Innovation for Developing Markets Is Different; Here’s How

By Suzette Norris

More than 10 million bank accounts open in India every year. That type of volume requires a whole different thought process around profit margins and innovation.

That insight came from Xerox scientist Nischal Piratla during a guest lecture at the Haas School of Business at the University of California Berkeley earlier this year. Nischal manages the Services Innovation Lab at the Xerox Research Centre India and is a Xerox Innovation Group program manager for projects that relate to financial services and human resources. We asked him to explain how companies (like Xerox) can use innovation to take advantage of the growth potential in developing markets.

“Many existing technologies from the Xerox Innovation Group have great potential in developing markets, so we regularly cross-pollinate.” Nischal Piratla
“Many existing technologies from the Xerox Innovation Group have great potential in developing markets, so we regularly cross-pollinate.” Nischal Piratla

You mention several studies in your talk that point to the immense potential in growth markets. How have those studies affected the way the corporate world approaches emerging markets?

Various studies have shown, rather repeatedly, the immense potential in growth markets. Many corporations have invested in the studies to obtain the market potentials for their respective industries and offerings. Looking at positive response in these studies, multi-national corporations have adopted globalization as part of their growth strategies. However, many are still struggling to capitalize on the portrayed potential in those studies.

What do corporations need in order to move forward in this area?

There are a lot of examples throughout different industries that can teach you how you should and should not innovate, and how to move forward in these markets. There are a number of what I like to call “catalysts” that play an important role in this process including: Innovating with the customer, having the right partner, open innovation, open business models, frugality, large numbers versus huge margins.

What do you mean by large numbers versus huge margins? Is that something unique to these markets?

Many of us are so accustomed to the good margins found in the developed world. In growth markets, and particularly in emerging markets, consumers are incredibly value driven. They want to pay the minimum possible and get maximum value from the product/service. In this model, the margins may not look the same in dollars, but one must consider the volume, which is at a level that is almost unheard of in developed markets.

Can you share one of the case studies you used in your talk?

Ford is an amazing case study. Around 1996, Ford invested $450 million for a plant in Chennai, India, and struggled for more than a decade to use the plant to its capacity of 100,000 units. To meet the value expectation of the market and to stay lean, Ford boldly invested $500 million more. They took a number of innovative steps including: Build petrol and diesel engines in the same manufacturing line under one roof; create an assembly line that produces multiple models at the same time; use a process (kitting) that automates the identification of components for many variants, and using Ford’s 3 Wet High Solid Painting Technology on cars — until then it had only been piloted only on trucks. The Ford Figo has been successfully sold in developing countries since 2010, and I imagine not a single day goes by at Ford Headquarters without mentioning the innovations of India, which are helping them globally.

What role is the Xerox Research Centre India (XRCI) playing in this area of growing markets?

While Xerox was not the first to enter growth markets, we have the benefit of learning from others and understanding how to be successful. We also have a number of key advantages here at XRCI:

  • All our innovations in progress are customer-led. Customers are viewed as partners in our innovation process, and this approach allows us to bring practical innovations that solve customer needs.
  • We take an entrepreneurial approach to solving problems with innovation.
  • Many existing technologies from the Xerox Innovation Group have great potential in these markets, so we regularly “cross-pollinate” with our colleagues in other research centers.
  • We have been focusing on retail banking for the last two years, thanks to Xerox’s existing document outsourcing business in India.

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