Opinion
CK Prahalad, the oracle whose wisdom still echoes in Indian boardrooms
Summary
- CK Prahalad was a renowned management thinker who revolutionized corporate strategy with his concepts of core competence and the bottom of the pyramid. Read on to discover the insights that made him ‘The Man Who Sees Tomorrow’.
No management guru has held as much sway in the boardrooms of Indian companies as the late Coimbatore Krishnarao Prahalad. As the Paul and Ruth McCracken Distinguished University Professor of Corporate Strategy at the Stephen M. Ross School of Business, University of Michigan, Prahalad was twice ranked the world's most influential business thinker by "Thinkers 50."
Through the 1990s, following the significant economic liberalization in India in 1991, opportunities abounded across various sectors. Indian businesses eagerly pursued these prospects, often overlooking essential factors like competence and capability. Companies traditionally focused on electronics ventured into power plant construction, while real estate firms explored telecommunications. Amid this rush, Prahalad's voice stood out, cautioning against unrelated diversifications. In workshops, closed-door sessions, and one-on-one meetings, he advised companies to consider their core competencies and focus on their strengths.
While some heeded his counsel, others couldn't resist the lure of the next big thing, influenced by the era's success stories like GE, a diversified American conglomerate, with businesses ranging from aircraft engines to financial services. Prahalad often cited examples like Sony's expertise in miniaturization or Philips in optical media to illustrate his points.
Read this | From failed steel to soul: Vinay Rai’s dubious reset and redemption
During a period when Apple was struggling after Steve Jobs' departure and John Sculley's leadership setbacks, Prahalad still regarded the company as a visionary force. He believed that Apple's recovery, which would indeed occur a few years later, would be driven by its core strength: user-friendliness. As he explained in a Business Today magazine interview, “You can unwrap an Apple Macintosh and be operational in a few minutes, whereas you need a few hours to fix a VCR."
It was part of Prahalad's ground-breaking theory on the core competencies of an organization, which first appeared in the Harvard Business Review in June 1990, in collaboration with Gary Hamel. They described core competencies as a bundle of skills and technologies that represent collective learning across individual skill sets and organizational units.
Despite his rockstar-like status in India, where CEOs flocked to his annual events (one year, 30 of the top Indian CEOs skipped their annual pilgrimage to Davos to attend his talk), Prahalad's advice wasn't widely heeded. Many emerging business groups pursued unrelated diversifications. The consequences of these choices became apparent throughout the 2000s, and well before his untimely death in 2010, it was clear that the struggles of groups like Videocon, Unitech, Lanco, GVK, and Essar were linked to these unfocused expansions.
More here | The curious case of Pawan Sachdeva: The shoe magnate who took on Gautam Adani
Another of Prahalad’s significant contributions, developed alongside Stuart Hart, was the concept of the "Fortune at the Bottom of the Pyramid." This idea has deeply influenced India's consumer economy. In their original 2002 paper for Strategy+Business, they insightfully wrote, “The real source of market promise is not the wealthy few in the developing world, or even the emerging middle-income consumers. It is the billions of aspiring poor who are joining the market economy for the first time." The unlocking of this market potential led to the remarkable success of companies like Reliance Jio in the telecom sector.
But CKP, as he was popularly known, was more than just a renowned management thinker. He was a passionate advocate for the idea of India. The Prahalad family made annual trips from their base in Michigan to India, allowing the children to choose a different destination each year. During these visits, he would highlight the country's architectural landmarks, asking, "Do you think the people who built these thought of themselves as second class?" Prahalad believed that, although India had few global brands at the time, this was not a liability. Instead, he argued that India's genius was unique and different from the rest of the world.
Also read | When royalty met Rolls-Royce: Indian maharajas' love affair with luxury
His father, a district judge, instilled in him a deep love for learning. This passion guided him to study and teach at the Indian Institute of Management in Ahmedabad, and later pursue a PhD at Harvard Business School. His doctoral thesis, Resource Allocation in a Global Economy, marked the start of an illustrious career in academia and management writing. However, it was his two ground-breaking concepts—core competence and the bottom of the pyramid—that earned him the nickname “The Man Who Sees Tomorrow."
