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The Disruptive Voice
The Disruptive Voice
- 30 Aug 2016
- The Disruptive Voice
19. What if we viewed nonconsumption as a competitor with Efosa Ojomo (MBA 2015)
Tracy Kim Horn: Welcome to the Disruptive Voice. I'm Tracy Kim Horn and with me in the studio today is Efosa Ojomo, Senior Researcher at the Forum for Growth and Innovation. Efosa recently authored an article in the Emerging Markets Business Review Magazine called Non-consumption is Your Fiercest Competition and it is Winning. I thought this was such a compelling headline and I loved the framing of the article that I invited Efosa here to the studio with me today to talk about it, how he got this idea and how he started to think about non-consumption truly as a competitor, which is the basic framework for the article. And also just to talk about some of the ideas and the examples that he referenced in the article. So Efosa, thanks so much for coming by today.
Efosa Ojomo: Thanks a lot Tracy. It's really good to be here once again.
Tracy Kim Horn: Efosa, I have to ask you, how did you come up with this headline? Was this you or was this a really good editor that was working on your side?
Efosa Ojomo: Well, let's say a little bit of both. Yeah. I think if you, over the last few years I've been kind of delving deep into the research and how analysts look at emerging markets. And a lot of times they focus quite a bit on demographics. And they focus on things like say the rising middle class. And they bring out statistics that tell the world the middle class is rising or it's shrinking. And multinational companies and investors look at that information and decide whether or not to invest.
Efosa Ojomo: As a result, I started thinking, what if they have it backwards? What if they're not quite thinking about it in a way that can actually create true transformative growth for the companies? What if these companies have an opportunity to address what we call non-consumption in the article, and we'll define that here today, what if these companies have an opportunity to address the vast non-consumption of goods and services in these emerging markets and actually create really exponential and transformative growth?
Efosa Ojomo: And so I said, "Let me write something that actually takes the non-consumption and looks at the percentage of people who are not consuming a particular good or product and say, what if that was part of the competitive set? What if that was part of how companies analyze their competition?" And you'd be surprised to find that, oh my gosh, if non-consumption was actually a company so to speak, it would be eating many people's lunch.
Tracy Kim Horn: So it's Coke versus Pepsi versus no soda at all.
Efosa Ojomo: Exactly. Exactly. So it's no longer just Coke versus Pepsi. It's no longer Nike versus Adidas or Samsung versus Sony. It's now Samsung versus Sony versus everyone who maybe would love to purchase a TV or a mobile device or something that they could use to enjoy whatever the benefits of the products are, but they just can't. And a lot of times we find that many companies don't consider those people as they define and create business models.
Tracy Kim Horn: Well, when I think back to one of the first times I heard Professor Clay Christensen talking about disruptive innovation and he was talking about low end disruption, he would talk about how Toyota could see the Koreans coming. And every now and then they would throw down a crummy Corona or something like that. But it never really took off. And I guess once you're Toyota and you're building not just the small cars anymore, but you're already in that, midsize sedan market that is in some ways commoditized but you're going from there into luxury SUVs and whatnot, you don't want to build a cheap car and then people don't want to buy your cheap car because they know it's a cheap car.
Efosa Ojomo: No, you're absolutely right. And one of the things that we do in the article is give recommendations for how companies can actually reassess and start to think about this competitive landscape differently and actionable steps they can take. And so what I would recommend in that instance you raise for Toyota to do is say, create a completely separate unit that goes out into the market and engages with these non-consumers.
Efosa Ojomo: These people who maybe they would love to purchase a car or they would love to purchase a device that helps them move from point A to point B more easily than their feet but they can't afford what's on the market. Have Toyota create a completely separate unit that understands their struggles and then it's almost like you're backward engineering a product that is specific to the struggles that Toyota or whatever company finds as opposed to taking their existing product and trying to form fit it and remove features and get it into the market at a price that people can afford.
Tracy Kim Horn: Absolutely. I mean, if you're just looking for something to get from point A to point B, you can either strip down a car or invent a bicycle.
Efosa Ojomo: Exactly. You can do so many other things. I think part of why I wrote this was a couple of reasons. The first is if you free yourself of your existing business model and the existing products that you make and your capabilities, and really just focus on the struggles that many, many people in emerging markets are having, it really allows you to think outside the box. I know that's a cliche, but it really allows you to stretch your brain and really think, "How do I create a product that helps these people get the job done that they're trying to do? That helps them overcome the struggles in their lives?"
Tracy Kim Horn: So let's go back to talking about this competitor that we call non-consumption or that you've titled this in the article. What are some tips for competitor non-consumption? What should they be looking through, looking for as they seek to develop a product portfolio?
Efosa Ojomo: I'll just tell a quick story. I wake up every morning and if I don't have breakfast around say 10:00 a.m., my stomach starts to growl and I get really hungry. Well, it turns out in the mornings I'd love to have breakfast. So I met with a moment of struggle where I start to feel hungry and in order to make progress I have to eat something and have breakfast. Well, it turns out not many people can afford say breakfast. In this case it's food that I'm consuming. But you can imagine people who don't have the money or the time to purchase food, they would be non-consumers. Or don't have the time or money to purchase the kinds of food that I would have access to. They would be non-consumers of food. So non-consumption happens anytime someone or a company is met with a struggle that they cannot afford, so they don't have the money or the time or the skill to actually make progress or buy a product on the market.
Efosa Ojomo: Now, in terms of how to spot it, because you know, I mean non-consumption there are some that are pretty obvious. Some they're not so obvious. The first thing is really characterized by struggle. And I think that's one of the most important things. Where there is no struggle, we say there is no non-consumption and there is no opportunity and so when someone doesn't really have an interest in a particular product or a service, I wouldn't really characterize that as non-consumption. That's just I don't have an interest.
Efosa Ojomo: The first thing is you've got to make sure there is struggle involved and some tips on how to really spot it is anytime you're in a market where very few rich people have access to a product or service and you find that that product is typically over engineered, then you know that there are opportunities for non-consumption. The second thing is if you really key into people's emotions. So say you create this separate unit and you go out and you start to do surveys and interviews and engage with people who are not consuming existing products and see how they live their lives and see what really angers them, what makes them anxious as they go through their days, you would find very many opportunities for non-consumption.
Tracy Kim Horn: You know when you said that the anger emotion suddenly reminded me of a conversation I had with Bob Moesta, the Practitioner of the Jobs To Be Done Theory and the researcher behind a lot of that work. And I remember him once telling me, "You know, if you just go on Twitter and you look for hashtag angry or hate that or whatever sucks, there's actually a lot of opportunity there for new products or services." And you see so much of that anger is actually because it's over engineered for the wrong outcome.
Efosa Ojomo: Absolutely. And one of the examples I give in the article is there's a company in Kenya called Safaricom and they created a product called M-PESA, which stands for mobile money. You use your cell phone and you essentially text money from one cell phone to another and so it's a very easy, seamless way to send money. Now you can imagine before M-PESA came into the picture, it turns out if I wanted to send money to my mom or my dad who was living in the village, or if I wanted to pay for a good, it's very cash based society. And so I'd have to give money to a driver who was going to the village and call my mom or dad and say, "Hey, can you meet the driver at this building by this sign?" And so on. And the driver would have to find my parents. And you can imagine the anxiety.
Efosa Ojomo: And Safaricom was able to key into that and create a product that just makes it very seamless. And so Kenya goes in 2007 from having less than 20% of adults without banks and financial services to today over 20 million people. So about 80 or so percent of Kenya's adults now use this service and you can see the kind of impact going after non-consumption can have.
Tracy Kim Horn: Wow. So that's tip number two. What's next?
Efosa Ojomo: So the other thing is just looking at work arounds. So what are people doing to ... Because when people have struggles, I mean they want to make progress and so they're ingenious and try to figure out ways they can do it without a particular product that they can't afford.
Tracy Kim Horn: Life hacks.
Efosa Ojomo: Right, exactly. Life hacks. Right. Exactly.
Tracy Kim Horn: One of my favorite memes.
Efosa Ojomo: Yeah, looking at life hacks and one company that comes to mind is [Godrej 00:10:40]. Godrej is, it's an Indian conglomerate and they make everything from home appliances to textiles and they deal in property and so on. Well, Godrej realized that about 20 to 25% of people in India, over a billion, 1.2 billion people don't have access to refrigeration. And that then created a set of behaviors and life hacks and work arounds that Godrej was just fascinated by. And so what the company did was engineer a product that was much lower cost. It cost like a third of the least expensive refrigerator on the market. And the product was also able to fit into people's lives. If you look at India, the majority of people in the rural areas don't have access to electricity.
Efosa Ojomo: In fact, some of the people who do, have access to electricity, but there are frequent blackouts and so they're anxious to purchase a big refrigerator even if they can. And so Godrej developed a rechargeable refrigerator essentially. It's got a battery in there. It uses a completely different technology. But they were able to come up with a product that went after this market. And so that's another way just looking at life hacks on what are people trying to do.
Efosa Ojomo: The other thing that comes to mind is I think about this, the fourth tip for kind of spot non-consumption is looking at what is available as we like to call them abundant resources. There are many abundant resources in developed countries, in emerging markets that people write off. One of my best examples is how the mobile telephony companies came into Africa, and if you really think about how they developed a new business model, it's fascinating.
Efosa Ojomo: They were able to leverage this widespread informal network of people who sold goods and services on the streets, right outside of people's homes. I mean there was just a plethora of people selling things on what's characterized as informal markets. And they were able to have those folks be part of their distribution network as opposed to building out a completely new distribution network. And that's an abundant resource that they were able to leverage as part of their business model to go after vast non-consumption.
Tracy Kim Horn: It's such a funny thing because as we're both sitting here as formerly trained engineers and I think that's what we often look at it and see as and label inefficient. Wow. What an inefficient way of doing things. There were all these people out there and you could really streamline them. And if you'd only do that instead of seeing it that way, there's your opportunity. Those are the resources.
Efosa Ojomo: Absolutely. Absolutely. I think this new model of thinking about competition or thinking about going to market, it really changes and challenges our assumptions. And my hope is they could really create a paradigm shift in how people start to think about emerging markets and creating new business opportunities.
Tracy Kim Horn: You know Efosa, what I love about these theories is that we're talking here about emerging markets, but it's not at all limited to just the emerging markets. In fact, when we look at Zipcar for example, those cars they take what is underutilized capacity, cars that just sit around because most people don't actually drive cars for 24 hours a day and created a whole business model centered around that.
Tracy Kim Horn: And in fact, I remember when you came back from Nigeria, you were telling us about what Uber has done over there. It's not just disrupting the taxi market for example, which is I suppose up for debate of what they're doing here, but in Nigeria they actually offer a platform for people who have the cars because cars are so difficult to get to Nigeria and they allow them and they view that car ownership in fact as an underutilized asset because for the rich and the skilled, they have their driver. The driver takes them to work and then the driver and the car sit in the parking lot until it's the end of the day and they need to be driven home. And instead Uber is offering a platform now for those car owners to be able to make money off of their car during the day when otherwise it would just be sitting there idle.
Efosa Ojomo: Absolutely. And if you see the growth of that market in Nigeria, it's been phenomenal for Uber. Lots of cars on the platform and they've now moved from not just Lagos, but they've added another city of Abuja. So things seem to be going well there.
Tracy Kim Horn: Yeah. So these abundant or idle resources should not be actually idle. It's like what can you do? How can you see that as your opportunity and turn that into something.
Efosa Ojomo: Again, it's a reframing of what I historically have considered as a slack or idle resource and saying, "How can I leverage that to go after non-consumption?" I mean, think about Africa's population for instance. Many people might look at that and start to get scared that say by 2050 Africa is going to more than double in population size by, 2100 there's going to be almost 4.5 billion people on the continent. If I were a business executive, I would look at that and say, "Okay, how can I utilize people as my resource? What kinds of industry can I build in order to utilize people as kind of a driving resource?" And so if you reframe how you look at these resources and non-consumption significant opportunities, lay, lay ahead.
Tracy Kim Horn: Awesome. You know, it's so funny how just changing the way you look at something can completely open up a new world of opportunity. So what's your last tip then?
Efosa Ojomo: Well, the last one is really looking at the law breakers or the law benders as we like to say. This one, a very simple example. If you go back to downloading music in the U.S. or in perhaps more developed markets, you'd find that when Napster came around, people just kind of downloaded music illegally and they were breaking the law. Well Steve Jobs and Apple, the late Steve Jobs and Apple found that they could actually modularize the purchasing of music and give people MP3 players and the software to help them do that and they were able to create immense opportunity there. Well, the same thing happens if you look at many countries, many emerging markets. There are people who just have to survive and so they bend or they break the law.
Efosa Ojomo: There are so many informal [inaudible 00:17:20]. We talked about informal retail. There's so many people who build homes illegally that don't meet the standards. So many people operating outside the law that if you looked at as a business executive or an investor, you could say, "What would it look like if I integrated across all the interfaces that you'd have to in order to own a home and just have you sign on a sheet of paper and you'd move into your home." And so you don't have to worry about building it. You don't have to worry about getting the land. You don't have to worry about titles and so on. I would take care of all that as an investor or as a company and people would essentially, the anxiety that a lot of people feel would go away and they wouldn't have to keep breaking or bending the law.
Tracy Kim Horn: I mean, it goes back to what we talk about so often here I think of causality. Why are the people breaking the law?
Efosa Ojomo: Exactly.
Tracy Kim Horn: There are the people who break the law because they want to break the law. We don't have much to say on that topic. But for those who are breaking the law because they can't afford to follow or they don't even know that that regulation exists, there feels like there is opportunity there certainly.
Efosa Ojomo: Absolutely.
Tracy Kim Horn: So what does this mean? What does this all mean? So you have these tips. What can investors or managers in emerging markets do with these tips, do you think?
Efosa Ojomo: The first thing that I'd recommend is really reframe how you consider opportunity. If you look at global foreign direct investment spends, $1.6 trillion is about the global FDI spent. About 1.2 trillion of that goes to the richest 30, 35 countries, about 400 or so billion, whatever's left, goes to the others. And you can imagine many countries in Africa, many of the poorer countries, Bangladesh, India, are not getting a lot of that 400 billion. Which means that investors are chasing existing consumption. They're not looking at non-consumption at all.
Efosa Ojomo: So the first thing is just reframe that. If we could get those numbers flipped, the kinds of immense growth and prosperity that they can create for themselves and their firms would be unprecedented. That's number one. Number two, from a tactical standpoint, the metrics that are going to be used to go after non-consumption have to be different from the metrics that are used to go after consumption. In fact, what we see today in how investors make decisions to go into emerging markets are that they are constantly thinking about these emerging markets as if they are already developed markets. And so what they have to do is develop a separate unit that focuses all day, all night on the struggles of people in emerging markets. And what they're going to find is this new unit is going to evolve and create its own metrics that are going to make sense in the context in which they find themselves.
Tracy Kim Horn: Certainly, I mean, if the metrics were so clear, everybody would be there already and doing something, and it wouldn't be the emerging market, it would be the emergent or sorry, the market which emerged.
Efosa Ojomo: Right. Right. The market would have already emerged. If you go back a few hundred years, you'd see that Europe and the U.S., they were once emerging. And they emerged. And they didn't treat investments the way that we're treating investments in emerging markets today.
Efosa Ojomo: And the last tip that I think is critical because if you're going to create this new unit and you're going to have it focus on emerging markets exclusively, you have to understand your existing capabilities. You have to understand your existing resources, processes and priorities. And we've talked about RPPs quite a bit here actually. And so you'd have to understand what current processes do we have as a company that we can lend to this new unit and which ones should we completely discard? What resources can this new unit leverage and what resources shouldn't. You have to really assess your capabilities and understand what you can give to the new unit that you're building.
Tracy Kim Horn: Thanks Efosa. Thanks so much for being here today. Here's to hoping that non-consumption does not remain the incumbent in the emerging market for all that much longer once this research gets out there.
Efosa Ojomo: Thank you, Tracy.
Tracy Kim Horn: The Disruptive Voice is a production of the Forum for Growth and Innovation, a research project at the Harvard Business School guided by Professor Clayton M. Christensen, the Kim B. Clark Professor of Business Administration. Follow us on media @HBSFGI.