The Tickle-up Innovation

Yesterday, I read an article about importance of investments in R&D to manufacture and sell low-cost products or technology in developing markets like India, China and Africa. It emphatically also pointed out troubles to promote such products because of their low customer reach, and lesser brand recognition due to a stiff competition from other well-established consumer products companies. One thing, which caught my eye, was the term “tickle-up innovation“. A total mystery for my knowledge, I decided to Google. Here are my findings and I will try to relate it to you in some or other forms.

First, what is Tickle-up Innovation? (also known as Reverse Innovation) is a practice, which is used first, in developing countries and then sold elsewhere in the world. Traditionally, innovation originates from a developed country, which further moves to a developing markets, if successful. But here life-cycle is reverse, hence the name “Reverse Innovation”. The contrasting point involved is that the products/technology/services, which are a part of it, are created locally in the developing markets.

But what edge does this gives to a local manufacturer?

1) Cut down huge shipment costs.
2) Easy availability of hundreds of low-pay skilled workers.
3) Customer feedback can be obtained and processed much faster and more efficiently.
4) Setup and opportunity costs are considerably lower.
5) Humongous market size to test/pilot any product/technology.
6) Superior customer acquisition model as product developers would mostly be from the country of origin.

Okay. Now comes the part: what all problems it can eradicate by providing a plausible solution. Following is sector-wise analysis:

a ) Food:

High price and Saddled working hours: Life style in developing countries is rougher in comparison with developed countries, thus people tend to miss a daily dose of healthy food or right amount of nutrition (both in rural and urban areas). Costly food further adds misery. Therefore, there is a dire need of a new category of food supplement.

b) Health:

Non-availability of state-of-the-art medical facilities: Paying monthly medical bills isn’t easy. Instruments with high cost and steep power consumption system makes a patient life’s more miserable. Steep power consumption means more electricity requirement, and countries like India, having acute shortage of electricity, ask for efficient and cost-cutting alternatives. To counter such problems many companies are recommending battery based medical devices as a solution.    

c) Technology:

The Power of Web: Everyone demands it but only few can afford. With mobile internet market size to grow to 300 Million by 2015 in India (and considerably at a higher or same rate in other developing countries) there are only two ways to cash-in the upcoming customers. Either by decreasing prices of smartphone devices or by innovating applications for non-smartphone segment to allow users to access web. The later could be a more cost-effective and plausible solution at this moment. Due to this reason alone, most of the tech companies are investing and betting on cloud computing today.

d) Travel and Transportation:

Easy on pocket, anytime, anywhere: The “mantra” for travel nowadays. Everyone loves to own car but affordability is the biggest issue stopping them from fulfilling their dreams. Projects like Tata Nano aims to fill that bridge, though, is far from a huge success and yet to be tested worldwide, provides ample opportunities for other Auto-manufactures to take a leap in this segment. Also there is a huge requirement for a new day-to-day transportation model, to keep pace with the growing demand and population.

What NEXT?……If it is successful in developing countries, then it can be upgraded for sales in developed world. But that raise questions about whether or not they be able to compete in the top-tier markets (as I pointed out early). This particular concept is called “provenance paradox“. Though, many experts suggest to go for a long-haul then looking for short-term profits and flaunt your country of origin, if you want build your brand for the future, the real deal is yet to be proven.

“Roadmap of business innovation for the world” –  Mukesh Ambani

“Essential for global business leaders” – NR Narayana Murthy

“Reverse Innovation explains how innovations are originating from developing countries” – Ratan Tata

The Chinese Renaissance

Only recently, I came across an article, eliciting how China’s one-child per household policy has promulgated its economy assiduously. The thought, without any disbelief, is subtle with knotty implications but we all, with consensus, have to agree that it was a winning stroke by Chinese government, during the times when their fortunes were darting in a wrong direction. This made me spent a few hours to find a rationale on how China made its path to the top. And here are my findings:

First, lets look into the not-so-good factors:

1) Working population: Population, generally, is divided into three groups: young age, working age and old age. With one-child per household policy, the old age group held (still hold) a larger portion in Chinese population, which saddled China due to:

a) Decrement in the % of population involved in any productive work.
b) Distribution of large chunk of Chinese money as pensions.
c) Shortage of funds for investments in various avenues.

2) Supply-Demand ratio: In a large population, like China, demand for basic necessities was relatively higher. But supply too, due to low % of working class people, was low. Hence, there always a disruption in the supply-demand ratio from time to time, which lead to raise in prices, and shambles the economy.

3) Dearth of natural resources: To satiate the needs of a rampant population, and with attenuation of resources, China forced itself to increase imports. This again put Chinese government on back foot.

Inspite of many caveats down the road, China is now able to compete with the USA and other top economies because of following upheaval:

1) Foreign Investments:  China was (and still is) a humongous consumer market and interests from abroad were thus quite imminent. In return, it bolstered infrastructure, and valorises copious job opportunities to Chinese masses. With more and more people now earning healthy income, stirred the demand for better life quality, and lead them to technological renaissance.

2) Education: Plentiful job opportunities, urged Chinese government to invest heavily on education to produce skillful work force. With educated employees and technological support, China’s productivity quadrupled, and its growth became inevitable.

3) Decentralization: With the backing of a huge labor force, it became easier for firms to decentralize labor. This division of labor caused a greater increase in production than any other factor and lead to universal opulence in China.

4) One-child policy: Single child parents, with a  huge pile of money [as they only had one child to spend on] under their beds, created a gemutlich environment for all market segments.

Along with, all the above discussed factors, behavior too helped them to achieve a great success. And I hope they could see back on what they were and help others achieving big without any rancorous. Now, as usual, I would leave you with a quipped quotation.

When I was growing up, my parents told me, ‘Finish your dinner. People in China and India are starving.’ I tell my daughters, ‘Finish your homework. People in India and China are starving for your job. – Thomas Friedman