Today I'd like to share with you five main insights for my research that make me believe business -- and more specifically innovation -- are the greatest tools that can help us create wealth and prosperity in poor countries. Well every economy, rich or poor, is really made up of two different segments -- the consumption economy and the nonconsumption economy. The consumption economy has the following characteristics -- when you think about competitors in the economy, they exist.
You think about demographics. You think about things like disposable income. You think about age groups and so on. A market already exists. People have income to spend and there typically is a supply chain that already serves that market. The nonconsumption economy is very different. The competition really is workarounds, right?
People typically don't have a lot of income and so they have to create workarounds. There's really no established competition. The demographics -- there's really no demographics here, right? You don't really think about a segment in the nonconsumption economy -- it's really invisible. There's no existing market. In fact, when you tell people that you're going to go after the nonconsumption economy, they're going to be like, are you crazy? Those folks don't have any money. There's no way they can afford this particular product.
And so another thing that characterizes the nonconsumption economy is a lack of income. There’s also no existing supply chain that can serve that market because the supply chains that exist are serving the consumption economy. And that brings us to our next point, which is what kind of strategy we employ. Now there’s two main types of strategy -- push versus pull. And when you think about it, the push strategy goes after the consumption economy.
There's already a market and you're really just trying to steal market share -- company A, company B, company C, company D. The nonconsumption economy is very different. Innovators have to develop products and services that nonconsumers can pool into their lives and so a very different type of strategy. Think about how Uber came into the picture. And many of us just pulled that innovation into our lives because it performed a particular job to be done for us.
And so that then leads me to my next point. Now the job-to-be-done theory was developed by Professor Clay Christensen at Harvard Business School and some of his colleagues. The first layer is the job. So what do I mean by the job? Jobs arise in our lives that we need to hire products and services to help us accomplish.
So one example is I needed to send something from Boston to Wisconsin and to Florida and so I have to hire the USPS, right? So I could have hired FedEx or UPS or any other courier service. The functional component is the company needs to send the product from Boston to Florida. Now it doesn't matter how the company makes me feel.
If they send the product from Boston to Tokyo or to Jamaica, then they’re not doing the job. Now there's an emotional component, as well, to every job. Now this is how does your product or solution make the customer feel. Now many of us may not enjoy flying -- and not because they don't take us to our destination -- maybe it's you’re going for Thanksgiving or Christmas – but it’s because of the whole experience. How does it make you feel, right?
So they might perform the functional component of the job, but the emotional component, very few people like really look forward to going through the TSA line. Now there’s some products that do the job functionally well. They actually make you feel good but somehow just because other people might see you and you may not -- they may think less of you as you use the product. You're not too excited to show people that you use the product and so that's the first one.
The second is the experiences layer. Essentially, as experiencing and purchase and use that the customer feels as they experience your product. The third layer in the job-to-be-done theory is the integration. This is now where you start to think about how you integrate your resources and what kinds of processes your organization needs to create in order to fulfill the experiences that help people get their job done.
Now the last thing is if you’re able to do all these things really well, all of a sudden, you become a brand in yourself. You become a verb really, like Google this and so on. Let's move on to the next point because I've talked quite a bit about integrating operation and so when should I integrate? When should I not integrate?
Now, there are three main questions that you need to ask yourself before you make a decision on whether or not integrate or to modularize or outsource your operations. The first is this component of my value chain specifiable? In other words, if you can sit in a room with your colleagues and develop specifications for another company, then that's a checkbox, right? And so you're on your way to possibly being able to modularize or outsource some of your operations.
The next is this verifiable? Are you actually able to verify that they got the specifications right? Now if that's the case, then you've got another check box by that. And the last is this predictable? Can you count on this company giving you this solution every single time? If you're able to answer yes to all these, then it's almost like you kind of have a license to outsource.
It doesn't mean you should but you have a license. Now if you said no to any of these, then you absolutely have to bring the operation into your company. Now the last thing I'll touch on here is when you're able to do this, this is where you actually create markets and you don't exploit markets. There's no right or wrong strategy in terms of whether or not you should create or exploit existing markets, you just have to understand a few things.
If you go after a strategy that exploits markets, understand that somebody had to create that market first, which means someone has already profited from all the hard work of creating the market and you're fighting for market share, as opposed to somebody who actually creates the market. Now the second thing that you want to think about, is if you're going after an exploit market, then you're going to be – I mean you have to be aware of competition because if you know that there's a market that exists somewhere, these people are getting richer.
Well, guess what? Everybody else knows. If you read it in an analyst report, well guess what? Other people can read, as well. So competition is going to be fierce. Now the last thing I'll touch on is if you actually dedicate a strategy to create markets in emerging markets, in poorer countries, then what you're also doing is creating the next wave of middle class folks in that country.
That strategy has worked in all the rich countries that I've been researching. In the US, you had entrepreneurs like Henry Ford, entrepreneurs like Isaac Merritt Singer, entrepreneurs like Friedrich Tudor, who created markets in the US that actually was able to create middle class in the country.