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

Accelerating growth of EMs (2/3 rd 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 Contd…

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

Recently locus of innovation is changing 1. Roland Berger Global Topic 8 Billion report 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

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