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Innovating for Asia’s BOP

Can dinosaurs dance?
Oct 11th 2007 | From The Economist print edition

Responding to the Asian challenge

ARE consumers in India and China too poor to afford high-quality Western goods? That used to be the old idea of doing business in these countries as firms offered watered-down versions of their products at reduced prices. Mr van Houten, of chipmaker NXP, says Indian and Chinese consumers are forcing multinationals to design sophisticated products that more closely meet their needs, and this is making firms operating in Asia better innovators.

By recruiting ingenious local engineers and designers in places like Bangalore and Beijing, and paying close attention to trends and practices in the market, firms are coming up with products and services that can be sold in other parts of the world too. Nokia’s engineers are finding that many Chinese and Indians access the internet mainly through their mobile handsets. Such customers’ requirements of their handsets may therefore be quite different to those of Western users, many of whom have computers at home and at work.

GE’s research lab in China has come up with a simplified magnetic-resonance imaging machine that costs a fraction of the one it sells in rich countries. The firm now plans to sell it worldwide. Wenda, a question-and-answer “knowledge community” product developed by Google in China to help overcome a lack of local content, was launched in Russia in June.

Unilever has long had a strong distribution network in India, but it has expanded its efforts with a division called Shakti, which provides Indian women’s self-help groups with business education and the chance to earn a living selling cheap sachets of Unilever products. The effort has proved so successful that Unilever introduced a high-tech element: the Shakti entrepreneurs now run kiosks with personal computers which villagers can rent to send e-mails and browse the web for things that can make a big difference to their lives, like market prices.

Alan Lafley, who ran some of Procter & Gamble’s Asian businesses before getting the top job at the American company, says many Asian firms began imitating what foreign ones did but are now “very innovative, especially with business models”.

Mr Lafley sees Indian firms shaking up the way foreign companies operate, and not only with back-office services where many began. Hours after he uttered those words, Wipro, an Indian pioneer of software services said it would open a new development centre in Atlanta, Georgia, that will report to its headquarters in Bangalore.

This is forcing P&G to innovate in other ways too. Mr Lafley uses the example of detergents in China, where the company is using a low-cost manufacturing method which he likens to Coca-Cola’s “syrup” model, which supplies a concentrate to local bottlers. P&G provides secret, high-value “performance chemicals” to Chinese partners, who add basic ingredients and packaging before distributing the products.

4 Comments to Innovating for Asia’s BOP

  1. October 12, 2007 at 5:06 pm | Permalink

    CK Prahalad stated that catering to the BOP cannot be done by dumbing down products and services, but by improving them and introducing efficiencies.

    From practical experience both Ashok Jhunjhunwala of the TeNet Group at IIT-Madras and Hans Wijayasuriya CEO of Dialog Telekom have testified to the need to do more and work smarter to serve the BOP.

  2. Dee's Gravatar Dee
    October 13, 2007 at 12:25 am | Permalink

    Nokia’s global survey on peer-to-peer gaming found that Indians spent the most time gaming compared to their counterparts across the world. N-gage did exceedingly well in India when it bombed in other markets. The Nokia communicator, a hulk of a phone did poorly in most countries except Indonesia. It did so well in that country that the CEO of Nokia launched a gold-plated version for Indonesia in Jakarta. Nokia markets the N95 aggressively in India, for a $900 phone it is selling well.

    The point of this is to underline that BOP isn’t the only attractive market in India. Even if 1% of Indians can afford $900 mobiles it is a potential market for 5 million units.

  3. Chanuka's Gravatar Chanuka
    October 15, 2007 at 8:51 am | Permalink

    In the pre-liberalisation days innovative low cost local products in India, were many.

    Remember, Sam Pitroda’s ubiquitous, yellow-signed Public Call Offices (PCOs)? He used un-sophisticated robust Indian technology to build these during the license raj.

    Then India did manufacture (at least partially) most of the computers and peripherals it used. I have used old Indian XT machines. Wipro brought the printer head and motherboard from Epson to make their own dot matrix printers. The appearance was not good, but they performed. Prices were very affordable when compared to the Epsons.

    In the post-liberalisation era, people had money so no need for anyone to opt for these low cost products. The booming IT industry absorbed the talented engineers, so killing the research aimed at BOPs.

    This happened in other industries as well. Remember how many local soft drink brands boomed in the absence of Pepsi and Coca colas? Remember the chota chota burger joints everywhere? (which McDonalds might have killed)

    I guess this is the negative impact of liberalisation, which we have to accept. Such innovations rarely come from multinationals. Marketing people of multinationals are more interested in showing high profit margin cash cows to their superiors than presenting low cost innovative products or models.

    This landscape can only change with increasing competition. However it will take some time because TOP markets in India are not adequately saturated yet for everybody to take BOP seriously.

  4. October 7, 2008 at 11:51 am | Permalink

    i like joind ur company. do u have a wany vacencey? if you vacencey call me. make swear.

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