Efosa Ojomo: Market-Building Innovations

October 17, 2019 1:08:00
Kaltura Video

WDI and Poverty Solutions at the University of Michigan were proud to co-host Efosa Ojomo, co-author of “The Prosperity Paradox: How Innovation Can Lift Nations Out of Poverty" and senior research fellow at the Clayton Christensen Institute, a nonprofit think tank.


Before I get into the details of this I hear
some of you are students and so cause

the questions

roughy not much to my precision so so
the answer is earth citizen all right so

we're gonna same question but now
America so if my curiosity the answer is

and this is that a federal level the
reason I started with that is because

when you look at that and you say don't
they have the roads fixed all the

schools all the hospitals good
governance and so on this media puts

their circumstance into perspective
right I do this just a highlight how

important the role of entrepreneurs at
Univision is because another one hand I

do want many governments in the world to
be better especially for countries I

want them to build the roads schools and
so on at the same time reality

that's a this is clay I love talking
about it because he changed the way I

think and we're going to see the world
and my job today is to do my best to

introduce you a couple of ideas in our
book maybe the way you think the way you

see innovation role in creating
prosperity but one of the big things

that clay harps on is the importance of
theory and the focus of today is really

sort of combining ideas in this book
with some new ideas we have in the

prosperity paradox and he applied the
innovation to competition and industry

in the
dilemma which is sort of the book that

was this type of thing and we have taken
that concept and you applied it to

economies and how it can impact
economies and Adam root of all his his

books ideas is the most of management
theory we don't wake up every day with

questions in our minds right what
classes do I take whatever goes oh

you're an investor or a manager dressing
different questions right should I buy

this company should I sell should we
invest in this resource should we hire

this person should advise so they all
these questions and we answer the

questions or they sun-god or we can use
the management theories and so clay has

built his career based on coming up with
these theories and they act as tools

right so depending on the situation you
find yourself you say do I need an

innovation theory to help me with that
we need jobs to be done

so the idea that just want to share with
you today on the economy on consumption

and consumption that talk about how all
the innovations are created equal and

really illustrate the power of market
creative innovation and the third is

something we're working on creating
Innovation Lab so what you see here are

three eccentric circles this is a bubbly
think about the economy a lot of times

when usually economy this is going on
and from the innovation perspective we

simplify it and say like if you look at
these three circles and just take the

population of any very visually people
it was small a circle of my wealth a ton

of access right it's on the skill and as
the circle gets bigger you go

and especially because it's just years
ago my guess is almost everybody

everybody has a computer in their
pockets right now right because they

I had been further democratize

in lowering countries and so as you as
we think about innovation and the impact

its in its ability to democratize access
it doesn't mean people they have to use

computers so it is that if make them
just were so the dominant way we do

computation there's no way I would have
access to computers in this in this room

and so we think about how you
democratizing innovation and how it

needs to impact people in these circles
the more access to democratize be

computing healthcare education to see so
these are just simple characteristics of

economies I'd like to show this is so
you see that a lot of times exist and

make sense it doesn't make sense people
look at you like you're crazy if you

back over

founded by Steve Jobs and Steve Wozniak
right I was me acting at the time he

came up with yeah yeah it was actually
working at HP and he did she idea of the

personal computer five times two people
at HP edit just kept shuttin it down if

they didn't see the value ARCA didn't
exist and they just did see what the

point was
and so you can to see the

characteristics of these different
markets and how when you pitch

annulation to a circle where there's no
product or service yet but there are

ways that you can you can figure out how
to democratize access to people in those

markets and so how do we do that I think
that's sort of where the next and that's

where for us at the Institute and clay
he also clay is so the Silicon Valley

especially father of innovation
especially one of the worst he hates the

most is Novation because they would even
others right it means so many different

things to different people
so he actually

language like the word innovation right
so for us the value of an innovation is

its ability to democratize access from
one circle to another here's the thing

transitioning from one circle to another
fundamentally that's just a fancy

business word for how do you did your
products on point it might be right and

so if you think about it
virtually every product this there's a

group of people who sit down research
and design it and it figured I was a

very suggestive of how you change our
value network manufacturer and

distributor market itself and if
necessary you can survive self-service

with each component in the value chain
right you're adding costs to the product

for you to go from a mainframe computer
to a personal computer or smartphone you

have to change the value Network and
this is where you can create an enormous

value for people in society as you
change the value network from mainframe

computers to the personal use the

right into what ultimately happens is
because you're serving people in

progressively larger circles they won't
be able to make the product market the

front of the sell the product services
of products and they

using the products and so they'll have
more access so as we think about our

work with your every single model is how
do we democratize innovations that make

life better for people how do we
increase the number of people that have

access to doing that it finding sort of
a business can help us do that what

ultimately happens is you create a new
value network that hires a lot more

people and as that happens you see
society begin to become more prosperous

and it's an evolutionary process cars
are about the same thing you know 100

years ago cars when I private just today

but they're extremely expensive and
difficult to drive cars

before it comes around to help me the
car for the average American many people

who told said that's some of his
investors walked out of him and said

entirely new access to cars and that led
to so much development in the US and you

know how many folks know how you
actually pay for our roads today though

some taxes okay so that's true right
both of taxes taxes from gasoline and

rubber tires and so paying for over so
we need to vote for countries right and

it won't have good roads so they can't
maintain their roads you begin to think

about how many cars they have on the
roads vs. cars wealthy countries how

about the roads people begin to draw
these connections and see oh there is a

link between the construction of madness
of infrastructure to the democratization

of innovation all right you begin to
even estimate when you read a report and

Wall Street Journal this country that
built this new road and is you can

actually assess to see
years that rule is probably not going to

do well why because the mechanism that
makes it sustainable it's not yet there

and that is democratizing access that's
the important that's why we take that

very serious hobby seeded and so the
three main types to stick around that

out the first on market creating

these are innovations that transform
complicated and expensive products it's

a part of simple and affordable so any
all people in society could get access

to them at the core they created growth
development they create jobs but they

need capital manager requesting capital
or a market that does not get this so

this is where I see most an equal status
issues a unit capital to advertise

computing for a market the second type
of innovations which are also reported

will be called sustaining innovation the
occur innovations that make good parts

better and so if you think about if the
University of Michigan had resources

from 25 years

so there's a lot of value but when you
step back it's on the new manufacturing

labs or distribution to get the products
and the third type are what we call the

efficiency operations efficiency
ovations are they're probably the most

interesting types of innovations because
they're all so important but they

especially sort of have a detrimental
impact on so think about when an

organization decides outsource jobs a
region where they do production for

instance at a lower costs of the moment
they get automation into their

these jobs now my very interesting is

know if you was a company innovations

invest in them it's important to know
that they will probably have one

industry in particular that is notorious
for investments in efficiency

innovations our resource extraction
industries so you can see at night or on

Cola they have oil but these are
efficiency innovations is the typical

manager in that industry is thinking how
do I reduce costs so can distract this

resource as cheaply as possible so then
arbitrarily democratizing access the

prices are set for global global markets
so interesting about a decent cost and

so if you go to many countries that have
efficiency will find is both industries

is our media they were these cash flows
are important for the organization what

you find is that the cash typically goes
to select you and this

inequality so so these are the three
types of innovations and what we try to

do in the book in chapter 2 is explain
these in detail and then we focus on how

market creating innovations I've talked
about some of these ideas innovations

internal process misalignment is every
company is designed to write so if

you're a company that makes cars you are
designed figure out how to make them

sell better cars be more efficient but
how add features that keep your

customers excited many companies are not
designed to focus on creating new

markets especially markets that may
ultimately appear cut their existing

products and so there is this other
internal process misalignment in

organizations to go out of market
creating innovations book a quick show

of hands or an answer no we have some
demographics see you and if you can tell

me what
this is so this is the country the

average household sends more than half
their income on food 25 kids dies before

the fifth birthday 10% of people those
secondary school electrification is sub

expectancy is 45 years missions years so

what if you go read a report in the
newspaper you saw these demographics

what countries would come to mind DRC
that's excellent one just too long

so this is the demographics of the
United States of America this is

probably my favorite slide whenever I
see America today so this happened but

this is the u.s. anywhere from 150 years
ago and the reason I like this it's not

to say you know watch the one map of
America and many more countries today

but the reason I love this is it just
shows where America has come from and

how development is possible for many
more countries it's an evolutionary

thing that can happen but if we'd have
to get the mechanism right because when

Erica had these demographics and you
looked at how much the government sent

per citizen it was on par with many more
countries today if you looked at

corruption in government which me we
explained in chapter 9 you will see

widespread corruption
mismanagement of mathematical flows if

you look at the level of the state of
American institutions maybe even exists

but the one set did I mean judge is
where in the pockets of if you look at

infrastructure projects there's a book
called the big roads as you know for

municipalities a worth of grows wherever
you call the percent and so just sort of

look at the state of things and whether
he's a day alright his not perfect

country but it's very different from
where it has come from and what we as we

were doing researches on that one day
everyone government had it sort of come

to Jesus moment and they said stop
stealing money you gotta build the vote

right we gotta take care of the poor
what happened was market creating

innovators created new markets employed
those people became more prosperous over

time and began to fight the government
saying you can't keep doing this you

can't keep behaving this way and that's
a very quick summary of American history

of how it became prosperous but when you
look at that mechanism right you you

can't divorce the power of

so I said let me see how I could get as
possible at the time to appreciate this

whole center as if the rules so they

you're laughing but if you've never seen
Google's but these guys figured out this

model in every corner of the country and
just you and I get a big impact trying

to get a packet who's to the average
person in Nigeria's had a country where

the way Google's you know have like say
see another of their companies that are

making it means you've got over a half a
billion dollars in investments factories

have this part of their division and so
the point of showing this is a product

this has this economic weight and
activity behind it now as we save the

book right while back of Google's is not
going to create austerity measure what

Model T is but the mechanism of the
process by which a man about creating

this market is what I think
for us and we can share this message for

our why do we need to change how do you
think about development innovation a lot

of progress the same thing happened with
cell phones this is the story that's

been told once and many times but it's a
good story because you forget how

improbable it was 20 years ago to go
into Africa double as a country to have

anything that's big is above this in
telco infrastructure in an industry that

has to integrate with governments right
with corruption and poverty and so on to

democratize access to phones it was
highly improbable moving for him scribe

mice to go up that many of these guys
said I'll give this a shot and now you

sort of see the impact it's had many
other innovations are built on top of

this again this is up going to create
prosperity for the entire continent but

I think this it gives us an idea of how
prosperity can begin to emerge after you

create so many jobs we create an
entirely new industry that inspires new

elevators to see how sorry this is

annually I realize that Christ set the
slides I didn't put annually baby

you'd be surprised how many people

it's people who can't stomach a major
catastrophe that happens today in

societies where they can only fall sick
I mean I know yeah issues with our

healthcare system but they live in
countries where they

and so far for me for us the school's
how think about variations role in

creating these products and services for
people even if you remember how I

started this as much as let's even
assume for one second governments want

to help wake up every day thinking 100

would argue it's impossible for them
right and so it's incumbent on us to

figure out how we can democratize
innovations I can have access so it's an

important lesson here there's a few
companies doing this and I met these at

my last trips Nigeria Copa 360 is
democratizing distribution on logistics

AXA energy similar with urban
transportation micro ensure with

insurance they now have over 60
their insurance platform these are

people who earn less than three to five
dollars a day and they're able to get

some form of insurance with its health
insurance life insurance or accident

insurance policies all gonna pay out
like our policies yeah but again that

staff is investing and makin
pharmaceuticals more affordable one of

my head with is what we're trying to do
at the Institute we didn't want to

create a lab where we can make it a lot
easier for people to democratize access

if you're an entrepreneur and you want
to go to Europe democratize and

innovation we want to create the
resources and tools to help similarly

you're an investor 15 you know we want
to create a space where there are there

are entrepreneurs that you can look at
this is a quote from Henry Ford this is

the highest use of capital is help to
make more money to make money

so FDI foreign direct investment its
capital that comes into your country so

this foreign import which is a shorter
term so companies that that would that

would invest in the stock market for
instance they pull out a lot quicker

than if I build up plans right so if I
am FBI sucks

FBI it's the best decision let's ask you
a question I think very sorry I need the

pants now when does it depend if you
look at our numbers many African

countries have attractive FDI over the

but even it depends is what is that I
get excited when I see that is the child

market creating a business or sustaining
or efficiency innovations so bring back

the light it sorry for all my
assumptions I was and if you were not

I'm sure president Trump is now after
the sign in 1994 President Bill Clinton

so it's a great deal us-mexico yeah now
at the time many experts saw it as an

opportunity for Mexico to but when that
happened a lot of manufacturing jobs

went and we would categorize those as
innovations so X ago so

but they were able to sense the us go
back much farther but if you look at how

we've taken like Huck's he's taking it
yeah you sort of have to look at what is

I would say I would have all this anger
I would try to attract the kind of

entrance market
I would shot the others but no nice

layout of mission I have a similar
question of that which is I'm also

curious trying to grapple with what this
means for policy makers so in terms of

our needed support or the three types of
innovation is there an area policy

makers should focus on if we provide
cars than the roads will Pablo before is

this not just a focus on issue yeah so

that's a good woman and I'll be I'll be
the first to tell you I cringe whenever

I get questions about what policymakers
do because this sort of short answer is

under percent sure the way that I would
respond which I hope doesn't sound like

a cop-out is the first thing is just
understanding any event that you you

cared enough to understand this
logically that I say that because many

policy makers they have this sort of
fluid 6-tier cycle they raise a lot of

money to get elected
and these papers they have to build out

and so those are real pressures that
they are under the event that they could

overcome those and say okay I want to
actually make change policy for the

the first is understanding the types of

issues and the second is focusing
creating policies that prioritize

productivity not just profitability so
what does that mean if say there is a

pharmacy in the biggest my policy would
essentially be you have to make sure

over the next five years
this and more people have access to

so that's forces companies to develop or

create new markets I look at looks like
on the ground

how would you lays out I don't know but
when you look at policies and


because local Chinese and what happens
is today today China's not just making

cheap t-shirts and attractive
the conditions it's good for investors

but I also noticed throughout the talk
that when it comes to innovation

you'll also encounter resistance to a
change so then how do you best balance

kind of wanting to be Perot collective
protein while also having the

perseverance and resistance to continue
to push word

I understood your question correctly
it's what I saw all of these different

people's journeys there's always this
moment we're in a room so education is a

big part of it that's like the slide of
our Americans come from is really

that's why we broke the book the way he

did there's a third section of the book
called a section and it focuses on

institutions corruption and
infrastructure and we try to talk about

these things in a way that help people
see I wanted Savior process

overnight but in order to be successful
we have to get with magnetism right and

it did try to sort of get the conditions
in place for decades especially in poor

countries will be try to build
institutions judiciary's courts

legislators and those are good things to
do but if we don't have the

complementary innovation part of is
evangelizing the message and then I need

key people who are very well resourced

activists by the rightness questions

the best way to connect like investors

so it's party and then even the language
to be able to explain what they're

trying to do
resonate with investors people with

capital and then we're also very
well-placed to to get access to these

investors connected to our business we
are all here and we're all so figuring

out the infrastructure to connect that
is where we I don't pull up the answer

to that is

I am Martha thank you I'm from on I'm a
PhD student in the School of Education

and so one of my questions is where does
the where if you think about education

as as as a way for people to improve
their knowledge experiences so they can

be more productive in an economy right
they begin to see a lot of education

even what countries are just useless
it's just you've got kids who go to

school for computer science they never
seen there you go kids studying biology

from the standpoint of how they impact
Western disease


relationship to what was going on in
America at the time the agricultural

revolution and so insofar as we create
education in that context we can you

cannot develop without education
actually practically speaking I hope you

just continuing to evangelize this
message but schools that teach policy

work or public administration talk about
the impact of innovation Hey those kinds

of things and ultimately make education

so yeah I'm glad you actually are
struggling with that because I didn't

make a comment which was good or I think
we are somewhat agnostic

I'm not going to moralize the impact of
an innovation I think we call it what it

is and so efficiency innovations we look
at it from the standpoint of where the

investment is happening and so if I
invest in efficiency

we saved the University of Michigan and
I invested in a technology that

eliminates 20% of jobs here I'm focused
on how that efficiency innovation

affects the University of Michigan now
the idea that there's 90 percent of jobs

that are lost they would go somewhere
else and find other jobs I think that's

it's it's a consideration but I think
from the University of Michigan

standpoint I think it's important to
think about how the economy and so and I

say University of Michigan but if you
think of it as a local economy if I'm on

mayor or governor right how will the
efficiency innovations impact economy

even though the jobs lost here and
somewhere else what programs are in

place to get them either retrained to
get other jobs how should you be making

investments your infrastructure to make
sure that whatever efficiency innovation

shocks happen each state will it doesn't
as much as it should and I think just

understanding that I think it's
important what we tried to do with the

book is maybe say market creed create an
evasion good all these other things back

we just try to illustrate the power of
market creative innovations and I think

that's where we spend a lot of our time
the last thing I'll say our efficiency

innovations is it reduces the cost of
making a product but they don't

necessarily reduce the price of the
product and so when they make me more

efficient typically I take that money
and I give it back to my shareholders or

I figure out what I want to do with it
but when we talk about market creating

innovations there is a a seismic shift
in the price of the product were talking

mainframe computers to personal
computers to smartphones

yeah it does it drives the price down
but from yeah so from a development

standpoint right if you couldn't afford
a car you know if you can't afford if

you couldn't afford afford last year no
matter what kind of competition on

industry you can't afford afford this
year right and so on until a fundamental

value network right on how you make
changes and so people who couldn't

afford $2,000 computers some of them can
afford $100 smartphones right I think

that's the shit I'm talking about so the
fact that the computer goes from 2000

there's always a window 2002 nineteen if
you look at Mexico there's a guy in

chapter 7 we talk to he's changing the
way that ETS treated in Mexico there are

a lot of hospitals and clinics that
treat diabetes but it cost the average

Mexican about $1,000
he is fitted out a model

to about $250 is incredibly difficult
for nothing right but I I had a question

about what happens after market so like
once prosperity kind of goes up in 4

countries what do you think is the next
step in addressing corruption that means

still linger in governments

so I think we write about corruption is
is it happens up this spectrum right so

the first most obvious well the second
phase is what we call covert and

predictable that phase is where I would
put say a China today or South Korea 15

this preference where this will crushed

and happening and this corruption in
everywhere you have people like Russian

but have the systems being developed to
help us reduce corruption

people baby
civil society and so

no pun intended yes thank you so much
for this talk I'm curious your thoughts

on the goal of achieving lasting
prosperity in the countries we're

talking about how important it is that
these market creating innovations

ultimately end up being homegrown
innovations so you take you to be

examples I guess I'm a Nigerian and my
noodles are made by Nestle instituted by

Nestle and I'm using a sample I'm voting
on the Airtel network and I'm driving on

a Chinese name Road to my job at Shell
oil you know is there a captain of how

much prosperity my fellow countryman can
achieve when so many of those yes I

think there's no free lunch
we didn't paid for being able to do

things that many people want all right
and so if you think about it it's really

hard to do something that many people
want to do company

part of wide market creating innovations
are important is not only do they

inspire copycats most of local they
there's this transfer of technical

know-how or business that happens as a
results right and so if I import all my

Samsung phones I don't I don't add value
in country absolutely insanity right

this in some ways when you make it part
of from another country and you ship it

to a different country you are
essentially importing the cost structure

that that made the product in that
country so if a German person in

manufacturing plants is making your car
you who's buy-in artistry I think with

you when you transfer that technology
and make it locally which is a process

it doesn't happen overnight then you can
begin to make a lot more games so it's

absolutely important but it does not
have to start with

first there any lost burning questions

if not let's stop give our speaker