The Prosperity Paradox

Market-creating innovations transform complicated and expensive products and services into simple and more affordable products, making them accessible to a whole new segment of people in a society whom we call "nonconsumers." Nonconsumption as opportunity.

Market-creating innovations transform complicated and expensive products and services into simple and more affordable products, making them accessible to a whole new segment of people in a society whom we call "nonconsumers." Nonconsumption as opportunity. In many developing countries, vast segments of the population are nonconsumers of products and services that are taken for granted in developed economies. This represents an enormous untapped market and opportunity for innovation. By creating new markets that serve nonconsumers, companies can: Generate sustainable economic growth and job creation Pull in necessary infrastructure and institutional development Catalyze a virtuous cycle of increasing prosperity Examples: Mo Ibrahim's Celtel bringing mobile communications to Africa Tolaram's Indomie noodles creating a new food market in Nigeria M-PESA mobile money platform in Kenya enabling financial inclusion

In the struggle lies opportunity. Reframe challenges as possibilities. When examining a market, look beyond conventional metrics to identify the daily struggles and workarounds people employ. These pain points signal unmet needs and opportunities to create new markets through innovation. Key principles for targeting nonconsumption: Focus on making products simpler, more affordable, and more accessible Develop new business models and value networks to serve nonconsumers Use an emergent strategy to learn and adapt to market needs Case study: MicroEnsure created a new market for microinsurance in developing countries by radically simplifying the product and sign-up process to meet the needs of nonconsumers.

Pull strategies ensure a ready market is waiting. This, we believe, is essential for long-term and sustainable prosperity. Market demand drives development. Traditional "push" strategies that attempt to impose solutions often fail to take root. Instead, "pull" strategies that respond to market demand are more likely to create lasting change: Innovations create new markets that pull in supporting infrastructure and institutions Local entrepreneurs are best positioned to identify and meet market needs Pulled resources are more likely to be maintained as they serve a clear purpose Contrasting approaches: Push: Building toilets in India without addressing underlying market dynamics Pull: M-PESA mobile money creating demand that pulled in financial regulations and infrastructure

Institutions are not something that can be pushed in by virtue of good intentions, even with all the expertise in the world. Markets mold institutions. Contrary to conventional wisdom, effective institutions and infrastructure typically follow market-creating innovations rather than precede them. As new markets emerge: They create economic incentives to develop supporting institutions Infrastructure is pulled in to meet market needs Regulations evolve to govern new market realities Historical examples: US railroad development driven by market…