Old wine in new skins: Prahalad's "New Social Compact"

Over at NextBillion.net Al Hammond celebrates C.K. Prahalad's and Jeb Brugman's new article "Cocreating Business’s New Social Compact" in the Harvard Business Review as "transformative" and "an idea as radical as his and Stuart Hart's suggestion 5 years ago that there was significant value to be found in business engagement at the base of the pyramid".

So what is to it? Basically, Prahalad tells us that NGOs and Multinationals should partner up and co-create products and services for the BoP.

As Brugman and Prahalad picture it, there is an initial "stage of pre-convergence", where companies and NGOs fight over the nature and speed of deregulation and the companies’ conduct, especially in developing countries. From there onwards, the process of convergence comes in three stages:

Stage 1: Companies and NGOs realize they have to coexist. They look for ways to influence each other. Some corporations and NGOs execute joint social responsibility projects.

Stage 2: Some companies get into bottom-of-the-pyramid segments and niche markets even as NGOs set up businesses in those markets. Companies and NGOs try to learn from, and work with, each other.

Stage 3: Companies and NGOs enter into cocreation business relationships. Cocreation entails the development of business models in which companies become a key part of NGOs’ capacity to deliver value and vice versa.

Sounds pretty neat, but you have the feeling that you have heard that before? That is probably because you did.

Apart from the massive literature on Public-Private-Partnerships (which has at least overlaps with the specific NGO-MNC partnership), Stewart Hart wrote about the specific need to partner up with NGOs it in his seminal "Capitalism at the Crossroads", where he also gives multiple examples of working partnerships (chapter: working with non-traditional partners):

In our analysis of BOP ventures, Ted London and I found that successful strategies (like ApproTEC's) rely heavily on non-traditional partners, including non-profit organisations, community groups, and local (even village-level) governments. ... As another example, Bata, a leading retailer of shoes with operations throughout the developing world, has entered into an innovative partnership with the NGO Care in Bangladesh to gain access to rural areas in the country...

The idea came also through in the BoP protocol (even coined as co-creation), which places a huge emphasis on ecosystem creation and selecting the right partners. And funnily, Prahalad and Al Hammond himself pointed out how important it is to forge partnerships with NGOs on their 2002 article "Serving the poor, profitably" (p.17). And that is only three sources I can think of from the top of my head - there must be a lot more.

Prahalad and Brugman have found a nice way of systematising the process of convergence and putting it into three easily comprehensible stages - but is it a "transformative vision" or a "radical idea"? I don't think so. The "Profit at the BoP" idea was radical because it disrupted traditional thinking: You businesses are stupid because you are missing out on a huge opportunity. It is not only OK to do business at the BoP, but it makes sense in terms of shareholder value. The "New Social Compact" on the other hand describes the traditional conflict of NGOs and companies and suggests that is it disruptive to think of NGOs and MNCs as partners. I'd rather think that this is by now conventional wisdom. But then again, is it bad to educate the public (ie. HBR readers) once again about the opportunities of cooperation at the BoP? Of course not.