Some Observers - Filed under 'innovation'

April 17, 2010

Looking To a Post-Prahalad Future

This morning many awoke to read the sad news that renowned management professor and development theorist CK Prahalad passed away after a brief illness. Even though his most well known work, "The Fortune at the Bottom of the Pyramid", was released in 2004, it seemed that in some ways, Prahalad's vision of a world where the poor, to paraphrase his obituary in the Times of India, are not seen as victims but as consumers in their own right, was reaching its largest audience today. In an era where so many companies in the developed world are seeking new opportunities to replace the weakening consumer markets of the West, Prahalad's enticement to create demand from, and deliver value to, people in emerging and underdeveloped markets looks very attractive. And not a few of these companies are staying in business at this stage due to the relative strength of these emerging market economies.

And now, many top global players followed Prahalad's advice and have poured resources into India, China, parts of Africa, Southeast Asia and Latin America in hopes of selling cars, soap, PCs, appliances and many of the trappings of "mainstream" consumer society to new buyers. Banks, NGOs and technology companies are hard at work finding ways to speed the arrival and movement of money and credit to these sectors. And local companies in these regions are rapidly developing inside tracks to serve their own markets. Ironic that the week of Prahalad's passing the Economist carries a special feature on bottom-up innovation and the success stories of companies and brands many in the West have only just become aware of.

So, what comes next? What is the post-Prahalad world? As a futurist, my job is to think about these things—to observe, think, sketch and describe possible futures that may emerge, and look at possible models that aren't just extrapolations of the past, or fulfillment of management fantasies about the successful transplantation of Western strategies to other regions. To me, we are already starting to see some of the signals that outline this future: not just rising incomes and new consumers, but a fundamental shift in global power dynamics in economics, social values, technology models, and more. We are seeing a swing from acquisition to utility, from consumption to production. And the producers, creators and builders are the ones that will call the shots for some time to come. We aren't just seeing our own ideas and values with an Indian or Chinese or Brazilian name on the label. We've spent five centuries in the West creating models of commerce that reflect our deeper cultural values. Why will the next phase be any different for those people, countries and cultures that have the momentum in the next five centuries?

If one believes that Prahalad's ideas have helped bring us to the edge of an era where "the other 90 percent" are the leading innovators, we need to be prepared for how those innovations differ from what's come before, with what values they will teach and shape us, and how we might find new economic and social pathways forward as our current ones increasingly falter. Prahalad's ideas have been interesting, stimulating and to some extent catalytic. It's what comes next, however, that will be really powerful.

Filed under // Africa Asia BOP China Economist futures India innovation Latin America Prahalad scenarios

Posted by Scott Smith

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February 18, 2010

The World is Flat, but in a Different Way

New Scientist today carries a report on how scientific research is surging in areas such as the Middle East (notably Turkey and Iran), as well as in Asia, which passed North America last year in total scientific papers published. Judging by total published papers is at best a simple metric, but it indicates an important shift in knowledge production—itself an indicator of innovation overall.

As I wrote about with regard to Chinese IT and the long-term implications of its growth, these weak signals point to a future where the roles of innovators and copiers may well shift and swap. Science and technology driven by these emerging regions will change the cultural mix of global S&T and will certainly over time take away the West's perceived birthright as the engine of global technology. Flat worlds run both ways.

(Thanks for the link goes to @mgorbis)

Filed under // Asia innovation Iran science technology Turkey

Posted by Scott Smith

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January 29, 2010

Workshop Recap: Designing Solutions for Emerging Ecosystems

Click here to download:

Workshop_Recap_Designing_Solut.zip (569 KB)

Coming to the end of the week in Finland, the dust has now settled from our workshop on innovations for emerging markets this week at Aalto Design Factory (though the snow continues to fall) and there finally has been some time for reflection. First, a huge thanks goes out not only to my partner in this prototype, Niti Bhan, but to the generous team at the Design Factory and its leader, Kalevi Ekman as well. Without Niti's personality, her suggestion of the workshop, and her work within the Design Factory, none of it would have started. Without the DF team's generous support and interest, none of it would have actually happened. And from the workshop and the connections made, both human and cognitive, many positive things will surely emerge.

The Design Factory describes itself as a passion-based co-creation platform, which suited the day very well. Many people showed up in the dark Nordic morning to take part in this event because of their passion for combining design, innovation and social development. Because of this, collaborative creation of ideas was the key thread throughout the day. The blend of students, entrepreneurs, and people stepping out of their roles in private companies and government bodies—with both local values and global views—was exactly what was needed. We put the workshop here because, as Ekman pointed out before the event, Finland is uniquely positioned to leverage its skills, assets, energy, IP and unique social values to help solve serious problems and improve life elsewhere in the world.

Niti and I took the first hour or so to describe the realizations from our respective roles and trajectories that brought us to this point—mine from the consumer culture side, hers from her field work experience and research in low income, challenging environments. Along the way, these trajectories met, and new patterns are now emerging, showing us possibilities of new ecosystems blending technology, social and cultural structures that are uniquely configured.

We were there just to set the table, however. The core of the day, and the best part of the workshop, was generated by the participants. Organized into teams, they were tasked with taking on a new unfamiliar roles, in new countries, cities and situations, and a unique set of external factors and barriers around which they needed to create a solution for a specific target user. It was fitting that took place within the Aalto Ventures Park facility, which itself is a converted workshop. With a variety of tools, materials and working styles, each created something uniquely suited to their task: water delivery systems that doubled as information networks, thoughtfully conceived community centers in conflict zones, a mobile platform for local jobs, and more. Each used the human networks already in place, and each contained multiple innovations worth considering alone.

Given that our tendency today is to throw technology at problems in scattershot ways, most striking to me was how the groups constructed or leveraged existing networks and ecosystems giving only the lightest touch to technology—resulting in an appropriate simplicity and resilience in every solution. No hammers looking for nails, no new complexities created to suit potential capabilities, just carefully considered balance of tools and needs. If this was the only takeaway, it was a day well spent. Luckily, there was a lot more to leave with, not least a sense of momentum and whetted appetite—for us, for those who participated, and for the broader Aalto community as well.

Filed under // Aalto BOP BOPNet co-creation design Design Factory ecosystems events Finland innovation technology

Posted by Scott Smith

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January 12, 2010

One-Day Workshop on Innovation in Emerging Economies

To delve more deeply into the topics we discuss on Some Observers, Changeist + Emerging Futures Lab are collaborating on an upcoming event exploring near-future opportunities for innovation in emerging economies. The one-day exploratory interactive workshop will be held January 26th at Aalto Venture Park, Otaniemi, in the greater Helsinki area, and will explore the nature of the BoP consumer, technology behaviors, needs and barriers, and will allow participants to test their own assumptions and uncover new opportunities to serve these growing markets. For more information, contact Scott Smith at ssmith [at] changeist.com.

Filed under // announcements consumers events innovation technology

Posted by Scott Smith

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January 8, 2010

Super Fakes, Open Source and Informal Channels of Innovation

Photo by Samout3

A recent string of interesting signals, including yesterday's New York Times post about the Chinese smartphone fake encountered at CES with the iPhone look, Android guts and faux HTC splashscreen may provide an interesting view of where innovation in mobile apps and services for emerging markets may come from in the near future. These signals tell me that we are approaching a point where said innovation is no longer just going to come from "official" device and application makers, but are starting to emerge from hidden development "dens" in places like China, Russia or Thailand as well as from Kenyan startups or American giants.

The numbers paint a story of probability. Somebody is actually counting and forecasting these illicit grey-market activities as best they can, and the most recent figures, from research house iSuppli, put Chinese grey market shipments at at least 145 million units for 2009. That's a growth rate of over 43% over 2008, and represents about 13% of global handset volume. This, at a time when the legit market has been slowing. And in those 145 million units, somewhere some interesting new innovations are taking place, and in the 145 million customers, some folks are getting what they want.

As Jan points out, at least a portion of these devices' buyers know what they are getting at purchase, and likely make their purchase decision based on a value for money tradeoff. They may be getting access to the (glancing) look and (approximate) feel of a smartphone, the cachet of the counterfeit brand, or, in the case of the Times example above (I suspect increasingly in the next few years) they are after some hybrid formulation of open source flexibility with proprietary look and feel.

The latter effect is where we start to cross over into innovation territory it seems. In the past a hacker would have to reverse engineer or obtain a crack of an OS like Symbian, or fake up some melange of a platform to run on. Since the advent of an open source system like Android, which has allowed the legit developers to roll a mobile OS of their own, this is changing. One week it's HTC or Motorola making a new Android derivative and handset, the next it is Lucky Dragon's Mobiles 'R' Us with a smartphone/e-reader with MP3 playback. Or, more importantly, a device with apps written to suit local tastes, which presumably run beyond knock-offs into utility territory. If the big mobile companies aren't innovating for the grassroots fast enough, or can't be everywhere at once, the expertise gained over time in making passable hardware, combined with the ability to crank out a platform tuned to local tastes, puts Lucky's operations on a collision course with Moto or Nokia. Over time, this more responsive operation may win an increasing number of customers, as price and value converge.

Imagine a time, five years hence, when West African developers creating apps for the specialized needs of the region crank out cheap Ivorian handsets from a customs-free, loosely governed black market zone like Bouake, where black market pirates roam free even today, making ersatz Arsenal tops and pseudo-Murakami LV backpacks. They will know the local market, they know how to make the supply chain run, and they can provide regional support. Not that far fetched.

Informal innovation, even illicit innovation, is nibbling around the edges now, just emerging on the radar. Whether its a no-name mobile bought in a Shanghai market, a People's Processor, a phone for the everyman, or a local operator that just happens to be seen as a terrorist organization, the boundaries around who happens to be a "legit" innovator and who is black market is blurring. Bottom-up innovation doesn't just come in an official wrapper, and increasingly, we will see consumers in parts of the world where price/performance is measured differently choose high technology from a broader bazaar of providers, as they do for low technology today. Today's No Name Inc. may be tomorrow's Notion Ink.

Filed under // Android counterfeits design grey markets innovation mobile open source stats

Posted by Scott Smith

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January 6, 2010

Leaner, Meaner, Cleaner Futures

Scott has written extensively on the shift towards "small" taking place referencing elements as diverse as the influence of the emerging BoPNet as well as incremental improvements. Now, McKinsey has released their research on the shift in consumer preferences in the packaged goods industry which ends with the following paragraph supporting this trend.

There’s evidence that the shift of consumers away from more expensive products is a widespread trend. In the consumer electronics industry, for example, McKinsey research found that 60 percent of consumers were more interested in a core set of product features at a reasonable price than in the bells and whistles of the latest and greatest technology at a higher price.³ Similarly, in the building-products industry, there is a trend away from premium-priced design features and toward simpler, more basic designs. Understanding this challenging shift in consumer behavior is necessary for companies to compete successfully.⁴ It represents an opportunity for those that respond quickly and effectively to differentiate themselves from their peers.

Filed under // design innovation McKinsey small

Posted by Niti Bhan

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January 5, 2010

Small World

Photo by djoheninde

Two very different events in two very different places this week are worth watching for what they tell us about the future and its emerging design requirements: the Consumer Electronics Show in Las Vegas, which kicks off this coming weekend, and the New Delhi Auto Show, which opened already this week in India's capital.

Leaks and previews ahead of CES suggest what we forecasted in private last summer: a plethora of small, light, energy conserving, utilitarian devices to against the usual focus on power, size, reach and volume. Netbooks, smartbooks, tablets, hybrids, mobiles and other devices based on open platforms and/or efficient processors and sufficient storage are the theme this year. While there is still plenty for the early adopter fanbois to get excited about, there is a noticeable shift to more affordable. some might say more democratic, devices.

Meanwhile, accelerating a theme that has emerged in recent global auto shows, but enhancing it for India's unique needs (growing demand, cramped infrastructure, lower per capita incomes), small, simple, efficient and useful have been the watchwords in New Delhi. Tata of course had more to say about its revolutionary Nano, including plans to make an electric version, and Honda, Toyota and VW have led the early announcements with compact vehicles designed for the country's new motoring classes.

All of this effort in design, innovation, manufacturing and marketing isn't simply to support a short-term fad. While markets such as the US have been ramping "down" to add smaller cars and computers to product line-ups, emerging markets such as India are ramping up into these product lines as a future core offering—they know the way to reach the mass market is to accommodate this need for small, and by gaining scale and the related economies needed to succeed, these "small" innovations will increasingly port to more advanced markets. In the US, we look at small as our second or third option—something for when there is still space left to fill, and money to burn. Not so the rest of the world, where innovating small is the way out—and up.

Filed under // Honda India innovation mobile netbooks open source small Tata Toyota transportation VW

Posted by Scott Smith

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January 4, 2010

The Rise of Chi-T: Chinese IT and the Developing World

Many people already know China represents the largest Internet and mobile user base in the world: CNNIC put usage at just under 340 million midyear last year. Likewise, Chinese mobile penetration is at 54% and climbing. Both trends have fueled a voracious appetite for access devices—PCs, mobile handsets, laptops and now new lighter classes of devices, such has netbooks and early forms of MID/media players. Western device makers have historically been a major beneficiary of this growth, though homegrown OEMs such as Lenovo and Haier have become global names in the electronics business over the past decade. Meanwhile, China's low-cost labor and a growing base of bright engineers and designers have fueled the country's attractiveness as a manufacturing center for the world's gadget fetishes.

This is changing, and Chinese IT is poised to make the leap into a strong position of influence in the next decade, driven by several important factors: the aforementioned growing demand base at home and acquired expertise among its dozens of major contract manufacturers, and a desire to exercise its know-how on the global stage. While the West remains focused on its own known brands—Intel, Nokia, Microsoft, Sony, LG, Samsung to name a few, Chinese contract manufacturers such as PC makers Founder, Tongfang and Great Wall are producing own-brand product for the domestic Chinese market, including the latest 3G netbooks, e-readers and other portable devices to meet the growing demand. And some are poised to follow other Chinese IT leaders like Lenovo, Haier, Huawei and ZTE into international waters with a wave of new, cheaper devices.

The great leap doesn't stop at hardware, but reaches into operating systems and processors to run these devices. A few weeks ago Wired covered the emergence of what it called the People's Processor, a government funded push to develop an alternative, "open" processor called the Longsoon chip, which has already found its way into a number of Chinese notebooks in recent years, and forms the cornerstone of a push toward domestically created open computing that frees Chinese developers and consumers from having to rely on high-price Western software, namely Microsoft Windows and other software dependent on x86 architecture.

The implications of this rise of "Chi-T," or IT formulated and brewed in mainland China, are potentially far reaching. Like Brazil's push into open source in the last decade (also partially a move to enable the people to attain technology with fewer licenses, and costs, attached), China's drive to create a multipolar IT world won't stop at its own borders. As it has done with automotive, energy, and other important sectors, China is looking to fill the gaps left by Western companies in the developing world, and sees an opportunity to be the provider of IT to these areas. The head of the Longsoon project himself recognizes this potential:

“Compared to Intel and IBM, we are still in the cradle,” concedes Weiwu Hu, chief architect of the Loongson. But he also notes that China’s enormous domestic demand isn’t the only potential market for his CPU. “I think many other poor countries, such as those in Africa, need low-cost solutions,” he says. Cheap Chinese processors could corner emerging markets in the developing world (and be a perk for the nation’s allies and trade partners).

This parallel IT world will be much more driven in its definition not by Western-style early adopters, but by the wants, needs and behaviors of a much greater proportion of what we might refer to as traditional late adopters—rural, less educated, lower income users, with functionality, applications and design dictated more strongly by these groups from the beginning. China-grown technology will be a central part of the fabric of the BoPNet, just as Chinese and Indian vehicles make up more and more of the wheels on the road in the BoP.

And, as open source technology gains further in the West with the rapid rise of new operating systems and new classes of devices that platforms like Windows can't evolve fast enough to keep up with, not just components but processors, software and applications of Chinese origin (and Brazilian and Indian) will become more prominent as companies seek to innovate freely, quickly and flexibly in the West, and take advantage of all of the building blocks that are available globally, not just from Redmond, Mountain View, Seoul or Espoo.

Filed under // China Founder Google Great Wall Haier Huawei innovation Intel Internet Lenovo LG Longsoon Microsoft mobile Nokia Samsung Sony Tongfang ZTE

Posted by Scott Smith

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January 1, 2010

Questioning the Global Mobile Apparatgeist

The Economist recently put forth an argument strongly reminiscent of Theodore Levitt's 1983 HBR classic "The globalization of markets" (PDF) where he first framed the concept that global consumer preferences were converging, thus companies could develop, launch and market the same product across the globe - “Different cultural preferences, national tastes and standards, and business institutions are vestiges of the past." We know where that argument went however, so lets take a closer look at the venerable Economist's thesis. A few key snippets:

A few years ago such questions provoked academic controversy. Not everybody agrees with Ms Ito’s argument that techno logy is always socially constructed. James Katz, a professor of communication at Rutgers University in New Jersey, argues that there is an Apparatgeist (German for “spirit of the machine”). For personal communication technologies, he argues, people react in pretty much the same way, a few national variations notwithstanding. “Regardless of culture,” he suggests, “when people interact with personal communication technologies, they tend to standardise infrastructure and gravitate towards consistent tastes and universal features.”

and even more reminiscent of Levitt's words:

In the long run most national differences will disappear, predicts Scott Campbell of the University of Michigan, author of several papers on mobile-phone usage. But he expects some persistence of variations that go back to economics. In poorer countries subscribers will handle their mobile phones differently simply because they lack money. Nearly all airtime in Africa is pre-paid. Practices such as “beeping” are likely to continue for quite a while: when callers lack credit, they hang up after just one ring, a signal that they want to be called back.

Curiosity made me seek out Campbell's studies, one of which (PDF) looked at cross cultural usage patterns - from its abstract, we learn these cultures are "A sample of participants from the U.S. Mainland, Hawaii, Japan, Taiwan, and Sweden was surveyed for social acceptability assessments of talking on a mobile phone in each of these locations." Quite.

One fears The Economist has been a tad slapdash in constructing their thesis of an emerging global mobile Apparatgeist for their own data chart above shows that we are now close to 4 and half billion mobile phone users in the world. Even a cursory glance at the numbers would inform us that not more than the first billion and a half were members of such well off and well connected nations such as those studied above or the OECD.

Can the converging practices and habits of a quarter of the total user base influence the rest strongly enough to give rise to such a singular global mobile culture or will the other 75% of mobile phone users continue on with their workarounds and innovations, overlooked and unnoticed by the "world" until their influence bursts forth as a "surprise"? Or will the global media's apparatchiks finally unblinker their vision to consider the mobile majority and its own growing influence? These differences posed by the mobile majority are those that stand poised to influence global convergence in their own particular way (as has been discussed in previous posts on the BoPNet and the DevNet).

Certainly, it can be said that Levitt's prediction of a global marketplace ruled by standardized products sold at low prices (1) has come true for the global mobile phone market, but it is one thing to build standard hardware for the world and entirely another to minimize the immense challenges posed by economics, not to mention culture and language, literacy and contextual knowledge as The Economist does:

Only a few countries, mainly in Africa and Asia, still need special cultural attention when designing a phone (which is why some models in India double as torches).

That's right, only a few countries that happen to constitute a market of 2 or 3 billion people btw, a fact that neither manufacturers nor service providers overlook as they consider how best to serve these markets.

It is this article's implication that only the converging social or cultural behaviour of the first world masses constitute any kind of global trend - future or otherwise - that diminishes the importance of the wireless platform, its impact and influence on the daily lives, the wellbeing and the income of the rest. It also underlines the blinkered perspective of the (not even mainstream anymore really) media and analysis that tends to skew perception of the global mobile market and its attendant potential, challenges and opportunities for innovation.

Filed under // culture design globalization innovation markets mobile

Posted by Niti Bhan

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November 9, 2009

Mobile Money Practices

Designing Services for Financial Inclusion

Jan Chipchase posted a great paper and slide deck today summarizing top-level themes in mobile money practices from Nokia's research around the world, and elaborated on some design implications of his teams' findings.

The compelling Venn diagram from the outset is this: in 2009, there are 3.5 billion people unbanked worldwide, and 4+ billion mobile phones in people's hands on the planet (not Jan's figure, but the ITU). The crossover point is some 1.7 billion unbanked people with mobile phones by 2012. That's a huge opportunity, moreso because of what tapping a percentage of that group might unleash in terms of economic benefit than the profit to be had from enabling it.

Read on and find out more.

Filed under // banking BOP design innovation mobile money Nokia practices research

Posted by Scott Smith

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