In an article in the Fall 2002 edition of MIT Sloan Management Review entitled The Great Leap: Driving Innovation from the Base of the Pyramid, Stuart Hart and Clay Christensen write:
Disruptive Innovations allow many more people to begin doing for themselves that could only be done either with the help of skilled intermediaries or by the wealthy before the disruptions (examples include the tabletop copier and online trading). In the past, major waves of growth have been created by innovations that have had an impact only on the bottom of developed markets. Disruptive innovations at the base of the pyramid home to billions of the aspiring poor have much greater potential than those that begin and end in developed markets.
Developing countries are ideal target markets for disruptive technologies for at least two reasons. First, business models that are forged in low-income markets travel well: that is, they can be profitably applied in more places than models defined in high-income markets.
In addition to having more adaptable business models, disruptive innovators also compete against nonconsumption that is, they offer a product or service to people who would otherwise be left out entirely or poorly served by existing products and who are therefore quite happy to have a simpler, more modest version of what is available in high-end markets.
Hart and Christensen give the example of Chinas Galanz:
In 1992, only 2% of all households in China owned a microwave-oven. Many families did not have kitchens large enough to accommodate the available models, which had been designed to fit into homes in the West. Galanz, a Chinese company, introduced a simple, energy-efficient product at a price affordable by Chinas middle-class and small enough to fit in their kitchens. As sales steadily climbed, Galanz stimulated demand by using its ever-declining cost per unit to reduce the products price. Galanzs domestic market share rose from 2% in 1993 to 76% of a much larger market in 2000. Armed with a business model that could earn attractive profits at low price points, Galanz moved upmarket to manufacture large machines that had more features. It began to disrupt the microwave-oven markets in developed markets: By 2002, its global market share was 35%.
The developing countries need the equivalent of many Galanz-like innovations to bridge their digital divides. Think of these divides as separating todays technology markets from tomorrows. The next 500 million users lie on the other side of the divide. What is needed to open up these new markets is the construction of digital bridges with disruptive innovations as their foundation. Lets call them Disruptive Bridges.
Next Week: Disruptive Bridges (continued)
TECH TALK Disruptive Bridges+T