New markets for future technologies

The middle class across emerging markets is very similar. And that is the market that needs to be addressed first.

As we look ahead in 2005, the rapidly converging areas of computing, communications and consumer electronics are creating an unprecedented set of opportunities -- and threats.

My belief -- which has got reinforced over the past year -- is that it will be the emerging markets like India that will define future technologies. While the top 10 per cent of these markets are just like their counterparts in developed markets (the "top of the pyramid"), a big chasm separates the top from the middle.

It is this chasm, which presents an opportunity for entrepreneurs and established companies. This "middle of the pyramid" needs home-grown solutions which are not just priced differently but also may need different business models.

This market segment is not just about making things faster, better and cheaper (not all of which are necessarily possible simultaneously) but also about focusing on the utility and value that the device or service provides and building specific solutions to address those needs.

Think about the Rs 100,000 car the Tatas are planning. It is not just about taking the Indica and trying to cut costs dramatically. To build the car, the Tatas will have to fundamentally rethink every aspect of the car and the corresponding value chains.

The group did a similar exercise when it came up with the Tata IndiOne hotel in Bangalore to offer a room for business travellers at less than Rs 1,000. Disruptive thinking is the need of the hour.

Entrepreneurs in India have a great opportunity. As India's consumer class burgeons, there is an opportunity to not just to provide solutions to them but also propagate these solutions to other emerging markets globally. India is a laboratory to try out innovations and a large, first market.

For the "bottom of the pyramid" thinkers, the middle is what comes first. The way to the bottom is via the middle. Just as the top globally is almost similar, the middle in emerging markets is very similar. And that is the market that needs to be addressed first.

India may have 700 million people in rural areas, but it also has 300 million in urban and semi-urban areas.

These potential customers comprise a huge target market of families across 45 million households, 40 million employees across three million small- and medium-sized enterprises, and 100 million students in schools and colleges. They are the ones on the edge.

The right solutions can help provide new windows of opportunities for them. This is the first market for Indian entrepreneurs.

Besides thinking about the markets outside the top 10 per cent, there are three other guiding principles which I apply to my thinking and writing as we seek out opportunities across these markets: services, subscriptions and ecosystems.

For the next markets, it is important to think of the services that the solutions provide. The target customers have limited resources. So they need to be convinced of the value that the solution provides.

For example, instead of talking about computer hardware specifications, this market needs to know what they can do with a computer. That old marketing adage of customers needing a quarter-inch hole rather than a quarter-inch drill is perhaps most apt to describe the marketing approach that is needed for this segment.

The middle segment is also more likely to adopt a monthly subscription-based model than one, which requires a large upfront investment.

Reliance Infocomm recognised this when it launched its mobile service and converted the handset capital expenditure into operating expenditure. This is partly about EMI (equated monthly installments) and partly about offering flexibility of upgrades in a technology world that is rapidly evolving.

Finally, the solution provided needs to address the entire backend ecosystem, rather than just the silo that it is operating in. For example, to target computers at this segment, it is necessary to think about the connectivity and services (applications and content) that will be provided because that is the value chain the computing device is a part of.

At times, it will become necessary to reinvent all of the elements of the ecosystem to provide a whole solution that is not just cheaper but also more desirable and manageable than the current offering.

We are at a fascinating point of time. Even as new technologies converge (and diverge), providing us with an amazing array of options and opportunities, we are also part of one of the fastest growing economies in the world. We can build not just the India of our dreams but also create the next Intel, Microsoft, Cisco, Nokia or Google for the "middle of the pyramid" across emerging markets -- out of India.

As Alan Kay said: "The best way to predict the future is to invent it." And that is what Future Tech is about.