Anda di halaman 1dari 16

Innovating for Rural Markets

Sameer Bhajni
Papers used
• The Great Leap – Driving Innovations From the Base of the Pyramid
– Stuart L. Hart and Clayton M. Christensen
• How Disruptive Will Innovations From Emerging Markets Be? –
Constantinos C. Markides
• Beyond Great Ideas: A Framework for Scaling Local Innovations –
Dilip Soman, Vandana Kumar, Murray Metcalfe, Joseph Wong
The Great Leap
• Disruptive Innovations – companies sustainable corporate growth +
social responsibility (inclusion?)
• Catch-22 situation –double digit annual growth to revising
expectations – new markets?
• Anti-globalization – should corporates’ thirst for profits serve only for
this?
• “great leap” at the base of the economic pyramid (4 mn) –
identification of growth opportunities (saturation)
Creative Creation and Disruptive Potential
• Creative Creation
• Prior to destruction of industry leaders – “creative creation”
• Industry leaders tend to ignore
• Smaller players tap this market leading to innovations – creation of jobs, $$$,
raising standard of living
• Bottom to top – down the pyramid can have an extraordinary potential
• Disruptive Potential
• Why developing economies? –
• BM developed in low-income market travels well (Honda – Japan post WW2, Toyota,
Sony);
• Nonconsumption
Microwaves for the Masses & Connections for
the Poor
• Microwaves for the Masses
• Galanz (China) – microwave ovens – differentiation was not possible; mature
and shrinking market; 2% households owned microwave oven in China;
simple, energy efficient model developed – affordable for Chinese middle
class and small enough to fit in their kitchen
• Domestic market share increased from 2% to 76% betwn 1993 to 2000. Global
MS- 32%
• Later entered into air conditioning industry as well
• Connection for the Poor
• Grameen family of enterprises in Bangladesh – Started with Grameen Bank –
now Grameen Telecom.
Disrupting the Pyramid
• Grameen Telecom
• Per capita income (Bangaldesh) - @286/year
• High costs involved
• Lent up to $175 to rural women – independent entrepreneurs (“wireless
women of Grameen) – cost of mobile phone, small solar recharger unit,
training
• Sell phone usage per-call basis in the village
• Recently extended mobile internet services as well
• Result: village phone operators increased their income by ~$300/year-
spent on education, health care ; each call saved $2.7-$10 per user;
Revenue generate in excess of $100 million per year
• N-logue in India – tremendous potential
Disrupting the Pyramid
• Power to the People
• Affluent countries – 75% of world’s energy and resource consumption; if this
model of commerce and consumerism becomes standard – 4 Earths will be
needed to supply Raw Material
• Difficult to bring disruption in developed markets for environmentally friendly
technologies – developing markets could be good starting point
• Power generation and distribution – centralized in developed countries;
investments in “distributed generation” is expanding (solar, wind, micro
turbines)
• Huge potential market – lesser use of polluting fuels could be encouraged
• Such technologies need to be incubated and refined
• Eg. Rolltronics – produces semiconductor circuits on a flexible substrate like
plastic or foil; Iowa Thin Film Technologies – produces roll-to-roll photovoltaic
cell
How Disruptive Will Innovations from
Emerging Markets Be?
• Disruptive Innovation – began with Japan post WW2 – Sony, Canon,
Toyota, Nippon Steel
• Similar disruption is now seen in India and China; Example- Nano
introduced by Tata Motors in 2009; Tata Swatch water purifier;
chotuKool portable refrigerator by Godrej & Boyce; LePhone by
Lenovo
• Low-end segment to gradual upswing to upward market
• What kind of disruptions from emerging markets stand the biggest
chance for success in more developed markets?
The Disruption Process
• Conditions for a product to be disruptive
• Must start-out as inferior in terms of performance but superior in price
• Must evolve to become “good enough” in performance while remaining superior in
price
• A disruptive product develops over time and how incumbents react to it
• Questions to be asked to consider the potential of emerging market
innovation in developed economies-
• Will you continue to have price advantage over competitors in developed
economies?
• Will you be successful in closing the performance gap so that the customers in more
advanced economies come to see your product as “good enough”?
Maintaining Price Advantage
• Source of cost advantage? – Low Labor Cost or a reengineered
product – incumbents will try to neutralize this
• Eg. Swiss watches did this when attacked by Japanese watches in 1970s –
reengineered their product – elimination of disruptor’s cost advantage
• Cost advantage that comes on the back of a BM + which conflicts with
BM of established companies is more sustainable
• BM are difficult to imitate
• A company would find itself “stuck in the middle” if it tries to compete both
low-cost and differentiation strategies
• Eg. Success of low-cost airlines over traditional
Closing the Performance Gap
• Disruptors – developing technology or knowledge by acquiring
companies in developed countries (Tata’s acquisition of Land Rover);
investing in R&D; entering into partnerships and alliances
• What incumbents do to influence consumer’s expectation of what
“good enough” is – incumbents can continue to innovate; raising
product’s existing value proposition
• Shifting the basis of communication altogether toward another
product benefit
Beyond Great Ideas: A Framework for Scaling
Local Innovations
• Scalable solutions are built on singular ideas; scalability is driven by
careful crafting of a system of innovative components and processes
• Scaling up – Replication & Customization
• Replication – replicating the solution in a new region
• Customization – custom designing of innovative solution; time-consuming,
inefficient and expensive
• Successful scaling requires –
• Efficiency core of the solution that needs to be replicated more broadly
• Parts of that overall solution which can be most efficiently adapted to
particular settings
5 Baseline Factors to Create a Hybrid Model
• Cost
• Adoption cost should be low; Aravind Eye Hospital; Jaipur Foot (lower limb prosthesis
at $30 – limb replacement free to 20,000 people annually, assisted 1.2 mn
amputees); Narayana Hrudayalay Hospitals – heart surgery costs
• Failures – Rural Micro Health Centres, National Institute of Speech and Hearing
• Active Demand
• BE research – people do not know what they want and they fail to value sol
• Crafting and delivering good value proposition – direct economic benefits + indirect
and experiential benefits; Aravind Hospital
• A Sustainable Business Model
• Long-term sustainability
• In most successful organizations, multiple innovations have been developed at once
5 Baseline Factors to Create a Hybrid Model
• Demonstrated Outcomes
• Outputs Vs Outcomes – Outcomes : results that demonstrate an idea’s
broader impact
• Good ideas are likely to scale when the outcomes are measured
systematically
• Effective Leadership
• Leadership with clear mission and flexibility to surmount barriers
• Aravind Eye Hospital – Dr. Govindappa Venkataswamy; Amul – Dr. Varghese
Kurien; Narayana Hrudayalay Hospital – Dr. Devi Shetty
Three Hybrid Models of Scaling Up
• The Contiguous Model
• Solution is a specific technology/ organization/ delivery system – expanding
outwards from original hub; eg. Aravind Eye Hospital – scaling efforts largely
focused on growing new markets
• Propelled by generation of new demand
• The Distant Replication Model
• Locally-generated solution replicated to distant sites; on-the-ground team
explores the local conditions and adapts the system; eg. Amul
• The Transfer and Translation Model
• Grameen Bank – from Third World to local development schemes in
economically depressed areas in North America – through transfer of
knowledge as opposed to replication
Thank you!