How to spot nonconsumption: Five tips

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Aug 3, 2016

nonconsumption telescope

In my first post for the Christensen Institute, I introduced the term nonconsumption as the inability of an entity (person or organization) to purchase and use (consume) a product or service. I explained that if companies included nonconsumption as part of their competition, they would quickly find that it has has the biggest share of many markets. In this post, we will explore how to find nonconsumption opportunities.

Tip 1 – Recognize over-engineered products.

Over-engineered products are typically too expensive or complicated for most people to afford as they are usually made for the most demanding or the wealthiest consumers. Companies that make these products align their resources, processes, and priorities with those of the rich and skilled in society and not necessarily with the majority of people who happen to be nonconsumers.

Consider South Korea in the 1960s. Its GDP per capita was barely $1,500 but Kia Motors recognized the vast nonconsumption of mobility and designed the K360, a three wheeled utility vehicle. As the productivity and incomes of citizens increased, Kia Motors began developing automobiles that fit the changing needs of consumers. If Kia had over-engineered the automobile in the 1960s, the company may not have been as successful because most people would not have been able to afford their products.

Tip 2 – Key into people’s emotions.

Observing people’s emotions like anger, frustration, and anxiety as they go about their lives is one of the most effective ways to spot nonconsumption or underconsumption. Emotions expose innovators and entrepreneurs to dissatisfaction with existing products or circumstances.

The managers at Kenyan telecommunications company, Safaricom, were experts at this when they developed the mobile payment product MPESA. Before MPESA, Kenyan citizens had to use cash for most transactions and sending money to family members was a major hassle. Safaricom’s ability to key into the anxieties and frustrations of citizens allowed them create a solution that enabled a more efficient way of paying for goods and services in Kenya.

Tip 3 – Watch what they do, not what they say.

People’s actions and reactions to products and circumstances provide another window to help spot nonconsumption. Actions like waiting, repeating certain activities, and creating workarounds in order to get a job done are important clues for spotting opportunities.

The Indian conglomerate, Godrej Group, figured this out when it decided to design a portable refrigerator that did not require constant electricity for the migratory citizens in India. Many Indians who live in rural areas do not have access to electricity and created workarounds for storing their foods. Many of them used clay pots with water to keep food cool while others simply traveled to the market and cooked daily, a very expensive proposition for an already impoverished demographic.

After careful study of people’s behavior, those insights, and several others, gave Godrej engineers the idea to develop chotuKool, the world’s lowest cost refrigerator. chotuKool uses a fundamentally different technology and has a rechargeable battery that can keep products cool for up to eight hours. Godrej is targeting the vast nonconsumption in India, considering that about 80% of Indians do not have access to refrigeration.

Tip 4 – Look for abundant or idle resources.

Another marker for spotting nonconsumption is the availability of abundant or idle resources. These resources can be used to more effectively create solutions that will address nonconsumption. An example of this is how mobile telecommunications operators in Africa leveraged the abundance of informal retail networks to sell their respective recharge cards. This decision significantly reduced the cost of having to build a network of retailers.

Another interesting example can be drawn from the 1930s during the emergence of electrification and refrigeration in the United States.  At that time, electric utility companies sold refrigerators at cost, and in some cases below cost. They did this because they were producing an abundance of electricity that they needed to sell, and what better way to sell electricity than through a product that always stays on and is always plugged in?

Tip 5 – Watch out for lawbreakers.

When citizens are willing to break seemingly innocuous laws because the benefits far surmount the punishment, or when the possibility of getting caught is minuscule, these situations point to nonconsumption opportunities. Before the advent of iTunes, people were willing to download music illegally. While they risked getting caught and sent to prison, they understood the chance of that happening was low. The risk was worth it. The engineers at Apple caught on to this behavior and designed iTunes which enabled consumers purchase only the songs they enjoyed as opposed to spending 10 times that amount purchasing a whole album.

While these tips do not constitute an exhaustive list, they can provide entrepreneurs and managers with tools to spot the vast nonconsumption that exists in the emerging markets where they conduct business.

Efosa Ojomo is a research fellow at the Clayton Christensen Institute for Disruptive Innovation. Efosa’s work focuses on using disruptive innovation theory to fundamentally change the discourse in the global development community, thus enabling nations to engender their own path to long-term growth and prosperity.