increasingly emphasized sustainability and corporate responsibility. Following the conclusion of the MDGs, the introduction of the SDGs in 2015 reflected a more comprehensive understanding of development that integrates social, economic and environmental dimensions, addressing previous limitations related to ecological boundaries and structural inequalities.⁷⁵ This shift was reinforced by the growing institutionalization of sustainability practices in the private sector, for example through the introduction of global sustainability reporting standards by the Global Reporting Initiative (GRI) in.⁷⁶ By promoting transparency and accountability regarding firms’ social, environmental and economic impacts, the GRI strengthened expectations that companies should actively contribute to addressing societal challenges.⁷⁷ This development helped shape the context in which approaches such as BoP 3.0 could emerge.

In this context, BoP 3.0 researchers commonly understand it as a more holistic approach to poverty alleviation, combining economic, social and environmental dimensions of development. Overall, the third iteration of the BoP researchers associate it with the period from 2015 to the present.⁴⁶ ⁶¹ To better understand the BoP 3.0 framework, the following section discusses its main debates and emerging research trends.

2.2.3.1 Core debates and trends in research

The third generation of the BoP approach further develops the conceptual evolution of the BoP literature by redefining the role of people at the BoP as autonomous producers and entrepreneurs and by placing stronger emphasis on sustainability. The following section discusses these central debates in more detail and concludes with a summary table that synthesizes the three evolutionary phases to provide a clearer understanding of the BoP concept.

According to Pedrezo (2015), people at the BoP should no longer be perceived as passive recipients of market opportunities, but as active agents within production and value creation processes. Their participation is therefore expected to extend across the entire value chain, including strategic planning, resource mobilization, product development, commercialization and the distribution of profits. Within this perspective, partnerships with NGOs, governments and private firms continue to play an important role, although their function has evolved. These partnerships now play an instrumental and complementary role by providing technical, financial and managerial support under the leadership and governance of producers at the BoP.⁷⁸ This shift is illustrated in Figure 4, which shows the changing relationships between the base and the top of the pyramid. The literature emphasizes that people at the BoP are not only small-scale producers but are increasingly described as entrepreneurs who identify and develop new opportunities within their communities. They actively build and maintain networks with stakeholders, both within and beyond BoP markets, thereby positioning themselves as key actors in inclusive and sustainable value creation processes.⁷⁹

Figure 4: Conceptual relationships between the BoP and ToP across iterations of the BoP approach (own illustration based on Sato (2013), as cited in Pedrozo (2015)⁷⁸)

Alongside the growing recognition of people at the BoP as active producers and entrepreneurs, sustainability has become a central theme in BoP 3.0 research. This shift is commonly interpreted as a response to earlier criticism regarding limited development impact and unsustainable consumption patterns, leading scholars to emphasize sustainability as a key condition for more inclusive and long-term outcomes at the BoP.⁸⁰ This growing focus on sustainability is also reflected in Khandker’s (2021) literature review, which identifies several studies that explicitly address social and environmental aspects within BoP 3.0 research.⁶¹ Among these are the works of Brix-Asala et al. (2016), Khalid et al. (2015) and Pansera and Sarkar (2016). While Brix-Asala et al. (2016) examine how reverse logistics and informal recycling activities contribute to social and environmental value creation at the BoP92, Khalid et al. (2015) analyze sustainability from a supply chain perspective, showing how coordination across the value chain may improve sustainability outcomes.⁸¹ Pansera and Sarkar (2016), in contrast, focus on specific types of innovation as bottom-up solutions to sustainability challenges.⁸² Taken together, these studies indicate that sustainability is addressed from different analytical perspectives and constitutes an important dimension of BoP 3.0 research.

Overview

Building on the previous chapters, it becomes clear that the BoP approach has undergone a significant theoretical evolution. Over time, the focus has shifted from market inclusion in BoP 1.0 to value creation and collaboration in BoP 2.0, and finally to entrepreneurship and sustainable development in BoP 3.0 (see Table 2). As the BoP approach has become more established in both academia and practice, research has gradually moved beyond conceptual discussions towards the analysis of specific case studies and broader research themes.⁴⁶ ⁶¹

Although BoP 3.0 was developed to address several limitations of earlier approaches, the BoP concept continues to receive critical attention. The following subchapter therefore discusses remaining criticisms and limitations.

Table 2: Evolution of the BoP concept (own illustration based on Simanis and Hart (2008)⁶⁰ (for BoP 1.0 and 2.0) and Pedrozo (2015)⁷⁸ (for BoP 3.0))

BoP 1.0

BoP 2.0

BoP 3.0

Main idea

Selling products to low-income markets

Co-creating business opportunities with the BoP

Sustainable and inclusive development driven by the BoP

Role of the BoP actors

BoP as consumers

BoP as business partners

BoP as producers and entrepreneurs

Type of interaction

Understanding customer needs (“deep listening”)

Joint problem-solving and co-creation

(“deep dialogue”)

Bottom-up initiative led by BoP actors

Company-BoP

relationship

Indirect, distant

(often mediated by NGOs)

Direct, personal

(supported by NGOs and partners)

Direct

(initiated and governed by BoP producers)

Value creation logic

Companies create value for the BoP through affordable products

Value is co-created by companies and BoP actors

Value is largely created and captured by BoP actors

Capabilities and knowledge

Knowledge and control mainly remain with companies

Joint learning and capability development

Knowledge and capabilities increasingly developed within BoP communities

2.2.3.2 Criticism and limitations

Although the BoP 3.0 approach represents a further conceptual development of the BoP approach, it has also been subject to criticism, particularly regarding the repeated introduction of new iterations, the limited evidence on outcomes and gaps in existing studies.

The BoP approach has continuously evolved over time, with each iteration expanding the conceptual scope of the framework. Some scholars even suggest a further development toward a BoP 4.0 approach, which aims to integrate elements of Industry 4.0 as well as concepts such as modularity and micro-franchising.⁸³ ⁸⁴ Dembek et al. (2020) critically examine the rapid theoretical evolution of the BoP approach, arguing that earlier iterations, particularly BoP 2.0, have not yet been sufficiently implemented or empirically evaluated. They question whether the continuous introduction of new conceptual iterations is adequately supported by empirical evidence and whether further conceptual refinements are necessary at this stage of the research field.⁴ From this perspective, the authors emphasize the need for more empirical and quantitative research to assess the actual impact of BoP initiatives. In doing so, they reinforce earlier calls by Kolk et al. (2014) for a stronger empirical foundation of BoP research.⁴ ⁵²

Another critique concerns the way poverty is conceptualized in BoP research. As previously discussed, poverty is increasingly understood as a multidimensional phenomenon rather than solely in income terms. However, many BoP studies still rely mainly on income-based definitions of poverty, which may overlook important social, institutional and cultural aspects of deprivation. This narrow perspective may limit the overall understanding of poverty within the literature.⁴ Adopting a broader perspective on poverty may help improve the design and effectiveness of BoP initiatives.⁸⁵

After outlining the conceptual evolution and key ideas of the BoP approach in this chapter, the next chapter focuses on the strategic development of BMs to illustrate how companies can put BoP principles into practice.

2.3 Business model development at the BoP

As this thesis aims to develop practical implementation approaches for companies operating at the BoP, understanding how appropriate BMs can be designed for these contexts is essential. Accordingly, this chapter reviews existing research on BM development in BoP contexts. To provide a structured understanding of these issues, this section first introduces the concept of BMs and discusses how they can be configured in BoP contexts (Chapter 2.3.1). It then examines the relationship between BMs and sustainability, highlighting the role of sustainable business models (SBMs) in addressing social and environmental challenges (Chapter 2.3.2). Subsequently, the importance of partnerships and business ecosystems for implementing BMs in BoP markets this article discusses (Chapter 2.3.3). Finally, the section examines specific types of innovation that enable BM development in resource-constrained environments (see Chapter 2.3.4).

2.3.1 BMs at the BoP

BMs represent a significant stream of research within the BoP literature. This section therefore first introduces the core components of BMs in a general context before examining the specific characteristics of BM design in BoP environments.

Key components of BMs

The concept of BMs is widely used but often lacks a consistent definition.⁸⁶ As different scholars emphasize different aspects of BMs, Richardson (2008) reviewed nine BM frameworks in order to identify common elements and provide greater clarity to this fragmented field. Despite differences in terminology and structure, he identified a set of recurring elements across the literature. In particular, the concept of value emerged as a central and unifying theme. Based on this insight, Richardson (2008) conceptualizes BMs around three core components: value proposition, value creation and delivery and value capture (see Figure 5).⁸⁷

Figure 5: Key components of classic BMs (own illustration based on Richardson (2008)⁸⁷)

The value proposition defines what the firm offers, who the target customers are and why these customers should choose this offering. It also explains the value that is provided to the customers and the firm’s basic approach to achieving a competitive advantage. The value creation and delivery component describes how the firm produces and provides this value. This includes the key resources, capabilities and processes that enable the organization to deliver its offering, as well as its relationships with partners, suppliers and customers. Lastly, the value capture element focuses on how the firm earns revenue and profit from its activities. It outlines the firm’s revenue streams, pricing logic and cost structure, thereby showing how created value is translated into financial returns.⁸⁷

These components provide a useful analytical structure for examining how BMs operate in BoP contexts. In the following sections, they serve as a conceptual foundation for analyzing how BMs need to be adapted to the specific conditions of low-income markets.

Specific features of BMs at the BoP

The applicability of these components becomes more complex in BoP contexts, where firms operate under fundamentally different conditions.⁸⁸ ⁸⁹ As a result, BMs often need to be adapted in order to function effectively in these environments. In the literature, such adaptations are commonly discussed under the concept of business model innovation (BMI), which refers to the design of new BMs or the modification of existing BM components such as the value proposition, value creation and delivery system or value capture mechanisms.⁸⁸ ¹⁶ ⁹⁰

Building on this understanding, Voros Fregolente and Carvalho (2023) investigate how BM components are specifically configured in BoP contexts and what distinguishes them from traditional models. Based on a review of 161 empirical and conceptual studies, the authors identify several recurring features that are central to designing effective BMs at the BoP. Their analysis is structured around the established components of value proposition, value creation and delivery and value capture, complemented by an additional component referred to as the value offer, which emerges as a distinctive element in BoP BMs.⁸⁶

In BoP contexts, the value logic differs from that of traditional BMs, requiring substantial adaptation across all core components. Rather than following conventional configurations, these components are characterized by a stronger emphasis on social and environmental value creation, the use of unconventional delivery channels and hybrid value capture mechanisms. In addition, a distinctive feature of BM configuration in BoP contexts is the value offer component. This element is closely linked to the 4A framework proposed by Anderson and Billou (2007), which emphasizes that organizations must ensure availability, affordability, acceptability and awareness in order to succeed in BoP markets.⁹¹ Voros Fregolente and Carvalho (2023) further observe that the value offer component tends to prioritize solutions that enhance affordability through flexible payment mechanisms and strengthen acceptability through fostering strong local embeddedness. They suggest that these aspects play a central role in shaping a coherent value logic in BoP contexts.⁸⁶

The key aspects of the BM components in BoP contexts, including examples are summarized in Table 3 and Table 4.

Furthermore, the authors identify specific topics that show strong linkages to BMs in BoP contexts. These thematic connections will be explored in the following subchapters, beginning with an examination of the role of sustainability in BM design.

Table 3: Overview of business model components and key characteristics (own illustration based on Voros Fregolente and Carvalho (2023)⁸⁶)

BM component

Key aspects and challenges

Examples

Value proposition

Broader understanding of value, including social and environmental aspects of value.

• social value – high quality work

• environmental value – climate smart value

Value creation

Strategies employed to optimize profits, which frequently revolve around production strategies and operational efficiency.

Scalability remains a recurring challenge in BoP contexts.

• Achieving volume (scale) gains

• Outsourcing non-core activities

• Standardization

• Modular design

Value delivery

Refers to the channels and supply chain structures used to reach the end customers, often requiring solutions to infrastructural and logistical constraints.

• Use of non-traditional distribution channels such as franchising

• Networking with established institutions (e.g. NGOs or other companies)

Value capture

Encompasses the revenue sources and encapsulates the economic foundations, focusing on how the firm makes money and ensures sustainability.

• General economic model

• Use of various revenue sources, including non-traditional revenue ones (e.g. donations)

Table 4: Overview of the value offer component in BoP markets based on the 4A framework (own illustration based on Voros Fregolente and Carvalho (2023)⁸⁶)

4A’s framework

Definition

Examples from literature

Awareness

Highlights the difficulty of informing BoP consumers about products due to limited access to formal communication channels.

• Word-of-mouth

• Demonstrations, door-to-door campaigns, field trials

• Social media campaigns

• Trainings

Affordability

(price)

Refers to the need to align price levels with the limited purchasing power of BoP consumers.

• Shared use

• Tiered pricing

• Scale down or adaptation of technologies used in developed countries

Affordability

(payment methods)

Refers to the need for flexible payment mechanisms that accommodate irregular and limited income flows.

• Microfinancing

• Simplified credit

• Consignments

• Time payments

• Pay-as-you-go models

• Renting

• Exchanging

Acceptability

Is concerned with how well products or services fit local cultural norms, needs and usage practices.

• Product quality and design

• Adaptation of the value offer to customers needs’

• Allowing testing before purchase

• Field trials

Availability

Describes the challenge of physically reaching customers in environments with fragmented or non-existent distribution channels.

• Implementation of “shopping-together” models

2.3.2 BMs and sustainability

With the evolution of the BoP concept, sustainability has become an increasingly important theme, also within the configuration of BMs. As a result, SBMs have gained growing attention in the literature as a way to conceptualize how firms can contribute to long-term development. Against this background, the following section introduces SBMs and examines their relevance for BoP contexts.

Key features of SBMs

SBMs represent a relatively new and still evolving field of research, with no universally accepted definition or standard set of components that has emerged so far.⁹² Nonetheless, many scholars draw on the description by Lüdeke-Freund (2010), who defines a SBM as “a business model that creates competitive advantage through superior customer value and contributes to a sustainable development of the company and society […]” (p.23).⁹³ Despite definitional diversity, the literature seems to agree that SBMs are best understood as modifications of conventional BMs that incorporate additional characteristics.⁹⁰ Dembek et al. (2018) identify three features that distinguish SBMs from traditional BMs.⁹²

First, SBMs aim to create value not only for customers but also for a wider range of stakeholders, including communities (e.g. at the BoP), NGOs or society more broadly. They therefore extend beyond the classical company-to-customer relationship, described in classical BMs.⁹² Second, SBMs broaden the notion of value creation by explicitly aiming to generate sustainable value (SV) that is, social, environmental and economic value simultaneously.⁹⁴ Third, SBMs explicitly acknowledge negative value, recognizing that business activities may destroy value (e.g. through environmental damage) or have uncaptured value (e.g. when a firm offers clean cookstoves but neglects user training).⁹⁵ ⁹⁶

While SBMs extend traditional BMs by explicitly integrating social and environmental value creation, their application in BoP contexts presents additional challenges, which will be examined in the following section.

Special features of SBMs at the BoP

Similar to conventional BMs, SBMs must be adapted to the specific conditions of low-income markets. To address these context-specific requirements, Méndez-León et al. (2024) examine which elements of classical BMs remain applicable in BoP settings and which additional components are needed to adequately capture SV creation. Their multiple-case study shows that conventional BM components only partially capture how SV is generated in such settings. To address these limitations, the authors introduce two additional components, value adoption and value transmission and propose an extended framework for analyzing SBMs in BoP settings (see Figure 6).⁹⁶

A central finding of their study is that, in BoP contexts, value creation does not end with the delivery of a product or service but depends on whether the offering is accepted, understood and continuously used by the local community. In contrast to many developed markets, where products are typically adopted with limited interaction, adoption in BoP environments often requires ongoing engagement and support. Méndez-León et al. (2024) therefore emphasize the importance of pre- and post-engagement activities, including training and continuous interaction, in order to build trust and ensure the creation of SV. Another distinctive feature of SBMs in BoP contexts is the value transmission component. Méndez-León et al. (2024) show that stakeholders actively communicate the social and environmental benefits of the value proposition, thereby shaping how products and services are perceived and understood within BoP communities.⁹⁶

The discussion of SBMs in BoP contexts further extends the requirements for BM configuration by highlighting additional aspects relevant for creating SV. In particular, value adoption and transmission show that SV creation often depends on continuous interaction with multiple stakeholders. Firms operating in BoP contexts therefore need to consider not only the internal configuration of their BMs, but also the broader network of actors involved in the BM configuration process, which this article discusses in the following section.

Figure 6: Framework for SV creation in BoP contexts (own illustration based on Méndez-León et al. (2024)⁹⁶)

2.3.3 BMs and partnerships

Understanding business ecosystems and partnerships is essential for designing effective BMs in BoP markets. Firms cannot operate successfully in these contexts without considering the broader network of actors on which they depend. For this reason, this section examines business ecosystems and partnerships in BoP contexts.

BMs in BoP markets operate within business ecosystems that consist of many loosely connected but interdependent actors.⁹⁷ These ecosystems may include firms, local entrepreneurs, local communities, NGOs, microfinance institutions (MFIs), technology providers and public authorities.⁸⁰ Figure 7 illustrates the central actors typically involved in BoP ecosystems and highlights the contextual constraints that shape their interactions.

Because firms entering BoP markets rarely possess all the capabilities required to operate effectively, they rely heavily on other actors within the ecosystem to access local knowledge, networks, operational support or other resources.⁸⁰ ⁹⁸

Depending on which capabilities are missing, different types of partners may be required, as each actor contributes distinct resources and competencies to the BM. The BoP literature commonly distinguishes between traditional partners, such as other companies and non-traditional partners such as NGOs, governments and the BoP community itself. In BoP contexts, non-traditional partners are particularly relevant, as they help overcome context-specific barriers.¹⁶ ²⁸ Consequently, these partners often need to be actively integrated into the BM design and value creation process. The literature therefore increasingly highlights collaborative or joint BMs as a suitable approach for operating in BoP markets.⁹⁹ However, the effectiveness of such partnerships strongly depends on selecting partners whose resources and objectives complement the firm’s strategy and the specific requirements of the local context.¹⁰⁰

Figure 7: BoP business ecosystem (own illustration based on Hietapuro and Halme (2015)⁹⁸)

To better understand how different actors contribute to BM configuration in BoP contexts, Table 5 provides an overview of the main partnership types discussed in the literature, together with their key benefits and limitations.

Table 5: Summary of prominent partnership types at the BoP (own illustration)

Partnership type

Key actors

Forms of collaboration

Main benefits

Challenges / limitations

Business to business (B2B)

Private firms

Symbiotic or complementary⁸⁶

Cost reduction, improved efficiency, increased viability of BoP BMs¹⁰¹

Often insufficient alone in BoP contexts, limited ability to address institutional voids⁸⁶

Partnerships with the local community

Local micro-entrepreneurs, community members, firms

BoP engaged as suppliers, distributors, business partners, employees, etc.⁸⁶

Local insights, legitimacy, context-fit solutions, improved reach in rural areas, skill and income generation for the community¹⁰²¹⁰³

Requires credible, well-connected partners, risk of misalignment or dependency¹⁰⁰

Cross-sector partnerships

NGOs, social sector organizations, firms

Joint program development, community engagement, training initiatives¹²⁸

Local knowledge, legitimacy, strong social networks, ability to bridge institutional voids, improved trust⁹⁸¹²⁹

Misalignment in goals, organizational cultures and decision-making processes¹²⁸

Public-Private Partnerships

Local or national governments, firms

Joint service delivery, public procurement partnerships, co-development of infrastructure or public services¹³⁰

Mitigation of institutional voids, large volume orders, reduced marketing costs, access to government expertise and infrastructure¹³¹

Bureaucracy, corruption risk, complex decision-making processes, political instability¹³²

Financial sponsors/Investors

Investors, firms

Exchange of financial capital⁸⁶

Overcomes the lack of capital in resource-constrained markets⁸⁶

Misalignment in goals

2.3.4 BMs and innovation

Innovation plays a central role in shaping BMs in BoP contexts, as firms must develop solutions that are not only economically viable but also adapted to the specific institutional and socio-economic conditions of these markets. Innovation in BoP contexts can occur in two principal ways. First, innovation may relate to the design of the BM itself, as discussed in section 2.3.1 in the context of BMIs. In such cases, innovation does not necessarily concern the product or service offered, but rather the way value is created, delivered and captured. For instance, firms may innovate with distribution channels or pricing mechanisms to overcome the specific constraints that characterize BoP markets.¹⁶ ⁹⁰ Second, innovation may also directly affect the product or service itself. This dimension has received considerable attention in the BoP literature, particularly in relation to how firms adapt offerings to resource-constrained environments. Over time, a clear evolution in innovation management approaches can be observed.¹⁰¹

In early BoP literature, innovation was primarily examined from the perspective of MNCs seeking to serve low-income communities more effectively. Given the limited purchasing power at the BoP, firms initially focused on adapting existing products or services through cost reductions, simplified redesign or alternative packaging formats. Common examples include the sale of goods in small, affordable sachets or the provision of microfinance services to increase purchasing power. These early approaches to innovation were therefore largely oriented toward enabling greater consumption among BoP consumers.¹⁰²

With the emergence of BoP 2.0 and later BoP 3.0, the understanding of innovation broadened significantly. Innovation was no longer viewed solely as a means of market access, but increasingly as a tool to address poverty and strengthen local capabilities. In this context, greater emphasis was placed on co-creation, involving BoP communities directly in the development of products and services. Consequently, innovation in later BoP approaches focuses more strongly on strengthening the economic viability and entrepreneurial capacity of BoP communities, rather than merely driving consumption.¹⁰²

This evolution in the role of innovation has led to the emergence of a variety of innovation approaches that address resource constraints in different ways. Some concepts emphasize efficiency and cost reduction, others focus on market transformation, while other perspectives highlight participation and the generation of social impact. As a result, the literature on innovation in BoP contexts has become increasingly differentiated. However, as Agrarwal et al. (2017) argue, this growing diversity has also contributed to conceptual fragmentation and terminological ambiguity.¹⁰³ To provide greater clarity, the main innovation types discussed in the literature are defined in Table 6, drawing on the findings by Agrarwel et al. (2017) and Brem and Wolfram (2014).¹⁰³ ¹⁰⁴

While numerous forms of innovation exist at the BoP, the following section focuses on those approaches that are most prominently discussed in the literature, namely frugal, disruptive and inclusive innovations.

Frugal innovation

Frugal innovation researchers widely regard it as a key innovation approach in BoP contexts, as it directly responds to the resource constraints that characterize these markets. Brem and Wolfram (2014) define frugal innovation as the development of products and services that minimize resource use while maintaining sufficient functionality to meet basic customer needs.¹⁰⁴ Rooted in the concept of jugaad, frugal innovation emphasizes simplicity and affordability. In contrast to conventional innovation approaches that often focus on increasing product performance, it prioritizes solutions that reflect the resource constraints typical of BoP markets.¹⁰⁴

As a result, frugal innovation not only influences product design but also has implications for the overall configuration of BMs, particularly regarding cost structures and value propositions.

Studies indicate that firms successfully applying frugal innovation can improve market access and competitiveness in BoP contexts.¹⁰⁵ However, firms from developed economies often face greater difficulties in adopting such approaches compared to local producers, who have developed capabilities through experience in these environments. This highlights the importance of local knowledge and strategic partnerships for innovation in BoP markets.¹⁰⁶

Disruptive innovation

In addition to frugal innovation, disruptive innovation represents another important perspective for understanding innovation in BoP markets. Originally proposed by Hart and Christensen (2002), the concept has strongly influenced academic discussions on how firms develop new solutions for low-income contexts.⁴⁵ ⁷⁰

Disruptive innovations typically emerge at the lower end of the market or in previously underserved segments by offering products or services that are simpler, more affordable and more convenient, while still being sufficiently functional to meet basic needs. Although these products or services are initially unable to meet the requirements of high-end markets, they improve steadily over time. As their quality and functionality increase, disruptive innovations can eventually meet the demands of the mainstream market and challenge, or even displace, incumbent firms.⁴⁵ ¹⁰⁷ Compared to traditional BMs, disruptive innovations provide substantially higher market potential. Whereas firms historically concentrated on innovations for the ToP, disruptive innovations allow firms to access a considerably broader portion of the income distribution by targeting previously underserved lower-income segments (see Figure 8).⁴⁵

While both disruptive and frugal innovation provide important insights into innovation under resource constraints, neither approach inherently requires the active involvement of BoP actors. Frugal innovation, although more closely embedded in local contexts, primarily focuses on efficiency and cost reduction, whereas disruptive innovation is largely driven by market-oriented considerations. However, with the emergence of BoP 2.0 and BoP 3.0, the role of the people at the BoP has evolved significantly. Rather than being viewed as passive consumers, they are increasingly recognized as active participants in the innovation process. This shift has led to a growing emphasis on participatory approaches and ultimately to the emergence of inclusive innovation, which this article discusses in the following section.

Figure 8: Process of disruptive innovation diffusion (own illustration based on Christensen and Hart (2002)⁴⁵)

Inclusive innovation

George et al. (2012) define inclusive innovation as “the development and implementation of new ideas which aspire to create opportunities that enhance social and economic wellbeing for disenfranchised members of society” (p.663).¹⁰⁸ Building on this definition, inclusive innovation goes beyond a sole focus on affordability by also emphasizing localization and social empowerment of people at the BoP. Inclusive innovation focuses on developing solutions that enable firms and other actors not only to serve BoP populations, but also to improve their capabilities and overall well-being. In this sense, inclusive innovation aims to create sustainable livelihood opportunities for individuals who have traditionally been excluded from formal markets.¹⁰⁹ Mortazavi et al. (2021) distinguish inclusive innovation from other innovation approaches, such as frugal innovation. While both emphasize affordability, inclusive innovation places a stronger focus on participation, capability building, and long-term socio-economic inclusion.¹⁰⁹

Table 6: Innovation types at the BoP (own illustration based on Baker and Nelson (2005)¹³³ and Brem and Wolfram (2014)¹⁰⁴)

Innovation type

Definition

Jugaad

“An improvisational approach to solving one’s own or others’ problems in a creative way, at a low cost, in a short amount of time, and without serious taxonomy or discipline applied by people at the BoP as a result of poverty and exigency” (p.19)¹⁰⁴

Frugal Engineering/constraint-based innovation

“Describes a process-oriented approach to adapt existing technologies to local challenges by dint of the integration of the local society in order to reduce inherent development costs and time” (p.19)¹⁰⁴

Gandhian

innovation

“An approach that takes advantage from the adaption of existing technologies by integrating them into local context or/and establishing local expertise by spillovers through collaborations in order to increase social wealth of people from the BoP” (p.19)¹⁰⁴

Catalytic

innovation

“An approach that focuses on social change by breaking down existing social and economic structures and creating new market structures which involves new development approaches of systematic, sustainable, and system-shifting kind” (p. 19)¹⁰⁴

Grassroot

innovation

“Represents a bottom-up development approach that includes social integrity and local civilians as inventors by connecting peoples through social or technical networks in order to develop ecologically and socially acceptable products and services” (p.19)¹⁰⁴

Indigenous

innovation

“Considers technology transfers, predominantly technology inflows, from developed to emerging countries and their effects on local entrepreneurs at the BoP” (p.19)¹⁰⁴

Reverse

innovation

“Represents the development of new products in and for emerging countries by DMFs [developed market firms] or EMFs [emerging market firms] which will be introduced equally in developed markets if the demand in developed markets is identified.” (p.19)¹⁰⁴

Bricolage

Baker and Nelson (2005) define bricolage “as making do by applying combinations of the resources at hand to new problems and opportunities” (p. 333)¹³⁴

2.4 Outcomes and impacts at the BoP

The core premise of the BoP approach is that market-based business activities can contribute to poverty alleviation. While this proposition has been influential and widely adopted by practitioners, empirical evidence on the actual outcomes and impacts of BoP initiatives remains limited and fragmented. Studies report that a surprisingly large number of BoP initiatives have not achieved their intended objectives, instead failing outright, shifting toward philanthropic approaches or delivering only limited results at high cost.¹¹⁰

Against this backdrop, this chapter reviews and synthesizes the existing literature on BoP outcomes, drawing on the Triple Bottom Line (TBL) framework, a sustainability concept that emphasizes firm success beyond purely economic performance by also considering social and ecological dimensions.⁵²

2.4.1 Economic outcomes

Among the TBL dimensions, economic outcomes tend to be the most frequently discussed in BoP research. BoP initiatives are commonly conceptualized as mechanisms of mutual value creation, combining profitability with poverty alleviation. What fundamentally differentiates BoP approaches from philanthropic activities is precisely this emphasis on profit as a mechanism for ensuring long-term organizational sustainability. Yet, despite this conceptual clarity, achieving profitability at the BoP remains a persistent challenge.⁹³

A recurring critique of the early BoP literature is its strong focus on positive case examples. As London (2009) argues, many companies assessed progress through “feel-good stories” or simplified output indicators, such as the number of products sold, rather than addressing the more fundamental questions of who benefits from BoP initiatives and how.¹¹¹ One frequently cited example of an allegedly successful BoP innovation is Godrej’s low-cost Chotukool refrigerator. Although initially presented as a promising case of “making it” at the BoP, later accounts show that the product struggled to achieve commercial viability in low-income markets and was eventually repositioned toward urban middle-class consumers or used as a corporate social responsibility giveaway.⁴ Such examples indicate that cases are often not adequately assessed in the literature. Accordingly, Dentchev et al. (2022) therefore call for a broader range of research methods, particularly longitudinal studies, to account also for temporal dynamics and to prevent premature assessments of BoP initiatives such as in the case of Godrej’s Chotokool.¹¹² London and Hart (2004) are among the few scholars who examined unsuccessful economic performances at the BoP. In their study of 24 cases, they identified numerous initiatives that failed due to an insufficient understanding of the complexities of BoP markets and explored the reasons why some companies were unable to reach BoP consumers accordingly. However, more empirical evidence is needed, particularly regarding the factors that contribute to the failure of BoP initiatives.²⁸

In line with this observation, literature reviews highlight considerable weaknesses in the assessment of economic impact. Kolk et al. (2014) find that only 45 out of 104 reviewed studies explicitly address economic outcomes. Even among these, economic impact is frequently assumed rather than systematically measured and reported effects range from positive to negative economic outcomes. Overall, the authors conclude that economic impact evaluations are often weakly designed, frequently biased toward positive results and rarely reproducible.⁵² A more recent literature review published in 2020 confirms that these shortcomings persist. An analysis of 276 articles indicates that BoP research continues to focus heavily on profitability and traditional economic indicators, while empirical evidence for sustained success remains weak. In particular, there is a lack of aggregated data demonstrating that MNCs can serve BoP markets profitably over extended periods.⁴

Taken together, the literature reveals a significant gap between the conceptual emphasis on economic viability in BoP research and the availability of robust empirical evidence, indicating a need for further empirical assessment.

2.4.2 Social outcomes

Following economic outcomes, social outcomes represent a central dimension of the TBL in BoP research. Given the strong emphasis on mutual value creation, the assessment of social outcomes constitutes a central element of the BoP approach. However, similar to the literature on economic outcomes, there is no clear consensus on whether BoP initiatives consistently generate positive social effects.⁴

Existing literature reviews report mixed evidence regarding the social outcomes of BoP initiatives. For instance, Kolk et al. (2014) identify 48 out of 104 reviewed articles that refer to social impacts. However, only 28 of these studies provide empirically measured results, revealing mixed effects on local populations. The authors therefore emphasize the need for more rigorous and systematic assessments of social outcomes, particularly given that the promise of positive social impact constitutes a core element of the BoP proposition.⁵² Similarly, Dembek et al. (2020) find that BoP research places considerably greater emphasis on economic aspects than on social value creation. They highlight the importance of explicitly considering negative social consequences of BoP initiatives, especially given the vulnerability of BoP communities.⁴ Both Kolk et al. (2014) and Dembek et al. (2020) conclude that empirical evidence on social benefits remains limited and that much of the existing literature continues to rely on anecdotal or descriptive accounts rather than systematic empirical analysis.⁴ ⁵²

Building on this point, Lashitew et al. (2022) stress the need for more aggregated and multi-level evidence on social value outcomes. They argue that firm-level assessments alone are insufficient to capture the broader social effects of BoP initiatives and therefore call for analyses at the meso (e.g. community or regional) and macro (e.g. national) levels.¹¹³

One potential explanation for the limited availability of aggregated data on social value outcomes lies in the inherent challenges of conducting social impact assessments in BoP contexts. Evaluating business strategies across diverse societal stakeholders such as employees, distributors, suppliers or community members is methodologically complex and requires substantial resources. Additional difficulty arises from the multidimensionality of social value and the subjective, often normative nature of outcomes. As a result, many firms rely on intermediate indicators such as outputs (e.g. number of microfinance credits) rather than attempting to measure long-term outcomes (e.g. change in income or capabilities). While such measures provide useful information, they capture only part of the overall social value created.¹¹³

In response to the difficulty of capturing social impact in BoP contexts, London (2009) developed the Base of the Pyramid Impact Assessment Framework, which enables the assessment of both financial and non-financial dimensions of well-being. The framework proposes evaluating impacts across multiple dimensions, including changes in the economic situation, capabilities and social relationships of a firm’s key constituencies.¹¹¹

London and Esper (2014) applied this framework to assess the impacts of a Kenyan enterprise providing sanitation services in urban slums. While prior evaluations of similar initiatives have largely focused on health outcomes, their multidimensional perspective revealed additional effects, including improvements in the economic and relational well-being of franchisees’ children.¹¹⁴ These findings highlight the importance of comprehensive assessment tools that capture broader dimensions of poverty and well-being.

At the same time, existing research also illustrates the limitations of narrowly defined impact assessments. Jackson and Young (2016) find that the expansion of microfinance, a prominent BoP innovation, was associated with changes in traditional social networks in Bangladesh. They report increased experiences of pressure and shame among participating households. While this study reflects a specific empirical context, it suggests that assessments focusing primarily on economic indicators may overlook important social dynamics.¹¹⁵

Taken together, these findings highlight the importance of comprehensive assessment approaches that enable firms to capture the social outcomes associated with their activities. Despite the availability of such conceptual and methodological tools, evidence indicates that relatively few firms systematically measure the social outcomes and the progress that researchers associate it with their BoP activities. This limited use of assessment practices may constrain organizational learning and reduce the extent to which firms are able to build on prior experiences in their efforts to create social value.¹¹⁶

Finally, while the literature widely acknowledges the methodological complexity of such assessments, empirical examples demonstrating how these tools can be effectively implemented in practice remain scarce. Further empirical research is therefore required to better understand how firms can systematically assess and manage social outcomes in BoP contexts.⁴ ⁵² ¹¹³

2.4.3 Ecological outcomes

Beyond economic and social considerations, the BoP approach has also been associated with expectations that market-based innovations could contribute to the resolution of environmental challenges in BoP settings.⁴⁵ However, compared to economic and social outcomes, ecological outcomes have received considerably little attention in the BoP literature. Early reviews indicate that environmental aspects were only marginally addressed, with Kolk et al. (2014) reporting that just 17 out of the 104 reviewed articles mentioned ecological outcomes at all. Among these, only eight studies attempted to measure potential environmental effects, with six reporting favorable outcomes and two identifying negative effects. The authors further highlight that many studies focus on waste generation, which represented a strong research focus in early BoP literature.⁵²

Empirical examples illustrate that economic opportunities in BoP markets may also generate unintended environmental consequences. A frequently cited case is Unilever’s strategy of selling shampoo and other consumer goods in single-use sachets to low-income consumers in India. While these sachets may increase affordability and enable market access, they also generate substantial plastic waste, as the packaging is typically non-recyclable and discarded after a single use.¹¹⁷ More broadly, such cases illustrate concerns raised in the literature that profitable BoP BMs may not necessarily lead to environmentally sustainable outcomes. Arnold and Williams (2012) further suggest that if BoP BMs follow historical patterns of economic growth without considering ecological consequences, they may contribute to unsustainable consumption patterns and environmental degradation.¹¹⁸

Although environmental aspects remain comparatively underrepresented in BoP research, more recent discussions associated with BoP 3.0 emphasize the relevance of long-term sustainability challenges, including environmental considerations.⁴ However, despite this increased conceptual emphasis, existing evidence suggests that environmental objectives remain difficult to maintain in practice. Duke (2016), for example, analyzes the environmental outcomes of two companies operating in BoP contexts and finds that environmental goals frequently become less prominent over time as firms prioritize economic viability and the urgent social needs of local communities. Social goals often take priority in BoP ventures, as addressing poverty-related challenges is typically seen as more urgent than achieving environmental objectives. Duke (2016) identifies four key reasons why social benefits often outweigh environmental impacts in these contexts, which are summarized in Table 7.¹³⁵

Table 7: Barriers to implementing environmental solutions (own illustration based on Duke (2016)¹³⁶)

Dimension

Social benefit

Environmental benefit

Scale

Effective at the individual or immediate community level

Requires substantial scale to show measurable effects

Observability

Highly visible at the individual level

Often less visible or difficult to measure

Immediacy

Benefits often occur immediately

Effects often take years or decades to materialize

Locus

Accrues directly to the individual customer

Accrues to the system or ecosystem level

While these barriers provide a possible explanation for why environmental outcomes are often overlooked and insufficiently assessed in BoP research, there remains a clear need for more robust empirical evidence, particularly quantitative studies that systematically evaluate ecological impacts. This need becomes increasingly important in light of the evolution of the BoP 3.0 approach, which places stronger emphasis on long-term sustainability and systemic environmental challenges.⁴

Taken together, the review of economic, social and ecological outcomes highlights substantial limitations in the existing empirical evidence on the impacts of BoP initiatives. Across all three dimensions of the TBL, findings remain context-specific and often based on firm-level assessments. Despite a growing body of conceptual work, robust empirical studies remain scarce. Scholars therefore call for a broader set of studies such as longitudinal studies, quantitative methods, multidisciplinary and transdisciplinary approaches to address complex issues such as poverty.⁴ ⁵² ¹¹² To adequately evaluate the original claims of the BoP approach, greater emphasis should be placed on systematic assessments that go beyond initial assumptions of mutual value creation and allow for a more comprehensive understanding of long-term sustainability effects.

3 Practical implementation

This article provides practical guidance for companies that want to operate successfully in BoP markets. While Chapter 2 discussed the theoretical foundations of BoP strategies, the literature still highlights a key challenge, namely how companies can translate these insights into concrete action.

This chapter therefore proposes a five-step guideline for companies targeting BoP markets (see Figure 9). The guideline translates theoretical insights into practical steps that can support implementation. Each step includes several sub-steps, which are explained in the following sections. The proposed guideline is loosely based on the BoP protocol by Simanis and Hart (2008)⁶⁰, as it provides clear and structured steps for developing BoP initiatives. At the same time, insights from more recent BoP literature are integrated to ensure alignment with the latest developments represented by the BoP 3.0 perspective.

Firms engage in BoP markets for different reasons. Some aim to access new markets and strengthen their competitiveness, while others are primarily motivated by the intention to address social or environmental challenges. These motivations influence how BoP initiatives are designed and implemented.¹¹³ The guideline presented in this chapter aims to be applicable to a wide range of organizations. At the same time, not every step may be equally relevant for every organizational type. Depending on existing capabilities or the level of local embeddedness, some firms may already fulfill certain aspects of the process. Therefore, the guideline should be understood as a flexible orientation that can be adapted to different starting points, while explicitly aiming to support the simultaneous creation of social, economic and environmental value.

Figure 9: Proposed 5-step guideline for a successful BoP implementation (own illustration)

3.1 Preparatory phase of the BoP implementation

Before starting a BoP project, thorough preparation is essential to ensure a structured and effective engagement process. Simanis and Hart (2008) emphasize the importance of a pre-field process that must take place before a company enters a local site. The scope and duration of this phase may vary depending on a firm’s ties to the community and its organizational characteristics.⁶⁰

This preparatory phase consists of five key steps, including site selection, team formation, local partner identification, the critical reflection of prevailing assumptions about BoP communities and finally, defining informational needs.

3.1.1 Step 1: Site selection

The first step within the preparation phase concerns site selection. However, the relevance of this step strongly depends on the organizational context of the company. For locally embedded organizations, site selection may be largely inherent, as these actors are often founded within the communities in which they seek to create change. In contrast, for external companies, site selection constitutes a strategic decision that precedes project implementation.

Several factors should guide this decision. A long-term perspective is important, as sustainable impact requires continuous engagement. Basic infrastructure and the presence of local institutions can facilitate implementation and increase legitimacy. At the same time, the site should not be too closely connected to the initiating organization, as some distance can enable experimentation and innovation. Another factor that may contribute to site selection is the presence of NGOs and other local actors in the region, as BoP initiatives are often developed in collaboration with partner organizations.⁶⁰ ¹¹⁹

While site selection was previously mainly driven by market potential, current approaches are more system-oriented and focus on identifying contexts in which companies can contribute to solving relevant social problems.¹²⁰ Companies may therefore select locations where their capabilities can support the resolution of local challenges and where meaningful change is possible.

Overall, site selection establishes the contextual basis for the initiative. Building on this decision, the next step in the preparation phase involves the formation of a project team capable of operating effectively within the chosen environment.

3.1.2 Step 2: Team formation

After selecting an appropriate site, Simanis and Hart (2008) recommend establishing a small, interdisciplinary team of approximately four members per site. The team should combine diverse functional expertise, such as expertise in strategy, marketing and operations and ideally include at least one development practitioner with experience in community facilitation and local mobilization.⁶⁰

A key requirement is diversity within the team, particularly regarding cultural background, gender, age and professional experience. Diverse teams are better able to integrate different perspectives and adapt solutions to complex local realities. In projects implemented by external companies, including members with local origins or strong ties to the region can help reduce information asymmetries and increase cultural legitimacy.⁶⁰ In line with this argument, Chen et al. (2024) show that lived experience of poverty or close connections to affected communities can strengthen poverty alleviation efforts, as such individuals possess deeper knowledge of local constraints and priorities.¹²¹

Although the BoP protocol was primarily developed for external companies entering new contexts, existing literature suggests that diverse teams with expertise in different contexts may be beneficial across different organizational types operating in low-income contexts.¹²²

After forming the team, members should critically reflect on their initial assumptions about low-income contexts to develop an open mindset for collaboration.

3.1.3 Step 3: Building awareness for effective collaboration

Building on the composition of the team, companies should ensure that team members critically reflect on common assumptions about low-income communities and markets before entering a BoP context. This step is particularly relevant for organizations acting as external actors, especially firms from Western contexts, as they may unintentionally rely on perspectives that privilege Western expert knowledge while underestimating local capabilities.

Arora and Romijn (2012) argue that local knowledge at the BoP has often been treated as “unscientific” or reduced to “common sense”, which can hinder effective collaboration. If companies assume that solutions must mainly come from external expertise, existing power imbalances may be reinforced and opportunities for mutual learning may be overlooked. Companies therefore need to question their own role and recognize that valuable knowledge also exists within the local context. To build truly equal partnerships, companies must involve people from these communities throughout the value creation process and challenge stereotypes about their capabilities.⁷³

This also influences how the role of the external team should be understood. Rather than acting as a permanent driver of the initiative, the team should adopt a facilitating role that strengthens local capabilities and supports local ownership.⁷⁸ Even though this step is part of the preparatory phase, such an understanding is important from the beginning, as it shapes later collaboration with local actors. In line with the BoP 3.0 perspective, local actors should increasingly be able to manage and adapt the initiative independently, so that the external team can gradually step back over time.

To support such collaboration, companies should prepare their teams accordingly. Training may help team members become aware of potential biases and reflect on stereotypes. This can create a shared mindset within the team that enables more respectful collaboration and increases the likelihood of developing solutions that are appropriate for the local context.

After selecting and preparing the corporate team, the next step involves establishing connections to the local context by identifying and contacting potential local partners.

3.1.4 Step 4: Local partner identification

Simanis and Hart (2008) recommend that external firms identify and contact local partners before entering a BoP context.⁶⁰ As discussed in Chapter 3.3.3, partnerships play a central role in the success of BoP initiatives.

While some partnerships may evolve over the course of a project, Simanis and Hart (2008) emphasize the importance of establishing at least one relationship with a locally embedded organization at an early stage. Such partners may support the initial entry into the community, provide contextual knowledge and help facilitate relationships between the corporation and local communities. At the same time, identifying appropriate partners can be challenging, as local community partners are usually small in scale and operate within limited geographical areas. Nevertheless, early partnerships are particularly important for external companies, as they enter the selected context as external actors and depend strongly on the social capital, trust and legitimacy of local actors.⁶⁰

For companies that are already locally embedded, identifying local partners may be less critical in the early stages, as these organizations often possess existing networks and contextual understanding. However, partnerships can still be valuable, for example by providing complementary capabilities or additional resources. In such cases, partnerships may emerge at a later stage as specific needs become clearer.

Because local insights are essential for developing appropriate solutions in BoP contexts, companies need to gather a wide range of contextual information during the immersion phase. As a final step of the preparatory phase, firms should therefore consider which insights are most important and clarify which questions should guide the immersion phase.

3.1.5 Step 5: Identifying key learning areas

Before entering the selected site, firms must first clarify which types of information are required to operate effectively at the BoP. At this stage, the objective is not to collect data or conduct an in-depth analysis but rather to define which types of information are required for effective engagement. Early BoP initiatives largely relied on assessments of market size or purchasing power. However, the literature demonstrates that such information alone is insufficient for addressing BoP contexts effectively.⁶⁰ ¹²³

Instead, companies need to adopt a broader perspective that extends beyond conventional market data and encompasses the social, institutional and infrastructural characteristics of the local environment. Accordingly, companies may reflect prior to entry on which types of information are likely to be relevant for their BM. Based on the literature, several key informational domains can be identified, as summarized in Table 8.

Table 8: Informational domains needed for successful BoP engagement (own elaboration based on Lashitew et al. (2021)¹¹³ and Zomodorri and Fayezi (2022)¹³⁷)

Information required

Core aspects

Relevance for BoP engagement

Legitimacy context

Local norms, values, beliefs and expectations

Shapes whether firm activities are perceived as appropriate¹³⁸

Socio-cultural structures

Power relations, gender roles and family dynamics

Helps avoid unintended consequences¹¹³

Institutional environment

Governance structures, formal and informal rules

Determines how business activities can be organized or regulated¹³⁹

Infrastructural environment

Physical infrastructure, logistics and communication systems

Influences feasibility of distribution and interaction mechanisms¹⁴⁰

Market structures

Existing actors, suppliers, etc.

Supports identification of potential partners¹⁴¹

While these informational domains can be defined prior to engagement, they cannot be fully understood without direct interaction within the community. The following section therefore examines how firms may develop such understanding through immersion and local embeddedness.

3.2 Building contextual understanding and local relationships

Méndez‐León et al. (2024) emphasize that a thorough understanding of local conditions is a prerequisite for successfully introducing products or services into new environments. Once a potential community has been identified, it is therefore essential to systematically assess its social and infrastructural characteristics.⁹⁶ Building on this perspective, the following section examines the key dimensions and practices involved in understanding the local environment in BoP contexts.

This phase should not be understood as a purely analytical assessment, but as a process of gradual learning. Firms should therefore develop context-specific knowledge through direct interaction with local actors during this phase. Such learning can take place across the activities of immersion, trust-building and the exploration of the strategic ecosystem. The insights gained during this phase may subsequently inform the configuration and adaptation of BMs (see Chapter 3.3) by ensuring that they are grounded in local realities.

As shown in Figure 9, this phase represents a continuous learning process that may need to be repeated when firms expand to new locations, as differences in local conditions often require further adjustments to the BM.

3.2.1 Step 1: Establishing physical presence within the BoP context

Following the preparatory phase, project teams should establish a sustained presence within the community to become familiar with local living conditions and community dynamics. Scholars recommend that external companies, in particular, should spend a significant amount of time in the selected site.⁶⁰ ¹²⁰ Such immersion supports the development of social embeddedness, which has been identified as a key success factor for BoP enterprises. Social embeddedness, while potentially taking a lot of time and resources, can have strategic long-term effects by enhancing a firm’s ability to create social impact while remaining profitable. Moreover, it may help organizations navigate challenges that are specific to BoP markets (see Chapter 3.1), including informal institutions and cultural norms. Through continuous interaction, firms may better understand how daily life is organized and how existing systems function in practice.¹²⁴ For firms without prior local experience or established relationships, this type of understanding cannot be gained through analytical assessment alone, but requires physical presence and integration into the local context.

3.2.2 Step 2: Building trust within the BoP community

After establishing an initial presence in the selected location, firms must prioritize the development of trust and legitimacy within the BoP community, a process that extends across all subsequent stages of engagement.⁹⁶ External companies in particular usually enter these contexts without established credibility or relationships. Gaining local trust must therefore be treated as a primary objective.

The locally embedded partner organization identified during the preparatory phase may play an important bridging role by facilitating first contact with the community and introducing the external firm to relevant stakeholders. Building on this initial access, companies should actively invest in local relationship building. They may attend community meetings and informal gatherings, engage in open and transparent communication and clearly introduce themselves and their intentions. Furthermore, scholars also suggest temporary homestays with local households.⁶⁰ If conducted on a voluntary basis and with appropriate compensation, such arrangements allow company representatives to directly experience local living conditions. Even if this level of immersion is not feasible, firms should remain physically close to community members and consistently listen to their everyday challenges and concerns. In addition to informal interaction, companies may complement their engagement with structured methods such as semi-structured interviews, participatory workshops and community discussions. These methods help systematically capture insights and validate observations. However, they should support continuous relationship building rather than replace sustained presence and direct interaction.⁶⁰

While social enterprises and locally rooted ventures may achieve embeddedness more organically through their own sustained presence and close integration within the community, externally operating firms often face greater barriers to achieving local legitimacy. For these firms, partnerships with locally embedded actors, including NGOs and social enterprises can significantly support trust-building processes while also providing access to social capital, local legitimacy and context-specific capabilities.³ ⁹⁸ Step 3 therefore focuses on developing a structured understanding of the local ecosystem in order to identify relevant actors and potential collaboration partners. Although described as a distinct step, the transition from immersion to collaboration is gradual, with trust-building continuing throughout the process.

3.2.3 Step 3: Assessing the local context and identifying partners

Building on the initial presence and trust-building activities, firms should systematically assess the local context in order to identify relevant actors and potential collaboration partners. As discussed in Chapter 2.3.3, partnerships represent a central element of BoP engagement. A structured understanding of the existing ecosystem therefore provides an important basis for identifying suitable partners.

A prerequisite for this assessment is to consider both the firm’s own capabilities and those already present within the target context. Following the “inside-out” logic described by Chmielewski et al. (2020), firms should focus on the resources and competencies available within the community instead of approaching the BoP environment mainly from a deficiency perspective.¹²⁰ This perspective helps firms recognize existing local strengths and identify opportunities for collaboration based on complementary capabilities.

To operationalize this assessment, Simanis and Hart (2008) recommend systematic social and institutional mapping. Such mapping approaches help firms to identify relevant actors, networks and informal structures beyond the most visible community representatives, thereby reducing the risk of relying exclusively on local “gatekeepers” and supporting a more inclusive understanding of the local ecosystem. By increasing transparency regarding existing relationships and resource flows, mapping enables firms to identify locally available assets as well as capability gaps and determine which types of partnerships may be needed to support the planned BM.⁶⁰

Partnering itself should be understood as an ongoing and adaptive process that continues throughout the overall process. At this stage, however, the primary objective is to develop a structured overview of the local ecosystem and identify actors who may contribute capabilities.

By the end of this phase, firms should have developed an initial overview of the local context, established initial trust and identified potential collaboration partners who can support the implementation of the initiative. Building on this foundation, the next section examines how BMs can be adapted to operate effectively within BoP environments.

3.3 BM configuration

After developing a grounded understanding of the local environment, firms can begin to adapt and refine their BMs. With the evolution of the BoP approach, the timing of this process has also changed. Whereas early BoP strategies often relied on entering BoP communities with predefined BMs and product concepts, more recent perspectives emphasize that BMs should emerge through interaction with the local ecosystem and be aligned with existing capabilities and contextual conditions.¹²⁵

The steps of this phase draw on the conceptual foundations discussed in Chapter 2.3.1 and 2.3.2. To illustrate the practical implications, the following section outlines its key steps using a case study. A prominent example frequently cited in the literature is Project Shakti, established in 2001 by Hindustan Unilever, the Indian subsidiary of Unilever. The initiative integrates low-income women as micro-entrepreneurs into Unilever’s distribution network, combining income generation with expanded market access at the BoP.¹²⁶ According to Unilever, the initiative remains active today, with approximately 200,000 women operating across 22 states in India.¹²⁷ Although the program has attracted criticism, particularly concerning the relatively limited attention given to ecological sustainability aspects¹¹⁷, it remains a useful illustrative example of how companies can engage with BoP markets.

3.3.1 Step 1: Validating the value proposition in context

The first step in the BM configuration process focuses on clarifying how the firm can create value within the specific local context. Rather than transferring a predefined solution, companies should assess how their capabilities relate to locally perceived needs and challenges.

By considering existing practices and available resources within the community, firms can identify where their knowledge and competencies may add value and how their activities can complement existing local solutions.⁹⁶

In BoP settings, value should be understood more broadly than in many Western market contexts. Beyond economic benefits, the value proposition should also encompass social and ecological dimensions.⁸⁶ For this reason, it should not be defined unilaterally by the firm, but developed in interaction with members of the BoP community.

To operationalize this alignment, firms and community members can structure this step around a set of guiding questions:

Which challenges are perceived as most relevant within the community?
Which of these challenges can the firm meaningfully address with its existing knowledge and resources?
What forms of economic, social or environmental value could realistically be created through such an intervention?

Addressing these questions helps establish a shared understanding of where and how value can be generated. Once this foundation is clarified, the focus can shift from identifying what value should be created to determining how this value can be translated into an offering that is accessible and workable within the local context.

3.3.2 Step 2: Translating the value proposition into a contextualized value offer

A specific feature of BM configuration in BoP contexts is the need to translate the validated value proposition into a form that is feasible under local conditions.⁸⁶ This step is less a distinct phase than a guiding perspective through which subsequent decisions should be assessed. As discussed earlier, many BoP initiatives fail not because the intended value is irrelevant, but because it is not translated into an offer that people can realistically use.⁸⁶

Before defining operational structures in steps 3 and 4, firms should therefore critically assess whether their proposed solution is accessible, affordable, acceptable and understandable within the local context.

Drawing on the 4A framework introduced in Chapter 2.3.1, firms may use these dimensions to critically evaluate and refine their initial value proposition. This reflection may be structured around these guiding questions:

Awareness: How can users become aware of the offering and develop trust in it? Which locally trusted channels and actors can be engaged to build awareness?
Affordability: What pricing and payment structures can align with local income patterns and reduce entry barriers?
Acceptability: Which adaptations to the offering are necessary to ensure alignment with existing practices and user expectations?
Availability: How can reliable access be ensured despite infrastructural constraints?

Working through these questions allows companies to adjust their concept before committing resources to implementation. The result is a contextualized value offer that can be operationalized through value creation, delivery and value capture structures in the subsequent stages.

3.3.3 Step 3: Value creation

After revisiting and refining the value proposition through the 4A lens, firms move toward the operational configuration of the BM. At this stage, the focus shifts to the organizational design of how the intended value can be produced and sustained over time. This step requires decisions regarding resource allocation, partnership structures and the degree of innovation embedded in the model. In BoP contexts, value creation rarely relies solely on internal firm capabilities. Instead, it requires combining organizational resources with locally available assets and actors.

Resource configuration:

A first strategic decision concerns the configuration of key resources. Firms must determine which capabilities need to be developed internally and which can be accessed through collaboration or existing local structures. Building on the earlier mappings, companies should assess which resources are already present within the community and how these can be integrated into the BM. Research shows that successful BoP initiatives frequently rely on locally available materials, informal infrastructures or even waste streams as inputs for their BM design.⁹⁶

Partnerships:

At this stage, partnerships move from being exploratory relationships to becoming operational elements of the BM. Firms need to define how previously identified partners are integrated into the value chain and which specific roles they assume. This may include distribution, service provision, coordination tasks or other operational responsibilities. The focus lies on clarifying roles and expectations to ensure that value creation processes function reliably.⁶⁰ ⁹⁶

Closely related to this is the question of capacity building. In many BoP contexts, technical or entrepreneurial skills cannot be taken for granted. Training and skill development may therefore be necessary to ensure that operational tasks are performed reliably. This should not be framed as an additional social activity, but as part of the core value creation logic. Without adequate local capabilities, the model is unlikely to function sustainably.⁶⁰ ⁹⁶

Innovation approach:

A further decision concerns whether and how innovation is integrated into the BM design. In the literature, innovation has been identified as an important factor for successful BoP implementation (see Chapter 2.3.4). Due to resource constraints, firms often require creativity within the product development process. One useful starting point is to observe how local actors currently address similar challenges and to build on these practices instead of replacing them entirely.

Frugal innovation principles can be particularly relevant in this context. Simplifying product design and reducing unnecessary features may significantly improve cost efficiency and operational feasibility. The objective is not technological sophistication, but the development of a solution that is affordable and manageable under BoP conditions.⁸⁶

3.3.4 Step 4: Value delivery

After defining what value is created and how it is operationally organized, firms must determine how the product or service is delivered to users by structuring distribution channels and coordination processes that ensure reliable access over time.

In many BoP settings, companies do not deliver the product themselves but rely on networks of local actors. As Hahn and Gold (2014) argue, firms often take on the role of coordinator rather than direct provider. This requires clearly defining responsibilities and accountability structures to ensure that the value is delivered effectively and consistently.¹²⁸

Choosing appropriate distribution channels is therefore a central strategic decision. Based on insights gained in earlier phases, firms need to assess which actors can be trusted and are capable of reaching end users. Studies show that decentralized models such as social franchising systems or micro-entrepreneur networks are frequently more effective than conventional retail structures in geographically dispersed environments.⁸⁶

The following guiding questions may help companies to structure this step:

Which distribution channels are feasible under local conditions and compatible with existing community structures?
Which existing actors or networks are best positioned to reach the target group and how can they be integrated into the delivery structure?
How can the firm structure and manage roles and responsibilities across different actors to ensure reliable delivery?

3.3.5 Step 5: Value capture

Another important component concerns how the firm captures economic value. In BoP contexts, financial constraints represent a central challenge, as long-term viability depends on the ability to achieve financial sustainability. Without a viable revenue model, the initiative cannot be maintained over time.

A first strategic decision relates to the revenue mechanism. Firms need to decide how income is generated and how costs are covered. Given limited and often irregular incomes, payment mechanisms require careful design. Flexible schemes such as pay-as-you-go models, installment payments or microcredit are frequently used to increase affordability.⁸⁶ However, such mechanisms are not without risks. Critics argue that certain payment systems may increase financial vulnerability or create debt burdens if they are poorly structured.¹²⁹ Companies should therefore assess whether their revenue model supports long-term stability rather than short-term sales growth.

From a strategic perspective, firms may also rely on hybrid revenue streams, in which commercial sales are complemented by public funding or external financial support. Such diversification can help stabilize cash flows and reduce liquidity risks.⁹⁶

In addition, firms must critically assess their cost structure. Decentralized distribution, coordination efforts and capacity building may increase operational expenses. To manage these higher costs, companies may adopt models such as social franchising, which are frequently discussed in the BoP literature. Social franchising allows for relatively rapid geographic expansion while limiting capital requirements, as local entrepreneurs invest in the system and assume operational responsibility at the local level.⁸⁶ ⁹⁶

As with other elements of the BM configuration process, firms should deliberately address financial viability and consider whether non-traditional revenue mechanisms are required to operate under BoP conditions. The following guiding questions may support this assessment:

Which revenue and payment mechanisms align with local income realities without increasing financial vulnerability?
How can the cost structure be managed given higher coordination and distribution expenses?

3.3.6 Step 6: Value adoption

Another component that extends classical BM thinking is value adoption. It addresses whether a product or service is understood and accepted by the target group.⁹⁶ Although aspects of trust and legitimacy are addressed in earlier phases, value adoption goes beyond initial acceptance. It concerns whether the offering generates sustained use and becomes embedded in everyday practices. Before scaling the model, firms must therefore assess not only whether the solution functions operationally, but whether users actively engage with it and derive ongoing value under real conditions.

Pilot phases and small-scale experiments can support this process. Simanis and Hart (2008) emphasize iterative testing and learning, often described as “fail small, learn fast.” Through controlled trials, firms can identify weaknesses early and adapt the model before committing significant resources to expansion.⁶⁰

In addition, the literature emphasizes the importance of “last-mile” functionality. This implies that operational processes, distribution mechanisms and user interaction must function smoothly at the local level before replication is pursued.⁸⁶

To support this process, companies may use these guiding questions:

Do users consistently use the product or service as intended or does usage decline after initial adoption?
Are operational processes functioning reliably at the local level, including maintenance and user interaction?

By completing 3.3, firms should have a product or service that is sufficiently validated within the local environment and supported by a largely defined BM. However, successful implementation does not end with the introduction and local validation of the solution. While the previous steps focus on ensuring that the offering is accepted and integrated into everyday practices, it remains necessary to assess whether its use generates meaningful economic, social and environmental outcomes. Therefore, the next part of the practical implementation focuses on measuring outcomes and impacts of BoP initiatives.

3.4 Measuring outcomes and impacts

As discussed earlier, achieving scale is often critical for economic viability in BoP contexts, particularly given typically low margins.⁸⁶ However, before firms expand their initiatives to additional locations, it is essential to evaluate whether the implemented model actually delivers the intended outcomes. The systematic measurement of economic, social and environmental impacts therefore represents a crucial step following the pilot phase. As outlined in Chapter 2.4, such outcome and impact assessments remain insufficiently implemented in practice, despite their importance for understanding the effectiveness of BoP initiatives. Firms should only make informed decisions about replication once the model has demonstrated operational viability and the ability to generate value.⁶⁰

As a reference, the Base of the Pyramid Impact Assessment Framework by Ted London (2009)¹¹¹ is used, as it provides a structured approach for evaluating the impact generated by companies operating in BoP markets. The World Business Council for Sustainable Development (2013) notes in its guide to measuring socio-economic impact that applying frameworks such as the BoP Impact Assessment Framework may take approximately two to four months to develop an initial qualitative understanding of impacts, with up to 21 additional months required to quantify these impacts.¹³⁰ However, these timeframes should be considered indicative rather than fixed benchmarks. The duration of an impact assessment may vary depending on factors such as the community context, the complexity of the initiative as well as the availability and quality of data.

3.4.1 Step 1: Defining the scope

To assess the impact of a BoP initiative, companies must first clearly define the scope of the assessment. This involves identifying the relevant stakeholder groups whose outcomes will be evaluated, such as customers, distributors, partners, local entrepreneurs and the broader community, as well as determining the types of impact to be measured. In the context of BoP initiatives, this should include economic, social and environmental outcomes generated by the firm’s activities.¹¹¹

3.4.2 Step 2: Choice of impact indicators

After defining the scope of the assessment, companies must determine which impact indicators are most relevant for evaluating their initiatives. London (2009) provides a useful baseline by suggesting indicators related to economic well-being (e.g. income generation or job creation), capabilities (e.g. development of skills or education) and relationships (e.g. market integration or access to networks).¹¹¹ These categories offer an initial structure for assessing how business activities influence different stakeholder groups at the BoP.

However, companies should not rely solely on predefined indicators. Instead, the selection of metrics should be aligned with the specific objectives and activities of the initiative. Additionally, environmental indicators should be included to ensure that the broader sustainability implications of the BM are adequately captured. Importantly, impact assessments should also consider indirect or less visible outcomes that may emerge beyond the immediate use of the product or service. For instance, Méndez‐León et al. (2024) show that social enterprises providing access to safe drinking water not only measure direct outcomes such as improved water access, but also consider broader effects, including improvements in water-use efficiency and changes in environmental awareness within local communities.⁹⁶

3.4.3 Step 3: Data collection

After defining the scope and selecting appropriate impact indicators, companies can proceed with the data collection process. Ideally, data collection begins before the intervention to establish a baseline against which subsequent changes can be assessed. Collecting data both before and after implementation enables firms to identify changes in the selected indicators over time.¹³⁰ However, if baseline data is not available, firms should at least monitor developments over a longer period to identify trends and approximate potential changes associated with the initiative.

London (2009) suggests several tools for collecting such data including surveys, interviews, company records and community feedback. Using a combination of these methods can help firms gain a more comprehensive understanding of the outcomes generated by their initiatives.¹¹¹

3.4.4 Step 4: Interpretation of data

After collecting the relevant data, companies must interpret the results to assess the actual impact of their initiatives. This involves analyzing where and to what extent the provided product or service has generated impact across the different dimensions. In addition, firms should evaluate which stakeholder groups have benefited from the intervention and whether any unintended negative effects occurred.¹¹¹

Based on this analysis, firms can determine whether adjustments to the BM are necessary to improve the outcomes of the initiative. The results of this step therefore serve as an important basis for decision-making regarding the future development of the initiative.

If the assessment indicates insufficient impact, firms may need to revisit earlier stages of the process and adapt elements of the BM configuration to strengthen value creation within the local context. As illustrated in Figure 9, this process should be understood as iterative, allowing firms to refine the different elements of the BM until the intended value can be effectively generated. If, however, the analysis shows positive outcomes across relevant stakeholder groups and scaling aligns with the firm’s strategic objectives, expansion to additional contexts may become a viable next step. In this case, the insights gained during the impact assessment can help firms identify which elements of the model can be replicated and which require adaptation to new environments.

3.5 Scaling out

After a BM has proven successful in its initial setting, the next step involves expanding the initiative to a wider range of communities. This process, often referred to as “pollination”, relies on the gradual replication and transfer of the original value proposition to new geographic areas.⁶⁰ ¹³¹ Due to low margins and comparatively high operating costs, scaling is a key mechanism for increasing social value creation at the BoP and reaching a significant number of beneficiaries.¹¹³

Referring back to the practical implementation process shown in Figure 9, the decision to scale leads back to the core process made up of understanding the environment and building fundamental relationships, configuring the BM and finally measuring the effects of the initiative.

3.5.1 Step 1: Reaching out to new communities

As a first step in the scaling process, firms need to identify new communities in which their BM has the potential to generate value. Companies should assess whether the underlying problem addressed by the value proposition is also relevant in the new context.¹³¹

A useful starting point may be to identify communities that face similar structural challenges. If similar constraints exist, the core logic of the value proposition may remain relevant, even though certain elements of the BM may still require adaptation.

Once the company has identified a suitable community in which to scale the initiative, the core steps of the practical implementation process are revisited, although often in a more focused manner due to prior experience.

3.5.2 Step 2: Understanding the new environment and building relationships

Developing a contextual understanding for replication builds on the mechanisms described during the initial implementation phase. Firms must again establish a local presence, build trust and identify suitable partners within the new environment. As these activities follow the same underlying principles outlined in Chapter 3.2, they are not discussed here at the same level of detail. The focus instead lies on scaling-specific mechanisms that facilitate the transfer of the BM to a new context.

To facilitate knowledge transfer, members of the project team may act as business ambassadors and support implementation in the new context. Their prior experience with the BM and familiarity with implementation processes can accelerate learning and adaptation, for example through shadowing or train-the-trainer approaches.⁶⁰

However, prior experience alone may be insufficient, as each community is shaped by distinct socio-cultural conditions and resource configurations that influence how the BM operates in practice. Even locations within the same country may differ substantially, making direct replication challenging. Research on scaling in BoP contexts highlights local variation as a key barrier to transferring BMs across settings.⁶⁰ ¹³¹ Consequently, firms must carefully assess which elements of the initial BM can be transferred and which components require modifications to local conditions.

Once firms have developed a sufficient understanding of the new environment, they can proceed to the adaptation of the BM, as outlined in the following step.

3.5.3 Step 3: Adapting the BM to the local context

Once a sufficient understanding of the new environment has been established, the BM needs to be adapted to local conditions. Firms should revisit the core BM components: value proposition, value creation, value delivery, value capture and value adoption and assess which elements can remain unchanged and which require modification to fit the specific characteristics of the local market.

Simanis and Hart (2008) again emphasize the importance of supporting this adaptation process through small-scale pilot initiatives, which allow firms to assess the suitability of the BM for the new environment and to identify necessary adjustments at an early stage.⁶⁰

Once the BM has been successfully adapted and validated through pilot testing, firms may proceed with the launch of the product or service in the new market. However, measuring the intended outcomes remains essential. Although performance measurement does not differ substantially from the approach described in Chapter 3.4, companies should continuously assess outcomes in each local context to ensure that the intended value proposition is effectively delivered and that the expected impact is achieved.

3.5.4 Step 4: Replicating and expanding through networks

Once the BM has been proven successful in the new context, companies may expand their initiatives to additional communities. Building on the pollination process described by Simanis and Hart (2008), firms may gradually transfer the value proposition across additional locations.⁶⁰ Scaling in BoP contexts should therefore be understood as a continuous process in which the BM is repeatedly transferred and adapted across different communities.

Accordingly, the first three steps are not conducted only once but may be repeated multiple times as firms expand into further locations. Through each iteration, companies accumulate experience and knowledge, which can improve the efficiency of future implementation. Expansion may continue until firms reach a scale that allows them to operate in an economically viable manner.¹³¹

At the same time, firms must continuously monitor outcomes and remain attentive to the specific needs and conditions of each community. Even when the core value proposition remains consistent, local adaptations remain necessary to ensure that the intended social and economic value is effectively delivered.⁶⁰

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Executive summary

1 Introduction

2 Theoretical foundations

2.1 Characterization of the BoP

2.1.1 Poverty perspective on the BoP

2.1.2 Structural characteristics of the BoP

2.1.3 Behavioral characteristics of the BoP

2.2 Evolution of the BoP concept

2.2.1 The initial formulation of the BoP approach

2.2.1.1 Core debates and trends in research

2.2.1.2 Criticism and limitations

2.2.2 Reformulation of the BoP approach

2.2.2.1 Core debates and trends in research

2.2.2.2 Criticism and limitations

2.2.3 The latest formulation of the BoP approach

2.2.3.1 Core debates and trends in research

2.2.3.2 Criticism and limitations

2.3 Business model development at the BoP

2.3.1 BMs at the BoP

2.3.2 BMs and sustainability

2.3.3 BMs and partnerships

2.3.4 BMs and innovation

2.4 Outcomes and impacts at the BoP

2.4.1 Economic outcomes

2.4.2 Social outcomes

2.4.3 Ecological outcomes

3 Practical implementation

3.1 Preparatory phase of the BoP implementation

3.1.1 Step 1: Site selection

3.1.2 Step 2: Team formation

3.1.3 Step 3: Building awareness for effective collaboration

3.1.4 Step 4: Local partner identification

3.1.5 Step 5: Identifying key learning areas

3.2 Building contextual understanding and local relationships

3.2.1 Step 1: Establishing physical presence within the BoP context

3.2.2 Step 2: Building trust within the BoP community

3.2.3 Step 3: Assessing the local context and identifying partners

3.3 BM configuration

3.3.1 Step 1: Validating the value proposition in context

3.3.2 Step 2: Translating the value proposition into a contextualized value offer

3.3.3 Step 3: Value creation

3.3.4 Step 4: Value delivery

3.3.5 Step 5: Value capture

3.3.6 Step 6: Value adoption

3.4 Measuring outcomes and impacts

3.4.1 Step 1: Defining the scope

3.4.2 Step 2: Choice of impact indicators

3.4.3 Step 3: Data collection

3.4.4 Step 4: Interpretation of data

3.5 Scaling out

3.5.1 Step 1: Reaching out to new communities

3.5.2 Step 2: Understanding the new environment and building relationships

3.5.3 Step 3: Adapting the BM to the local context

3.5.4 Step 4: Replicating and expanding through networks

References

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