Saturday, January 10, 2009

Design and Adoption of Technology for Emerging Markets

For the past few months I have been thinking about the design and adoption of technologies by people in emerging markets and other under-served communities (a.k.a. Base of Pyramid, "BoP", markets). During this period I've come across several interesting ideas related to this topic. It is clear that many challenges and possibilities have been, and are being, created by technology's continued expansion into the lives of people who just a few years ago were "off the radar".

My interest lies in exploring the common features shared by products and services that have been successful in these markets, and understanding how the process of design can evolve to support innovation focused on creating products and services that are appropriate for these communities.

Perspectives from Emerging Markets
People in emerging markets have particular worldviews that are colored by the specific context in which they live. I am implying not only that numerous differences exist between developed and emerging markets, but also that an equal number of differences can be found between emerging markets alone.

Here I will focus primarily on key characteristics that differentiate most emerging markets from developed ones. First and foremost, consumers from emerging markets tend to be less confident when it comes to making purchases due to their tighter economic situation. According recent article from Interactions magazine written by a team from Human Factors International, consumers in these markets "are more cautious than their counterparts in the West; they would rather pay more for quality than risk product failure". Affordability is important to them but they are not willing to accept products that offer low-quality compromises as "every act of discretionary consumption is an act of sacrificing something essential." [read full article]

On Core77, interesting insights are offered by Niti Bhan about the behavior of people from low-income communities in emerging markets. "Buying behavior and decision-making criteria imply that those in the lower income strata—particularly in the developing world—are not 'consumers' but in fact extremely careful 'money managers' for whom an expense is often an investment whose return must be maximized... The BoP customer has not been bombarded by mainstream consumer culture and all the trappings of 'consumerism' that come with it." [read full article]

This is not to say that the choices of these consumers are not influenced by emotion - emotion plays an important part in determining the "return" that will be delivered from a given purchase. However, the role of emotion is somewhat tempered by the fact that most of their spending choices are focused primarily on meeting basic human needs such as clothing, food, shelter.

When approaching emerging markets most companies take the approach that the same basic value proposition can serve across all markets since people have the same basic needs. Pricing and cosmetics are often considered the only elements that truly need to change. This approach demonstrates a lack of understanding regarding the extent to which the needs of these audiences differ from more affluent markets. Santosh Desai sums up the point nicely: "the need is to develop products that are appropriate rather than merely cheap."

Adoption of Products and Services in Emerging Markets
There are many factors that influence a product's rate of adoption. According to the article from Interaction magazine, these factors include "infrastructure, culture, language and dialect, purchasing power, literacy, urbanism, and terain." Recently on PSFK Allison Mooney shared her perspective about the three fundamental forces that govern the adoption of new services and products. Though her post focused exclusively on the adoption of a clunky service in South East Asian emerging markets, these hold true for all markets. So here are the three fundamentals [read full article on PSFK]:
  1. "Discovery: Is there an easy and reliable way for people to learn about it?" (Does their community use it? Can their teenager or friend explain it them? Is it something that people will feel comfortable sharing? If a device is required, is such a device common and easy to acquire and use?)
  2. "Utility: Does it enable them to do something they need or want to do?" (Does it fulfill a real need or is it useful? The need can be practical, e.g. banking, entertainment, e.g. games, or something else - but it must offer some utility.)
  3. "Motivation: How badly do they need or want to do this?" (How does the utility offered by this product compare to difficult required to learn how to use it, or the costs associated to its use - monetary, cultural and social costs? For hard to use or expensive products and services a lot of motivation is needed.)
To examine the value of this framework let's do a high-level analysis of successful products and services from emerging markets. First let's examine mobile-enabled financial services that have quickly gained adoption. In many developing markets, mobile phones have emerged as the communication standard because in large part due to the scarcity and expense of land lines. However. the role that these devices play has expanded far beyond calling; in the Phillipines and India they have evolved into important financial instruments and are often referred to as "wallet phones".

In these countries banks and phone companies have begun to support a wide range of phone-based financial transactions in ways not commonly available in the West. Services offered include checking balances, money transfers and even e-cash capabilities. According to the previously mentioned article from Interactions magazine, a "currency-free future is dawning in these 'developing countries... mobile phone providers like the Philippines' Globe Telecom have become a kind of shadow banking system."

In Mumbai, a start-up called Eko partnered with a local bank to offer these same types of services. Users carry out transactions using USSD messages that feature a complicated syntax consisting of long sequences of numbers, *'s and #'s (thanks to Anupam Varghese for pointing out that this service is provided using USSD as opposed to SMS). USSD enables a transaction to be just 'dialed' as if it were just a longish phone number. Here is an example of a transfer request for 100 rupees: "*543*190123456789*100*1133740274#" (I suspect the service from the Philippines has a similar interface). Despite the seeming "clunkiness" of the user interaciton these services have achieved wide adoption.

So how does it line up against the fundamentals we laid out above? To drive discovery of these services, the bank in Mumbai set-up a network of neighborhood service representatives that promote the service, and sign up and assist customers. The telecom company from Philippines is able to drive discovery via marketing and their existing network of representatives. From a utility perspective boths services are obviously useful, enabling mobile phone users to easily access money. Though the interface seems "clunky" it is easy to use because it leverages a known behavior (dialing numbers), a widely used feature (SMS) of a commonly available technology (cell phones). In Mumbai, neighborhood service reps also provide support so that it’s not necessary for people to know how to do everything themselves.

Design of Products and Services in Emerging Markets
I believe that good design delivers some form of usability, coupled with a pleasurable and meaningful experience. This perspective is based on the consumerist cultural and social context in which I live, my privileged economic situation, and my passion for design and aesthetics. In order to create products that are appropriate for emerging markets designers need be aware of cultural and social blind spots. Understanding the specific cultural, economic and social context is key to designing a successful product. Ken Banks of kiwanja.net recently wrote about what causes many products to fail: "lack of basic reality-checking and a tendency to make major assumptions are lead culprits, yet they are relatively easy to avoid."

The latest issue of Interaction magazine featured a study into the adoption of a mobile service. This piece highlights the importance of leveraging deep cultural and social understandings when designing services. The focus of this study was a project to leverage mobile phones to enhance education for school-age kids. In order to create a solution that was adopted by students the design and research team had to go through several prototypes. During this process they unearthed important social and cultural behaviors and beliefs that guided updates in the design of the user interactions and the way in which the education was developed and delivered. [read full article]

Niti Bhal outlined a human-centered framework for the creation of successful products and businesses for BoP markets. This framework, called 5-D, is comprised of 5 elements: development, design, distribution, demand, dignity. The first four elements roughly align to phases of a process, whereas the final element refers to the philosophy of the approach. Below is a brief outline of these 5 elements. [read the original post]

Development refers to the identification of opportunities for social or economic development that will serve as the basis for the design. Design refers to the creation of a product or service in response to the opportunity for development. Distribution refers to need for ability to make a product or service readily available for customers. Demand refers to the development of an appropriate value proposition that can communicate the benefits of your product or service. Lastly, Dignity refers to the need to create products and services that respect economic, social and cultural needs and with an intent to create a positive impact.

1 comment:

Anupam Varghese said...

Hi Julio,

Would just like to mention that Eko uses USSD and not SMS. USSD enables a transaction to be just 'dialed' (as if it were just a longish phone number) - even the process of composing an SMS is inherently complex - which is exactly what Eko has avoided. Thanks.

Regards,
Anupam