Vijay Govindarajan and Amos Winter have an interesting article in the July/August issue of Harvard Business Review. They identify the barriers to successfully integrating reverse innovation from emerging markets into the product pipeline for mainstream consumer culture. Their key paragraph echoes the issues of people, pesa and place I’d written about earlier:
Our research suggests that the problem stems from a failure to grasp the unique economic, social, and technical contexts of emerging markets. At most Western companies, product developers, who spend a lifetime creating offerings for people similar to themselves, lack a visceral understanding of emerging market consumers, whose spending habits, use of technologies, and perceptions of status are very different.
And they go on to identify the common mental traps that act as barriers to innovation.
As we will show in the following pages, the reverse innovation process succeeds when engineering creatively intersects with strategy. Companies can capture business opportunities only when they design appropriate products or services and understand the business case for them.
I’ve annotated the design principles developed by an engineer and a strategist with a soupçon of human centred design *cough* thinking below:
Trap 1: Trying to match market segments to existing products.
Design Principle 1: Define the problem independent of solutions.
Companies tend naturally to look at opportunities from the perspective of their the product lines, placing their technology front and center of their opportunity assessment. Govindarajan and Winter suggest stepping back to evaluate the landscape of the operating environment for which they wish to innovate.
Trap 2: Trying to reduce the price by eliminating features.
Design Principle 2: Create an optimal solution, not a watered-down one, using the design freedoms available in emerging markets.
Which designer sitting in the comfort of the developed world’s stable and reliable infrastructure would have thought of adding a torch to a mobile phone if Nokia’s exploratory user researchers had not observed people’s behaviour? In developing countries with inadequate infrastructure, power cuts are a frequent occurrence and the bright screen of the device in your pocket was being used by people to find the keyhole in the door.
Trap 3: Forgetting to think through all the technical requirements of emerging markets.
Design Principle 3: Analyze the technical landscape behind the consumer problem.
This is really why a landscape map of the operating environment is critical (and yes, I’ll be following up with a post that explains a landscape map). No-one can remember all the constraints and criteria for product design in environments of scarcity and variance in infrastructure. Whirlpool was one of the first to discover this with their World Washer designed specifically for emerging markets 25 years ago. From Govindarajan and Winter:
When designing offerings for the developing world, engineers assume they’re dealing with the same technical landscape that they are in the developed world. But while the laws of science may be the same everywhere, the technical infrastructure is very different in emerging markets. Engineers must understand the technical factors behind problems there—the physics, the chemistry, the energetics, the ecology, and so on—and conduct rigorous analyses to determine the viability of possible solutions.
It boils down to listing assumptions and questioning them rigorously, something engineers are already accustomed to doing. And, now, my favourite of all these traps and principles.
Trap 4: Neglecting stakeholders.
Many multinationals seem to think that all they need to do to educate product designers about consumers’ needs and desires is to parachute them into an emerging market for a few days; drive them around a couple of cities, villages, and slums; and allow them to observe the locals. Those perceptions will be enough to develop products that people will purchase, they assume. But nothing could be further from the truth.
Design Principle 4: Test products with as many stakeholders as possible.
Companies would do well to map out the entire chain of stakeholders who will determine a product’s success, at the beginning of the design process. In addition to asking who the end user will be and what he or she needs, companies must consider who will make the product, distribute it, sell it, pay for it, repair it, and dispose of it. This will help in developing not just the product but also a scalable business model.
Complex Value Web of Transactions in Cash, Kind and Information. Sketch: Michael Kimani
There are two key assumptions embedded in Trap #4 and its supporting Design Principle. These are:
1. End users are individual actors.
2. That the ecosystem is a conventional value chain
This may be true in the highly individualized mainstream consumer culture of “the West” where the bulk of consumer facing organizations and their designers head quartered. In most of the developing world, users – people – are part of a closely networked community, more true the lower down the income stream you go. Not only must organizations consider the entire ecosystem in which their new product or service will be introduced but they need to consider the individual customer’s social and communal ecosystem as well.
The Individual as an Ecosystem Sketch: Jeroen Meijer
In fact, as we discovered in the last mile, the value chain is actually a complex value web with overlapping nodes and roles – a community of trust, social capital, information flow and opportunity networks.
Overlooking these characteristics and constraints, that too in the context of the informal and/or rural economy, where transactions are mostly in cash or kind, with few formal financial instruments, has impact on the design of the business model and payment plans as well, not just that of a tangible artefact.
Which leads us to the final and most important point being made by Govindarajan and Winter:
Trap 5: Refusing to believe that products designed for emerging markets could have global appeal.
Design Principle 5: Use emerging market constraints to create global winners.
Though most Western companies know that the business world has changed dramatically in the past 15 years, they still don’t realize that its center of gravity has pretty much shifted to emerging markets. China, India, Brazil, Russia, and Mexico are all likely to be among the world’s 12 largest economies by 2030, and any company that wants to remain a market leader will have to focus on consumers there. Chief executives have no choice but to start investing in the infrastructure, processes, and people needed to develop products in emerging markets.
And, critically, India, China, Brazil and Russia, among others, are all eyeing the opportunities in the emerging economies of the African continent. Understanding these challenging conditions and satisfying the demands of these connected consumers will become all the more crucial going forward.