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Disrupt or Be Disrupted: Innovation in Emerging Markets
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The term, ‘Emerging Market’ is no longer topical; it’s a table stake! A decade ago these mysterious markets filled with untapped potential were only for the brave and stupid to conquer. However, as time has passed and potential has been realised, the fear of entering these markets has eased. According to Bloomberg Business Week, emerging markets are expected to produce 75% of the world’s growth in the foreseeable future.

It would be foolish for multinational companies not to be clambering for a piece of the emerging market pie, and they are doing so. But what is really exciting is that companies in emerging markets are no longer content to follow a 'first to follow' strategy, whereby they leave the innovation to the multinationals. More and more, emerging markets are innovating for themselves - and reaping the enormous financial rewards that come from successful disruption.

With limited infrastructure, unsophisticated regulatory practices, intense cultural complexities and consumers that have disparate and unpredictable levels of income, these markets are by no means easy targets. Emerging market companies are at an advantage in that they understand these dynamics and are more flexible, dynamic and willing to completely reinvent business models to fit the market. Innovation is not a differentiator in these markets; it is a pre-requisite for success.

Innovation means different things to different people. For those in more developed markets, it may conjure up images of stainless steel R&D labs, streamlining the most streamlined processes or the latest techno gadgets. In emerging markets, this type of innovation is superfluous. So then, if it takes innovation to win in emerging markets, what kind of innovation is necessary?

Innovation guided by real insight should be the imperative

The companies that have succeeded in emerging markets are those that consider their offerings from the outside-in. They pride themselves on being relevant and base everything they do off the foundation of customer insight. For example, Unilever in India understood that their bottom-of-pyramid market could not afford standard sized product nor had the space to store them. Unilever responded by introducing 'micro' product portions and successfully markets Sunsilk shampoo and Clinic anti-dandruff shampoo sachets at 2.5 Rupees each. By doing this, Unilever is not only catering to the needs of their market, but the smaller sachets provide users with the opportunity to try the products out without giving up all of their disposable incomes.

Sometimes it requires 'leapfrogging' beyond the status quo

Companies often get fixated on the untapped potential of emerging markets and forget to think about the feasibility of their business models in the market they may be entering - much to their detriment! Others assume that they can apply old processes to markets purely based on the life stage of a particular market. Because each emerging market is made up of completely different challenges, it requires businesses to innovate and 'leapfrog' beyond the current conventions. For instance, consider consumer payment networks: these systems took years to become fully functional in mature economies. In Africa, by contrast, many countries are going beyond catching up. They're expanding their limited legacy payments infrastructure beyond developed economies' standards from the use of 'mobile money' systems such as M-Pesa, to being the first countries to roll-out chip credit cards (instead of the usual fraud-prone magnetic strip cards).

In essence, cookie-cutter approaches when entering emerging economies are detrimental. Making assumptions can be even more damaging. Innovation for innovation sake will fail too. Innovation in emerging markets should be guided by real insight, relevance and true understanding of unmet needs - so invest your resources in getting that right. It's requires us to disrupt or be disrupted!

Article originally appeared in April's edition of Advantage Magazine


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