Doing business with the world's emerging markets requires radical innovations in technology, business models and design methodologies, says Apala Lahiri Chavan, managing director of Human Factors International India.

Despite identifying the wealth of opportunities presented by emerging markets, many global companies have struggled to tap into these.

This is due to a failure on their part to recognise that the same mind-set that made them so successful in developed markets is not necessarily transferable to a relatively unknown domain.

Companies wishing to penetrate emerging markets need to re-evaluate their products and services, throw off their inhibitions and be more flexible in the way they do business.

Whilst countries such as India, China and Brazil have gained a worldwide reputation for providing low-cost manufacturing and customer support services, they are now also considered by global companies as new routes to market for goods and services. One of the main drivers for this is the need to overcome the competition and saturation in the developed markets.

Two major factors provide an opportunity for growth in this sphere. The first is the size of the market. A research project carried out in 2002 revealed that India and China together had a total of 457 million households. Taking into account both urban and rural consumers, India alone has 100 million households.

Secondly, although India's urban population is only 24 million, the purchasing power of this group is relatively very high. Moreover, the behaviour of this group of consumers is, by Western standards, unusually youthful, demanding, open-minded and adventurous.

To penetrate this vast market, companies must reduce prices or unpack the high priced consumer technology products to smaller, 'value for money' solutions that the majority of consumers can afford.

The advantage of the open-mindedness of this target group implies that consumers are open to switching from established brands and accepting new ones. This will provide the impetus for companies to rethink they way they develop and deliver their offering and help drive continuous product innovation.

However, it is not simply a matter of adopting and localising products originally made for developed markets. Products and services created for the American or European market often will not work in emerging markets because they are not relevant to the way people in those countries live or think.

The basic product concept may be impractical or need to be completely redesigned. This need for redesign or for product ideation based on available technology must reflect the fundamentally different characteristics of consumers in emerging markets.

A growing number of companies now acknowledge that taking a radically different approach is the only choice in these markets as the consumers and the context in which they will use the product are completely different from developed markets.

The process of responding to these consumers' needs and expectations is undoubtedly cost and resource intensive. However, companies like Hindustan Lever, the Indian subsidiary of Unilever, are countering this by concentrating initially on low-income sectors and utilising the local talent pool to target a much wider base.

This is in recognition of the fact that designing for emerging markets often involves designing for the bottom of the socio-economic pyramid, a group that tends to be the most different. This attention by global companies to the bottom tier of the pyramid is helping to propel the aspirations of this tier to the next pyramid level, as well as creating a new pyramid tier that did not previously exist.

Apart from increasing market share, there is another significant benefit for companies designing for emerging markets in that is helps to make their organisations more receptive to change and constant reorientation. Such flexibility is crucial to embracing a new perspective to create value for both the organisation and its new customers.

This is achievable through an in-depth creative exercise of problem-solving, empathetic analysis of observations and interpretation of reality and common sense, which we term the contextual approach to innovation. This methodology allows for an analytical description of reality and presents opportunities irrespective of the discipline or problem being addressed.

Companies usually have a vision of a particular application, including prototypes and visualisations, which are rarely practical for emerging markets. It makes sense, therefore, to screen the ideas based on local knowledge and systematic modelling.

This will show why an idea will not work - it may be too delicate for the rigors of the emerging market environment, counter to the culture or require prerequisites such as a particular skill-set or access to credit card facilities.

If an organisation's objective or technology seems promising, the next step is to define the core capabilities offered. This is called 'The Lahiri List', which sets out the product's primitive capabilities, as well as any fundamental requirements.

These form the basis of brainstorming sessions, which include people who are conversant with the target market, to generate ideas and develop a set of promising market domains and product spaces.

User research is an important element of the contextual innovation methodology and is conducted through interviews, observation and culture probes. Whilst interviews and observation are mainstream skills of usability engineers, these methods do need to be tuned to different cultures.

Pioneered by Bill Gaver, culture probes are specialised methods to gain insights into the way that people think and live. The data gathering phase also incorporates what is called 'feed-forward', where researchers suggest design concepts and discuss them during the interview process.

The user research supports two key types of insights into the domain being studied. A performance analysis identifies any choke points. These are tasks that are difficult and physical needs that are not fulfilled.

The second type of insight is the psychodynamic pressure points, which are based on the target market's emotional needs. The results from the user research are used for further brainstorming sessions focusing on applications that meet the end-users' needs and expectations.

Promising ideas are best approached using parallel design, where several designers are given an idea and asked to provide a conceptual sketch of how it would work. As this process can throw up several different models, each is assessed in terms of feasibility and likely ROI.

This includes estimated development, manufacturing and marketing costs, as well as likely take-up and a realistic pricing structure. Application of this business analysis ensures that only practical and economically viable concepts are recommended.

User-centred design has traditionally focused on concepts developed by strategic marketing groups or specialists in product ideation. To meet the challenges posed by emerging markets and maximise their potential, companies need to embrace a radical new approach to design concepts and gain greater insight into the market environment.

This requires not only a willingness to modify existing methods and techniques, but also to ensure that their staff understand the local language, mindset, social conventions and existing limitations.

About the author

Apala Lahiri Chavan is managing director of Human Factors International India and a world-renowned expert in contextual innovation and cross-cultural design.