unlocking new markets pdesign srocchi 230606
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Unlocking
new marketsVia sustainable innovation and design break-through
A ew questions or investigation. By Simona Rocchi
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Unlocking new markets
“For a company to be successul in emerging markets, it takes a lot
more than just making minor modications to existing products”
“Emerging markets are becoming the catalysts or new products andservice innovation. But tapping the talent and growth potential o
these rising economies will require manuacturers to shed many
o their assumptions about customer needs, product design and
innovation strategies that they have relied upon in the developed
economies. Companies will need to look beyond traditional
strategies in order to meet the needs o markets with signicantly
lower per capita GDP, while still leveraging the eciency and
expertise provided by their global networks”G. Coleman, Global Managing Director, Deloitte, 2006
About Philips Design
Philips Design is a global community o
proessionals, ocused on delivering competitive
value to its clients through design. It strives or
innovation in both its design services and in the
solutions it oers.
At its core is a multidisciplinary team o researchers and designers which, over the past
ten years, has been addressing how design can
best serve people’s current and uture value and
needs. It continuously develops and experiments
with the latest methods in design research.
Abstract
This paper addresses some thoughts on
business innovation and design challenges
related to growth and sustainable development
in emerging and developing markets. In the
ramework o the current debate among
academies, public entities, multinationals andnon-governmental organizations, it does not
pretend to provide an exhaustive explanation
on theories and practices in this complex eld.
Rather, it aims to provide some background
inormation to contextualize a ew design
research questions: questions that have to be
addressed in order to understand how design
and design instruments can support businesses
- as well as governments and various other
types o organization - in creating sustainable
solutions in promising new markets.
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Unlocking new markets
1 Developing markets are also known as ‘Bottom o the Pyramid’ or ‘Base o the Pyramid’ (BOP) markets.
Most companies target end-users in developed
markets. This is a group o approximately 500 million
people living at the top o the economic pyramid, with
an average purchasing power o more than USD 10,000
per year. However, according to Stuart Hart, Proessor
o Management at Cornell University, these companies
underestimate the business potential at the base o the
economic pyramid, where many unsatised needs make
up a market covering the vast majority o the remaining
world’s population (Hart, 00). In this context, theollowing distinction can be made between:
• Developing markets1, representing the 4 billion people
with an average purchasing power o less USD 1,500
per year;
• Emerging markets, which include 1.5 billion people
relying on purchasing power o USD 1,500-10,000
per year.
Such a growth opportunity is theoretically present in all
regions o the world, rom Europe and the United States
to Latin America and Asia Pacic. Indeed, gaps between
satised and unsatised needs do not necessarily refect
geographical distinctions, since economic disparity,
dierent level o market maturity and variations in
lie expectancy are ound in varying degrees both in
developed and less developed societies. However, in this
paper, the ocus is mainly on the BRICA countries: Brazil,
Russia, India, China and some Asian nations like Indonesiaand Vietnam. These are places where opportunities or
sustainable growth and innovation seem more appealing
in the short-medium term period, based on their Gross
Domestic Product (GDP), and assuming that in the next
ve years their annual increase in dollar spending could
be greater than that o the top 6 economies in the world
(G6), and more than double its current level (Royal Philips
Electronics, 006).
Introduction: setting the border o investigation
4,000
population in millionspurchasing powerparity per year
1,500
500
< $1,500
$1,500 -$10,000
> $10,000
Advancedmarkets
Emergingmarkets
Developingmarkets
Fig. 1. The global economic pyramid. A representation o the global market based on
three main average levels o purchasing power. (Source: Adaptation o a model presented
by Stuart Hart, Proessor o Management at Cornell University, during the second World
Summit or Sustainable Development, Lekgotla - Business Day, Johannesburg, 2002)
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Unlocking new markets4
Today, companies with long-term economic ambitionshave to continue being competitive in the saturated
markets o developed societies, but also have to learn
how to fourish in emerging and developing markets
that represent the major growth opportunity or the
coming years. In order to build upon this opportunity, the
learning process has to start now: understanding unlocking
mechanisms and appropriate business and design practices
in these unknown territories will require considerable
eort beore a clear and eective growth strategy can be
dened. The challenge is the creation o accessible and
aordable solutions able to t local economic conditionsand socio-cultural preerences, without expanding the
current use o environmental resources. This challenge
oers companies the chance to improve their current
product portolio, and even to create completely new
value propositions by combining technological, social
and business innovation.
A ew drivers underpinning companies’ interests in emergingand developing markets have been identied by the World
Business Council or Sustainable Development (WBCSD), in
one i its rst publication on sustainable livelihoods business
project (WBCSD, 004). The main drivers reported in the
publication can be summarized as ollows:
Opportunity or growth and brand reputation
Potential or new revenue stream generation is certainly
the most appealing reason to deal with emerging and
developing markets. However, this opportunity oers
also the chance to increase a company’s brand reputationin the current markets, while establishing and urther
developing brand equity in other countries.
Framework conditions in many less developed countries
are improving
The BRICA countries in particular are strengthening their
governance, legal structures, and investment inrastructure.
Even i progress is not yet uniorm, there are signs o
improvements in many countries: over the 10 years rom
199 to 00, the average risk score in low- and middle-
income countries improved by 8%. This progress expandsthe context in which business can protably operate.
Communications are becoming aster and cheaper
Lower costs o Inormation Communication Technology
(ICT) and transportation enable more geographically-
distributed production. This allows companies to benet
rom lower labor and material costs, and encourages them
to relocate or intensiy part o their activities in
the BRICA countries.
Importance o the themeand encouraging drivers
2According to CK Prahalad, Proessor o Business Administration at the University o Michigan Business School, opportunities o engaging ‘underserved’ people
through innovative solutions already exist. He points out that the majority o people on very low incomes are currently relegated to high-cost economic
systems, where outlays are vastly higher than in the developed markets o the world (poverty penalty): or instance, the cost o credits are oten 50 times
higher, the price o water 37 times higher and health services 10 times higher than equivalent services in the USA (Prahalad, 2005).3There are signicant dierences between the BRIC A countries. GDP per head gives an indication o the dierences: Brazil $8.7k; Russia $10.7k; India $3.4k;
China $6.2k; Indonesia $3.5k, Vietnam $3.0k (Royal Philips Electronics, 2006).
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Unlocking new markets 5
“Emerging markets are the place where virtually everything that you
need or a company to grow is happening”G. Kleisterlee, Philips CEO, 2006
“We believe continuous innovation is key to unlocking this potential…
To support our vision we are reinventing our business rom top to
bottom and in the process transorming our industry too”
G. Kleisterlee, Philips CEO, 2006
New and more competent partners are locally availableToday, many local suppliers and various stakeholders
oer richer knowledge and know-how, driven by
their need to become more sel-sustaining, ecient
and eective. Furthermore, many o them start to
acknowledge that multinationals can help local players
ulll missions and scale-up promising opportunities
or socio-economic development
Aid and investments are beginning to create ertile
market territories
A oreign direct investment (FDI) fow to less developedcountries increased rom $7 billion in 1990 to almost
$40 billion in 000. This increase, together with the
prousion o micro-credit services, has contributed to
debt relie, and is recognized as an engine or wealth
creation and local economic development.
Public expectations and stakeholder pressure towards
corporate responsibility.
Civil society increasingly expects companies to operate
in an ethical way, both in developed and less developed
markets. Business aces a growing pressure rom societyand various stakeholders to support equitable socio-
economic development worldwide, in line with the
Millennium Development Goals (MDGs)4. Business
solutions targeting ‘underserved’ people are increasingly
considered part o corporate social duties and their
licenses to operate.
In this business landscape, Philips has started toconsistently address the challenge o generating
sustainability-driven business initiatives in new promising
markets around the world since 00. At that time, with
the ‘New Sustainable Business Initiative’, the Board o
Management launched an invitation to all the ve Philips
Product Divisions (Consumer Electronics, Domestic
Appliances, Medical Systems, Lighting and Semiconductors)
to encourage innovative business practices that oster new
business models and the creation o appropriate solutions
or ‘unmet’ people’s needs (Royal Philips Electronics, 00).
Such practices were not intended as philanthropic actions.They were considered as true entrepreneurial activities
aimed at creating both economic and social/environmental
returns on investment, possibly with a dierent payback
time on each dimension. Today, this invitation has
become stronger in the light o the company’s ambition
to grow drastically: an ambition not reachable without
also considering emerging and developing markets. In
this respect, the Board o Management has increased its
commitment on growth in the BRICA countries during
the Philips Summit meeting held in New Delhi, in
March 006.
4 In September 2000, all 191 United Nations Member s States pledged to meet eight socio-economic and environmental goals by the year s 2015. The goals,
stated in the Millennium Declaration, include: 1. Eradicate extreme poverty and hunger; 2. Achieve universal primary education; 3. Promote gender equality and
empower women; 4. Reduce child mor tality; 5. Improve maternal health; 6. Combat HIV/AIDS, malaria and other diseases; 7. Ensure environmental sustainability;
8. Develop a global partnership or development (http://www.un.org/millenniumgoals/ ).
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Unlocking new markets6
At Philips, the implementation o this commitment is stillunder experimentation. Like other multinationals, Philips
has recognized that ‘walking the talk’ requires business
innovation. However, the kind o business innovation
necessary in emerging and developing markets is dierent
to that normally adopted in developed markets (Hart,
005). Purpose and practices tend to be dierent.
In developed economies, many new product/service
development processes are geared towards immediately
maximizing the sale o these new oerings to increasingly
sophisticated customers with a certain degree o
purchasing power.
In emerging and developing economies, companies
oten aim to become operational in territories that
represent the markets o the coming decades. Their goal
is to develop business propositions that can gradually
create market penetration and solid medium-/long-term
revenue generation. This oten requires supporting local
socio-economic improvements in two ways: by enabling
sel-development and local communities’ empowerment;
and creating business propositions that can generate
return on investment not only gradually but also onsocial/environmental level. With this in mind, companies
ace the need to develop new business practices
capable o establishing a mutual value creation process
between themselves and local stakeholders that have a
deep understanding o the contexts, the issues and the
opportunities related to the targeted areas (Simanis,
Hart, Enk, et al., 005).
More specically, according to some ndings o the World
Business Council or Sustainable Development (WBCSD)
in its rst publication on ‘Sustainable Livelihoods’ businessproject, three basic blocks characterize the innovation
process o successul business models in new promising
markets: ocus; partner and localize (WBCSD, 004).
FOCUS on core competenciesCompanies that concentrate on their key strengths are
more likely to tackle an issue eectively and create a viable
business. Keeping the ocus helps guarantee consistency
between the company core business and sustainable
livelihood: it will be easier to scale-up pilot projects and
move successul initiatives into the mainstream. It is
advisable to involve R&D, and rethink existing products
lines and services to suit the specic requirements o
lower market segments.
PARTNER across sectorsBy involving global and local businesses, governments
and development organizations that share similar goals,
companies can benet rom additional resources, on-
the-ground expertise and links with potential customers.
Thinking across sectors might lead to innovative
partnerships involving companies rom dierent industries
and thereore dierent / complementary skills, addressing
many dierent needs simultaneously. It is advisable to
involve partners with a considerable understanding o
the local market (and who might enjoy local political
or community support) and involve them early in theprocess in order to use their input when shaping and
contextualizing the oer. It is also important to dene
expectations and align objectives in order to increase
co-operation and share eventual risks.
LOCALIZE the value creation
Companies operating in emerging and developing
markets oten lack the usual inrastructure / support
systems available in more developed societies. In many
cases there is also a lack o knowledge on people’s
needs, preerences and aspiration values; companiescan miss or instance manuacturing capabilities or
distribution channels; market intelligence and consumer
insight inormation (understanding o the socio-cultural
context). They thereore need to connect into local
networks, which include the targeted communities, to tap
into capabilities and human resources. It is advisable to
maximize the involvement o local groups by considering
how local entrepreneurs and SMEs can best contribute to
value creation. Time and energy should also be devoted to
development the capacity o local partners, in order
to create a solid socio-economic basis or uturemarket growth.
New ways o doing businessor new markets
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Unlocking new markets 7
These three major building blocks have been urther
articulated thanks some lessons gained during thematuring o practical business experiences under
development (WBCSD, 005; WBCSD, 006; WRI, 004).
A ew characteristics o new business practices start to
emerge and to take shape.
Co-creation o value
In particular, developing/BOP markets practices - due
to the complexity o the socio-economic systems o
intervention - imply a collaborative eort between
global and local players. These include public or private
ventures, agreements with either or-prot or non-or-prot organizations (or instance local consultancy
groups, Non-Governmental Organizations, universities)
and local community involvement. Indeed, it is possible
to provide new economically aordable, eective and
sustainable solutions on a broad scale simply by combining
global nancial resources and know-how with local
competencies on specic issues and opportunities.
‘System thinking’ versus ‘product thinking’
I the needs o people in emerging and developing
economies are to be met, it is not always sucient tothink in terms o single (stand-alone) products and their
unctionality. Total solutions - a fexible mix o tangible and
intangible aspects - need to be envisioned to overcome
the lack / weakness o inrastructure, appropriate
distribution channels and maintenance services.
This implies the creation o a consortium o partners,
all dedicated to solving problems by designing anddeveloping fexible solutions, which can potentially grow
over time through the addition o technologies, content
and services.
Incubation and piloting phase
In exploring ways to realize solutions or emerging and
developing markets, companies have discovered the
importance o allocating initial ‘seed’ money to start pilot
projects (using internal capital and oten external unding)
as well as o creating a motivated and multidisciplinary
team (comprised o internal resources complemented byexternal capabilities) to take care o all necessary activities
beore the initiative is ramped up.
People, planet, prot approach
Practices or emerging and developing markets need
to consider not only economic objectives but also socio-
cultural and environmental aspects. Due to the dimension
o the potential market demand in less developed regions
o the world, and the consequent strain this places on
natural resources, there is no alternative. New practices
need to adopt a triple value approach by promotingeconomic prosperity while respecting the natural
environment and the local socio-culture values. Social
and environmental criteria thereore have to be
introduced early in the new business creation process
and related design strategies.
l ll
FOCUSon your core
competencies when
adapting your business model
LOCALIZEthe value creation
by harnessing local
intelligence and capabilities
PARTNERwith external resources
that offer complementary
expertise
Fig. 2. The three building blocks o successul ‘Sustainable Livelihoods’ business
(Source: Doing business with the poor - a eld guide , WBCSD, 2004)
“Emerging and developing markets oer business opportunities
or growth, value creation and or the development horizon
o the world’s poor by providing culturally-appropriate andecologically-eective goods and services”
S. Hart, Professor of Management at Cornell University, 2002
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Unlocking new markets8
Benets plan versus business planAs an implication o long-term nancial expectations
and social and/or environmental return on investments,
initiatives or emerging and developing markets require
the elaboration o ‘benets plans’ that contain inormation
on business development, as well as potential social
benets and environmental advantages. This involves
introducing social and environmental matrices that include
the appropriate indicators or monitoring and measuring
the sustainability o the initiatives over time.
Beyond traditional market segmentationsAs developing/BOP markets especially relate to particular
kinds o users - such as amilies, communities or even
entire villages - conventional consumer investigation
techniques, normally targeting single individuals,
require additional investigation methods. Observations,
ethnographic research and ocus groups have proven to
be key practices in this area, not only to obtain valuable
inormation or new idea creation (understanding o
people’s needs, socio-cultural habits and inrastructural
conditions), but also to establish trust with the identied
potential customers and ensure their urther involvementin the co-creation o the solution.
Use o non-conventional entrepreneurial orcesBusiness practices or emerging and developing markets
oten rely on ‘non-conventional’ players to establish the
value network that has to be put in place to promote
a new oer. Indeed, especially in rural areas, the lack
o inrastructure, distribution and marketing channels
has stimulated the creation o resh entrepreneurial
local orces, including community leaders and Sel Help
Groups (SHGs)5, who are undamentally important in
implementing the business models.
Alternative payment mechanismsIn many cases, solutions or emerging and developing
markets have to leverage on micro-credits schemes,
‘sharing access models’ and ‘pay-per-use’ mechanisms
to be economically viable. In particular, pre-paid systems
are crucial in acilitating access to services or users in
developing/BOP markets. Indeed, by the adoption o
pre-paid cards, customers do not need to present
a ormal address, which is normally required in any
service contract.
5 The Sel Help Groups (SHGs) operating in emerging and developing markets are orms o micronance activated by their members (mainly women).
These groups collect savings rom their members and provide loans to them. However, unlike most accumulating savings and credit associations (ASCAs)
ound in several countries, these groups also obtain loans rom banks and re-lend them to their members. In India or instance, by 2003, over 700,000
groups had obtained over US$425 million in loans rom banks, beneting more than 10 million people. The level o savings in these groups is estimated
to be at least US$170 million (http://ideas.repec.org/p/wbk/wbrwps/3516.html).
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Unlocking new markets 9
Business experiences targeting emerging and developingmarkets are increasingly taking place around the world.
These experiences, some o which are successul and
some which aren’t, propose context-specic solutions
that either make use o current available technologies in
new ways, or introduce new technologies by leaprogging
the most appropriate innovation.
Such solutions come rom dierent sectors. A ew
pioneering ones include access to energy (Eskom-Shell
‘Rural Electrication’ program in South Arica, in 1991);
clothes (Arvind Mills ‘Ru & Tu’ jeans in India, in 199);telecommunication (Vodacom ‘Community Phone Service
Program’ in South Arica, since 1994, and Grameen
Telcom with ‘Grameen village phones’ in India, since
001); clean water (WaterHealth International and
‘Ultra-violet Waterworks’ solutions in India, since 1996)
and ood (Unilever ‘Iodized salt’ in Ghana, since 000).
Other more recent solutions include also access to
electronics solutions (Cable Net and ‘TV cable interactive’
in Colombia, in 00); nancial services or ood and
agribusiness (Rabobank ‘Promoting armers’ co-operatives’
in Indonesia, since 00) and low-cost houses (Holcim‘House-or-Lie’ initiative in Sri Lanka, since 005).
The business cases described below are running in
the BRICA countries, particularly in India, in energy,
electronics and medical systems sectors. They touch
upon the main eatures o the business model used and
o the promoted solutions, in terms o their product and
service components.
Selco Solar ServicesThe Solar Electric Light Company (SELCO)6 brings
electric power to amilies, armers, institutions, and
local small businesses in India, Sri Lanka and Vietnam.
Specializing in wireless solar electric power systems and
related services (e.g. installation, maintenance training),
SELCO has installed over 4,000 solar home systems
(SHS) on a purely commercial basis, reaching rural
and semi-urban customers with an average income o
approximately $4 a day. Driving its business philosophy
is the idea that poor amilies in less developed economies
are willing to purchase SHSs (as long as they are reliableand aordable) via installment credits.
Providing credit nance to such customers is the
company’s biggest achievement. Usually, a amily pays
at least $75 as a down payment plus $10 to $15 a month
or or years beore owning the system (the bank
retains ownership until the loan expires). To provide
credit nance, SELCO works with numerous rural
banking networks, agricultural societies and micro-credit
institutions7. In India, or example, 45 rural banks provide
consumer credit to SELCO customers. In Sri Lanka, thelargest nance company oers loans or SHSs exclusively
to SELCO customers. In addition, the World Bank and
other nancial institutions have instituted consumer
nance mechanisms or the purchase o SHSs by o-grid
rural households, mechanisms that SELCO also utilizes
on behal o its customers.
The company oer includes various packages o small SHSs:
• SHS with lights and 0Wp module (very ew);
• SHS with 4 lights and 5Wp module (very popular
and aordable);• SHS with 6 lights and 50Wp module and with 5 lights
and 65Wp, sucient power to operate a DC color TV
(popular in Vietnam).
A ew business experiences:co-creation o sustainable value
6SELCO is the world’s r st solar ser vice company, with 385 employees, two international oces located in Bangalore,
India, and San Francisco, Caliornia, and a solid rural power delivery inrastructure spread over three dierent regions.7Recovery rates in such situations are over 99% and deaults are rare.
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Unlocking new markets10
SELCO builds most o its electronic components- which range rom charge controllers to lamp xtures
and compact fuorescent lights - locally. Major PV
manuacturers provide the modules and several careully
selected manuacturers supply deep-cycle batteries. Its
core business is in the value o the service oered. Via the
use o micro credits, and the provision o installation and
maintenance services carried out by appropriately trained
local people, SELCO has been able to enter the emerging
market o o-grid rural and semi-urban households.
Today, the company has 5 branches (Solar ServicesCenters) operated by its three subsidiaries: SELCO-India,
SELCO-Sri Lanka and SELCO-Vietnam. Considering there
is an untapped worldwide household power market o
over 400 million amilies, it is actively looking at new plans
to ranchise its delivery system and business model, in
association with local partners in various countries.
“Our Solar Home Systems carry the SELCO brand, which has come to mean
quality, reliability and service. Without service, you don’t have a business.
When we launched SELCO, we decided that customer service would be
our main product, not technology. The technology was there but not theservice in rural areas”
N. Williams, former CEO, SELCO, 2003
Fig. 3. Delivery o a solar home system to a rural amily in India.
SELCO branch oce. (Sources: Solar Today magazine, March/
April 2003; Selco Brochure 2004)
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Unlocking new markets 11
The HP ‘Mobile Photo Studio’The ‘Mobile Photo Studio’ is part o a broad spectrum o
solutions and services developed at the Kuppam Hewlett
Packard i-community centre8, a community portal located
in a rural province north o Bangalore, India. It makes
a need or ID photos, necessary or a variety o
government orms and applications (e.g. to gain access
to healthcare services), by providing village entrepreneurs
with a portable photography tool kit. This is appropriate
because very ew o the region’s 00,000 inhabitants
can aord a camera. Films and quality batteries are hard
to nd, and printing necessitates a time-consuming andexpensive trip to the nearest city.
With the ‘Mobile Photo Studio’, HP has created a digital
camera and printer, capable o producing quality digital
photographs. It has a solar-powered rechargeable battery,
and comes zipped up in a tough yet lightweight (7 kg)
backpack. This solution has enabled local entrepreneurs to
create a new business; delivering photos to people rather
than people to a photographer. With a pricing scheme that
allows dozens o local women to rent the equipment or
$9 a month, the ‘Mobile Photo Studio’ provides immediateincome or rural amilies. Since it is simple to operate and
portable, the women can take their business to some o
the region’s least accessible communities, and villagers can
buy high-quality ID photos or a raction o the cost o
traveling to a photographer in the city.
In the rural district o Kuppam, the ‘Mobile Photo Studio’
is oten used or much more than ID photos. Residents
are lining up or amily portraits, and ‘village photographer’
services are in demand or wedding ceremonies, religious
celebrations, news stories, and even insurance claims.Meanwhile, the skill and prestige o the women in the
village photographer program is growing daily. HP is
currently working with local entrepreneurs to explore
business and revenue models that would maximize return
on investments while adhering to community economic
constraints. Able to purchase consumables at the market
rate rom HP, many o the entrepreneurs have reported
doubling their monthly amily income. The ‘Mobile Photo
Studio’, is considered to be a ‘win-win’ situation, where
both a multinational company and local entrepreneurial
orces benet.
Village Photographer program economics:
• Price o the complete kit: $500
• Kit rental: $9/month
• Price o a 4” x 6” photograph $0.70
• Price o an ID photo: $0.0
• Gross margin earned by the photographer:
$0. per 4” x 6”
• Family monthly incomes o village photographers
doubled on average rom US$15 to US$0
• Currently 18 village photographers in Kuppam
(initially only )
Fig. 4. The HP ‘Mobile Photo Studio’. A tool kit or the
creation o high-resolution digital photography and printing
services by local entrepreneurs in the Kuppam region o India.
(Source: ‘Eradicating Poverty through Prot’, WRI conerence,
San Francisco 2004.)
8 In the Kuppam I-community, HP has established a platorm o web services and web-based applications to provide very
low-income citizens with access to critical government, healthcare, education and agriculture inormation services.
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Unlocking new markets 1
already halved. In addition, local women have traditionally
had poorer healthcare, with the amily breadwinner’s
health coming rst. Through its low-cost provision, DISHA
serves to help combat this inequity. Hospital consultants
are now also able to use their time more eciently, and
pressure on existing rural primary health centers has been
reduced (WBCSD, 005).
The rst pilot project was ocially launched in July 005,
targeting the Theni district (Tamil Nadhu). Within six
months a tele-clinical van perormed 500 diagnoses and
image transers in order to test the concept and ensure
viability by the end o the year. The intention now is to
scale up the (adjusted) pilot in other areas o the Theni
district rst, and to cover other districts in Southern India
in the course o 006, with six additional smaller tele-
clinical vans (without the X-ray equipment) and lower-
cost solutions to reach more inaccessible areas.
Fig. 5. DISHA van providing health care services during a visit to rural communities. (Source: Philips, DISHA pictures bank, 2005)
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Unlocking new markets14
10Design innovation can be distinguished in ‘incremental’ and ‘radical’. When incremental it provides some improvements that ‘t in’ with existing users’
expectations, and which do not require behavioral changes. When radical it oers new solutions able to generate new patterns o production and consumption
(new ways o ullling a need through dierent activities or ways o interacting with products and services). This distinction also refects the dierent meaning
o ‘eco-design’ and design-or-sustainability’. Eco-design in its essence is the integration o environmental criteria into the product development process (Brezet,
1998). And, as such, it promotes incremental product improvements by the use o dierent environmental strategies that modiy physical assets to answer
conventional consumption patterns. Design-or-sustainability, on the other hand, considers both environmental and social criteria in the entire socio-economic
system o reerence. It aims to stimulate technological changes and social innovation by solutions that might recongure ways o living and doing business.
The creation o accessible, economically aordable andcontextualized solutions oten requires new business
models as well as innovative corresponding design
strategies. Indeed, design - as an intrinsic part
o the business value creation process - has to ace the
complexity o today’s markets directly. It has to question
‘what’ to shape, in terms o tangible and intangible
aspects o a solution, and ‘how’ to do that, in terms o
adequate approaches, tools and kind o competencies
involved. Design innovation processes that are looking
or competitive added-value propositions in mature and
saturated markets have already started to consider:
• going beyond traditional consumer segmentations
(such as income, gender, age or education), to generate
specic, qualitative user insights via the use o
appropriate techniques;
• adopting a ‘system thinking’ mindset rather than a
‘product thinking’ approach. Redening answers to user
needs and aspirations rom scratch, and creating rich
combinations o material components, services and
content.
These two milestones o design innovation are becoming
even more important when addressing emerging
and developing markets. On the one hand, a deep
understanding o the context o application - in terms o
issues like availability o inrastructure, distribution channels
and technologies in place - is required. In addition, sucient
knowledge on belie systems, social structure, cultural
values and liestyles is also necessary in order to create
successul solutions or these markets. This is valid both
when redesigning a global proposition to meet regional
market requirements, and when designing somethingcompletely new and dierent rom what already exists.
I the purchasing power o end-users is low, the oer hasto be right and must clearly communicate its added value.
Especially in developing markets, experience shows that
a ‘deep listening’ o the ‘voice’ o potential communities,
amilies and individuals to target is crucial when dening
the most appropriate oer (Simanis, Hart, Enk, et al., 005).
Even i people’s basic needs are more or less the same
everywhere in the world, their local maniestations and
ways o prioritization can vary depending on the context.
Besides leveraging valuable user insights, design increasingly
needs to shit rom a ‘linear and deterministic thinking’approach, which ocuses on the generation o continuous
incremental product improvements in the product
development process, to a ‘holistic view’, which aims
to generate product-service-systems able to support
innovative ways o production, distribution and usage10.
For a number o years, theories and practices on design
and ‘unctional and systems thinking’ have been promoted
by well-known design proessors such as J.C. Brezet (Brezet
et al., 001) and E. Manzini (Manzini, Collina, Evans, 004)
as a valuable potential path to provide competitive and
sustainable solutions.
Today, these theories and practices become essential in
promising markets where (stand-alone) products may not
be sucient on their own to guarantee market penetration.
The question here is: ‘Do we need to provide a product,
or the results/benets brought by such a product, to ulll
people’s needs, values and aspirations?’ The right oer
might require the identication o the most appropriate
combination o traditional and/or digital services, plus high-
tech and low-tech technologies. Product-service systems,
as an open and fexible platorm o tangible and intangiblecomponents that can grow their unctionalities over time,
seem to be a very appealing option or creating sustainable
solutions in emerging and developing markets.
Taking these issues into consideration, a ew design research
questions need to be posed or envisioning, designing and
realizing ast prototyping solutions in such markets.
Conclusions: changes in the design paradigm,looking or answers
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Unlocking new markets 15
How can designers generate insights into potential current
and uture target groups in their specifc local context?
At the moment, various design tools (such as personas and user proles in context-o-use) are available to capture
insights related to users’ needs, aspirations and behavior in developed societies. The issue here is to understand
i similar tools can be applied in emerging and developing markets. Are the available design tools able to deliver
sucient inormative and inspirational knowledge to the creative process? What kind o variations or additional
methods do these tools require to provide reliable inormation to designers?
As an answer, an overview o design tools under experimentation in this research eld should be provided, including
an evaluation o the various methods / techniques and their related advantages and disadvantages.
How can we co-design and co-produce appropriate solutions with
potential customers and local stakeholders, now and in the uture?
Potential target groups are easily identiable in developed economies, and can oten be consulted or brainstorming
on envisioning solutions to ulll their specic needs and aspirations. Unortunately, the same cannot be said or
emerging and developing markets. The issue here is to understand how we approach potential users - who especially
in developing markets may be illiterate - and how we get them involved in a creative conversation.
Where does the concept creation take place, in the eld or in a design studio? And how? Furthermore, how do we
engage with local stakeholders, willing to cooperate in a common value creation process ,without raising too many
expectations o a solution that could require some time beore it will be scaled up and commercially viable?
As an answer, various co-creation techniques specic or emerging and developing markets should be researched,
mapped and explained with the support o concrete examples.
What kinds o specifc typologies o design qualities do solutions
or emerging and developing markets require to be successul?
In developed economies, added-value solutions tend to be highly sophisticated in terms o unctions, perormance
output, use o digital technologies and/or new technologies made available in dierent sectors. Additionally, they
tend to be light in terms o materials used, and are oten quickly obsolete and dicult to repair. The issue here
is to balance global product/service requirements (e.g. health and saety regulations, mains voltage,) with local
requirements and customers’ expectations, and thereore to identiy which typologies o design qualities should be
considered upstream in the design process or these specic markets.
Should the solutions oer a mix and match o high-tech11 and low-tech components? Should product be easy to
repair and oer the possibility o sel-maintenance? Should they be more robust and longer lasting than those sold
in developed markets? Should they leverage the use o local materials? Even i the answers are dierent or specic
products/solutions, general common ndings should be research in this eld.
A list o typologies o design qualities recognizable in solutions or emerging and developing markets should be
outlined, supported by appropriate design recommendations.
How can we validate and measure personal satisaction and social/
environmental benefts generated by the introduction o new solutions?
In developed societies the testing o products/services to assess customer satisaction is carried out using
various proven techniques. The evaluation o the environmental impact and social consequences o a solution,
on the other hand, is carried out using less consolidated approaches. In the context o emerging and developing
markets, the assessment o a solution is particularly important in terms o monitoring socio-economic and also
environmental returns on investments. The issue here is to understand the social value-chain. How can we evaluate
the eectiveness o a new solution in terms o its direct and indirect consequences on individuals (personal needs
ulllment), as well as on communities’ quality o lie?
Methods and tools under experimentation should be researched and mapped, together with the identication o social/
socio-economic and environmental indicators used so ar.
11 In emerging and developing markets’ contexts, the leaprogging o eco-ecient technologies (such as white LED lighting technologies
and new solar power technological systems) seem to be promising due to the lack or limitations o existing inrastructures.
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The author is grateul to André Rotte or reviewing andcontributing to this paper.
Special thanks go also to Henk de Bruin, Philips Corporate
Sustainability Oce, or the work done together in the
eld o sustainability-driven business models in new
emerging markets, and or sharing his insights.
About the author
Simona Rocchi is Design Director at Philips Design,
Eindhoven, The Netherlands. At Philips Design, she is
responsible or the ‘Exploring Sustainability’ design
research theme, and she coordinates projects relatedto sustainable development and design-or-sustainability
activities. At Philips Corporate, she is part o the task
orce on ‘New Sustainable Business Initiative’.
Simona has both a Master o Science in Architecture
(Politecnico di Milano, Italy) and a Master o Science in
Environmental Management and Policy (International
Institute or Industrial Environmental Economics, Lund
University, Sweden). She has also a PhD in Cleaner
Production, Cleaner Products and Sustainability (Erasmus
University, The Netherlands).
She is the author o several publications on sustainability
and innovation design process. She gives lectures at
dierent European universities, and is a visiting proessor
at the Faculty o Business Administration at the Externado
University o Bogota, Colombia.
Acknowledgments
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