Innovation focused on the base of pyramid : the case of an African telecommunications company

Van Rooyen, Gert Willem (2007-12)

Thesis (MBA (Business Management))--University of Stellenbosch, 2007.

Thesis

AFRIKAANSE OPSOMMING: In vandag se besigheidswêreld bestaan twee teenoorgestelde pole. Aan die een kant is die wêreld se gevorderde markte wat reeds so oorbevolk geraak het, dat dubbelsyfergroei ‘n skaars verskynsel is. Ten spyte hiervan word aanhoudende druk geplaas op senior bestuur om hulle besighede te groei teen koerse wat ‘n toename in aandeelhouersbelang sal verseker. Aan die ander kant is twee derdes van die wêreld se bevolking (4 Miljard mense), die sogenaamde basis van die ekonomiese piramiede (BVP), wat in armoede lewe en afgeskeep word in terme van noodsaaklike goedere en dienste, om nie eens te praat van weelde artikels nie. In dié markte is dubbelsyfergroei nog behaalbaar en in meeste gevalle is die enigste kompetisie die gevaar dat produkte nie verbruik word nie. Dié navorsing kyk na hoe dié twee pole geïntegreer kan word sodat beide daaruit kan voordeel trek. Besighede kan volhoubare vlakke van groei bewerkstellig deur ewe veel aandag te skenk aan volhoubare innovasies as ontwrigtende innovasies. Die klem wat gemaak word in dié navorsingsverlsag is dat besighede dit nie kan bekostig om net op volhoubare innovasies te fokus nie. Hulle moet ook in ontwrigtende innovasie strategieë belê. Die innovasie teorieë bepaal dat opkomende markte die beste plek is om ontwrigtende innovasies te ontwikkel. Verskeie multi-nasionale maatskappye het al egter misluk om die belowende massa-markte binne opkomende markte te penetreer. Die rede is dat baie van hul globale strategieë mik na die ontwikkelde marksegmente binne-in daardie ontwikkelende markte en nie op die massa-markte aan die BVP nie. Om tegnologieë te ontwikkel vir die BVP verg plaaslike strategieë en, onder andere, ‘n kwantum sprong in die prys-werkverrigting verhouding. In baie gevalle kan dit ‘n daling in prys wees met soveel as ‘n faktor van tien. Indien suksesvol, bestaan die moontlik dan om dié tegnologieë terug te vat om gevorderde markte te ontwrig. Daar is egter ook ‘n humanitêre sy van die saak. Elke jaar is armoede indirek verantwoordelik vir miljoene sterftes in Afrika en baie oorlewendes leef in haglike omstandighede sonder noodsaaklike goedere en dienste, terwyl hulle uitgebuit word deur ‘n paar informele besighede. Die BVP bied aan die gevorderde ekonomieë van die wêreld nie net die geleentheid om baie geld te maak nie, maar ook die geleentheid om op só ‘n manier besigheid te doen dat dit arm mense kan help om ‘n inkomste te verdien of selfs inkomste te genereer. Dit kan op baie verskillende maniere help om dié mense te lig vanuit armoede. Dit wil voorkom asof besigheid en die moontlikheid om welvaart te skep die mees effektiewe manier is om die BVP te lig vanuit armoede. Die BVP het egter die kennis, verantwoordelike besigheids-sin en die onderhandelingskrag van multi-nasionale besighede nodig om te verseker dat besigheid in dié markte op ‘n verantwoordlike, volhoubare manier geskied.

ENGLISH ABSTRACT: In today’s world of business two opposite poles exist. On the one end is the world’s developed economy that has become saturated to such an extent that double digit growth has become a scarcity. However despite this fact continuous pressure is being placed on managers to grow their companies at a rate that will ensure an increase in shareholder value. On the other end are two thirds of the world’s population (4 billion people), the base of the economic pyramid (BOP) that is desperately poor and underserved in terms of basic needs, let alone luxury items. Double digit growth is achievable in these markets with the only competition being non-consumption in many cases. This research looks at how these two poles can be integrated into a mutually beneficial relationship. Companies could ensure sustaining levels of growth if there is an equal focus on sustainable as well as disruptive innovations. The case made in this research report is that companies cannot afford to focus on sustainable innovations alone, but need to invest in disruptive innovations as well. The innovation theories hold that the best place to test and develop disruptive innovations is in emerging markets. However too many multinational corporations (MNCs) have failed to access the illusive mass markets within emerging economies. It seems that their strategies were focussed on the developed segments within those emerging markets and not on the masses that constitute the BOP. Developing technologies for the BOP requires a local strategy and, amongst other things, a quantum leap in the price-performance ratio - in many cases a typical reduction in price by a factor of ten. The possibility then exists to take these solutions back to disrupt developed markets. There is a human aspect to this scenario as well. Poverty has indirectly been a cause of millions of people dying in Africa every year and many survivors live in poor conditions without basic services and being exploited by few informal businesses. The BOP offers an opportunity for the developed economies, not only to make a lot of money, but also to innovate their products and business models to empower poor people to start earning and generating income. This will in many ways help them to rise from poverty. It seems that growing business and generating wealth might be the most efficient vehicle to help lift the BOP from poverty. However, the BOP needs MNCs to bring their power and knowledge to these markets to ensure that it is done responsibly and in a sustainable manner.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/792
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