As this article in Spiegel Online International states, the mobile industry is about to be disrupted again; Swedish-Indian private start-up VNL intends to launch its low-cost and energy efficient base station for the “next billion mobile users”.
Whilst consumers in the West salivate at the latest Apple iPhone the less glamorous network equipment sector that powers the networks is focused elsewhere. Growth in emerging and developing markets drives the majority of new sales today, but at prices that leave little margin for the struggling vendors or truly satisfy the needs of local operators.
VNL sees opportunity to address the next billion mobile users and in so doing “disrupt” the leading mobile telco vendors of Ericsson, Nokia Siemens and Alcatel Lucent and their more price competitive Chinese competitors Huwai and ZTE.
They aim to do this via their solar-powered network base station specifically designed to meet emerging market needs. More energy-efficient, simpler to install and easier to maintain than today's offering, they hope to open-up the market to more low-end growth so network operators can be profitable with revenues of a few dollars per subscriber rather than $5-$10 today.
If delivered as conceived, VNL will under-cut current offerings by a least a third and maybe much more. They will enable networks to be installed and operated at lower costs and in places with no grid electricity or need for increasingly expensive diesel for generators. They aim to drive demand in rural and impoverished areas across India and elsewhere. Not only will this improve the quality of life for millions but it will drive GDP growth and encourage enterprise and development, as mobile penetration has already demonstrated in many emerging markets (see the GSM Association for further details).
For students of innovation, VNL's solution could be a classic example of 'disruptive innovation'. On the one hand such disruptive innovation can expand a market by lowering the cost for Customers for whom the current solution is too expensive. At the same time it can more cost-efficiently (and environmentally in this case) meet the basic needs of existing Customers for whom current solutions are both too sophisticated and too expensive, discouraging usage and adoption.
The potential for such “two-sided" disruptive innovation in emerging markets is significant. We will surely see examples in other industry’s as the limitations of products adapted from Western designs and dependent on Western infrastructure, support and resources reach their natural limits but fail to address the real needs of billions.
Can Western firms react quickly enough to address this market themselves, and should they? Are they willing to disrupt and cannibalise their own existing businesses and product lines in order to do this? And are they willing to concede direction and control to emerging market subsidiaries and local R&D or will it be left to company’s such as VNL to disrupt in the future?
No financial, commercial or client interest to declare.