Posts Tagged ‘product development’

The Informal Industrial Ecosystem: An Introduction to REculture

The Art of Seeing Beauty in Garbage, Kenya, September 2010

This article introduces and explains some things I’ve been seeing in the informal industrial ecosystem in the developing world context for almost a decade now. First noticed in 2009, I then named it REculture, a neologism to capture the vast and complex ecosystem I saw in the revenue generating facility of recycle, replace, repurpose, reuse and resale. Given contemporary interest in developed country concepts such as the circular economy, and other sustainable and ecological initiatives, I thought it timely to sit down and attempt to synthesize the past work before proceeding to write more on current events.

What is REculture?

I thought I’d start from the beginning – is there, for example, a difference between “the entrepreneur” and “the producer”, “the creator” and “the innovator”, if at all? And if none, then perhaps start to fill in some few blanks based on our earlier thinking on the BoP “consumer” and their mindset, worldview or value system.~ June 2009

In July 2009, I was inspired by my observation of a man sitting under a tree in the administrative district of New Delhi with a visibly large bag of buttons by his side. His service, to the civil servants rushing to and fro from important governmental meetings, was to quickly repair a missing button from their suit jacket or shirt. Not unlike a shoeshine boy, this gentleman’s service was on demand, while you waited, his fingers flying rapidly with the needle as he sewed a reasonable facsimile of your missing button back on for you.

Look at the unusual yet welcome niche he had found for himself! A repair service that could only work in this part of the city where the common uniform was a suit and tie and important visitors the norm.

Once he opened my eyes to what it was I was seeing on the streets – the entrepreneurial opportunities squeezed out of the margins of daily life – I began noticing such services more and more. Repair, re-use, re-purposing, resale, and, in their own inimitable way, recycling of used up or abandoned products of industrialization were turning out to provide a significant chunk of the revenue streams of many of the informal sector’s service providers who now became visible to me.

In June 2009, I wrote:

…many other such observations got me thinking about the whole RE culture among the BoP. Stepping back, if you take the broad space of REuse, REpurpose, REpair and REcycle – its the low hanging fruit for the BoP entrepreneur’s opportunities for income generation. In fact, REpair is an entire professional service area in its own right, perhaps a subset of the opportunity space in the informal economy with varying degrees of skill and ability required.

But coming back to the other three, it seems at first glance that they look to be more or less the same thing i.e. how different is it to reuse a plastic bottle to contain some liquid from recyling it? particularly if the manufacturer had intended for it to be a disposable container? Yet, from the big picture perspective, one can say (and it has been said before) the whole concept of recycling is a cost in the OECD world whereas its actually a source of income, in a myriad ways, among the BoP.

The second thing that struck me, when I pondered these signs of a post-consumption economic ecosystem, was that the actors in the informal sector – whom we now discuss as traders, fabricators, service providers – were still then thought of as the “Bottom of the Pyramid” or the BoP – the economically vulnerable, the marginalized, the low income barely making ends meet on a dollar or two a day. There was no attempt at segmentation, this was the lumpen mass of the next 4 billion. Even though the late CK Prahalad had called them out as micro-producers, creators, and innovators, in his seminal book The Fortune at the Bottom of the Pyramid, those who had grabbed the label with both hands and run with it were still thinking in terms of consumption. “How do we make products profitably for the poor?”

What about the creators, the makers, the innovators, and the producers in the informal economic ecosystem?

Again, back in June 2009, I wrote:

I am attempting to evaluate whether all our previous observations and learnings viz., “Life is hard” (the mindset and values of a customer at the BoP particularly one living on an irregular income) can help us begin to understand the other side of the coin, that is, the “innovator” or “creator/maker” or simply, the “informal business owner or service provider” at the BoP.

At this point at least, it seems to me, that rather than quibble about each individual word choice to describe “who” or “what” they are, perhaps we’re better off looking at the “why” and “how” – by this I mean, that the driver of motivation is to generate an income stream (the why) and the gaps observed, as mentioned above, are the opportunity spaces (the how). That is, the BoP seem to display more of a tendency towards ‘opportunity spotting’ (not quite the same as the word opportunists, though that may also apply in many cases or situations), filling the niche quickly with a service or product. Some of these services have arisen spontaneously around the developing world, mobile phone repair comes to top of mind.

It feels as though its a far more active than passive quality – poverty and hardship can be a powerful motivational driver in itself, though we tend to overlook the ingenuity and creativity involved.

That is, back then, just over 9 years ago, I connected the dots I was seeing in this space – the mindset and values of the low income customers and their post consumption behaviours, taken together with the “RE” space where visibly they were earning income – and framed it so:

That is, the lower income market tends towards maintenance and extending the lifespan of the products (through repair or repurposing it) they purchase rather than disposing it for convenience or replacing it for a trendier style. All very obvious, you say, but its this very same quality that leads to the wide variety of opportunities for the entreprenuerial or the innovative to make some money (or even a living). From the very basic, in terms of skills and ability such as the button repair guy to the complex, such as the mobile phone hacker, all of these services meet an ‘unmet need’ in the market, an opportunity gap which they can fill.

However, what’s interesting about this is the fact that these opportunities would very rarely be either a) spotted as one in mainstream consumer culture; b) not be a gap per se due to a difference in mindset/worldview OR even c) not be profitable enough, given the comparative cost of labour vs the price of the product involved. These conditions for making money, and more so, making money that is deemed a valid ROI seem only to be available among the lower income demographic and in the developing world.

For the precondition to their success is also a sufficient customer base seeking such a service and their willingness to pay for it,  and that, imho, emerges from their mindset as BoP consumers, one quality of which is their need to Maximise the return on their investment (purchase). This shows up in this context as a wish to REpair, REuse, REsell (for REpurpose or REcycling or whatever along those lines) – I doubt if they’ve stopped coming by from door to door among the ‘consuming classes’ in India to buy old bottles, newspapers and other sundry junk. (A sign of development if it stops?)

Once I could “see” the entire post consumption entrepreneurial activity in the informal sector, I went back to my research documentation conducted in rural Philippines and India for the original ‘prepaid’ economy work, and pulled out the patterns seen in the photographs that, when fitted together, showed all the evidence of an entire industrial ecosystem. As a working title for this seemingly vast economic space within the informal economy across Asia and Africa, I had called it REculture – the group blog went on spawn a magazine.

An entire industrial ecosystem within the informal economy based on the discards of the consumer lifestyle

A discarded Kraft cream cheese bottle would be picked out of the garbage by a waste picker and sold to an intermediary who would clean and sort these by colour and size and sell them on to a fabricator, who in turn, would convert these into affordable – and handmade mass produced – kerosene lamps, completed with spot welded wick tube.

An entire industrial life cycle from “raw material” through to “mass production” supported by distribution and retail. The only difference? The informal nature of the entire value chain and the post consumption adaptation of the materials and discards.

My concluding thoughts at the stage in which I’d left my explorations almost a decade ago can be summed up thus:

So, at this point, early stages of exploration though it is, one could say that the whole area of “post consumption” consumer practices – most of which have withered away like the appendix in the ‘rich’ world – forms one major  basis for both products and services, with value addition to varying degrees, in the ‘informal economies’ of the developing world.

There are insights to be teased out here on flexible, adaptable, ‘on demand’ business models ~ but applied outside the virtual world. Scarcity of resources and circumstance force lean overheads and inventory. Constraints of demand and customer purchasing power create their own flows in the chaos. Is there a pattern to the flow of the informal after all?

What next?

I summed up this history so as to provide me with the foundation and backdrop to pick up the threads of this conversation, now with the added insights of the past decade, and the increasingly sophisticated frameworks of framing the informal economy as a commercial environment in its own right, populated with entrepreneurs and niches that the mainstream overlooks.

As the topics of sustainability, resource conservation, and the circular economy become top of mind and critical, the early lessons from the developing world will only become more important going forward. I’ll be writing more under the category and tag “REculture” for old times’ sake.

Innovation, under conditions of resource scarcity

When Mkulima Young, a social media community for young farmers in Kenya tweeted this photograph of a motorcycle modified to pump water, I was delighted. It had been a long time since I’d seen such an excellent example of innovative product development under conditions of resource scarcity.

REculture, the group blog hosted by the now defunct Posterous is gone, though Makeshift magazine still keeps the spirit alive. Afrigadget rarely updates these days, and I, too, have moved on in my interests in the past 5 years since Mikko and I first went to Nairobi for Maker Faire and research.

 

Case study of design strategy failure: Whirlpool World Washer for emerging markets

This is a comprehensive study of the introduction of an automatic washing machine, the World Washer, into the Indian market, by Whirlpool Corporation in 1990. Conceived as an important part of Whirlpool’s global strategy in the late nineteen eighties, it was designed for the emerging markets of Mexico, Brazil and India. It failed dramatically and resulted in Whirlpool having to purchase obsolete twin tub technology from Korea for their next product launch in India.

This paper attempts to describe the existing market at the time of the launch 1988-1990; Whirlpool’s global strategy and the part played by their design departments; the intersection of strategy and design; and, to analyze the reasons for the World Washer’s failure.

“First, you have to ascertain which standards have already been established by the competition. The product won’t be accepted if it doesn’t live up to those standards. Secondly, you have to look at the environment in which the product will be used.” ~ Dr Pia Honold, Center for User Interface Design, Siemens AG

Scarcity as a driver for innovation

Frugality and affordability are very much in the news of late, what with the most recent essay on Change Observer and this post on Paul Polak’s new blog both highlighting similar concepts but from the point of view of very different markets. It seems to imply the trend towards frugal design or extremely affordable yet relevant and useful products is emerging to the forefront of the mainstream, regardless of whether its the sophisticated mainstream consumer culture or the challenging markets of the lower income demographic. In which case, this is a timely moment in which to give a brief introduction to the conditions of scarcity within which we looked at informal manufacture, fabrication and innovation during our recent trip to Kenya and how these conditions drive innovation. Necessity, after all, has always been the mother of invention.

Infrastructure

Infrastructure availability or systems that we take for granted such as running water, stable electricity supply without voltage fluctuation or blackouts is an ongoing challenge in this operating environment (the majority of the unevenly developed world). This need not necessarily imply “poverty” so much as scarcity or uncertainty – for example, the latest Economist has a great article that underlines this point with regard to India’s chaos having little to do with its economic growth potential and ability. The variability of infrastructure not only influences product development for these markets but as we recently noticed, drives innovation in sometimes surprising directions that we may not always perceive of as an “unmet need” immediately.

Tap (Faucet) lock, Nakuru, Kenya 30th August 2010

These are locks for your water tap, available in the jua kali market in Nakuru, Kenya. They not only prevent the unauthorized use of your water (particularly if its from a tank of finite capacity that you may have paid good money to get filled) but also protects your tap itself from theft (the metal can be sold as scrap to be melted down and reused).

Fuel and energy

While much of the drivers for renewable energy solutions in the developed world are concerned with environmental and energy security issues, (valid in themselves yet still considered a luxury, imho, in the mindset of the customer due to premiums), product development and invention in the emerging markets is based more fundamentally on scarcity and need for affordable reliable power and fuel supply. Does this change the way the problem is framed for the inventors/makers and how does this shift in perspective influence the solution development? As Paul Polak points out:

If you don’t design to realistic customer-derived price points from the very beginning, any tool you design for a poor customer will never be adopted at scale.

Aluminium smelter’s workshop, Nairobi, Kenya September 2010

And it doesn’t necessarily have to be a solar lantern for a poor customer per se – it can be the micro-entrepreneur who wants to lower his costs to the minimum in order to maximize his daily profits. Here is an aluminium smelter’s workshop, the can on the left contains used motor oil which he burns to melt the scrap metal down into ingots for reuse. On the other hand, he is dependent on electricity supply to power his air blower that vaporizes the heavy oil enough for it to burn and loses income if the power is out.

Transportation and distribution

If you’re in the informal economy, you don’t have access to the far flung top of the line logistics and distribution networks that other businesses do, or at least not at scope and scale available. Furthermore, due to the variance in infrastructure and operating environment, this is a challenge even for the biggest companies if you’re in a market like India’s much less the less developed nations. I’ve touched upon this further in this article but here I’m bringing this forth as one more element of scarcity that acts upon the operating environment, and so can lead to some ingenious and/or innovative solutions. Developed in context, they are often very affordable and relevant as they seek to solve locally observed problems.

Modified boda boda bicycle, Maker Faire, Nairobi Kenya 27th August 2010

Boda bodas are bicycle taxis popular in Africa, particularly East Africa, originating in Kenya. Here, these two makers from a smaller town outside of Kisumu came to display their specially modified boda boda. The back carrier has not only been elongated to increase the carrying capacity of the vehicle (which is what this is) but the gentlemen had also figured out that 250 kgs was the average load therefore they had calculated the necessary size of the modification accordingly. In addition, since their local area was both hilly and had uneven paths, they added shock absorbers to help the driver and improved the braking mechanism. Of course, they’d also added the facility to both charge your mobile front at the front of the bike while charging a car battery at the back from the dynamo. There is fodder for an entire article on the bicycle as the platform for innovation in emerging markets but that’s for another day.

Materials and Tools

Far more than in India but I can’t recall the situation in the Philippines at this moment, was the obvious scarcity of appropriate and affordable hand tools, small machine tools and raw material in Kenya.And certainly, there’s no Home Depot or some such there. And Kenya is supposed to be the most advanced in this sphere in the East African region. I would really like more information in this area so please write in or comment if you have knowledge.

Scrap from aluminium casting ready for re melting into ingots

Hammerheads made from old car axles

This earlier post compares two simple manual machines, the local variant of which uses far less energy and material to effect the same purpose and this one takes a look at the prototype of an affordable coffee grinding machine.

Working capital, cash flow and insurance (Risk and uncertainty)

A natural but challenging side effect of operating in the informal economy is access to financial tools and support systems available to small businessmen everywhere else. Bank rates are very very high (the risk of Africa!) and so access to capital for investing in new machines or growth is hobbled by the owner/entreprenuers insistence and preference on saving up and using cash instead. This takes time, slowing down economic development at the grassroots. Microfinance tends to favour consumer behaviour rather than investments or micro-enterprises and regardless, does not tend to take irregular income streams into account.Interestingly enough, mPesa is making a difference in this sphere but again, as a workaround rather than a product targeted at this need. This aspect of products designed to support micro-entreprise was the biggest challenge in the Philippines as well as my colleagues at the Philippine Business for Social Progress have informed me. These very same lacks, one could call it a systemic mistrust, drive creative solutions of a sort perhaps that may not always be preferred as much as the more positive ones mentioned above.

Backpanel of inverter, Nakuru, Kenya 30 August 2010

For example, the gentleman who makes these inverters is forced to put Japan components on his products so that customers will take the risk to purchase his product. He also offers a 1 year warranty and installs what would be an off the shelf, plug and play comp0nent anywhere else himself on the premises. The display and control shown here has inspired a lot of insight on contextual knowledge of technology – “Up for on”, issues of trust and commitment as well as the risk aversion already seen among BoP consumers.

While this has been wholly focused on Kenya, the conditions of scarcity are only variations on the themes that can be seen around the world. In the meantime, they offer much food for thought on the operating environment.

First published October 7th 2010 at Aalto Design Factory, Finland