As the mature world struggles through both recession and recovery, more than 75 percent of the growth of global output will come from the emerging markets. But with so much need that must be met, businesses with that “bigger is always better” mentality are struggling with how to capture all of the opportunity.
Source: chotukool.in
ChotuKool, the world's cheapest refrigerator, launched by Indian conglomerate Godrej and Boyce
Meet ChotuKool. A refrigerator with no compressor, it is tiny, weighing in at less than 18 pounds. It can run on a 12-volt battery and can be yours for about $75. Most importantly, you can get it in some of the most hard-to-reach rural areas of India. “Chotu” means “the small one” in colloquial Hindi. It may well be the Next Big Small Thing.
In many ways, ChotuKool is like any other new product. Its design, price, features and eye-popping red color were determined the old-fashioned way: through iterations with focus groups of target customers. But when that target is a woman in an outlying village, research can be both difficult and expensive. To solve the problem, ChotuKool’s makers piggy-backed on another “small” innovation, the microfinance network, and returned to that same network when the product was ready for sale.
The starting point for innovation in an emerging market is like that of innovation in any other market: It has to tap into an unmet need. However, emerging markets are distinct in that the contextual challenges are rather significant and mutually reinforcing. If we were to disentangle them, there are three distinct challenges: affordability, appropriateness and accessibility. Overcoming all three is hard, which is why the volume of unmet need is large, as is the prize for an innovator who overcomes them.
Imagine the difficulty of designing a product that must work in the context of small homes, poor infrastructure, unreliable transportation, unreliable energy sources, extremes of weather, little usage experience, relatively limited media and fragmented retail networks, to name a few of the challenges. Meeting the appropriateness challenge can make research and engineering quite difficult. Access is not easy either; reaching the consumer in distant towns and villages or even in cities with poor infrastructure can be expensive. Overcoming these problems can make it impossible to then meet the critical third requirement of affordability. ChotuKool scored highly on all three. The notion of leveraging the existing deeply embedded networks may have been its breakthrough idea.
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The motivations for finding such breakthroughs are strong for both home-grown innovators as well as for the multinational companies. This doesn’t mean venture capitalists, CEOs and entrepreneurs should rush to book their plane tickets for emerging markets. While emerging market innovation has not yet reached a bubble phase, it does run the risk of becoming a fad. Furthermore, while solving the triad of affordability, appropriateness and accessibility is hard, it by no means will guarantee a winner.
As an example, the Tata Nanowas widely celebrated as the world’s cheapest car and the biggest of the Next Big Small Things. Yet buyers didn't particularly relish being perceived as buyers of a product positioned as the world's cheapest car. So far, the Nano has enjoyed far more success in magazines and business school case studies than it has in the market.
Or consider the microfinance networks — the same networks used to conceive of and sell ChotuKool. They excelled at cracking the accessibility challenge. In fact, they ensured so much access that multiple microfinance institutions were giving loans to the same client, leading to over-borrowing, default and, in some cases, suicide.
"The starting point for innovation in an emerging market is like that of innovation in any other market: It has to tap into an unmet need."
While not every innovation will become a success, ChotuKool may indeed be cool. “Chotu” has become a platform; it inspired the ChotuWash washing machine; there are other products in the pipeline, including a water purifier. It has pointed the way to how small things piggybacking on other small things can solve the challenge of the three A’s in a way that can be replicated and profitable.
So stop thinking so big – the Next Big Small Thing could surprise you.
Bhaskar Chakravorti is a Senior Associate Dean of The Fletcher School at Tufts University and Executive Director of the Institute for Business in the Global Context at Fletcher. He is the author of the book,The Slow Pace of Fast Change: Bringing Innovations to Market in a Connected World.He was a leader of McKinsey’s innovation practice and taught entrepreneurship and innovation at Harvard Business School.