The Emerging World Some Statistics on whatâ€™s going on in emerging markets from an Economist Special Report: $1,000 Cars $100 Computers $10 Mobile Phones that provide nationwide service for just 2Â˘ per minute
Increase in Business The number of companies from Brazil, India, China, or Russia on the Financial Times 500 list more than quadrupled in 200608, from 15 to 62.
Table shows opinions on the current economic situation of each country ďƒ
Emerging markets Multinationals expect 50% of growth in next ten years from developing markets whose economies are driven by adoption of technologies such as mobile, renewable energies, clean water, mobile banking and innovations in last mile health and agriculture Table above shows GDP growth
Education in Emerging Countries Number of higher degrees in engineering or computer science per year:
Big Markets Attract Big Names Cisco is splashing out more than $1 billion on a second global headquarters – Cisco East – in Bangalore, now nearing completion.
Microsoft’s R&D centre in Beijing is its largest outside its American headquarters in Redmond.
A Development Perspective (Education, Health, Sanitation, Governance, etc) State : Primary Accountability - service provided from Taxes NGOs : Supplement State actions where there is a gap â€“ Charity /Philanthropy Approach = Missionary Mode
NGOs : Hold State accountable for service deliveryâ€“ Rights Based Approach = Civil Society (RTI , Press etc .) Corporates : Contribute to Development ( CSR )
Social Enterprise : Organisation Goals are linked to development
The great rebalancing: McKinsey This decade will mark the tipping point in a fundamental long-term
economic rebalancing that will likely leave traditional Western economies with a lower share of global GDP in 2050 than in 1700. By the end of the decade, roughly 40 percent of the world’s population will have achieved middle-class status by global standards, up from less than 20% today. This mean opportunity in consumer markets. Engineering for computing, clean energy, and electronics Huawei, Chinese telco #1 in patent applications in 2009. China to have world’s largest R&D workforce India supplies largest number of technology workers Highest profits from cutting edge smart phones, highest volumes ultra low-cost handsets 15x more Bharti Airtel outsources construction and management of its networks to Ericsson and Siemens R&D cost structures in developing markets at 20-30% of developed world Clean energy in 2009 topped venture capital investments
Question How to appeal to new customers in developing markets?
New Distribution Systems
New Business Models
Frugal Innovation- New Paradigm First Break All the Rules Tata Chemicals Rice Husk Water Filter $24 up front and only $4 to maintain filter Provides clean, bacteria free water
Aravind Eye Care Providing preventative eye care to all at a low cost rate
General Electricâ€™s Mac 400 $800 electrocardiogram Fits in a backpack Reduced patient cost to $1 per test
Taking the needs of poor consumers as a starting point and working backwards
Developing World Sectors ICT/ Mobile Applications* Renewable Energy* Public Health-medtech* Clean Water Transportation Housing Food Financial Services * Class Focus Sectors
The MNC: Traditional Customer Base
“Tip” of the Income Pyramid > $15,000/yr
“Base” of the Resource Pyramid
Cost structures, business models, & research methods based on a “Western infrastructure”
The “ToP” Customer 85% of Global Resources
The BoP: Serving a Different Customer I. New Market: Less than $1800 per year
The “BoP” Customer
$3,000 - 15,000/yr
Tier 4 ~ 4.0 Billion Tiers 2&3
~1.5 billion Tier 1 ~ 800 million
Massive & growing underserved market Aware savvy rural customers
II. Radical Innovation: Incubation site for “disruptive Tier 1 technologies”
III. Competitive Pre-emption: Breeding ground for next-gen, global-scale competitors
Many Companies are Beginning to Experiment with the BoP Nutristar, Nutridelight (nutritional drink), Pur (water purifier) Hindustan Lever (detergent for the poor in India and Brazil), Annapurna (iodized-Salt for the poor) Banco Real, microcredit in Brazil Vodacom community services in South Africa, joint venture between Vodafone and Telkom SA Solar powered digital camera in India and community information systems Program in South Africa to help entrepreneurs enter the supply chain and profit from new business ventures. Water for all program to periurban areas in Brazil N-Logue Wireless Local Loop Technology for rural areas General Electric Ec0magination Products exceed $30 billion in revenues
The BoP Presents: NOT JUST a marketing problem The “Sachet Mindset” • Food & Nutrition and FMCPs
NOT JUST a technology problem The “Killer Ap Mindset” • Water Purification, Distributed Energy and ICTs
…but a Business Model challenge
Social Entrepreneurship So What is a Social Enterprise? Social Enterprise combines both goals: • Economic Viability • Human Development
“Social enterprises are social mission driven organizations which apply market-based strategies to achieve a social purpose. The movement includes both non-profits that use business models to pursue their mission and for-profits whose primary purposes are social” – Wikipedia entry
Social Capital Services 1. Financial First Investors seek to optimize financial returns with a floor
for social/environmental impact. This group tends to consist of commercial investors who search for sub-sectors that offer market-rate returns while yielding some social/environmental good. These investors may be driven by fiduciary requirements as in the case of pension plans.
2. Impact First Investors seek to optimize social or environmental returns
with a financial floor. This group uses social/environmental good as a primary objective and my accept a range of returns, from principal to market-rate. This group is able to take a lower than market-rate of return in order to seed new investment funds that may be perceived as high risk, or to reach tougher social/environmental goals that cannot be achieved in combination with market-rates of return. - Solutions for Impact Investors: From Strategy to Implementation
Rockefeller Philanthropy Advisors
Agent of Social Change MICROFINANCE
Muhammad Yunus, winner of the Nobel Peace Prize, participated in CSTS conference, “Transformative Changes Through Science and Technology: The Role for Social Entrepreneurs.”
“Poverty is imposed on people artificially. Poverty is not natural to human beings.” Why are women better borrowers? “Money going to the family through the women transforms the community.”
Frugal Innovators RENEWABLE ENERGY
ToughStuff was founded by Andrew Tanswell (GSBI â€™09) along with Adriaan Mol (GSBI â€™06). It replaces kerosene with solar panels and LED lights. The business lifts people out of poverty, reduces CO2 emissions, improves health and creates sustainable micro-enterprise. ToughStuff is looking to scale this business to have a truly global impact.
Naandi, which in Sanskrit means a new beginning; is one of the largest and fastest growing social sector organizations in India working to make poverty history. Founded in 1998 our work has 3 broad sectors: Child Rights, Safe Drinking Water and Sustainable Livelihoods.
Dr. Helen Lee of Diagnostics for the Real World, works to develop pointof-care tests intended for the detection of infectious agents that cause serious health problems in developing countries, while remaining useful and desirable to the developed world. Examples include sample extraction and rapid and sensitive detection of infectious disease targets (DNA, RNA, antigen or antibodies).
Frugal Innovators – Online Solutions MICROFINANCE
Matt Flannery (GSBI ’06) was looking for guidance to grow his online lending platform, Kiva. GSBI helped to provide the funding, knowledge and contacts Matt needed. To date over 500,000 Kiva lenders have loaned to 250,000 entrepreneurs worldwide in increments of $25.
Ronni Goldfarb is a founder and President of Equal Access. The mission of Equal Access is to create positive social change for millions of underserved people in the developing world by delivering critically needed information and education through innovative media, appropriate technology and direct community engagement.
WorldofGood.com by eBay is the world’s first online marketplace to convene thousands of People Positive and Eco Positive sellers and products all in one place, empowering you to shop in ways that align with your personal values. Respected, independent organizations verify the positive impact every product has on people and the planet.
Core Competencies for Developing World
Ruggedization Affordability Simplification Adaptation Use of local materials Green technologies Simple user centric design Lightweight New Distribution Models Local Manufacturing Online Services