Value capture and value creation

The role of information technology in business models for frugal innovations in Africa

Journal article (2017)

Authors

R.J. Howell Economics of Technology and Innovation - TPM
Cees van Beers Economics of Technology and Innovation - TPM
Research Group
Economics of Technology and Innovation (TPM) (TU Delft)
Frugal innovation Business models Bottom of the Pyramid Inclusive business Sub-Saharan Africa, information technology
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Published Date

2017

Language

English

Reuse Rights

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Faculty

Technology, Policy and Management

Department

Values Technology and Innovation

Research Group

Economics of Technology and Innovation

Abstract

Bringing value to end consumers is one of the main challenges for businesses in emerging markets. This paper examines the role of information technology (IT) advancements in frugal innovation and in influencing new business models to bring frugal innovations within reach of the poor. A thorough review of theoretical concepts of business models and their applicability to the Bottom-of-the-Pyramid (BoP) literature and frugal innovation is given. IT has three characteristics that have influenced both business models and frugal innovation. First IT reduces transaction costs, sensor prices have decreased, and IT's externalities have increased the economic and social value from one innovation. By discussing the case of a high-technology low cost weather sensor system deployed in sub-Saharan Africa, this paper demonstrates how IT has introduced new frugal innovations, and influenced new business models. The success of the weather station diffusion has been due to the value of the weather data generated, the adaptive business model, and the co-creation approach throughout the station and business model design. IT has played a strong part in diffusing new innovations in Africa, but also has the potential to exclude certain groups. Future research should explore how IT and frugal innovation can lead to inclusion.