For Profit Social Innovations in Developing Markets

For Profit Social Innovations in Developing Markets

For profit solutions to social problems, rather than charitable solutions, may seem at best inconsiderate, and at worst callous. However, in my view these solutions are the ideal answer to social issues for two main reasons.

1)   If social innovation is a for profit business venture, there is much more of an incentive for the project to be a viable addition to the market.  Essentially, it is less likely an organization would come up with a product like A Laptop for Every Child. The laptop project seemed cool in theory, but was not an item that consumers really wanted or needed. As an academic conceptual pursuit the laptop project worked but without demonstrated demand for the product it would not be a successful business venture. With for profit social innovation there is more pressure for the innovation to actually work because people need to be able to justify paying for it. This is especially relevant in emerging markets because consumers have very slim margins for their disposable income and tend to be very discerning consumers.

2)   Taking the time to create products that address social problems in emerging markets and consumers in these markets value can foster innovative ideas that enhance products in other markets. For example, even though The Tata Nano was not a huge financial success, the car’s design process demonstrated that certain design innovations were possible on a tight budget. For example, even though The Nano retailed for a couple thousand dollars, and on The Indian Market it still met the rigorous crash test safety standards and emissions standards placed on cars in European markets. To meet these standards, Indian engineers for the Nano pushed German manufacturers to innovate create top notch products at a much lower price point than was typically demanded by European consumers. This kind of pressure demonstrated inefficiencies in more established markets and pushed down the price on goods that the Tata Nano engineers needed, and the innovations created through the Tata Nano design process could be used on European market as well.

Basically, providing for profit solutions to the social problems experienced in developing markets makes financial sense as it encourages firms to provide products and services people in these markets need (and people in these markets collectively have massive spending potential). It also makes technological sense as the frugal engineering process encourages rethinking the way products are created and distributed and when these ideas diffuse the concepts from the frugal engineering process can be adapted to benefit consumers in emerging as well as developed markets.