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Unlocking

new marketsVia sustainable innovation and design break-through

A ew questions or investigation. By Simona Rocchi



Unlocking new markets

“For a company to be successul in emerging markets, it takes a lot

more than just making minor modications to existing products”

“Emerging markets are becoming the catalysts or new products andservice innovation. But tapping the talent and growth potential o

these rising economies will require manuacturers to shed many

o their assumptions about customer needs, product design and

innovation strategies that they have relied upon in the developed

economies. Companies will need to look beyond traditional

strategies in order to meet the needs o markets with signicantly

lower per capita GDP, while still leveraging the eciency and

expertise provided by their global networks”G. Coleman, Global Managing Director, Deloitte, 2006

About Philips Design

Philips Design is a global community o

proessionals, ocused on delivering competitive

value to its clients through design. It strives or

innovation in both its design services and in the

solutions it oers.

At its core is a multidisciplinary team o researchers and designers which, over the past

ten years, has been addressing how design can

best serve people’s current and uture value and

needs. It continuously develops and experiments

with the latest methods in design research.

Abstract

This paper addresses some thoughts on

business innovation and design challenges

related to growth and sustainable development

in emerging and developing markets. In the

ramework o the current debate among

academies, public entities, multinationals andnon-governmental organizations, it does not

pretend to provide an exhaustive explanation

on theories and practices in this complex eld.

Rather, it aims to provide some background

inormation to contextualize a ew design

research questions: questions that have to be

addressed in order to understand how design

and design instruments can support businesses

- as well as governments and various other

types o organization - in creating sustainable

solutions in promising new markets.



Unlocking new markets

1 Developing markets are also known as ‘Bottom o the Pyramid’ or ‘Base o the Pyramid’ (BOP) markets.

Most companies target end-users in developed

markets. This is a group o approximately 500 million

people living at the top o the economic pyramid, with

an average purchasing power o more than USD 10,000

per year. However, according to Stuart Hart, Proessor

o Management at Cornell University, these companies

underestimate the business potential at the base o the

economic pyramid, where many unsatised needs make

up a market covering the vast majority o the remaining

world’s population (Hart, 00). In this context, theollowing distinction can be made between:

• Developing markets1, representing the 4 billion people

with an average purchasing power o less USD 1,500

per year;

• Emerging markets, which include 1.5 billion people

relying on purchasing power o USD 1,500-10,000

per year.

Such a growth opportunity is theoretically present in all

regions o the world, rom Europe and the United States

to Latin America and Asia Pacic. Indeed, gaps between

satised and unsatised needs do not necessarily refect

geographical distinctions, since economic disparity,

dierent level o market maturity and variations in

lie expectancy are ound in varying degrees both in

developed and less developed societies. However, in this

paper, the ocus is mainly on the BRICA countries: Brazil,

Russia, India, China and some Asian nations like Indonesiaand Vietnam. These are places where opportunities or

sustainable growth and innovation seem more appealing

in the short-medium term period, based on their Gross

Domestic Product (GDP), and assuming that in the next

ve years their annual increase in dollar spending could

be greater than that o the top 6 economies in the world

(G6), and more than double its current level (Royal Philips

Electronics, 006).

Introduction: setting the border o investigation

4,000

population in millionspurchasing powerparity per year

1,500

500

< $1,500

$1,500 -$10,000

> $10,000

Advancedmarkets

Emergingmarkets

Developingmarkets

Fig. 1. The global economic pyramid. A representation o the global market based on

three main average levels o purchasing power. (Source: Adaptation o a model presented

by Stuart Hart, Proessor o Management at Cornell University, during the second World

Summit or Sustainable Development, Lekgotla - Business Day, Johannesburg, 2002)



Unlocking new markets4

Today, companies with long-term economic ambitionshave to continue being competitive in the saturated

markets o developed societies, but also have to learn

how to fourish in emerging and developing markets

that represent the major growth opportunity or the

coming years. In order to build upon this opportunity, the

learning process has to start now: understanding unlocking

mechanisms and appropriate business and design practices

in these unknown territories will require considerable

eort beore a clear and eective growth strategy can be

dened. The challenge is the creation o accessible and

aordable solutions able to t local economic conditionsand socio-cultural preerences, without expanding the

current use o environmental resources. This challenge

oers companies the chance to improve their current

product portolio, and even to create completely new

value propositions by combining technological, social

and business innovation.

A ew drivers underpinning companies’ interests in emergingand developing markets have been identied by the World

Business Council or Sustainable Development (WBCSD), in

one i its rst publication on sustainable livelihoods business

project (WBCSD, 004). The main drivers reported in the

publication can be summarized as ollows:

Opportunity or growth and brand reputation

Potential or new revenue stream generation is certainly

the most appealing reason to deal with emerging and

developing markets. However, this opportunity oers

also the chance to increase a company’s brand reputationin the current markets, while establishing and urther

developing brand equity in other countries.

Framework conditions in many less developed countries

are improving

The BRICA countries in particular are strengthening their

governance, legal structures, and investment inrastructure.

Even i progress is not yet uniorm, there are signs o

improvements in many countries: over the 10 years rom

199 to 00, the average risk score in low- and middle-

income countries improved by 8%. This progress expandsthe context in which business can protably operate.

Communications are becoming aster and cheaper

Lower costs o Inormation Communication Technology

(ICT) and transportation enable more geographically-

distributed production. This allows companies to benet

rom lower labor and material costs, and encourages them

to relocate or intensiy part o their activities in

the BRICA countries.

Importance o the themeand encouraging drivers

2According to CK Prahalad, Proessor o Business Administration at the University o Michigan Business School, opportunities o engaging ‘underserved’ people

through innovative solutions already exist. He points out that the majority o people on very low incomes are currently relegated to high-cost economic

systems, where outlays are vastly higher than in the developed markets o the world (poverty penalty): or instance, the cost o credits are oten 50 times

higher, the price o water 37 times higher and health services 10 times higher than equivalent services in the USA (Prahalad, 2005).3There are signicant dierences between the BRIC A countries. GDP per head gives an indication o the dierences: Brazil $8.7k; Russia $10.7k; India $3.4k;

China $6.2k; Indonesia $3.5k, Vietnam $3.0k (Royal Philips Electronics, 2006).



Unlocking new markets 5

“Emerging markets are the place where virtually everything that you

need or a company to grow is happening”G. Kleisterlee, Philips CEO, 2006

“We believe continuous innovation is key to unlocking this potential…

To support our vision we are reinventing our business rom top to

bottom and in the process transorming our industry too”

G. Kleisterlee, Philips CEO, 2006

New and more competent partners are locally availableToday, many local suppliers and various stakeholders

oer richer knowledge and know-how, driven by

their need to become more sel-sustaining, ecient

and eective. Furthermore, many o them start to

acknowledge that multinationals can help local players

ulll missions and scale-up promising opportunities

or socio-economic development

Aid and investments are beginning to create ertile

market territories

A oreign direct investment (FDI) fow to less developedcountries increased rom $7 billion in 1990 to almost

$40 billion in 000. This increase, together with the

prousion o micro-credit services, has contributed to

debt relie, and is recognized as an engine or wealth

creation and local economic development.

Public expectations and stakeholder pressure towards

corporate responsibility.

Civil society increasingly expects companies to operate

in an ethical way, both in developed and less developed

markets. Business aces a growing pressure rom societyand various stakeholders to support equitable socio-

economic development worldwide, in line with the

Millennium Development Goals (MDGs)4. Business

solutions targeting ‘underserved’ people are increasingly

considered part o corporate social duties and their

licenses to operate.

In this business landscape, Philips has started toconsistently address the challenge o generating

sustainability-driven business initiatives in new promising

markets around the world since 00. At that time, with

the ‘New Sustainable Business Initiative’, the Board o

Management launched an invitation to all the ve Philips

Product Divisions (Consumer Electronics, Domestic

Appliances, Medical Systems, Lighting and Semiconductors)

to encourage innovative business practices that oster new

business models and the creation o appropriate solutions

or ‘unmet’ people’s needs (Royal Philips Electronics, 00).

Such practices were not intended as philanthropic actions.They were considered as true entrepreneurial activities

aimed at creating both economic and social/environmental

returns on investment, possibly with a dierent payback

time on each dimension. Today, this invitation has

become stronger in the light o the company’s ambition

to grow drastically: an ambition not reachable without

also considering emerging and developing markets. In

this respect, the Board o Management has increased its

commitment on growth in the BRICA countries during

the Philips Summit meeting held in New Delhi, in

March 006.

4 In September 2000, all 191 United Nations Member s States pledged to meet eight socio-economic and environmental goals by the year s 2015. The goals,

stated in the Millennium Declaration, include: 1. Eradicate extreme poverty and hunger; 2. Achieve universal primary education; 3. Promote gender equality and

empower women; 4. Reduce child mor tality; 5. Improve maternal health; 6. Combat HIV/AIDS, malaria and other diseases; 7. Ensure environmental sustainability;

8. Develop a global partnership or development (http://www.un.org/millenniumgoals/ ).




At Philips, the implementation o this commitment is stillunder experimentation. Like other multinationals, Philips

has recognized that ‘walking the talk’ requires business

innovation. However, the kind o business innovation

necessary in emerging and developing markets is dierent

to that normally adopted in developed markets (Hart,

005). Purpose and practices tend to be dierent.

In developed economies, many new product/service

development processes are geared towards immediately

maximizing the sale o these new oerings to increasingly

sophisticated customers with a certain degree o

purchasing power.

In emerging and developing economies, companies

oten aim to become operational in territories that

represent the markets o the coming decades. Their goal

is to develop business propositions that can gradually

create market penetration and solid medium-/long-term

revenue generation. This oten requires supporting local

socio-economic improvements in two ways: by enabling

sel-development and local communities’ empowerment;

and creating business propositions that can generate

return on investment not only gradually but also onsocial/environmental level. With this in mind, companies

ace the need to develop new business practices

capable o establishing a mutual value creation process

between themselves and local stakeholders that have a

deep understanding o the contexts, the issues and the

opportunities related to the targeted areas (Simanis,

Hart, Enk, et al., 005).

More specically, according to some ndings o the World

Business Council or Sustainable Development (WBCSD)

in its rst publication on ‘Sustainable Livelihoods’ businessproject, three basic blocks characterize the innovation

process o successul business models in new promising

markets: ocus; partner and localize (WBCSD, 004).

FOCUS on core competenciesCompanies that concentrate on their key strengths are

more likely to tackle an issue eectively and create a viable

business. Keeping the ocus helps guarantee consistency

between the company core business and sustainable

livelihood: it will be easier to scale-up pilot projects and

move successul initiatives into the mainstream. It is

advisable to involve R&D, and rethink existing products

lines and services to suit the specic requirements o

lower market segments.

PARTNER across sectorsBy involving global and local businesses, governments

and development organizations that share similar goals,

companies can benet rom additional resources, on-

the-ground expertise and links with potential customers.

Thinking across sectors might lead to innovative

partnerships involving companies rom dierent industries

and thereore dierent / complementary skills, addressing

many dierent needs simultaneously. It is advisable to

involve partners with a considerable understanding o

the local market (and who might enjoy local political

or community support) and involve them early in theprocess in order to use their input when shaping and

contextualizing the oer. It is also important to dene

expectations and align objectives in order to increase

co-operation and share eventual risks.

LOCALIZE the value creation

Companies operating in emerging and developing

markets oten lack the usual inrastructure / support

systems available in more developed societies. In many

cases there is also a lack o knowledge on people’s

needs, preerences and aspiration values; companiescan miss or instance manuacturing capabilities or

distribution channels; market intelligence and consumer

insight inormation (understanding o the socio-cultural

context). They thereore need to connect into local

networks, which include the targeted communities, to tap

into capabilities and human resources. It is advisable to

maximize the involvement o local groups by considering

how local entrepreneurs and SMEs can best contribute to

value creation. Time and energy should also be devoted to

development the capacity o local partners, in order

to create a solid socio-economic basis or uturemarket growth.

New ways o doing businessor new markets




These three major building blocks have been urther

articulated thanks some lessons gained during thematuring o practical business experiences under

development (WBCSD, 005; WBCSD, 006; WRI, 004).

A ew characteristics o new business practices start to

emerge and to take shape.

Co-creation o value

In particular, developing/BOP markets practices - due

to the complexity o the socio-economic systems o

intervention - imply a collaborative eort between

global and local players. These include public or private

ventures, agreements with either or-prot or non-or-prot organizations (or instance local consultancy

groups, Non-Governmental Organizations, universities)

and local community involvement. Indeed, it is possible

to provide new economically aordable, eective and

sustainable solutions on a broad scale simply by combining

global nancial resources and know-how with local

competencies on specic issues and opportunities.

‘System thinking’ versus ‘product thinking’

I the needs o people in emerging and developing

economies are to be met, it is not always sucient tothink in terms o single (stand-alone) products and their

unctionality. Total solutions - a fexible mix o tangible and

intangible aspects - need to be envisioned to overcome

the lack / weakness o inrastructure, appropriate

distribution channels and maintenance services.

This implies the creation o a consortium o partners,

all dedicated to solving problems by designing anddeveloping fexible solutions, which can potentially grow

over time through the addition o technologies, content

and services.

Incubation and piloting phase

In exploring ways to realize solutions or emerging and

developing markets, companies have discovered the

importance o allocating initial ‘seed’ money to start pilot

projects (using internal capital and oten external unding)

as well as o creating a motivated and multidisciplinary

team (comprised o internal resources complemented byexternal capabilities) to take care o all necessary activities

beore the initiative is ramped up.

People, planet, prot approach

Practices or emerging and developing markets need

to consider not only economic objectives but also socio-

cultural and environmental aspects. Due to the dimension

o the potential market demand in less developed regions

o the world, and the consequent strain this places on

natural resources, there is no alternative. New practices

need to adopt a triple value approach by promotingeconomic prosperity while respecting the natural

environment and the local socio-culture values. Social

and environmental criteria thereore have to be

introduced early in the new business creation process

and related design strategies.

l ll

FOCUSon your core

competencies when

adapting your business model

LOCALIZEthe value creation

by harnessing local

intelligence and capabilities

PARTNERwith external resources

that offer complementary

expertise

Fig. 2. The three building blocks o successul ‘Sustainable Livelihoods’ business

(Source: Doing business with the poor - a eld guide , WBCSD, 2004)

“Emerging and developing markets oer business opportunities

or growth, value creation and or the development horizon

o the world’s poor by providing culturally-appropriate andecologically-eective goods and services”

S. Hart, Professor of Management at Cornell University, 2002




Benets plan versus business planAs an implication o long-term nancial expectations

and social and/or environmental return on investments,

initiatives or emerging and developing markets require

the elaboration o ‘benets plans’ that contain inormation

on business development, as well as potential social

benets and environmental advantages. This involves

introducing social and environmental matrices that include

the appropriate indicators or monitoring and measuring

the sustainability o the initiatives over time.

Beyond traditional market segmentationsAs developing/BOP markets especially relate to particular

kinds o users - such as amilies, communities or even

entire villages - conventional consumer investigation

techniques, normally targeting single individuals,

require additional investigation methods. Observations,

ethnographic research and ocus groups have proven to

be key practices in this area, not only to obtain valuable

inormation or new idea creation (understanding o

people’s needs, socio-cultural habits and inrastructural

conditions), but also to establish trust with the identied

potential customers and ensure their urther involvementin the co-creation o the solution.

Use o non-conventional entrepreneurial orcesBusiness practices or emerging and developing markets

oten rely on ‘non-conventional’ players to establish the

value network that has to be put in place to promote

a new oer. Indeed, especially in rural areas, the lack

o inrastructure, distribution and marketing channels

has stimulated the creation o resh entrepreneurial

local orces, including community leaders and Sel Help

Groups (SHGs)5, who are undamentally important in

implementing the business models.

Alternative payment mechanismsIn many cases, solutions or emerging and developing

markets have to leverage on micro-credits schemes,

‘sharing access models’ and ‘pay-per-use’ mechanisms

to be economically viable. In particular, pre-paid systems

are crucial in acilitating access to services or users in

developing/BOP markets. Indeed, by the adoption o

pre-paid cards, customers do not need to present

a ormal address, which is normally required in any

service contract.

5 The Sel Help Groups (SHGs) operating in emerging and developing markets are orms o micronance activated by their members (mainly women).

These groups collect savings rom their members and provide loans to them. However, unlike most accumulating savings and credit associations (ASCAs)

ound in several countries, these groups also obtain loans rom banks and re-lend them to their members. In India or instance, by 2003, over 700,000

groups had obtained over US$425 million in loans rom banks, beneting more than 10 million people. The level o savings in these groups is estimated

to be at least US$170 million (http://ideas.repec.org/p/wbk/wbrwps/3516.html).




Business experiences targeting emerging and developingmarkets are increasingly taking place around the world.

These experiences, some o which are successul and

some which aren’t, propose context-specic solutions

that either make use o current available technologies in

new ways, or introduce new technologies by leaprogging

the most appropriate innovation.

Such solutions come rom dierent sectors. A ew

pioneering ones include access to energy (Eskom-Shell

‘Rural Electrication’ program in South Arica, in 1991);

clothes (Arvind Mills ‘Ru & Tu’ jeans in India, in 199);telecommunication (Vodacom ‘Community Phone Service

Program’ in South Arica, since 1994, and Grameen

Telcom with ‘Grameen village phones’ in India, since

001); clean water (WaterHealth International and

‘Ultra-violet Waterworks’ solutions in India, since 1996)

and ood (Unilever ‘Iodized salt’ in Ghana, since 000).

Other more recent solutions include also access to

electronics solutions (Cable Net and ‘TV cable interactive’

in Colombia, in 00); nancial services or ood and

agribusiness (Rabobank ‘Promoting armers’ co-operatives’

in Indonesia, since 00) and low-cost houses (Holcim‘House-or-Lie’ initiative in Sri Lanka, since 005).

The business cases described below are running in

the BRICA countries, particularly in India, in energy,

electronics and medical systems sectors. They touch

upon the main eatures o the business model used and

o the promoted solutions, in terms o their product and

service components.

Selco Solar ServicesThe Solar Electric Light Company (SELCO)6 brings

electric power to amilies, armers, institutions, and

local small businesses in India, Sri Lanka and Vietnam.

Specializing in wireless solar electric power systems and

related services (e.g. installation, maintenance training),

SELCO has installed over 4,000 solar home systems

(SHS) on a purely commercial basis, reaching rural

and semi-urban customers with an average income o

approximately $4 a day. Driving its business philosophy

is the idea that poor amilies in less developed economies

are willing to purchase SHSs (as long as they are reliableand aordable) via installment credits.

Providing credit nance to such customers is the

company’s biggest achievement. Usually, a amily pays

at least $75 as a down payment plus $10 to $15 a month

or or years beore owning the system (the bank

retains ownership until the loan expires). To provide

credit nance, SELCO works with numerous rural

banking networks, agricultural societies and micro-credit

institutions7. In India, or example, 45 rural banks provide

consumer credit to SELCO customers. In Sri Lanka, thelargest nance company oers loans or SHSs exclusively

to SELCO customers. In addition, the World Bank and

other nancial institutions have instituted consumer

nance mechanisms or the purchase o SHSs by o-grid

rural households, mechanisms that SELCO also utilizes

on behal o its customers.

The company oer includes various packages o small SHSs:

• SHS with lights and 0Wp module (very ew);

• SHS with 4 lights and 5Wp module (very popular

and aordable);• SHS with 6 lights and 50Wp module and with 5 lights

and 65Wp, sucient power to operate a DC color TV

(popular in Vietnam).

A ew business experiences:co-creation o sustainable value

6SELCO is the world’s r st solar ser vice company, with 385 employees, two international oces located in Bangalore,

India, and San Francisco, Caliornia, and a solid rural power delivery inrastructure spread over three dierent regions.7Recovery rates in such situations are over 99% and deaults are rare.




SELCO builds most o its electronic components- which range rom charge controllers to lamp xtures

and compact fuorescent lights - locally. Major PV

manuacturers provide the modules and several careully

selected manuacturers supply deep-cycle batteries. Its

core business is in the value o the service oered. Via the

use o micro credits, and the provision o installation and

maintenance services carried out by appropriately trained

local people, SELCO has been able to enter the emerging

market o o-grid rural and semi-urban households.

Today, the company has 5 branches (Solar ServicesCenters) operated by its three subsidiaries: SELCO-India,

SELCO-Sri Lanka and SELCO-Vietnam. Considering there

is an untapped worldwide household power market o

over 400 million amilies, it is actively looking at new plans

to ranchise its delivery system and business model, in

association with local partners in various countries.

“Our Solar Home Systems carry the SELCO brand, which has come to mean

quality, reliability and service. Without service, you don’t have a business.

When we launched SELCO, we decided that customer service would be

our main product, not technology. The technology was there but not theservice in rural areas”

N. Williams, former CEO, SELCO, 2003

Fig. 3. Delivery o a solar home system to a rural amily in India.

SELCO branch oce. (Sources: Solar Today magazine, March/

April 2003; Selco Brochure 2004)




The HP ‘Mobile Photo Studio’The ‘Mobile Photo Studio’ is part o a broad spectrum o

solutions and services developed at the Kuppam Hewlett

Packard i-community centre8, a community portal located

in a rural province north o Bangalore, India. It makes

a need or ID photos, necessary or a variety o

government orms and applications (e.g. to gain access

to healthcare services), by providing village entrepreneurs

with a portable photography tool kit. This is appropriate

because very ew o the region’s 00,000 inhabitants

can aord a camera. Films and quality batteries are hard

to nd, and printing necessitates a time-consuming andexpensive trip to the nearest city.

With the ‘Mobile Photo Studio’, HP has created a digital

camera and printer, capable o producing quality digital

photographs. It has a solar-powered rechargeable battery,

and comes zipped up in a tough yet lightweight (7 kg)

backpack. This solution has enabled local entrepreneurs to

create a new business; delivering photos to people rather

than people to a photographer. With a pricing scheme that

allows dozens o local women to rent the equipment or

$9 a month, the ‘Mobile Photo Studio’ provides immediateincome or rural amilies. Since it is simple to operate and

portable, the women can take their business to some o

the region’s least accessible communities, and villagers can

buy high-quality ID photos or a raction o the cost o

traveling to a photographer in the city.

In the rural district o Kuppam, the ‘Mobile Photo Studio’

is oten used or much more than ID photos. Residents

are lining up or amily portraits, and ‘village photographer’

services are in demand or wedding ceremonies, religious

celebrations, news stories, and even insurance claims.Meanwhile, the skill and prestige o the women in the

village photographer program is growing daily. HP is

currently working with local entrepreneurs to explore

business and revenue models that would maximize return

on investments while adhering to community economic

constraints. Able to purchase consumables at the market

rate rom HP, many o the entrepreneurs have reported

doubling their monthly amily income. The ‘Mobile Photo

Studio’, is considered to be a ‘win-win’ situation, where

both a multinational company and local entrepreneurial

orces benet.

Village Photographer program economics:

• Price o the complete kit: $500

• Kit rental: $9/month

• Price o a 4” x 6” photograph $0.70

• Price o an ID photo: $0.0

• Gross margin earned by the photographer:

$0. per 4” x 6”

• Family monthly incomes o village photographers

doubled on average rom US$15 to US$0

• Currently 18 village photographers in Kuppam

(initially only )

Fig. 4. The HP ‘Mobile Photo Studio’. A tool kit or the

creation o high-resolution digital photography and printing

services by local entrepreneurs in the Kuppam region o India.

(Source: ‘Eradicating Poverty through Prot’, WRI conerence,

San Francisco 2004.)

8 In the Kuppam I-community, HP has established a platorm o web services and web-based applications to provide very

low-income citizens with access to critical government, healthcare, education and agriculture inormation services.




already halved. In addition, local women have traditionally

had poorer healthcare, with the amily breadwinner’s

health coming rst. Through its low-cost provision, DISHA

serves to help combat this inequity. Hospital consultants

are now also able to use their time more eciently, and

pressure on existing rural primary health centers has been

reduced (WBCSD, 005).

The rst pilot project was ocially launched in July 005,

targeting the Theni district (Tamil Nadhu). Within six

months a tele-clinical van perormed 500 diagnoses and

image transers in order to test the concept and ensure

viability by the end o the year. The intention now is to

scale up the (adjusted) pilot in other areas o the Theni

district rst, and to cover other districts in Southern India

in the course o 006, with six additional smaller tele-

clinical vans (without the X-ray equipment) and lower-

cost solutions to reach more inaccessible areas.

Fig. 5. DISHA van providing health care services during a visit to rural communities. (Source: Philips, DISHA pictures bank, 2005)




10Design innovation can be distinguished in ‘incremental’ and ‘radical’. When incremental it provides some improvements that ‘t in’ with existing users’

expectations, and which do not require behavioral changes. When radical it oers new solutions able to generate new patterns o production and consumption

(new ways o ullling a need through dierent activities or ways o interacting with products and services). This distinction also refects the dierent meaning

o ‘eco-design’ and design-or-sustainability’. Eco-design in its essence is the integration o environmental criteria into the product development process (Brezet,

1998). And, as such, it promotes incremental product improvements by the use o dierent environmental strategies that modiy physical assets to answer

conventional consumption patterns. Design-or-sustainability, on the other hand, considers both environmental and social criteria in the entire socio-economic

system o reerence. It aims to stimulate technological changes and social innovation by solutions that might recongure ways o living and doing business.

The creation o accessible, economically aordable andcontextualized solutions oten requires new business

models as well as innovative corresponding design

strategies. Indeed, design - as an intrinsic part

o the business value creation process - has to ace the

complexity o today’s markets directly. It has to question

‘what’ to shape, in terms o tangible and intangible

aspects o a solution, and ‘how’ to do that, in terms o

adequate approaches, tools and kind o competencies

involved. Design innovation processes that are looking

or competitive added-value propositions in mature and

saturated markets have already started to consider:

• going beyond traditional consumer segmentations

(such as income, gender, age or education), to generate

specic, qualitative user insights via the use o

appropriate techniques;

• adopting a ‘system thinking’ mindset rather than a

‘product thinking’ approach. Redening answers to user

needs and aspirations rom scratch, and creating rich

combinations o material components, services and

content.

These two milestones o design innovation are becoming

even more important when addressing emerging

and developing markets. On the one hand, a deep

understanding o the context o application - in terms o

issues like availability o inrastructure, distribution channels

and technologies in place - is required. In addition, sucient

knowledge on belie systems, social structure, cultural

values and liestyles is also necessary in order to create

successul solutions or these markets. This is valid both

when redesigning a global proposition to meet regional

market requirements, and when designing somethingcompletely new and dierent rom what already exists.

I the purchasing power o end-users is low, the oer hasto be right and must clearly communicate its added value.

Especially in developing markets, experience shows that

a ‘deep listening’ o the ‘voice’ o potential communities,

amilies and individuals to target is crucial when dening

the most appropriate oer (Simanis, Hart, Enk, et al., 005).

Even i people’s basic needs are more or less the same

everywhere in the world, their local maniestations and

ways o prioritization can vary depending on the context.

Besides leveraging valuable user insights, design increasingly

needs to shit rom a ‘linear and deterministic thinking’approach, which ocuses on the generation o continuous

incremental product improvements in the product

development process, to a ‘holistic view’, which aims

to generate product-service-systems able to support

innovative ways o production, distribution and usage10.

For a number o years, theories and practices on design

and ‘unctional and systems thinking’ have been promoted

by well-known design proessors such as J.C. Brezet (Brezet

et al., 001) and E. Manzini (Manzini, Collina, Evans, 004)

as a valuable potential path to provide competitive and

sustainable solutions.

Today, these theories and practices become essential in

promising markets where (stand-alone) products may not

be sucient on their own to guarantee market penetration.

The question here is: ‘Do we need to provide a product,

or the results/benets brought by such a product, to ulll

people’s needs, values and aspirations?’ The right oer

might require the identication o the most appropriate

combination o traditional and/or digital services, plus high-

tech and low-tech technologies. Product-service systems,

as an open and fexible platorm o tangible and intangiblecomponents that can grow their unctionalities over time,

seem to be a very appealing option or creating sustainable

solutions in emerging and developing markets.

Taking these issues into consideration, a ew design research

questions need to be posed or envisioning, designing and

realizing ast prototyping solutions in such markets.

Conclusions: changes in the design paradigm,looking or answers




How can designers generate insights into potential current

and uture target groups in their specifc local context?

At the moment, various design tools (such as personas and user proles in context-o-use) are available to capture

insights related to users’ needs, aspirations and behavior in developed societies. The issue here is to understand

i similar tools can be applied in emerging and developing markets. Are the available design tools able to deliver

sucient inormative and inspirational knowledge to the creative process? What kind o variations or additional

methods do these tools require to provide reliable inormation to designers?

As an answer, an overview o design tools under experimentation in this research eld should be provided, including

an evaluation o the various methods / techniques and their related advantages and disadvantages.

How can we co-design and co-produce appropriate solutions with

potential customers and local stakeholders, now and in the uture?

Potential target groups are easily identiable in developed economies, and can oten be consulted or brainstorming

on envisioning solutions to ulll their specic needs and aspirations. Unortunately, the same cannot be said or

emerging and developing markets. The issue here is to understand how we approach potential users - who especially

in developing markets may be illiterate - and how we get them involved in a creative conversation.

Where does the concept creation take place, in the eld or in a design studio? And how? Furthermore, how do we

engage with local stakeholders, willing to cooperate in a common value creation process ,without raising too many

expectations o a solution that could require some time beore it will be scaled up and commercially viable?

As an answer, various co-creation techniques specic or emerging and developing markets should be researched,

mapped and explained with the support o concrete examples.

What kinds o specifc typologies o design qualities do solutions

or emerging and developing markets require to be successul?

In developed economies, added-value solutions tend to be highly sophisticated in terms o unctions, perormance

output, use o digital technologies and/or new technologies made available in dierent sectors. Additionally, they

tend to be light in terms o materials used, and are oten quickly obsolete and dicult to repair. The issue here

is to balance global product/service requirements (e.g. health and saety regulations, mains voltage,) with local

requirements and customers’ expectations, and thereore to identiy which typologies o design qualities should be

considered upstream in the design process or these specic markets.

Should the solutions oer a mix and match o high-tech11 and low-tech components? Should product be easy to

repair and oer the possibility o sel-maintenance? Should they be more robust and longer lasting than those sold

in developed markets? Should they leverage the use o local materials? Even i the answers are dierent or specic

products/solutions, general common ndings should be research in this eld.

A list o typologies o design qualities recognizable in solutions or emerging and developing markets should be

outlined, supported by appropriate design recommendations.

How can we validate and measure personal satisaction and social/

environmental benefts generated by the introduction o new solutions?

In developed societies the testing o products/services to assess customer satisaction is carried out using

various proven techniques. The evaluation o the environmental impact and social consequences o a solution,

on the other hand, is carried out using less consolidated approaches. In the context o emerging and developing

markets, the assessment o a solution is particularly important in terms o monitoring socio-economic and also

environmental returns on investments. The issue here is to understand the social value-chain. How can we evaluate

the eectiveness o a new solution in terms o its direct and indirect consequences on individuals (personal needs

ulllment), as well as on communities’ quality o lie?

Methods and tools under experimentation should be researched and mapped, together with the identication o social/

socio-economic and environmental indicators used so ar.

11 In emerging and developing markets’ contexts, the leaprogging o eco-ecient technologies (such as white LED lighting technologies

and new solar power technological systems) seem to be promising due to the lack or limitations o existing inrastructures.




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The author is grateul to André Rotte or reviewing andcontributing to this paper.

Special thanks go also to Henk de Bruin, Philips Corporate

Sustainability Oce, or the work done together in the

eld o sustainability-driven business models in new

emerging markets, and or sharing his insights.

About the author

Simona Rocchi is Design Director at Philips Design,

Eindhoven, The Netherlands. At Philips Design, she is

responsible or the ‘Exploring Sustainability’ design

research theme, and she coordinates projects relatedto sustainable development and design-or-sustainability

activities. At Philips Corporate, she is part o the task

orce on ‘New Sustainable Business Initiative’.

Simona has both a Master o Science in Architecture

(Politecnico di Milano, Italy) and a Master o Science in

Environmental Management and Policy (International

Institute or Industrial Environmental Economics, Lund

University, Sweden). She has also a PhD in Cleaner

Production, Cleaner Products and Sustainability (Erasmus

University, The Netherlands).

She is the author o several publications on sustainability

and innovation design process. She gives lectures at

dierent European universities, and is a visiting proessor

at the Faculty o Business Administration at the Externado

University o Bogota, Colombia.

Acknowledgments

unlocking new markets pdesign srocchi 230606

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