Emerging Market Companies Are Main Engines of Innovation

For those in the business world who, by some miracle, have not yet registered that Indian or Chinese corporations are on the move within their borders and overseas, a May McKinsey Quarterly article, "Innovation Blowback: Disruptive Management Practices from Asia," serves as a wake-up call. The authors not only caution Western companies against complacency, they urge them to reposition themselves quickly.

"Emerging markets 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 traded goods and services."

As wake-up calls go, the tone of the McKinsey article is slightly strident but perhaps that's what it takes to shake things up. The article is behind a subscription wall, so unable to post a link. But the discussion of the reasons for the lead acquired by companies in China and India on product and process innovation is valuable. Spending behavior and the peculiarities of huge but discerning consumer bases account for much of that lead. The authors acknowledge that obstacles remain daunting for most emerging market companies but argue that Western companies must adapt old business models and build distinctive capabilities in the low-income segments of emerging economies.

Our friends at WRI's NextBillion.net would be interested in this last aspect of the argument since they are particularly concerned about "Bottom of the Pyramid" innovations and sustainable investments. One of their recent posting on the subject is "Innovation, Profits, and the Common Good."

Comments

[Mark Fraeght]

In my personal opinion,we can describes the unexpected consequences of the investments that Western companies have made in emerging markets. For instance, the presence of foreign businesses and the competition they bring often forces local businesses to take their game up a level. In doing so, they become more competitive on a global scale, threatening the foreign companies' home markets.
More to the point, that companies can gain key capabilities by serving low-income customers. In a market characterized by a lack of infrastructure, low education, and little disposable income, businesses must innovate to survive. These cost and management innovations become strong competitive advantages for a company, regardless of what market they are serving. Thank you very much for all your info. I am doing now research for my dissertation on E-Commerce for one of my customers,( http://www.coursework4you.co.uk) for sure will use some of that information