Reverse innovation – book review

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As much of the global economy continues to evolve in a difficult environment, the notion that innovation stems from the more developed nations is increasingly inaccurate. The term “Reverse Innovation” refers to an innovation which has its roots in the developing world but is eventually embraced across the globe.In Reverse Innovation, Vijay Govindarajan and Chris Trimble encourage businesses to focus on solving issues in developing nations as a catalyst for innovation. The challenges faced here are very different and require new products and solutions. Business models need to be adapted to benefit from a consumer base made up of many people with small budgets as opposed to few clients with substantial resources. The book contains several examples of companies producing products originally designed for local consumption within developing markets, which eventually made their way abroad.Reverse Innovation in Practice reviewIn the healthcare sector, General Electric (GE) produces a variety of electrocardiogram machines which cost up to $10, 000. These products were too expensive for practitioners in India and GE set about developing an $800 version. The new product did not have a monitor and employed a much smaller printer, in order to drastically lower energy consumption. In addition, by simplifying the interface, GE was able to reduce the need for technical support. The new device has met with impressive success in India and is now on sale in 90 other countries, including Germany and the USA.After years of developing products for the USA and then distributing them globally, PepsiCo realised the businesses was no longer growing in developing markets. In an attempt to improve performance in the Indian market, the company developed Aliva, a baked savoury snack. By bringing together local taste preferences and growing demand for healthier snacks, PepsiCo was able create a product which appealed locally but which is also being primed for launch outside India’s borders. Numerous challenges in terms of marketing, packaging and production also yielded valuable new processes for the company.Cannibalising MarketsReverse innovation often incites a fear of market share cannibalization. By bringing out less expensive products which can replicate the performance of more expensive devices, sales of the former will decrease. Govindarajan argues that, although this fear is well-founded, the cost of inaction is far higher. Established Western businesses risk being made obsolete by companies from the developing world. By heading to these poorer countries and tackling local issues, organisations can not only enter new markets but also stay ahead of the competition.In the words of Ajay Banga, President and CEO at MasterCard; “Reverse Innovation superbly addresses a phenomenon that is shaping the global economy. As the world’s economic centre of gravity continues to shift-and as new consumers continue to emerge-it’s clear that the logic and business practices that drove yesterday’s success won’t drive tomorrow’s. The concept of Reverse Innovation has value for any organization that has its eye toward the future.”

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