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TECH TALK: Technology’s Next Markets: The Need for Disruptive Innovations

October 14th, 2002 · No Comments

The worlds emerging markets are technologys new markets. Even as growth in technology spend in the worlds developed markets slows, we are seeing many technologies making a significant impact in the emerging markets. Wireless connectivity via cellphones is increasingly the preferred communications option over wired lines. Countries like India and China have state-of-the-art GSM networks. SMS (Short Message Service) has spawned its own language of interaction among the new users, even as text messaging has been slow to take off in the US. South Korea leads the world in gaming and broadband. The emerging markets are hungrier for new technology, because they see it as the one route to progress and a better life in times to come.

One of the major inhibitors with respect to technological deployment in the emerging markets has been Cost for the most part, technology is still predominantly dollar-denominated, putting it beyond the reach of the mass markets. Most new technology has been coming out of companies in US and Europe. Their pricing, especially for semiconductors and software, is what their markets will bear, which means it is many times the capacity of what users in the emerging markets can pay. Also, the feature set embedded in the products is not targeted specifically at users in the emerging markets.

What these users need is a small subset of features at a fraction of the price. But this is what few companies have bothered to do. For example, users in the emerging markets get the same versions of MS-Office or SAP or Oracle, at the same price points as their counterparts in the US or Europe. The problem is that the earnings for most users (individuals and enterprises) are in local currencies and not in dollars, putting the best technologies out of reach for them. This is the cycle that needs to be broken.

One of the reasons why technology companies find themselves in this zero (or even negative) growth phase is that their products have overshot the needs of their current set of users, and they have nothing to meet the needs of the next set of users who need similar products at lower price points. In other words, the technology industry is ready for disruptive innovations at the bottom-end of the markets, which offer solutions to new markets at dramatically lower price points, and are on a trajectory of improvement where they can one day even take on existing players in the current mainstream markets.

Think of the opportunity going ahead as creating a schism between todays developed markets (the mainstream markets served by established players) and tomorrows emerging markets (the low-end fringe markets targeted by new entrants). To borrow a phrase from Clay Christensen, existing technology companies serving the mainstream markets face the equivalent of an Innovators Dilemma. Their current markets are overserved by what they have saturated with hardware, software and communications options. The new markets need a very different value proposition which their current cost structures, business models and marketing methodologies are not conducive to. The technological battleground is ripe for new entrants with disruptive innovations.

Tomorrow: Disruptive Technologies

Tags: Tech Talk

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