They argue that this phenomena, in the end will benefit us all, rich countries and emerging markets, like any other "great insurrections". Both sides are dependent each other. Rich countries need cheap labors, market and brain powers from developing countries and developing countries need fundings and technologies from richer ones.
1. First, it is about the world turning upside down. Advanced nations are well known by their innovations… years ago. Now, great innovations belong not just to them but also to developing countries. Just like what Japan did to Americans in 80's (replacing the US as world's leading carmaker), now countries like China and India is challenging the US in various technologies. Westerns used to believe that their companies create ideas and export them to developing countries. But now, they "spread their Research and Development divisions around the world". The market is also moving to emerging ones. The chart shows that most of world's population is in Asia, and it will be like that many years from now.
2. Innovation is now about "break all the rules". The chapter tells stories about some tech innovations in India, such as a water filter that costs much less than other water filters, the Mac 400 (a handheld electrocardiogram / ECG) that also much cheaper and portable than GE's ECGs. The innovations moved from "manufacturer to consumer" to "consumer to manufacturer". They work it backward, to find what the consumers need and be able to afford, then they manufacture the specific products. There also a story about Dr. Devi Shetty from India, who created an innovative system that can enable people in India to have heart surgery with much less cost, and to serve higher number of patients than conventional ways, and still get profit! China is also known for "weak property rights". This condition benefits some people to stole other's technologies and make something new out of it, which is a cheaper version. These people are not just "bandits", but they are also talented innovators. The point is, the new first rule of innovation is to break all the rules!
3. To penetrate the emerging market is not an easy task to do. Unlike the established markets, the emerging ones are far more varied and volatile. This will make a big difference between success and failure. This chapter (Easier Said Than Done) gives many examples of companies conducting many researches to understand how the specific market behaves. Sometimes the entire business model must change in order to survive in the market. Price is also essential in survival in emerging markets. Determining the price point could be hard, depends on the market segmentation.
4. Grow, grow, grow. To survive in emerging market, a company has only one choice: to grow. There are several examples of fast growth, such as Lenovo, who doesn't even exist before 90s, but the bought PC division of IBM. The important aspect of growth is to get best local talents.
5. To survive in emerging markets, companies cannot bring plain business plan they have from developed countries. They have to adapt to survive. In developing countries, many big companies have diversified themselves, to answer various demands and also for brand reason. Business models in emerging markets differ from developed ones in three ways:
- Scaling Out
Involving a wider range of people in the process of production and distribution. Unlike the classic Scaling Up model which centralized manufacturing and producing process.
- Pull Model
Provide system to mobilize resources when the need arises. The western model is to allocate resources to expected demands.
- Application of Mass-Production Techniques to Sophisticated Services
Emerging market companies now are not just outsourcing companies, but they also can provide complicated services from their offices.
6. Emerging markets create new paradigms of management, because of the market condition itself which its consumers mostly are poor people. They redesign their product and the production process as well. But after a closer look, there is nothing new of there paradigms. They are only classic paradigms (customer is number one and economies of scale can produce radical reductions in unit costs), but improvised to meet the specific needs of the emerging market.
7. This phenomena is big. In fact, it is shifting the "center of gravity" from the west to the developing countries (emerging markets). The balance of power is moving. Innovations from the east are moving fast. The change is not just for emerging market, but also the rest of the world.
Those are some of the special report in The Economist 17-04-2010. You can read the complete version there. I think it is a good analysis of the global situation in the current years. Years to come, the analysis could come true and we must be prepared if we want to survive.
Developing countries are moving right now to take opportunities that arise. Like any other business principles, developing countries cannot challenge developed countries on the same battlefield. Besides, their characteristics are much different. The best way is to start with outsourcing. One benefit of developing countries is cheap labor. That could attract rich countries to outsource, as long the corresponded country can maintain their quality.
The author argued that this phenomena can lead us to a better future, "but painful for incumbents". Well, a change always does. I think it all not necessarily can happen, depending on how we improve ourselves now. What I mean is, developing countries still struggle on basic political, culture and financial problems such as corruption, tax fraud, work ethic, etc. As long as they don't solve these problems, "a better tomorrow" will be just a dream.
Technology is one thing that developing countries can surpass the west. With information technology, the people around the world can find almost anything. Decades ago, we can only find knowledge in the library. But things have changed now. Science is not just belong to loaded people, but to everyone.
I live in Indonesia. Until this day, we still struggle with classic problems like corruptions and tax frauds. But Pew Global Attitudes Project said that Indonesia is the third place in perception of economic situation, just behind China and India. That means the people still believe that it is good to do business in Indonesia. So, it is not hopeless to hope for a better tomorrow in Indonesia, but with certain conditions.
TheAnalyticMonkey
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