Addressing the Value of WiMax to Emerging Market Consumers

Late last week, Motorola announced an agreement with Vietnam Data Communications to launch WiMax testing in Vietnam later this year. This announcement came just days after Ericsson spoke publicly about their refusal to put their weight behind WiMax, claiming it lacks a business model. While Ericsson continues to remain focused on cellular broadband, building upon existing infrastructure instead of transferring over capabilities to WiMax, others like Motorola and Intel believe that WiMax is a cost-efficient way to boost broadband adoption in developing countries. Motorola, Intel, Samsung, and others are clear about their interest in this emerging technology. Yet, widespread WiMax adoption in developing countries is not guaranteed.

Investors bear the risk that governments may choose not to support WiMax in their spectrum allocation policies favoring homegrown technologies. In addition to spectrum policy issues, WiMax success or failure rests on its true addressable market and its value proposition against available options in developing countries. Once established as a viable technology, the addressable market for WiMax will depend on customers’ eagerness to have and ability to afford broadband access and devices. With price-sensitive consumers, the value (or net utility) of broadband has to be carefully weighed, and recent studies show that, for new users, access to high-speed connections is not necessarily a priority.

The opportunity for corporations banking on WiMax is to focus on the value proposition of the technology in this market. The technology alone will not automatically induce adoption. Essential to WiMax success are service offerings, devices and go-to-market plans that maximize the net utility offered by the technology to the price-sensitive customers of emerging economies. This can be done, in part, through the introduction of services and applications via strategic relationships. Key partnership areas will include financial institutions to facilitate electronic payments and remittances, health professionals for delivering and collecting health-related information, and advertisers who are willing to supplement WiMax service costs in return for access to these new markets. With a great value proposition for the customer and reliable market data about where to focus their efforts, MNCs will be better equipped to benefit from the potential of the WiMax market.

Also in the news:

• Cisco shows link between economic development and broadband penetration
• Laptop industry eyes emerging markets
• MNC business execs know little about business in emerging markets

Remittances to fund mobile phones and minutes - why not PCs?

Posted by Karen Coppock
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NPR had a story on electronic money transfer service, Mukuru, this afternoon. Mukuru allows the immigrant community to send money - in the form of gas vouchers and mobile phone minutes - to their relatives back home in Zimbabwe.

The Mukuru business model is not new. Several firms, including MamaMikes of Kenya and Thamel.com of Nepal, enable immigrants to direct their money transfers to specific purchases or purposes. This phenomena is commonly referred to as the "productive use of remittances," which is somewhat of a misnomer as the companies offer gifts such as roses, candy and televisions as options.

In all three cases - Mukuru, MamaMikes and Thamel.com - the company accepts the money transfer request online, hence taking advantage of the technically savvy immigrant population. The family member back home then receives a text message notifying them that they have a gift or voucher waiting for pick-up. Thamel.com adds an extra touch of delivering the gift and then sending the immigrant a picture, or video, of the family member with their new gift or voucher in hand.

Mobile phone minutes are gift options on all three services, which is logical given that mobile phone minutes are an alternative currency in many poor countries. Thamel.com and MamaMikes also offer many brand-name mobile handsets as gift choices. None of the three firms have brand-name PCs as gift options - perhaps a missed opportunity for computer companies interested in reaching the next billion consumers in emerging markets.

Translating the "Huge" Opportunity into Actionable Forecasts

Market research firms and the business media have finally caught the emerging market bug and are yelling from the hilltops that the opportunity is “huge.” Forrester’s recent study received considerable media attention by stating that by 2015 most PC growth will occur in Brazil, Russia, India and China and the world will have 1 billion PCs in use by the end of 2008. The research says that in order to capitalize on this growth, hardware and software manufacturers will need to make a fundamental shift in their businesses and it gives nods to some of the heavily-marketed multinational initiatives.

With such compelling numbers and media attention, it is no wonder that technology companies are investing in programs targeting developing countries. Indeed, there has never been a more compelling time to invest. Senior executives no longer need convincing and emerging-market consumers are prioritizing technology spending. However, many large-scale emerging-market initiatives have failed in spite of the overwhelming opportunity, and business managers are advised to proceed thoughtfully.

Emerging markets are different and less intuitive, even for experienced business managers. Corporations that insist upon actionable analyses, sound data, and scenario forecasting will gain a competitive advantage in navigating the gauntlet of emerging-market opportunities. Business managers are well advised to apply the same sound strategic analyses to emerging-market endeavors as they would other business opportunities. Using new dynamic tools and broad sources of data, corporations can mitigate the risks associated with emerging markets and secure their share of the “huge” opportunity.

Also in the news:

• Ericsson edges ahead of rivals in emerging markets
• Migrant works could pave the way for SMS money transfers
• Sun sees networked computers as the key to bridging the digital divide

Anecdotes on Mobile Trends in Africa

posted by Karen Coppock
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Had the opportunity to have coffee with Ken Banks of Kiwanja yesterday – always enlightening.

He mentioned some interesting anecdotes from the Mobile Advocacy Toolkit Working Meeting he participated in in Nairobi earlier this month.

Uganda - Training on SMS inbox cleaning. An entrepreneur created a business teaching mobile phone users how to clean their SMS inboxes. He charges $1 for a one hour class, a steep rate in a country in which many people earn less than $1 per day. Shows how we take for granted how “easy” mobile phones are to use.

Congo and Rural Uganda – Women prevented from using mobile phones. Appears that women are discouraged, or outright forbidden, to use mobile phones in some parts of the Congo and rural Uganda. Jealous husbands are not keen on their wives having access to communications devices even if they could be the gateway to financial, health and educational services.

Kenya – Mobile phones cobbled together with spare parts. In Kenya, some entrepreneurs apparently build mobile phones from a variety of spare parts and homemade materials. For some $15-20 a customer can pick a model and the entrepreneur will weld together a mobile phone for them…it may not be pretty, but it works – at least for a while.

Kenya – Mobile phones used to connect cyber cafes to the Internet. A leading carrier offered a flat rate (a few dollars per month) GRPS service in Kenya. Entrepreneurs seized the opportunity to create cyber cafes using mobile phones as modems for PC Internet connectivity. Pakistanis also tend to use mobile phones/GRPS to connect their computers to the Internet – a new twist on fixed mobile.

Thanks for the interesting stories, Ken.

Quantifiable Business Value required for Social Development in Emerging Markets

Increasingly, multinational corporations are required to justify business investments in developing countries as having benefits for local populations, and likewise, philanthropy departments are asked to demonstrate the business rationale for philanthropic programs. IDG news recently discussed how some corporations are managing to achieve this delicate balance better than others. Recognizing and quantifying a blended value for these types of investments is necessary as technology companies search for near- and long-term growth opportunities in lower-income markets around the world where infrastructure is weak and educational programs are limited. For years, technology companies have addressed these issues through philanthropic or corporate social responsibility projects. As developing countries become increasingly attractive consumer markets, however, social development initiatives married to the company’s core products and services are proving to be sound strategic business investments.

The shift from philanthropy to sustainable business investments, or “social innovation,” may be here to stay, according to Unilever’s Chief Executive Patrick Cescau. Recently, Cescau even suggests that corporate social responsibility (CSR) may, in fact, be dying out. By addressing socio-economic conditions with their products and services, companies are both identifying next-generation consumers and discovering novel, low-cost ways of using technology.

Business managers sometimes find resistance to focusing company resources on emerging-market business growth due to the challenge of quantifying the opportunities and benefits. Managers responsible for growth in emerging markets will gain greater traction internally by demonstrating the business value of social development initiatives. These investments must be measured on the basis of market size, financial opportunity and alignment with current business systems and goals. By applying business rigor to social development initiatives, companies can ensure their sustainability and ultimately maximize the benefit to the target markets.

Also in the News:

• Kenya registers 1000 users daily on mobile money transfer system
• Intel launches consumer-focused low-cost laptop, Eee PC
• World to see two billion PCs by 2015

Cisco Invests in Designing for Local Markets

In today’s business climate, it is common for technology companies to be bullish on India, but Cisco is taking action by hunting for acquisition targets among Indian companies that design new technologies specifically for developing countries. Vital Wave Consulting closely follows the evolution of multinational corporate activity in developing countries. After decades of outsourcing to reduce labor costs, companies are now adding the creation of learning and innovation centers to their emerging-market strategies.

Outsourcing research and development (R&D) is not new to corporations; around 300 multinationals, including the majority of leading IT and telecommunications companies, have R&D centers in China. But creating innovation centers in developing countries for the purpose of designing products explicitly for those markets is still an anomaly. HP led the way with its i-Community initiative in South Africa and India in 2000. Intel followed with its Platform Definition Centers, and now Cisco is following a similar strategy through acquisition.

Cisco and its predecessors have realized that a growing consumer base in rapidly-developing economies is evolving into a profitable market with distinct technology needs and preferences. Companies can no longer recycle developed-world technology in emerging markets and hope to win a leadership position. To be successful, products must be developed with the needs of these markets in mind. And to truly understand these needs, it benefits companies to invest in on-the-ground learning laboratories in the heart of these emerging mass markets.

Also in the news:

• HP launches computer lab at Chinese University
• Hugo Chavez puts his personal stamp on the emerging-market PC race
• Vodafone and other mobile operators focus on emerging markets