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Innovating for the next three billion - The four capabilities of innovation - EY - Global

Innovating for the next three billion

The four capabilities of innovation

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Most important enablers of innovation in rapid-growth markets

Which of the following capabilities are most important to enable innovation in rapid-growth markets?

EY - Most important enablers of innovation in rapid-growth markets

Location of innovation

Which of the following best describes where innovation generally takes place in your company?

EY - Location of innovation

Tailoring new product development to low-income customers in rapid-growth markets

Which of the following approaches do you currently take to developing products and services aimed at lower-income customers in rapid-growth markets?

EY - Tailoring new product development to low-income customers in rapid-growth markets


"The new consumer does not have to adjust to the market. If you want to sell, you have to adjust."Daniel Mendez, President of Sapore

Innovating for the next three billion will require companies to develop a set of key capabilities. Our research has identified four that are particularly important:

  1. Customer insight: The development of any successful innovation requires companies to get close to their customers and understand the problem that needs to be solved. But in the case of the next three billion, this process will be particularly important. Asked about the key enablers of innovation, respondents point to an understanding of local customers as the most critical factor.

     

    EY - Most important enablers of innovation in rapid-growth markets Most important enablers of innovation
    in rapid-growth markets
  2. People and culture: Simply taking products from the developed world and hoping that customers in rapid growth economies will buy them is unlikely to be effective. Instead, companies need to adopt a culture and mindset that are willing to tailor products to customers' needs.
  3. Research and development: Companies must strike a careful balance between local relevance and global scale. A global network of R&D centers enables companies to leverage global resources and reapply innovation across multiple markets. For example, at Xerox a polycentric approach to innovation means that the best aspects of local and global are combined. The company's researchers engage closely with local customers in a particular market, but collaborate with teams in other markets to see how innovations developed with one set of customers in mind can be reapplied elsewhere.

     

    EY - Location of innovation Location of
    innovation
  4. Operations and business model: Among our survey respondents, changes to the pricing structure or business model are the most widely used approach to develop products and services aimed at lower-income customers. More than half of companies say that they take this approach, while only 38% create entirely new products with lower income customers in mind.

     

    EY - Tailoring new product development to low-income customers in rapid-growth markets Tailoring new product development to low-income
    customers in rapid-growth markets

Companies must build these capabilities at both a local and a global level. In our innovations capabilities model, we look at these four key capabilities in detail and explain the interaction between the local and global layers.



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