Finally! Relief for Hungry Farm Dogs

Last summer, Google introduced its developmental drone delivery system, "Project Wing," with a video showing a dog food air drop to a farmer in the Australian outback. This was at the height of the Ebola outbreak in West Africa, and just a few weeks after deadly mudslides in Afghanistan and India, and a severe earthquake in Ludian, China. Instead of highlighting the disaster relief potential for drone delivery, or demonstrating that drones have uses beyond spying and launching missiles, Google's marketing department promised help for rural dog owners hoping to avoid a long drive into town. And this spectacular marketing miss has since been repeated by other leading tech innovators. The slick videos, launch parties, and press releases for Tesla's home battery, Apple's HealthKit, and Microsoft's HoloLens all suggest there is no world beyond North American and Europe.

These innovations would be a slight convenience or a cool new gadget for developed-country users, but a valuable necessity in developing countries, where systems of house numbering, street naming, postal delivery, grid power, data collection, job training, and healthcare are all lacking. Few will blame tech giants for focusing mainly on lucrative consumer, gaming, and medical markets in developed countries; that's where their marketing and distribution channels exist. And of course there are considerable challenges to launching and scaling in developing countries. But the principle of user-centered design begins with the idea that users really need what you're building. Do doctors in a remote relief center in Nepal need antibiotics delivered by drone? Yes, they do - much more than an Aussie farmer needs a bag of kibble. They also need to report and track cholera outbreaks. And they might also have to walk a scared, inexperienced health worker in another town through an amputation - both wearing a HoloLens connected to a Tesla Powerwall.

The use cases for these innovations in emerging markets are plentiful, and the utility is far more convincing than it is in most mature-market contexts. Tech innovators would certainly claim that developing-country consumers are free to buy and use their new products and services, but they are being priced too high for most people, and there has been no appreciable effort to market or distribute them in developing countries. (Elon Musk claims the Powerwall would be great for "people in remote parts of the world," but China is the only developing country for which Tesla's website has been adapted.) Tech companies that ignore emerging markets are leaving the doors of opportunity open to low-cost imitators and counterfeiters. Instead, they should be developing tailored, affordable versions of these solutions for specific geographies and use cases. They could also pair these new products (through partnership or acquisition) with enabling innovations in payment and delivery so they can market, sell, and distribute them anywhere in the world. Apple will make a quarter of their income - more than $60 billion - in China this year, up from less than $1 billion in 2009. Are tech companies doing what it takes to realize this kind of growth in emerging markets when today's innovations are as common as a second-hand iPhone?

Trust and Verify

Two seemingly unrelated announcements were made by a pair of tech industry heavyweights - Apple and (eBay's) PayPal. Apple extended two-step verification - where a code sent to an old device must be used to change an account or buy something on a new device - to 49 countries, including China, India, Brazil and dozens of other developing nations. Nigeria was not on the list. This is noteworthy because PayPal announced that tens of thousands of Nigerians signed up for PayPal in the first week of operations there. PayPal and its partners (a prominent local lending partner, suppliers in Dubai and China, and fast-growing online retailer Jumia) claim that e-commerce in Nigeria has officially arrived.

Of course, for consumers, signing up for PayPal or verifying a new iPhone is only the beginning of the online buying experience. The bloom will quickly fade from the e-commerce rose if buyers fail to receive an order or fall victim to identity theft. The trust barrier is considerably higher for emerging-market consumers than it is for their mature-market counterparts. In many developing countries, people generally mistrust banks, operators, mail delivery organizations, foreign companies, and the legal system's capacity to prosecute fraud or theft. It will take a concerted effort to build trust and educate new smartphone users about risk, data protection and privacy.

As smartphones and wearables are used for more and more functions, trust and education will determine the growth rate for online purchasing. Device makers, app developers, and service providers (including back-end hosts) all have tremendous opportunities up and down the e-commerce value chain. Multinational companies that build reliable public - and private-sector partnerships (particularly with delivery services) and implement strong, user-friendly security measures will foster trust. To be truly effective, these efforts should accompany early and continued investment in brand marketing via localized content and messaging that reinforces security features. Providing a platform for user reviews and focusing on early adopters and influencers through social media can also validate the online buying experience and address the trust issues of willing but wary buyers. 

Car Talk

First came machines, then came machines that talk. Up next, machines that talk to each other. Consider the automobile, which started out as a fairly simple machine, then acquired more computer components and systems, and will soon be equipped with dozens, perhaps hundreds, of sensors integrating with drivers and passengers, the environment, and other cars.

The next wave of car technology is coming just as millions of new drivers in Asia, Africa, and Latin America get their first cars, and the role and function of cars is expanding beyond a simple people mover. More and more, cars are being seen as data generators, and the data they yield can populate an ever-wider range of databases (mapping, traffic, civil services, planning, insurance, consumer trends, health, and more). Given the amount of time people spend in their cars, there is already jockeying for position among data-hungry tech companies to integrate portable handheld devices with car systems - or better yet, to build sensors, chips, antennae, and software right into the cars. Tech industry giants, including Google, Apple, Microsoft, Qualcomm, and Intel, have been making sizeable investments in car-based technologies for several years.

These companies are sensing opportunities, and rightly so. Global sales of passenger cars will top 70 million in 2014, led by China (at 18 million units, or more than double the sales in the US). Among drivers - even in lower-income countries - there is a clear interest in avoiding traffic and collisions, and optimizing the driving environment with safety, comfort, entertainment, and information. The companies behind these technologies also understand that driving somewhere is evidence of consumer habits and intent. In emerging markets, having capable and reliable broadband networks, the right business models, the ability to connect multiple device types, and tailored solutions for different demographic segments are some of the more obvious challenges. As these challenges are better understood, there will be openings for hardware and software companies, mobile operators, service providers, programmers, and many others. One day soon, you may have to squeeze your Google Roadster between an Apple iCar and an AlibabaVan on the crowded streets of Bangkok.

Battle of the Form Factors: Tablets vs. Ultrabooks

A glance at the headlines over the past several weeks makes clear the battle of computing form factors continues to rage. HP announced it will sell or spin off its PC division, including its struggling TouchPad. Meanwhile, in India, Lakshmi Access Communications announced the launch of a new US$99 tablet computer. The tablet, which runs Google's Android OS and connects to the Internet using both Wi-Fi and 3G networks, comes only a few weeks after Bharti Airtel and Reliance Communications launched tablets to compete with Apple's iPad and Samsung's Galaxy Tab. In the United States, Intel said it would invest US$300 million in companies that develop new technologies for Ultrabooks, a class of thin and light laptops, signaling that the company believes there is still a market for the notebook form factor.


These announcements recall the debut of OLPC's ultra-low-cost XO laptop several years ago and the subsequent netbook craze. The netbook category, which took off and then promptly fizzled, was a response to demand for low-cost computing devices that were lighter, consumed less power and accessed most functions and content via the Internet. Yet its demise illustrated that fickle consumer preferences and technological convergence, especially coupled with the rise of mobile networks, can cause a category to stall just as quickly as it rose. Companies, like Intel, may be hoping that snazzy devices combining the best features of the tablet, smartphone and laptop form factors might help drive demand for devices packing its higher-margin processors. This is especially true in emerging markets where consumers may own just one or two devices and demanding more functionality from each device. 


While it may be impossible to predict device trends with any accuracy (few foresaw the tablet boom), it is fair to say that only categories that address both a deep consumer need and align with market characteristics will have staying power. Purchasing power, evolving tastes and ICT infrastructure will continue to drive consumer decisions in both developed countries and emerging markets. A differentiated device strategy that caters to local market characteristics and needs can help multinational firms capitalize on convergence trends in diverse markets.

Undercut on the Low End: Rethinking Strategy in the Mobile Handset Market

The huge and rapidly growing Indian mobile handset market once seemed like a boon to developed-country manufacturers, but lately it is starting to cause them some sleepless nights.  Formerly the dominant player with over 70% of the market, Nokia has seen its share slide to 31.5%.  Samsung, meanwhile, recently lost the number-two spot to the relatively unknown Chinese brand G'Five, which now holds a 10.6% share to Samsung's 8.2%.  Although Nokia and Samsung still make up the largest share of the market, fierce competition from domestic and Chinese companies is quickly changing the market landscape.  Last year alone the number of Indian domestic handset manufacturers grew from five to 28. These companies have learned that they can score by addressing rapidly changing consumer preferences, such as longer battery life and feature-rich phones with low price points.

The shake up in the Indian handset market points to the challenges Western companies are having in maintaining a strong presence in emerging markets as new players offer value products in the low- and mid-markets with rock-bottom prices and novel features.  While not alone in struggling in the Indian market, Nokia stands out because it is being squeezed on the low and high ends, and in both emerging and developed markets.  In the global smartphone market, rising competition from such large players as Apple, Research in Motion, and Motorola has eaten away at Nokia's market share.  Commentators note that Nokia's market share loss is due in part to an insufficient focus on consumer needs and the emphasis consumers place on style and design, which rings similar to what is driving its loss in the Indian market - a lack of understanding the demand the Indian consumer has for cheaper, feature-rich products.  The fierce competition in markets such as India means that companies like Nokia need to find a way to stand out in the crowd, as they risk losing their competitive edge in low-cost device markets to homegrown emerging-market players.

One potential strategy is for multinational companies to move into solutions that require more than just the ability to manufacture cheaply, such as offering ancillary or end-to-end services that bind consumers and business customers more tightly to certain brands.  Nokia is pursuing this path with its Ovi suite of mobile services, with some success so far. Focusing on offerings that go beyond hardware can help shield companies from competition in low-end device categories by increasing customer loyalty and providing a new revenue stream.  Learning how to do this requires an understanding of evolving local preferences and trends, but it can help companies hold their own as competition intensifies.

Demand vs. supply-oriented forecasting

by Karen Coppock
_______________

Apple has sold more than 2 million iPADs over the past sixty days. Who would have expected such uptake? Not many if historic, supply-oriented forecasting techniques were used.

Future technology sales are often based on recent sales levels (e.g., how many PCs were sold in the previous quarter), which are adjusted based on current industry and economic conditions. With new technology, such as the iPad, this approach falls short as there there is little (tablet PCs have not been a vibrant product category) or no sales history to use to inform the estimates. Therefore, industry players can be blindsided by new product categories or innovations.

One solution to this problem is to use demand-oriented forecasting. By understanding what features and functionalities consumers (as well as businesses and government clients) value and the trade offs they are willing to make between performance, features, functionality and price, firms will be better positioned to estimate the demand for innovative products and services.

Apple seems to be quite adept at launching category-changing  innovations...their forecasters must be looking at more than historical data to inform their business plans or else we may never have seen the iPad.

CES Hype Ignores Emerging-market Innovations

The dust is still settling in Las Vegas after 140,000 techies gathered for the annual Consumer Electronics Show (CES) last week. A hotbed of trends, gadgets and futuristic predictions, CES hints at the year’s soon-to-be hottest products and establishes solid predictions for the direction of the industry. This year’s show, responding to increasing media attention, attempted to shine a spotlight on solutions designed for developing countries. With industry representatives from the One Laptop per Child initiative, Qualcomm, Voxiva, AMD, Intel, Microsoft, and Cisco, CES hosted “Technology and Emerging Countries: Advancing Development through Technology Investments.” Even with the emerging-market star power of some of the world’s largest companies, coverage of the session was noticeably absent from CES press reports.

The absence of media attention on technology solutions for developing countries is not surprising. CES, traditionally, has been focused on the bells and whistles of the technology industry. The demand for sexy gadgets and flashy form factors keeps announcements comfortably far from reality and, as a result, only a fraction of the technology gizmos demonstrated make it to market. Successful emerging-market solutions are less often about flashy technology and more about shifts in business models to address day-to-day user needs. While new business models for and investments in emerging markets are not of particular interest to CES bloggers, they continue to be of interest to Wall Street.

Strategic investments that drive growth and true innovation in developing-country markets may be overlooked in the coverage of this year’s CES, but IT analysts are responding to them favorably. IBM, for instance, was rewarded by investors this week when their earnings report showed continued strong growth in emerging markets, making up for a slowing tech spending in the US. For companies just getting into the emerging-market game, there is still time to generate near-term revenues through smart investments. But newcomers are advised to ignore the tech-show drama of “devices in search of a market”, and balance technology innovation with business models and internal restructuring that will enable emerging-market growth.

Also in the news:

• NComputing takes on enterprise
• Apple loses negotiations in China
• OLPC to make XO laptop available in United States

iPhones in Beijing? Well…maybe later

Close on the heels of Apple’s iPhone launch in England and Germany, China Mobile announced it is in talks with Apple to introduce their iconic device to the world’s biggest market. The stock market certainly liked the news – Apple’s share price jumped 10% on Tuesday. But we at Vital Wave Consulting are questioning the “mature-markets-first, emerging-markets-later” launch strategy.

Consider: no fewer than ten iPhone clones are now available in China. This is not just the result of lax IP protection; it is also an expression of pent up demand for the status and functionality of a high-end, multi-functional device. Emerging-market consumers have shown they’re more than willing to leapfrog technologies for the right value proposition (witness the millions who have foregone landlines in favor of mobile phones). This may already be occurring in India, where a combination of low phone rates and poor home Internet services has driven large increases in mobile browsing and, according to India’s Economic Times, a decrease in broadband subscriptions.

While Apple focuses on mature markets, China Mobile and other carriers have been strengthening their hand for the coming negotiations. China Mobile recently joined Google’s Open Handset Alliance, inked a deal with Research in Motion (RIM) to sell the Blackberry, and announced strong growth for their in-house music download service. (Sixty million out of their 350 million subscribers now use the service.) Apple, Google, Nokia, Palm, and RIM have an excellent growth opportunity in emerging markets, especially in urban areas where there is relatively strong infrastructure and a burgeoning middle class. However, the layer of gold around that opportunity will only get thinner with an “emerging markets later” approach.

Also in the news:

• Asus plans desktop Eee for ’08
• EBay launches microfinance lenders site
• Notebook makers pay attention to low-cost PC market

Think Global, Partner Local

March 14, 2007

Think Global, Partner Local

Professor Pankaj Ghemawat of Harvard Business School poked a hole in the world-is-flat version of globalization in the current edition of Foreign Policy magazine. Ghemawat points out that “more than 90 percent of all phone calls, Web traffic, and investment is local,” and that most Web users chat with local friends or e-mail family rather than connect with someone overseas. “We’re more wired, but no more global.”

The preference for local, relevant content may account for the struggles US-based companies like Google, Yahoo, and eBay have faced in transplanting their success to emerging markets like Russia and China.

To win these markets, multinational tech companies are wisely experimenting with different business models – partnering with local competitors, surrendering overseas operations to local players, or signing up proven consumer champs like Pepsi and Procter and Gamble to find new advertising revenues.

There is a clear opportunity for SMB’s in developing countries to partner with multinational search and e-commerce companies to collect and deliver locally relevant content. Soon, it will be possible to identify a user’s location as soon as she logs on. The company with the strongest roster of local content providers will achieve the most business growth in that environment.

Also in the news this week

• MobiTV sees demand for service in developing countries
• Apple developing flash-memory notebooks – more rugged, less expensive could give Apple an emerging-market play
• Microsoft moves into enterprise VoIP – enabling more cost-effective operations in MNCs with overseas offices