Corporate Initiatives to Serve Poor Markets as a Driver for Innovation and Change: A Longitudinal Study

Cornell University, Ithaca NY

Investigators

Abstract

The increasing competitiveness of North American, Western European, and some Asian markets is forcing firms to search for new growth opportunities around the globe. At the same time, discontent with globalization has increased over concerns about environmental degradation, a widening gap between rich and poor, and loss of both local autonomy and cultural diversity. Consistent with theory, a growing number of US and foreign companies are seeking new business opportunities by focusing attention on the most ignored market segment of the world: those 4 billion at the bottom of the economic pyramid who earn less than $5 a day and lack access to goods and services that meet their most basic needs. The ability of firms to serve a market they have traditionally ignored requires significant reframing of the business challenge by managers, the development of cutting-edge innovations and technologies, and fundamental organizational transformation through the creation of new business models. With support from the National Science Foundation's Innovation and Organizational Change Program, this study will follow the attempts of five multinational firms over time to test that theory in the field as they conceive, propose, implement, expand or terminate projects that meet the needs of a new market segment. The study will occur over a period of three years, during which time managers expect that their initiatives will either succeed or fail. If successful, these initiatives will become businesses that signal a significant change for their firms in terms of strategy, structure, and process. This research will focus on how firms can most effectively organize to develop, implement, and diffuse these disruptive innovations. Five firms in three industries -- Chemicals (Dow and Dupont), Consumer Products (Johnson & Johnson and Procter & Gamble), and Beverages (Coca-Cola) -- have committed to provide access to use a multi-method approach to collect longitudinal data on more than eight initiatives. Primary data collection will occur through on-site, semi- structured interviews with key managers who can lend insight into the processes employed to affect change in their companies. Interviewees range from members of the company's Executive Team to in-country project managers, as well as external stakeholders (e.g., NGOs, public entities) utilized by the focal organization to move their projects forward. Investigators will also analyze internal communications including memos, reports, meetings, and email, to validate data collected in interviews. These data will be used to inductively build and refine a testable model of organizational change related to these types of ventures. To test and validate the model, the final phase of the study includes the development of a survey instrument and its distribution to a larger sample of firms engaged in projects to serve the world's poorest people. This research has important intellectual and practical implications. Management literature has recognized that over the past decade a set of complex issues has emerged as a critical challenge for corporations attempting to optimize economic, social, and environmental performance. A substantial body of scholarly work focusing on global issues calls for fundamental industrial transformation in the future, but offers little insight or prescription for how or why that might occur. By grounding this work in the actual activities of real firms, this study will not only provide insight into actual bottom-up and top-down change and innovation processes employed by companies in the marketplace today, but also help explain how and why such processes succeed or fail. Results of the study will be extremely valuable to a broad group of stakeholders. Companies are interested in more tangible recommendations of how they might transform themselves to meet the challenges of sustainable development and grow in the future. NGOs and governments around the globe are interested in forming a better understanding of how to effectively engage companies to work together to increase the economic fortunes of a broader group of the world's population.