Mobile Meals

The Economist is the latest to serve up lukewarm Emerging Market news after a decades-long buffet with all the gluttonous expansion the world could ingest. Slowed growth, lackluster ROI, bribery and corruption scandals, and of course the PC getting served with divorce papers by a few billion former prospects. Companies that have counted on emerging-markets growth have fallen short, leading some to question whether the buffet is closed for good.

These are worrying trends, to be sure, but they are hardly signs of the apocalypse. Emerging markets are not the feast they used to be, but they still offer myriad opportunities for growth. As smartphones pass the noteworthy milestone of outselling feature phones globally - due largely to swelling sales in Asia, Latin America and Eastern Europe - many opportunities will be mobile-based. Besides the obvious boon for operators and handset manufacturers, there is promised growth for everyone in the mobile Internet value chain (app developers and store owners, content and service providers, networking and even peripherals). The ad agency Publicis, which recently merged with Omnicom, has seen the writing on the wall and gone on a buying spree of emerging-market firms. As billions of new consumers acquire smartphones and tablets (and the means to purchase more goods), it makes sense to be the one who speaks to those buyers. 

Who will mobile advertisers be working with in 10 years? They will be working with companies that develop products and services with compelling features and functionality, at the right price for wildly diverse emerging-market customer segments. Their clients will have a plan for navigating an increasingly competitive environment, hyper-localized go-to-market strategies, and careful management of country risk factors. They will be working with company executives who don't mind snacking on-the-go. 

Facing Traffic Mortality in Emerging Markets, Head On

This week, Vital Wave's CEO was in a head-on car collision with a Ugandan boda boda (or scooter). Amazingly, everyone involved walked away unscathed, narrowly avoiding joining the 50 million people worldwide who are injured or killed in car accidents each year. This incident also underscored an issue that is highly relevant to the continued growth of emerging markets. The World Health Organization (WHO) has labeled traffic fatalities a serious but neglected public health issue that disproportionately affects developing countries. A full 90% of the 1.3 million people killed each year in road traffic injuries are in low- and middle-income countries. Low-income rural countries have a per capita traffic death rate more than twice that of high-income countries, despite owning only 1% of registered vehicles. This discrepancy appears to be widening, and current trends suggest that road traffic injuries will be the third leading cause of death and disability worldwide by the year 2020.

"The use of smart phones to reinforce safety habits will be much more affordable in developing countries than integrated, in-vehicle systems such as collision avoidance systems. The technology and some applications already exist to connect vehicles with smart phones for supporting safe behaviors such as speed limit and seat belt compliance." - Nicholas Ward, Professor of Mechanical and Industrial Engineering, Montana State University

The impact of traffic injuries is felt across all sectors of emerging markets. Economically, road crashes cost developing economies the equivalent of 1-3 percent of GNP each year. These costs will only go up as car ownership and traffic levels balloon faster than the surrounding road infrastructure and traffic safety culture can support. In addition to the direct costs of automotive crashes, the healthcare resources required to treat these injuries also take away from efforts across the developing world to address high rates of infectious disease and the increasing burden of chronic disease.

Cross-sector efforts present opportunities to address this growing but neglected health and economic problem in emerging markets. The WHO points out that "reducing the risk in the world's road traffic systems requires commitment and informed decision-making by government, industry, non-governmental organizations and international agencies, and participation by people from many different disciplines, such as road engineers, motor vehicle designers, law enforcement officers and health professionals and community groups." Such coordinated efforts – through public-private partnership, strategic investments, and rigorous evaluation of needs and interventions – stand to have direct, positive impact on social and economic goals as well as business growth in industries as diverse as high-tech, healthcare, and automotive.

Analytics in a Changing Landscape

Analyzing data in emerging markets used to be fairly easy. Of course, that's because there were little or no data to analyze. But those days are pretty much over. The bleak landscape of reliable data on customers and markets in developing countries has bloomed like a flooded desert. And today, new data are being captured through government and business information systems, mobile phones, social networks, and retail transaction systems. With two-thirds of its growth expected to come from emerging markets in coming years, perhaps no other industry stands to benefit more from rigorous data analytics in emerging markets than Pharma.

The pharmaceutical industry can benefit from solid analysis at every stage of the value chain. For instance, disease tracking data support the discovery and development of new therapies. Remote data collection and diagnostic or treatment support can aid clinical investigations and help companies understand how health workers and patients manage health and disease. Improved analysis can help companies segment diverse global customers and devise localized pricing, packaging, and educational programs. Once products are in the field, data can be mined to make improvements in the supply chain, patient education, and communication or training for health workers.

If applied creatively and skillfully, data analytics could help pharmaceutical companies move past the role of pill manufacturer and toward the business of providing personalized health services. As data grow and become more accessible, the time is ripe for pharmaceutical companies to develop and apply new tools that enhance the care experience (and grow their business). This will require evaluation and prioritization of areas where data can bring the most value, and then a clear plan of action to implement the technical and analytical systems to capture, analyze, and integrate that data. With agility and a business-driven focus on quality data analytics, pharmaceutical companies will discover the value of making medicine from desert flowers. 

Oh Moses, Where Art Thou?

When a small town government on the New Jersey shore wanted to build protective sand dunes along the Atlantic coast, it faced stiff resistance from homeowners who demanded compensation for losing their view of the ocean. The conflict made its way to the courts before Hurricane Sandy hit the Northeastern coast in October, 2012. After Sandy, the courts, governments at all levels, the real estate and insurance industries, and even homeowners with a view admit that houses shielded by natural barriers fared much better than those without. The case for compensation was blown away like a 1920's bungalow.

The argument for "green-gray" infrastructure – a combination of engineering and natural barriers like sand dunes, oyster beds and salt marshes – is building worldwide as rising sea levels cause increasingly erratic weather patterns and violent storms. Governments and funders have learned the hard way that vast infrastructure investments can be completely undone by natural disasters. This is particularly true in seaside urban centers in developing countries, where huge populations, entrenched poverty, and misguided policies put tremendous pressure on the environment through polluting, overfishing, and the destruction of coastal forests. In fact, as part of a broad research effort, studies funded by the Rockefeller Foundation found that there is substantial interest by funders and governments in climate change adaptation, but little funding is focused directly on protecting the 200 million urban poor in coastal areas.

There are limits to what any single organization can do to combat rising sea levels. Government efforts generally end at their own borders, and the motivation for private industries (e.g., engineering and construction) is to build, baby, build – regardless of the potentially long-term negative effects of artificial sea-walls and dykes. The most likely candidate for battling the rising waters isn't a single entity; it's a coalition of stakeholders focused on funding and scaling high-profile projects to demonstrate the effectiveness of green-gray infrastructure. A cross-sector coalition including the public and private sectors, non-profits, foundations, and academia can provide incentives for sustainable green-gray strategies, while discouraging short-term, ecologically harmful engineering and construction projects. These coalitions may not be able to hold back the waters, but they can mitigate risk and maximize impact by tying funds to sustainable long-term solutions. 

Big Data = New Class of Economic Asset

In a single week, a small-scale farmer in rural Kenya may use his mobile phone to pay for seeds, search for co-ops offering the best prices for sorghum, and text his expatriate brother asking for money for school fees or medicine for a sick child. This farmer’s mobile phone usage may be of interest to a sociologist or cultural anthropologist. But when combined with usage information from 27 million other mobile subscribers in Kenya, the data paint a unique, unprecedented image of public behaviors, preferences, and needs. According to IBM, 2.5 quintillion bytes of data are generated worldwide every 24 hours. Interest in the collection and use of this so-called "big data" is gathering steam. It is new class of economic asset, like currency or gold.

Yet, there is an important difference between developed and developing countries in terms of data creation. In the developed world, data is produced by a wide variety of sources - Internet-enabled computers and mobile devices, ATMs, cash registers, GPSs, cell phones, RFID tags, and many others. In urban areas of developing countries, the variety of data sources is beginning to rival mature-market cities. However, in the remote areas of many countries, mobile phones are by far the dominant source of data. This presents a unique opportunity for private companies, governments, academic institutions, and development organizations. Data from mobile phones can be used by companies to support new product definition, market segmentation, and ongoing product and service development. Governments and NGOs can use big data to allocate resources, evaluate and improve social programs, and quickly identify (and respond to) health and environmental crises.

In a recent report for the World Economic Forum, Vital Wave Consulting showed that momentum is growing for a centralized "data commons" that will guide public and private sector efforts to gather, clean, protect, and share data. This work is being advanced by the UN, NGOs, academic institutions, and innovative organizations like Kenya’s Ushahidi and San Francisco’s Global Viral Forecasting Initiative. These groups foresee the application of big data to persistent challenges in the areas of health, public services, agriculture, financial services for the poor, and disaster relief. To be sure, there are obstacles to overcome - privacy and security, data quality, incentivizing private companies to share data, and a dearth of data mining and analysis expertise. But the singular importance of mobile phone-generated data throughout the developing world presents a clearer path to data gathering and usage. And the potential benefits to sharing and aggregating data are becoming more evident each day.

Low-Cost Tablets Fuel "Post-PC" Debate

A technophile walks into a bar. The bartender says, "Have you heard the one about the new laptop that costs a fraction of the price of the real thing, but with all the bells an' whistles?" The techie chuckles and says, "Yeah, I've heard it - it's a good one. In fact, I hear it every year."

One recent installment in the cheap, revolutionary laptop field comes from India, where Datawind announced a $35 tablet with Android 2.2, 256 MB of RAM and 2 GB of flash memory. The announcement followed the established pattern - developers stoke demand by unveiling a prototype that looks and behaves just like higher priced machines. Tech blogs dutifully report the announcement, then pose questions and comments about the fate of the PC in a world full of handhelds, smart phones and tablet PCs that anybody can afford. One tech observer went so far as to suggest that the device will make India the first true "post-PC" country - borrowing a term from the ongoing debate everywhere from the Consumer Electronics Show (CES) to the Economist over whether PCs have been effectively replaced by smart phones, tablets and laptops.

But the technophile in the bar knows that the devil is in the details. According to Datawind's CEO, Suneet Tuli, the $35 price can only be reached when annual volume reaches 2-3 million units. In the meantime, the Indian government's initial order costs $50 per unit. And Datawind is hoping to save money by "componentizing" the manufacturing process, and make money from their own app store. The company should be commended for re-tooling the standard business model, but multinational technology firms are not obliged to take the "post-PC" bait. While it's true that iPads outsold top-selling traditional computers last quarter, and a fully loaded PC isn't needed just to send emails or surf the Web, students and office workers will balk at creating reports with a 7" digital keypad. Consumers (and many common software applications) demand more processing power and memory than most low-cost machines can offer.

The only tech companies that should worry about a "post-PC" world are those that have not diversified to feed the insatiable global demand for mobile devices - and there are few of those (though their mobile market share may be smaller and less defensible). The rise of cheap tablets and app-filled smart phones is an opportunity for traditional hardware, software and component companies. The "Annual Low-cost Challenger" will need more than just large government orders; they will need distribution channels, marketing savvy, production partners and many other advantages to sustain their business. Supporting new entrants (formally or informally) may bring more customers into the technology market, leading them along the path to more sophisticated devices. And that's no joke.

India On-shoring?

The Indian government's Department of Telecommunications quietly released a policy document that should rattle pretty much every global tech company in the world. The National Telecom Policy advocates a huge increase in domestic manufacturing and design, particularly in the areas of microchips, network equipment and computing devices (including smartphones). Designed to meet local demand for relevant products and services, reduce the trade deficit and ensure cyber security, the policy aims to:

• Promote domestic production of telecoms equipment to meet 80% of India's demand and capture more of the global ICT market
• Provide preferential market access for domestically manufactured telecommunication products including mobile devices and SIM cards
• Support development of Indian standards for hardware and software
• Streamline taxes and provide greater access to financial resources for local manufacturers and R&D groups 

For India, this is a well-designed and ambitious policy initiative, and multinational ICT companies can't afford to ignore the underlying reasons for the move. Countries like India and China, which have the design talent (and in some cases the manufacturing capacity) to implement or impose a home-grown ICT ecosystem, are becoming increasingly aware of the inherent vulnerability of buying critical technologies from abroad. Multinational ICT companies may see in the new policy a threat to market access, but it remains to be seen whether the DOT has the broader government backing to implement and enforce it. There are also unresolved questions about the policy, such as whether locally designed products made by multinational companies will qualify as domestic.

Tech companies should also smell opportunities in the new policy. The goals of ensuring at least one e-literate person per household and increasing access to mServices promise a growing market for mobile and low-cost devices. Efforts to support IT purchasing by small- and medium-sized businesses, especially in Tier II and Tier III cities, may also bolster demand. And there will almost certainly be partnership opportunities, particularly for companies that respond to the government's concerns over cyber security by building in or enhancing security features in their chips, network equipment, hardware and software.

For more information about the Indian Government's proposed policy and its implications for your business, contact anne.craib[at]vitalwaveconsulting.com