Seoul Digital Forum, May 22, 2012
Business leaders today spend all their time trying to serve the richest 10% of the world’s customers. We need a revolution in business thinking to create products and services for the other 90%, not because it is the moral thing to do, but because there are vast new profitable markets awaiting the brave companies willing to create ruthlessly affordable new products serving the world’s 2.6 billion bypassed customers who live on less than $2 a day. The Appropriate Technology Movement, which showed such great initial promise, died prematurely because it was peopled by tinkerers instead of hard-headed entrepreneurs.
Henry Ford, Akio Morita, and Steve Jobs transformed business in the twentieth century by creating radical breakthroughs in two key areas: affordability, and miniaturization. Ford built a lighter, smaller car for $500 that armies of factory workers could afford to buy.
At a time when computers cost a million dollars and filled a whole room, Jobs and Wozniak created a computer that a college student could afford, and that was small enough to sit on his desk.
Apple PCs were classy and expensive. Apple lost its dominant position in the PC market it created to more affordable IBMs and a rapidly growing army of other PC-clones. After Henry Ford’s breakthrough, Detroit moved up-market with high-margin, expensive, aspirational Lincolns and Cadillacs, and then was brought to its knees by Japanese imports, which were smaller, cheaper, and more fuel efficient.
The digital revolution is following the same path, and risks facing the same do-or-die crossroads as General Motors because of it. Microsoft serves the top 10%, and leaves serving poor customers to the Gates Foundation. The One Laptop per Child movement serves children from middle-class families in developing countries, where there are a billion potential customers whose ability to use computers is constrained because they can’t read and write. Iphones and iPads are only available to the rich. But the future of digital technology is in services made possible by radically affordable hardware. Cell phones are already providing market information for small farmers, and access to mass markets for savings and credit for the poor.
There is a misplaced perception that the marketplace serving bottom of the pyramid customers requires products that work poorly, break quickly, and look cheap, and that high quality products and services can only be given away as charity. Nothing could be further from the truth. Products that are attractive to poor customers must indeed be affordable, but they also need to work well and look good. Poor customers are, if anything, more aspirational than the rich!
The $35 Aakash tablet computer can provide an interesting counterpoint to the western world’s fascination with cool terabyte performance. To the 40% of the world’s customers who live on less than $2 a day, the trade-offs to reach affordability are not onerous, and they open up access to vast new markets in education, financial services, and entertainment.
Can the design genius of Steve Jobs and Apple be harnessed to create a $15 iPad that would create revolutionary transformative markets serving the world’s 3 billion most bypassed customers? I sincerely hope so. Businesses that don’t learn quickly and effectively how to compete profitably at scale serving bottom of the pyramid customers risk going out of business in much the same way that Detroit was overtaken by Japanese imports.
I will be speaking on this topic at the Seoul Digital Forum on May 22. A video of my presentation and panel discussion will be available after the event.
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