The late author and theologian C.S. Lewis once wrote, ‘There are lots of nice things you can do with sand; but do not try to build a house on it.
In the first chapter of the new book The Prosperity Paradox, the authors tell the story of the Sudanese entrepreneur Mo Ibrahim. They explain how, in the late 1990s, he started his mobile communications network Celtel in sub-Saharan Africa even though everyone laughed at him or told him his company would fail.
“Everybody said Africa is a basket case,” Ibrahim recalls now. “It’s a dangerous place, it’s full of dictators, it’s full of crazy people. . . who are all corrupt.” More importantly, Africa was then a place where most people had never used a phone, let alone owned one. Of course, Ibrahim went on to sell his company and become a billionaire as well as a well-regarded philanthropist.
The book, which was written by the famous Harvard Business School professor Clayton M. Christensen with Efosa Ojomo and Karen Dillon, is full of anecdotes, factoids and data points about “how innovation can lift nations out of poverty.” Specifically, the book explains how different types of innovation can impact a region differently. We Interviewed Ojomo, a Nigerian development expert who actually studied under Christensen at Harvard before embarking on this book project with his mentor.
How did you come to work on this book?
I first got interested in global poverty and development economics after reading books by Jeffrey Sachs and Paul Collier. But it was William Easterly’s book, The White Man’s Burden, that really changed the trajectory of my life. In his book, I read about a ten-year-old Ethiopian girl, Amaretch, who had to wake up every morning at 3 a.m. to fetch firewood, walk miles to the market to sell. After reading about her, I couldn’t keep living life the same. Something happened in me and it was then that I wanted to dedicate my life to finding out how to improve the world for the hundreds of millions of Amaretchs in it.
Working on The Prosperity Paradox: How Innovation Can Lift Nations Out of Poverty was true providence. I came to Harvard Business School in 2013 to learn how business and management could make a noticeable dent in reducing poverty in the world. While at Harvard, I was fortunate to meet and take a class from Professor Clayton Christensen, the father of disruptive innovation theory. After taking his course, Building and Sustaining a Successful Enterprise, he asked that I join him in writing a book about how innovation would impact low- and middle-income countries.
What are some of the immediate changes needed at the government level in Africa?
I think one of the most immediate changes that needs to happen is quite simple. It is an understanding of the critical importance of how innovation impacts Africa. Without it, Africa will never grow. Here’s what I mean. From an economic development standpoint, there are three types of innovations: market-creating, sustaining, and efficiency, each of which has a different impact on an economy.
Market-creating innovations transform complicated and expensive products into products that are simple and affordable so that many more people in society can access them. They serve as the bedrock and foundation of sustained economic prosperity. For example, the proliferation of mobile phones on the continent is an example of a market-creating innovation. This industry now supports millions of jobs and creates billions of dollars in economic value in the continent.
Sustaining innovations make good products better. These are also important, but they have a very different impact on economies and organizations as they increase margins and keep companies vibrant. Efficiency innovations make good products cheaper. These are also important as they increase cash flows for companies and make their organizations more efficient. But they don’t support widespread economic growth.
Once African governments understand this, many are brilliant enough to prioritize investments in market-creating innovations.
Name one innovation that has positively impacted an African country and its people.
Perhaps the most obvious one is the proliferation of mobile phones on the continent. 20 years ago, when Mo Ibrahim decided to focus on providing several African countries with mobile telecommunications, many of his colleagues laughed at him. Today, however, according to GSMA, that industry supports roughly four million jobs, generates about $20 billion in taxes, and is estimated to create $200 billion in economic value. That is the impact of a market-creating innovation.
Now think about this. What if we did the same thing we’ve done in mobile telecommunications for affordable healthcare, or education, or food processing, or entertainment, or affordable housing. The solution will differ, but the process is the same. It is possible and we detail several other examples in our book.
You seem to feel that NGOs don’t often lead to true transformation. Why is that?
Behind every major NGO is a profitable enterprise. Behind the Gates Foundation is Microsoft; behind the Rockefeller Foundation is Standard Oil (ExxonMobil); behind Ford Foundation is Ford Motor Company. The list is endless. NGOs are important, but a continent’s development strategy cannot and should not be left to well-meaning NGOs that are funded primarily by profitable enterprises, or people who work for profitable enterprises. What if the work of NGOs were secondary and many people instead focused on creating enterprises in Africa? That is what works in the long-term.
NGOs serve a purpose, but when it seems as if the primary way to solve Africa’s problems is through NGOs, then we will never succeed. The late author and theologian C.S. Lewis once wrote, “There are lots of nice things you can do with sand; but do not try to build a house on it.” We are trying to build a house (Africa) with sand (NGOs).
Why did you choose to start the book with the story of Mo Ibrahim and his entrepreneurial success in Africa?
I think the story and success of Mo Ibrahim very clearly illustrates the power and potential of market-creating innovations and reflects the solution to the Prosperity Paradox. The Prosperity Paradox is quite simple. You don’t get to fixing poverty (and creating prosperity) by trying to fix poverty. It hasn’t worked. And it is not likely going to work.
Instead you get to fixing poverty by focusing on creating prosperity. The way you do that is by making products simple and affordable so that many more people will have access. The new market this creates is forced to pull in the resources that sustains the market. In so doing, society, over time, gains access to many more resources that not only lift it out of poverty, but that also creates prosperity. That’s the solution to the Prosperity Paradox and Mo Ibrahim’s story illustrates it perfectly.