:: The Park Paradigm ::

Markets for the Digital Generation

I’ve written in the past about my belief that a number of innovations in business are likely to originate in the developing world only to be exported and adopted in the developed world in the coming decade, turning conventional wisdom on its head. My thinking on this tends to revolve around businesses in the developing world harnessing the power of cheap and ubiquitous communications and computing (ie mobile phones) to develop innovative, robust, low-cost business models driven by (1) the need to deliver products and services profitably at extremely low (by developed world standards) price points, and (2) the lack of inhibitions with respect to thinking outside “established” ways of approaching markets and customers.

Although manufacturing - and especially auto-making - lies outside the field of my interest and expertise, this post from the Indian Economy blog highlights the new Tata Nano as an example of exactly the phenomenon I subscribe to above.

In summary, the Tatas look set to become the dominant player in the Indian car market via the new market segment established by the Nano. If allowed to compete on fair terms they should take this new segment to other developing countries too.

Will the price USP help it in developed countries though? In the United States there is a huge market for cars costing less than $10,000. Small cars were always popular in Japan and are catching on big-time in Europe too. There are lots of people even in the first world who cannot afford new cars. So there is a huge market in the biggest car markets in the world for a strong price warrior. The Nano was not made for these markets but the huge price difference it has with the cheapest cars in those countries offers plenty of room for redesign. Do you hear someone say that is impossible? Really – “impossible”?

Update:
It seems I’m in good company…

(from Fortune) …To stay ahead, Immelt is pushing GE hard into an advanced phase of globalization he calls “in country, for the world.” That may sound like some celebrity ditty composed for Live Earth, but Immelt is quite serious. He believes that by figuring out how to meet demand in these still relatively poor growth markets, he’s going to achieve hard-to-imagine price breakthroughs. And here’s what’s truly radical: As GE and others do this, these products won’t just be sold in emerging markets. Instead they’ll filter back into the rich economies - a new deflationary force that should delight buyers but devastate competitors who lack a global footprint.

Examples? “Water,” says Immelt. “There’s a shortage everywhere, even in places like California and Florida. Some systems we’re working on in the Middle East, India, and China are trying to do water desalination at $0.001 per milliliter, which is an off-the-charts low cost. We’ll never hit that in the U.S. But we’ll hit it someplace outside. And the second we do, a huge market is going to open up inside as well.” Immelt sees the same thing happening with coal-sequestration technology or MRI scanners, where GE is working on a product in China that could cut prices in half. “At the right cost point, you not only sell it in China, you open up a market among the 35% of U.S. hospitals that today cannot afford to have an MR scanner,” he says. “We’ve got 15 or 20 projects like this that are going to open up big markets around the world over the next five years.”

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