March/April 2001 Foreign Affairs

The Great Disruption

Authors: Clayton Christensen, Thomas Craig, and Stuart Hart

...THE GREAT LEAP DOWNWARD (an excerpt)

LOOKING AHEAD, the disruption process could hold the key to economic development in poor countries. Globalization's real market opportunity lies with the billions of poor who are joining the market economy for the first time. Consider the approach that General Motors has taken to China's automobile market. It recently opened a plant there to manufacture Buicks for the small but price-insensitive premium tier of the market. Over time, GM might convince enough wealthy Chinese to buy Buicks instead of BMWs so that the investment will generate acceptable returns. It has also been investing hundreds of millions of dollars to develop an electric vehicle that is large, powerful, and safe enough to be used in the U.S. market. Until now, the few electric cars that have been sold in America cost so much and perform so poorly that they offer little prospect of volume or profit. But imagine if GM targeted its electric vehicle technology to create new markets for middle-income Chinese, Indonesians, and Thais--i.e., those who could afford cars that were priced around $3,000. The crowded, polluted streets of Shanghai, Jakarta, and Bangkok could constitute a much more hospitable market for electric vehicles than do the expansive freeways of California. If GM figured out how to make and market profitably a $3,000 car for the masses, it would form a powerful platform to launch an up-market attack on more developed markets around the globe.

The Solar Electric Light Fund (SELF), a nonprofit organization with projects in countries from Brazil to South Africa to China, is another good example. Two billion people on the planet have no access to electricity, instead using for fuel such dangerous, polluting substances as kerosene, candles, wood, and dung. Since most of these poor live in rural regions of the developing world, it is unlikely that electrical service grids will be extended to them any time soon. And given the growing crisis of greenhouse gas emissions, an extension of fossil fuel- based power would further devastate the environment. To achieve a sustainable form of rural electrification, therefore, SELF created a fundamentally different model premised on small scale, on-site solar power generation. SELF brokers the purchase, installation, and operation of household-scale solar photovoltaic units among the rural poor; these units, in turn, draw on the radiant energy of sunlight to produce voltage. Through a revolving loan fund, rural villagers get the money to own and operate their own electrical systems.

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