Emerging Markets Mean Emerging Customers
In today's competitive global business environment, companies are placing innovation at the top of their agenda but finding that their IT organizations are lacking in visionary thinking and innovation. Conversely, organizations operating in highly constrained environments in emerging nations such as China and India are innovating at a faster rate than ever before. A new report from Gartner says innovation from these new, untapped markets is driving global innovation and creating a force that cannot be ignored by companies in mature markets.
"In our increasingly customer-driven world we are moving away from the traditional view of innovation as internally managed and R&D focused," says Sandy Shen, research director at Gartner. "Innovation doesn't come from a laboratory. It comes from solving real life problems and responding to everyday needs regardless of how sophisticated the market might be, with the ultimate goal of enriching people's lives."
Shen says developing nations are adopting innovation and technology faster than mature markets for three main reasons. First, emerging markets have fewer legacy systems, enabling them to leapfrog technology and commercialize it faster, making them ideal test beds. Second, in highly constrained environments, which might include poor infrastructure and low affordability, there is an acute need for products that can serve the local market better, rather than products designed for the developed world. Shen cites mobile phones as an example: Requiring less power and having built-in connectivity, they are thus more suitable for emerging markets than PCs. They are also cheaper than PCs and more adaptable to the emerging market environment, and will outnumber PCs in developing markets by 2010. Finally, emerging countries such as China and India have the ambition to lead the IT industry in the global market, and innovation is their only way to compete globally.
Although emerging and mature markets each have different innovation drivers, they very often yield the same kind of innovation. For this reason, Gartner predicts that by 2015, IT engineered for developing economies will drive 20 percent of disruptive IT innovation worldwide. One example is mobile banking. "SMS money transfer was first introduced in emerging markets because it was not otherwise cost effective to reach people in remote areas. This solution is now being adopted globally by leading carriers and financial institutions to address the inefficiencies of international money transmission," Shen says. "This development is profoundly altering the way people in mature markets use banks and other financial services."
Adding to this are China and India, which are emerging as powerhouses of innovation and creativity. Today, Chinese companies like Haier, Huawei, and Lenovo are stepping up investment in new product research, aggressively pushing into the global market as low-cost players, and posing a threat to global organizations, the report says. India is also becoming an IT services powerhouse with the help of established leading Indian IT companies like Infosys, Tata Consulting Services, and Wipro. IT services account for around half of India's services exports and the IT services market is growing at more than 30 percent per year. "Established businesses can't expect innovation to come to them. They have to look beyond their own borders and consider untapped markets and customers that they have perhaps not considered up until now if they want to continue to innovate in a global economy," Shen says.
"We are looking at immense nations that are rapidly moving from subsistence living to being consumers, which in turn means a large number of new people to sell new technology to," Shen says. "Global companies in mature markets cannot afford to ignore developing nations, given the huge untapped opportunities they offer. Don't dismiss the vast potential of third world markets; make them your customers."
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