Developing market-creating innovations in emerging markets

For over a decade I have been thinking about doing further study whether a masters, MBA, LLM or even a PhD. For various reasons I haven’t pressed the button on anything, although in 2019/20 I did get close.

I had just read a brilliant book called the “Prosperity Paradox” by Clayton Christensen which discusses why so many investments in economic development fail to generate sustainable prosperity, and how investing in market-creating innovations can create lasting change.

I was immediately hooked, although I was biased. I had focused my undergraduate business honours thesis on a former book by the same author called “The Innovators Dilemma”.

I found a few universities with suitable programmes and sent off applications. In the end I didn’t proceed with the offers but I thought it would be worthwhile to show the summary application and proposed research topic, approach and key areas to investigate. I still may look to explore this topic in the future albeit in a different way e.g. research, articles, consulting etc.

Proposed PhD Research title

“Developing Market-Creating Innovations That Drive Prosperity in Emerging Markets”

Background

The historic approach to improving outcomes and prosperity in emerging economies has typically focused around ‘poverty alleviation’ whereby private-sector companies and start-ups exploit existing markets at the top or ‘bottom of the pyramid’ (Prahalad 2004), or other initiatives which ‘push’ international aid, grants, loans, outsourcing, or incremental (‘sustaining’) improvements to existing offers for established customer bases. More recently, a number of leading management researchers led by Clayton Christensen (2019) argue that more successful approaches may lie in creating or ‘pulling in’ new market innovations that enable significant numbers of non-consumers to easily and affordably find a product or service to help them overcome daily struggles or solve an important problem. Pursuing this strategy (distinct from other types of innovation including ‘sustaining’ and ‘efficiency’ innovations), established firms and founders[1] typically see opportunity in the struggles of their respective frontier markets by targeting non-consumption in the broader market, creating not just products and services, but entire ecosystems, enabling infrastructure, networks and jobs to promote stability, prosperity and sustainable economic growth. Despite this opportunity, in 2016 alone, the OECD estimated that $143 billion was spent on official development approaches. Christensen (2019) however asks that what if this was instead channelled to support direct market-creation efforts in developing countries, even when those circumstances seemed unlikely? Some examples of market-creating innovations (MCI) are listed below:

  • M-PESA: A mobile money platform that enables the storage, transfer and saving of money without owning a bank account;
  • MicroEnsure: Affordable insurance for millions of people living on less than $3 a day;
  • Celtel: A pay-as-you-go mobile phone service that enables customers to purchase cell phone minutes from as little as 25 cents;
  • Galanz: An inexpensive microwave oven for the average Chinese citizen;
  • Tolaram: A tasty, inexpensive, easy-to-cook meal in Nigeria that can be prepared in less than three minutes;
  • Grupo Bimbo: Affordable, quality bread for Mexicans;
  • Ford Model T: An affordable car for the average American in the 1900s;

Topic

My PhD research will seek to build on these themes and the work of Christensen (2019) and others (Prahalad 2006; Auerswald 2012; Quadir 2014) to better understand the following key questions: How do established firms and start-ups successfully build market-creating innovations (“MCIs”) in emerging markets? Why are some firms successful, and others are not? The research will address gaps in understanding highlighted by Christensen (2019) in terms of further defining the process by which new markets are created, the characteristics that set market-creating innovators apart, and more details into the role of non-consumers (‘non-consumption economy’) in this process. In addition, my research will improve understanding of the relative importance of external factors which facilitate (or inhibit) success, including government, ecosystems, NGOs, investors, skilled labour, infrastructure, networks, and partners. The extent of benefits that MCIs deliver for society in terms of driving inclusive, sustainable and prosperous development across sectors including education, health, financial services, energy, and communications will also be analysed. Finally, the findings will deliver practical guidance, frameworks and insight for a wide range of international companies, entrepreneurs, governments, investors, thinktanks, and NGOs who pursue (or are looking to pursue) strategies and investments in emerging markets, or alternatively use the learnings to apply in more developed contexts

References

C.K. Prahalad, The Fortune at the Base of the Pyramid: Eradicating Poverty Through Profits (Upper Saddle River, NJ: Prentice Hall, 2006)

Philip Auerswald, The Coming Prosperity: How Entrepreneurs Are Transforming The Global Economy (Oxford University Press, 2012), 58

Iqbal Quadir, “Inclusive Prosperity in Low-Income Countries,” Innovations 9, no. 1-2 (2014): 65-66

Provide a statement of your research interests and intended research topics:

Research interests:

My research interests focus on how organisations innovate (across processes, practices, products, partnerships) in various contexts, including geographical (e.g. emerging or developed markets), new markets (e.g. non-consumption economy, consumer insight, go-to-market), operational (e.g. outsourcing, resource allocation, incentives, portfolio management, projects, change), offerings (e.g. new product development), technological (e.g. emerging technology), competitive (e.g. start-ups, business models), strategic (e.g. organic, M&A, JVs), human (e.g. leadership, culture, talent, skills), ecosystems (e.g. networks, partnerships, knowledge, public-sector), and sectoral (e.g. education, health, financial, energy).

I will use my many years of relevant professional experience working across most of the above topics (whether as an academic, lawyer, consultant, or founder) to ensure that the PhD research makes a substantial contribution to the academic research (see research questions), and provides practical insight for critical strategic and investment challenges for industry stakeholders (e.g. multi-national companies, investors, public sector, NGOs, etc).

Research topic:

My PhD research will seek to build on the themes of my research interests, and the work of Christensen and others to help answer the following question: How do established firms and start-ups successfully build market-creating innovations (“MCIs”) in emerging markets?

Core research questions include[2]:

  • What is the process by which these new markets are created?
  • What is the MCI development process within established and new (start-up) firms? For example, opportunity identification, development, investment, launch and scaling;
  • Why are some firms and efforts successful, and others are not?
  • What is the role non-consumers (‘non-consumption economy’) play in this process?
  • What are the qualities that set market-creating innovators and firms apart? For example, the ability to identify possibilities where there seem to be no customers;
  • What are the characteristics of the most successful (and unsuccessful) MCIs?  For example, business models, attributes, targeting non-consumption, value networks, ecosystems, partnering;
  • What are the most important internal and external conditions which facilitate or inhibit this process?
  • What commonalities exist across nations, sectors, firm size, age, or other variables?
  • What is the role of other key stakeholders in MCI development? For example, government, NGOs, investors, ecosystems, networks;
  • What are the key benefits for society, sectors (e.g. education) and stakeholders (e.g. government) from MCIs which deliver inclusive, sustainable and prosperous development?
  • What are the future implications for private and public sector organisations (e.g. companies, government, investors, NGOs etc) who wish to facilitate the future development of MCIs, or take the learnings into other developing (or developed) markets?

The below diagram describes the research focus areas and questions relevant to be asked:

Some anticipated research parameters may include a focus on:

  • Products/services and ventures which create new markets (“MCIs”) and benefits for large segments of the population, as opposed to product improvements (“sustaining innovations”) or efficiency gains (“efficiency innovations”).
  • Sectors that play key roles in prosperity development including education, health, financial services, communications, food and water, energy, and technology;
  • Data collection in a wide selection of geographies including BRIC nations, developing and developed nations (e.g. US), although the feasibility of this may prove problematic thereby requiring a more vertical approach (e.g. narrow to a few nations);
  • A time horizon of MCIs created post-2000 to capture more recent examples of MCI development;
  • An inter-disciplinary research approach given the wide-ranging research topic, building on academic researchers in fields including strategic management, strategic marketing, disruptive innovation, new product development, consumer insight, technology and operations management, innovation, organisational behaviour, leadership, emerging market strategy, international and economic development, and public policy;
  • Hybrid data collection strategy: whilst the research scope (e.g. companies, countries, sectors etc) and data collection strategy has yet to be defined, it is expected that a hybrid approach which mixes both qualitative and quantitative methods with primary and secondary research might be the most appropriate.  For example, face-to-face interviews, online surveys and case studies can help collect primary data to define firm MCI development processes. However, firm performance and development benefits (e.g. social, economic, and sectoral) will require quantitative analysis of public records and databases, as well as any additional internal data from private companies or government agencies.

[1] Examples of successful market-creating companies include Celtel (Africa), GrameenBank (Bangladesh), M-Pesa (Kenya), MicroEnsure (Africa), Jio (India) and Ford Motors (US) in the 1920s

[2] I have a range of sub-research questions but in the interests of brevity I have not included here.

A Quick Course on Lean

Today I came across a brilliant resource from Steve Blank for anyone interested in better understanding ‘lean’. It covers resources helpful for a formal class or for anyone who wants to review the basics. Here is what he provided:

Lean in Context

No Business Plan Survives First Contact With Customers

How did we build startups in the past?

The Business Model

An introduction to The Business Model Canvas

The Minimal Viable Product

How to Get, Keep and Grow Customers?

How to Get Out of the Building and Test the Business Model

What is Customer Development

What is Customer Discovery and Why Do it?

Why Get Out of the Building?

short article on how to do Customer Discovery via Zoom

Jobs to be done

Customer Validation

The Pivot

The Harvard Business Review Article “Why the Lean Startup Changes Everything” ties the pieces together here

The Mission Model Canvas

What is the Mission Model Canvas

The Mission Model Canvas Videos

Extra’s

Why Customer Development is done by founders

What Do Customers Get from You?

What are Customer Problems/Pains?

Users, Payers and Multi-sided markets

How do I Know I Have the Right Customers – Testing

How big is it?

How to Avoid Pricing Mistakes

More two-minute lectures here

Tools for educators here

Tools for students here

Pandemic Pivots by Small Businesses

The COVID-19 crisis caused many businesses to make crunch decisions such as rapidly pivot offerings or building out new products/services. Often we hear stories of how big companies (e.g. Uber pivoting away from ride-sharing to food delivery) have done this (or not as the case may be), but rarely do we hear of pivots by small or local businesses.

In the course of research for my REIGNITE! 2020 Report which analysed strategic responses of 439 international organisations (large and small) around the world between March-June 2020, I came across many inspirational stories of incredible small business pivots.

In a recent speech to the NED Forum (slides here), I described the story of one particular business who had managed to turn crisis into opportunity.

To tell the story of a brilliant pandemic pivot by a small business, I’ve pasted the excerpt from the talk below:

Let me tell you a quick story about ABC Learning Company, based here in Gsy. Obviously that is not their real name but I came across them in some research I did during Q2 and lockdown. 

In the research which later became the REIGNITE 2020 Report – which I’ll introduce shortly – there was so much devastation across sectors including travel, hospitality, retail, construction, manufacturing, and so on. 

In fact 50% of the 439 leaders surveyed were in total despair, in terms of closures, restructuring, uncertainty and so on. 

However…there was a glimmer of hope!

About 10% of businesses were doing extraordinary things. They were using the crisis as an opportunity to reset, rethink, and reinvent. They were pivoting, quickly using technology to launch new offerings, testing new business models, and at the same time becoming more efficient, productive and reducing costs.

In terms of ABC Learning, it was a typical lifestyle business providing high school tutors, owned by one person with 5 tutors on the payroll. No online presence, web-site or anything. Business stopped overnight with lockdown, but by rethinking things quickly and using simple online and digital tools – google spreadsheets for CRM and bookings, zoom for delivery of live sessions, stripe for online or over the phone payments, the owner was not only able to quickly survive but doubled revenue during lockdown, hired 10 more tutors on contracts, and created a scalable solution which allowed for recorded training on-demand on popular topics. So better CX, more revenue and profits.

So what is interesting here is the combination of human psychology and business strategy during a crisis: so how did the leader reinvent whilst everyone was retreating, what can we learn, and how can we emulate this for our own contexts

This is what underpins today’s talk and certainly the REIGNITE 2020 Report which I’ll introduce shortly.


The Invincible Company

It is not often that you receive a business book and want to take a photo of it. And just like that amazing meal, post it on Instagram (I didn’t, but couldn’t resist a cheeky post on LinkedIn. And Twitter).

In fact, it is probably never that this urge happens.

That all changed this week when The Invincible Company by Alex Osterwalder (and others) arrived.

It looks and feels great. And knowing the track record of the authors, will be jam-packed full of great insight.

I’ll post a review here once I tuck in.

IMG_6976

 

 

 

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