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Providing appropriate technology for the Base of the Pyramid markets Jianghua Zhou Guidelines • • • • • Introduction Theoretical background Methodology Findings and discussions Conclusions and implications The trade-off between growth and equitable distribution • Technological progress and innovation have impact on both productivity and distribution • Dominant innovation trajectory in the past century which increasingly favors the use of labor-saving technological progress, assumes high-quality and pervasive infrastructure, and produces products for high-income consumers at a large scale • When the global division of innovative effort is shifting to BRICS, is it possible to align these two developmental objectives? – simultaneous promoting growth and more equitable distribution with technological progress and innovation The rise of the AT movement and the BoP markets • The call for Intermediate technologies (small scale and labor intensive innovations) for low income countries (Schumacher, 1973) • The huge potential of the BoP markets (Prahalad and Hart, 2002) • Could the integration of AT movement and the BoP markets provide implications for the direction of technological progress? The research on appropriate technology (AT) • Technologies appropriate for low income countries – – – – Labor-intensive Simple to operate and repair Products for low income consumers at small scales Minimally-harmful impact on the environment • New technology must also be compatible with income levels, resource availability, existing modes of production, existing technologies and costs corresponding to the community (Stewart, 1977) Critiques on AT • Only NGOs and some bilateral aid agencies respond to the call for AT (Kaplinsky, 2010) • Possibly consign poor countries to a state of perpetual underdevelopment, locked into the use of low productivity, undynamic and inefficient techniques • The notion of ‘appropriateness’ of innovations for the poor should be broadened to look beyond the ‘design of the technology’ to ‘the design of business models and delivery mechanism’ (Prahalad, 2005; Hart, 2005) Research on frugal innovation /disruptive innovation/reverse innovation • A potent combination of constraints and ambitions could ignite a new genre of innovation (Prahalad and Mashelkar, 2010), • Redesigning products and processes to cut out unnecessary costs, and the ability to manufacture low cost versions of goods for mass markets with frugal use of resources (Woolridge, 2010) • Leap to BoP for disruptive opportunity (Christenson et al., 2001) • Starting with the needs of low income mass consumers in developing countries to produce solutions which have global application (Immelt et al., 2009) • "Design for Extreme Affordability" programme in stanford • Requires a paradigm shift in innovation strategy Review of the literatures • What is lacking are comprehensive in-depth studies on development of appropriate technologies, especially by local enterprises and their successful diffusion into mass markets in emerging countries. • This study explore in depth an innovation model of local enterprises that are successful in designing and diffusing an appropriate technology for the masses at the BoP with profitable production. Methodology • Case study • Select low-cost cell phone, low-cost medical equipment and solar thermal as targeted cases Findings • Modular designs to meet user demands of affordability and functionality through architectural innovation • Design for manufacturability and scale • The exploitation of the local knowledge base and the creation of local innovation clusters • Enabling inclusive participation Modular designs through architectural innovation • An architectural innovation and a modular design enabled minimizing costs to develop new products • Modularity in product design expands the range of possible product varieties and allows engineers to create families of parts that share common characteristics Design for manufacturability and scale • Standardized and modularized the core components of the product, and made the production process into a standardized assembly process. • Simultaneous consideration of cost reduction, tempo and scale The exploitation of the local knowledge base and the creation of local innovation clusters • The exploitation of local talent pool to develop and implement the appropriate product design further reduced costs • Labor-intensive and capital-sensitive processes along the entire value chain starting from R&D through to manufacturing, assembly, distribution, or service functions minimized the cost of development by maximizing the use of abundantly available low-cost resources • Develop and train a large pool of local manufacturers to whom it transferred technologies • Create a locally sustainable innovation ecosystem to pursue low-cost innovation for the masses Enabling inclusive participation in innovation diffusion • Diffusion of innovation are enhanced by structuring the value chain activities to maximize engagement of local agents and supporting their need for income generation A theoretical framework Thanks