Revolutionary Product Development isn’t about the iPad

Okay, that’s a fairly weird title for what I’m about to offer to you.

I was reading my this week’s The Economist over a tall glass of ice tea. I really was trying to take a break from posting, but something just hit me like the proverbial bolt out of the blue.

There’s a special report on innovation in emerging markets which is where my money and my research are so I’m fully vested in the topic. The big introductory article is called “The new masters of management.” I was very interested in it because before I moved down here to the land of still using plantation-style management techniques Louisiana, I used to own a very profitable consulting firm focused on Japanese Manufacturing Techniques. I was taught by Dr. W. Edwards Deming in the 1980s. His work was considered the second ‘industrial’ revolution wave and the reason I still buy Ford stock, despite everything, is that they still practice Dr. Deming’s lessons. He was a revolutionary mind and I am still very proud that he was one of my earliest mentors.

The article in The Economist talks about what’s going on in places like India and China that are frankly cleaning the clocks of nearly every developed nation in North America and Europe in terms of economic growth rates and industrialization. The author basically concludes that it’s the redesign of products and of processes that do things faster and much much cheaper that are revolutionary. I guess being primarily a business magazine, they’re focusing on the more mundane aspects of the innovation although the idea that the west is losing its economic leadership because it’s not developing breakthrough, transformational ideas is correct. I think they may have missed the larger point buried in all that high minded ink. But then, many management types miss what was REALLY important about the first industrial revolution and, indeed the second. I think this is because they go straight to business school and skip things like World History. I also think that it’s the major point that the MBA-centric management in the USA has completely missed too which is why many businesses are profitable, but the wealth isn’t trickling anywhere and change appears to be happening now at a snail’s pace.

Read this quote then, let me posit something your way.

Even more striking is the emerging world’s growing ability to make established products for dramatically lower costs: no-frills $3,000 cars and $300 laptops may not seem as exciting as a new iPad but they promise to change far more people’s lives. This sort of advance—dubbed “frugal innovation” by some—is not just a matter of exploiting cheap labour (though cheap labour helps). It is a matter of redesigning products and processes to cut out unnecessary costs. In India Tata created the world’s cheapest car, the Nano, by combining dozens of cost-saving tricks. Bharti Airtel has slashed the cost of providing mobile-phone services by radically rethinking its relationship with its competitors and suppliers. It shares radio towers with rivals and contracts out network construction, operations and support to specialists such as Ericsson and IBM.

Just as Henry Ford and Toyota both helped change other industries, entrepreneurs in the developing world are applying the classic principles of division of labour and economies of scale to surprising areas such as heart operations and cataract surgery, reducing costs without sacrificing quality.

When I read that paragraph, I don’t focus on the ‘principles of division of labour and economies of scale’, surprisingly enough. Yes, I’m an economist, but what drew me to economics was the social sciences first. I focused on this part right here: “no-frills $3,000 cars and $300 laptops may not seem as exciting as a new iPad but they promise to change far more people’s lives”. That’s called burying the headline in the middle of the article.

It wasn’t so much the process of industrialization that changed the young, agrarian nation of the United States into a modern powerhouse nation as it was the availability of the Tin Lizzie to nearly every household in the U.S. It won’t be so much an iPad that will change anything anywhere, it would be a $300 laptop available to nearly every one, cheaper than a TV, more functional than an iPad, and much more revolutionary because it grants access to information and the ability to process it and share it.

It’s the availability of these no frills products to the masses that revolutionize countries and bring them out of tribal darkness, not the innovation of a few sexy toys for the privileged few. It’s the availability of products that can create a huge empowered middle class that are innovative. I’ll point to one of the oldest examples and that is the Gutenberg Printing Press. It made literacy, books, and knowledge available to nearly every one. You no longer had to get the message from the one person in the county that could read the meager library in his estate or rectory. Think of small pox vaccines versus erectile dysfunction pills or mosquito nets vs. botox injections.

It wasn’t the production process itself that was revolutionary on its own, it was the production that brought a radicalizing product to the masses. The iPad and the iPhone are nice for the few remaining upwardly mobile yuppies we have left in this country and I’m sure they have a really nice profit margin. But, just try and argue with me that the disposable cell phone or a $300 laptop wouldn’t do more in terms of bringing a whole lot of Americans out of the darkness of isolation and into the light of the information age. But, perhaps, deep down, that’s not what today’s marketing execs really want. Perhaps niche marketing to an elite makes them feel, well, so very elite?

So, instead look at China or India, and then decide what is more likely to revolutionize their country? An iPad available to the already technical and cultural elite few or a cheap, minimally functional computer that does just about everything? Would it be a Prius that very few people can afford but gee, it sounds so, well, green and upscale and trendy, or a $3000 piece of transportation called the Nano that nearly every working family can afford?

I know that MBAs and Lawyers from Harvard think it’s all about them. I know that CEOs are always looking for that niche they can exploit by convincing a group of status-conscious yuppies that one label is more prestigious than another. But, what about the concept of offering a life changing vehicle to the ‘unwashed masses’ that they desperately try to ignore? What happened to the kinds of products that brought every man to a new level? This kind of volume marketing doesn’t just changes lives, it changes countries.

Is this what living in an emerging market like India and China brings to a business that living in a culture and access-driven society does not? Also, how are you going to get more customers if you don’t bring more customers up to the level of income where they can afford your product? Right now, we’re concentrating wealth into the hands of fewer and fewer people. As a result, our innovation is aimed at pleasing and tantalizing their taste buds, not creating a larger market for bigger ideas.

What product have we now offered the masses in our nation? Fast Food. Stuff that’s basically killing them, not raising them to a new level of knowledge and economic power. A 99 cent menu of grease and bad carbs does not have the same impact as a $300 laptop and cheap broadband would for the inner cities of the U.S. or it’s poor rural counterparts. But where are the minds in the U.S. that grok this simple concept?

We need to rethink our paradigm (oh, gawd, that word) of niche marketing and go back to the idea of selling things that move the country. I think that’s what’s really going on in India and China. They’re bringing the people up to the niches instead of making the niches compact and highly profitable. It isn’t all about lean manufacturing or innovative production techniques after all. It’s about meeting people’s needs and that ought to be highly profitable if done correctly for lots of people.

So, as an example, green technology is nice, but until every one can afford to put a solar panel on their roof and generate electricity to their home, it’s really not going to be much of game changer. Although, the idea seems to have given Ed Begley Jr a nice hobby and TV show for awhile. It also gives POTUS some really nice talking points for California Yuppies. (Pssst, POTUS, you have to be rich enough to take advantage of the TAX credits.) Right now, here in the ninth ward, the only homes with their green showing are the ones where the Hollywood elite adopted the local po’folk like they do starving kids in Africa. Let me see a few of us teachers, firefighters, and waiters with the same set up on our houses and it will then be revolutionary.