From "reducing poverty" to creating prosperity: the power of market-making innovation
The Prosperity Paradox (Christensen, Efosa & Dillon, 2019) discusses a critical component for successfully moving people and communities out of poverty and deliver sustainable return on social and financial investment.
Clayton Christensen's "innovator's dilemma" -the reason why so many new businesses and programs based on great ideas or products fail while others succeed" - must be addressed in developing countries by not just introducing new revolutionary, affordable products and services, to alleviate poverty but to create prosperity.
Lets start by defining prosperity:
"we define “prosperity” as the process by which more and more people in a region improve their economic, social, and political well- being." (Christensen, Efosa & Dillon, 2019)
It might seem utopian or even laughable to discuss prosperity for those who are struggling with systemic poverty and deprivation, and that's precisely what happened to Mo Ibrahim when he first proposed introducing cell phones in Africa, in the 1990s. As Ibrahim says:
“It’s not an easy thing to be laughed at by serious people.
And serious people laughed at me when I told them I wanted to build a telecommunications network in Africa twenty years ago.
They told me all the reasons the project would never succeed. Somehow, I just kept thinking, I know there are challenges but why can’t they see the opportunity?”
Ibrahim, however, didn't budge at the reaction and move ahead. He soon found that the technology was the easiest component: there was no infrastructure, no governance or value chains to help people use or pay for the phones. He started step by step, by building those components and creating a market-based innovation:
He started by asking the right question:
"Instead of seeing just poverty, he saw opportunity. “If you live far away from the village where your mother lives and you want to talk to her, you might have to make a seven- day journey,” Ibrahim recalls now. “If you could just pick up a device and speak to her instantly, what would be the value of that? How much money would you save? How much time?”
Notice that Ibrahim did not say How will millions of Africans, for whom three meals a day is often a luxury, afford a mobile phone? or How can you justify the investments in infrastructure for a market that does not exist?"
The payoff was tremendous
"Today, Africa is home to a sophisticated mobile telecommunications industry, with numerous mobile phone companies (including Globacom, Maroc Telecom, Safaricom, MTN, Vodacom, Telkom, and others) providing more than 965 million mobile phone lines.
These companies have not only raised billions of dollars in debt and equity financing, but by 2020, the industry is forecast to support 4.5 million jobs, provide $ 20.5 billion in taxes, and add more than $ 214 billion of value to African economies." (Christensen, Efosa & Dillon, 2019)
Christensen and his colleagues identified three kinds of innovation: (1) sustaining innovation -the kind that keeps a products competitive through gradual "performance improvement" (such as fuel efficiency or longer-lasting batteries) ; (2) efficiency innovations, which help companies save costs and do more with less and (3) market-creating innovations, that turn non-consumers into consumers by creating entire value chains.
Market-creating innovations have three key characteristics:
First, by their very nature, they create jobs as more and more people are required to make, market, distribute, and sell the new innovations. Jobs are a critical factor in assessing the prosperity of a country.
Second, they create profits from a wide swathe of the population, which are then often used to fund most public services in society, including education, infrastructure, health care, and so on.
And third, they have the potential to change the culture of entire societies.
Job and market creation are not just "social impact" but business drivers that differentiate leading companies from laggards and copycats.
Henry Ford didn't just create the Ford T, but a market by asking himself "what is the job to be done?" thinking from the point of view of potential users for the automobile. The answer was (a) making it better than the horse: more productive, more durable, reliable and scalabe, (b) creating the components to use it (tires, roads, gas stations) and (c) making it affordable,
In the same manner, all great companies and communities start by thinking in terms of creating systems, markets and value chains that will support higher levels of productivity and higher standards or living and consumption.
This book is a must read for those in the business of social and organizational innovation.