The felicitous constraints of “lean” markets

by October 24, 2010

The Nokia 1100: monochrome screen, no camera, 250 million sold

It has often been observed that poetry freed from the constraints of metre and rhyme — a form generally known as “free verse” — does not necessarily enable greater creativity in a poet, and may indeed lead to less. A counter-intuitive conclusion, perhaps, but one that rests on the everyday power of limits and scarcity to increase the use of creativity in the achievement of goals, a truth that is demonstrated every time a bright employee is assigned a difficult task with insufficient resources.

So entrepreneur, financial trader, and blogger Nathan Laurell has hit on something fundamental and important in his observation that developing markets are best thought of not as markets that have yet to develop to Western standards (and are thus “behind”), but as markets that are “lean”:

As I met one amazing entrepreneur after another last week in Kenya with Acumen Fund, I thought, what better word to describe the environment they operate in than “lean.” These guys are all about maximizing value and minimizing waste—they have to be. They’re capital-constrained, they face a shortage of skilled labor, their customers have little disposable income, and they are often at odds with state-backed incumbents or even the government itself. They operate in a lean market, and yet they are succeeding…

The constraints of these markets breed innovation—it’s the reason startups beat incumbents. It’s why the Nokia 1100 cell phone with it’s monochrome screen and $20 price tag is the world’s best selling cell phone. It’s why Tata can build a car for $2,200 and why Visa’s mobile banking platform was developed in Africa and imported to the US and Europe.

Read the rest.