Closing the IT Infrastructure Gap, Opening Doors to Rural Markets

Rural areas in China, which have fallen further behind major cities during the country's long economic boom, are set to receive a major upgrade to their information technology infrastructure. The Ministry of Commerce, the Agricultural Bank of China and China Mobile recently announced a cooperation agreement to install and develop new platforms to help modernize rural areas by increasing businesses' and residents' access to information networks and boosting the appeal of these areas for outside investment.  The news comes as other developing country governments announce initiatives aimed at helping rural areas close the economic and infrastructure gap with their urban counterparts. For instance, India's budget for 2011-2012 included a $12.8 billion allocation to improve telecommunications and broadband in rural areas. South Africa has earmarked $65 million to expand rural broadband infrastructure and services. 

These investments underscore governments' realization that their large rural populations have been economically underdeveloped and socially disadvantaged by their lack of information technology infrastructure. Roughly half of the global population lives in rural areas, including 56% of China's population and 70% of India's population. Telecommunications investment has been overwhelmingly concentrated in urban areas due to their high levels of wealth and inhabitants, while rural areas have been left behind. This focus has constrained companies' access to rural markets, in addition to reducing access to products and services for people who live there. In Nigeria, even with significant foreign direct investment in the telecommunications sector, data access penetration has remained low, and the Nigerian government is being blamed for the lack of investment in broadband. Ultimately, national governments will have to take the lead in investing in and creating policies to support the expansion of broadband and other IT infrastructure to rural areas.

Companies looking to break into untapped rural markets would do well to pay attention to these governmental infrastructure investments, and the grant making trends of the regional development banks that often fund them. By understanding where and when they will be completed, they can position themselves to enter rural markets on the heels of these projects. In many cases, new rural infrastructure is built using the latest technology, providing opportunities to create next generation products specifically to meet the needs of rural consumers instead of recycling technology previously developed for urban markets. The rise of rural technology investment allows companies a unique opportunity to not only reach rural markets, but also leapfrog existing technology to develop innovative products for them.

New Educational Technologies Set to Take Hold in Emerging Markets

McGraw-Hill and Wipro Technologies recently announced a partnership to develop "mConnect," a new mobile learning platform offering preparation support for university entrance exams and English-language training. Targeted to the rural poor in emerging markets, the product will first be launched in India as an affordable alternative to the traditional test prep materials that many consumers are already accustomed to purchasing. Pearson, the British publishing group, made a similar move last month by investing further in TutorVista, an Indian online tutoring services firm. 

The global education industry is the second-largest industry in the world after health care. Economic growth hinges on creating an educated and skilled workforce, which is driving the demand for education technology in developing countries. In recent years, the focus has been on supplying hardware products, such as the One Laptop Per Child (OLPC), to younger children in countries such as the Philippines, Costa Rica and India in order to educate them in the use of technology. Now the spike in rural mobile adoption, combined with the growing demand for varied educational content by teenagers and adults in developing countries, is creating a market for mobile education ("mEducation") services as well.

For technology companies, publishers and entrepreneurs seeking to meet the growing mEducation demand, the challenge will be commercializing these new educational products. Organizations would do well to design solutions for scale from the outset, which includes having the right business model and partners in place to support the wide adoption of new educational tools. Adapting content and technologies to local educational structures, as well as tailoring content delivery to multiple device categories (e.g., mobile handsets and laptops), can also enhance the adoption rate. Actionable business and market intelligence on local education needs and business systems can inform the development of go-to-market strategies that help ensure new mEducation services are both relevant and sustainable. 

Growing Political Unrest Calls for a Fresh Look at Risk Management

As political instability spreads throughout the Middle East like a wildfire, the risk associated with operating in emerging markets is keeping managers and investors alike on their toes.  Unrest in Egypt left Coca-Cola, Procter & Gamble and other foreign multinationals no other choice but to bring local operations to a halt, mirroring a similar move made by Cisco and Fidelity in Tunisia weeks before.  The panic felt by nervous investors, still jittery after the global financial crisis, triggered a massive flight of domestic capital and foreign investment, wiping nearly $50 billion from Arab stock exchanges.  Not surprisingly, risk management firms are advising their clients to start planning for the effects of spreading turmoil throughout the region, and interest in political risk insurance has spiked as companies scramble for ways to protect against potential losses.

These developments highlight a sensitive issue for firms operating in emerging markets: how to react to unforeseen changes in political environments?  Some of the countries affected by the current wave of unrest once appeared stable to outsiders due to the presence of longstanding autocratic governments, but a closer look would have revealed an undercurrent of growing unrest.  Political risk is about more than just the possibility of change in political regimes; it encompasses complex social and economic forces that can shatter the established order.  The need for quality information on these forces is clear, yet respondents in a study from PricewaterhouseCoopers cited the difficulty in accessing vital risk information as a major impediment to business planning.  Moreover, the study shows that although a high percentage of multinational managers engage in ongoing monitoring of country political environments, most feel they lack effective political risk management processes. 

The recent developments underscore not only the importance of performing political risk assessments that incorporate social, political and economic conditions and their impact on the local operating environment, but the need for conducting such assessments on a continual basis.  Changing risk landscapes are creating new issues that were not on the radar a decade ago, such as rising geopolitical tensions in Asia, the rapidly rising cost of food and politically motivated decisions to enact capital controls.  Firms can mitigate risk through the development of effective risk management plans for both new opportunities and existing operations in foreign markets.  Despite the concern over political instability, the growth potential for emerging markets remains strong, and businesses can capitalize on this growth by keeping their ear to the ground in periods of stability and turmoil alike.

Vital Wave Consulting quoted in The Economist

Vital Wave Consulting comments on commercializing mServices in The Economist:

Not just talk: Clever services on cheap mobile phones make a powerful combination—especially in poor countries