Finding a new route will demand action at different levels—from both market players and government regulators. Players will need to be bold in their vision and investments. Regulators will need to be tolerant of experiments, reviewing and rescinding policies and rules that impede the exploration of this new “nation.”
The success of microfinance and self-help models has shown that with the right structures and incentives, a next billion community as a group poses a much lower risk than its individual members. In its strength, however, also lies its weakness. As noted above, the next billion market, depending as it does on a maze of informal arrangements, often appears to be unscalable.
But commercial enterprises can build enormous scale and cost efficiencies, provided they are bold in their aspirations. Those that have successfully made inroads into the next billion have dreamed big and have built what at first glance seemed like audaciously outsize delivery platforms.
In India, a late-entrant mobile operator set itself the goal of pricing a mobile call on a par with a postcard—until then the cheapest means of communication across the country. The operator launched its service simultaneously in several thousand cities and towns, in sharp contrast to its predecessors. As a result, it was able to sign up more than 5 million subscribers in just a few months, catapulting itself to the top league of mobile operators in the country.
To break the compromise between intimacy and scale, innovators are experimenting with a host of self-service models in which target customers participate in the “production” process. Microfinance institutions, for example, operate through local groups that provide valuable information for credit assessment of customers and also serve as the primary collection agencies for loan installments.
Companies are also breaking the compromise between intimacy and scale by allying with unfamiliar partners (postal services, public distribution systems, and networks of direct-selling insurance agents, among others) to leverage preexisting high-reach distribution and service networks. Recently, another mobile operator in India turned to the dabbawallas as a channel for distributing its SIM cards and prepaid vouchers. A 125-yearold trade group in Mumbai, the dabbawallas comprise a network of 5,000 largely uneducated men who deliver, with Six Sigma accuracy, more than 200,000 homemade lunches each day from suburban kitchens to downtown offices. Other companies have followed suit and are using the dabbawallas to distribute everything from bank account applications to promotional materials for software.
Government policy and regulation have a far-reaching impact on this segment and will also need to change. Rather than condemn the next billion consumers to rely on government action or social agencies for products and services, regulators must see them as commercially viable. In line with this view, the regulators’ primary role should be to make sure that the segment is served—not to prescribe how, at what price, or with what products. Market players, recognizing the cue, should take it from there.
Vasco da Gama’s successful voyage paved the way for others to follow, setting up a centuries-long era of leadership in trade and commerce. The next billion present a similar opportunity to companies with an appetite for adventure and innovation. The reward could well be a decades-long advantage in the world’s tenthlargest economy.