Everywhere we look there’s evidence of the consumption economy.
The shoes you’re wearing, the device you use to go online. All around us are innovations with features that are sleeker, faster, smarter, and better quality than those that preceded them. Look carefully, and you’ll see a host of other options delivering similar features, if not the same. The consumption economy is crowded.
But what about the nonconsumption economy? Nonconsumption—the inability of an entity (person or organization) to purchase and/or use a product or service—may be just as prevalent, though sometimes less easy to spot. It results when people forgo purchasing a product in a given market because it isn’t physically available, or due to cost or other restricting factors.
Oftentimes, entrepreneurs choose to engage in the former. Noting that large sums of money are already being spent in a given industry, they hope to collect a piece of the pie. The downside to this strategy, however, is the “profit mirage”; though the industry may boast a lot of spending, competition is fierce.
Conversely, entrepreneurs who target the nonconsumption economy don’t compete with other companies, but rather nonconsumption itself. Recognizing that future consumers have fewer dollars in their pockets, they’re tasked with creating innovations that are so inexpensive and accessible, those consumers will be able to make the purchase when before they could not.
These entrepreneurs concern themselves with questions like:
- Is my solution focused on making something accessible to a population that historically has lacked access?
- Do my target consumers regularly create workarounds to purchasing this product?
- Does my solution address the major barriers to product adoption?
- Does my solution contain the bare minimum features necessary to turn nonconsumers into consumers?
Developing innovations that target nonconsumption—what we call market-creating innovations—results in a domino effect of positive change. First and foremost, these innovations enable people to make progress in their lives where they could not historically. Whether it be a health clinic in a previously neglected neighborhood, a convenient transportation service that helps Grandma safely make it to and from the grocery store, or an affordable tablet that enables students in underprivileged schools to virtually attend classes at other schools, these innovations create opportunities.
They also create markets (hence, the name), and with markets come jobs, infrastructure, even a change in the predominant culture in a region. Consider Henry Ford’s Model T. In the early 1900s cars weren’t affordable to the vast majority of Americans, so Henry Ford decided to do something about that. He created the Ford Model T which was far less luxurious than existing cars on the market, but that was fine—it wasn’t competing with other cars. Its closest competitor was the horse and buggy, but really the Model T was competing with nonconsumption. In prioritizing affordability and simplicity (other cars during that time required a certain level of expertise to be driven), the car transformed nonconsumers into consumers. Like that, a new market was created.
Apart from the jobs Ford created in his assembly lines, the market spurred significant investment in American infrastructure by providing a tax base to support construction of roads. Eventually, as more people gained access to convenient transportation, investments in other things, such as restaurants, schools, and suburbs skyrocketed. America was one step closer to becoming the wealthy powerhouse we know today. This example, like countless others, speaks to the impact that targeting nonconsumption has on a country’s development.
Change, we’d argue, is where the money is. Entrepreneurs, then, have an incredible opportunity to change our world for the better. In targeting the nonconsumption economy, they can not only provide value to those who need it most, but truly transform communities and create prosperity where there previously was little.
