The ambition to disrupt markets with new innovative products and services is on the rise. This ambition is especially prevalent in Silicon Valley, where entrepreneurs building startups love to talk about disruption — though few really understand the term.
There is an important distinction between efficiency, sustainable and disruptive innovations — namely that instead of making products better or more affordable, disruptive innovations gives a market access to a product that was previously unavailable to them. Enter constrained consumption.
African consumers are aspirational by nature to say the least. The common challenge however, is that the man in the street has to overcome a plethora of barriers and constraints in order to achieve their aspirations. These constraints come in a variety of forms, and if they can be accurately identified by entrepreneurs and brands, they have a huge opportunity to capitalise on them.
The Disruptive Opportunity
When it comes to making a true dent in the world — perhaps the biggest opportunity for disruptive innovations lies firmly in the context of emerging markets, where examples of constrained consumption can be found literally everywhere you look — it represents a fertile playground for entrepreneurs and brands alike to truly disrupt markets and create monopolies around new innovative products and services. This opportunity is compounded further when one considers the impact of “the rising billion”, which refers to the estimated 3–5 billion people who will connect to the Internet for the first time by 2020.
Unpacking Constrained Consumption
Below are just a few examples of constrained consumption, and how entrepreneurs and brands can take advantage of them.
- Wealth Constraints — arguably one of the most common addressable constraints in emerging markets is the wealth constraint. Smartphone adoption in emerging markets is largely constrained because of the affordability of smartphone devices. The worlds cheapest Android smartphone (the Freedom 251) by the Indian company Ringing Bells is a disruptive product which removes the affordability constraint completely, and even in remote areas where some consumers earn less than $10 a month.
- Access Constraints — there are more people in Africa with access to mobile phones than clean drinking water. The same can be said when it comes to electricity access. In many instances, the simple ability to charge a mobile phone is restricted and in some instances even non-existent. The $5 wind powered phone charger for bicycles developed by a sixteen year old Danish student is an example of disruptive innovation that addresses the access constraint in a simple and DIY fashion.
- Complexity Constraints — if a technology product is complex by nature the technology adoption curve by users is often extended. There are some who argue, that the launch of the smartphone has extended the technology adoption curve — not shortened it. While this can be debated, the reality is that if a complex feature of a smartphone can be transformed into something simpler and then provided to the constrained users, then the technology adoption curve can be shortened and even removed. MTN has recently done just this. They have enabled feature phone users in Africa with the means to access tweets from Twitter via SMS.
- Educational Constraints — South Africa’s population is currently roughly 55 million people, but According to the 2015 statistics from the Department of Basic Education only 550 127 full-time learners took the National Senior Certificate (NSC) in public and independent schools. But what if this status quo could be disrupted through peer-to-peer video streaming technology e.g. Meerkat / Periscope. By enabling lessons to be streamed to a broader set of remote students; many of these educational barriers could be substantially removed. It could also disrupt the underlying business model whereby educational institutions could create an additional revenue stream by charging 25% of the normal tuitional fees to remote students (subscribers).
- Health Constraints — the simple act of getting to a medical healthcare professional or doctor is often out of reach for many Africans. The connection of doctors to patients in a remote and digital context can remove this barrier. While the commercial model won’t work in Africa given its price points, iCouch.me is a Web app that pairs users with healthcare professional who typically charge between $65 and $90 for 50 minutes of video chat time. In effect, a solution like this lends itself to disrupting the entire value chain through partnerships with companies, hospitals, and insurance companies.
- Banking Constraints — the lack of banking infrastructure has seen a plethora of disruptive mobile banking solutions launch across Africa. Most notably is mPesa in Kenya and EVP Plus in Somalia, but more startups are entering the financial services category with disruptive innovations. Why does this matter? Access to affordable financial services is linked to increasing economic growth, reducing income disparities, and alleviating poverty. But in most emerging markets, access is limited due to high fees, product constraints, and lack of trust. The Barclays Accelerator startup GetWala for example, is on a mission to bring digital banking solutions to emerging markets.
- Funding Constraints — for many startups and small businesses in emerging markets, the lack of funding is often pointed to as a primary barrier to growth. The rise of crowdfunding and social funding can be largely attributed to solving the funding dilemma of startups. But the emerging opportunity lies with the traditional institutions and todays modern disruptive companies. Barclay’s Africa for example, has recently launched their own accelerator and in the process are opening up their previously closed business model to disruptive innovators. Even WeChat Africa has recently announced of their own seed fund for promising mobile startups.
- Others constraints— the aforementioned examples are illustrative of just a few common examples of constrained consumption in emerging markets. There are many others.
Disruptive companies who put innovation at the heart of their culture are future proofing their businesses, and the importance of culture generally increases in direct proportion to the number of competitors in the market. Success and profit therefore, are largely dependent on getting the culture mix right. Spotting constrained consumption is just the first step towards realising a disruptive ambition and a pre-cursor to creating a dent in the world as we know it.