Five Innovations Leapfrogging the U.S.
Originally posted at Wired on January 2, 2014
The U.S. prides itself on being the source of the world’s greatest innovations. While this generally is true, we have become complacent and are at risk of being overtaken by increasingly unique innovation in other countries. The U.S. ranks number two in patents granted worldwide, just behind Japan, but China is rising quickly in the ranks.
Historically, most innovation in developing markets was adapting business models from industrialized markets to the local situation. Think Baidu in China, which is a Google equivalent, or V Kontakte in Russia, which is the local Facebook.
However, we are seeing an increasing amount of leapfrogging, as developing markets innovate to create new business models that bring them ahead of industrialized markets. Here are five innovations doing just that:
1. Mobile Payments that Work: M Pesa
Emerging markets tend to rely on mobile communications much more than the US. Cell phones are plentiful, cheap and often more reliable than traditional fixed line phones. For example India, has 30 times the number of cell phone users as landlines. At the same time, the percentage of the population that has access to traditional financial services is low, creating a gap in how to make payments.
Enter M Pesa, an easy to use, low transaction cost, ubiquitous way of making mobile payments. Launched in Kenya in 2007 by Vodaphone’s Safaricom, it now handles over 80 transactions per second and more than 30% of Kenya’s GDP. If you want to buy groceries, pay for your next holiday or shop for the latest fashionable clothing you can use M Pesa. Compare that to the U.S., where mobile payments are still something of a novelty and largely relegated to paying your monthly cell phone bill. The U.S. has a long way to go.
2. Next Generation Social Network: WeChat
China’s Tencent had been a laggard in the domestic and global social media markets until it launched WeChat (WeiXin) in early 2011. Taking its cues from Facebook, instant messaging and Skype, WeChat is much more than the sum of its parts.
Want to send an instant voice message to a friend on the other side of the world for free? Done. Want to post content to friends quickly and securely? Done. Need to send a quick message to your family but don’t want to incur text messaging fees? Done. Want to to discover people near you and make some new friends? Done. The system is easy, fun and just works.
WeChat now has more than 236 million users and is rumored to be launching e-commerce and banking services over the next few months. In many ways WeChat has leapfrogged its developed market peers. Don’t believe me? Tencent’s market cap is now over $100 billion, rivaling that of Facebook.
3. Water Desalination: IDE Technologies
Water is boring, right? Who really cares about water technology? Then again, the U.S. has suffered from some of its worst droughts in recent years and if you live in the water starved Southwest, this is no laughing matter. To put things in perspective, it is estimated that there will be a 40% worldwide shortfall in water by 2030.
If you search the globe for the most advanced water technology, you may be surprised to find yourself in Israel. Long a center for high technology, Israel has pioneered everything from drip irrigation to desalination. With the world’s fresh water sources drying up in the U.S. and being irreparably polluted in China, desalination is becoming a critical technology.
IDE Technologies, based just north of Tel Aviv, just opened up the world’s largest seawater reverse osmosis (SWRO) desalination plant. While there are certainly competitors in the space, IDE has aggressively expanded from traditional oil and gas and mining verticals to address the needs of governments as they fight to provide clean water for drinking and other uses to their people.
4. Business to business commerce: Alibaba/Taobao
Taobao. Aibaba. For anyone living in China, these are household names. For U.S. based purchasers looking for new suppliers, you probably have heard of them. But for most Americans, the fact that Alibaba sold $5.9 billion on China’s “Black Friday” would come as something of a shock.
Jack Ma, Alibaba’s founder, is a huge celebrity in his native land, and rightfully so. A former teacher, he founded Alibaba in 1999. A few years later the company launched Taobao as an e-commerce site and has continued to grow rapidly. Still the world’s largest B2B marketplace, privately held Alibaba is expected to IPO in 2014, with a valuation that will likely be higher than Twitter and Facebook combined. Once it has additional cash in its coffers, don’t be surprised to see Alibaba competing with Amazon and E-bay in the U.S.
5. Sustainable Cars: Biofuels in Brazil
The U.S. keeps talking about energy independence, but so long as the internal combustion engine and gasoline are the dominant forces in getting cars from Point A to Point B, we will need imported crude oil. Looking south to our neighbors in Brazil, we see an innovative market where the government actually has had the foresight to put in place the infrastructure and regulations to create an independent, sustainable transportation industry.
Brazil’s government decided in 1976, amidst the oil shocks of that decade, to require all gasoline to include at least 10% ethanol. That proportion has increased over the years and Brazil now relies on biofuels for over 20% of its total transportation fuels. Today, all cars sold in Brazil can handle biofuels, which are mainly derived from local sugar cane. While the U.S. and other markets chase after “next generation” biofuels made from cellulose and other technologies, Brazil has quietly, consistently, pushed far ahead of other countries in creating the world’s leading biofuels market.
