Innovative business models arising in emerging markets present both opportunities and uncertainty for established global players.
The adoption of technology is a global phenomenon, and the intensity of its usage is particularly impressive in emerging markets. Disruptive business models arise when technology combines with extreme market conditions, such as customer demand for very low price points, poor infrastructure, hard-to-access suppliers, and low cost curves for talent. With an economic recovery beginning to take hold in some parts of the world, high rates of growth have resumed in many developing nations, and we’re seeing companies built around the new models emerging as global players.
Innovation And Its Outcomes In Different Parts of World
In parts of rural Africa, for instance, traditional retail-banking models have difficulty taking root. Consumers have low incomes and often lack the standard documentation required to open bank accounts. But Safaricom, a telecom provider, offers banking services to eight million Africans through its M-PESA mobile-phone service (M stands for “mobile,” pesa is Swahili for “money”). Safaricom allows a network of shops and gas stations that sell telecommunications airtime to load virtual cash onto cell phones as well.
In China, another technology-based model brings order to the vast, highly dispersed strata of smaller manufacturing facilities. Many small businesses around the world have difficulty finding Chinese manufacturers to meet specific needs. Some of these manufacturers are located in remote areas, and their capabilities can vary widely. Alibaba, China’s leading B2B exchange, with more than 30 million members, helps members share data on their manufacturing services with potential customers and handles online payments and other transactions. Its network, in effect, offers Chinese manufacturing capacity as a service, enabling small businesses anywhere in the world to identify suppliers quickly and scale up rapidly to meet demand.
In India, there has been an uprising of e-commerce revolution. Fulfilling the aspirations of millions of people with easy accessible discounted shopping, e-commerce firms such as Amazon and Flipkart are constantly implying new innovative approaches. Innovation is based on E-Commerce using three components: value stream, revenue stream and logistic stream.
- Value stream is nothing but a list of tangible value propositions that a customer is likely to derive from the business.
- Revenue stream will involve building blocks representing the cash a company generates from each customer Segment. It identifies which revenue source to pursue, what value to offer, how to price the value, and who pays for the value.
- On the other hand, logistic stream will focus on various elements pertaining to asset control and configuring the supply chain.
All the above definitions point to three important ingredients of a business model: a need to understand the customer requirements, linking it to various operational choices to be made and activities (transactions) of the business and the need to include supply chain elements in the definition.
Constant Improvement Is The Need Of The Hour
Companies need innovative business models and processes to address profitably, to overcome institutional weaknesses and gaps in everything from credit systems to supply chains. Companies have to collaborate with key players in the unorganized or informal economy to create an ecosystem that supports their business model. Technology is key, of course, but so are networks of brick-and-mortar service centers and other offline support systems.
An appropriate business model will lead to sustained value creation profitability. Here is an innovation model expressing it.
- Ecosystem Collaboration: Extract value by creating an ecosystem, collaborate with the unorganized sector.
- Modular scale: Have a modular design, aggregate local demand and think scale from the beginning
- Smart reach: Cluster marketing and distribution, create local financing mechanism, enable through technology and offline.