January 16, 2013

Harnessing Innovation for Change in Developing Countries

“With businesses increasingly expanding into developing countries, firms of every size should understand that many of their potential customers are living in poverty,” Garry Bruton, Professor of Management and Fehmi Zeko Faculty Fellow at the Neeley School of Business at TCU, said. His extensive research into emerging economies provides helpful insights for companies expanding into those areas, especially companies providing products and services that contribute to sustainability.

“For firms to succeed in making the world more sustainable while making a profit in settings of poverty, the firms’ products and services must consider local customers’ needs, the networks among those customers, and ecosystems that affect any business effort,” Bruton said.

Bruton’s research with colleague Susanna Khavul of the University of Texas at Arlington, forthcoming in the Journal of Management Studies, cites the successful example of an innovation that was introduced and succeeded both in terms of sustainability and profitability: mobile telephone technology in Kenya.

Cell phones allow immigrant workers to make mobile payments or transfer funds to their families living back in their home village. The transfers have no wire service fees or banking fees, thus saving money for the consumers. The technology is environmentally sustainable since landlines can be avoided, and the cell phone industry is very profitable. Thus, it creates a win for the environment, consumers and the firms.

Bruton’s research found that there are significant technological issues that are unique to those living in poverty that must be addressed to help solve poverty in a sustainable manner. For example, according to the United Nations half of the 2.6 billion people in the developing world lack access to basic sanitation, including clean water. Research has shown that water-borne diseases account for 80 percent of all ailments and death among the poor.

“These ailments drag down the GDP of the developing counties by an estimated 2 percent annually, so these countries are ripe and ready for easily obtained clean water,” Bruton said. “Yet, while there are many potential technological solutions to improve water for the poor, none have been widely accepted to date by those living in poverty.”

Another technological need in developing countries which could help advance sustainability is improving the methods used for heating and cooking. Biomass or wood is used primarily, yet results in significant pollution and health issues from the smoke and misuse.

“Technological solutions that could solve this problem have been developed but not widely adopted because the firms developing them have not heeded the needs and purchasing nature of those living in poverty,” Bruton said.

Overall, Bruton’s research states three keys for firms to be successful and sustainable when introducing a product or seeking to solve a problem in settings of poverty:

Develop a deep understanding of those in poverty. People living in poverty have specific needs and desires that do not necessarily equate to those living in wealthier environments in the same country. “Rich or poor, actual consumer needs should direct what the firm does, not what the firm thinks the consumers should be doing,” Bruton said.

Realize that each community is unique. “Assuming that ‘the poor’ all act the same or need the same things is like assuming all Asians or Africans are the same,” Bruton said.  Each population has unique dimensions that must be carefully and thoughtfully understood.  

Focus on understanding local behavior. Communication in settings of poverty is different than in wealthier domains. “Usually in settings of poverty, the communities are very tightknit,” Bruton explained. Rather than communicating through advertising, obtaining the support of those who lead the community may result in better success.

The ability of businesses  to understand all the nuances of settings of poverty in emerging economies, create trusted connections within these communities, and support development and service at every level, is the key to global success now and for the future.

Dr. Garry Bruton is professor of management and Fehmi Zeko Faculty Fellow at the Neeley School of Business at TCU in Fort Worth, Texas. He is editor of the Academy of Management Perspectives, honorary director of the Entrepreneurship Center at Shanghai University, a fellow in the School of Management at Xi-an Jiaotong University, former president of the Asia Academy of Management and former senior editor of Asia Pacific Journal of Management. His areas of expertise are emerging markets, entrepreneurship and strategy. He has conducted research in the Dominican Republic, South Africa, Thailand, Singapore, India, Taiwan and China. He holds a Ph.D. from Oklahoma State University and MBA from George Washington University.

Research cited: Bruton, G.D., Khavul, S. “Harnessing Innovation for Change: Sustainability and Poverty in Developing Countries.” Journal of Management Studies, forthcoming. Read the entire article online.

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