gamified badges, the ability to view videos not otherwise available in their region, early access to new
shows, and an advertising-free, high-definition experience of the content.
As it happens, the market is ripe for services like
Viki’s. In fact, the combination of rapidly increasing internet video adoption rates and a greater
appetite for foreign content — both in Asia and
globally — has become a big opportunity for Viki,
which was acquired by Tokyo-based Rakuten Inc.
for a reported price of $200 million in 2013.2
Two Business Model Waves
From our perspective, as a consultancy that analyzes
business model innovation across the globe, Viki’s
story exemplifies a larger trend playing out in Asia.
We see Viki as an archetype of a new generation of
companies emerging in Asia and leveraging business
model innovation to drive growth in the region. But
to understand this type of business model innovation
in its proper context, it’s important to understand
Viki’s forerunners. Our research into business model
innovation in Asia uncovered two distinct, yet overlapping, waves of innovation: one decades old and
still going, and one that includes Viki and is evolving
now. (See “About the Research.”)
The first wave, as we call it, primarily exploited
differences in labor and other input costs between
developed and developing markets. By contrast,
the second wave is driven primarily by business
model innovation and typically leverages new
technology. These companies are characterized by
extensive and often radical reconfigurations of the
profit formula, resources, processes, and relationships within a broader stakeholder ecosystem.
They may have a sophisticated global orientation
from the start; for example, in Viki’s case, the company was “born global,” beginning as a class project
by graduate students who were studying in the
United States but who later moved the company to
The First Wave
The first wave of contemporary business innovation emerged in Asia during the post-World War II
era. It became a tidal wave from China following
Deng Xiaoping’s 1978 “open door” policy, which
changed the competitive landscape of global manufacturing. Another sea change involved opening
and deregulation in India in the 1990s, which
transformed the global services industry. These
changes have been explored before. For example,
C.K. Prahalad and Stuart L. Hart pioneered research on the opportunities at the “bottom of the
pyramid” in emerging markets. 4 John Seely Brown
and John Hagel III also investigated product and
process innovation practices from Asia. 5 In a similar vein, Vijay Govindarajan and Chris Trimble’s
ABOUT THE RESEARCH
To chart the emerging wave of business model innovation in Asia, we applied a four-step process. First,
we reviewed 27 lists of the most innovative global companies, compiled during the past year in publications
such as Forbes, MIT Technology Review, and Fast Company. These lists emphasize measures such as
patents filed, revenues, and spending on research and development. To complement the lists, we sought
input from our venture capital arm, Innosight Ventures, on relevant startups. In addition, we reached out
through our networks to identify other innovative companies. All told, this resulted in a list of roughly 200
companies operating in Asia.
In step two, we filtered this list based on business models. We evaluated the business models on several parameters, including the extent to which they address important and unmet customer jobs to be done;
the complexity of resource and process configuration; the novelty of the profit model; the leveraging of technology; the reduction of barriers to adoption through simplicity, convenience, accessibility, and affordability;
and the applicability to emerging market circumstances. We also gauged the business models by the companies’ demonstrated growth so far and by their potential, in our view, to become globally disruptive.
In step three, we synthesized these findings and categorized the companies based on their business
models. In step four, we selected representative companies for both waves, and we interviewed company
executives to develop further insights into their business models. An overwhelming majority of the companies we reviewed were incumbents or low-cost innovators that we categorized as first-wave innovators.
However, we saw evidence of a distinct category that we subsequently labeled second-wave innovators.
The success of these companies is built upon the reconfiguration of their business model components.
From the second-wave companies, we selected two illustrative examples out of a handful.