NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

BOP markets used to be regarded, if they were regarded by large corporations at all, mostly as a place to unload excess or obsolete product. That has changed, as I will attempt to illustrate in this and following posts. What I am suggesting is that low-income, predominantly rural communities located at the edge of the telecom network, the edge of the electrical grid, and the edge of existing commercial markets, are becoming a key driver of technology innovation, in large part because their sheer scale warrants such attention.

BOP markets are beginning to be targeted with technologies designed specifically for the needs of low-income communities, and R&D and commercialization investment in such technologies is increasing. These technologies range from the prosaic but important, like low tech pedal-driven water pumps, to advanced hi tech inventions aimed at improving health and cultivating economic growth. They include near-term deployments, such as new wireless technologies and advanced low cost ATMs, as well as longer-term visions based on emergent composite, IT, nanotech, and biotech innovations that are beginning to attract venture capital investments.

This trend, coupled with expanding interest in social entrepreneurship and socially-relevant investment, could have a significant impact not just on BOP communities, but on existing markets and infrastructures as well. Telecom networks, for example, mostly use packet-based (TC/ICP) formats at their optical fiber core, but retain the legacy switched network structure elsewhere. If there is significant packet-based growth at the edge of the network because of new wireless technologies, voice-over-Internet phones, and data-driven applications on cellular networks, that will accelerate the need to move the whole telecom network to packet-based architecture. This pressure will be strongest where the edge markets are large relative to the legacy networks, as they are in emerging economies. Similarly, proliferation of off-grid or distributed power generation technologies such as solar, wind and fuel cells, might transform the power grid in emerging markets to more of a load-balancing function than a distribution function.

Western markets for consumer products will also feel the effects of technology innovations at the edge of existing distribution channels. To be viable, products aimed at consumers in resource-poor areas must be cheap, efficient, durable and low maintenance. These improvements may provide a value add over existing products in developed markets, and will likely trickle up to influence or replace them. For instance, cheaper computer platforms designed to minimize repairs could capture some of the PC market in Western countries among consumers who only need a limited amount of functionality, in much the same way that pre-paid cards for cellular, introduced in emerging markets, are now playing a growing role in developed countries, especially among younger customers.

I?m going to pursue these thoughts, and provide illustrations of some of the pertinent technologies, over several posts. But I’d welcome additional illustrations, as well as comments, additions, or objections to the hypothesis.