Bottom of the Pyramid

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Schumpeter’s blog had (yet another) interesting entry a couple of weeks back:  “Now for some good news.”  It reviews a couple of authors’ view that we are on the cusp of future abundance due to upcoming technical breakthroughs.  The four drivers of the future are listed as the:

  1. Rise of a generation of philanthropists;
  2. Discovery of the “Fortune at the Bottom of the Pyramid;”
  3. Proliferation of do-it-yourself innovators;
  4. Clever use of prizes.

It is the second driver that interests me as an implementer of data warehouses.  This group comprises the expanding long tail of the customer data.  “Firms have realised that poor people collectively constitute a huge market. The key is to make things cheaper. DataWind, a British company, has produced a $35 tablet computer in partnership with the Indian government.”  As of result we see an expansion of potential customers, and thus more data to be captured, stored and subjected to analysis.  And with lower revenue per marginal customer, this also requires lower analytical costs to contribute to a positive overall profit. 

Making things cheaper doesn’t apply only to physical goods.  I remember reviewing some bank and telco case studies a decade ago where the data warehouse was used to identify those customers that were not profitable, and then take action to change the situation:  either by raising fees or simply letting them go as a customer, hopefully to a competitor.  But another way to generate profit would be to decrease the costs of serving the customer, which is driven by technical innovation.

I do not remember this last approach as being listed as an option back then.  Things are changing for the better.