Consumer Innovation at the Base of the Pyramid: Emerging Patterns of User Innovation in a Resource-Scarce Setting

185 Pages·2014·1.486 MB·English

by  Sarah Praceus (auth.)

Forschungs-/Entwicklungs-/
Innovations-Management
Herausgegeben von
H. D. Bürgel (em.), Stuttgart, Deutschland
D. Grosse, vorm. de Pay, Freiberg, Deutschland
C. Herstatt, Hamburg, Deutschland
H. Koller, Hamburg, Deutschland
M. G. Möhrle, Bremen, Deutschland
Die Reihe stellt aus integrierter Sicht von Betriebswirtschaft und Technik Arbeits-
ergebnisse auf den Gebieten Forschung, Entwicklung und Innovation vor. Die
einzelnen Beiträge sollen dem wissenschaft lichen Fortschritt dienen und die
Forderungen der Praxis auf Umsetzbarkeit erfüllen.
Herausgegeben von
Professor Dr. Hans Dietmar Bürgel Professor Dr. Hans Koller
(em.), Universität Stuttgart Universität der Bundeswehr Hamburg
Professorin Dr. Diana Grosse, Professor Dr. Martin G. Möhrle
vorm. de Pay, Technische Universität Universität Bremen
Bergakademie Freiberg
Professor Dr. Cornelius Herstatt
Technische Universität Hamburg-
Harburg
Sarah Praceus
Consumer Innovation at
the Base of the Pyramid
Emerging Patterns
of User Innovation in
a Resource-Scarce Setting
Sarah Praceus
Hamburg, Germany
Dissertation Technische Universität Hamburg-Harburg, 2013
ISBN 978-3-658-05104-4 ISBN 978-3-658-05105-1 (eBook)
DOI 10.1007/978-3-658-05105-1
Th e Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografi e;
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Foreword
Today, an extremely large proportion of the world population is still living in poverty.
These people living at the lower end of the global wealth pyramid are the so-called
“Base of the Pyramid” (BoP). As the poor are not in a position to buy currently
available products and services, they represent a vast and largely untapped market
from an industrial perspective.
According to C. K. Prahalad the so-called BoP market offers market entry and growth
opportunities particularly to companies aiming to contribute to poverty alleviation. For
this purpose products and innovations that are specifically targeted at the BoP
market are indispensable. The development of these innovations requires solid, deep
and detailed knowledge concerning the living conditions at the BoP and the needs of
its consumers. Hence, high hopes are placed on the involvement of the BoP itself as
well as their ideas and innovations into the new product development process to
ensure market and need knowledge and to achieve overall product success.
However, up to now there has been very little research on consumer innovation at
the BoP and general knowledge on needs and solutions for subsistence markets is
scarce.
The present dissertation by Mrs Praceus employs a quantitative approach to analyze
the characteristics of a large sample of innovations generated at the Indian BoP. The
research reveals similarities as well as differences compared to consumer
innovations generated in the resource-rich world. To furthermore identify innovative
consumers and drivers of consumer innovation in subsistence markets, she
investigates by means of two separate yet interrelated studies the effect of
innovation-relevant resources and contextual factors on the attractiveness of
consumer innovations at the BoP.
The results of her work show that wealthier and poor consumers share certain stable
demographic predispositions and preferences towards consumer innovation while
adapting at the same time to their respective living conditions e.g. through mainly
satisfaction of basic needs at the BoP versus hobby-related necessities in the
wealthier world. At the BoP resources such as an innovator’s technical experience
and education have a positive impact on the technical quality of a solution while
technical experience and cooperation exert a positive influence on its creative quality.
Repeated innovation activities, however, appear detrimental to creativity.
Furthermore creative solutions achieve higher success or acceptance among other
BoP consumers while an innovation’s technical elaboration does not relate to its
market success.

V
I believe that the findings gained from Mrs Praceus‘ research are relevant and
enriching for both research as well as business practice leading to differentiated and
new insights into innovation at and for the BoP.

Taken altogether, I consider the present dissertation by Mrs Praceus as a successful
and very readable contribution to the current state of research.

Hamburg, December 2013
Univ. Prof. Dr. Cornelius Herstatt

VI
Acknowledgements
This book is based on my dissertation that I have conducted at the Institute for
Technology and Innovation Management at Hamburg University of Technology
during the period 2010 to 2013. The successful completion of this thesis has only
been made possible thanks to the support of my supervisor, colleagues, friends and
family.
First, I want to express my gratitude to my doctoral supervisor Prof. Dr. Herstatt for
giving me the opportunity to carry out my research under great working conditions at
the TU Hamburg-Harburg right from the start. His openness to different
methodological approaches and his open-minded leadership style allows his doctoral
candidates to fully indulge in their individual research.
I would also like to thank my fellow research colleagues. The many thoughtful
discussions and critical questions were always valuable and helped me gain new
insights. Among those I want to specifically mention and thank three colleagues who
have also become true friends: First Niclas who was the best office mate I could have
imagined, second Tim for his incredibly knowledgeable and valuable advice all along
the dissertation project and finally Jan who I have shared the entire dissertation
journey with from taking the educational leave to returning to the consulting work at
McKinsey & Company.
Finally I want to thank my parents and my brother Julian for always being there for
me and reminding me of the importance of other things than work and research.
Each of them supported me in their own, special ways during this research project.
Above all, my greatest thanks go to my husband Richard for his unconditional
support in every situation of life and for always encouraging me to take advantage of
the eduational leave of absence from my job to write this thesis.
VII
List of Contents
List of Contents .......................................................................................................... IX(cid:3)
List of Figures .......................................................................................................... XIII(cid:3)
List of Tables ........................................................................................................... XIV(cid:3)
List of Abbreviations ................................................................................................. XV(cid:3)
1(cid:3) Introduction .................................................................................................... 1(cid:3)
1.1(cid:3) Research problem and relevance ........................................................................... 1(cid:3)
1.2(cid:3) Research objectives and approach ........................................................................ 3(cid:3)
1.3(cid:3) Structure of the document ...................................................................................... 4(cid:3)
2(cid:3) Phenomenological background for the BoP .................................................. 6(cid:3)
2.1(cid:3) Definition and background of the Base of the Pyramid ........................................... 6(cid:3)
2.1.1(cid:3) Population group ................................................................................................ 6(cid:3)
2.1.2(cid:3) Business concept ............................................................................................... 9(cid:3)
2.1.2.1(cid:3) Benefits to the private sector .....................................................................10(cid:3)
2.1.2.2(cid:3) Benefits to the people living at the BoP .....................................................13(cid:3)
2.1.2.3(cid:3) Concerns and concept development .........................................................15(cid:3)
2.2(cid:3) Business conditions at the BoP .............................................................................17(cid:3)
2.2.1(cid:3) The economic life of the poor ............................................................................18(cid:3)
2.2.2(cid:3) Market constraints at the BoP ...........................................................................21(cid:3)
2.2.3(cid:3) Organizational challenges .................................................................................23(cid:3)
2.3(cid:3) Innovation for and at the BoP ................................................................................25(cid:3)
2.3.1(cid:3) The role of innovation at the BoP ......................................................................25(cid:3)
2.3.2(cid:3) Approaches for BoP innovation .........................................................................28(cid:3)
2.3.3(cid:3) The need for participatory innovation ................................................................31(cid:3)
3(cid:3) Conceptual foundations of user innovation .................................................. 33(cid:3)
3.1(cid:3) Definitions and background ...................................................................................33(cid:3)
3.2(cid:3) Relevance of user innovation ................................................................................35(cid:3)
3.3(cid:3) Users as source of innovation ...............................................................................37(cid:3)
3.3.1(cid:3) Antecedents and motivation of user innovation .................................................38(cid:3)
3.3.2(cid:3) Characteristics of innovating users ....................................................................40(cid:3)
3.3.3(cid:3) Identifying and taking advantage of innovating users ........................................41(cid:3)

IX
4(cid:3) Research focus ........................................................................................... 44(cid:3)
4.1(cid:3) Research gaps and questions ...............................................................................44(cid:3)
4.1.1(cid:3) Relevance of user innovation research in subsistence markets.........................44(cid:3)
4.1.2(cid:3) Characteristics of consumer innovation at the BoP ...........................................47(cid:3)
4.1.3(cid:3) Antecedents of BoP consumer innovation .........................................................49(cid:3)
4.2(cid:3) Research framework .............................................................................................51(cid:3)
4.2.1(cid:3) Theoretical foundations .....................................................................................51(cid:3)
4.2.2(cid:3) Elements of the research framework .................................................................55(cid:3)
4.2.3(cid:3) Development of the hypotheses ........................................................................59(cid:3)
4.2.3.1(cid:3) Resource-related hypotheses ....................................................................59(cid:3)
4.2.3.2(cid:3) Context-related hypotheses .......................................................................62(cid:3)
4.2.3.3(cid:3) Innovation quality-related hypotheses .......................................................63(cid:3)
5(cid:3) Methodology ................................................................................................ 65(cid:3)
5.1(cid:3) Analysis ................................................................................................................65(cid:3)
5.2(cid:3) Data collection ......................................................................................................67(cid:3)
5.2.1(cid:3) The Honey Bee Network ...................................................................................67(cid:3)
5.2.1.1(cid:3) Institutional background .............................................................................67(cid:3)
5.2.1.2(cid:3) Example cases of the Honey Bee Network database ................................68(cid:3)
5.2.2(cid:3) The sample .......................................................................................................71(cid:3)
5.3(cid:3) Data preparation ...................................................................................................73(cid:3)
5.3.1(cid:3) Codification of award profiles ............................................................................73(cid:3)
5.3.2(cid:3) Assessment of creativity and technical elaboration ...........................................77(cid:3)
5.3.2.1(cid:3) Definition of creativity ................................................................................77(cid:3)
5.3.2.2(cid:3) The Consensual Assessment Technique ...................................................78(cid:3)
5.3.2.3(cid:3) Approach and results .................................................................................80(cid:3)
6(cid:3) Patterns of consumer innovation at the BoP ............................................... 86(cid:3)
6.1(cid:3) Study 1: Characteristics of consumer innovation at the Indian BoP .......................86(cid:3)
6.1.1(cid:3) Characterization of the consumer innovator ......................................................86(cid:3)
6.1.2(cid:3) Characterization of the consumer innovation .....................................................89(cid:3)
6.1.3(cid:3) Discussion of findings .......................................................................................91(cid:3)
6.2(cid:3) Study 2: Comparison to studies in wealthy, developed markets ............................94(cid:3)
6.2.1(cid:3) Comparative analysis of consumer innovation patterns .....................................94(cid:3)
6.2.2(cid:3) Discussion of findings .......................................................................................96(cid:3)
7(cid:3) Antecedents of consumer innovation at the BoP ......................................... 99(cid:3)
7.1(cid:3) Choosing appropriate statistical techniques ..........................................................99(cid:3)
7.2(cid:3) Study 3: The impact of resources on innovation quality ....................................... 101(cid:3)
7.2.1(cid:3) Prerequisites to the multiple linear regression ................................................. 102(cid:3)
X