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What made CK Prahalad a management guru

Last updated on: April 19, 2010 12:56 IST

C K Prahalad was an interesting combination of an academic and a practitioner, says R Vaidyanathan.

In India, the word 'guru' is not used in a cavalier fashion. It denotes certain level of wisdom, achievement and respect given by the disciples.

It is not granted by any position, power or by legal processes. It is neither conferred nor self-proclaimed. The title sits lightly on those who are worthy of it, unspoken and understood.

From that point Coimbatore Krishnarao Prahalad can be called a guru. He was insightful and definitely provocative. He was an interesting combination of an academic and a practitioner.

His thought process got formulated by observing businesses in action and his ideas thus formulated altered many businesses. He was communicator par excellence and had ability to focus on the emerging scenarios.

The ivory tower academics - we can call them epsilon estimators - were disdainful of him. For the pure academics any discussion of the real world is anathema. But CK was not to be bound by such notions particularly in the business management world.

He was a graduate in Physics from Loyola College-Chennai (then Madras). He worked in Union Carbide for nearly four years which according to him - in a way shaped his ideas of management and then did his masters from IIMA and his DBA from Harvard in 1975. Then he taught at IIMA for a while to return to Stephen M Ross School of Business at the University of Michigan as a Distinguished Professor.

Two of his major ideas are about core competencies of the organization and leveraging on it and the idea of looking at poor as source of profit than an object of charity.

During the eighties and early nineties it was fashionable to create conglomerates which consists of unrelated businesses since low correlated or unrelated businesses reduce risk at the time of crisis.

But he turned the entire idea on its head and suggested the need for corporations to focus on their main strength or core competencies. His seminal work with Gary Hamel (HBR May-June 1990) won him the Mckinsey Prize and maximum number of reprints were sold of his paper.

He compared the 'Diversified Company' as a tree and major limbs as core products, smaller branches as business units' leaves and fruit as end products and the root system which nourishes and stabilizes all things as core competencies.

Many an award followed and he was always in the top ten of every conceivable lists of management thinkers - even though Indra Nooyi of PepsiCo feels all such lists are only worth keeping in the garage before entering the house!

He was a recipient of Padma Bhushan and was actively involved in the India @75 initiative of CII. His discussion on core competencies had its quota of critics -  some with justification - particularly in the emerging market context where one teacher school flourish (who teaches from Mathematics to English to Civic Sense) and where existing traditional businesses get in to unrelated areas and succeed. Rice millers and Banana Farmers become business barons in areas of high technology.

His other big idea is the formulation about the bottom of the pyramid (BOP) as market opportunities for corporate.

C K Prahalad in an interview with the renowned Professor of Strategy, J Ramachandran of IIM-Bangalore in 2004 (pioneering a new paradigm IIMB Management Review 2004) had elaborates his idea on the BOP.

JR: But the poor have always been there. Why do we suddenly see them as providing a radical opportunity?

CK: I think two or three discontinuities are coming together to create an opportunity. One, the regulatory framework is going down dramatically worldwide. And therefore there are opportunities for a commercially oriented view of the poor, rather than subsidies, poverty alleviation schemes and so on.

The second factor is the advent of digital technologies, which provide a different way to connect poor people with the rich. Take for example the cell phone. For the first time in history, the most advanced technology is being totally driven by the poorest people - 250 million Chinese with cell phones; 1 million Indians being added every month (in a year we went from 3-4 million to 20 million, as of today); Brazil with 35 million - in three or four years, these three poor countries alone will have about 450-500 million cell phones. And the US has only 150. So who is driving the cell phone business? It is the poor.

In the same interview he elaborates on the continuing theme of his research in the management discipline. He says "If you look at what I have done over the years, I first worked on the challenges of managing multinationals.

The important issues, as I pointed out way back in 1987, are global integration and local responsiveness – two forces that no multinational can avoid. This fundamental tension will always be present. In fact that has had the most enduring life.

You can call it glocal; you can call it transnational; you call it anything you want, the fundamental tension hasn't gone away. While a lot of people have talked about managing the multinational, nobody has challenged this basic premise. The question is how to manage it."

Cavincare of Chennai was already into sachet shampoos and various brands of pan masala in pouches were big market success.

The MNCs of the west which were always in bigger; larger; greater mode could not understand the market of the poor. They were used to selling 10 bottles of shampoo in a crate and offer two bottles as bonus.

The model followed by Unilever or P&G was to shift as much as possible from Wal-Mart to the basement of households. In other words each American household was a retail store except what they hold is consumption and what the mom-pop store holds is inventory.

The MNCs could not comprehend the idea of 50g packets and top line as well as bottom line getting bigger. CK consolidated this idea of poor as market, giving examples of Aravind eye hospital and Bank of Madhura - both from Tamil Nadu his home state. He could explain Dharavi as an opportunity and not a curse.

Many an MNC in India later followed the Cavincare route to target the poor. Even Biscuits are now sold in packs of one or two for as low as one rupee.  Of course not many agreed with him.

Critics which included his colleague at Ross school Aneel Karnani in his 2007 paper- maintained that at the bottom of the pyramid market is small to add to bottom line of big companies. It was suggested that the poor can improve their position by being entrepreneurs and not consumers. He was not deterred.

He was a co-founder and became CEO of Praja Inc. The goals of the company ranged from allowing people to access information without restriction - in a sense related to the bottom of the pyramid or BOP philosophy to providing test bed to various innovative ideas.

The venture did not succeed and laid off one third of its work force and was finally sold to TIBCO. Perhaps, the age old saying that professors should only profess and not try to practice has been validated by this venture!

He was a popular teacher and CEOs listened to him carefully since he was provocative and also incisive. He was concerned about India and its problems. Being one of the nine sons of a Sanskrit scholar and a Judge; CK was the product of the times of scarcity and India of ration queues - of the fifties and sixties.

He would have understood what it means to be poor since during those days for everything from rice to coffee powder to milk long queues were formed, and entrepreneurship was considered as low brow.. After growing up in such a milieu he has seen India rising and emerging as a global power.

He was on many boards and his Windsor Manor Lectures at Bangalore were eagerly awaited by the entrepreneurs of the South who are soft spoken are less brash compared to the Mumbai chieftains. He wanted a moral and ethical leadership shown by India and that comes from his roots. His demise has definitely left a void in the field of the management.

I am sure the sociologists - in the future - will explain how the microscopic Madhwa Brahmin community could produce at the same time such global management legends in the area of theory and practice - like CK, Narayana Murthy, Jerry Rao.

R Vaidyanathan is professor of finance at IIM-Bangalore.

R Vaidyanathan