In this five-part series, Five insights for innovating in emerging markets, I explore several insights, one by one, that my research has uncovered for innovators interested in emerging markets. This is part two of the series, based on an earlier blog.
Poverty often shows itself as a lack of resources, such as schools, roads, hospitals, and even properly functioning institutions. It’s understandable then, that organizations and governments would try to invest in—or push—education, healthcare, clean water, and the like into poor communities in an attempt to eradicate poverty. Unfortunately, the impact of such efforts often falls short.
Studies and reports that highlight the overwhelming lack of success in many institutional reform projects are all too common. In his research, Harvard University professor, Matt Andrews, has found that an astonishing 70% of reforms have muted results. Although these projects are well-intentioned, many fail because the fundamental strategy is “pushing” what seem to be the “right solutions”—most of which have a track record of working well in prosperous countries—into low- and middle-income countries. To understand why this doesn’t work, let’s take a step back and discuss two contrasting development strategies: pushing, and pulling.
Pushing versus pulling
Many development programs are focused on implementing what we call a “push” strategy, where they directly fund resources and other markers of development. While these programs are vital during times of immediate disaster or during a humanitarian crisis, on their own they rarely create long-term prosperity.
That’s because push strategies are often driven by the priorities of their originators, typically experts in a particular field of development. It is important to note that many of the resources being pushed are good things and they are often welcomed by people in poor countries. However, they are usually pushed into a context that isn’t quite ready to absorb them. And that can turn what started out as a good thing into a something profoundly disappointing, very quickly.
By contrast, “pull” strategies are often originated by innovators on the ground who are responding to the struggles of everyday consumers or specific market demands. As their innovations are developed, they then pull in appropriate solutions for low- and middle-income countries, such as the infrastructure, resources, and human capital needed to bring the innovations to market.
Consider the case of education, and more specifically the investment in human capital, when part of a pull strategy. Tata Consultancy Services (TCS),* one of the world’s largest IT companies, pulls in education into the company and more broadly into the Indian economy. With almost 400,000 employees, TCS is one of the largest private-sector employers in India. Over the past several years, in order to meet the demands of many of its clients who are asking for more digital services including data analytics, mobility, cloud computing, and internet of things, TCS has trained 200,000 employees on more than 600,000 competencies in digital technologies, and it doesn’t seem to be slowing down.
When TCS trains new or existing employees—pulling education into its business model and by extension the communities where it operates—it is usually based on market demand or project specifications. This way the education is relevant almost immediately. The employee understands why she is learning, and the company understands why it is investing. Our research suggests that pull strategies like these are very effective at triggering sustainable prosperity. Here are two reasons why:
First, pull strategies are tied to specific market demands. Because innovators are responding to previously unmet needs, the market and subsequent solutions that are pulled in to create the market, however imperfect at first, are almost willed into existence. Market-creating demands breathe life into pulled-in solutions, allowing them to take root and thrive.
Second, pull strategies have more of an investigative or inquisitorial approach to problem-solving as opposed to a one-size-fits-all approach. The innovators are there to learn and then solve specific problems unique to the community, as opposed to pushing what they believe to be the right answers to particular development puzzles. Every quarter, for instance, TCS takes stock on the skills it needs to pull into the organization and invests accordingly.
Now that the benefits of a pull strategy are clear, the question remains—how do innovators go about understanding what needs to be pulled into an economy to create a new market? Part three of this series, which focuses on understanding a customer’s Job to Be Done, will address this question.
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*The Christensen Institute receives funding from Tata Consultancy Services.