FINANCING INNOVATIONS FOR THE BOTTOM OF THE

PYRAMID MARKET

A.S.Rao, Adviser, DSIR, GOI

asrao@nic.in

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Contents

• UN millennium goals• Characteristics of innovations for

millennium goals• BOP market• Characteristics of innovations for BOP

market• TePP program of Government of India• Financing innovations for BOP- challenges

and opportunities

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UN millennium goals

• The eight Millennium Development Goals (MDGs) – which range from halving extreme poverty to halting the spread of HIV/AIDS and providing universal primary education, all by the target date of 2015 – form a blueprint agreed to by all the world’s countries and all the world’s leading development institutions.

• They have galvanized unprecedented efforts to meet the needs of the world’s poorest.

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Characteristics of innovations for millennium goals

• High diffusion potential.

Diffusion is the adoption of new products or services overtime by consumers within social systems as encouraged by marketing activities.

• Speed of diffusion is critical parameter.

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BOP market

• Four billion people form the base of the economic pyramid (BOP) -- those with annual incomes below $3,000 (in local purchasing power).

• The BOP market in Asia (including the Middle East) is by far the largest: 2.86 billion people in 19 surveyed countries, with an aggregate income of $3.47 trillion.

• The African BOP includes 486 million people in 22 surveyed counties -- 95 percent of the population in those countries.

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Characteristics of innovations for BOP market

Prahalad outlined 12 principles of innovation for the BOP markets:

• Create a new –price performance envelope.• Creatively blend existing technologies with the new

technologies.• Solutions developed must be scalable and transferable

across countries.• Use minimum resources.• Product development based on functionality and not just

form.• Process innovations to address logistics constraints

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TePP program of Government of India

• Markets under invest in developing innovations for the BOP markets as the market size and penetration is unattractive.

• Private investor needs to appropriate knowledge to make it pay, but government is more interested in diffusion of knowledge.

• TePP program of GOI (Government of India) supports independent innovators at Ideation stage to prove their concepts as the first prototypes.

TePP Innovation Funnel

2351 887

1st level Screening

TePP Screening Committee

196

Creativity Phase

Successfully completed

Appropriation & Scale-up limitation

Commercialisation of Innovation

77Diffusion by Imitation

Innovation Phase Diffusion Phase

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Financing innovations for BOP- challenges and opportunities

• Opportunity

tool to use S&T to meet socio – economic goals of nation.

• Challenge

to access ideas on large scale and

screen at least transaction cost.

• TePP as a orchestrated network

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TePP orchestrated Network

• Access through 20 outreach centres.

• Mentoring by `Technology angels’.

• Separate `innovation incubation’ and `enterprise incubation’ phases.

• Separate tracks for `open source innovations’, `technology transfer innovations’ and `start-up innovations’

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Summery

• Innovations for BOP market require a distinct sub-national innovation system with primary emphasis on creatively altering `price-performance’ envelope.

• The large body of independent innovators can make a significant contribution in developing and marketing these solutions.

• A network mode of operation can keep the transaction costs lower while providing wide access.

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Thank You