Efosa Ojomo on Harnessing Disruptive Innovation for International Prosperity
Efosa Ojomo is a senior research fellow at the Clayton Christensen Institute for Disruptive Innovation and co-author of The Prosperity Paradox: How Innovation Can Lift Nations Out of Poverty.
His work focuses on understanding how best to create prosperity in low- and middle-income countries. The pillars of his research include understanding why poor countries have remained poor despite the trillions of dollars spent on development over the past several decades; analyzing a country’s capabilities to help it better predict the viability of projects; and helping investors, entrepreneurs, and development professionals improve their project success rates.
Efosa discusses his experience in developing international projects for prosperity, and shares insights into how theories, disruptive innovation and different strategies help us develop projects that can lift nations out of poverty.
Highlights from the interview (listen to the podcast for full details)
[Amedeo Watson] - Could you please share a bit about your background in socio-economic development & innovation? [02:18]
[Efosa Ojomo] - Absolutely. I was actually a little bit of an accidental innovation & development guy. I graduated from Vanderbilt University here in the United States in 2005. I was fortunate to leave Nigeria in 2000 to come to college here. After I graduated, I got a job. I was working. Life was good. I was living what we call 'The American Dream' here. In 2008, I began to read about development, economics and poverty. The text I was reading, the information I was consuming, gripped me like nothing had ever gripped me before. I remember on my third book, I read about this 10 year old girl who would have to wake up every morning at 3am, fetch firewood and walk miles to the market to sell. She was 10 years old in Ethiopia. I remembered what I was doing when I was ten. I wasn't doing that at all. That night, in February 2008, I was sobbing in my room and I just said, ‘I have to do something about this. I don't know what to do, but I have got to do something.’ That night began my journey into the world I am in now, which is really understanding how innovation can make life a lot better for billions of people in the world who still struggle to make ends meet every day.
Right after I read about that 10 year old girl, I went back to Nigeria for the first time in eight years and I started a nonprofit organisation called Poverty Stops Here with a group of friends. We just wanted to help. So we raised money in the U.S., and we would go to poor communities in Nigeria and provide access to water, build wells, give out micro loans of $200-$300, sometimes a bit more. Then we would fund some education initiatives for young kids and we felt like we were just doing our part. In terms of just a big milestone and a big learning, starting Poverty Stops Here and being able to raise hundreds of thousands of dollars and ultimately learn a lot more about how hard it, is to do development on the ground. Those were big lessons that I learned.
What is it that drives you to work in development & innovation? [4:48]
If I could summarise with one word, it would be 'hope’. That is also how I tell people we summarise our book. When I left Nigeria in 2000, I had no intentions of ever coming back. In my opinion, it was a continent where there was no opportunity, and I had come to America 'The Land of Opportunity'. But after I started to read about what was going on, I realised, ‘oh my, if more people don't go back and try to figure out how to solve this poverty problem we're never going to do it.’ I think the more I immersed myself in this literature, the more I just had hope. I believed that there was a way out. As we've been doing our research over the past few years, I've found that innovation is the best chance we have. That's really what drives me to work in this field.
Part of your work involves helping improve project success rates. What are the key considerations in building & sustaining successful enterprises? [6:10]
You'll notice I like to summarise things and then we'll talk more in depth, so if I could again use one word it would be 'theories'. I was fortunate to go to Harvard Business School and study and work under Clay Christensen. So in my second year at business school I took his course. It is the most popular course at the business school, its called - Building and Sustaining a Successful Enterprise. I'm sure your listeners probably know who Clay Christensen is. He is the father of disruptive innovation and one of the greatest management thinkers of all time, and he designed his course around a set of theories. He said, look, a theory is simply a statement of causality. If you do X, Y is going to happen. When you start to think about theories in that way you realise they are very practical. We all live based on theories. A simple one is, if I go to the gym three days a week, I'm going to lose X amount of pounds. Or if I cut out sugar, I am going to become healthier. Those are simple theories. So he has designed this course around management theories that can help us as new managers make better decisions in the organisations we are going to be going to after we graduate.
Ultimately, what we have done is taken the theories in this course and have now applied it to economic development and some of the things that we have found are just absolutely fascinating. So they really help us to not only improve success rates in projects but think about how you can make an organisation or a project much more sustainable. It is really making sure that whatever decision you're making as an organisation or enterprise, you have really good theories as a foundation of your decision making.
Could you provide an example of one of those theories and how they contribute to building a successful & sustainable enterprise? [8:33]
Think about the word innovation. I mean, it's a buzzword. We all love it. I love it. Politicians love it. I don't know anybody who doesn't love it. But what do we mean when we say innovation?
Innovation means so many different things to many people. So the first thing Prof. Christensen does, is categorise innovation in a way that it can actually be meaningful for us with regards to helping the economy grow in a vibrant way. When you begin to think about innovation that way, you take a step back, and from that standpoint, from the economy's standpoint, there are three types of innovation.
The first type we call 'Market-Creating Innovation'. These are innovations that transform complicated products into products that are simple and affordable so that many more people in society can afford them. Think about Henry Ford's 'Model T', that was a Market-Creating Innovation. It created a new vibrant market for cars and so many other people who couldn't afford cars could now afford them. He didn't invent the car. That is very different. But he created an innovation such that it increased access significantly. Now that innovation he created serves as a solid foundation for future growth for an economy. In order to do that, he had to hire so many more people to sell the product, make the product, distribute the product, service the product, provide raw materials and so on. So that's one type of innovation - make it simple and affordable so many people could afford.
The second type is called a ‘Sustaining Innovation’ - those innovations that make good products, better. And so simply, it’s like heated seats in your car. You've got power windows. You've got adaptive cruise control. Those are very important as well for economies and organisations to stay competitive and relevant. However, when you begin to think about the impact they have on an economy, they’re very different to Market-Creating Innovations. Sustaining Innovations are more substitutive in character because they are targeting people who can already afford existing products in the market. In our language we say they are targeting the consumption economy. The Market-Creating Innovations are targeting the non-consumption economy - people who would love to consume but can't.
The third types are Efficiency Innovations. These are innovations that help you make good products, cheaper. Classic case is outsourcing. This is also a lot of resource extraction industries, where you know you're sending a commodity product, and you introduce a new technology to help you reduce your workforce by particular percentage, but you increase your productivity. Now that type of innovation, also important, has its place in the economy, but it has a different impact on the economy.
So as an organisation and as a country, we would be well served by understanding that innovation is not a universal word that means the same thing regardless of the circumstance. There are different types and each type has a different impact on the economy.
So that's just one example of how that course, that simple theory of understanding that if I create a market, here is what will happen; if I make a good product better here is what is likely going to happen; if I invest in efficiency innovations, people in this community are probably going to lose jobs and I need to think about how to replace and so on. Those things help us become more critical thinkers and much better managers.
You have outlined theories as something that helps individuals improve project success rates. What are the most common challenges investors, entrepreneurs, and development professionals face when building a successful enterprise; and what advice do you commonly give to work around these? [12:50]
That's a brilliant question and I think the answer is counterintuitive. I'll give two responses to that. First - the obsession with ending poverty, ending a particular illness, providing water or providing clinics - that obsession and whatever limited success the organisation gets is often a big challenge and a big problem. What I mean by that, is if my goal is to end extreme poverty, or alleviate poverty, there are many things that I will do as an organisation that don’t actually help people begin the march towards prosperity, but they do alleviate poverty and so they seem to be things that will be acceptable. The example I give is with the organisation I founded, Poverty Stops Here. As an organisation, we built five wells and of those five wells, four of them broke down. Now, after the second well broke down, I knew that the third well we'd built was probably going to break down and the people in the community would not get access to water. But because my goal at the time was to alleviate poverty, I told myself at least the well is going to work for six months, maybe a year, and that would help. When you have an entirely different goal, which is to create something that's more sustainable, that can actually get people a foot on the ladder towards prosperity, then projects like that no longer cut it, because you know that they are just not going to be enough. So I think the first one is it is a challenge and a mistake, and it is unfortunate, but we actually focus on solving the wrong problems - trying to alleviate poverty, I think that's not the problem we should try to solve.
The second one is more to the investors.
The best opportunities actually come from seeing what many others can't, which is quite interesting when you think about it. Every investor wants an edge. Every entrepreneur wants an edge. But the minute you meet an entrepreneur who tries to convince you to invest in something that you can't see, it becomes suspicious.
So I'll go back to my example of Henry Ford. Before Henry Ford said I want to democratise cars, cars were toys for the rich. We had ways of moving around. We had trains, we had horses and carriages, and we organised our lives around those modes of transportation. Cars were very expensive things that only rich people could afford. Well, Henry Ford said, ‘I want to make this available for everybody,’ and he lost quite a few investors when he made that decision because they just could not see it. How could people afford this? There's no way. It is impossible... but he created a new market for cars that drove a lot of development. A similar thing happened about 20 years ago with the proliferation of mobile phones, especially in Africa where an entrepreneur by the name of Mo Ibrahim said, ‘I want to democratise the cell phone for the average African.’ People said, ‘no way.’ They thought he was crazy. To cut the long story short, he was able to create a new market for mobile telephony and in seven years he was able to create over $3.4 billion worth of value from the poorest continent in the world, because he saw an opportunity that many others didn't and he went after it. So those are two misconceptions, challenges and mistakes that I think a lot of groups might make.
Can you please share more about the specific innovation techniques or strategic approaches you employ to create positive change through business? [17:40]
Business gets a bad rap. The private sector, the investor class... in the private sector we have done some things that are bad. If you look at the financial crisis people. You know, the bankers and so. But with the new way of categorising innovation, I think it helps. That can really help investors, governments, policy makers and development people to really see that not all innovation is created equal. When you create a new market that provides access for many people - things that historically they haven't had access to - I think there's a lot of opportunity for good to come out of that. And so one of the examples is a company in Mexico, called Clínicas del Azúcar, and they are a chain of diabetes clinics. The average person in Mexico spends about a thousand dollars on diabetes care annually and it's one of the fastest growing diabetes countries in the world. There's a high rate of infection of the disease. Clínicas del Azúcar thought about starting a non-profit, and then helping people get treatment. But then instead, he took a step back and created an organisation that leverages technology efficiency and certain organisational structures. Now he's providing diabetes care for about two-hundred and fifty dollars (annually). He's creating a new market of people who historically did not have access to diabetes care. He's doing it in a profitable and sustainable way, and doing it in a way that's actually much better than he would have if he tried to start a non-profit and raise donations.
So really understanding that there are different types of innovations and you can have significant impact on the economy if you focus on creating a new market by providing access for people who historically did not have any.
Efosa, before when we were talking about the common challenges that investors, entrepreneurs and development professionals face, you alluded to a common issue that they face is they seem to be solving the wrong problem. Nowadays, there's a lot of traction around organisations becoming purposeful. Having a clear mission that seeks to solve a social or environmental problem. Businesses having a purpose that is centred around social or environmental impact. Do you think that having a clear purpose helps accelerate innovation, in that it is slightly more specific and addresses a clear problem? [20:11]
Absolutely. There is one thing I would caution though. One of the things I know, learning from Prof. Christensen, is a theory, a model he teaches us called 'Deliberate and Emergent Strategies'. Now these strategies are simply one of the models we learn in the course where at the onset of the organisation, when you're not quite sure of the market, or what you're supposed to be doing, what you want to do, you want to have more of an emergent strategy.
You want to listen. You want to enquire. You want to learn. Then when you figure out the business model that makes sense, (and you know, non-profits have a business model too, this isn't just for for-profits), that can scale, you have to remember you scale the good and you scale the bad.
If you go back to my example with Clínicas del Azúcar - if Javier Luzano, the Founder of this wonderful organisation, said, ‘my purpose here is to provide diabetes care and I want to start a non-profit that does it’ that would be the purpose of the organisation. Still a good purpose, but you see he has developed a deliberate strategy at a time where he should be emergent. At a time where he should be learning. He should be asking different questions. How can I leverage technology to provide this solution? Is there a way I could make this significantly less expensive? Is the current solution, (even if we raise all the money), actually good for the diabetes patient? He was asking himself those questions and came to find the current solution actually wasn't good.
So, purpose is absolutely critical because it gives you a north star. I would add to that that you must figure out if you need to have a deliberate strategy or an emergent strategy. I think you do that for your organisation, your business and you do that for your life as well.
Fascinating. Part of the focus of your research has been around understanding why poor countries have remained poor, despite the trillions of dollars spent on development over the past several decades. Why is this? [23:14]
It's quite simple actually when you think about it. We have been trying to fix poverty. We have been trying to fix corruption. We have been trying to fix infrastructure. We have been trying to fix institutions. We have been trying to fix all these things, which are simply symptoms. Symptoms of a lack of an innovation culture; a culture of curiosity. No matter how much money we spend on pushing the right solution to many poor societies, we are never going to get to fixing poverty. That really is at the heart of the paradox. That really is at the heart of our book.
You don't get to fixing poverty by trying to fix poverty. You have to have an entirely different goal and a different agenda.
When you look at the past 30 years, we celebrate the fact that many people, over a billion, have been lifted out of poverty. That's a good thing to celebrate, but when you take a step back and say, who are these people? Where do they come from? They come primarily for one country - China. To a lesser extent India. There are a couple of hundred million in India, and about eight-hundred million in China. So if you take out India and China, we are not looking good with regards to poverty demographics. The number of people living in poverty in Africa is going up. It's projected to keep going up, but when you look at the strategies that these countries employed to "fix" poverty, its entirely different.
China said, (I'm obviously paraphrasing and simplifying), ‘let's innovate. Let us create stuff that the world wants. Let us create stuff China wants. And let's learn how to do that.’ So you go to China; you’ve got a company; you've got a JV with a Chinese company; and they learn the technology. They figure it out. Very different strategies. As a result of that, their focus was not primarily on alleviating poverty, it was creating a prosperous China. Now when you go to many countries in Africa, very different strategies - let's alleviate poverty; let's help these people... very different strategies. So that's why many countries remain poor.
You don't get to fixing poverty by trying to fix poverty. You have to have a different focus. A different goal. I think creating prosperity is a much better goal to have.
That’s the main essence of yours and Prof. Christensen’s new book Prosperity Paradox: How Innovation Can Lift Nations Out of Poverty. What is the new lens on how governments, development organisations, entrepreneurs and businesses should view economic development? [26:15]
Two answers really quickly. One is, it's actually the title of chapter three 'In Struggle Lies Opportunity'. When you see people struggling to do something, then that has to be a mark not just of poverty, but of significant economic and social opportunity. So that's what Mo Ibrahim saw twenty years ago. When people would want to see their parents, they would have to take long journeys to the villages. When people wanted to have to communicate with a friend, when people could not call in sick to work... I mean simple things. He saw that struggle and said, ‘there is an immense opportunity here.’ Now, the solution to the prosperity paradox is incredibly difficult. I mean, he had a hard time building the telco infrastructure in Africa, but in that struggle lies opportunity. That's the first one.
The second one is a concept we explain in the book of pushing versus pulling. See, poverty almost always shows itself as a lack of resources. A lack of schools, a lack of water, a lack of roads, a lack of clinics... and so our response is to push the solutions to these problems. We pushed wells, as I did. We pushed the schools, we pushed the clinics, we pushed the roads... we push all these things. Many, many times, these solutions are temporary at best. I would be a testament to that and a lot of research we uncover in the book also shows that many projects that we push do not work.
Instead, a different way to think about this is what might a new market for mobile telephony for instance pull into the economy? I'll answer that question. Today, that new market in Africa at least, is pulling in about twenty plus billion dollars in tax revenue; about 4 million or so jobs. It's also pulling in about $200 billion of economic impact into the economy and it's pulling in a bunch of other things. It's actually pulling in education. It's pulling in healthcare. It's pulling in infrastructure development and it's pulling in the development of the institutions that can help govern the telecommunications sector, and a couple of other adjacent sectors... The lawyers writing contracts; bankers financing cell towers. So you see, it is a very different approach. Same people, same demographic. One says, ‘I am going to push what I believe the solution is for you - water, education, schools and clinics and so on.’ The other says, ‘let me lean in to your struggle; understand what you are going through; create a new market that helps you make progress,’ and as a result, that market is going to pull so many things into the economy. So I hope that lens really comes through in the book and begins to change the way people see these problems.
That’s fascinating. That push & pull dynamic really highlights the issue there and a way around it. As a final note, could you please recommend some great books on innovation & impact for our listeners?
So, a lot of the stuff we talk about in the book I will be the first to say is not easy to do. Especially when you have shareholders or managers screaming down your throat. So I'd recommend two books. One is called Dual Transformation by Scott Anthony, Clarke Gilbert and Mark Johnson. It says, ‘how do we develop prosperous organisations that can save disruptive threat, while still keeping the core business going?’ Many organisations today are designed to push solutions onto poor countries. They start to think, how can we develop a different pull strategy?
Another one is called The Innovator’s Guide to Growth. So in our book we talk a lot about non-consumption. We talk about the consumption economy and the non-consumption economy, and how you really can't see the non-consumption economy a lot of the time with conventional demographics. So The Innovator’s Guide to Growth really helps you think about non-consumption, and how you can actually target it and build an organisation that focuses on that.