Innovation models change

07 January 2011

BEIJING: Major companies such as GlaxoSmithKline, Siemens and Renault are benefiting from innovation originating in emerging markets.

Last year, the Chinese arm of Coca-Cola created fruit drink Minute Maid Pulpy, which has been introduced across Asia and Latin America, and is soon to be launched in Eastern Europe.

"This is one of the most successful Coca-Cola innovations of the 21st century," Joanna Lu, Coca-Cola's Chinese marketing director, told the Financial Times.

Nokia, the mobile giant, has also adapted its portfolio in developing economies, covering low-cost products for shoppers with limited disposable income and high-end smartphones.

As rivals as Lenovo, the Chinese IT specialist, begin to enhance their international presence, they have move beyond simply making discount alternatives to established brands.

"They don't need to steal any more. That's history," said Dieter May, head of Nokia's Ventures Organisation said.

BesTV, part of Shanghai Media Group, has built a web-enabled set-top box costing just $30 (€23; £19), and that was trialled by France Telecom in Europe.

The firm is seeking to expand in Malaysia, Singapore and Vietnam, typically by sharing its intellectual property with local partners.

"We are pioneers in this technology," said Li Huaiyu, BesTV's chief executive.

"But this is not complex technology that needs a lot of time to develop like Google's search engine. This is simple technology which works well."

China Mobile, the wireless network provider, recently announced plans to foster an "innovation alliance" to augment its smartphone output, having previously worked with multinationals including Motorola and Samsung.

"If we can effectively make an advanced smartphone less expensive, then more users will come to use China Mobile's services in a shorter amount of time," said Bill Huang, general manager, the China Mobile Research Institute.

Price considerations play a role in many sectors, and the advent of the recession means cheaper products originally intended for fast-growth economies have often assumed greater importance worldwide.

Siemens, the engineering and technology group, witnessed this process first hand after its Indian unit offered up a high-quality, relatively affordable, X-ray scanner camera.

"A good idea or product from, for instance, India can be plugged into a global system of sales and manufacturing," said Peter Löscher, Siemens' chief executive.

"It helps increase a company's competitiveness not only in emerging markets but also in industrialised countries."

Some automakers have followed similar strategies, in recognition of the fact these outlets now constitute the largest opportunities, and generate insights into key future trends.

"Indians want dynamic-looking cars. The look is very important," said Jean-Philippe Salar, studio chief designer at Renault Design India.

"India is a perfect place to design new cars. New vehicles must be frugal, small and light compared to those of the last ten years."

But the shift in emphasis does not solely apply to big-ticket items, as shown by GlaxoSmithKline, which has cut the prices of drugs for ailments such as asthma, allergies and hepatitis in some countries.

In Africa's poorest nations, for example, many pharma goods are bought and sold at a quarter of Western prices.

"We need to push products down the pyramid," said Abbas Hussain, emerging markets chief at GlaxoSmithKline.

"There is a double bottom line here. You make products far more affordable to a greater proportion of the patients [and boost revenues]."

Data sourced from Financial Times, TMC, Forbes; additional content by Warc staff