Executive Summary

When a movie is released straight to video, it’s usually a bad sign: Early reviews were negative, the quality is dubious, or backers aren’t confident it will find an audience. Going straight to video, historically, was a way to save face and move on. But in 1992, when the electronics salesman Kenneth Nnebue shot the straight-to-video Nigerian movie Living in Bondage, it was anything but a disaster.

Nnebue had received a shipment of blank VHS cassettes to sell in his store but quickly realized that most Nigerians had no use for them. He then had the idea of putting homemade content on the tapes. He wrote a script, found a producer and a director, and hired actors and actresses. The resulting two-part thriller about a down-and-out businessman who uses witchcraft to revive his fortunes was released on those tapes; Nigeria had no operational cinemas at the time. Made on a $12,000 budget, the film went on to sell hundreds of thousands of copies across Africa, in the process catapulting “Nollywood”—the then-nascent Nigerian movie industry—to eminence.

Barely a blip on anyone’s radar 25 years ago, Nollywood today produces about 1,500 movies a year, employs more than a million Nigerians, and is thought to be worth $3.3 billion. In terms of volume, it rivals both Hollywood and Bollywood. This homegrown industry has attracted the attention of banks and other financial institutions, some of which now have “film desks” designed to invest in its productions. By some estimates, Nigeria is home to more than 50 film schools. The government has established funds for training filmmakers and financing new movies and is beginning to take piracy and copyright protection more seriously. In 2018 both New York and Toronto hosted Nollywood film festivals, while Netflix bought its first Nollywood film, Lionheart.

How could a modest investment by an electronics salesman simply looking to sell VHS cassettes trigger the rise of a multibillion-dollar industry in one of the poorest countries in the world—where fewer than 35% of households had access to electricity and only about 20% had a television set? Was Nollywood just a lucky anomaly?

Hardly. Nollywood is among scores of entities that have realized enormous growth by creating entirely new markets where they might least be expected. With emerging-market giants such as Brazil, Russia, India, and China experiencing slowdowns, investors, entrepreneurs, and multinationals are looking elsewhere. They’ve been eyeing so-called frontier economies such as Nigeria, Pakistan, and Botswana with great interest—and enormous trepidation. How can one find serious growth opportunities in economies characterized by extreme poverty and a lack of infrastructure and institutions, and with little or no data about market size and customers’ willingness to pay?

Missing from the conversation is a foundation of theory to help explain why some efforts succeed while others don’t. The reason, in our view, is the power of innovation, and specifically what we call market-creating innovation. It not only generates new growth for companies but catalyzes industries that buoy frontier economies and foster inclusive, sustainable development.

Read the full article at HBR.