Cracking Frontier Markets

Innovations from underdeveloped economies are launching brand-new industries. Investing in them is the key to creating wealth and fostering inclusive, sustainable development.

by

and

Karen Dillon

by

and

Karen Dillon

From the Magazine (January–February 2019) · Long read

Avik Chakraborty/Getty Images

Summary.

With emerging-market giants such as Brazil, Russia, India, and China experiencing slowdowns, investors, entrepreneurs, and multinationals are looking elsewhere. They’ve been eyeing frontier economies such as Nigeria and Pakistan with great interest—and enormous trepidation. Can one find serious growth opportunities amid extreme poverty and a lack of infrastructure and institutions?

The answer, the authors argue, is yes. The key lies in market-creating innovations: products and services that speak to unmet local needs, create local jobs, and scale up quickly. Examples include MicroEnsure, which has made insurance affordable for 56 million people in emerging economies, and Galanz, which has brought microwave ovens to millions of Chinese consumers previously considered too poor to buy such an appliance.

What’s more, the essentials of development can be “pulled in” by market-creating innovators—and over time, governments and financial institutions tend to offer their support.

Idea in Brief

The Context

Experts often assume that frontier economies are so underdeveloped that they can’t support consumer-facing businesses—yet hundreds of companies have proved the conventional wisdom wrong with unexpected fast, sustainable growth.

The Way Forward

Entrepreneurs who succeed in these markets focus on market-creating innovations: products and services that speak to unmet local needs, create local jobs, and scale up quickly.

The Social Gains

Frontier markets are often plagued by corruption and held back by poor roads, lack of electricity, and so on. The essentials of development can be “pulled in” by market-creating innovators—and over time, governments and financial institutions tend to offer their support.

When a movie is released straight to video, it’s usually a bad sign: Early reviews were negative, the quality is dubious, or backers aren’t confident it will find an audience. Going straight to video, historically, was a way to save face and move on. But in 1992, when the electronics salesman Kenneth Nnebue shot the straight-to-video Nigerian movie Living in Bondage, it was anything but a disaster.

A version of this article appeared in the January–February 2019 issue of Harvard Business Review.

Clayton M. Christensen was the Kim B. Clark Professor of Business Administration at Harvard Business School and a frequent contributor to Harvard Business Review.
Efosa Ojomo is a senior research fellow at the Christensen Institute and a co-author of The Prosperity Paradox: How Innovation Can Lift Nations Out of Poverty. He researches, writes, and speaks about ways in which innovation can transform organizations and create inclusive prosperity in emerging markets.
Karen Dillon is a former editor of Harvard Business Review and coauthor of The Microstress Effect: How Little Things Pile Up and Create Big Problems — and What to Do About It (Harvard Business Review Press, 2023). She is also coauthor of three books with Clayton Christensen, including the New York Times best-seller How Will You Measure Your Life?

Cracking Frontier Markets

Idea in Brief

The Context

The Way Forward

The Social Gains

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