L10: Innovation in BOP

Question 1

Definition of non-profit organization

Answer 1

• An organization whose attainment of its prime goal is not assessed by economic measures.
• Goal: to overcome global challenges - education, employment contribution to tax, aging population, disease, etc.

Question 2

Characteristics of non-profit organizations

Answer 2

1) Expectation by the public: Ethical, Non-competitive salaries, Not too commercial
2) Missions: Change the public attitudes, and Evoke strong emotional responses
3) Challenges: a) Unmeasurable goals with unmeasured outputs. b) Stronger impact of environment turbulence. c) Ambiguity over who are the customers.

Question 3

Social innovation definition (Mulgan et al., 2007)

Answer 3

Innovative activities and services that are motivated by the goal of meeting a social need, which is “meeting pressing unmet needs and improving people’s lives”.

Question 4

Fields for social innovation (Mulgan et al., 2007)

Answer 4

Rising life expectancy, Growing diversity of countries and cities, Stark inequalities, Rising incidence of L-T health conditions, Behavioural problems of affluence, Difficult transitions to adulthood, and Happiness.

Question 5

4 Barriers to carry out the social innovation? (Mulgan et al., 2007)

Answer 5

1) Efficiency: any new approach may appear inefficient compared to the subtle interdependencies of a real social or economic system.
2) Interests: risks of change compared to the benefits of continuity.
3) Minds (assumptions, values and norms). The more system appears to give people security and prosperity, the more it is entrenched as part of peoples’ sense of identity.
4) Relationships: personal relationships between the movers and shakers in the system create an additional stabilising factor (social capital and mutual commitment).

Question 6

4 Stages of innovation (Mulgan et al., 2007)

Answer 6

1) Generating ideas by understanding needs and identifying potential solutions
2) Developing, prototyping and piloting ideas
3) Assessing then scaling up and diffusing the good ones
4) Learning and evolving

Question 7

One of five world-changing social innovations (Mulgan et al., 2007)

Answer 7

1) The Open University (Education)
2) Watsi (Health)
3) Food Recovery Network in Uni of Maryland (Environment)
4) Grameen (Bank)
5) Wikipedia or Google Map (Internet-based)

Question 8

3 Reasons for failure of social innovations (Mulgan et al., 2007)

Answer 8

1) Too expensive, not good enough or flawed by unforeseen side-effects.
2) Lack of adequate mechanism to promote them, adapt them and scale them up.
3) Impeded by structures and systems.

Question 9

3 Ways to support scaling-up the social innovations (Mulgan et al., 2007)

Answer 9

1) Capabilities to grow: In terms of management, money, leadership and governance; Straddle different sectors; Ability to communicate - persistence, catch the imagination of communities of supporters
2) Methods: franchising and licensing, federations and gov, sharing credit of the ideas between the bees and trees.
3) Condition of environment: Public to pay, Funder to provide subsidy, Public agency to provide contracts.

Question 10

3 drivers for innovation (Van der boor et al., 2014)

Answer 10

1) Needs as a driver for innovation
2) Reduced technological lag between 2 countries
3) The importance of platform’s openness and flexibility

Question 11

1) Needs as a driver for innovation (Van der boor et al., 2014)

Answer 11

• Ind. need is often a more important driver of innovation than potential market size. In developing markets, there are more unmet needs.
• Customers can create solutions to meet their own needs. High need ↑ the number of user innovators and diffusion rates.
• Ex: M-Pesa => M-Kesho (saving accounts in the mobile wallet for the Kenya users).

Question 12

2) Reduced technological lag between developing countries and developed countries as a driver for innovation (Van der boor et al., 2014)

Answer 12

• The global convergence in communication costs and technological lag is a result of increasingly ubiquitous technology platform. So, users and producers can innovate the global frontier using the latest technology in developed countries. Ex: Philippines use SMS to vote presidency.
• Technology is being leapfrogged instead of being displaced. Ex: Using mobile phone subscriptions instead of a fixed phone line.

Question 13

3) The importance of platform’s openness and flexibility as a driver for innovation (Van der boor et al., 2014)

Answer 13

• Users devise their own solutions by building on existing platforms and leveraging its functionality in novel ways, which was not envisioned by the platform provider.
• Incumbent firms engineer ideas to be more convenient and broadly available, or adding features to product.
• Ex: scratch card send money for distant relatives instead of topping-up

Question 14

4 ways to encourage users play the role of innovators in developing countries (Van der boor et al., 2014)

Answer 14

• Innovation policies should be sufficiently flexible and support open standards to allow for trial and error.
• Leverage the versatility of general-purpose technologies to address specific needs.
• Actively choose to search externally to identify successful and radical user innovations.
• Engage in inventive collaborations with users early by crowdsourcing

Question 15

The characteristics of BOP market (Prahalad, 2012)

Answer 15

• > 4 billion people who live on less than $2/day.
• Within-country diversity (multiple cultures, ethnicity, literacy, capabilities and needs).
• Large and untapped market
• Served by the unorganized sector that is inefficient and controlled by local monopolies.

Question 16

4 “A”s model of BOP (Prahalad, 2012)

Answer 16

1. Creating awareness of the product: consumers and producers know what is available and on offer, and how to use it.
2. Enabling access: consumers in remote locations are able to get access to the products
3. Ensuring the affordability: provide world-class quality at prices that = 1/50 or better.
4. Focusing on availability: Ensure an uninterrupted supply of products to build trust and a loyal base at the BOP.

Question 17

The process for developing the business specifications (Prahalad, 2012)

Answer 17

1) Immersion into customer life and work styles to get Consumer insights
2) Developing broad specifications and the Sandbox
3) Building the core delivery system
4) Creating the ecosystem for Continuous innovation: cost-effective, scalable and provide needed skills and knowledge (gov, NGO, etc.)
=> Business model innovation, of which product is only a subset.

Question 18

Innovation sandbox (Prahalad, 2012)

Answer 18

• The innovation must meet the criteria that could not be violated.
• Ex: Biomass stove in India: an easy-to-use stove, global safety standards, scalable production, and affordable.

Question 19

2 steps to build innovation in BOP (Prahalad, 2012)

Answer 19

1) Recognizing BOP as a legitimate market consisting of microconsumers, microproducers, microinvestors and innovators.
2) Accepting the constraints and building an innovation sandbox within which innovation will take place.

Question 20

4 Challenges in the emerging markets context (Ernst et al., 2015)

Answer 20

1) Lack formal institutions, physical infrastructure and stable regulation
2) Acute scarcity of resources
3) Highly price-sensitive consumers
4) Served by the informal sector with competition coming from unbranded products and services.

Question 21

Affordable value innovation and performance (Ernst et al., 2015)

Answer 21

• Affordability: significantly lower price than in developed markets.
• Value: attributes such as quality, robustness, intuitive use and multi-functionality.
• Both dimensions have to be present to fully meet customer expectations.

Question 22

3 Antecedents of affordable value innovation and performance (Ernst et al., 2015)

Answer 22

1) Bricolage
2) Local embeddedness
3) Adaptation to local market

Question 23

Bricolage as an antecedent of affordable value innovation and performance (Ernst et al., 2015)

Answer 23

• The ability to combine scarce existing resources in order to find new solutions to problems and discover new opportunity.
• The ability to overcome resource constraints and institutional voids.

Question 24

3 Elements of bricolage (Baker and Nelson, 2005, pp.334-36).

Answer 24

1) “making do”: willing to experiment and try new ways to accomplish goals w/o worrying about whether they have the “right” tools, resources, or skill.
2) “the resource at hand”: both internal and external resources available cheaply; find value in inputs that other firms view as worthless.
3) “the creative combination of resources for new purposes

Question 25

2 Benefits of bricolage (Ernst et al., 2015; Senyard et al., 2014)

Answer 25

1) Help achieve affordability by reducing costs.
2) Provide capabilities to exploit the presumed “agility” and “freedom of action” by making creative use of their limited resources.

Question 26

3 Negative effects of excessive bricolage (Senyard et al., 2014)

Answer 26

1) Wasted efforts (time and attention): may lead to repetitive and inefficient trial-and-error attempt.
2) Lack of cumulative development: ‘2nd best solution’ - a temporary solution that cannot adopt more broadly. Repeatedly solving problem with innovation may lower the chances to develop relevant competencies to design a more lasting a cumulative solution.
3) Failure to engage with competent suppliers (to learn new tools) and demanding customers (who willingly pay).
=> Selective use of bricolage.

Question 27

Local embeddedness as an antecedent of affordable value innovation and performance (Ernst et al., 2015)

Answer 27

• The ability to create CA based on a deep understanding of and integration with the local environment.
  => Need to seek partnership with who are familiar with local market setting.

Question 28

3 Benefits of local embeddedness (Ernst et al., 2015)

Answer 28

1) Reduce cost, achieve access and scalability.
2) Achieve affordable value, hence increasing the likelihood of firm’s innovation being suited to local requirements.
3) Compensate for lack of institutions (ex: formal distribution channels) by means of establishing nontraditional partnerships for collaboration (ex: NGO, local gov, or community members).

Question 29

Adaptation as an antecedent of affordable value innovation and performance (Ernst et al., 2015)

Answer 29

• The ability to adapt to local conditions to target customer segment. In this case, “one-size-fits-all” approach is not appropriate.
• It is because emerging economies have great differences in consumer needs, PES both across and within countries.

Question 30

Resources constraints (Gibbert et al., 2014)

Answer 30

• Have a dual nature for innovation: As an obstacle: [1] Reduce the options and ideas available to solve the problem. [2] Obtain knowledge across the departmental boundaries and division of labor is difficult.
• Success depend not on the absolute level of resources, but on how they are perceived.
• Bricolage, improvisation and frugal innovation are the pathways for resource-constrained firms.

Question 31

Frugal innovation (Gibbert et al., 2014)

Answer 31

Removing nonessential features of the goods to reduce the complexity and cost in the context of resources constraints.
=> Companies need to reimagine their relationship via product innovation that will potentially tap the hidden markets.

Question 32

Reverse innovation (von Zedtwitz el at., 2015)

Answer 32

Any type of global innovation that is characterized by a reversal of the flow of innovation from a developing to an advanced country, as long as this innovation is eventually introduced to an advanced country’s market.

Question 33

Two types of reverse innovation (von Zedtwitz el at., 2015)

Answer 33

• Development-based: product or service as reverse innovation
• Ideation-based: an original idea or concept as reverse innovation

Question 34

16 typology of reverse innovation (von Zedtwitz el at., 2015)

Answer 34

• Strong sense (ADDA: Lifestraw water purifier ideated in Denmark and developed in VN).
• Weak sense (AADA: “Milk in a pouch” of Parmalat packaging from China, Brazil)
• Traditional flow (AAAD: Volkswagen’s Santana in China).

Question 35

The mechanism for reverse innovation

Answer 35

1. Enter marginalized niche markets in the rich world. (Ex: Tata Nano car in India => US)
2. Disrupt mainstream markets (Ex: PnG honey-based cough syrup in Mexico => US)

Question 36

The clash of two models - Glocalization and Reverse innovation (Immelt et al., 2009)

Answer 36

1) Glocalization: centralized, product-focused structures and practices. The major business functions (RnD, manufacturing and MKT) were at headquarters, while some RnD centers were move abroad to tap overseas talent and reduce cost.
2) Reverse innovation: decentralized, local-market focus.
=> The need to shift the center of gravity.

Question 37

Five critical principles of local growth team model (Immelt et al., 2009)

Answer 37

1) Shift power to where the growth is to develop their own strategies, organizations and products.
2) Build new offerings from the ground up - low income, infrastructure and sustainability needs.
3) Build LGT from the ground up. Ex: GE recruited local engineers with deep knowledge of miniaturization.
4) Customize objectives, target and metrics. Ex: GE learn how doctors in rural areas react to machine > training and customizing products.
5) Have the LGT report to top executive in the organization. Ex: include China LGT in the company’s Ultrasound Council.

Question 38

The influences on product adoption for BOP (Nakata and Weidener, 2011)

Answer 38

• Social context: social capital, assimilationist culture, collective needs
• MKT environment: interpersonal promotions, atomized distribution, flexible payment forms
• New product attributes: affordability, relative advantage, adaptability, compatibility, visual comprehensibility