Future innovation: Threat or opportunity?

A year may have passed since this particular edition of the Economist hit the shelves, but I bet you could replace “April 2010” with “April 2011” and few people would notice. I kept this edition back because of it’s special report on business and innovation in the developing world. It goes a long way to explaining and describing what’s happening not only in the commercial world, but also the informal sector. I’d say that makes it a must read for members of the ICT4D community.

There are dozens of takeaways from the report. Here are a few of the highlights which resonated most with me:

“Most striking is the emerging world’s growing ability to make established products for dramatically lower costs – no frills $3,000 cars, $300 laptops and $30 mobile phones may not seem as exciting as a new iPad, but they promise to change far more people’s lives”

“Emerging countries are no longer content to be cheap sources of cheap hands and low-cost brains. Instead, they too are becoming hotbeds of innovation, producing breakthroughs in everything from telecoms to car making to health care”

“Innovation in the emerging world will encourage, rather than undermine, innovation in the rich world”

“Emerging economies are not merely challenging [our lead] in innovation. They are unleashing a wave of low-cost, disruptive innovations that will, as they spread to the rich world, shake many industries to their foundations”

“Multinationals expect about 70% of the world’s growth over the next few years to come from emerging markets”

“Old assumptions about innovation are being challenged. People in the West like to believe that their companies cook up new ideas in their laboratories at home and then export them to the developing world, which makes it easier to accept job losses in manufacturing. This is proving less true by the day”

“Because so many consumers are poor, companies [in emerging markets] have to go for volume. But because piracy is so commonplace, they also have to keep upgrading their products”

“General Electric and Tata Consultancy Services are doing something more exciting than fiddling with existing products – they are taking the needs of poor consumers as a starting point and working backwards. This approach has been dubbed ‘reverse innovation’, or ‘frugal’ or ‘constraint-based’ innovation”

“Emerging markets are far more varied and volatile than mature ones. Cultural complexities are confounding and tastes are extraordinary fluid”

“Indians often see frugal innovation as their distinctive contribution to management thinking. They point to a national tradition of ‘jugaad’ – meaning, roughly, making do with what you have and never giving up – and cite many examples of ordinary Indians solving seemingly insoluble problems”

“Because of the lack of brand loyalty, companies have to put even more thought into marketing than they do in the West”

(This image, taken on one of my trips to Uganda, shows ‘alternative’ advertising at work)

“To flourish in this atmosphere it helps to have a spirit of a frontier settler, not a corporate bureaucrat. A property company, say, might suddenly move into computers. Rather than worrying about synergies or core competencies, they see opportunities and seize them”

“The corporate go-getters love to explain that if you can make it here – despite the poverty, the dismal infrastructure and the unpredictable politicians – you can make it anywhere”

“Hostility to globalisation in the developed world is likely to grow as emerging giants disrupt one product market after another”

I find the whole topic of innovation, emerging markets and globalisation – and how the three intertwine – fascinating. What would our reaction be if globalisation, for example – which has long been accused of disadvantaging the developing world – turned on us? And what for the international development community? As more and more countries “emerge” less and less remain to be “developed”. A fully emergent African continent would leave a considerable number of international NGOs looking for a new home, and in dire need of a little innovation themselves.

Maybe that’s one measure of success they wouldn’t be so keen to find themselves meeting.

The “emerging market” handset trap

Today at Mobile World Congress, Vodafone announced “the world’s cheapest phone”. At $15 it certainly scores low on the price tag – which is good – but it also scores low on functionality – not so good. Not only is this a problem for any end user who might need (or want) to use it for things beyond voice calling and SMS, but it’s also perpetuating a long-standing problem in the social mobile world dating back over five years.

With the ICT4D community putting an increasing focus on “smarter phones” – ones which feature downloadable applications and allow for cloud-based solutions, for example – where do phones like today’s Vodafone 150 fit in? Aimed specifically at emerging markets, these are the kinds of phones Vodafone are hoping will end up in the hands of the very patients or farmers the ICT4D world is itself working hard to reach.

Low-cost phones have certainly achieved one thing – low cost – and in price terms they’ve done exactly what they said on the tin. Over the past five years or so, prices have indeed steadily dropped, as we can see if we pick an early “emerging market handset” winner from 2005 (the Motorola C113), a ZTE phone widely available in East Africa in 2008, and today’s Vodafone 150.

The prices may have changed, but functionality has largely stagnated. You couldn’t browse the web on the Motorola in 2005, nor the ZTE in 2008, and today you’d have the same problem on the Vodafone 150. You can’t download applications onto any of them, either. They all have monochrome screens and look pretty-much-the-same despite having a five year gap between them. Very little has changed other than price, it would seem. Voice and SMS remain king at the bottom of the pyramid, or so it would seem.

The real trick is to reduce the price of these phones whilst at the same time increasing (or at very least maintaining) functionality, a combination which no manufacturer has yet managed to crack. Nokia’s announcement last week of their cheapest 3G-enabled phone for the Indian market shows prices are shifting downward for data enabled phones, but at $90 it’s still some way off what most would consider affordable for the remaining 1.5 billion people in the world without a phone.

From today’s announcement, a sub-$40 smart phone – which really would change the game – looks to be as far off as ever.

[Related post: “The Digital Divider“]

Nokia: “Developing markets”?

Ka-Torchi poster, Uganda. Photo: Ken Banks, kiwanja.netIt’s official. Or so it seems. Already the most active handset manufacturer in the developing world, Nokia today made an announcement which places it well and truly at the heart of the international development effort. It’s a move which mirrors their ‘developed world’ strategy – a move from out-and-out hardware supplier to one of a more inclusive services-based outfit. As if (very) successfully designing and building low-cost handsets for emerging markets wasn’t enough, Nokia will now start offering emerging-market specific data services through their low-cost phones. And we’re not talking music or games here. We’re talking agriculture and education, and that’s just for starters.

According to today’s November 2008 Press Release:

“In 2002, Nokia unveiled a strategy to lower the cost of owning and operating a mobile phone and to bring the benefits of mobile telephony to people in emerging markets. Today, we are expanding that vision by introducing a number of devices and services that aim to bring the power of the Internet to these markets as well. The mobile device and the Internet are a powerful combination in connecting people with each other, accessing information, news, entertainment and sharing. By introducing products and services that are affordable, relevant and easy-to-use, we believe Nokia can fuel the growth of the Internet in emerging markets through mobility”

The announcement is interesting on a number of fronts. In addition to their move into ‘social mobile’ services – something previously the domain of the ICT4D community and a handful of innovative companies who managed to figure out working business models – Nokia also announced “Mail on Ovi” which enables Series 40 users to set up and run email accounts without the need to go anywhere near a personal computer. The mobile browsing world is also set for a shake-up with the announcement of new low-cost internet-enabled handsets, including the Nokia 2323 Classic (pictured) with a price point of just €40.

A little over a year ago, in a post called The Digital Divider, I made the point:

“The opportunity at the bottom of the pyramid is huge, and handset manufacturers and network providers alike are working hard to fill it with phones. For them, the most important issue is cost because that’s what’s most important to their customer. And if this means providing trimmed-down handsets at the lowest possible prices then so be it.

This current reality sees many of these phones with no GPRS, no browser, no Java, no camera, no colour screen – the very technologies which form the lynchpin of our plans to promote the mobile phone as the tool to help close the digital divide”

The emergence of feature-rich sub-$50 handsets isn’t necessarily a game changer on its own, but it’s a significant step in the right direction. Cheap as it may be, even the Nokia 2323 Classic is still around $25 off target from a comfortable price-point for many BOP customers, assuming they’re among the target audience. The shared phone culture in many developing markets could of course come to the rescue, allowing a single web-enabled phone to open up web access for many people, assuming shared phone functionality (private bookmarks, cookies, browsing history, and so on) is made available. It’s not clear whether this has been.

It’s the addition of Nokia Life Tools – agricultural and educational services – which raises eyebrows almost as much as it raises the bar. How will Nokia’s move into providing agricultural data and advice to farmers effect, for example, the operations of Trade At Hand, DrumNet, Manobi or TradeNet? Will they be partners in any Africa-wide venture? (Nokia do seem to be developing a habit of going-it-alone – more recently with their release of Nokia Data Gathering – rather than working with established, existing open source tools). For now, Nokia Life Tools will only be available in India, giving everyone – including Nokia – plenty of time to see how this thing plays out:

“Nokia Life Tools is a range of innovative agriculture information and education services designed especially for rural and small town communities in emerging markets. Nokia Life Tools helps overcome information constraints and provides farmers and students with timely and relevant information. These services use an icon-based, graphically rich user interface that comes complete with tables and which can even display information simultaneously in two languages. Behind this rich interface, SMS is used to deliver the critical information to ensure that this service works wherever a mobile phone does, without the hassles of additional settings or the need for GPRS coverage. Nokia plans to launch the service in the first half of 2009 with the Nokia 2323 classic and the Nokia 2330 classic as the lead devices in India, and expand it across select countries in Asia and Africa later in 2009”

So, what next? Nokia develop a mobile payments platform and embed the client into all of their emerging market handsets? Imagine, a single company controlling the entire mobile technology value chain would make interesting viewing. It could well be the answer to the age old fragmentation problems suffered by the “social mobile” and ICT4D space, but would this give the Finnish giant Google-esque powers?

These are interesting times. And for once, it’s the users at the bottom of the pyramid who stand to gain the most.