MTI Innovation in Emerging Economies


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What is the result ofinnovation blowbackfrom emerging

economies?


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Emerging Economies reinventing business models &

systems of production & Distribution es ern s regar ng emerg ng econom es as

sources of economic growth & high quality brainpower

beyond upper class Opportunities & Threats

,economies coming back with frugal innovation

to it due to disruptive nature


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nations turning the

economies? What

from their success


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What is driving emerging market

innovation?

Emerging markets are far more varied and volatile than

mature ones ere s e money aroun

Cultural complexities are confounding and tastes are

People who are not used to brands move easily from

Heavy investment in education


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What is driving emerging market

innovation?

As companies work their way down the income pyramid,

distribution becomes tricky o ern re a c a ns accoun or on y a r o consumer

goods sold in China and a fifth in India

surprising innovations and even generate entirely newbusinesses

Companies in search of fortune at the bottom of the

pyramid have to start not with consumers but with non-consumers


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Re lacin scalin u b scalin out

Decentralization

Outsourcing e u mo e

Designed to help companies mobilise resources when theneed arises

Flexibility increases Application of mass-production techniques to sophisticated

services Disruptive/Frugal Innovation

Redesigning both products and processes from scratch to

Value-for-money strategies for recessionary times


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Constraint-based innovation or reverse innovation

Different from fiddling with existing products Taking the needs of poor consumers as a starting point

and working backwards

nstea o a ng more e s an w st es, t ey str p t eproducts down to their bare essentials

Hand-held electrocardiogram (ECG) called the Mac


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Frugal innovation is not just about redesigning products

business models

more customers, and accept thin profit margins to gainvolume

Apart from being cost efficient, frugal products need tobe tough and easy to use

Nokia handsets

flashlights (because of frequent power cuts) multiple phone books (because they often have

several different users)

menus in several different languages


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Frugal does not mean second-rate

technology

materials and their impact on the environment

1. Contract out more work - Bharti Airtel

.

TCS is looking at using mobile phones to connect

television sets to the internet3. To apply mass-production techniques in new and

unex ected areas such as health care

Dr. Devi Shetty - Narayana Hrudayalaya Hospital


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Jugaad Making do with what you have & never giving

Chinese have made two distinctive contributions to frugalinnovation

Use of flexible networkspowered by guanxior personalconnectionsto reduce costs and increase flexibility

Bandit or Guerrilla innovation, known as shanzhai


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highly diversified conglomerates

Inabilit of ca ital markets

Talent shortages

Brand buildin

Many emerging countries also rely heavily on state-owned enterprises

Local entrepreneurs can use them to seize business

opportunities Multinationals can use them to gain access to difficult

markets


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Disruptive Innovation Why will it

Markets for cor orate control are much more li uid

be quicker than in the past?

Emerging economy companies keen on M&A

China in 2007

30 billion $ outbound deals (60 % more thanrevious ear

5 billion $ inbound deal more than previousyear

India in 2007

35 billion $ outbound deals (5 times more thanprevious year)

10 billion $ inbound deal more than previousyear


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eer s ze o t e emerg ng mar ets

Japanese expert in few engines i.e. cars & electronics But emerging-market export machine has engines in

almost every industry

.g rce or a , n osys an , a er e c

Producing world class products & processes


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Em hasis on volume


Emerging-market companies are obsessed by finding

new markets to make u for their slim rofit mar ins Mobile-phone companies have been adding 8m-

10m new subscribers a month

Wests best companies have grasped the potential ofemerging markets

West is ripe for frugal innovation.

Western consumers and governments have been ona debt-fuelled spending spree for many years


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Heads Tails

.

Customers have always been put first and the

objective has been to cut costs.

counts as innovation.Extending Henry Fords Innovation to heart &

eye surgery Very Innovative.

No such thing as single emerging market, letalone emerging market paradigm - India inservices China in manufacturin Russia and

Similar Challenges Large number of peoplebelow poverty line . Similar opportunities- Rapideconomic rowth. Joint venture - Mahindra

Brazil in energy & commodities working with Chinese companies, Huawei hasopened research center in Bangalore, GE sellsits electrocardiograms as successfully in China

.

Overselling Emerging Markets - India ranked

133rd out of 183 for ease of doin business.

India & China investing heavily in business

schools ISB 16 , Hon Kon Universit ofScience and Technologies (14) Emergingmarkets firms are leapfrogging there Westerncounterparts such as Mobile money in Kenya,

Shift in interest towards emerging nations forleading business gurus like CK Prahalad


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What are the emergingMNCs from theseeconomies?


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Accounts for 6% of Indias GDP

u s ar es n automo es, osp ta ty, te ecom & ot ers

Uses Capital from established businesses to supportgrow n new ones

Uses resources to attract & train the best people

ses ran name o se a n s o pro uc s

Brand is estimated to be worth about 100 billion rupees

otors

Worlds Cheapest Car, $2,200 TATA Nano


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Tata Consultancy Services

Innovation for Indias most pressing problem Drinking Water

Uses Rice Husks n a nves men o recurr ng expense o every ew mon s

Already developing new & improved version for future

Produced 1m, hopes to sell 100m in the future

Fortune At the Bottom Of the Pyramid Installed sensors in rural areas to gather local soil & weather conditions

Farmers call help lines on their mobile phones & receive advice on bestproducts to use which creates a market

Box that connects television to the Internet through a mobile phone

Elegant & Frugal idea can connect millions of people to the Internet Bought Citigroup Global Services

Outsourcing Division of Citibank


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HCL

Reliance Industries .

Bharti Airtel

Ac uirin Zain for $9 billion

Charges Lowest Fees in the industry Outsourced all its work to Ericsson & IBM

Made companies rethink their business models

Hindalco se success on o we p anne acqu s ons

Revenues grown from $500 mn to $15 bn in seven years


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In 1990, unknown producer in Indonesia

,

ITC

One of the bi est Indian con lomerates

Internet Kiosks called E-Choupals help farmers manage demand& supply efficiently

uture roup

Innovation through organised chaos in its stores

o re oyce anu ac ur ng

Developed $70 fridge that runs on batteries


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Retail Stores that offered line of credit to customers

,

One of the countrys biggest network of banks & retail stores

Dachan ian China

Motorcycle maker works with 100s of part suppliers Li & Fung (Hong Kong)

Works closely with 12,000 companies in more than 40 countries

Puts together customised supply chains & ensures quality& on-


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Extremely good at market segmentation

SAB Miller (South Africa)

Prior to 1990 was a local South African brewer, now the worlds

2nd

largest Lenovo (China)

Did not exist in 1990

Bought IBMs PC business & is now worlds fourth largest PC


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Thank You!

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MTI Innovation in Emerging Economies