Is China, Korea or India Part Of Your Gobal Innovation Strategy? If Not, You Must Think Twice.

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by: Idris Mootee

What a view of probably the most vibrant business place in the world. In Hong Kong seeing the hyper competitive markets and it is the gateway to the world biggest market of the future, funny enough that I wonder why the word ‘innovation’ is not commonly used or comes up in board room conversations here. But innovation is deeply embedded in every inch of this place and the people here. For them, it has always meant survival and opportunities.

Fortune 500s of the west is thinking too narrowly about the emerging world, particularly China and India, these are not only emerging markets, they are emerging innovation centers. If we are not careful, there is a risk that we may eventually become the emerging market if they out-innovate us.

Since global brands first entered these markets 2 or 3 decades ago, and to a some extent today, these companies have an "imperialistic" view of seeing the emerging markets as something waiting to be conquered., or markets waiting to be colonized. With the growing middle class and a thirst for the latest and newest, companies expect to harvest the fruits of the innovation efforts developed at home (suck costs). It is easy see the logic but this is to some extent can be a dangerous view, a complacency problem. The very presence of Fortune 500 together with the entrepreneurialism of the web 2.0 World and the competition they create have inspired the emerging world’s companies to raise their game in response. They are seeing and learning how these innovation games are being played out.

Emerging markets on steroid such as China and Korea are generating a wave of disruptive product and process innovations that are helping established companies and a new generation of entrepreneurs to achieve new price-performance levels for a range of globally marketed goods and services. Eventually, such companies can be the worst nightmares for Whirlpool, Ford, Dell and Nokia of the world. Although this is not going to happen tomorrow, but I don’t think it is that far away either. The low incomes of consumers in China and India — a total of a little less than 500 million households with an average annual income of less than $6,000 a year. You do the math. The other is the spending behavior of this immense group of consumers, who, by Western standards, are unusually youthful, demanding, extremely open-minded, and adventurous. They are the perfect customer archetypes for any kind of innovative products and services.

The powerful low-end home market can provide an unfair competitive advantage for these emerging market companies to innovate on the low end of the market and then bring them global. The low end of these markets are generally underserved and ignored by many. There are three innovation models, most common one is process innovation: wiring everyone to the same network and leveraging the cost, talent, and scale of a global company. This is the most commonly practiced and lease innovative, really just a conventional scale-play. The second one is creating lower quality products and services sold cheaply to mass, which works to some extend for commodity products. The third one is innovating through local  joint ventures.

Organizations must reposition themselves to deal with and prepare for this. This is not about stripping features and lowering qualities, they must instead redesign their products and processes from a "clean-sheet" perspective, and innovation out of these “white spaces”. My advice for them, stop innovating based on familiar markets. Your home-market organizations should no longer be the primary locus of innovation. When you think innovation, try starting from the emerging market and then bring them back home. Or at least, integrate your innovation in your home markets with the emerging markets.

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