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.
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