Developing World Companies and Innovation

HBS Working Knowledge looks at learnings from companies in the emerging markets, and “how three businesses in developing countries overcome a lack of resources to succeed.” The companies: CEMEX (Cementos Mexicanos), the Mexican cement giant; Natura, a leader in Brazil’s cosmetics arena; and China’s Haier, which sells appliances in one of the world’s most demanding markets.

Know your customers’ mindsetsintimately: Employees of China’s Haier, for example, discovered through visiting rural customers that they frequently used their washing machines not only to launder clothes but also to clean vegetables. By making a few minor modifications to the washers they manufactured, Haier was able to market the machines as versatile enough to wash both clothing and vegetables, and rapidly became the market leader in rural areas of its home country.

Innovate aroundrather than throughthe technology: Consider the challenge of delivering ready-mix concrete. Contractors often change their orders at the last minute, but CEMEX found that, on average, it took three hours between the time when a change order was received and when the order could be delivered. To decrease turnaround time in its Mexican market, CEMEX equipped most of its fleet of concrete mixing trucks with global positioning satellite (GPS) locators, allowing dispatchers to arrange deliveries within a twenty-minute window, versus the three hours CEMEX’s competitors require. This systemwhich did not emerge from a central R&D lab but rather from CEMEX’s internal innovation efforts, as described belowhas allowed CEMEX to increase its market share, charge a premium to time-conscious contractors, and reduce costs resulting from unused concrete.

Scour the globe for good ideas: Recognizing that the company could never compete on technical innovation with global competitors such as Procter & Gamble, Este Lauder, and Shiseidoall of which spend hundreds of millions of dollars on R&D every yearNatura’s executives have developed close connections with universities in France and the United States, and license technology from universities and research centers around the world. Says Philippe Pommez, Natura’s R&D director, “The hard part is not finding the new technology; it is knowing what you are looking for. This is where our conceptualization of new products and new lines that serve local needs becomes indispensable.”

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Rajesh Jain

An Entrepreneur based in Mumbai, India.