An interesting WSJ article

Indian Firms Shift Focus to the Poor

Some salient excerpts:

Indian companies, long dependent on hand-me-down technology from developed nations, are becoming cutting-edge innovators as they target one of the world's last untapped markets: the poor.

India's many engineers, whose best-known role is to help Western companies expand or cut costs, are now turning their attention to the purchasing potential of the nation's own 1.1-billion population.

The trend that surfaced when Tata Motors' tiny $2,200 car, the Nano, hit Indian roads in July, has resulted in a slew of new products for people with little money who aspire to a taste of a better life. Many products aren't just cheaper versions of well-established models available in the West but have taken design and manufacturing assumptions honed in the developed world and turned them on their heads.

And about time too, eh? If anybody, and I mean anybody, can make a profit selling in scale to the desi masses, they can succeed mighty well anywhere in the world. India has the right combustible mix of low cost, high quality, good brainpower and developing institutional as well as infrastructural support to pull this off. If anyone can, we can.

The Nano is an overused example. Am looking for more examples in profitably serving the bottom of the pyramid. And I found some in the article.... Yippie!

For the farmer who wants to save for the future, one Indian entrepreneur has developed what is, in effect, a $200 portable bank branch. For the village housewife, a wood-burning stove has been reinvented to make more heat and less smoke for $23. For the slum family struggling to get clean water, there is a $43 water-purification system. For the villager who wants to give his child a cold glass of milk, there is a tiny $70 refrigerator that can run on batteries. And for rural health clinics, whose patients can't spend more than $5 on a visit, there are heart monitors and baby warmers redesigned to cost 10% of what they do elsewhere.

Such inventions represent a fundamental shift in the global order of innovation. {Yup, and you can say that again.}Until recently, the West served rich consumers and then let its products and technology filter down to poorer countries. Now, with the developed world mired in a slump and the developing world still growing quickly, companies are focusing on how to innovate, and profit, by going straight to the bottom rung of the economic ladder.

They are taking advantage of cheap research and development and low-cost manufacturing to innovate for a market that's grown large enough and sophisticated enough to make it worthwhile.

"There was a large potential market that all the players have not been able to reach," says G. Sunderraman, a vice president at Mumbai's Godrej & Boyce Manufacturing Co., which developed the inexpensive refrigerator dubbed the "Little Cool." "Now economic factors are making these areas more and more attractive."

Also note the fortuitous emergence of mobile phones and microcredit - both enabling business and consumption at the pyramid bottom in ways not possible 10 yrs ago. The next 10 yrs promise to be an exciting time. If only we can keep our internal divisions manageable, we have a lot to look forward to as a nation.

Change's in the air....anybody notice??

Sure enough, the biggies have started to smell competition, and perhaps opportunity....

As with all innovations, many of these new products will fail to make their mark. But with so many unlikely products aimed at overlooked consumers, the trend could bolster bottom lines over time, create new companies and lead to a new kind of multinational corporation that thrives outside of the developed world. Unilever NV and General Electric Co. are taking notice. GE's chairman, Jeffrey Immelt, on a recent tour of Asia, outlined how the global giant is restructuring to take advantage of what he calls "reverse innovation." While in India this month, he said the innovations in medical equipment here could eventually help bring down the cost of health care in the U.S.

As expected, the academics simply have to say something at this juncture.

"The biggest threat for U.S. multinationals is not existing competitors," says Vijay Govindarajan, professor at Dartmouth's Tuck School of Business and chief innovation consultant to GE. "It is going to be emerging-market competitors."

And no, this is not some SKU size tinkering producing incremental sales only. O no, not that boring this time...

What is happening today is much different than the so-called "sachet revolution" of the 1980s when Unilever and other consumer-goods companies realized they could sell hundreds of millions of dollars more of their shampoo, detergent, toothpaste and snacks just by selling them in tiny packets.

This time, Indian engineers are reinventing products to cut costs and reach the billions of people world-wide who live on less than $2 a day.

The growing awareness of this new market has sparked start-ups as well as new business divisions in established Indian companies. Everyone from small local players -- looking to go national then global with their low-price inventions -- to the country's biggest conglomerate, the Tata Group, are in the race. They are trying to figure out what the poor want and how much they are willing to pay for it. Then the companies are going back to their research teams and crafting new products and unprecedented price points.

"These are not cheap knockoffs of Western products, they are in many cases very different products," says Arindam Bhattacharya the Delhi-based managing director of the Boston Consulting Group. "Western companies have not often explored these segments so they are untapped markets."

Gives a whole new twist to "the meek shall inherit the Earth" now, doesn't it?
Read it all!

Sudhir