Boosting Local Start-up Brands in Emerging Economies

Discover how start-ups in emerging economies thrive through innovative strategies like jugaad, skilful training, and community engagement amid challenging environments.

In the face of economic downturns and unprecedented challenges like the COVID-19 pandemic, start-ups in emerging economies are finding innovative ways to survive and thrive. 2019 saw a peak in venture capital funding for these start-ups, but the landscape drastically changed in the following years, necessitating a shift in strategies. Entrepreneurs in these regions are demonstrating remarkable resilience and resourcefulness, finding success through creative improvisation, community involvement, and pragmatic training approaches.

Creative Improvisation and Local Engagement

In India, the concept of "jugaad" – improvising in the face of scarcity – is not just a buzzword but a critical survival strategy for start-ups. Businesses such as Aravind Eye Care System, LifeSpring Hospitals, and Ziqitza Health Care Limited embody this approach. By leveraging multipurpose assets and focusing on local hiring, these organizations have maximized their resources while deeply embedding themselves within their communities. For instance, Aravind's use of its lens manufacturing facility to also produce cheap sutures is a brilliant example of this adaptive approach.

Similarly, start-ups in other emerging economies can look within their communities to identify such multi-use resource opportunities. This strategy not only cuts costs but also fosters a deep connection with the local populace, which can lead to better market understanding and customer loyalty.

‘By embracing local wisdom like jugaad, focusing on practical entrepreneurial training, and leveraging community resources and non-market logic, these businesses can overcome constraints and even find a competitive edge.’

Training as a Form of Capital

In Uganda, the transformative power of entrepreneurship training illustrates another path forward for start-ups in emerging markets. The experiment conducted with final-year undergraduates demonstrated that proper training in business administration and entrepreneurship could significantly enhance the ability to start and sustain businesses, even in financially constrained environments. This finding suggests that emerging market start-ups should invest in or seek out business training programs to enhance their teams' skills, especially in understanding financial concepts and opportunity evaluation.

For start-up ecosystems in these markets, developing such training programs – possibly in collaboration with educational institutions or successful entrepreneurs – could be a game-changer. These programs can serve as incubators for future business leaders and innovators, driving the economy forward.

Embracing Fail Fast, Fail Cheap Ethos

The Silicon Valley mantra of "fail fast, fail cheap" is increasingly relevant in emerging economies. The concept encourages experimenting with new ideas at a minimal cost, learning from failures quickly, and pivoting as needed. In regions where resources are limited, this approach can be particularly effective. Leveraging the non-market logic – where support is drawn from family, friends, and the community rather than through financial incentives – start-ups can test their ideas without substantial financial investment.

An example of this can be seen in the origins of platforms like Github, which grew within the open-source community. By drawing on the skills and time of contributors motivated by factors beyond direct monetary compensation, start-ups can access talent and resources that might otherwise be unaffordable.

Key Strategies for Success Summarised

Emerging market start-ups have developed several key strategies to navigate their unique challenges and leverage local opportunities effectively. Summarizing the approaches mentioned above, the core strategies include:

Creative Resource Utilization (Jugaad)

Multipurpose Asset Usage: Innovatively using available resources for multiple purposes to maximize utility and minimize costs. Examples include using manufacturing facilities for producing multiple products or repurposing space and equipment for various functions.

Local Talent Utilization: Hiring from the local or underprivileged communities not only supports these communities but also fosters a deep understanding and connection with the local market. Training local hires across multiple roles and skills enhances flexibility and operational efficiency.

Emphasis on Training and Skill Development

Entrepreneurial Education: Investing in or providing access to business management and entrepreneurship training helps in honing crucial skills like financial management, opportunity evaluation, and risk management.

Cultivating Financial Savviness: Understanding financial concepts such as cash flow, profit margins, and investment returns is vital for start-up survival and growth, particularly when resources are scarce.

Community Engagement and Non-Market Resources

Building Community Ties: Leveraging relationships with family, friends, and the broader community can provide non-monetary support crucial for early-stage start-ups. This support could be in the form of labour, advice, networking, or moral support.

Utilizing Non-Market Logic: Aligning start-up goals with community or societal benefits can mobilize resources from those who are motivated by the impact rather than financial gain.

Adopting a Fail Fast, Fail Cheap Ethos

Minimal Viable Products (MVPs) and Pivoting: Quick experimentation with MVPs allows for learning from the market at a low cost. The ability to pivot based on feedback and failures ensures resource efficiency and better alignment with market needs.

Resource-Light Experimentation: Undertaking new ventures or project tests with minimal resource investment to gauge viability before committing more substantial resources.

Emerging market start-ups, while facing distinct challenges, are not without unique opportunities. By embracing local wisdom like jugaad, focusing on practical entrepreneurial training, and leveraging community resources and non-market logic, these businesses can overcome constraints and even find a competitive edge. As the global economic landscape continues to evolve, the resilience and innovative spirit of start-ups in emerging economies will likely play a pivotal role in shaping a new wave of economic growth and development. The key lies in embracing the local context and leveraging the inherent strengths and resources available within these vibrant markets.