Skip to 0 minutes and 9 secondsWelcome! We have established that emerging markets - particularly from Asia - are not necessarily followers anymore in the innovation world order. At the same time it is still true that emerging markets, in some respects at least, have a less developed innovation infrastructure and less established consumer practices. This may hamper commercialization of advanced market practices. What does this mean for advanced market managers? Do emerging markets still offer a commercialization opportunity if they suffer from less developed infrastructures and consumer practices? The answer is a resounding yes, particularly if you are facing very established regulatory or customer practices in your own advanced markets which are holding you back progress to the next innovation generation.

Skip to 1 minute and 6 secondsIn that case emerging contexts may allow you to leapfrog to the next innovation generation making them a great place to engage in innovation advances beyond what is done in the US, Europe and Japan.

Skip to 1 minute and 22 secondsLet me give you a few leapfrogging examples

Skip to 1 minute and 26 secondsFor instance, a new category of so-called FinTech or financial technology companies are applying internet platform technologies to improve financial services across the world. Did you know that four of the five largest FinTech platforms in the world are Chinese? That is because about 75% of the Chinese population, that is no less than a billion people, are « underbanked », that is they have no or very little access to financial services. Services that are taken for granted by Western and Japanese customers. As a result, in 2017, 69% of digitally active Chinese were using fintech services. India is following with 52% of fintech services. Germany, the United States and France by contrast, are lagging very far behind, barely attaining half the Chinese figures.

Skip to 2 minutes and 24 secondsLet me give you another example, less developed road and healthcare infrastructures mean that governments and healthcare professionals in Rwanda and Kenya are much more welcoming to innovations in respectively drone technology and on-line healhcare education. Some Western startups are jumping on these opportunities. This helps them leapfrog other Western companies that stay at home to next generation innovations.

Skip to 2 minutes and 55 secondsAnother reason to learn to innovate from and for emerging markets is rooted in the global wealth pyramid and the rise of emerging market challengers. Let’s have a look at the global wealth pyramid to understand why. The world population reached 7.5 billion in 2017. Let’s assume at least a billion of them are too young to be considered potential customers. That leaves us with 6.5 billion potential customers ine the global wealth pyramid; 500 million of which make up the top tier. These are the people across the world earning more than 20,000 dollars a year. A second tier is made up of about 2 billion people who earn between 1,500 and 20,000 dollars a year.

Skip to 3 minutes and 45 secondsFinally, the base of the pyramid is populated by no less than 4 billion people earning less than 1,500 dollars a year. Advanced and emerging market firms approach this wealth pyramid from opposite angles. North American, European and Japanese firms first target the top tier, while emerging market firms from Asia, Latin America or Africa typically target the Second tier and the wealthier amongst the base of the pyramid. Over time, advanced market firms go down the pyramid, while emerging market firms go up; That is the emerging battle for the global middle classes. In the next step we’ll explain how advanced market firms can successfully innovate for and from emerging markets by co-evolving with local innovation contexts.

Skip to 4 minutes and 39 secondsWhile hard to crack emerging markets provide a unique opportunity for advanced market managers to start new innovation trajectories, challenge old ways and in some cases get a new lease of life. We’ll broach the example of Volkswagen to illustrate exactly this most clearly. So please stay tuned for the following!

Why should advanced market firms innovate for and from emerging markets?

In this video, we discuss why advanced market companies should innovate for and from emerging markets.

We zoom in on two arguments in particular:

  • innovation leapfrogging opportunities

  • and the global wealth pyramid, which acts as the scene for an emerging battle for the global middle classes.

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This video is from the free online course:

Innovation Strategy: Challenging the Usual Suspects

Université Libre de Bruxelles