The Impact on Local Innovation

Let’s be blunt: barring some strange vagary, Facebook Zero is going to be a hit. Facebook is already popular in Africa, and in other developing countries, such as Indonesia, we know that usage is overwhelmingly through mobile devices. The success of MXit in South Africa, as well, is strong evidence of the viability of mobile-based social networking, and with free access to 0.facebook.com, the proposition is even stronger.

What does this mean for Africa’s burgeoning technology entrepreneurs? The mobile phone is an exciting, preexisting platform for services and applications. CellBazaar in Bangladesh and M-PESA in Kenya are standout examples of the value that can be created from building new mobile services. Competing with Facebook is going to be very difficult, especially when so many carriers are picking them and giving them the ability to not charge for data usage on 0.facebook.com. To be clear, I’m not opposed to Facebook competing in this regard. They are clearly doing good business.

But in the midst of doing good business, they could cannibalize African jobs. For example, Safaricom, who has not partnered with Facebook, just announced they are working with MXit to bring the South African service to Kenya. Erik Hersman sees this as a missed opportunity for local entrepreneurs. The real problem, though, is that the operators in Africa can choose winners and losers on their proprietary networks. New entrants (the proverbial “next Google or YouTube”) face very steep transaction costs that limit their scale.

A Caveat?

As Prabhas Pokharel of MobileActive points out, though, there is more to this story. Speaking recently at the GSMA World Congress, a Facebook representative showed that when Vodafone in the UK offered one week of free Facebook, not only did data usage shoot up, it stayed up: “the number of people paying and using data plans increased by 20% from the people that tried it.”

No wonder Facebook was able to partner with so many operators: in time, they will phase out the free access and will have convinced more users to sign up for the lucrative data plans. Is this a good thing? As Steve Song and others have argued, mobile usage costs in Africa can be very high. There might be reasons to worry that people are spending money recklessly on mobiles, to the detriment of savings or “better” consumption.

But there could be a silver lining. Data services provide more flexibility and capability. Oftentimes people do not even know their phone is capable of anything more than SMS and voice. If Facebook Zero encourages people to responsibly use the mobile Internet, there will be opportunities for many more entrepreneurs and delivery of richer services.

Facebook Zero as Africa’s Agora?

Steve Song is more bullish on Facebook Zero, despite having well-founded critics of both Facebook and African telcos. He says,

I think the potential for innovation with Facebook Zero is really about people having conversations, exchanging ideas about any and every aspect of their lives. Those conversations will spawn innovations. Right now, Facebook Zero only covers ten countries in Africa but supposing in covers all or most of them. Think of the scope for new ideas to find their way across the continent or across the road.

This is an interesting angle. Though it is starting to change, Africa lacks participatory media. Facebook, despite being used for plenty of inane purposes, does have the potential to encourage both innovative thinking and, perhaps more likely, political activity and awareness.

But, again, I think there are reasons to be pessimistic. Is Facebook really the platform we want for this? For one, it is another intermediary on which pressure can be placed. Even worse, it is an intermediary that does not have a good track record on safeguarding political speech within its bounds (see Rebecca MacKinnon’s recent post on the human rights implications of content moderation and account suspension). Frustratingly, Facebook has also not joined the Global Network Initiative, an effort by corporations and NGOs to promote self expression and privacy in a digital world through corporate best practices. Entering places like Tunisia with Facebook Zero demands thoughtful reflection on a company’s role in facilitating political activity.

So, it is, of course, too early to tell the implications of what was certainly a big week for mobile and development, but for this specific initiative, there are plenty of reasons to be concerned.

[As always, I'm speaking only for myself on this blog.]

Introduction

In the early 1970s, if you happened to be hiking in the woods around Marin County, you might have witnessed a rather strange sight: on the paths traditionally trod by horses or backpackers, an increasing number of outdoor enthusiasts were careening down the hills on bicycles. At the time, what we know as mountain biking was unheard of – bicycles were ridden exclusively on properly paved roads and sidewalks. The modern distinction between “road bike” and “mountain bike” quite simply did not exist. Why would it if no one wanted to pedal up and down rock-strewn dirt paths?

But, sure enough, some people did think this breakneck activity was a good idea. Unfortunately, their bicycles were incapable of handling the tumultuous rides on which the daredevils took them. So, with remarkable ingenuity, the bikers began modifying their bikes – tougher rubber for the wheels, motorcycle-style braking mechanisms – and soon enough, they started selling these “clunkers” to less mechanically inclined experimenters. Today, the mountain bike market in the U.S. is worth nearly $4 billion.[i]

The experience of mountain biking is not unique – in the past twenty years, researchers have documented a wide range of industries that experience what MIT Professor Eric von Hippel calls “user innovation.” These range from semiconductors to software to windsurfing. The proliferation of inexpensive digital communication and prototyping methods is only adding to the amount of user innovation. According to von Hippel, this form of innovation is an important source of novel product concepts and, in turn, economic growth, but do the insights of user innovation theory apply to the experience of poor farmers in the developing world?

Lead Users

Not everyone is an innovator. Not everyone who rides bicycles off-road takes the time to modify their road bike. Sometimes people will only try a new product if they receive it from a business. Those that do innovate, however, are called “lead users” and, as von Hippel explains, they exhibit two main characteristics, regardless of their specific innovations:

• Lead users “are ahead of the majority of users in their populations with respect to an important market trend…”
• And “they expect to gain relatively high benefits from a solution to the needs they have encountered there.”[ii]

Lead users, who do form a substantial portion of all users, are generally driven to innovate due to the homogeneity of mass-market products; that is, they have unmet needs due to unique circumstances or desires. For various reasons, it is difficult for firms to meet all the needs of their customers. Economies of scale favor “one size fits all” manufacturing. Information can be “sticky” meaning that transferring the specific context of use from users, where it is generated, to firms, can be expensive. “As a result, users generally have a more accurate and more detailed model of their needs than manufacturers have” so they can better tailor their products to their needs by, say, adding tougher rubber or better brakes.[iii]

The fact that these innovators are not profit-seeking firms has some important implications. Most curiously to economists is the practice of freely sharing these innovations. If mountain biking is now a multi-billion dollar industry, the innovations made by those early enthusiasts surely had economic value. So why did they not capture it? Why do open source software programmers freely distribute their code? It turns out, capturing the rents from innovation is not always straight-forward or desired – registering intellectual property can be confusing and expensive and, in many cases, the reputational improvements that come from sharing the process behind your sturdier bicycle with your community is “payment” enough for passionate individuals.[iv]

Democratizing Farmer Innovation?

At first glance, innovations in software, mountain biking, and semiconductors seem like a far call from what is needed to help the poor farmers who constitute sizable portions of the population in developing countries; but might the user innovation theory provide an advantageous frame for innovation by farmers? Can innovative farmers be seen as lead users? And what are the implications of doing so? To begin to answer these questions, consider the story of Namwaya Sawadogo.

Namwaya, from Burkina Faso, provides for twenty family members, and through various innovations, he has moved from a small itinerant trader to a stable, relatively wealthy farmer. Through low-tech changes to his farm, such as constructing stone bunds and expanding into biologically diverse eucalyptus farming, Namwaya has become widely recognized in Burkina Faso as an innovator, even receiving visits from ranking officials.[v]

In many ways, Namwaya fits the archetype of a lead user – his innovations were motivated by the most fundamental of concerns, live or death, and he substantially benefited personally from them. In a survey of the motivations for farmer innovation, this is confirmed with food security toping the list while less essential goals, such as “better taste” correspond to less than one percent of the respondents.[vi] Furthermore, Namwaya was in front of market trends by creating innovations, such as conserving biodiversity, which would, in time, become larger movements.

Namwaya and other farmer innovators in developing countries are the victims of the same systemic market shortcomings that required mountain bikers to innovate. These market failures, such as the lack of appropriate technologies with regard to cost and durability, arise for numerous reasons in the developing world. In chronicling the trouble with traditional agriculture technology transfer, the authors of Farmer Innovation in Africa note that,

“[M]any of the technologies generated and promoted [through technology transfer] are too expensive for the hundreds of millions of small-scale farmers who cannot afford to invest in the packages of required inputs, such as introduced seed, fertilizers and pesticides. Moreover, these packages are often standardized and promoted countrywide without regard to agroecological differences and poorly suited to the diverse and variable conditions of small holders in semi-arid and other marginal areas.”[vii] [Emphasis added.]

The cultural differences are important, too, especially with regard to women innovators. For example, although women often carry much of the farm burden, their innovative ideas often need to pass the approval of the husband who heads the family. Innovations that come from the bottom-up, through a user-innovator, are almost always low cost and more acceptable to the local conditions. The same difficulties firms have in the developed world – sticky information, economies of scale – are present and could even be exacerbated if firms do not believe that there is a “fortune at the bottom of the pyramid.”

Von Hippel’s theory, though, does not map perfectly to farmer innovation in the developing world. In many ways it is overly general, especially given what we know about the nature of farmer innovators. They often exhibit a number of characteristics:

• Innovators have often been exposed to other areas through time in other parts of the country or world;
• Innovators tend to be relatively rich, giving them opportunity to experiment;
• Innovators are mostly middle-aged full-time farmers who have the experience necessarily to finely tune their farm systems;
• Innovators have strong personalities, but do not require formal education.[viii]

Moreover, although recent advances in information and communication technologies have greatly altered the communicative capabilities of poor farmers, illiteracy, scarce free time and the lack of broad communities of innovation in the developing world could limit the ability to disseminate user innovations.

Policy Implications

Given these strengths and weaknesses of von Hippel’s theory with regard to farmer innovation, what should those seeking to promote the livelihoods of poor farmers do? One of the most pressing concerns is to align intellectual property rights with their goal of promoting innovation. The growth of biotechnology has increasingly sidelined farmers who “have always been responsible for seed-innovation by selectively saving, planting and breeding seeds.” The patented nature of new seeds limits the flexibility of farmers who now need “permission to innovate.”[ix] Von Hippel has argued that countries without a long history of innovation policies biased towards large firms (i.e. developing countries) are better positioned to adapt to the user-innovator paradigm, but given the bargaining power of large firms compared to small farmers, there is still plenty to fear.[x]

Smaller steps are also possible: educational grants could increase exposure to other areas, better policing could reduce fears about physical theft of innovative products, and subsidies and information-sharing networks could promote the diffusion of ideas.

No theory is perfect or all-powerful, but ones with explanatory power can provide useful framing to real-world phenomena. Eric von Hippel’s user innovation model provides much of that explanatory power to farmer innovation in poor countries while still leaving room for local adaptation.

[ii] Von Hippel, Eric. Democratizing Innovation. Cambridge: MIT, 2005. Print.

[iii] Ibid.

[iv] von Hippel, E. (2007). Horizontal innovation networks–by and for users. Industrial and Corporate Change. doi: 10.1093/icc/dtm005

[v] Reij, Chris, and Ann Waters-Bayer, eds. Farmer Innovation in Africa: A Source of Inspiration for Agricultural Development. Minneapolis: Earthscan Publications, 2001. Print.

[vi] Ibid.

[vii] Ibid.

[viii] Ibid.

[ix] Braun, Viktor, and Cornelius Herstatt. “Barriers to User-Innovation: The Paradigm of “Permission to Innovate”" ICMIT (2006). Print.

[x] von Hippel, E., & Jin, C. (2009). The major shift towards user-centered innovation: Implications for China’s innovation policymaking. Journal of Knowledge-based Innovation in China, 1(1), 16-27.

First, let’s take a look at the Wall Street Journal, who I’ve criticized in the past for confusing the issue at hand. Their article on McCain’s policy lacks real balance and is essentially just rephrasing his policy without substantive critiques. But when you read technology experts, it is clear that they think McCain is woefully incorrect.

David Weinberger, one of the smartest philosophers on the meaning of the Internet, compiles a list of words you won’t find in McCain’s policy. He points out that McCain sees the Internet as a broadcast medium, not an interactive communicative tool.

Harvard computer science professor Harry Lewis says of the policy, “It’s mostly vague, aspirational statements, many of which are in flat contradiction with each other.”

Craig Newmark, founder of craigslist, has been a driving force behind making the net what it is today. He says in reaction to McCain’s positions, “Obama embraces the Internet as a means of cleaning Washington up, but McCain/Bush sees it as a threat which might make them accountable.”

Harold Feld, the tech policy wonk, calls the policy “a joke.”

David Isenberg, a Berkman fellow, says “to McCain, the Internet is yet another technology by which America can compete against the world.”

Former FCC Chairman, Reed Hundt, lists numerous problems.

Wharton Professor Kevin Werbach calls it a “non-plan.”

OneWebDay organizer and ICANN member, Susan Crawford, notes “This isn’t vision.  It’s more like a wistful memoir about times gone by.”

The list goes on, but it is important to note that these are the people who understand the Internet better than anyone. Many of them have been fundamentally involved in the development of the Internet. They are on the front lines, so to speak, and McCain is admittedly nowhere near them in expertise. If technology and innovation is something important to you, then the choice seems clear in November.

Update: Lessig weighs in via video.

Mike Masnick over at TechDirt has provided some important synthesis of research on the topic and concluded that non-competes are burdensome limitations on human capital which stifle innovation. In Silicon Valley, non-compete agreements are frowned upon and often not enforced. In Massachusetts, on the other hand, they are popular and limit the ability of would-be entrepreneurs from leaving big firms to pursue a new idea. An increasing number of people are beginning to identify the absence of non-competes as an essential reason Silicon Valley has been so innovative.

Now, Harvard’s Berkman Center has jumped into the foray. At a recent panel discussion, they examined the disadvantages of non-compete agreements. Coverage by PC World and Bijan Sabet provides insight into the ideas which were freely exchanged.

One article which spurred a bunch of thoughts was entitled “Less is More” and available here behind a registration wall (when will publishers learn?). In it, the authors point out what major actors in the development field often fail to remember: necessity is the mother of all invention.

Lissa Valikangas and Michael Gibbert see scarcity not as a barrier which must be overcome through massive amounts of aid. Instead, it induces creative innovations which very well may become marketable designs. As development economist William Easterly is famous for extolling: billions of dollars of aid have been spent and the poor nations supposedly helped have seen little progress or, in certain cases, reversals of fortune. In fact, external aid can severely distort markets and even cause “Dutch Disease,” the term economists use to describe the negative effects of resource exploitation.

What Valikangas and Gibbert propose is a refocusing of aid to “build on local tinkering that already exists and supply the often minimal extra resources needed to scale them up.” To them, resource constraints present an opportunity to foster innovation.

Similarly, Amy Smith of MIT proposes cheap technological fixes to the problems of the developing world. Technology, understood in this way, is more similar to the Greek origin of “craft.” It is not computers or large scale networks. Smith designs simple tools that ease daily concerns. In her interview at the New Yorker conference, she shows off rough metal objects which significantly reduce the time and effort needed to make charcoal or shell corn. The extra time or product can be used for other activities previously off-limits to the inhabitants of a resource poor area.

In times of grand thinking, it is often the most simple ideas which really reduce the burden of living on less than a dollar per day. Understanding these burdens requires a intimate knowledge of the developing world, one that comes from outside the classroom and beyond books. So what are you waiting for?