The worlds emerging markets are home to over 4 billion people. I strongly believe that the only way for these markets to transform from emerging to developing is via appropriate use of technology, especially information and communication technology. Yes, they need water, electricity and food. These are the basic requirements for them to survive. But what will make them thrive and give hope for the next generation is the intelligent use of computers, communications and information. Technology is what can transform the lives of consumers and enrich the prospects of enterprises in the worlds emerging markets.
These markets can also be technologys saviour and salvation. Even as technology overshoots what is needed in the worlds developed markets, there is an opportunity to create solutions much of it based on what already exists for the mass market of consumers and enterprises. The key lies in the pricing.
The cost of technology has to match the purchasing power, which implies a reduction in cost by 90% or more. Dollar-denominated solutions will go nowhere. And this is the reason why this market is largely invisible to the existing technology leaders. Their current customers are willing to pay their asking price. The same products are sold in the emerging markets with an approach of, If you have the money, buy our products. Else, dont waste our time. You are anyways too insignificant to our topline and bottomline.
This is a point made eloquently by CK Prahalad and Stuart Hart in their article in Strategy+Business entitled The Fortune at the Bottom of the Pyramid:
Doing business with the worlds 4 billion poorest people two-thirds of the worlds population will require radical innovations in technology and business models. It will require MNCs to reevaluate priceperformance relationships for products and services. It will demand a new level of capital efficiency and new ways of measuring financial success. Companies will be forced to transform their understanding of scale, from a bigger is better ideal to an ideal of highly distributed small-scale operations married to world-scale capabilities.
In short, the poorest populations raise a prodigious new managerial challenge for the worlds wealthiest companies: selling to the poor and helping them improve their lives by producing and distributing products and services in culturally sensitive, environmentally sustainable, and economically profitable ways.
Why? Because the annual per capita income based on purchasing power parity in U.S. dollars [of the 4 billion people at the bottom of the pyramid] is less than $1,500, the minimum considered necessary to sustain a decent life. For well over a billion people roughly one-sixth of humanity per capita income is less than $1 per day.
Can you imagine consumers and enterprises in these markets spending hundreds of US dollars on state-of-the-art Wintel-powered computers? That is precisely what is being sold to them. That is also why the 4 billion market remains invisible and unviable to marketers.
The one point that I differ on with Prahalad and Hart is the need for radical innovations in technology. I will argue in the coming columns that all the building components to target the worlds emerging markets already exist. In fact, if one has to sell cost-effectively to these markets, the R&D cost has become zero. What is needed is a radical innovation in the business model.
Tomorrow: PCs Next Markets
Technologys Next Markets+T