I see innovations as mechanisms to build digital bridges. This is not the same as saying that I want to bridge the digital divide. The digital divide is an effect, not the cause. Information Technology is a means to an end, even though we mistake it as the end in itself. Consider for example the activity in rural India which seems to focus on making available information kiosks connected to the Internet, with the mistaken belief that just by putting these computers there we will be able to solve all the problems that are there.
There are many divides across enterprises and people. More important than the digital divide are the income divides, the social divides, the education divides, the opportunity divides. The two divides that are perhaps more important than any other are the Credit Constraint Divide and the Information Divide. What technology can do is to bridges these divides by reducing transaction costs.
A point once made by Atanu to me was that if there was one problem which lay at the root of the problems in rural India it was that of the credit constraint. If only people had access to credit, then they could create more opportunities for themselves. For example, the lack of an education hampers people all their lives. If, however, they could be given loans with long-payback periods and low interest rates, then they could educate them in specific vocations and use their increased income to repay the loans over time. The lack of credit is one of the root causes of the development trap that rural India finds itself in.
Just as urban India is discovering the magic that access to credit can do (one can buy homes, cars, appliances and pay for it via monthly installments), so also rural India needs access to credit to bridge the opportunity divide that exists. A few innovations applied correctly in the system can have a dramatic amplifying effect across the chain. What the disruptive innovations need to do is to create options and opportunities so that people can start dreaming of a better future. This is happening in the new India that is emerging in the cities. It also needs to extend to the rural areas if India needs to maintain and increase its growth rates.
In the case of SMEs, while credit is a challenge, the information divide is a killer. I have seen this first-hand. The search costs of finding customers for ones products are just too high. This is where electronic marketplaces need to play a role in helping SMEs connect to other SMEs, so they can find new customers for their products. Perhaps, one way to consider getting around the credit problem among SMEs for the adoption of new technology is to consider the equivalent of SME Credits, a barter system which helps SMEs buy within the network. This way, there is a greater velocity for solutions which can make SMEs more productive.
These are some of the challenges that the innovations needs to address. The endgame is growth and development, and the middlegame is more than just creating hardware or software or a few services. Whole solutions that can focus on a key critical issues and elevate the entire value chain with appropriate bootstrap measures will create the next markets and entrepreneurial successes.
Tomorrow: The Road Ahead
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