No Frills Economy

More and more companies are starting to position their products and services with consumer affordability in mind. Innovating with price as the starting point, more companies are stripping out the undesired frills – sacrificing indiscernible differences in quality, features and standards – for portability, ease of use and most importantly, significantly lower price than the next best substitute. Think of $400 netbooks, $2,500 cars, $40 cellphones, etc.

Known as the theory of disruptive innovation by Clayton Christensen, new entrants often enter at the bottom of the market, where they are ignored by established incumbents. These products then grow by taking away significant market share to the point where they eclipse the old product. MP3 music technology, Internet long distance phone calls all entered their respective markets that way. Offering flexibility, convenience over features and sound/voice quality. Consumers want quick and dirty over slow and polished. Having it here and now is more important than having it perfect. “High-quality” or what we think of as a “better product” has a different meaning in today’s world. Suddenly what seemed perfect is anything but, and products that appear mediocre at first glance are often the perfect fit. Here’s an excellent article in last month’s Wired on The Good Enough Revolution: When Cheap and Simple Is Just Fine.

One common thread among the companies that have profited from “going no frills” and selling to the Good Enough market, is in crafting the perfect concoction of price/quality/feature tradeoffs that appeal to their new customers. Can your firm innovate to the extent that it is five times cheaper and trade down on features whose perceived value is less than five times the price? In a way, it’s simply Blue Ocean strategy with the emphasis on affordability.

Here are some ideas I’ve posted on slideshare. Enjoy!

The Adspecs

Invented by Professor Josh Silver, the Adspecs are the first (and currently only) available self-adjustable glasses that allow the user to tune their glasses to their eyes. To change the power of the lens, the user turns the wheels on the syringes on the arms to pump more or less silicone oil into the lenses (which are simply two flexible membranes, protected by a hard plastic layer), changing their shape. When done, the user simply tightens the screws on each side of the frame and cuts off the syringes and tubing – transforming the Adspecs into a normal pair of glasses in a few minutes! This is great for countries with not enough optometrists. Prof Silver’s goal is for Adspecs to reach a billion of the world’s poorest people by 2020.

Emtech India 2009

Finally got around to doing a quick summary of my takeaways for Emtech India 2009. I’ve mentioned before that my primary aim, which is also the aim of Emtech India, is to see what disruptive innovations will come from India, specifically Bottom of the Pyramid technologies. If India gets this right, it will unlock a lot of potential of its rural areas and slums.

What I came away with was there was plenty of innovation from the bottom of the pyramid. This series of Discovery Channel “My Technology” commercials shows it amply.

But what also came up in the conference was a certain sense of stuckness and tiredness, a repetition of what has been heard (like one laptop per child). What’s holding bottom of the pyramid developments back? I can certainly sense a lack of infrastructure to commercialise the innovations arising from the people living in the bottom of the pyramid, and a lack of infrastructure or incentives to scale it for mass production. mChek is the most promising app I came across, but is that it? Or was it Emtech India 2009 that did not do justice to this rich topic? I told the organisers that the discussions were not deep enough, plenty of banalities and corporate spiel I can put up with, but I want to hear business cases on what worked, what didn’t work. Having the MIT name will pull people to attend once, but it had better be good for the second or third round. I summed up some of my thoughts in a quick and dirty .ppt posted on slideshare below.The raw notes are on ipaper here.

I enjoyed interacting with the many MIT alumnis at the conference. So many MIT/IIT alums who also went to Sloan, Chicago, Stanford MBA schools, India’s elite brains are incredible. There is so much promise.

Willie Smits restores a rainforest | Video on TED.com

Wow, this is what I want to see for BOP. A case study on how to viably create rural wealth, especially in devastated areas. By piecing together a complex ecological puzzle, biologist Willie Smits has found a way to re-grow clearcut rainforest in Borneo, saving local orangutans — and creating a thrilling blueprint for restoring fragile ecosystems. Original TED link here.

How would we be able to scale this up? I remember one line of inquiry I put aside, on ecosystem services to restore natural wealth in a profitable people centered way. Looks like this is a signal to relook again.

Emerging Asia’s middle classes

Some random thoughts on emerging Asia’s middle classes, which under the Chasm model become crucial sources of demand. Adeline dug up the Asian Development Bank’s report on the myth of Asia’s decoupling.

View this document on Scribd

Remember I mentioned that G3 accounted for some 60+% of final demand? Well, China was only 6.4% of final demand, about a tenth. Meaning that while emerging Asia trades much among ourselves, it is because of MNC supply chains and not because we are developing each other’s markets. This crash will probably force us to ‘get religion’. hah hah.

Having said that, the Economist in a recent special talked much about the emerging markets’ middle classes, and I’ve been digging up McKinsey’s reports on China and India‘s middle classes and consumers. There are some surprising points like how India is closer to the USA and Japan in terms of private consumption, and India may be a better consumer play than China is.

From Bates 141, an excellent overview of change in what they call the emerging Asias (plural). A thoughtful snapshot of cultural and consumer changes through a non-monolithic Asia. Useful as signposts for the emerging Menagerie.

View this document on Scribd

But that is only one part of the four sub-economies. There’s the crucial rural market that we don’t really know how to approach. I’m hoping to get some light from that when I fly to New Delhi this weekend for next Monday and Tuesday’s MIT-organized EmTech conference, with a focus on Bottom of the Pyramid models and technologies.

Ultimately, Singapore is not a product play, it is a service play. What are the BOP services we can deliver that India and China cannot deliver to their people? Worth considering.