Understanding innovation in low-income markets

Abstract

As western markets stagnate, companies are looking to the emerging world for growth, and have begun to experiment with offerings that target the four billion microconsumers at the base of the pyramid. To successfully engage these emerging consumers, firms must innovate around their product offerings and business models. This report sought to better understand innovation in a low-income market context. It explored what drives companies to enter low-income markets, the triggers for innovation in these markets, and the characteristics of that innovation, drawing particularly on Clayton Christensen’s theory of disruptive innovation. Nineteen interviews with executives at 11 companies operating in South Africa were interviewed in order to test propositions derived from the literature. The findings showed that companies enter low-income markets largely in pursuit of growth, but that a variety of secondary factors also play a role. The data indicated that innovation in low-income markets is often triggered by negative factors such as lack of infrastructure or limited buying power, rather than the positive factors cited in much of the existing innovation literature. Finally, it illustrated that companies often exhibit the elements of disruptive innovation when they engage with emerging consumers. The report then offered two models -- Innovation in low-income contexts: a descriptive model, and the Emerging Consumer Innovation Web -- to help companies frame the innovation process in a low-income context. It concluded that companies need to adopt a new philosophy of innovation when engaging emerging consumers, one which embraces the challenge of low-income markets as a springboard for innovation and a catalyst for creativity. Copyright