Reverse Innovation
Aruna Naik
BUS 527
Reverse innovation
Global Innovation
Reverse Innovation History
• Term introduced by Dartmouth professors Vijay
Govindarajan and Chris Trimble and GE's Jeffrey R.
Immelt
• “Reverse innovation will transform just about every
industry, including energy, healthcare, transportation,
housing, and consumer products,” Govindarajan,
who coined the term in 2009 while working as a chief
innovation consultant at General Electric
• Goods developed as inexpensive models to meet the
needs of developing nations, such as battery-operated
medical instruments in countries with limited
infrastructure, are then repackaged as low-cost
innovative goods for Western buyers
Why Reverse Innovation
• Globalization efforts by removing expensive features
from their established product
• Attempt to sell these de-featured products in the
developing world
• Not very competitive approach
• Targets only the most affluent segments
• Reverse innovation: Products which are created and
tested in local markets, and, if successful, then upgraded
for sale and delivery in the developed world
Contd…
• Accelerating growth of EMs (2/3rd of World’s GDP)
• They are the non customers international organizations
could access
• Products tailored to their needs could form a platform for
new global products
• Global organizations have to develop new structures
and a mindset to capture those markets
Importance of Reverse Innovation
for MNEs
• Presence in future markets
– avoids emergence of new competitors
– understand the market and visibility (collaboration)
• Implementation of a new corporation mentality (fast time to market)
– acquisition of human capital
– new innovation strategy
• Governments provide funds
• http://www.youtube.com/watch?v=ztna1lt_LZE
Recently locus of innovation is
changing
•
•
•
Emerging countries no longer just borrow innovation from the
developed countries
Instances of reverse innovation appears to be rare but it might
change in the future
Key drivers: rise of emerging countries and flattening world
1. Roland Berger Global Topic 8 Billion report
Service Ecosystems
• Service Ecosystems literally
translates, testing services
the economical way
• Developing and servicing in
the western countries
involves a lot of capital
• India and Philippines are
occasionally termed as the
Outer hubs for IT services
• BPO’s, Call Centres are the
perfect example for service
ecosystems.
Average cost per day for 100
employees at a BPO ($)
Classic Example of Reverse
innovation
• Tata Nano, a low budget car
introduced in India, costing $2,000
is all set to launch it’s new version
in the European markets
• The car will be modified according
to the taste and preference of the
users in Europe and will be sold at
a higher price, thus backing the
‘Leapfrog Strategy’
Example II
• Electro-cardio machine in US costs
anything around $3,500-4,000.
Doctors in India invented a much
portable and cheaper version of the
machine which costs only $500
• This machine is now sold in 90
countries
• GE has struck an intriguing balance in
the case of healthcare in India. By
creating lower-cost end-user
solutions, they’ve actually been able to
create an entirely new market, primed
for expansion globally
Limitations of Reverse Innovation
• Per-capita incomes are so low in the
developing world, conditions are ripe
for innovations that offer decent
quality at an ultralow price — that is,
a 50% solution at a 5% price
• Most of the infrastructure (energy,
transportation, telecom, and so forth)
in the developing world has yet to be
built
• Many developing nations are
confronted with environmental
constraints far sooner in their path of
economic development than rich
nations were
The Challenge
•
It requires a company to overcome its dominant logic,
the institutionalized thinking that guides its actions
• Throwing out old organizational structures to create new
ones from scratch
• Revamping product-development and manufacturing
methods
• Reorienting the sales force
How to implement Reverse
Innovation
• Decision-making
– Localized in emerging market
• The local organization
– Connected to global technology
• Experiment-and learn approach
• Outsource and collaboration
Conclusion