How Developing Nations’ Business Can Influence Established Markets
Wednesday, May 2, 2007
At a Gartner consulting conference in San Francisco last week, analyst Mark Raskino gave a presentation on technology trends, and one of his main themes was influenced by the “The Fortune at the Bottom of the Pyramid,” by business strategist C.K. Prahalad. The idea of the book is that the developing world presents many more business opportunities than commonly are imagined, including for “First World” companies. Mr. Raskino explained how work in developing countries can influence markets back home.
What is the thinking behind the suggestion that businesses in rich Western countries should be interested in “the bottom of the pyramid?”
A couple of different ideas are connected. The first is the rate at which people of the Third World are moving from subsistence to being consumers. That means huge numbers of new people to sell new technology to, particularly in China and India, but also elsewhere.
Because you can’t spend very much money developing these products, you are challenged to create your technology innovation under serious constraints. But many of those innovations are things that would not only be useful in Third World markets, they also would come back to the First World.
There are other consequences to consider, too. Once people have, for example, mobile phones, they can exchange prepaid minutes with each other. And that can become something like a currency exchange. You might exchange minutes with the vendor in the local market, or give five minutes to your grandfather or a friend as a present.
You’ve got obvious cases like the $100 computer. Many people say the only way to get a laptop into the classrooms of Third World villages is at that price. And that forces creative thinking in order to build such a device. But once you have built it, you now have a new point of entry into advanced markets. There’s also a car from Tata Motors in India that could be sold for as little as $2,500. It’s due out next year, and I’m sure that will make a lot of news in the automotive sector.
Why does someone at a big U.S. company care about this?
Someone doing strategic planning inside a large U.S. corporation is probably trying to decide between going for the low end into an emerging market for fast growth, or doing something at the high end for customers back home. That has been seen as an either-or proposition. But these two ideas are not actually separate. If you go into those emerging markets, you will have to be very innovative in your thinking. And that will be transferable back to your First World market. You get a rotation of the innovation cycle between First World and Third World.
Is there anything unseemly about thinking of people who are desperately poor as potential customers, as opposed to people who need help?
Ultimately, people in Third World countries would like to become consumers, and there’s nothing wrong with that desire. The idea makes people uncomfortable. But once you realize that people want these things and it makes a big difference in their lives, it can be quite important.
Who are the best sorts of people to work on a project like this?
Have some people on your creative teams who have been down in the dirtiest, ugliest gutters of the Third World, and who really know what the differences are like.
Write to Lee Gomes at email@example.com