Developing market-creating innovations in emerging markets

For over a decade I have been thinking about doing further study whether a masters, MBA, LLM or even a PhD. For various reasons I haven’t pressed the button on anything, although in 2019/20 I did get close.

I had just read a brilliant book called the “Prosperity Paradox” by Clayton Christensen which discusses why so many investments in economic development fail to generate sustainable prosperity, and how investing in market-creating innovations can create lasting change.

I was immediately hooked, although I was biased. I had focused my undergraduate business honours thesis on a former book by the same author called “The Innovators Dilemma”.

I found a few universities with suitable programmes and sent off applications. In the end I didn’t proceed with the offers but I thought it would be worthwhile to show the summary application and proposed research topic, approach and key areas to investigate. I still may look to explore this topic in the future albeit in a different way e.g. research, articles, consulting etc.

Proposed PhD Research title

“Developing Market-Creating Innovations That Drive Prosperity in Emerging Markets”

Background

The historic approach to improving outcomes and prosperity in emerging economies has typically focused around ‘poverty alleviation’ whereby private-sector companies and start-ups exploit existing markets at the top or ‘bottom of the pyramid’ (Prahalad 2004), or other initiatives which ‘push’ international aid, grants, loans, outsourcing, or incremental (‘sustaining’) improvements to existing offers for established customer bases. More recently, a number of leading management researchers led by Clayton Christensen (2019) argue that more successful approaches may lie in creating or ‘pulling in’ new market innovations that enable significant numbers of non-consumers to easily and affordably find a product or service to help them overcome daily struggles or solve an important problem. Pursuing this strategy (distinct from other types of innovation including ‘sustaining’ and ‘efficiency’ innovations), established firms and founders[1] typically see opportunity in the struggles of their respective frontier markets by targeting non-consumption in the broader market, creating not just products and services, but entire ecosystems, enabling infrastructure, networks and jobs to promote stability, prosperity and sustainable economic growth. Despite this opportunity, in 2016 alone, the OECD estimated that $143 billion was spent on official development approaches. Christensen (2019) however asks that what if this was instead channelled to support direct market-creation efforts in developing countries, even when those circumstances seemed unlikely? Some examples of market-creating innovations (MCI) are listed below:

• M-PESA: A mobile money platform that enables the storage, transfer and saving of money without owning a bank account;
• MicroEnsure: Affordable insurance for millions of people living on less than $3 a day;
• Celtel: A pay-as-you-go mobile phone service that enables customers to purchase cell phone minutes from as little as 25 cents;
• Galanz: An inexpensive microwave oven for the average Chinese citizen;
• Tolaram: A tasty, inexpensive, easy-to-cook meal in Nigeria that can be prepared in less than three minutes;
• Grupo Bimbo: Affordable, quality bread for Mexicans;
• Ford Model T: An affordable car for the average American in the 1900s;

Topic

My PhD research will seek to build on these themes and the work of Christensen (2019) and others (Prahalad 2006; Auerswald 2012; Quadir 2014) to better understand the following key questions: How do established firms and start-ups successfully build market-creating innovations (“MCIs”) in emerging markets? Why are some firms successful, and others are not? The research will address gaps in understanding highlighted by Christensen (2019) in terms of further defining the process by which new markets are created, the characteristics that set market-creating innovators apart, and more details into the role of non-consumers (‘non-consumption economy’) in this process. In addition, my research will improve understanding of the relative importance of external factors which facilitate (or inhibit) success, including government, ecosystems, NGOs, investors, skilled labour, infrastructure, networks, and partners. The extent of benefits that MCIs deliver for society in terms of driving inclusive, sustainable and prosperous development across sectors including education, health, financial services, energy, and communications will also be analysed. Finally, the findings will deliver practical guidance, frameworks and insight for a wide range of international companies, entrepreneurs, governments, investors, thinktanks, and NGOs who pursue (or are looking to pursue) strategies and investments in emerging markets, or alternatively use the learnings to apply in more developed contexts

References

C.K. Prahalad, The Fortune at the Base of the Pyramid: Eradicating Poverty Through Profits (Upper Saddle River, NJ: Prentice Hall, 2006)

Philip Auerswald, The Coming Prosperity: How Entrepreneurs Are Transforming The Global Economy (Oxford University Press, 2012), 58

Iqbal Quadir, “Inclusive Prosperity in Low-Income Countries,” Innovations 9, no. 1-2 (2014): 65-66

Provide a statement of your research interests and intended research topics:

Research interests:

My research interests focus on how organisations innovate (across processes, practices, products, partnerships) in various contexts, including geographical (e.g. emerging or developed markets), new markets (e.g. non-consumption economy, consumer insight, go-to-market), operational (e.g. outsourcing, resource allocation, incentives, portfolio management, projects, change), offerings (e.g. new product development), technological (e.g. emerging technology), competitive (e.g. start-ups, business models), strategic (e.g. organic, M&A, JVs), human (e.g. leadership, culture, talent, skills), ecosystems (e.g. networks, partnerships, knowledge, public-sector), and sectoral (e.g. education, health, financial, energy).

I will use my many years of relevant professional experience working across most of the above topics (whether as an academic, lawyer, consultant, or founder) to ensure that the PhD research makes a substantial contribution to the academic research (see research questions), and provides practical insight for critical strategic and investment challenges for industry stakeholders (e.g. multi-national companies, investors, public sector, NGOs, etc).

Research topic:

My PhD research will seek to build on the themes of my research interests, and the work of Christensen and others to help answer the following question: How do established firms and start-ups successfully build market-creating innovations (“MCIs”) in emerging markets?

Core research questions include[2]:

• What is the process by which these new markets are created?
• What is the MCI development process within established and new (start-up) firms? For example, opportunity identification, development, investment, launch and scaling;
• Why are some firms and efforts successful, and others are not?
• What is the role non-consumers (‘non-consumption economy’) play in this process?
• What are the qualities that set market-creating innovators and firms apart? For example, the ability to identify possibilities where there seem to be no customers;
• What are the characteristics of the most successful (and unsuccessful) MCIs?  For example, business models, attributes, targeting non-consumption, value networks, ecosystems, partnering;
• What are the most important internal and external conditions which facilitate or inhibit this process?
• What commonalities exist across nations, sectors, firm size, age, or other variables?
• What is the role of other key stakeholders in MCI development? For example, government, NGOs, investors, ecosystems, networks;
• What are the key benefits for society, sectors (e.g. education) and stakeholders (e.g. government) from MCIs which deliver inclusive, sustainable and prosperous development?
• What are the future implications for private and public sector organisations (e.g. companies, government, investors, NGOs etc) who wish to facilitate the future development of MCIs, or take the learnings into other developing (or developed) markets?

The below diagram describes the research focus areas and questions relevant to be asked:

Some anticipated research parameters may include a focus on:

• Products/services and ventures which create new markets (“MCIs”) and benefits for large segments of the population, as opposed to product improvements (“sustaining innovations”) or efficiency gains (“efficiency innovations”).
• Sectors that play key roles in prosperity development including education, health, financial services, communications, food and water, energy, and technology;
• Data collection in a wide selection of geographies including BRIC nations, developing and developed nations (e.g. US), although the feasibility of this may prove problematic thereby requiring a more vertical approach (e.g. narrow to a few nations);
• A time horizon of MCIs created post-2000 to capture more recent examples of MCI development;
• An inter-disciplinary research approach given the wide-ranging research topic, building on academic researchers in fields including strategic management, strategic marketing, disruptive innovation, new product development, consumer insight, technology and operations management, innovation, organisational behaviour, leadership, emerging market strategy, international and economic development, and public policy;
• Hybrid data collection strategy: whilst the research scope (e.g. companies, countries, sectors etc) and data collection strategy has yet to be defined, it is expected that a hybrid approach which mixes both qualitative and quantitative methods with primary and secondary research might be the most appropriate.  For example, face-to-face interviews, online surveys and case studies can help collect primary data to define firm MCI development processes. However, firm performance and development benefits (e.g. social, economic, and sectoral) will require quantitative analysis of public records and databases, as well as any additional internal data from private companies or government agencies.

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[1] Examples of successful market-creating companies include Celtel (Africa), GrameenBank (Bangladesh), M-Pesa (Kenya), MicroEnsure (Africa), Jio (India) and Ford Motors (US) in the 1920s

[2] I have a range of sub-research questions but in the interests of brevity I have not included here.

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The REIGNITE! 2020 Report

“Many have compared the COVID crisis to armed conflict … Once this war against an invisible enemy is over, our ambitions should be bolder – nothing less than to make a fit planet for our grandchildren to live on” – Mark Carney, Former Governor, Bank of England

After a few months of research, analysis and writing during lockdown, I am pleased to be able to finally share insights from one of the largest single studies of strategic responses of Guernsey firms to the COVID-19 pandemic (“crisis”) conducted to date.

You can access the full report here, or below I have pasted in the key sections.

Background

Between April and June, I surveyed 439 senior leaders across Guernsey, UK, EU, US, APAC using a 15 question open-ended online survey (see below):

Why?

Given the nature and scale of the pandemic, this really is a once-in-a-lifetime opportunity for organisational behaviouralists to understand what is going on in terms of how firms, leaders, employees and other stakeholders are responding over time.

Specifically, for leaders and firm the findings hopefully help with the following:

New Insight: Leaders and teams can better understand the strategic responses of large and small firms across many different sectors to the crisis, and the complex consequences, behaviour, and implications it has had on firms, people and customers

Priorities: Leaders and teams can learn about the priority focus areas and big opportunities for leaders to better structure and get to work to rebuild and reignite performance

Behaviours: Leaders and teams can learn the new leadership styles, cultural behaviours, mindsets, and ways of working needed to turn crisis into opportunity

Key Findings:

We identified 6 areas of insight for leaders and firms:

1. Evolution AND Revolution

• 5-10 years of change in 5 weeks for many sectors
• Rapid acceleration of many pre-existing structural trends (e.g. cloud, flexible work, e-commerce, up-skilling) and new behaviours likely to endure
• For many change will likely be evolutionary but for others it will be revolutionary with increasing pace of change e.g. retail.
• Leaders must continuously identify, evaluate and scenario plan for the right market signals, trends and new consumer behaviours
• Firms who don’t do this, get it wrong or go too slow risk disruption, market share loss or other business risks

OPPORTUNITY: The top 5 key trends impacting your firm today will provide the investment roadmap for your next 24 months

2. Trust As A Differentiator 

• There are complex dynamics at play and business and moral imperatives for leaders to assess the impact of the crisis on the human psyche which has affected people in many different ways
• The “psychological contract” between employer/employee has also shifted for many, and firms must now not assume ‘old’ practices were the right ones.
• Traditional work assumptions have been challenged, as as well complex issues around safety, mental health, inclusivity, belonging, empathy, EQ, culture, power dynamics, and expectations on leadership styles 

OPPORTUNITY: The firms who get these complex dynamics right will become the new employers/brands of choice 2021+

3. Digital Acceleration 

• The crisis has shown that rapid change at speed and scale is possible using digital and cloud in the short-term.
• Rapidly advancing and converging technologies combined with increasing human capabilities, new business models and ways to organise and lead are needed.
• Digital laggards and firms with limited customer-centricity will get left behind due to external forces and competitive intensity

OPPORTUNITY: Put digital at the centre of your corporate strategy, align leaders on digital acumen so every CXO is a Chief Digital Officer for their function, upskill workers, and prioritise the top3 digitising opportunities beyond back-office operations into more advanced worker productivity tools (e.g. automation, AI, analytics), superior customer experiences, new products/services and ecosystem collaborations/ventures

4. New Skills, Mindsets and Ways of Working

• As a shift to ‘smarter working’ means different thing to different firms, it is important to define what it is, what it means for the firms and employees, and what are the expected behaviours, required, skills, mindsets, and ways of working.
• Continued experimentation is required to engage with workforce, test models, gain feedback, learn best practices, and repeat, but the risk is many firms will likely revert to old habits and practices which will jeopardise trust with their talent
• This process is critical as learnings will likely have firm-wide impacts to entire workforce and processes, practices, culture and strategies e.g. training, performance management, corporate values, recruitment, rewards, policies, agile methods

OPPORTUNITY: Whilst firms who prioritise and commit to this will adjust more quickly to the landscape, those who use intentional cultural design as the agent of change will build a stronger platform than peers for longer-term success

5. Resilience And Adaptability 

• Whilst many firms are making cuts to ride out the storm or shutting down permanently, our research identified many entrepreneurial firms who adapted quickly with new business models AND in parallel also focused on financial restructuring (e.g. loans, capital raising) and enhancing productivity (e.g. software, up-skilling), better utilisation (e.g. re-deploying staff), or improving customer experiences (e.g. online ordering via Facebook Commerce).

OPPORTUNITY: The firms who get the right but very difficult balance of resilient best practices, innovation for growth with longer-term exploration, and agile/new ways of working will be well-positioned to outperform peers and last for the longer-term

6. Increasing Leadership Complexity 

• Given the nature of the crisis, for many leaders it represented a call to action to adopt both crisis management AND people-focused behaviours such as empathy, self-awareness, openness, vulnerability, and EQ
• The best leaders will also now spend more time on longer-term growth and innovation planning and exploration

OPPORTUNITY: Self-awareness is critical for leaders to start addressing skills gaps. Those who do and forge more trusting, purposeful, inclusive, authentic, and empathetic workplaces will retain (and be able to hire) the best talent and rebound faster then competitors

Survey Results

The survey results showed that the crisis has impacted organisations in many different ways over time. Some have had headwinds and tailwinds, but many have been caught in the middle.

The challenge now will be for leaders to be ‘open’ to understanding ‘what is going on’ inside and outside the firm, evaluating the degree to which each is relevant and to what extent, and then planning and executing an appropriate response.

Confidence

Whereas 92% of international respondents were confident of being able to get through the crisis, only 64% of Guernsey respondents felt confident

Speed                                 

96% of respondents indicated that their firms were able to respond to the crisis fast (52%) or extremely fast (44%);

Impact          

22% of firms were unable to operate due to the crisis

Change

Smarter working (34%), new technologies (33%) and new offerings (22%) were pre- planned changes that were accelerated due to the crisis

Work     

47% of respondents saw no changes to their work (i.e. work remotely) with the remaining undergoing disruption including job losses (15%). Adapting to virtual meetings (26%) and new ways of working (27%) were the major changes to jobs/skills

People

Employee safety and well-being (31%) were the major areas of people focus

Leadership                       

Empathetic leadership (25%) with strong communications (23%) were the major leadership behaviours demonstrated

Technology  

Desktop and mobile video-conferencing (VC) tools (46%) and cloud-based document and collaboration software (28%) were the most valuable technologies

Culture

Supportiveness (30%) and team spirit (20%) were the most valuable cultural attributes

Processes

New ways of working (18%) and new technologies (18%) have been the most important processes to improve

Innovation + Growth

 Interestingly, only a small number of firms  innovated with new channels or offerings (7%), with 12% engaging more with clients/partners (12%), and 14% indicating ‘no innovation’

What survey respondents said about the impact of the crisis on:

 IMPACT:

“Categorisation of business critical role and function for immediate, should and medium term. Anything out of above scope, amended, reduced or halted. Focus is on surviving the immediate challenge and preparation for reopening” – Hotel Owner

 SMARTER WORKING:

“The crisis has enabled more working from home flexibility, more focus on work life balance in times like this where stress and anxiety are a big part of many employees’ lives” – Director, Training Firm

CHANGES:

“More areas of focus needed include managing mental health and wellness during and after the crisis; planning for the ‘new normal’, whatever that may be, and likely to be different in many ways to how we worked before COVID; and reintegration – thinking carefully about how we transition back to face to face after a sustained period of disruption, easily underestimated and ignored as a potential challenge”– Management consultant

LEADERSHIP:

“Empathy, transparency, and authenticity. For example, our MD did a WebEx from his daughter’s bedroom for all to see” – Sales Director

CULTURE:

“Agility, flexibility, ability to make quick decisions” – CTO

TECHNOLOGY:

“The crisis has sped up the utilisation of tools such as Microsoft Teams for meetings, e-signature software and other tech which will assist both with internal and external customers moving forward” – Investment Banker

GROWTH + INNOVATION:

We have built industry specific thought leadership and points of view that have historically fallen down the list behind client work; digitising our many face to face interventions, essentially helping us build out a whole new suite of assets that are now deployable in a virtual environment now and beyond COVID; more time for training and personal development – Learning and Development Manager 

Conclusion

In summary, the crisis presents a significant opportunity for all leaders and firms to reset and lean-in to fully understanding what is going on in terms of how the crisis is impacting organisations in the short-term, what this might tell us about longer-term impacts, and where and how to focus efforts and investments across the operating model.

Strategic Responses of Firms to COVID-19 Crisis

This week I developed and launched a survey designed to gather insight on how a range of firms in different sectors are responding to the COVID-19 crisis. If you are interested in completing it, the survey is here.

To provide more context, I’ve pasted below what is contained in the Introduction section of the survey:

Overview:
This survey seeks to understand what strategies, tactics and activities a sample of organisations large and small across sectors are undertaking to manage the current crisis. It is a project being run by Andrew Essa of ROCKET + COMMERCE (a management consultancy). An advisory board of cross-industry leaders is forming to interpret the results.

Geographies surveyed include firms based mainly in Guernsey and Jersey (Channel Islands), although there will be respondents from UK, EU, US, and APAC.

Timings:
The last day to complete the survey is 30th April 2020.

Interviews:
A number of short interviews via VC are also being conducted with select leaders or senior managers. If you would like to apply, please contact Andrew Essa via the details below.

Insights:
The results will contribute to a white-paper and new report series e.g. Disruptive Change 2020 Report. I will share these with all respondents in due course. It is expected to generate useful market insight for firm leadership on how your peers within or across sectors are managing and strategically responding to the crisis. The results therefore should improve firm decision-making in the short and long-term, including strategic planning, operational reviews or change management.

There may be further (e.g. 3+) surveys across the year to track strategic responses and changes over time as the crisis develops, but this will be kept under review.

Audience:
The target respondent is a senior manager, executive or experienced professional within an organisation. Firm sizes will range from international business to local SMEs, with sector coverage broad including Technology, Financial Services, Legal, Accounting, IT, Retail, Aviation, Health, PR, Government, Corporate & Fiduciary Services, Education, Charities etc.