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The Middle East Could Be a Cradle of Innovation

The Harvard Business Review

We in the West tend to think of innovation as the next, new, shiny, tech, globally-accepted thing. But in emerging growth markets, new access to even existing technologies (e.g., higher-speed broadband, mobile phones, smart devices), can lead to fresh and surprising thinking about local and regional problems, and one day these over-looked corners of the globe may produce world-class innovations as a result.

Consider mobile devices in Africa. Throughout the continent — and this is true throughout other emerging markets too — millions of people are glued to their cell phones. Since Africans were never tethered to landlines, innovation has been astounding. Kenya's M-Pesa, for example, allows customers to withdraw and deposit money via text message. The company is now one of the largest mobile cash-transaction companies in the world — roughly 20% of the country's GDP passes through it. The growth doesn't stop there. With hundreds of thousands of cell towers providing reception to the most rural corners of the world, mobile providers have been compelled to build their own power generators. As a result, they've spawned entire ecosystems of entrepreneurs who are using the excess electricity to power local towns and build community charging stations. And thanks to "social entrepreneurs," people with little voice are using mobile technology to report crime and corruption to authorities while holding the "powers that be" accountable — which was impossible even a few years ago.

Long before the Arab uprising in 2010 — and uninhibited by uncertainty and instability today — Middle East entrepreneurs have used innovation to overcome challenges and to find new opportunities for growth. As I have suggested in a recent post here on HBR, the Arab world alone represents a large and hungry consumer market. So it's no surprise that companies in the region are finding innovative ways to reach consumers. In the face of country-by-country regulatory complexity, Aramex, the region's largest logistics company, created Shop and Ship, which allows customers to order products from nearly any e-tailer in the U.S. and China and eventually the Middle East. It's a seamless process. Aramex receives the ordered goods at its facilities, takes care of all the bureaucratic headaches, and then delivers the goods right to the shopper.

Other e-commerce companies are overcoming obstacles in innovative ways as well. With only two million credit card users in the Middle East, and even fewer comfortable using their cards online, and with well over 60% of package deliveries paid COD, payment services create as much friction as regulatory concerns. But innovators such as CashU have created safe gateways (e.g., cash cards) for buyers who are weary about shopping online and on mobile devices.

The fact that new markets are using technology to solve local and regional problems is no longer surprising. But what's provocative, for me, is at some point these efforts will yield globally-competitive innovation as well. As Dartmouth Professors Vijay Govindarajan and Chris Trimble argue in their new book on innovation in emerging markets, Reverse Innovation: "It is easy to understand why a poor man would want a rich man's product. But why would a rich man ever want a poor man's product? The answer is that under certain circumstances, it offers new, unexpected or long-overlooked value."

This is why, when I travel throughout the Middle East, I look hard for situations and experiences that could foster innovation on a global scale. Simply put, the Middle East — despite its uncertainty — is rife with potential. This is a region that barely knew phone lines, yet mobile penetration regularly nears 200%. And when cheap smart phones (below $40) hit the market — as they have just started to in Africa — mass adoption of mobile computing will follow. What might this market have to teach the world about the future of mobile innovation?

There are other opportunities for innovation as well. The largest untapped resource of fresh water in the world lies beneath the Egyptian-Libyan desert but there isn't an adequate, cost-efficient, and reliable way to deliver petroleum in order to pump it. What innovation in solar pumping and agriculture may lie here? And what about the millions of people who communicated and coordinated on mobile devices and Twitter and Facebook during the Arab uprisings? They told stories. They toppled regimes. Might the next great global social network rise from these experiences?

There was a day, in my lifetime, when no one could imagine that Japan, or Finland, or Korea would become leaders in hardware innovation or computer gaming. True, there hasn't been a great, global software innovation outside of the United States in years, arguably ever. But as the region continues to use creativity to overcome its unique problems and as long as access to inexpensive technology continues to spread, "made in MENA" doesn't seem that far off.

 

Originally published by the Harvard Business Review, October 16, 2012.

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