Combating poverty requires more than wells and schools and clinics. It requires entrepreneurs who spy opportunity where there are no apparent customers and respond with innovations that generate jobs and profits. In his new book, The Prosperity Paradox: How Innovation Can Lift Nations Out of Poverty (2019, Harper Business), Harvard Business School professor Clayton M. Christensen, with co-authors Efosa Ojomo and Karen Dillon, explains how the components of healthy economies--infrastructure, institutions, even cultural change--are "pulled in" by market-creating innovations. In this edited excerpt, the authors describe the impact of a humble new food.
Perhaps the most beloved consumer product in Nigeria is also one of the humblest: Indomie instant noodles. Sold in single-serving packets for the equivalent of less than 20 US cents, the brand enjoys near-universal name recognition in the country, maintains a 150,000-member fan club with branches in more than 3,000 primary schools, and sponsors Independence Day Awards for Heroes of Nigeria to celebrate the accomplishments of exemplary Nigerian children.
You may not have heard of it, but Indomie is a household brand name in Nigeria.
In 2016, I was honored to speak at the annual conference of Harvard Business School's Africa Business Club. With approximately 1,500 attendees, it is the largest student-run conference on business in Africa in the world. In my talk, I referenced Tolaram, a fascinating company we had been studying, only to receive blank stares in the auditorium. But when I said, "These are the guys that make Indomie noodles," the crowd went wild. Why would noodles cause a crowd to erupt in raucous cheers? And more important, what in the world does that have to do with development and prosperity?
What Tolaram, through Indomie noodles, has done in Nigeria is astonishing. Since its entry into Nigeria in 1988--when Nigeria was still under military rule--Tolaram has invested more than $350 million to create tens of thousands of jobs, developed a logistics company, and built infrastructure including electricity and sewage and water treatment facilities. In addition, Tolaram has built educational institutions, funded community organization programs, and provided millions of dollars in tax revenues. Perhaps the most visible evidence of this strategy is that the company has taken a lead role in developing a $1.5 billion public-private partnership to build and operate the new Lekki deep-water port in the state of Lagos, Nigeria's commercial capital. Without overstating it at all, Indomie noodles isdevelopment.
Tolaram has shown that out of very little, a market can be created--and with the birth of a market come the attendant benefits that can lead to development.
Indomie noodles are so woven into Nigerian society that it might even surprise Nigerians to recall that noodles are not among their traditional foods. Tolaram has only been selling the product in the country for about 30 years. The company's growth track turns the conventional wisdom about development on its head.
In 1988, the year Tolaram began selling Indomie noodles in Nigeria, the country was far from an investment magnet: Nigeria was under military rule; life expectancy for its 91 million people was 46 years; annual per capita income was barely $257 (approximately $535 today); less than 1 percent of the population owned a phone; only about half had access to safe water; just 37 percent had access to proper sanitation; a staggering 78 percent lived on less than $2 a day. But even in these dismal circumstances, brothers Haresh and Sajen Aswani saw a huge opportunity to feed a nation with an affordable and convenient product. For them, this represented an enormous market-creating opportunity.
Indomie noodles can be cooked in less than three minutes and, when combined with an egg, can be a nutritious, low-cost meal. But in 1988, the vast majority of Nigerians had never eaten or even seen noodles. "Many people initially thought we were selling them worms," recalls Deepak Singhal, currently the CEO of Tolaram Africa. The Aswani brothers were convinced, however, that they could create a market in Nigeria because of the country's growing and urbanizing population, and the convenience their product offered. Instead of focusing on Nigeria's unfavorable demographics, they focused on developing a business model that would enable them to createa noodle market.
The decision to target the needs of average Nigerians who were very poor compelled Tolaram to make long-term investments in the country. In 1995, the company made the decision to shift noodle manufacture to Nigeria to better control its costs. In order to do so, Tolaram had to pull infrastructure such as electricity, waste management, and water treatment into its operations. "I run a food company, but I know more about electricity generation than food," Singhal says now.
Tolaram also got into the "education" business, through company-sponsored training in electrical and mechanical engineering, finance, and disciplines relevant to the business. Tolaram had to make these specific investments because the underlying infrastructure in Nigeria was either nonexistent or sub-par. So Tolaram "pulled" them in instead.
And that, in turn, created more opportunity for prosperity to begin flourishing. Consider, for example, what happens when Tolaram pulls a recent graduate from a local university into its operations and provides employment and training for the new employee. First, the company increases the productivity of its own operations and, by extension, that of the region. Second, it reduces unemployment and, as a result, indirectly reduces crime, since people with jobs are less likely to engage in criminal activities to try to meet their basic needs. Third, it contributes additional income taxes and consumer spending. All of these things might have been core regional development objectives, but for the executives at Tolaram, they were just the natural result of operating their growing business.
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