Developing winning products for emerging markets

The farm-equipment maker started with a feature that its analysis showed mattered most to small-scale farmers: the durability of tires. Farming in one region required considerable back-and-forth driving in mixed terrain (tar roads and soil). By redesigning tires to maximise their useful life, the company made its vehicle far more appealing to local customers. This company’s crucial willingness to challenge its assumptions ultimately led to a broader set of improvements.

By contrast, companies that fail to reexamine the assumptions inherent in their product designs risk making ill-informed decisions. A global maker of electrical products learned this the hard way when it introduced a minicircuit-breaker system to offer customers in India better protection from the country’s frequent power fluctuations and brownouts. The product, adapted from a comparable developed-world model, was technically sound and arguably superior to the alternatives. Yet sales suffered as customers turned to products from competitors offering an older – and cheaper – “use and throw” fuse technology. Not until the company started over with a new design incorporating the older technology did the product became competitive.

A handful of leading companies extend this thinking further still, approaching their product portfolios with a “zero-based design” mentality. The benefits can be profound. A global consumer-products company, for example, was losing share in an important Asian market to a domestic competitor offering a lower price for a common personal-care product. Instead of responding with a marketing push or a price cut, the consumer-goods maker ran a head-to-head comparison of the two products – including a sophisticated analysis of chemical ingredients. This investigation showed that the low-cost company, using a formulation that was half as costly as the global player’s, was achieving the same levels of efficacy. What’s more, the rival’s pump bottle maximised margins by delivering 10% more “product per pump.” After receiving this wake-up call, the global company redesigned its product from the ground up, ultimately changing the formulation, packaging, and even design of its pump bottle. The rejuvenated product, vastly cheaper to produce and no less effective than its predecessor, generated a 40% margin improvement.

Similarly, the telecommunications and data-services provider recognised that its mobile-phone towers were overdesigned compared with those of its competitors. By starting over from scratch, the company lowered its cost to build each tower by almost 30%, while still meeting or exceeding local safety regulations.

3. Design for manufacturability

A final way top product makers separate themselves from the competition is to go on challenging their assumptions well into the manufacturing process. Surprisingly, perhaps, though most global companies have manufactured products in emerging markets for years, they typically don’t go as far as they could to design them with emerging-market customers and workers in mind. By contrast, clever product makers look for easy opportunities to tweak their products and processes further and thereby lower their capital costs. To be sure, this is good practice any place companies operate, but an especially important one in emerging markets given the fierce levels of competition there.

For example, a large producer of engines and industrial equipment recognised that by making straightforward design changes to one of its drive-shaft assemblies, it could reduce the complexity of the machines needed to build them. Just allowing for more generous radii and bends in a few key spots would make it possible to produce the components with hot forging hammers, a cheaper technology than the high-speed cold-forging machines the company used at home. The changes helped reduce costs for materials by 10%, in part by enabling the company to source more goods and equipment from local suppliers.

The farm-equipment maker lowered its costs in a similar fashion by identifying places where its frontline workers could replace expensive fasteners with cheaper welds during product assembly. This reduced not only the company’s manufacturing costs but also the cost of maintenance for farmers, who otherwise had to replace the fasteners as they fell off.

Traditional approaches to product development are coming under strain as emerging markets start to dominate the global economy. Companies that learn to shake up their thinking and effectively challenge the assumptions about how they design, develop, and manufacture products are more likely to master the extremes of this new competitive landscape.

About the authors

Sauri Gudlavalleti is a consultant in McKinsey’s Delhi office, Shivanshu Gupta is a principal in the Bangalore office, and Ananth Narayanan is a principal in the Chennai office.

The authors wish to thank Gauranga De, Dave Fedewa, and Seungheon Song for their contributions to the development of this article.