Studies show consumers are willing to pay 5 to 10 per cent more for green products and services, so long as they function as well as their non-sustainable alternatives. Sustainable options must be just as reliable, safe, convenient, usable and aesthetically attractive as competing brands. However, some firms have found their products need only be good enough to reach target and niche markets, and in certain cases, offering a simpler product is preferable to an unparalleled gold standard.
Firms in the developed world can sometimes be constrained by existing infrastructural, institutional and regulatory frameworks. Developing economies on the other hand, are often unhindered by pre-existing systems and thus are freer to redesign how products and services are delivered. Firms can be attentive to developing countries’ systems-changing innovations that have the potential to change the face of competition in domestic markets. This is particularly true in cases where the target market is the bottom-of-the-pyramid consumer who accepts a good enough, satisfying product that works for them and is usually more affordable. Products in this category are characterized by a limited and simple functionality, but are at the same time reliable, durable and user-friendly.
Sometimes Good Enough is Best
In December 2009, Tata Chemicals Ltd. (TCL) introduced the “Tata Swach” (Hindi for “clean”), the world’s cheapest household water purification system. Tata Group Chairman Ratan Tata stressed that it was more important to the company that their product be as accessible as possible and large amounts of people, and not necessarily the cheapest. The Swach, which was developed by TCL’s Innovation Centre and built around natural, locally sourced materials and cutting-edge nanotechnology, does not use any harsh chemical treatments like chlorine. Tata Swach became the world’s most inexpensive water purifier, enabling a 50 per cent savings compared to its nearest competitor. The water purifier is a prime example of a “good enough” ethical product that reportedly complies with the U.S. Environmental Protection Agency standards.
In another example, mobile telephone services in China were targeted towards affluent individuals living in urban areas. To the extent that they were served at all, bottom of-the-pyramid customers in rural locations were sold “out-of-date” phones. This business model was changed with the introduction of a new, domestically developed chip: simpler and cheaper than other chips, but with limited stability. Existing manufacturers would not use the chip because of the stability issue, but it provided a “good enough” cell phone for rural users. A network of distributors, manufacturers, small- and medium-sized enterprises (SMEs) and local entrepreneurs worked with consumer groups to design a product that reflected local needs and accounted for local manufacturing capability. The phone was technologically “deskilled,” thereby allowing local entrepreneurs and SMEs to be involved; this built local capability from the bottom up and provided access to a service that stood to improve the lives of the rural Chinese.
Offering an ethical product that meets basic requirements and sells at low cost increases accessibility. In these cases, a company’s lack of innovation to create a more complex product is, in and of itself, innovative.
This has been adapted from NBS’s Innovating for Sustainability Systematic Review.