World’s top biz thinker reflects on global impact of his work

With $18 in his pocket, local resident C.K. Prahalad emigrated from India 32 years ago accompanied by his wife and their two young children.

$18 was the amount of money he was allowed to take out of India at the time due to government currency restrictions.

Fortunately, when he arrived in Ann Arbor, Michigan, he had a couple of other things going for him.

He had a doctorate in business administration from Harvard Business School that he had earned two years earlier and he had a job waiting for him - as an assistant professor on the faculty of the University of Michigan’s Stephen M. Ross School of Business.

Today, Prahalad still teaches at the University of Michigan, but since coming to the U.S., things have been looking up.

“People don’t always realize what a wonderful country this is,” he said, as we paused before an almost life-size, red Hindu Temple horse, frozen in full-gallop in the foyer of his luxurious home.

Prahalad insists his story is no different than any immigrant’s story.

Well, perhaps, with a little bit of luck and, in Prahalad’s case, with a deep-rooted determination to change the way corporations think and act.

A master teacher, Prahalad is one of a distinguished cadre of university professors, many of Indian heritage, who are championing a holistic brand of business called “informed capitalism” or, as some call it, “karma capitalism.”

Prahalad’s title at the University of Michigan is Paul and Ruth McCracken Distinguished University Professor of Corporate Strategy. He commutes to Michigan each fall for 10 weeks to teach in the university’s MBA program, in addition to lecturing, consulting, traveling and writing throughout the remainder of the year.

And last month, for the second consecutive time, Prahalad was named the world’s most influential business thinker, topping “The Thinkers 50″ list, an international biennial poll conducted by business communication coaches Stuart Crainer and Des Dearlove and published in The (London) Times. Crainer and Dearlove are both former London Times’ columnists.

This year’s list also contains two other local residents: Microsoft co-founder and philanthropist Bill Gates, in the #7 spot, and executive coach Marshall Goldsmith, in the #14 slot.

We interviewed the 68-year-old Prahalad in his local home where he has lived since 2000 when he took two years off from teaching to run a software company he had started in San Diego. The company, Praja Inc., developed software that monitored real-time business operations against their key indicators.

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The big surprise he encountered in running his own business was, he said, “how much of managing is blocking and tackling. And I learned a lot about myself, that I am very excited intellectually in solving a problem that has not been solved. But once it is solved, for myself, then I find it less exciting.

“So the first two years of the company were extraordinarily interesting because you had to figure out exactly how to position the company…

“Then came administrative things, everything from bottle-washing to going and selling to CEOs. And I found that didn’t motivate me as much as I thought it would. That’s a good lesson.”

He sold the company in 2004 and returned to teaching.

Prahalad is the author of several bestselling managerial books, including Competing for the Future (1994), which was heralded as one of the great business books of the 1990s, earning millions in royalties and speaking engagements, and The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits, published in 2004, in which he argued that the world’s poor represented a viable, untapped market worth up to $13 trillion a year. His latest book with co-author M.S. Krishnan is The New Age of Innovation.

During the interview, we sat at Prahalad’s circular wooden desk in his bookcase-lined, high-ceilinged library. On the desk, neatly gathered in the center, and within easy reach, was a selection of office “tools” including paper clips, a stapler and a magnifying glass. Directly in front of him, like a bottled genie awaiting orders, was his Apple laptop computer.

Prahalad is of medium height, stocky, mustached and bespectacled. When we suggested he had a reputation for being a high-energy maverick, (of whom a former business associate once said dealing with him was like playing chess with Bobby Fischer) he smiled and said, “They are very kind, but I am no way near that smart.”

Prahalad was born in Coimbatore, southern India, in 1941 He was one of nine children and the youngest of six sons. His father, Krishnarao, was a well-known Madras district judge and Sanskrit scholar. All of those factors put together formed his full name, Coimbatore (his birth-town) Krishnarao (his father’s name) Prahalad (his first name), shortened to C.K. Prahalad.

Growing up, in a privileged family, Prahalad recalled, “I was smart, but not necessarily hardest working.”

After earning an undergraduate degree in physics from the University of Madras, he was recruited as an industrial engineer at a local Union Carbide battery plant.

He originally intended to work at Union Carbide for a year at most and then go on to study for a Ph.D.

He ended up staying at Union Carbide for four years, calling it a major inflection point in his life.

“As a young industrial engineer, I had to work with communist unions. When I say communist unions, [I mean] really rough communists, not adverse to violence… I always tried to be fair, not easy, but fair… The union bosses gave me lots of slack, I guess, because they trusted me and I trusted them. It was a wonderful relationship. They were tough. They negotiated hard, but they were never mean.

“I still remember many of the conversations where people would talk about what does it mean to be an employee, what does it mean to work at hard labor eight to 10 hours a day, and what does it mean to have a family. I was very, very young, so it had a huge impact on me.

“And from then on, I never felt any difficulty relating to people who are very different from the way I am.

“What I’m saying is once you start relating to people -and I came from a very privileged family - to be able to relate to people on the shop floor, [with our differences in education, age, socio-economic, and work experience], I learned so much from that. They were my best teachers…”

He is proud that he was able to change the way the piece-work wage rates were negotiated at the plant. “There was a lot more open discussion and when I set the rates, I made sure I could do the actual work myself. So when the union came and said, ‘This is too hard. It can’t be done,’ I was able to say, ‘If I can do it with no experience, you guys who do it day and night, must be able to do it.’”

In dealing with the workers, he came to appreciate that intelligence is uniformly distributed among people, but opportunities are not.

“The only difference between them and me was four years of college,” he concluded. “The message is you can learn from other people who are not like you.”

He also learned from a boss who had studied at Harvard and gave him the latest U.S. books on management, on the proviso that after reading the books, he would report back on whether the ideas could work in India. “So it forced me to think,” Prahalad said.

In 1964, motivated by his experience at Union Carbide and determined to study harder than he did at university, he enrolled in the Indian Institute of Management and finished first his class.

He also met his future wife, Gayatri, a young psychology student whom he married five years later before heading to Harvard to study for his D.B.A. (doctor of business administration) which he earned in just two and a half years.

Returning to India where he found nationalism running high, he taught at his alma mater, the Indian Institute of Management, but soon decided to return to the U.S. and join the faculty of the University of Michigan where he was welcomed as a globally-oriented thinker.

“The centrality of the individual has been across all my work, starting from ‘The Core Competence,” with the idea that the accumulated intellectual capital of people is as important as financial resources. It is a new form of currency.

Accumulated knowledge in organizations is the new form of currency. I was the first one to say it.

“So from there to ‘The Bottom of the Pyramid,’ the idea was very simple. With the fall of the Berlin Wall, five billion people wanted to be part of the world economy, but they live on less than $2 a day. We had never thought of them as markets or consumers or as effective producers…

“What if,” he asked, “we brought the disciplines of large scale organization to these markets, so companies have enormous growth opportunities and poor people have a chance to get good quality products and services at affordable prices.

“That was the connection that I made for the first time.”

It was a market, he said, that was visible, but not seen.

“For example,” he said, “four billion people have been connected by cell phones in the last 10 years. First time in human history. And this revolution is taking place everywhere. India alone is creating 12 million new subscribers per month.

“With pre-paid cards, the poor are paying for their cell phone services before they use them. As a result, the poor are less risky, Prahalad points out, “but we always have this mental block that says the poor are more risky, and actually, they are less risky.”

In many of these poor countries, new applications are emerging. In Kenya, for example, people can transfer money from one person to another by cell phone for a small fee without dealing with a bank. It’s called mobile money. “It’s a totally new banking system that has emerged,” Prahalad said.

“Now a maid in Dubai can send money to her family in the Philippines by cell phone. We can’t do that here,” he said. “Not only is this market becoming vibrant and large and the companies extremely profitable, but they are also building new applications that we have not seen. Why? Because we have Visa and Mastercard … a legacy we have to fight to bring new technologies and innovations.”

While many of his ideas, especially about the economic relevance and importance of the world’s poor and the necessity for corporations to be environmentally responsible were once regarded with skepticism, today are being accepted by his peers and much of the corporate world, he says the question now is “How do we do it in a thoughtful way.”

He tells his students: “Any company that innovates at the intersection of inclusive growth (inclusive of poor people), sustainability, connectivity and globalization and understands how to manage those key drivers is going to be a winner in the future.”

In other words, he counsels: “Don’t fight sustainability. Embrace the inevitable and get on with it.”

He defines sustainability as “total environmental stewardship.”

He is confident that “companies are quietly starting to rethink that sustainability is not only compliance with regulations, it’s also opportunity for innovation.”

But, he cautions, these things take time.

In the meantime, he intends to keep on pointing out “new patterns of opportunity.”

Arthur Lightbourn writes for Carmel Valley News where this story originally appeared.

Tags: ann arbor, berlin wall, bill gates, harvard business school, karma capitalism, marshall goldsmith, Michigan, michigan mba program, microsoft, school of business, SDNN, stuart crainer and des dearlove, the bottom of the pyramid, the core competence, the fortune at the bottom of the pyramid: eradicating poverty through profits, the london times, the new age of innovation, union carbide, university of madras, university of michigan's stephen m. ross

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