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Tech Challengers Lead Innovation in Emerging Markets

BCG Identifies 100 Emerging-Market Technology Companies Driving the Next Generation of Innovation and Growth

BOSTON—In a new report on the leading companies in emerging markets, Boston Consulting Group (BCG) identifies 100 tech challengers that have grown into powerful forces in technology and other industries. Their impact is being felt in their home markets, regionally, and internationally. Most have weathered the COVID-19 crisis well, with many showing increases in both number of customers and frequency of usage.

While previous emerging-market tech leaders came predominantly from China, the current generation is much more geographically diverse, encompassing Africa, Asia, Latin America, the Middle East, and Russia. More than 10,000 tech companies have been founded in emerging markets since 2014, 47% of them outside China. Among emerging-market tech unicorns (companies valued at $1 billion or more), one-third hail from countries other than China.

The BCG tech challengers represent 14 countries from all major regions and are active in multiple sectors that span both B2C and B2B. While two-thirds of the challengers focus on consumer apps or services, one-third are active in B2B, transforming how other companies work.

Slightly less than half of the 100 the tech challengers are active primarily in their home markets, while 16 are replicating their success in their emerging markets and 39 are pushing into mature markets. Ola, a ride-hailing company based in India, entered the UK market in July 2019 and acquired 3 million customers in more than 20 cities in just eight months.

“Tech challengers are reinventing their industries and charting their own paths to scale and success,” said Nikolaus Lang, BCG managing director and senior partner and report coauthor. “They are also gaining the attention of major industry incumbents—in the tech industry itself and in other industries—which must determine how best to deal with the rise of these new potential adversaries and allies.”

The tech challengers have an average valuation of $6.3 billion, putting most of them well beyond unicorn status. Despite averaging $2 billion in revenues each, they are still growing at an average annual rate of almost 70%, six times the rate of the tech sector in developed markets. Gaming challengers are growing at almost 130% a year, 30 times the average rate of developed-market gaming companies.

Since the beginning of the COVID-19 crisis, tech categories done well overall, showing increases in both users and usage. Some sectors, such as edtech, gaming, and video streaming, have seen accelerated growth, capitalizing on changes in consumer habits.

Monthly active users in edtech have increased by 28% so far in 2020, following growth of 6% per quarter during the previous two years. For the same periods, monthly active gaming users have increased by 14% compared with 10%, and video streaming users have jumped by 13% versus 11%. Three challengers (37 Interactive, Century Huating, and Sea Group) ranked among the top 25 highest grossing gaming companies in 2019.

Tech challengers follow multiple paths to growth and success. Many use their capabilities to solve problems specific to emerging markets, such as limited financial inclusion and restricted access to education. In doing so, they often leapfrog more mature markets—for example, taking unbanked populations straight to digital banking. They also reimagine the value chains of their industries, rethinking how players collaborate, to address inefficiencies and deliver better outcomes to customers.

Emerging-market startups have multiple potential sources of early funding and assistance—including government backing, corporate venture capital funds or incubators, and conglomerates—depending in part on where they are located. Tech challengers also pursue multiple paths to growth and expansion. They embrace ecosystems and tend to do so early in their development. Many transcend industry boundaries and the online-offline divide through partnerships and M&A.

"Tech challengers are formidable and disruptive competitors, willing to attack new sectors beyond their core businesses,” said Michael Meyer, BCG managing director and partner and report coauthor. “At the same time, their tendency to work through ecosystems makes them more open to collaborative models than many of their predecessors. Incumbents need to develop strategies to deal with this new source of competition. Do they try to beat them or join them?”

A copy of the report can be downloaded here.

To arrange an interview with one of the authors, please contact Samantha Pacan at + 44 7500 973 504 or Pacan.Samantha@bcg.com.

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