Academic journal article Research-Technology Management

Innovation in Emerging Markets: An Interview with G. N. Bajpai: G. N. Bajpai Talks to James Euchner about the Drivers of Innovation in Emerging Markets

Academic journal article Research-Technology Management

Innovation in Emerging Markets: An Interview with G. N. Bajpai: G. N. Bajpai Talks to James Euchner about the Drivers of Innovation in Emerging Markets

Article excerpt

Innovation in emerging markets is driven by a different mindset than is traditional in developed markets. According to G. N. Bajpai, innovation in India is driven by a singular focus on hitting price points that will drive the creation of markets. This practice of innovation offers both opportunities and threats to multinational firms. The opportunity is the chance to tap into large, growing markets. The threat is the potential for disruption by innovation driven by the needs of emerging markets. Drawing on his extensive experience with companies ranging from LIC of India, Tata, and ICICI Bank to telecommunications firms and the stock market in India, Mr. Bajpai provides concrete examples of the drivers, the potential, and the implications of innovation in emerging markets.

James Euchner [JE]: You have been deeply engaged with innovation in India in a wide variety of sectors, from insurance to mobile telephony. How do you see innovation as being different in emerging markets like India than in more traditional markets?

G. N. Bajpai [GNB]: The first and foremost thing is to look at India's market. It is a very, very large market of consumers, and these consumers are divided into four parts. The first is very high-income, rich individuals. Next are the people we call the upper middle class, who are still rich individuals. Below that, there's a middle class, the people who live happily within their economic means. And then there are the poor people; they also have aspirations, but they have very little money to buy goods and services. This last piece of the whole pyramid is very, very large, and innovation [in India] is being driven with these people in mind.


The second driver has been the opening of the Indian market to global competition. By and large--except for defense production--industries in India have been opened to global competition. Looking at the size of the market, players from across [the world] are eyeing India; they would like to have a large piece of the cake of many potential Indian markets.

These two facts are the basic realities of the Indian market. On the one side, there is competition from global operators in every area, whether it is finance, manufacturing, the hotel industry, airlines--everywhere.

At the same time, the manufacturers of goods and services are acutely conscious of the fact that they really cannot be successful if they hold on only to serving very rich people. And that is what C. K. Prahalad described as the "fortune at the bottom of the pyramid." Innovation in India is being driven by the basic fact of this large mass of consumers who are ready to consume goods and services. They cannot afford a big price, but they want high-quality goods and services. The media explosion is helping to drive this. People want the best quality and, at the same time, an affordable price.

Now, as a consequence of this, some of the innovation that has taken place [is focused on finding ways to make high-quality products affordable]. I'd like to give you an example. In India, men and women want to use shampoo. And they want a quality shampoo, but their full daily earning is $1.00 or $2.00 per day. For them to afford a bottle of shampoo is very difficult. And in any case, these poor people don't need to shampoo their hair every day. So Hindustan Unilever, a subsidiary of Unilever, developed a sachet, with very little shampoo, that can be used once. All that they needed was a way to purchase. Instead of a bottle of 100 grams, 200 grams, or 500 grams of liquid, they buy a one-use sachet. And it's available for 1 rupee. That's how shampoo in India has become very, very popular. They no more use the traditional method of cleaning their hair.

JE: It's a packaging innovation in this case.

GNB: Packaging innovation and also pricing innovation.

A telecommunications revolution has also has taken place, in a similar way. …

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