Innovation Process: Connecting the Disconnected

GURGAON, India - Nov. 24, 2014 - PRLog -- Through major part of InvYramid policy liberalization growth era, the consumer economy growth has continued to be largely driven by the urban population. However, over the past decade of government initiatives and private enterprise, the income trickle has been driving a dynamic transformation in the Indian consumer economy, being led by rural India.

India’s Rural ‘Consumer’ – Empowered and Evolved

India’s ‘rural market’ has almost 840 million people, and quite clearly, rising incomes and aspirations are leading the transformation towards a ‘rural-driven’ consumption economy with rapid growth in expenditure. Nearly half of this population set earns between $1 - $5 a day and almost 50 million of these who can be identified as ‘rich’ as they earn more than $5 per day.

As of last year, powered by a real estate-construction boom and the government's well known rural employment creation drive through NREGA, the rate of growth of consumption in rural India outpaced the urban increase in the two-year period since 2009-10. That is the first time this has happened in a period of about 25 years. In actual rupee terms, rural consumers spent Rs. 3.75 lakh Crore more in
two years, which was substantially higher than the additional Rs.2.99 lakh Crore spent by urban India (NSSO). The data also revealed that spending on goods and services from rural India rose by 19% during this two-year period, as compared the 17% growth in urban areas.

The average Indian rural household spent an unprecedented 51.4% on consumer items other than food in 2011-2012. The growth in share of expenditure on durable goods such as household furniture and electronic devices, as well as entertainment, has soared more than 100% over the past 5-7 years, accompanied by a steady cut down in the food expenditure. This is indicative of an evident empowerment of the rural population, with basic needs of food needs being met; the aspirations to acquire ‘luxury’ goods and lifestyle are growing.In absolute money terms, the actual amount being spent by an average rural household on these categories may still be very small. However, factoring in the massive number of rural households and population in India, even relatively smaller percentage changes in discretionary expenditures can result in

THIS ALREADY HUGE AND RAPIDLY GROWING CONSUMER BASE AT THE BOTTOM OF THE PYRAMID IS BEING GRADUALLY BUMPED ABOVE THE POVERTY LINE, INCREASINGLY CREATING THE SITUATION OF AN INVERTED PYRAMID OF ASPIRATIONAL CONSUMERS.

What businesses need to focus on – driving Co-Creation
As InvYramid Team (http://www.invyramid.com/team) study businesses across emerging economies including India, most of them seem keen to adopt the repackaging approach to tap into this consumption. The intention is to take something existing that targets the top of the pyramid, leaving out certain attributes to reduce costs and creating rural availability. This strategy however has not seen much however has not seen much success for global giants and domestic players alike. The expansion is easier to roll out as there isn’t as demanding a need to innovate with the products & services or invest in the accompanying ecosystem. In contrast to being focused on only selling a cheaper product to an emerging user segment, enterprises need to be more focused on bridging the consumption-need gap and driving sustainable solutions.
Businesses should drive Co-creation of value by engaging local stakeholders – which has been the catalyst for successful rural business models such as Microfinance. This approach however does take more time and requires a significantly higher investment at the initial phase, along with building mutual trust through sustained community engagement.

How innovative businesses (http://www.invyramid.com) are engaging communities for sustainable growth

A case in example is ITC’s e-chaupal initiative, which is a unique hub-and-spoke intervention model that has disrupted the farmer to mandi to trader supply chain. The growth-driving rural initiative has shown the way for empowering farmers and transforming the state of Indian agriculture.Essentially, to enable Co-creation of value – businesses and entrepreneurs should come to the market with a concept to address a problem and build it with the community, rather than trying to sell a finished product. A recent example of successful value co-creation is Godrej’s chotuKool, which is widely regarded as the ‘world’s cheapest fridge’. It is a cooling system, which was co-created with the villagers of Maharashtra. The need was to have cooling solution for preservation of fruits & vegetables for a day or two, along with cooler water to drink. The created system does not have a compressor. The product meets the needs, and represents an environmental friendly system with lesser components and lower power consumption.

SUCH INSTANCES CLEARLY TEACH United State- ‘VALUE CREATION WITH BOTTOM OF THE PYRAMID REQUIRES CREATING A NEW MARKET, WHICH DOES NOT CURRENTLY EXIST, OFTEN REQUIRING INFRASTRUCTURE TO BE BUILT AROUND THAT’.

The Swaayam Ksheer Dairy initiative is another successful example of value co-creating thorough engagement of local women and building community trust. By mid 2012, the IKEA-UNDP pilot was touching the lives of 55,000 women on a daily basis, with the women being involved in producing 24,000 litres of milk every day. With the successful pilot, the project is now being expanded to three other states to reach 2.2 million women.

To drive such transformational initiatives, business leaders and entrepreneurs should take the leading responsibility to help people understand the lifestyle changes this could bring. They need to help the rural consumers understand that their new concepts, and subsequent products or services could create a better quality life.As an economy and country desperate to reduce inequality, InvYramid team require businesses that can create both economic and social value, developed through community participation and mutual trust. Enterprises have to be ‘productive’ in terms of – creating employment and social wealth. The inequality between rural and urban can lead to unsustainable social conditions, and value co-creation businesses (http://www.invyramid.com/services/build-business-models) would help in reducing that gap and building a more stable economy.

ABOUT INVYRAMID

InvYramid is a global business model innovation (http://www.invyramid.com/services/aboutus) strategy consulting firm, enabling our clients innovate better, faster and cheaper than before. We leverage our experience in Design Thinking, Lean Startup, and Venture Investing to increase the ROI on innovation-led growth. In the past, our Partners have helped Fortune 500 companies master transformative growth, along with having on-ground experience in running startups, based on innovative business ideas (http://www.invyramid.com/services/identify-new-opportunities) . We have worked with companies like P&G, J&J, Medtronic and helped conceptualize and commercialize powerful disruptive growth businesses