Engine of Recovery: the Third World

Last Thursday the New York Times Business Section featured a piece entitled "Developing Markets in Bloom Again" which reported stock markets in India, Brazil and China up by 64%, 41%, and 37% respectively over the past three months.  The article's premise was "the recovery of the global economy is at hand and being led by the developing world".  I couldn't agree more.

At our conference in Scottsdale ten days ago we focused on the need for business across industries to understand where and how their global supply chain strategy impacts and is impacted by the special challenges of managing intellectual property.  Clearly there is something to this idea since the event sold out despite the rotten economy and widespread travel bans.  Candidly, however, I have to admit we're no more certain of how to make money in the Content Economy now than we were before the conference.  So where's the growth engine that digs us out of the current recession?   

The conundrum goes like this:  we all know higher value work is based on intellectual value add and we all hope there will be profits in building IP empires.  Unfortunately, today's pricing and IP protection models are so weak that pure IP players like media and entertainment are getting killed.  We also wonder how the developing world can keep up if such work is education intensive and dependent on a highly evolved consumer economy infrastructure.  Meanwhile, consumer demand in the US and Europe looks unlikely to ever return to its credit drenched ways of 200X.  Sounds like a Catch 22 - can't move on to the post industrial economy because our profit engines are designed for the old days.

Perhaps the answer lies simply in serving the basic needs of the populations of India, China, Brazil and the like.  Take IP that is market ready including brands and formulas, life science patents, manufacturing technologies and so on, package and price it for low income consumers and seek growth in markets that are not saturated.  Bring back consumer demand data to reenergize the IP portfolio and include it in the next round of innovation.  Lather, rinse, repeat.

Developing world economies are recovering now because they have demand, and increasingly, the means to serve it.  Exports are not the engine they once were because we in the US can skip the new toys.  None of this is a mystery to some of the mega-brands we look up to like GlaxoSmithKline, Procter & Gamble or Caterpillar.  They see the opportunity and are preparing to tap it.  A global recovery will blossom if the infrastructure serving this massive consumer population moves up the priority list. 

With any luck, the brain intensive work of the new Content Economy will grow alongside this build out as established 20th century IP empires find new partners and customers in the developing world.  To repeat a phrase from our opening video at last week's conference "the modern fascination with media is built on manufacturing".  Let's build the foundation and start the engines running again.

Comments

[Trevor Miles]

Hi Kevin

I wish I had come across your post when I wrote a blog on June 23 about this very topic. If nothing else I would have referenced yours for added credibility. I believe that Nokia has adopted your concept of "Lather, rinse, repeat", and that this is the strategy that all companies need to adopt, particularly in consumer electronics.

I think the environmental movements catch phrase of "reduce, reuse, recycle" can also be repurposed to capture the concept of what companies in the western world need to do in terms of products and IP in order capture markets in the developing world. Again I think Nokia has been leading the way with the manner in which it is transforming banking transactions in Africa.

I am also fascinated in the rise of companies such as Acer, Huawei, and Lenovo. I came across Wockhardt, an Indian Pharma company, the other day that has revenues of USD833M. I am embarassed to say I had not heard of them before last week.

My blog post is http://blog.kinaxis.com/2009/06/recession-or-reset/

Regards
Trevor Miles
Kinaxis

[Puneesh Lamba]

Hi Kevin,

I completely agree with you when you say that the engine of recovery of economy will come from the developing world specially the BRIC countries. Having said this, there are enough pointers that suggests that the biggest economy of the world, The United States, is also on the path of recovery and we can see it as early as Q1 2010. The UCLA Anderson School of Management's report predicts an average quarterly growth of 2.7% and an average of 4.1% in 2011.

Talking about India, a 'U' shaped revival of growth path is expected with two not-so-good quarters followed by two good quarters as mentioned by some of the analysts.

Thanks,
Puneesh