In today’s fast-evolving technological and sociological environment, one of the challenges that companies should address in the very near-term is the leapfrogging behavior of emerging economies. It may affect not only the product and services offering on a Worldwide scale (meaning in both mature and emerging markets), but also corporations’ organization and the daily working environment.
What is leapfrogging? Well, everybody did it one day or another, it corresponds to a community (consumers, collaborators, suppliers…) that bypasses a generation of technology or behavior and jumps directly to the next generation. Emerging economies in Africa, Asia, Middle-East and South America show strong examples of leapfrogging moves: for instance some of their telecommunication consumers never used fixed broadband Internet; they directly jumped into the mobile phone voice & data technology. Another example is that, in countries such as Morocco or China there is, in a same industrial district, a decreasing number of polluting old factories next to an increasing number of amazingly state-of-the-art environmental-friendly Greenfields… Meanwhile, mature economies struggle to convert their historical facilities, with their background of unfit assets and processes, into “green” standards. But why is it important to take leapfrogging moves into any strategic and management assessment?
The mass of consumers in “leapfrogging” economies will sooner or later impose their model at a global scale
Today leapfrogging is mainly an emerging countries’ trend. Due to the significant size of their population, these countries represent such a huge business potential for brands that their leapfrogging profile could become the business model to follow for the first-generation companies of mature countries. This is reinforced by the fact that corporations from Asia, Middle-East and South-America more and more invest abroad (Africa, Europe…). Until now this new generation of shareholders have not really changed the management model of Western companies, but it seems logical that the more powerful and successful these companies will be in their international expansion, the more they will be considered as a Worldwide benchmark for management and business efficiency, therefore progressively imposing their approach as the new standard.
And in most cases the way they approach management, marketing, sales processes, recruitment, careers… is already far advanced into the next-generation world:
– they do not “discover” social networks as a money provider, they “use” it as a money provider,
– they do not “assess” the advantages of mobile data, they already “use” it at a large scale, and so on…
While consuming behavior trends and related innovations used to stem from “the American model”, they may shortly be inspired by a “BRICS model”
On a historical basis, the evolution of consuming behaviors and the adoption of product innovations in one country have always followed the influence of demographic powers, migration flows and travel routes: antique Asian migrations to Etruria imported pasta to Italy, antique Romans wore trendy and comfortable Egyptian sandals, and more recently European markets have been used to adopting innovations stemming from the American brother.
Now just consider today’s World map: the huge demographic power is in Asia, Africa and Middle-East, travel flows between Western economies and Asia – be it for tourism or business – have dramatically increased in both ways during the two last decades, and it is no more extraterrestrial for a young Western traveler to do shopping in Shanghai or Seoul and make his friends admire the trendy products he just found there. In addition to these drivers, there are now more graduates and PhD in India or China than in many Western countries, which means more and more scientists, strategists, marketers and innovators at the heart of economically highly dynamic regions.
In fact, we have already and unconsciously adopted consuming trends and business models from Asia: micro-payment, for instance, was the main innovating business model pushed by Japanese video games; and Asian social networks such as Korean Cyworld adopted this pricing model well before Western Zynga games or Apple’s iPhone apps did it.
The leapfrogging business model is entirely built on a second-generation basis:
The fact that the next generation of ideas, innovations and business models may stem from developing countries changes a lot our strategic paradigm because:
− these consumers, managers and employees are usually leapfroggers, which means they don’t “adapt to” the new product or model from an old one, they immediately play in the second-generation model;
− their proportion of unbanked population is higher than in Western economies, however these unbanked consumers are a significant potential of consuming expenses – leading to the development of new business models, as for example new micro-payments systems;
− their managers’ relationship to risk factor is opposite to the one of mature economies: on a strategic market that they target, they DO take risks, while in companies of mature economies we would spend weeks assessing dozens of alternative scenarios…
The whole business model of leapfroggers is, from the beginning, entirely “second-generation thought”: brands “think” mobile data, they “think” near-field communications, they “think” second-generation, and the entire business model (marketing offering, pricing structure, processes, HR…) is built around the second-generation product.
On the opposite, mature economies who built their business at the time of first-generation products think in terms of “adaptation” to the second-generation step. As a consequence, they lose time and money at the first stage of business development, as they approach the second-generation market with the same paradigm and analytical tools as the first-generation one.
Take as an example brands’ marketing for mobile applications: a few years ago, while the mobile marketing strategy of FMCG brands in Korea, Japan and China was already 100% fit to a mobile environment and behavior, regardless of what they had already done for their fixed website, at the same time European brands were just trying to adapt the design and functionalities of their fixed website to a mobile app, a wrong strategy that failed. Fortunately they thereafter changed their approach, aware that using a mobile app had nothing to do with browsing on a fixed PC, but such a loss of time and money in strategy and marketing could have been avoided if those companies had observed leapfroggers and adopted a development process based on “think second-generation”.
This is only an example, but it shows to what extent our strategic paradigm becomes more complex: we have to take into account not only the consuming and behavioral aspects of the leapfrogging factor, but also the new models and ways of thinking that leapfroggers show to us. Similar to a Blue Ocean strategy, it is a deep transformation of the way we have to think business and management.