Where should you look for the unexpected? Try finding a different world view.

"the unexpected success is not just an opportunity for innovation; it demands innovation. It forces us to ask, What basic changes are now appropriate for this organization in the way that it defines its business? Its technology? Its markets? If these questions are faced up to, then unexpected success is likely to open up the most rewarding and least risky of all innovative opportunities."
- Peter Drucker, Innovation and Entrepreneurship

At BRINQ, we believe those living in the Base of the Pyramid (BOP), the so-called poor, are a huge source for something unexpected: innovation. And particularly a type which we like to call "innovation in utility", the novel and unexpected ways in which people use technology. It’s simple really, when does your invention become a true innovation?

Somebody uses it.

Lots of somebodies, and often in a way you didn’t expect.

Look at the examples Harvard business guru Clay Christensen gives of disruptive innovations in his pathbreaking work the Innovator’s Dilemma, many of his examples’ early successes came from unexpected uses in unexpected markets. Or take a look at Cemex, which capitalized on the unexpected success of cement sales to Mexico’s poor by developing its Patrimonio Hoy program. Our colleague Gordon Enk (Partners for Strategic Change) summed it up best in a recent conversation, "I don’t think anyone ever sets out to invent a disruptive technology." We believe that’s because invention is about technology, but innovation is about utility, and it’s a near impossible task to guess all the seemingly crazy ways in which people might use your creation, even if those crazy ways determine your future failure or success.

Innovation in utility is rarely discovered inside a corporate R&D lab, rather it’s user and market focused: the more people you observe using your technology or service, the better chance you have to discover an unexpected success. Even better is to find people with an entirely different world view than your own, as they can create possibilities you never dreamed of, and then give them reasons to seek you out. We believe the Base of the Pyramid has a wealth of such perspectives and dreams that are ripe for this purpose.

We recommend two critical components to discovering innovation in utility: casting your net for innovation as far and wide as possible, through product offerings or services, and then drawing the resulting innovative uses back to you. In the remainder of this article we will focus on the second component, drawing the unexpected innovations back to you. We will do this the through the example of the MTN villagePhone venture in Uganda, a new venture which we analyzed in the Spring of 2004 on behalf of the the Grameen Technology Center and the Base of the Pyramid Learning Lab. These concepts (and our introduction of the "Model T Trap") were awarded the BOP Lab’s Best of 2004 Award.

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The Ford Model T: Available in any color as long as it’s black.

In 1908, Henry Ford introduced the Ford Model T, a "car for the common man", which both created and dominated the modern automobile market for the next 20 years, with more than 15 million units sold in its lifetime. Ford, however, failed to read the changes in perception of the market he had created, and continued to offer only one model to an evolving market looking for upgrades. The upstart General Motors capitalized on this shortcoming and surpassed Ford and the seemingly unbeatable Model T, by providing a ladder of car brands and upgrades. Some argue that Ford never really recovered from that misstep. This trap of not understanding and capturing the future value a venture enables we dubbed the “Model T Trap”*.

The “Model T Trap” is a critical issue for Base of the Pyramid (BOP) ventures, which by nature are enabling ventures, offering products and services “for the common man”. By enabling progress in the BOP, these ventures run the risk of lifting the customers they serve up and beyond the very services the ventures provide, potentially allowing others to capitalize on that future value, as GM did with Ford. Admittedly, falling into the trap itself is initially a sign of success both for the company and BOP development, but for ventures looking to attract continued investment to the BOP, they must have plans to capture the current AND future value their efforts enable.

This is even more critical if your goal is to incubate disruptive innovations in the Base of Pyramid. As Clayton Christensen details in "The Innovator’s Dilemma", before an innovation can disrupt its mainstream competitor, the innovation first incubates in an emerging market that values its attributes (attributes which are initially considered inferior by the mainstream). The innovation then follows an upward climb of improvements to eventually disrupt the mainstream market. That upward climb is a series of steps driven by customer demands in the emerging market. If you are not improving in step with your customer’s demands or you are unaware of the innovative ways in which your customers are using your offering, your unlikely to understand which aspects of your innovation are disruptive.

To avoid the trap, BOP ventures must find ways to embed themselves in their markets, capturing and leveraging local knowledge and shifts in perception, and to continue evolving their product and service offerings with their customers. Most critical is understanding how your customers are using your products and capitalizing on the new opportunities and innovations they are creating.

*The "Model T Trap" was presented at the 2004 meeting of the Base of the Pyramid Learning Lab, included in our recommendations for a consulting project to the Grameen Technology Center on the MTN villagePhone venture in Uganda.

The disruptive-innovation theory explains why new firms armed with relatively simple, straightforward technological solutions can beat powerful incumbents, often creating entirely new markets and business models. The disruptive innovation theory was popularized in Harvard professor Clayton Christensen’s "The Innovator’s Dilemma". This article points to some examples of disruptive innovations, their characteristics, how to test for disruptive innovations, and further sources for review.

Some examples of disruptive innovations:

• Peer to Peer networking, disrupting traditional distribution mechanisms
• MPEG Audio and Video Compression (MP3 et al.), disrupting physical media
• PCs, disrupting other media devices (TV, stereo, etc.)
• Smaller sized hard drives (as discussed in the Innovator’s Dilemma)
• Steel Mini-Mills (as discussed in the Innovator’s Dilemma)
• Amazon.com (disrupting traditional Brick & Mortar retail)
• Dell Direct (disrupting the whole PC Industry)
• Cell Phones (disrupting PCs and digital cameras)
• Ebay (disrupting traditional retail systems)

Potential Disruptive Innovations

• Renewable and Distributed Energy (Solar, Biomass, etc.)
• Adaptive Eye-Care’s user-adjustable corrective glasses
• WiFi and organically grown networks

Characteristics of a Disruptive Innovation>

• Its performance attributes meet the unfulfilled needs of an emerging market’s customers. These same attributes are not initially valued by the mainstream market, which instead value different performance attributes and initially see the innovation as substandard.
• Emerging market adoption enables the innovation to increase its performance and to begin overlapping with the performance expectations of the mainstream market.
• Awareness of the innovation increases as the innovation develops, influencing change in the mainstream market’s perception of what it values.
• The change in the mainstream market’s perception of what it values enables the innovation to disrupt and replace the existing offerings in the mainstream market.

Can you see why those us of working in the Base of the Pyramid are so excited about this theory? The Base of the Pyramid could be an ideal place to meet unmet needs and to incubate disruptive innovations, creating new markets and one day perhaps even disrupting mainstream markets higher up the pyramid. This idea of incubation in the BOP was put forward in Christensen and Hart’s article “The Great Leap: Driving Innovation from the Base of the Pyramid”. Quoting Professor Hart:

“It is much easier to take an innovation up-pyramid than it is to try to do it the other way around.”

We believe that same reasoning is why Hewlett-Packard set up the HP labs in India.

Is the Idea Disruptive? Christensen’s Litmus Test
Summarized by Emergic.org

Executives must answer three sets of questions to determine whether an idea has disruptive potential. The first set explores whether the idea can become a new-market disruption. For this to happen, at least one and generally both of two questions must be answered affirmatively:

• Is there a large population of people who historically have not had the money, equipment, or skill to do this thing for themselves, and as a result have gone without it altogether or have needed to pay someone with more expertise to do it for them?
• To use the product or service, do customers need to go to an inconvenient, centralized location?

The second set of questions explores the potential for a low-end disruption. This is possible if these two questions can be answered affirmatively:

• Are there customers at the low-end of the market who would be happy to purchase a product with less (but good enough) performance if they could get it at a lower price?
• Can we create a business model that enables to earn attractive profits at the discount prices required to win the business of the overserved customers at the low end?
• Once an innovation passes the new-market or low-end disruption test, there is still a third critical question to answer affirmatively:
• Is the innovation disruptive to all of the significant incumbent firms in the industry? If it appears to be sustaining to one or more significant players in the industry, then the odds will be stacked in that firm’s favor, and the entrant is unlikely to win.

Sources and Links:

The Innovator’s Dilemma, by Clayton Christensen
The Innovator’s Solution, by Clayon Chistensen and Michael Raynor
The Great Leap Forward: Driving Innovation From the Base of the Pyramid , by Clayton Christensen and Stuart Hart
HBS Working Knowledge Article - A Diagnostic for Disruptive Innovation
Optimize Magazine - Forging Innovation from Disruption
CIO Magazine - Disruption is Good - an interview with Clay Christensen Emergic.org Article - TECH TALK: My Mental Model: Creating Disruptive Innovations
Adaptive Eyecare - low cost, user adjustable eye glasses.