Innovation Vs. Poverty

By Clayton M. Christensen, Hari Nair, Stephen Wunker

The math is clear: more than 80% of the world's population lives in developing countries, and these markets account for 40% of the world economy, adjusting for purchasing-power parity, which takes into account the relative cost of living and inflation rates by country. However, less than 12% of the S&P 500's revenue comes from emerging markets. Even for a global giant like General Electric the figure is a mere 19%.

This imbalance simply cannot hold. The opportunities in the rapidly developing economies of Asia, Africa and Latin America are too big to ignore. They're also very easy to mishandle. A few companies have decided that these markets are too poor to justify investment. Still others have tried to compete by selling the same product they sell in the developed world but for lower prices by shrinking the package size or by stripping out features.

There is another path: designing a profitable business that enables customers in developing economies to be more productive and financially secure. Succeeding with this strategy requires that a company shift its focus away from redesigning its current offerings and toward creating new businesses from a blank slate. Those new businesses will perform jobs that customers in developing countries are struggling to get done. Unless a firm truly comprehends the jobs that developing-country customers want to get done, it risks importing assumptions from abroad that will sink the overseas business.

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