The Future Of Innovation In Emerging Markets

Dr Marko Torkkeli

The nature of innovation activities aimed at developing products for future emerging markets (such as Mexico, Indonesia, Pakistan and Turkey) differs markedly from the nature of innovation activities which focus on the needs of developed markets. In particular, in the case of emerging markets, one cannot succeed by offering just "updated" or cheaper versions of current products or services, since there is a need to create genuinely new products, services and business models based on local customer needs, as well as to develop new kinds of value networks.

On emerging markets, especially disruptive innovations will be important. This is because the focus of innovation activities must be on discovering unmet needs or "opportunity gaps" where existing products, services do not fulfill the needs of their customers. As C.K. Prahalad has emphasized, the needs at the Bottom of the Pyramid (social and economic) around the developing world are the great unknown and therefore provide numerous product and service innovation opportunities. Innovations related to energy, infrastructure and the environment, as well as to social networks and information infrastructure/transfer, in these countries are therefore among the key issues to consider in innovation strategies. Consequently, innovations in emerging markets are also often so-called "social innovations", which means that a company not only tries to increase its profitability and create growth, but also tries to find solutions for social needs or problems in cooperation with local actors. All this requires new approaches to innovation processes and new capabilities from a company.

A good example of this kind participatory approach to innovation and creating new markets comes from Nokia. That is, field observations in Uganda had demonstrated that people only rarely could afford their own personal mobile phones, so that often an entire family would share one cellphone. Therefore, in response, Nokia developed a sharedphone device which permitted up to five separate profiles, contact directories and other personalization features for the single phone (i.e., with this device each family member could have his/her "own" phone). And later, as these family members become accustomed to using Nokia's phone, this invention greatly increased the likelihood that they would later purchase the same brand - thus increasing Nokia's sales.

The bottom line here is that anticipating future needs and trends in emerging markets requires considerable efforts from a company. The company must carefully observe how people live and behave at the bottom of the pyramid in order to identify the "weak signals". Only through shifting the focus from efficiency issues and streamlining costs can a company better understand users and their needs that lead to the effective design of new products and services. Companies thus need to address the business challenges and opportunities of emerging markets by developing more user-centered design processes and integrating them to their business models.

Article © 2009 Dr Marko Torkkeli. All rights reserved.

about the author...

Dr Marko Torkkeli

Dr Marko Torkkeli

affiliation:   Lappeenranta University Of Technology

position:  Professor of Technology and Business Innovations

country:  Finland

area of interest:  emerging markets

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