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The Prosperity Paradox: How Innovation Can Lift Nations Out of Poverty

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Clayton M. Christensen, the author of such business classics as The Innovator’s Dilemma and the New York Times bestseller How Will You Measure Your Life, and co-authors Efosa Ojomo and Karen Dillon reveal why so many investments in economic development fail to generate sustainable prosperity, and offers a groundbreaking solution for true and lasting change.

Global poverty is one of the world’s most vexing problems. For decades, we’ve assumed smart, well-intentioned people will eventually be able to change the economic trajectory of poor countries. From education to healthcare, infrastructure to eradicating corruption, too many solutions rely on trial and error. Essentially, the plan is often to identify areas that need help, flood them with resources, and hope to see change over time.

But hope is not an effective strategy.

Clayton M. Christensen and his co-authors reveal a paradox at the heart of our approach to solving poverty. While noble, our current solutions are not producing consistent results, and in some cases, have exacerbated the problem. At least twenty countries that have received billions of dollars’ worth of aid are poorer now.

Applying the rigorous and theory-driven analysis he is known for, Christensen suggests a better way. The right kind of innovation not only builds companies—but also builds countries. The Prosperity Paradox identifies the limits of common economic development models, which tend to be top-down efforts, and offers a new framework for economic growth based on entrepreneurship and market-creating innovation. Christensen, Ojomo, and Dillon use successful examples from America’s own economic development, including Ford, Eastman Kodak, and Singer Sewing Machines, and shows how similar models have worked in other regions such as Japan, South Korea, Nigeria, Rwanda, India, Argentina, and Mexico.

The ideas in this book will help companies desperate for real, long-term growth see actual, sustainable progress where they’ve failed before. But The Prosperity Paradox is more than a business book; it is a call to action for anyone who wants a fresh take for making the world a better and more prosperous place.

368 pages, ebook

First published January 15, 2019

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About the author

Clayton M. Christensen

94 books1,878 followers
Clayton M. Christensen is the Robert and Jane Cizik Professor of Business Administration at the Harvard Business School, with a joint appointment in the Technology & Operations Management and General Management faculty groups. He is best known for his study of innovation in commercial enterprises. His first book, The Innovator's Dilemma, articulated his theory of disruptive technology.

Christensen was born in Salt Lake City, Utah, the second of eight children. He holds a B.A. with highest honors in economics at Brigham Young University (1975), an M.Phil. in applied econometrics and the economics of less-developed countries at Oxford University (1977, Rhodes Scholar), an MBA with High Distinction at the Harvard Business School (1979, George F. Baker Scholar), and a DBA at the Harvard Business School (1992).

Clay Christensen lives in Belmont, Massachusetts with his five children, wife Christine, and is a member of The Church of Jesus Christ of Latter-day Saints. He has served in several leadership positions in the Church. He served as an Area Seventy beginning in April 2002. Prior to that he served as a counselor in the Massachusetts Boston Mission Presidency. He has also served as a bishop. He speaks fluent Korean.

Christensen is currently battling follicular lymphoma.

For further details and an ordered list of the author's works, see the author's Wikipedia page.

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Displaying 1 - 30 of 151 reviews
Profile Image for Mehrsa.
2,234 reviews3,660 followers
February 13, 2019
Oh boy--what to say about this book. I'll start with the history--no, America did not become prosperous thanks to innovators like Ford and Singer. There are many reasons for our prosperity (i.e. we became the empire, we put the world on the dollar standard, we had lots of resources, we successfully created a mixed economy, etc etc). And the poor aren't poor because they lacked innovation--go read Jason Hickel's book or literally any other good development book to look at the root causes of poverty.

Christensen et all propose that innovators create markets where none existed. This can be a good idea in a few of the cherrypicked examples he chose like phone lines in Africa and others. In other examples, it looks like a neat way for entrepreneurs to exploit the world's poor. Selling micro-insurance to "protect" poor people against the death of a loved one? Is this a joke? Some dude becomes a millionaire because he takes premiums from poor people for the risks of poverty? Sorry, no. Maybe this would have been a good time for Christensen to talk about America again--FOR IT WAS NOT Ford and Singer who took the risks out of poverty for Americans. It was the federal government--through social security, WIC, etc. This book made me angry. I really like Christiansen and I think he means well. I think he actually wants to fix poverty, but he is so far down his neoliberal business school well of a worldview that he cannot honestly take stock of the world. I really worry about how many people will read this book and take it seriously and go try to find markets that hustle the poor out of their meager dollars.
362 reviews
April 29, 2019
It's taken me a while to write a review of this book (longer than it took me to finish it). But I've finally been able to marshal my thoughts into something semi-cohesive, so here it goes:

The main argument of the Prosperity Paradox is that market-creating innovation drives growth -- good institutions, infrastructure, etc are secondary. Using historical examples from the US, Korea and some contemporary cases in Mexico, Nigeria (and a lot of other countries), the authors challenge us to rethink the history of development through the lens of innovation.

Here's what the book does well: it is very clear in its definitions, and does a good job differentiating between the types of innovation. The case studies are also quite interesting, and the authors illustrate how they fit the framework of their main argument -- innovation is crucial for growth. If this book was geared towards convincing entrepreneurs to seek investment opportunities in developing countries, or to go after market-creating opportunities, I would consider it a success.

But in terms of offering a different approach to development for policy makers, the book is far less convincing.

The biggest flaw is that the book is entirely anecdotal, and policy should not be informed solely by anecdotes. The examples that the authors cite all suffer from survivorship bias. Yes, the singer sewing machine transformed the clothing industry, and yes, the Ford company changed manufacturing and infrastructure in the US. But how likely are similar situations to arise in developing countries today? And more importantly, why aren't tons of these kinds of innovations springing up already? If good institutions aren't necessary to bring about innovation and development, then what is the role of policy makers? What are the initial conditions that make innovation more likely to succeed in bringing prosperity?
For example, Tolaram has made some difference in Nigeria but clearly not enough to raise GDP per capita in any meaningful way. How many Tolarams will it take? Why haven't there been more? What are the barriers to scaling up market-creating innovations? What can policy makers do?

Secondly, the authors assume that market-creating is labor-intensive, but that is not necessarily the case. For example, MainOne has improved internet access for millions of people in West Africa, but the business is not particularly labor intensive.

Finally, for a book about development, it is oddly quiet about China. One could argue that examples from US history do not apply today because the world is far more connected and capital flows away more easily from high-risk areas like developing countries.. China provides one of the starkest examples of millions of people lifted out of poverty and an economy transformed in just a few decades. It would have been more compelling if the authors could show how China's trajectory fits with their theory of innovation as development (government-facilitated or not).

Overall, the book had interesting ideas but falls short in terms of policy relevance.
Profile Image for Catalin Tenita.
2 reviews118 followers
April 6, 2019
E o carte grea in ciuda tonului foarte relaxat si a numeroaselor exemple. Curge ca un bestseller dar iti pune multe intrebari.
Tocmai d-aia am stat o saptamana inainte sa scriu despre ea, ca sa am timp sa ma gandesc. Adica e o carte prea seducatoare, si e nevoie sa zabovesti un pic asupra ideilor, nu sa le adopti sau sa le respingi in corpore.

Teza principala e ca nu toate inovatiile sunt la fel. Ca exista invovatii care creeaza piete (de pilda aparitia Iphone-ului), inovatii de marketing si conservare de marketshare (de pilda, Iphone-ul care e acum si negru si alb si gri si rosu si mai mare si mai mic) si inovatii de eficientizare (de pilda un proces prin care Iphone-ul se realizeza cu 30% mai putina munca umana).

Christensen spune ca inovatiile care dezvolta societatea sunt cele care creeaza piete noi, care aduc in zona consumului non-consumatorii de pana atunci fie prin oferirea unui produs la un pret substantial mai redus, fie prin scaderea altor bariere (de tranzactionare, de logistica, de comunicare etc). Ideal prin ambele.

Si vine si povesteste pe larg despre anumite piete din tari in curs de dezvoltare. De pilda asigurarea de viata prin telefonul mobil din India la cativa zeci de centi pe luna, sau hranirea populatiei cu noodles in Nigeria, sau clinicile de diabet cu abonament de 200 dolari pe an din Mexic, sau ochelarii la 10-15 dolari sau clinicile de boli cardiace din India la 1000-2000 de dolari pentru interventii care in alte state (cele dezvoltate) ar costa deci de mii de dolari.

Christensen spune ca aceste inovatii genereaza piete interne puternice. Nu doar ca aduc in zona consumului non-consumatori, dar creeaza si locuri de munca mai bine platite care nu se bazeaza pe ecartul salarial dintre tarile dezvoltate si cele nedezvoltate/in curs de dezvoltare.

Mai mult, autorul sustine ca aceste tipuri de inovatii creeaza infrastructura. De la infrastructura in sensul clasic (utilitati, drumuri), pana la infrastructura in sensul soft (educatie, knowledge si chiar proceduri legale/administrative care imping inspre statul de drept).

In esenta Christensen sustine ca o astfel de abordare (antreprenoriala, de tipul pull cum zice el) este mai eficienta decat una de tipul ajutoare (prin granturi, subventii, de tipul push). Aceasta abordare din urma ar fi neeficienta in termeni economici. Si da exemplul fantanilor din Africa care raman in paragina daca nu sunt asumate de o comunitate sau al toaletelor din India care presupun niste costuri de operare ce le fac prohibitive. Sau al autostrazilor finantate de China in Africa care din lipsa de transport de marfuri inghit bani, nu doar ca nu sustin economia.

Ca un corolar al acestei teorii, Christensen spune ca practic coruptia si implementarea normelor de functionare ale democratiei vestice nu au sanse de reusita fara un background economic suficient de vibrant. Practic daca nu ai cum sa iti rezolvi problemele altfel you "hire corruption".

Si intr-adevar daca ne gandim la societatea noastra gasim o atitutidine care substantiaza aceste teorii.

Personal m-a cam enervat partea asta. E greu sa acceptam teorii care sunt impotriva parerii noastre (coruptia genereaza sub-dezvoltare si nu sub-dezvoltarea genereaza coruptie - desi evident ca e un cerc).

Asa ca am incercat sa gasesc o cale care sa tina cont de aceasta carte (care repet, este fabuloasa - inclusiv prin referirile la inca vreo 10 carti pe care as dori sa le citesc) si teoria mea despre Romania.

Si asta suna ca asa:

E evident ca exista o mare doza de adevar in ceea ce zice omul. Insa in tara noastra, aflata intr-o zona bizara intre tarile dezvoltate si cele nedezvoltate, coruptia este o problema sistemica nelegata neaparat de nedezvoltarea economica. Din contra, daca ne-am lua strict dupa dezvoltarea economica, daca ar exista o relatie bijectiva, noi ar trebui sa stam mult mai bine decat stam in realitate in privinta statului de drept si a coruptiei.

Si atunci de unde vine problema? Dupa mine problema vine din viteza de evolutie inegala a economicului vs viata publica. Practic economicul (privat) a luat-o cu vreo 15 ani inaintea publicului (politic, administratie, disponibilitatea de implicare in civic) datorita boostului primit de aderarea noastra la UE (si la NATO). Datorita investitiilor straine, a crearii unui sector in jurul internetului, a milioanelor de diasporeni.

Si de fapt acum inovatia noastra - la care lucram de cativa ani din mai multe directii (civica, politica) - este acea creare de piata in zona publica. Adica aducerea de resurse (umane, materiale, idei, proceduri) din zona economica (si academica adevarata) in sfera publicului.
Cu alte cuvinte, nu cred ca ceea ce facem noi acum e in contra teoriei lui Christensen, desi ar parea la prima vedere.

E doar cumva mai convolut datorita particularitatilor nationale. Nu se refera direct la economic, asa este, dar tot un fel de market-creating inovation si de generare de infrastructura paralela este.

Pe de alta parte cartea spuna un mare adevar pe care noi (astia care se cred mai cultivati) il ignoram in 90% din cazuri. Vorbim foarte mult de eficientizarea sferei publice (informatizare, digitalizare, reducerea coruptie, proceduralizare), dar nu gandim in termeni de aducere a non-consumatorilor in sfera publica.
Cine sunt acest non consumatori? Pai in primul rand acei oameni care nu au voce. De la tineri carora nu le pasa, la persoane cu mai putina educatie, aflati intr-o stare de supunere cvasifeudala, ale caror probleme nu sunt cu adevarat adresate.
Intrebarea principala pentru a crea o piata mai larga in sfera publica ar fi: care e o victorie comuna care ar aprinde nu doar mintile bulei noastre? Si exemple ar putea fi spitalul creat de Carmen Uscatu si Oana Gheorghiu sau miscarea pentru autostrazi, dupa mine.
Cred ca e nevoie sa gandim in felul asta, de extindere a placintei si mai putin de reimpartire a ei (ex, daca bugetarii castiga, atunci privatii pierd si invers).
Profile Image for Miebara Jato.
149 reviews22 followers
January 20, 2020
For centuries, economists have debated what brings about economic development, what are the best mechanisms for tackling poverty. There are two leading schools: The Keynesian camp that supports state intervention and; the free marketers that argues for a private sector-led entrepreneurial state.

Of course, the world has tested both options and the result isn't completely sound. The 2008 economic crisis gives us enough reason to be wary of free-market's promises. And the inherent crisis of Marxism is a subtle and loud sign of danger.

For third world countries, the development policies for tackling poverty are mostly crafted by Development institutions located in Washington and pushed down. In addition to these externally imposed policies are the so-called development aid or donations.

But have these development policies and aid worked? You guessed it right, they've failed. In this book, Christensen and his colleagues overturn the current foreign-aid development paradigm of externally imposed, predominantly government-funded capital- and institution-building programs and replace it with a model of entrepreneur-led innovation. The authors contend that “enduring prosperity for many countries will not come from fixing poverty. It will come from investing in innovations that create new markets within these countries.”

"Market-creating innovations do exactly what the name implies—they create new markets. But not just any new markets, new markets that serve people for whom either no products existed or existing products were neither affordable nor accessible for a variety of reasons. These innovations transform complicated and expensive products into ones that are so much more affordable and accessible that many more people are able to buy and use them. In some cases, they even create entirely new product categories".

A good example of market-creating innovation mentioned in the boom is the Singapore-based Tolaram Group, that created the instant-noodle market in Nigeria, pushing out 4.5 billion packets annually and generating revenue of almost $1 billion a year. This and numerous other examples cited in the book is to illustrate the point that "development takes root when innovation harnessed to the entrepreneur’s ambition pulls in the resources society needs to become prosperous."

But if all it takes for countries to prosper is to undertake market-creating innovations, why are they not doing it? The problem, as the authors pointed out, is how to spot these innovative opportunities and going after them. To spot innovative opportunities, the authors make the case for harnessing the power of "entrepreneurs to develop more and more market-creating innovations, this can—and indeed does—lead to better and better governance."

In section 3, the authors discussed the barriers to prosperity. And the author's premises are indeed paradoxical and head-scratching. Take, for instance, their arguments that "corruption is not the problem; it's a solution". Therefore, instead of trying to eliminate corruption, the right question policymakers should ask is: Why does corruption persist in the first place?

Christensen and his co-authors supported their arguments with plenty of examples and empirical evidence. It's a serious book that makes you reconsider any long-held view about development policies. I recommend it for policymakers.
Profile Image for Donna.
3,871 reviews8 followers
December 26, 2022
Genres: Nonfiction/Economics

I like this author. I like how he gives food for thought in his books. He manages to shed light on things I haven't quite thought about in his way. Dialogue and action are necessary in bringing change and he shows that.

I liked this one. I listened to the audio and I thought it was going to be long winded. Gratefully, I never had that feeling. So 4 stars.
Profile Image for Daniel.
611 reviews82 followers
February 10, 2019
Christensen tackles the national development this time. Well known to the business world as the Innovation Professor, he asked why foreign aid never worked in alleviating poverty in developing nations. He used the example of well building in poor regions in Africa: it works for a while and when it dries up or breaks down, no one has the expertise or the parts to fix it. So the broken well becomes a monument showing how aid does not work. Or computers sent to communities where there is no electricity. Even the great economist Jeffrey Sachs could not do it (Nina Munk wrote about it in great detail). Instead, Christensen suggested that business innovation with local conditions in mind will bring true economic development. For example, Mo Ibrahim founded Celtel, to supply mobile networks in Africa, when most companies would have written off such investments. He had the vision to sell prepaid cards for less than US$1 to poor people as well as financing to people, build the infrastructure, train the engineers. Many other examples including Singapore was given. When Singapore was founded, it was poor and Lee Kuan Yew built the Economic Development Board and it sent representatives to the West to ask for Investments, not aid. The rest is history and now Singapore is one of the richest countries in the world.

A great book from a great professor. However the whole Business School suffer from the Survivorship bias. That is, winners are studied for their winning strategies. However sometimes it might just be the right timing and good luck. For example, Singapore received investments from the West when China was still in turmoil and closed for business; Lee said so in his book. Sometimes continuing to use the same strategy which was useful in the past will cause once great companies to be disrupted, as Christensen himself pointed out in his seminal book ‘The Innovator’s Dilemma’. Every country wants to develop economically, but not all countries succeed because of many many reasons. Nonetheless it is a good book of ideas.
Profile Image for Terry Earley.
928 reviews10 followers
July 30, 2019

I am not sure I agree with all of Christensen's premises that creating markets will lift 3rd world counties out of poverty. He provides plenty of examples, and research, mainly from his colleagues at Harvard.

What I did enjoy and saved was his chapter on corruption. He posits that each year, the world pays between 1.5 and 2 trillion USD in bribes. That puts a huge dent in the world economy. He writes that much of this is from ordinary people finding themselves with no other options to simply feed their families. When an Indian policeman gets a $200/month salary, but it costs $400 to just make ends meet, he is compelled to "hire" a bribery demand strategy. He has some creative examples about how to reduce corruption significantly.

Worth reading.
Profile Image for Cristina Balan.
69 reviews28 followers
July 7, 2020
Outstanding! I am so grateful to have been able to read this book, and so sad that professor Clayton M. Christensen is no longer with us. Such a loss!
Every page of the book shows his passion for innovation and love of people.
Food for thought, ideas that could emerge simply by looking into the right direction (i.e. non-consumers, processes that need and can be improved) - everything is in there. With real life examples, one can learn from both successful initiatives and huge failures.
Do yourself a favour and read the book.
Profile Image for Marcin Zaremba.
Author 6 books97 followers
March 27, 2019
Nowa książka Claytona to rozwinięcie teorii innowacji na państws i lokalnych ekonomii. Konkretnie: jak market creating innovation wpływają kaskadowo na poprawę jakości życia.

Christensen wykorzystuje znane ze wcześniejszych swoich dzieł idee na zupełnie nowym gruncie - i robi to na swój analityczny i empatyczny jednocześnie sposób.

Pokazuje różnie między podejściem pull (firmy które są zintegrowane i budują same potrzebną infrastrukturę) a push (firmy które opierają się na inwestycjach państwowych w infrastrukturę). Te pierwsze mają większe szanse na sukces gdyż inwestycje państwowe w krajach rozwijających się są nietrafione i nieekonomicze - jak słynny niedokończony most w Cape Town.

Jednak najmocniejsza teza książki to dla
mnie non-consumption - czyli idea, że faktyczne miejsce do rozwoju to sprzedaż rozwiązań do grup, które nie konsumują bo próg (finansowy, czasowy, dostępności itp) jest dla nich zbyt duży. Ogromne rzesze cukrzyków w Meksyku nie może nic zrobić ze swoją przypadłością bo terapia jest dla nich zbyt kosztowna... ale odpowienia innowacja jest w stanie odblokować ten rynek i uratować mnóstwo żyć.
Dlaczego to się do tej pory nie stało? Bo skoro nikt nie konsumuje to nie ma to liczb, więc ten rynek „nie istnieje” - dlaczego mamy wchodzić w coś co nie istnieje? Dopiero przez okulary non-consuption widać wyraźnie że to właśnie oznacza żyzną glebę a nie pustynię

Reasumując książka mnie niczym nie zaskoczyła: to ciągle ten sam dobry Clayton, ale zaaplikowany w nowej dziedzinie. Teoria ciągle broni się dobrze

1,971 reviews47 followers
April 6, 2019
This is a book about market innovation - and focuses largely on private companies leading the way in development. It's a very well-structured book: we start with the idea that there are three kinds of innovation: sustaining innovation (improvements to existing solutions on the market), efficiency innovation (companies can do more with fewer resources), and market-creating innovation (targetes non-consumption). The latter is the most important, and the book focuses on that.

Perhaps it's the nature of this book, but after a while, I felt that it focused too much on the private sector's role in market-creating innovation. Governments are secondary in building infrastructure; in fact, it is private companies that lead the way, and when there are enough resources, governments eventually step in and formalise the arrangements. For example, roads and railroads in America were privately funded. Another example he cites: legal institutions came about because of private companies needing a way to resolve disputes.

On one level, this makes sense - after all, if there is no demand for the resource, then providing the resource without understanding the market for it can lead it to a lack of demand for it. The resource must meet a need of the people (the consumers).

On the other, I did feel that the role of government was understated (except in the appendix). The author talks a lot about infrastructure being created by private companies, but public transport, for example, tends to be funded and created by government. Companies rarely initiate that (although countries nowadays have public-private partnerships).

4/5 stars
154 reviews15 followers
April 6, 2019
This book would make a great article. Not enough new opinions/theories to make a full book. Runs on market-worlder philosophy that market innovations can save the world (which I may just be too disillusioned by after reading Winners Take All to be impressed by the nuance offered here).

The basic tenants are that that specifically innovations that turn non-consumers into customers of products/services previously inaccessible, too expensive, too complicated, etc. for them to be relevant. Innovations like efficiency innovations that make a product marginally better/cheaper do not create this transformative change. Uses examples like Ford, Kodak, Bank of America, CelTel, a Nigerian instant noodle company, and a bunch of companies in the rest of the emerging markets thrown together in an appendix at the end.

Also talk about how development only works when it’s ‘pulled’ by the end users rather than ‘pushed’ by the donors/‘experts.’

My favorite part was about corruption and how it’s not actually about leadership, ethics/morals, institutions as many moral high ground westerners often espouse. His perspective is that it is more looking at the ‘job’ people are ‘hiring’ corruption to do, and if there were an easier or cheaper way to do that job, then people would be open to alternatives. Used Napster/Spotify as an example.

Anyway, it had some good points/concepts, but I would have preferred to read them in shorter articles or in a more strategically/logically presented way. As is, it feels a bit haphazard.

Profile Image for Mark.
896 reviews10 followers
May 3, 2019
This is an important book! I just hope that those who have the clout to implement its principles actually read it and put it in to practice! Throwing money at poverty has never worked in the long run, but creating business and opportunity does.
Profile Image for Joris.
97 reviews7 followers
November 30, 2020
Christensen is known for his economic theories on innovation, and in this book he looks specifically at innovation that drives growth in developing regions -- somewhat related to my field of work (building new technology products for emerging markets) so very interesting to me.

His main case is that "market creating innovation", that is innovation that creates entirely new markets by targeting non-consumers (say, inventing a new type of low cost motorbike and selling it to people who would otherwise not own any means of transport) is the strongest driver of economic growth. It's the invention of new products that find strong local market traction, and so get "pulled in" by the keen demand from consumers, that drives nations forward.

He contrasts this to the "push" model of developmental aid, such as building wells or schools, which often fall in disrepair or low use as they don't fit the local market needs and realities as neatly. He is similarly critical of infrastructure investments that aren't driven by the market, and argues the right infrastructure often gets built (either privately or in collaboration with government) as it's needed by innovators to build and grow their local business. He talks about the role of institutions (law, politics, agencies, etc.) in a similar manner: they need to get shaped by local market needs, rather than externally imposed.

The authors stretch their praises for innovation quite far in this book, probably to a fault. But it's compelling food for thought for anyone interested in economic development and innovation.
Profile Image for Sambasivan.
941 reviews27 followers
January 24, 2022
Excellent thoughts by the authors on how one can think about market innovations. They have created a template to address big issues like poverty, communication , sanitation etc at a global level. The examples provided are very appropriate and hard hitting. Well annotated with notes that exemplify the depth of research.

Discussed this book along with my friend over the weekends and therefore could get multiple perspectives. Could appreciate the book better.
Profile Image for Deb.
472 reviews2 followers
January 30, 2019
Such a great book on how innovation can lift an economy. Great examples. Sound insights. Super inspiring. Will need to own and mark up.
Profile Image for Mad Hab.
66 reviews6 followers
April 3, 2019
Not his best book, but still better than anything else
Profile Image for Major B.
49 reviews
May 11, 2022
This was a very eye opening book and has helped me see the world in a different way. I’ll be keeping this book around as a reference for my future goals.
Profile Image for Mike Bright.
126 reviews2 followers
March 29, 2020
Great book on the failures of most current development efforts in third world countries. The emphasis is on innovation that targets unreached consumer populations. There is a lot of good theory behind their claims (from authors with great credentials), and also a lot of practical examples of innovations that served new populations, created jobs, developed infrastructure and had lasting impact. The focus is on creative solutions that pull development in, rather than pushing from the outside.
31 reviews
February 10, 2021
Was drawn to read this book after having Clayton Christensen's other book, How Will you Measure Your Life. However, this was more of an academic read rather than a personal read. Good analysis and case studies of what has and has not worked in raising nations out of poverty. However, left with the feeling of 'what can I do'. Perhaps this book will come to me if ever placed in a position related to urban development or choosing what sort of endeavours to support
Profile Image for Heather.
961 reviews7 followers
April 6, 2019
This is a great book focusing on market-creating innovations and seeing opportunities and potential instead of problems and poverty. This creates change.

"I witnessed firsthand the devastating effects of poverty: I lost friends to preventable illnesses and saw families routinely having to make impossible choices among putting food on the table, educating their children, or supporting the older generation. Suffering was a part of daily life... I am happy to say that when I visit South Korea today, it bears no resemblance to the South Korea I remember... South Korea's transformation in just a few decades is nothing short of miraculous. Unfortunately, such a dramatic transformation has not been possible for many other nations that resembled South Korea a few decades ago (p. vii)."

"Prosperity, it turns out, is a relatively recent phenomenon for most countries. Most wealthy nations have not always been prosperous (p. viii)."

"Since 1960, we have spent more than $4.3 trillion in official development assistance trying to help poorer countries. Unfortunately, many of our interventions have not had the impact in poor countries that we'd hoped they would. In fact, many of the world's poorest countries in 1960 are still poor today (p. x)."

"'Water is life. It's why there are so many water projects throughout the world.'... In a similar vein, when you visit a poor country, the lack of quality education, unpaved roads, bad governance, and other poverty indicators are painfully obvious. Isn't it reasonable to assume that the answer to solving poverty lies in providing one of all of those things (p. x)?"

"There are more than fifty thousand broken wells across Africa alone... The experience was profoundly disheartening for Efosa, who was so eager to help alleviate suffering. His failure raised some difficult questions for him. If these vexing problems couldn't be solved by an injection of resources and goodwill, then what would help instead? Why do some efforts succeed and not others? Why do some countries fare better than others (p. xi)?"

"Alleviating poverty is not the same as creating prosperity. We need to start thinking differently (p. xii)."

"We have written this book with four stakeholders in mind... for those in the development industry who are working diligently to rid the world of poverty... for investors, innovators, and entrepreneurs looking to build successful enterprises in emerging markets... for the policy makers seeking to institute policies that spur development in their countries.... for the ten-year-old children all over the world...who deserve a better life... for the fathers and mothers who work tirelessly to provide for their families, but are unable to rise above a life of subsistence... for the increasing number of youth who...feel their hopes extinguishing because their world seems devoid of opportunity (xiii)."

"'Serious people laughed at me when I told them I wanted to build a telecommunications network in Africa twenty years ago. They told me all the reasons the project would never succeed. Somehow I just kept thinking, I know there are challenges but why can't they see the opportunity (Mo Ibrahim, p. 3)?'"

"What if, instead of trying to fix the visible signs of poverty, we focused on creating lasting prosperity (p. 4)?"

"At the time, mobile phones were seen as an expensive toy for the rich, a luxury that the poor could not afford, and more important, did not need... But Ibrahim, to his credit, saw things differently. Instead of seeing poverty, he saw opportunity.... [he] did not say How will millions of Africans, for whom three meals a day is often a luxury, afford a mobile phone? or How can you justify the investments in infrastructure for a market that does not exist? He focused on the struggle to accomplish something important for which there were few good solutions. For Ibrahim, struggle represented enormous potential (p. 4)."

"Today Africa is home to a sophisticated mobile telecommunications industry, with numerous mobile phone companies...providing more than 965 million mobile phone lines.... Ibrahim saw what others did not (p. 6)."

"It may sound counterintuitive, but our research suggests that enduring prosperity for many countries will will not come from fixing poverty. It will come from investing in innovations that create new markets within these countries. True and lasting prosperity...is not reliably generated through the flood of resources we are directly pouring into poor countries to improve poverty indicators such as low-quality education, subpar health care, bad governance, nonexistent infrastructure, and many other indicators in which an improvement would suggest prosperity. Instead, we believe that for many countries prosperity typically begins to take root in an economy when we invest in a particular type of innovation--market-creating innovation--which often serves as a catalyst and foundation for creating sustained economic development (p. 6)."

"What might happen if we flipped the emphasis to innovation and market-based solutions rather than conventional development-based solution (p. 7)?"

"Good theory is the best way I know to frame problems so that we ask the right questions to get us to the most useful answers (p. 9)."

"Investing in innovations, and more specifically market-creating innovations, has proven a reliable path to prosperity for countries around the world (p. 10)."

"Our definition of innovation refers to something rather specific: a change in the processes by which an organization transforms labor, capital, materials, and information into products and services of greater value (p. 10)."

"Market-creating innovations can ignite the economic engine of a country... they create jobs... they create profits... they have the potential to change the culture of entire societies (p. 11)."

"For example, instead of developing a business model where customers had to pay monthly cell phone bills, as is the case in wealthier countries with citizens with higher earning power, Ibrahim introduced prepaid cards (p. 12)."

"For instance, instead of seeing the roughly six hundred million people in Africa who don't have electricity as only a sign of their immense poverty, we should see them as a vast market-creation opportunity waiting to be captured. It should be a call to innovate, not a flag of caution (p. 13)."

"This book is about celebrating the power and potential of innovation to change the world (p. 14)."

"'One of the things people don't understand is that markets are creations. They are not something which we can [just] find. A market has to be created (Ronald Coase, p. 17).'"

"When a country's prosperity is not improving, in spite of what might seem to be a lot of activity within its borders, the country might not have a growth problem. Instead, we believe it might have an innovation problem (p. 17)."

"Sustaining innovations are all around us, and in effect, are a critical component of our economies... But they have a very different impact on an economy than the other two types of innovations--market-creating and efficiency (p. 20)."

"Steady Camry sales do not represent a new growth engine for Toyota.... Sustaining innovations range from faster processors in our computers to more memory in our phones (p. 23)."

"Efficiency innovations, while good for the productivity of an organization, are not always good for existing employees (p. 25)."

"Efficiency innovations free up cash flows, but they rarely add new jobs to an economy... Neither efficiency nor sustaining innovations are inherently bad for a country. In fact, they are good for our economies, but they play very different roles in fostering sustainable economic growth and job creation (p. 26)."

"Market-creating innovations...create new markets...that serve people for whom either no products existed or existing products were neither affordable nor accessible for a variety of reasons. These innovations transform complicated and expensive products into ones that are so much more affordable and accessible than many more people are able to buy and use them (p. 26)."

"Market-creating innovations have the potential to create what we call local and global jobs (p. 27)."

"Another virtue of investing in market-creating innovations is that when local entrepreneurs develop innovations and reap the rewards from the innovation's success, the returns are more likely to fund future innovations locally (p. 28)."

"Market-creating innovations...provide us with one of the most viable strategies for creating prosperity in today's poor countries (p. 29)."

"Here is a helpful frame of reference for five attributes that entrepreneurs and managers should look for as they consider creating new markets.... business models that target nonconsumption....an enabling technology....a new value network.... an emergent strategy.... executive support (p. 30)."

"Ford's innovation...was not simply a car. It was an entire business model born out of his vision to create an entirely new market for the automobile (p. 34)."

"For a market to be created and then sustained, it must create profits... jobs... cultural change (p. 35)."

"We have found markets to be a powerful force that has the ability to pull into societies many of the components that make societies safe, more secure, and more prosperous (p. 36)."

"How...do you spot these opportunities, much less go after them (p. 45)?"

"'We realized we weren't competing with giant insurance companies; we were competing with apathy (p. 47).'"

"Innovating for a market that does not yet exist can feel risky (p. 49)."

"Nonconsumption offers a powerful clue that there is enormous potential for innovation. But spotting nonconsumption requires putting on a new set of lenses to see what others might be missing (p. 50)."

"There are primarily four barriers or constraints that prevent people from consuming a solution that will help them make progress. They are: skill, wealth, access, and time (p. 50)."

"Innovators need to walk in the shoes of their prospective customers to create a product that is so much better than the existing alternatives that people hire it--even when the competition is nothing (p. 54)."

"We do not have all the answers to the struggles in the world. But we do know that one rarely finds what one is not looking for (p. 68)."

"Every year we spend billions of dollars in an attempt to help low and middle-income countries develop. These funds are primarily used to push resources into poor countries in order to help them being their march toward prosperity... We believe that many of these attempts are missing a critical component for development: innovation. Development and prosperity take root when we develop innovations hat pull in necessary resources a society requires (p. 73)."

"Building toilets is not enough. By mid-2015, the government found that a majority of the toilets were not being used (p. 74)."

"Investing in both affordability and availability is paramount to the success of a market-creating business (p. 83)."

"A pack of Indomie noodles is simply a 20-cent packet of instant noodles. How can it matter so much? It matters because Indomie noodles represent the process by which poverty, through innovation, can become prosperity (p. 85)."

"If we create a market that successfully serves a growing population of nonconsumers, that market is likely to pull in may other resources an economy requires. This is the simple, yet powerful, mechanism of pull (p. 87)."

"If pulling seems to be a more effective strategy than pushing, then why don't we dedicate more of our resources toward pull strategies?... What could happen if we changed our emphasis from push to pull?.... 'We are the first generation in human history that can end extreme poverty'.... He may be right--but this will not happen if we continue focusing our efforts on ending poverty. That's the paradox at play (p. 93)."

"Considering where it once was, America's transformation into an economic powerhouse is extraordinary. But as we will explore, at the heart of America's transformation story is the same force that has driven many economies around the world from poverty to prosperity: market-creating innovations (p. 99)."

"Of course these innovators did not single-handedly develop America--the country has benefited from the innovation of scores and scores of entrepreneurs whose work improved our lives. But collectively they demonstrate the transformative power of a culture of innovation that allows prosperity to take root and flourish (p. 100)."

"For transformative development to happen, innovators must first imagine a different world, one that is filled with possibilities that many others can't begin to imagine (p. 109)."

"Ford's decision to target nonconsumption and create a new market for the automobile in America and the market's need to develop and pull in many new resources were critical to the development and prosperity of America, including roads (p. 111)."

"At the core of any market-creating innovation is a business model that profitably democratizes an innovation so that many more people--nonconsumers who can benefit from using the innovation--gain access to it (p. 115)."

"America was once a fixer-upper, too, but through trial and error, and investments in market-creating innovations, we've built a culture of innovation.... 'Every success is the mother of countless others.' Collectively, they changed America's destiny (p. 120)."

"'The mission of Sony is to design products for markets that don't exist yet (Akio Morita, p. 129).'"

"Investing in innovation, regardless of the circumstances in which a country finds itself, is possible (p. 132)."

"Entrepreneurs with an eye for local needs are necessary to drive market-creating innovations (p. 132)."

"Integration is necessary when countries are at an early stage of development (p. 132)."

"The proliferation of efficiency innovations in Mexico is not creating prosperity because efficiency innovations are typically targeted at growth that has little or nothing to do with markets in the country (p. 167)."

"Mexico and many other nations that are not yet prosperous have the ability to become thriving nations. But for prosperity to come about...we have to think about how to create new markets that serve the vast nonconsumption (p. 169)."

"The lack of 'rule of law' and 'institutions' is a plague that affects poor countries. These countries can't hope to make progress until they fix their institutions--which often means they should adopt Western-style systems, conventional wisdom suggests.... Institutions are pushed onto these countries with the best of intentions.... Effective institutions are not just about rules and regulations. Ultimately, institutions are about culture--how people in a region solve problems and make progress. At their core, institutions reflect what people value (p. 181)."

"Culture is a way of working together toward common goals that have been followed so frequently ad so successfully that people don't even think about trying to do things another way. If a culture has formed, people will autonomously do what they need to do to be successful (p. 186)."

"Market-creating innovations make historically expensive, complex, and out-of-reach products and services accessible to a new class of consumers who could not afford them, thereby creating a new market for the democratized solutions (p. 190)."

"Innovations, especially those that create new markets, typically precede the development and sustenance of good institutions... institutions must be built with the local context in mind... innovation serves as the glue that keeps institutions together (p. 193)."

"Prosperity is a process, not an event (p. 194)."

"How can we eliminate corruption?... Why does corruption persist in the first place (p. 205)?"

"The vast majority of individuals in society want to make progress.... every individual, just like every company, has a cost structure (p. 209)."

"We all want...a society where trust and transparency are valued (p. 211)."

"Corruption is not primarily about the lack of good leadership... Corruption is about 'hiring' the most expedient solution for what seems to be, in the moment, the greatest good of the options available to us (p. 214)."

"Development often precedes successful anticorruption programs, not the other way around (p. 220)."

"What if we stopped focusing all our effort on fighting corruption? Without simultaneously providing a substitute for what people can hire, corruption will be incredibly difficult to minimize (p. 224)."

"Market-creating innovations have the ability to pull in what's needed, regardless of the existence of sound institutions or the state of corruption (p. 229)."

"'Between the ocean and the mountain [in Cape Town], there's the unfinished highway. It is an odd-looking landmark in a beautiful city: sections of elevated road left suspended in mid-air when construction stopped in the 1970s. Four decades later, the hulking slabs of concrete still end in precipitous drops (The Economist, p. 235).'"

"Poor infrastructure is one of the most visible signs of poverty and is one of the primary reasons poor countries cannot escape their cycle of poverty.... What sustains successful infrastructure development (p. 235)?"

"'Most of the things worth doing in the world had been declared impossible before they were done (Louis D. Brandeis, p. 261).'"

"While the path to prosperity will look different for different countries and will ultimately depend on their current economic circumstances, we believe that the Prosperity Paradox can become the Prosperity Process, one that is sustained by a continuous commitment to innovation (p. 261)."

"Over time, an organization's capabilities shift primarily from its resources toward its processes, with the business model determining what it must prioritize (p. 265)."

"What is the point of your product if it is affordable but not available (p. 267)?"

"If we can solve these problems in health care--one of the most complex sectors--imagine what we can do for food, transportation, finance, housing, and a host of other industries.... Innovators who have had the biggest impact did so by creating the processes that enabled them to democratize products and services so that many more people would have access to them (p. 269)."

"Market-creating innovations can begin to solve many of our biggest problems, and in the process they can ignite the economic engine of many countries currently struggling to prosper (p. 270)."

"Every nation has the potential for extraordinary growth within it (p. 271)."

"Most products on the market today have the potential to create new growth markets when we make them more affordable (p. 272)."

"A market-creating innovation is more than just a product or a service (p. 272)."

"Focus on pulling and not pushing (p. 273)."

"With nonconsumption, scaling becomes inexpensive (p. 273)."

"Innovation really does change the world (p. 274)."

"The Wright brothers created an industry, and that industry, in turn, changed the world (p. 275)."

"Why do we do things this way? Why do we believe what we believe? What if we thought about things differently? What is our mission and why? Why are we in this business? Why do we do development this way (p. 276)?"

"Unless we can convert the strong emotions these images trigger into intelligent action, our efforts will amount to putting Band-Aids on a wound that never heals. And over time, we will develop compassion failure (p. 276)."

"'Entrepreneurship is the most sure way of development (Paul Kagame, p. 279).'"

"Every industry would do well to have outsiders--or those that are not yet experts--in it (p. 279)."

"'We must choose not to see the economically poor exclusively through the lens of their needs, but also through their potential (p. 302).'"

"Prosperity, by itself, does not solve all of a society's problems (p. 318)."
Profile Image for Charles Nguyen.
41 reviews11 followers
February 10, 2019
Really nice book on push vs. pull when trying to solve problems, with emphasis on developing regions. With the constant desire to solve the world's problems, we keep pushing our solutions without regard to the long-term sustainability model. The solution is to seek solutions that can be maintained. This progress can and should be made by "local" innovation and entrepreneurs. The chapter on corruption was also quite enlightening, applying the same concepts of local problem solving to address corruption. Great read.
Profile Image for Ashwin Chhabria.
84 reviews7 followers
February 25, 2019
Clayton Christensen is one of my favourite thinkers. He has great structure in writing and takes a lot of time and care to deliver seminal insights in simple words. This book talks about innovation and how under-developed markets can be viewed as a great opportunity for new businesses (provided they are offering a real need). The authors of this book discuss, in great detail, the opportunities and progress in 5 different nations- Africa, India, South Korea, Japan and America amongst many other things that stress on innovation. The common theme is that enduring prosperity for less developed countries will not come from fixing poverty, but rather from investing in innovations that create new markets within these countries

Did you know South Korea’s economy was struggling in every possible way, only 50 years ago. The country has had a miraculous transformation. Clayton dives into the hows.


1. Innovation and its types- With words like innovation, disruption and digital being used so loosely in today’s construct, Clayton details and categorizes innovation into 3 types which I found to be very seminal-

a) Sustaining innovations-
Innovations that are focused on retaining the relevance of a particular business are usually the ones that come under this category. These are innovations that improve the existing product and are the result of either a proactive intention to retain the existing customer base or a strategy to wade threats from competitors. Think about the time when cars started adopting the power-steering feature or electric windows. These kinds of innovation make existing customers happier but do not lead to massive increase in sales, operations or even employment for that matter. They keep the vehicle moving and retain relevance of businesses.

b) Efficiency innovations-
Efficiencies that are focused on reducing time and/or costs. Think about the assembly line production by Henry Ford (which reduced production time of a car from 12.5 hours to 2.5 hours) or Manila’s average labour rates (major destination for outsourcing call center operations). These innovations are ‘we do it the cheapest so give it to us’ and is a very tenuous thread to hang on for the retention of business. It only takes another place to charge a dollar lesser for the ‘efficient’ innovators to lose business.

c) Market creating innovations-
Market creating innovations are the innovations that lead to the creation of new markets. They serve a new market which Clayton refers to as ‘the non-consumer market’. The potential to scale, grow and employ is much higher in market creating innovations than it is with efficiency and sustaining innovations. A good example of a market creating innovation is how the Africa got its major telecom provider. The CellTel network was launched by Sudanese born, Mo Ibrahim, in Africa. Despite seeing Africa as a country that was struggling with basic needs of food, shelter and water, Mo Ibrahim identified the hardship of no-connectivity for the residents of Africa and was bold enough to follow through and build up towers, satellites and a fresh network from scratch (despite having no investment/VC backing owing to the fear of a corrupt system in Africa). The result of his determination was a thriving business which connected 24 million subscribers across 14 countries in Africa (as of 2005). Ibrahim later sold Celtel to Zain (formerly a mobile telecom company) for $3.4 billion.

2. Need based innovations- Innovations that come about to serve an actual need (pull) last longer and better than innovations that are merely pushed onto a country (push) because of their proven value. An example will be helpful, here. When the founders of Indomie noodles (the ‘Maggi noodles’ equivalent of Nigeria) realised that 20% of Indomie’s produce was being stolen on the way to its distribution centers, the founders invested in building a novel trucking system that they could trust, in. When they found deficiency in the skills of local labour, they invested heavily in technical skilling. Today, every new business in Africa benefits from these skills and trucks. Had there been no Indomie, the novel trucking system would not have had a demand enough to sustain itself. Skilling workers, who’d have no place to apply the acquired skills, would also be an investment waiting to reap returns for years. Indomie pulled innovations to sustain itself in the country thereby facilitating the sustenance of the innovations that it brought, with it. . Without a real need, most institutional investments perish.
Profile Image for Irina Ioana.
94 reviews4 followers
April 24, 2019
What a difference between Milton Friedman's neoliberal free market policies (where a business would own just the brand, and everything else is sub-rented, privatised and ends up corrupt due to revenue margins) and this take on what makes a business, society and country prosperous. Investing in the production chain and people.
The greatest example given in the book is South Korea.
223 reviews1 follower
August 13, 2020
Insightful book by the late Harvard Business School giant that focuses on the subtitle: how innovation can lift nations out of poverty. Where governments or corruption or other obstacles have failed or blocked prosperity historically, Christensen explains how innovation, non-consumption markets, "pulling" strategies, and a focus on solutions for local needs can and does transform nations and lift them out of poverty. This in turn paves the way for infrastructure, the reduction of corruption, and the explosion of other industries and jobs.
A few notable points and examples:
• Successful market-creating innovations emerge from unfulfilled jobs to be done, and they solve problems that formerly only had inadequate solutions, or no solutions at all. See, e.g. Celtel, which in 2005 (when it was sold to Zain) had 24 million phone/plan subscribers in 14 African countries where there were previously no telecommunications or telecom infrastructure. (Pt. 3, Sec. 1)
• Investing in both affordability and availability is paramount to a market-creating business. (Pt. 4, Sec. 1)
• Many times, localizing an innovation is necessary for success. (Pt. 4, Sec. 1)
• If a new market is created that successfully serves a growing population of non-consumers, that market is likely to pull in many other resources an economy requires. See, e.g. Tolerant Noodles company story. (Pt. 4, Sec. 1)
• A company should develop an interdependent integrated business model when it cannot depend on suppliers more specifiable, verifiable, and predictable inputs. This could be access to reliable electricity, or quality raw materials. See, e.g. M-Pesa, the African mobile phone-based money transfer service. (Pt. 4, Sec. 1)
• Innovators should dedicate more of our resources toward “pull” strategies. E.g. The new African water wells that broke after a few years and were left to crumble because they were “pushed” on the locals who had neither the resources nor the know-how to fix them. (Pt. 4, Sec. 1)
• “We are the first generation in human history that can end extreme poverty.” Jim Kim (former World Bank pres.) But this cannot happen if we continue focusing our efforts on ending poverty. THAT is the paradox at play. (Pt. 4, Sec. 1)
• Eastman Kodak transformed an industry once limited to the rich to one in which millions of cameras and film were sold to all Americans. Same with the Ford Motor Co. How? A business model that focused on the principles of Customer, Mass production at low cost, Worldwide distribution, and extensive Advertising. The impacts were large and wide: new technologies and industries, new infrastructure, new markets, and new wealth. For instance, Ford also invested in and ran steel blast furnaces, timberlands, coal mines, rubber plantations, a railroad, freighters, gas stations, sawmills, and glass works companies. (Pt. 5, Sec. 1)
• Henry Ford once remarked that his wage increase to his factory workers (from $2 to $5 per day) was the smartest cost-cutting move the Company ever made. Ford was also largely responsible for cutting a 6-day workweek to a 5-day one. Other companies followed suit on both accounts. All because Ford wanted to keep his factories open and chose to innovate. (Pt. 5, Sec. 2)
• An over-reliance on “efficiency” innovations (as opposed to non-consumption innovations) can only take an economy so far, as seen in the example of Mexico’s or Russia’s economies, because they must target existing consumption markets and compete for market share with their competitors. (Pt. 7, Sec. 2)
• “Emerging markets are peppered with ample opportunities to create new markets that can yield significant returns, if you know where to look for them.” But the creation of new markets requires patience as non-consumers are found and understood and then served. (Pt. 7, Sec. 2)
• Prosperous countries can generally depend on the rule of law and the enforcement of contracts, thus engendering trust among citizens and between citizens and the state. (Pt. 8, Sec. 3)
• Innovations, particularly those that create new markets, typically precede the development and sustenance of good institutions. Institutions must be built with a local context in mind so that they don’t become useless to those they purport to serve. Innovations serve as the glue that keeps institutions together. Prosperity is a process, not an event. See, e.g. the story of Venice and its economic ups and downs in history. “Innovations can be a great equalizer.” (Pt. 8, Sec. 3)
• The net worth of the 153 Chinese Communist parliamentarians topped $653 billion in 2017, larger than the GDPs of Norway and Finland combined. This is the case even though China has over 1,200 laws and rules against corruption. (Pt. 9, Sec. 3)
• In America, corruption was largely filtered out because “the equation about how average and rich Americans could make money, make progress, and make a living for themselves and their families began to change.” Development often precedes successful anti-corruption programs. (Pt. 9, Sec. 3)
• What can we do to reduce corruption? Two suggestions: 1- Stop focusing on fighting corruption unless there is an available substitute that people can “hire” (by enabling the creation of new markets, for example); and 2- focus on what can be controlled by integrating and internalizing operations in order to reduce opportunities for corruption to occur. (Pt. 9, Sec. 3)
• There’s no better way to curb corruption than the creation of new markets. See, e.g. the American music industry at the turn of the 21st century (pirated vs paid music). (Pt. 9, Sec. 3)
• Market-creating innovations can pull in what is needed, regardless of the level of corruption or absence of sound institutions. Those institutions will follow the new markets. (Pt. 9, Sec. 3)
• Innovation typically precedes infrastructure, rich and poor countries alike. See, e.g. Microsoft & Facebook’s joint 4,000 mile transatlantic sub-sea cable from Virginia to Bilbao, Spain (not funded by government). (Pt. 10, Sec. 3)
• When infrastructure is pushed into a local economy before it is ready, it rarely succeeds. (Pt. 10, Sec. 3)
• History is full of examples of innovators and entrepreneurs finding a faster path to creating the infrastructure their businesses need, long before the government is able or willing to step in. See, e.g. the private companies in early America that built most of the roads, rails, and canals. (Pt. 10, Sec. 3)
• “Ultimately, we must do the hard work of first creating the value that we intend to store or distribute on a particular infrastructure. If we don’t, we fall victim of to the doctrine of ‘Infrastructure-First,’” in which we may find ourselves having built a house without anyone being able to afford to live in it. (Pt. 10, Sec. 3)
• At the outset, an organization survives because of its resources. But in the long-term, an organization thrives because of its processes. See, e.g. Narayana Health, now the 2nd largest hospital network in India. Narayana reduced the cost of bone marrow transplants from ~$27k to ~$8,900, brain surgery to ~$1,000, and spinal surgery to ~$550, thus sparking a major medical tourism move in India. (Pt. 11, Sec. 4)
• The innovators that have the greatest impact created the processes that enabled them to democratize products and services so that many more people would have access to them. (Pt. 11, Sec. 4)
• Singapore has become one of the world’s richest nations in the span of only about 60 years. Singapore was successful by prioritizing jobs through innovation. One way was that Singapore set up an economic development board (EDB), which focused on attracting foreign investment in the country in order to create employment (not handouts, but investments). Singapore focused on innovation and not just industrialization or exports, and thus the nature of foreign investment has changed from industry (textiles, etc.) to biotech, pharma, etc. Singapore shows that we must continually learn new things if we want to keep making progress. (Appendix)
• “Investing in innovation and creating a new market is one of the most important things we can do to not only reap outsized returns, but to also sustainably develop [poorer] regions. The world is full of opportunity if you just know what you are looking for.” (Appendix)
- Recap (from Pt. 11, Sec. 4):
 Every nation has the potential for extraordinary growth within it. (Non-consumption, or a signal that opportunity lies within)
 Most products on the market today have the potential to create new growth markets when we make them more affordable. E.g. electric cars in poorer countries.
 Market-creating innovation is more than just a product or a service; it is a whole system that often pulls in new infrastructures and regulations and has the capability to create new local jobs. E.g. Celtel in Africa.
 Focus on pulling and not on pushing. ‘Pull’ strategies ensure that a ready market is waiting. This has an impact on long-term and sustainable prosperity.
 With non-consumption, scaling becomes inexpensive. The first step is identifying an area of non-consumption. How? Focus on re-framing the problem (the “why’s”). E.g. the Wright brothers vs Langley.
Profile Image for TΞΞL❍CK Mith!lesh .
298 reviews148 followers
May 8, 2020
Why have some nations become prosperous while others have remained poor—and in many cases poorer than half a century ago? Harvard Business School professor Christensen (The Power of Everyday Missionaries: The What and How of Sharing the Gospel, 2013, etc.) and colleagues venture some suggestive answers.

Prosperity, by the authors’ account, does not mean simply relative wealth, but also access to goods such as education and health care as well as the promise of good governance and upward mobility. By these lights, readers may well wonder whether the United States counts as a prosperous nation; be that as it may, an ingredient for prosperity is the ability to see a problem and solve it by opening a market that pulls infrastructure and other social goods up with it. A case in point is Mo Ibrahim, who, 20-odd years ago, saw that in Africa, with its lack of landline infrastructure, lay the opportunity to build a vast cellphone network to serve the continent’s billion people. This, writes the authors, speaks to “nonconsumption,” or unattainability—“there’s no affordable and accessible solution to their problem,” in short—that Ibrahim saw his way through to addressing by innovating in areas such as pay-as-you-go programs rather than fixed monthly fees. No bank would touch his Celtel, which he funded with equity financing, but Ibrahim built an empire overnight that spurred other “market-creating innovation.” All this is of a piece with Christensen’s doctrine of disruptive innovation: Creating markets is preferable to sustaining them (the original iPhone did the former, he writes, while the iPhone X does the latter) and to making innovations in efficiency. Christensen and colleagues serve up examples from business histories (among the most winning of them the Bank of America) around the world, including Mexico, long touted as “the next potential superpower—but it’s always stuck there.” Their extensive notes may seem a touch daunting, but they lend a case-study aspect to a book that will be valuable to business readers.

Of considerable interest to investors in emerging economies as well as development specialists and policymakers.
Profile Image for Austin.
170 reviews8 followers
March 21, 2019
The subject matter of this book is difficult to beat in importance, and in signature Clay Christensen fashion, the approach and analysis to an enormously complex problem is made accessible and almost deceptively simple. The authors' core argument is that a certain kind of innovation, called a "market-creating innovation," can help lift nations out of poverty by generating profits, creating jobs, and by orienting culture in more prosperous ways. The plan of the book is: first, to describe the various kinds of innovation, from efficiency, to sustaining, to market-creating; second, to review the history of economic development through these lenses; and third, to explore how to grapple with the various barriers to development--including by vertically integrating to account for more infrastructure and externalities than required in a 'developed' nation. The kicker here is that once a player invests in such things, they can often charge rents to those who wish to utilize them, thus achieving an even higher return on the cap-ex.

My favorite quotes:

--"In a sense, market-creating innovations democratize previously exclusive products or services." pg. 27

--"Investing in both affordability and availability is paramount to the success of a market-creating business." pg. 83

--"A company should develop an interdependent (integrated) business model when it cannot depend on suppliers for specifiable, verifiable, and predictable inputs." pg. 87

--"We see a different, perhaps more helpful, definition of infrastructure as the most efficient mechanism through which a society stores or distributes value." pg. 243
Profile Image for Dharmendra Rai.
Author 5 books6 followers
February 17, 2021
Creativity Can Advance Our Civilisation !
I just looooooove this book because of the following reasons 1 ) Its written by a highly credibly man - the legendary Harvard Professor Calyton 2 ) It gives you substantial hard data to prove that creativity can make the world a far far better place than it is currently 3 ) It proves that the most advanced countries are the ones where the governments do the basic stuff very well - like providing law & order & good roads et al & leave the rest to the private sector 4 ) This should motivate people to deeply believe that creativity works at a micro level ie it can make you & your shareholders richer & also at a macro level - it can move us towards an ideal world as depicted in Star Trek
Profile Image for Farida Ladipo-Ajayi.
56 reviews3 followers
February 12, 2020
So much insight into markets in countries all over the world, learnt a lot of that. The book was too long in my opinion, and I listened to the audio version so it just seemed to go on and on. Nonetheless it was a good listen, provoked some thoughts about what I do currently in my home country
Profile Image for Chido Nwakanma.
29 reviews
October 19, 2021
Nigeria needs more market-creating innovations to lift poverty

Clayton M. Christensen, Efosa Ojomo and Karen Dillon (2019), The Prosperity Paradox: How Innovation Can Lift Nations Out of Poverty. New York: Harper Business.

Two innovations from Nigeria feature in this epochal book by renowned Harvard Professor of the art and science of disruption Clayton Chrstensen. The storied author wrote this book in collaboration with Nigeria’s Efosa Ojomo and former Harvard Business Review Editor Karen Dillon. It has been a hit since its release in 2019.
The Nigerian innovations are the introduction of Indomie noodles as a feature of the Nigerian cuisine and the creation of Nollywood.
Christensen and his colleagues, including the Nigerian, proposed a new theory of market-creating innovation. What sets market-creating innovators apart is the ability to identify opportunities where there seem to be no customers and to create a business model that upends the way things have always been done.
Innovation ordinarily creates new products, ideas, and markets. The authors provide validation for the role of innovation. I recommend reading this book alongside the definitive work by management guru Peter Drucker in Innovation and Entrepreneurship: Practice and Principles (1985).
Four types of innovation already itemized in the literature: Incremental, Disruptive, Architectural and Radical. The Prosperity Paradox broadens the territory and then zeroes in on what it terms “market-creating innovation”.
The authors note that Kenneth Nnebue released Living in Bondage straight to video. The norm before then was to release films to cinemas first. There were no longer cinemas in Nigeria in 1992, the entrepreneur needed to use his stock of cassette tapes, so he created a story. The $12000 budget film earned massively and sold hundreds of thousands of copies across Africa and the Black Diaspora.
The Aswanis of Tolaram Group introduced a new product, noodles, into Nigeria and, through creative marketing and business management, made it part of our country’s cuisine. The Prosperity Paradox submits
“Perhaps the most beloved consumer product in Nigeria is also one of the humblest: Indomie instant noodles. Sold in single-serving packets for the equivalent of less than 20 US cents, the brand enjoys near-universal name recognition in the country, maintains a 150, 000 -member fan club with branches in more than three thousand primary schools, and sponsors Independence Day Awards for Heroes of Nigeria to celebrate the accomplishments of exemplary Nigerian children.
“What Tolaram, through Indomie noodles, has done in Nigeria is astonishing. Since its entry into Nigeria in 1998 -when Nigeria was still under military rule-Tolaram has invested more than $350million to create tens of thousands of jobs, developed a logistics company, and built infrastructure including electricity and sewage and water treatment facilities. In addition, Tolaram has built educational institutions, funded community organisation programs, and provided millions of dollars in tax revenues. Perhaps the most visible evidence of this strategy is that the company has taken a lead role in developing a $1.5billion public-private partnership to build and operate the new Lekki deep-water port in the state of Lagos. Without overstating it, Indomie noodles is development.”
The main argument of the paper is that Nollywood and Indomie Noodles are among scores of entities that have realised enormous growth by creating entirely new markets where they might be least expected.
They call it the power of market-creating innovation.
Nollywood and Indomie noodles come under the analytic lens of marketing experts for contributions to knowledge in routes to market, product development and market entry.
They assert: “Contrary to the conventional wisdom that a society must “fix” itself—its infrastructure, courts, legislatures, financial markets, and so on—before innovation and growth can take root, we believe that innovation is the process by which a society develops. Innovation funds our infrastructure, cultivates our institutions, and mitigates corruption. When a country’s prosperity stalls out despite a lot of activity within its borders, that country might not have a development problem. It might have an innovation problem.”
The authors argue that the power of market-creating innovation
• Generates new growth for companies and catalyses industries that buoy frontier economies
• Market-creating innovation provides a strong economic foundation as they
A. Offer many people access to a product or service that was previously unaffordable or otherwise unattainable—if it existed at all.
B. Leverage business models and value chains that focus on profitability before growth. They often do this by borrowing existing technology and inserting it into a different business model. Nnebue did this by using VHS tapes to launch a video-based film industry.
It is safe to say Nigeria has an innovation challenge. It may be necessary to document our innovations to spur more of the same.
Author 15 books58 followers
April 11, 2019
Alleviating poverty is not the same as creating prosperity. We can’t end poverty by focusing on poverty. I was bit surprised by how this book never just says that wealth is the only known antidote to poverty, and how poverty needs no explanation, it’s the natural condition of mankind. What needs explaining is wealth. That said, this book does explain how to create that wealth, by creating market-creating innovations that are sustainable. I believe Deirdre McCloskey, George Gilder, Michael Novak, among others, offer a better theory of how and why innovation occurs (McCloskey’s focus on rhetoric and Gilder’s on an information theory of capitalism, which is the most innovative theory I’ve ever read), at the macro level. This book is more at the micro level, but it’s still a worthwhile contribution. I only wish it would have built a stronger moral and ethical case for free markets. Extreme poverty has decreased from 35.3% in 1990 to 9.6% 2015, 730 million from China alone, 66.6% in 1990 to less than 2%. Yet in Sub-Saharan Africa poverty actually increased, from 1990, 282 million (55% of population), to 2013, 401 million (42% of population). Since 1960, $4.3 trillion spent on developmental assistance in poor countries. Name one that’s developed because of aid? Not one, which I was also surprised the author’s never delved into. I’ve always appreciated Clayton Christensen’s attachment to the importance of theory—there’s nothing more practical than a good theory! He’s also very precise in the words he uses, and in defining his terms, such as:

Prosperity: The process by which more and more people in a region improve their economic, social, and political well-being. A country can be rich, but not prosperous (e.g., the resource curse).

Innovation: A change in the processes by which an organization transforms labor, capital, materials, and information into products and services of greater value. They create jobs, profits, and change culture (innovation is not the same as invention, something new. Innovations are usually borrowed country to country).

Three types of innovation: Sustaining, efficiency, and market-creating

1. Sustaining: improvements to existing solutions on the market. Substitutive in character (Lipton Tea flavors, Camry best-selling Toyota), but don’t represent major growth in economy. Most innovations are sustaining in nature.
2. Efficiency: Do more with fewer resources, usually process innovations. Tend not to create jobs (resource extraction, fracking, fewer inputs, greater output). Both Sustaining and Efficiency free up cash for future investments.

3. Market-creating: create new markets that serve people for whom either no products existed or existing products were neither affordable nor accessible for a variety of reasons. Democratize products and services (turn luxuries into necessities). Less about the product and more about the value network and business model: Ford’s Model T: roads, schools, restaurants, hotels, oil refining, etc., etc. Changed culture. MC Innovations pull in resources, not push like NGOs and aid (price signals!). No one gets fired for building a well in a poor village, or building a school. But where are the kids employed when they graduate?

There’s not just one strategy (theory) for development. Japan, South Korea ($200 per capita income 1950s, $27,000 today; high suicide rate, 2.5 times OECD average; highest hospitalization for mental illness), Singapore (60 years ago, 1/5 GDP of sub-Saharan Africa’s), Taiwan, Hong Kong, all developed in different paths, but the common denominator was market-creating innovation. The authors point out that Mexico has been mostly efficiency and sustaining innovations, but a serious lack of market-creating innovations.

There are a lot of examples of entrepreneurs who are making a dent in these poor countries with market-creating, from mobile phone networks, electronic payments and banking, health care, food, flooring, and many others. They also deal with infrastructure, which is more a medium for moving value rather than creating it, and corruption. Corruption, like poverty, needs no explanation. What needs to be explained is why some countries have less of it than others. Entrepreneurs are good at identifying nonconsumption, which is the authors’ theory for market-creating innovations. They conclude that “We can solve this problem. Not because we’re eternal optimists, but because we have done it before.” I agree, there’s simply no excuse since we have a much better understanding of how wealth is created. But the focus on the “root causes of poverty” persist, which has always amazed me. What would we do if we learned the “root causes” of poverty? Create more of it? But the poverty bureaucracy is entrenched, as the great movie Poverty, Inc. explains. Perhaps this book will get more entrepreneurs to innovate rather than simply providing charity. I hope so.
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