While the business world is preoccupied with the global economic recovery, a mobile revolution is quietly reshaping the marketplace in the developing world. In Africa, mobile phones are providing access to communications for millions of people who’ve never had fixed communications let alone cell phones. I’ve written before about the impact that such ‘leapfrogging’ is having on African business. Now, we’re beginning to see exciting and substantial commercial projects taking shape, particularly in the service sector.
It’s been a week since the Port-au-Prince earthquake and images streaming in are helping us to grasp the region’s boundless misery and desperation. Hundreds of thousands have perished, and despite our best efforts, more will die and suffer for myriad reasons including the inability to deliver relief where it’s needed.
Despite the gut-wrenching news, it’s heartening to learn that determined, inventive people are finding ways to alleviate the suffering and, in some cases, save lives.
One of the more interesting stories is about an open-source project called Ushahidi which takes its name from the Swahili word for “testimony”. The software, developed during the post-election violence in Kenya in 2008, enables text messages to be mapped by time and location. Anyone with an internet connection, regardless of the device they use to access it, can send a text message, an image or an email. Ushahidi can also store data offline for later synchronization.
The Wall Street Journal/MIT Sloan Management Review published a disturbing paper on why Western companies are failing to transform the Bottom of the Pyramid into a booming consumer market. The author argues that the base of the world’s economic pyramid – where people live on $2 a day or less – isn’t panning out as a market because potential consumers “haven’t been conditioned to think that the products being offered are something one would even buy.”
To support his argument, he cites the case of PUR, a low-cost water purification system developed by Procter & Gamble. The product provides the obvious benefit of affordable clean water where the risks of drinking contaminated water are high. But curiously, PUR* achieved low market penetration rates in test markets.
Why would consumers reject a product as salient as PUR? The author contends that Western companies simply haven’t created demand among low income consumers. “Companies must create markets—new lifestyles—among poor consumers,” he insists. His prescription is that Western businesses need to do a better job “conditioning” low-income people to be better consumers. Really?
Information’s pretty thin stuff unless mixed with experience. ~Clarence Day
Nearly every day, I work with colleagues who are eight or more time zones away. I’ve been doing this, with few interruptions, since the ‘80s. Back then, “geographically distributed” projects were run only by multinational corporations. Times have changed.
Global markets have become more interdependent, and collaboration across borders is now commonplace, even at smaller companies. Businesses know that they have to team up with companies in other regions to compete in the global “value creation” race*.
But a lot of companies struggle with this. In a June, 2009 survey by TMA World, 82% of respondents rated the performance of their company’s “global, virtual” teams as either ‘moderate’ or ‘poor’. Yet nearly all of those surveyed said that global teams were ‘very important’ to their organizations.
Over the coarse of the eighteenth century, the Gold Coast produced more than a million slaves, about 15 percent of the total shipped from West Africa… ~Marcus Rediker, The Slave Ship
The first African-American President of the U.S. landed in Accra, Ghana last evening. His first trip to the Sub-Sahara has symbolic significance for many reasons. Many Africans believe that Barack Obama represents the ascendancy of Africa on a global stage, reversing the despair and hardship that’s plagued the continent during the post-colonial era. They hope that his visit will call attention to the steep challenges and promising opportunities the continent faces.
I’ve recently noticed a subtle but perceptible attitude shift among Americans working in foreign markets. My overseas colleagues are noticing, too. American business people, they say, are displaying more thoughtfulness than usual. U.S. companies operating overseas seem less inclined to approach global business as though its epicenter is in New York or Palo Alto.
It’s too soon to call this a new Zeitgeist, but change is in the air. The global economic crisis, which has its roots in the U.S., may be partially responsible. I think the new vibe is also influenced by Washington’s new tone in its approach to global affairs. As an American doing business abroad, this is promising.
Historically, many American firms have approached business from a decidedly ethnocentric perspective–more so than many of our European rivals. U.S. companies have missed opportunities as a result.
Things seem to be moving in a better direction now.
Today, there are more than 3.3 billion mobile-phone subscriptions worldwide, which means that there are at least three billion people who don’t own cell phones, the bulk… found in Africa and Asia. --Sara Corbett, author “Can the Cell Phone Help End Global Poverty?” (NYT)
I’ve been optimistic about the continued growth of mobile services in emerging regions, even through this downturn. If that happens, it’s good news for those who appreciate what connectivity is doing for new subscribers in the developing world. The nascent mobile sector is an enabling engine for other industries in the developing world notably health care, agriculture, banking, and goverment services.
We see continued growth in emerging markets where there are few fixed line communications, low mobile penetration rates, and the arrival of new, highly motivated operators. Look for continued double digit growth (CAGR). Revenue growth (ARPU) will likely lag subscriber growth as companies add more lower-income users. Despite a crowding market, prospects for for growth by incumbent and new operators remains strong so long as they manage their growth with an eye to the future.
Ex Africa semper aliquid novi — Out of Africa always something new. ~Pliny the Elder
This week marks my company’s 3rd anniversary of working in Africa within our emerging markets service practice. Helping companies in the region to understand and serve the needs of their customers has been enriching on a personal level. I’ve had the privilege of witnessing the growth of the sub-Sahara’s nascent service industry and I marvel at its favorable impact on a growing number of people in the region.
The ascendant mobile industry illustrates the point. On a continent where few people have landlines due to the high cost of installing cabling, cell phones are bridging the communications gap. In many sub-Saharan markets, like Ghana where we work, mobile growth rates have been approaching 50% annually. While less than 20% have mobile phones now, hundreds of millions of Africans are expected to get handsets in the next few years. Keep in mind that this is a continent of almost a billion people. That’s a lot of potential new subscribers.
For those interested in delivering their services to emerging markets, BusinessWeek provides an informative piece on Cisco’s EM strategy. The piece provides a glimpse of the company’s ambitious model for expanding its global footprint.
The story doesn’t delve into exactly how Cisco collaborates with emerging players aross geographic and cultural differences, etc. Often cultural disparities plague global alliances. I wondered how Cisco’s people engage their counterparts in emerging markets? Has Cisco developed a collaborative model for bridging the cultural gaps that often hamper global service initatives? These are my questions…
Despite the shaky underpinnings and dire economic climate, the U.S. still ranks ahead of the other nations in competitiveness, though economists see thorny challenges ahead. On the plus side, the U.S. still brings a lot in the area of production potential, well-functioning labor markets, sophisticated businesses, academic leadership and technological innovation.
While these are sustainable virtues, the U.S. has its work cut out to stay on top as other countries take steps to improve their competitiveness (see Fareed Zakaria’s seminal The Post American World). Globalization is leading to the “Rise of the Rest”. This pattern has been evident to anyone involved in business dealings across markets over the last decade.
The report had few surprises. A notable exception is that the UK slipped (from 9th last year to 12th) due to its heavy reliance on a flagging financial services sector.
Singapore, the Scandinavian nations and Switzerland have been perennial leaders for several years. And it isn’t surprising that the Gulf nations are on the rise due to worldwide demand for hydrocarbons coupled with concerted economic reforms.
Fiinally, some sub-Saharan nations are making headway though, as a region, it still lags behind. These economies have had 5-6% annual growth rates and relatively low inflation in recent years. But their infrastrusctures are fragile and they may be hit hard by a global slowdown.
The WEF report is a lagging indicator of the strengths and weaknesses of global economies. For example, it doesn’t take into account the prospects of a global slowdown which reduces the demand for resources.
The take away is that governments play a substantial role in shaping a nation’s long-term capacity to compete in an increasingly global and crowded world. Good governance rules.
The satellite company, O3b Networks, has attracted investors at Google, HSBC Principle Investments and Liberty Global for its project to deliver cheaper, high-speed wireless Internet access to underserved regions of the world. The term, ‘O3b’, refers to the “other 3 billion,” or the large segment of the world’s population that can’t access the Internet because there is no fiber cable in their regions.
03b, a Jersey Island (UK)-based company, announced that it is building 16 satellites that will enable lower-cost Internet accessibility over 3G and WiMax networks. These satellites will provide “trunking” or backhaul coverage zone between +/- 40 degrees of latitude which blankets much of the world’s underserved regions including Latin America, the Middle East, Africa and South Asia.
Fiber cable and the labor for digging fiber trenches in underdeveloped countries is costly by any measure. Mobile operators face prohibitive costs in building transmission capacity between their networks and towers. Using satellites had been long been considered problematic due to their latency or the time it takes for a signal to travel between earth and satellites.
Today’s geosatellites orbit the earth at an altitude of 22,500 and their latency can exceed 600 milliseconds. By contrast, O3b plans to use MEO satellites which orbit the earth at 5,000 miles and can reduce latency to only 120 milliseconds—not that much more than a fiber network.
O3b which expects to activate service by late 2010 intends to provide speeds of up to 10G bps (bits per second) to regions. The companies collectively invested about $65 million with the total cost estimated at $650 million.
This is good news for “3b” consumers, and probably a smart investment for Google which recognizes that the majority of the world isn’t currently using its services do to lack of access. With their $10M investment, Google is getting in on the ground floor, so to speak. Consider this another milestone in moving forward their Android initiative.
Having just returned from Ghana, I was keenly interested Roger Cohen’s NYT piece today. He says,
In my lifetime, conditions have grown immeasurably better, freer and more prosperous for a majority of humanity, yet hand-wringing about the miserable remains the reflex mode for most coverage of planet earth.
Nowhere more so than in Africa, from which I’d just returned when the e-mail landed. During a short stay in Ghana, which will hold free elections in December, Vodafone had bought a majority stake in Ghana Telecom for $900 million (entering a fiercely competitive mobile-phone market) and I’d heard much about 6 percent annual growth, spreading broadband and new high-end cacao ventures.
Accra, the capital, is buzzing. Russian hedge funds are investing. New construction abounds. Technology enables people in the capital to text money transfers via mobile phone to poor relatives in the bush.
I think most of Cohen’s points are well taken. He doesn’t mention the discovery of oil off Ghana’s coast and the country’s fiber projects or the investments being made by multinationals in the country’s business infrastructure. The business climate in the region is improving, albeit in successive approximations. The country’s services sector — chiefly teleco and financial services — are contributing to Ghana’s high annual growth rate. Inflation is a growing concern, but so far it’s been manageable. The process leading up to this December’s election should be interesting. So far so good.
It’s also true that Africa’s success stories aren’t newsworthy to many news consumers. We mostly hear about war, corruption, disease and rampant poverty. On this point, I recommend Charlayne Hunter Gault’s “New News Out of Africa: Uncovering Africa’s Renaissance,” – it’s chiefly about South Africa, but pertinent to the problem of media coverage across the continent.
If Ghana’s political environment remains stable and forward-looking, the country will be in a position to contribute even more of its stalwart intellectual capital to a “globalized” resource (R=G) community in the coming years. So, even if the global media is fixated on the region’s challenges, the numbers will support a different story. So look for Ghana and other gazelle nations of the sub-Sahara to lead the way.
My trip to W. Africa is winding down. What an interesting time to be in the region–multinationals are quickly entering the red hot telecom field–the last growth frontier in the industry. These new players are looking to hit the ground running. One thing is certain: consumers here will be exposed to a broad array of new services and enticements. Consumer demands will grow–radically–and power will shift to the consumer as it has in more other hypercompetitive markets.
How should businesses respond? We see exciting opportunities for companies to leapfrog the traditional approaches that firms in developed markets have struggled with in the past. Firms that make the most of their business intelligence and continually seek out new ways to gain new insights about their performance and their customers should have the upper hand.
There’s no magic bullet. Ultimately, it boils down to getting the fundamentals right. Simplicity and agility are critical. But companies that tighten up their business processes and align their people around a clear, customer-focused strategy can gain a serious competitive advantage.
Africa is leading the world in annual growth among mobile users. In markets where we’re working, penetration is still under 35% while annual growth has been over 50%. In a continent of 800+ million potential mobile users there are only about 80 million users today, making it one of the hottest global markets in any industry. This breakneck growth is leading to some interesting developments…
To add some perspective, there is only about one landline per 33 people in Africa and that’s unlikely to change much given the high cost of installing fixed lines in the continent’s vast, remote regions. However, mobile networks are relatively easy to install and maintain. Thus, mobile phones have become the primary communication channel throughout the sub-Sahara.
The large transnational telecoms, hungry for growth and finding saturation elsewhere, are quickly swooping in to the region hoping to grow their user bases. Mobile operators are investing millions of dollars in extending their coverage across the continent. And as competition grows, they’re pouring millions more in to expand and fortify their networks.
This injection of capital is creating jobs and raising living standards in the region, and this is only the beginning. It certainly feels like we’re at an inflection point and the socio-economic impact will be enormous.
But the African market poses some vexing challenges to operators. First, they’ll need to help the continent’s large base of very low income consumers to overcome the cost barrier of using mobile services. Bottom line: these consumers who make under $2 a day need lower cost handsets.
Operators have been working with handset makers to produce units for as little as $15 USD. Refurbished handsets, recycled from other markets, are bringing prices down further.
Low income users are mainly interested in a phone’s basic functions—voice calls and SMS text messages—and little else. For them, battery life – especially in regions with unreliable electricity – is more important than ring tone options.
But, low income users are “leapfrogging” to mobile banking which I’ve mentioned previously. Mobile phones are now being used in developing cash economies to pay for things or transfer money across distances. The implications of the rise of m-banking and other mobile-based services among low income users is enormous.
Meanwhile, mobile operators must also compete for higher income users. They’re rolling out and bundling higher end products like managed data services, Blackberry, WiMax, 3G and more – all of this while reinforcing their infrastructures and business processes to deliver higher service quality and reliability.
It gets even more interesting. Most of the people who are gaining access to communications and the Internet via cell phones have no other way to access the web, unlike developed country where cell phones are used mainky for voice with Internet access being an occasional activity.
Reliance on mobile devices for Internet access means that content developers in Africa, like other emerging regions, see mobile devices not as a substitute for their desktop, but as a primary data platform. We’re already seeing some promising examples of voice-data convergence aimed at this growing market. We may witness the first wide-scale convergence applications coming from Africa and other developing markets.
I’ve worked with some talented, dedicated people in the region’s telecom sector. The speed with which they’re adaptaing to the market’s growth has been impressive. They’re making strides in building their management capabilities and business processes to meet rising consumer demands.
It’s an exciting time to be working in this market. I can’t think of a more interesting, fertile business environment today than Africa’s nascent telecom sector. It’s a veritable hothouse for business innovation on so many levels.
Parag Khanna’s new book, The Second World: Empires and Influence in the New Global Order (Random House, 2008), makes a case for understanding the world from the standpoint of Second World countries—those between modern, highly developed economies, and those in the underdeveloped Third World. Second World countries, including Russia, Turkey, Indonesia and Brazil, among others, are increasingly using their resources to exert influence in a new world order.
“Right now,” Khanna notes, “from the Middle East to Southeast Asia, the hero of the second world — including its democracies — is Lee Kuan Yew of Singapore.” His point is that, contrary to poular belief, Second World countries are not ideologically-driven, as much as driven by their desires to advance their economic self-interests. Seeing the world from their perspective is helpful to operating more effectively in a multi-polar 21st century.
The Europeans, whom he classifies as a Superpower (with no apologies to conservative Robert Kagan), assume a more expedient stance when it comes to dealing with the Second World. As a result, they’re getting more traction in those markets.
Khanna’s take will stir controversy. But, at the very least, it’s helpful to view the world from others’ perspectives in order to understand the forces that are redefining the world.
Khanna’s book is a companion to Fareed Zakaria’sThe Post American World mentioned in an earlier post. Both books describe the profound implications of operating in an increasingly muti-polar world consisting of new relationships and sources of power. Individuals interested in doing business of any kind on a global stage can benefit from seeing the world through the prism of the other players.
In his compelling new book, “The Post-American World,” Newsweek Int’l’s Fareed Zakaria reframes the challenges and opportunities of a new world order. Zakaria argues that we’ve entered a “post-American” era in which the role of the U.S. will be diminished but not irrelevant.
While the U.S. still possesses unique, natural advantages, “the rise of the rest,” including China, India and Brazil, among others, are creating a world through their economic growth that is more multi-focal. Other nations are now catching up to America’s level of economic clout and self-assertion. What’s next for the U.S. in this new world order remains to be seen.
Zakaria argues that America has assumed that its innate strengths – academic resources, free markets and diversity of talent – can compensate for its anemic savings rate or the absence of a health care system or a cogent, long-term economic strategy.
“That was fine in a world when a lot of other countries were not performing,” argues Zakaria, but now the best of the rest are working hard, saving well and are looking ahead. “They have adopted our lessons and are playing our game”. He worries that “the U.S. risks having its unique and advantageous position in the world erode as other countries rise.”
According to Zakaria, the U.S. still has significant natural advantages. But the new worry for America is neither the rise of other societies, nor its own diminsihing influence, but Washington’s politics of stagnation and partisanship in recent years. Zakaria argues that anachronistic systems of government hijacked by vested interests are having a drag on the agility and innovativeness that led to America’s rise in the last century. As David Singh Grewal notes in his new book, Network Power, “Everything is being globalized except politics.”
Zakaria makes his case skillfully. His argument should inspire a broader conversation during this election cycle about how to shift attention to the new challenges and opportunities of a multi-focal world. Rather than engage in the same tired debate about restoring America’s lustre, it makes sense to weigh the options as seen through the prism of a post-American world.
There is a lot of confusion about emerging market economies (EMEs) and the economic notion of ”decoupling”.
First off, the term ‘emerging markets’ was coined in the ’80s to describe rapidly growing economies with low-to-middle per capita income. They comprise over 80% of the world’s population, representing about 20% of the world’s economies.
Countries that fall under this umbrella are incredibly diverse ranging in size from (Singapore) to massive (China and India). They’re growing at varying speeds—merely “quick” (South Africa, Mexico and Chile) to “breakneck” (China, India, and the Gulf states). And, their fortunes are linked to those of developed economies. In fact, many economists hold that when the United States sneezes, the EMEs catch pneumonia.
Or do they? Not so much, say advocates of the “decoupling,” the notion that emerging markets are broadening and deepening to the point where they no longer depend on the mature markets for their growth. Decoupling accounts for emerging market stocks’ overperformance these last few years. But is decoupling really happening?
Last May, Merrill Lynch economist David Rosenberg, told the NYT’s Daniel Gross, “I find it hard to believe that the rest of the world is going to be immune to a consumer sector that’s primarily responsible for pulling in nearly $2 trillion of the world’s output.” His take was, “Before we can say there’s a decoupling, we have to wait for a sneeze—all we’ve had is a runny nose.”
The U.S. economy sneezed (sub-prime mortgage crisis) and coughed (credit crisis). The U.S. economy is sounding more bronchial by the day.
Mr. Rosenberg, and his cohorts may have been vindicated. In January EME stocks were rocked. And, they failed to get much relief from the medicine–$145 billion stimulus package. Hong Kong’s main index dropped 5.5% — its biggest loss since Sept. 11, 2001—while India’s fell by 7.4%. Even Brazilian stocks – darlings of the EME — dropped 6.6%.
There is some degree of decoupling. While certain markets—mature and developing—are susceptible to certain market forces other markets simply aren’t because today there are lots more variables at play. The global economy is growing up rapidly and relationships among markets are becoming more complicated.
This increasing complexity is due to the fact that resources no longer flow exclusively from mature markets to emerging regions as they had in the past. For example, both the GCC’s and Africa’s mineral resources are being hungrily devoured by China to the benefit of all three economies. This is conferring a protective effect on them which wasn’t possible in prior cycles. Flows of knowledge and capital are becoming omni-directional and multifaceted.
So? It’s a classic “good news, bad news” story for mature economies, like the U.S. and EU. The good news: healthier, emerging markets can continue to buy products from mature economies like U.S. and Europe, hastening their recovery. But the bad news: the price of oil will likely remain higher, longer — despite the reduced demand for oil among mature economies.
And, let’s consider the implications for Western product-service providers who see opportunities for delivering services to some of these EMEs.
We’re developing, in successive approximations, a hybrid model of delivering premium training to emerging companies—those emerging regions that are clamoring for competitive capabilities to succeed in a world with more competitors along with more demanding customers.
It features, among other things, ”modular” content design which enables us to reduce development cycles and labor without compromising content quality. A new quick-check knowledge management system is powering this effort.
Today, many organizations offer innovative solutions for improving knowledge transfer, as well as products that enhance the learner experience. But, we want to go further by translating our vision for delivering premium learning services to emerging markets where we can achieve superior learning outcomes at significantly reduced costs.
We aim to further our mission of creating substantial business impact through initiatives designed to provide research-based solutions, expertise and structured peer interaction.
And, of course, we must do all this without compromising quality. Not easy, but worth the effort to be sure.
Last year, we launched our Emerging Markets practice to address new opportunities brought about by converging market forces, chiefly globalization. Several factors played into our selection of which markets to enter. Our focus is on rapidly growing markets in Southern-Eastern Europe, Sub-Saharan Africa “hot spots,” and the six nations of the Gulf Cooperative Council (GCC) and the surrounding region known as “MENA,” (Middle East-North Africa).
The case for entering the energy-rich GCC was compelling. Demand for the region’s energy will likely infuse $3 trillion in capital into these economies over the next decade. An emerging class of affluent consumers is demanding high-grade services in telecommunications, financial services, real estate, transportation, hospitality as wel as the region’s burgeoning ”connected communities”.
Governments in the region appreciate the need for a diversified foundation and recognize that they must foster entrepreneurialism while creating an infrastructure enabling companies to compete on a global level.
What adds to the market’s promise is that business leaders in the region are convinced that their companies need to become more competitive. They know that in order to operate on a global stage characterized by complexity, speed and ever-greater synchronicity, competitive business capabilities cannot be passively acquired.
As the region diversifies away from energy to a knowledge-centric economy, businesses have to do more than merely bridge functional gaps. They have to build dynamic, efficient business processes and relational skills. They realize that competitive capabilities can only be transformed through continuous interaction with experts with experience in global markets.
As companies seek to capitalize on business opportunities popping up, a shortage of top-flite business professionals is exacerbating skilled labor shortages. Many companies have been hiring expierienced, non-native practioners who bring added diversity as well as know-how. As that trend continues, a legion of talented, foreign workers will introduce new ideas and approaches. But ultimately, success will come when a true fusion occurs between native and non-native knowledge workers. Well-integrated, globally-oriented organizations serving the region are already on the horizon, but there’s a lot of work to be done in this challenging area.
We’re excited to see that regional businesses aren’t simply clamoring for best practices—they’re demanding next practices that enable them to deliver competitive, customer-centric services at lower prices. They are adopting more advanced tools and relying on data-driven metrics to track and manage their business activities.
Global business consultancies entering these markets are finding the environment to be challenging due to prevailing business traditions. For example, decision makers in the region remain protective, sharing their plans slowly, wary of abdicating control to outsiders.
Many global consultancies, new to the region, have struggled with this. They’ve experimented with a range of business strategies, often partnering with local companies to gain a foothold in the region, spending considerable resources in the process. Some are succeeding, but many have not.
We believe our approach sets us apart from other global firms. We are bringing together people, cultures and ideas from around the world, transforming businesses in the region and driving unprecedented value. Having worked throughout the Middle East, we recognize the paramount importance of demonstrating respect for and sensitivity to both the traditions and challenges of the region. Our aim is to remain open to alternate, more effective ways of seeing, communicating, and tackling problems, and this region is an interesting market space.
The digital divide between rich and poor countries is narrowing as mobile phones and Internet use is becoming more available, but emerging economies still lag far behind.
This is according to the UN Conference on Trade and Development (UNCTAD) in its ‘07-08 Information Economy Report. The report shows that mobile phone subscribers have almost tripled in developing countries over the last five years, and now make up some 58 percent of mobile subscribers worldwide.
“In Africa, where the increase in terms of the number of mobile phone subscribers and penetration has been greatest, this technology can improve the economic life of the population as a whole,” it said.
The report said mobile phones were the main communication tool for small businesses in developing countries, reducing costs and increasing the speed of transactions.
“Mobile telephony provides market information for, and improves the earnings of, various communities, such as the fishermen of Kerala, the farmers of Rajasthan, the rural communities in Uganda, and the small vendors in South Africa, Senegal and Kenya,” it said.
Internet use and penetration continue to increase worldwide but developed countries still account for the majority of Internet users and have the highest penetration.
“In 2002, Internet availability in developed countries was 10 times higher in developed than in developing countries; in 2006, it was 6 times higher,” the report said.
Developed countries continue to lead Internet subscriptions worldwide, and the gap in terms of Internet broadband penetration has widened since 2002, it said.
UNCTAD said the ICT revolution was spreading to the developing world but said more had to be done to make sure poorer countries reaped its opportunities in growth and development.
It recommends that developing countries invest more heavily in human capital and infrastructure and better regulation of cyber laws.
Many of the leaders of global business convened at Davos this week in their annual summit to discuss the state of the world economy. Like last year, the ’08 conference paid lots of attention to ventures that are reducing the misery in the poorest parts of the developing world.
Bill Gates advocated, as he has in the past, for a market-based (“creative capitalism”) model in which enterprises in the developed world contribute to fighting poverty.
Creative capitalism harnesses the profit motive among companies in developed markets to meet the business needs of a largely neglected market that’s growing at a faster rate than the developed world. This model has been frequently stressed among world leaders, particularly since C.K. Prahalad’s seminal book (’04) The Fortune at the Bottom of the Pyramid. The U. of Michigan scholar makes a convincing case for focusing on emerging markets that, in the aggregate, will rival the size of the developed world.
A self-described “impatient optimist,” Gates is keen on these markets, citing successful projects in several industries—in food, technology, cell phones—that are opening the door for other ventures. And he argues that self-interest among companies meeting needs will drive new forms of innovation. And, he credits Microsoft’s billions in contributions over the years for successfully bridging the digital divide.
This story has gone unheralded because results have come in slowly. But the success stories are mounting. In a few months China will surpass the U.S. as the country with the largest number of internet users. It already has the same number of mobile-phone users (500m) as all of Europe.
In Mumbai half the residents now have mobile- or fixed-telephone subscriptions and the number is growing by 8 million monthly. The growth potential for the telecommunications market throughout the developing world is enormous.
Gains aren’t only evident in the CTI services sector. India’s Tata Motors recently unveiled the world’s cheapest car equivalent of $2,500 aimed at low income consumers currently using motorbikes. Meanwhile, in Africa, people who live in rural villages are using mobile phones to pay bills or to check food prices and find the best market for their wares.
Despite the high-profile successes and the long tem market promise , Western companies don’t often make their margins offering services to developing economies. Profits are too meager to entice most companies to invest in this space. Barriers – political, cultural and beaurocratic - are high.
To succeed in this kind of environment, businesses will need a new organizational model enabling distributed collaboration to be far more efficient and effective. Such a model, will rely on peer-based, bottom-up decision making. The new model will be enabled if not sparked by technology that enables collaborative efforts over vast distances.
This could result in a kind of business alchemy. The new business model will probably emerge in successive approximations —through trial and error. Two steps forward, and one step back.
Google released its annual year-end list of its most popular queries, suggesting the latest trends. No surprises this year. The fastest rising query in ‘07 was ‘iPhone,’ an impressive techno-business phenomenon. Its meteoric sales in Europe this past week prove that the iPhone is a truly global phenomenon.
But, with all the hoopla about how the iPhone is revolutionizing the marketplace, we’re missing another interesting – if less sexy – mobile trend: the rapid acceleration of cell phone penetration in emerging markets and its impact on the global marketplace.
Mobile phone penetration in developing regions is staggering. And, it’s a key contributor to economic growth. Studies show that every 10 percent increase in mobile penetration results in a country’s GDP growth of 0.6 percent.
The growth of mobile teleco penetration affects global poverty, and the way people in emerging regions consume a growing range of services from prepaid phone cards to banking services. Micro economies in rural villages are developing around those who buy and sell prepaid vouchers. People are using cell phones to enable their nascent businesses to flourish. Some of these micro-enterprises are growing – rapidly.
Until recently, network coverage in emerging regions focused on large cities as well as in major tourist areas. But operators are realizing the sheer economics of extending their networks to rural areas, particularly in regions without fixed line infrastructures. In order to do this, base stations are being built at a record pace. It’s a major undertaking, with financial costs to match. But the ROI is massive.
Looking back at the past year and looking ahead, here are the hot, new trends facing teleco operators in emerging markets:
1. Infrastructure sharing: operators using the same base station sites and transmission equipment reducing network infrastructure costs.
2. Consolidation of carriers.
3. Investment is coming from unlikely sources such as private equity firms.
4. 3G leapfrogging in emerging markets. (Operators in Qatar and Saudi Arabia have begun to offer 3G services, as did South Africa.)
5. WiMAX is emerging as a platform alternative for introducing new mobile services over vast expanses.
6. Deregulation in Middle East markets is enabling greater competition and better service/pricing. GCC nations, Qatar, Saudi Arabia, Bahrain, as well as Lebanon are awarding new licenses for carriers. Consumers are benefiting from better service.
7. Regional call-centers will be used to help convert prepaid customers to higher-revenue, lower-churn post-paid accounts.
8. Celtel’s Pan-African roaming network will enable people across geographic borders to connect without having to pay for incoming calls.
I’m not knocking the iPhone as the tech-business story of the year. Apple’s success will change the shape of things to come in the coming year and beyond. The iPhone has earned a special place in the zeitgeist of commerce. But, consider the under-reported story of mobile penetration in emerging regions, and fathom the scope and scale of what’s on the horizon.
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