There’s a phenomenon that everyone in business needs to be aware of: reverse innovation. In fact, as authors Vijay Govindarajan and Chris Trimble write in their new book Reverse Innovation: Create Far From Home, Win Everywhere: “Whether you are a CEO, financier, strategist, marketer, scientist, engineer, national policymaker, or even a student forming your career aspirations, reverse innovation is a phenomenon you need to understand.”
After reading Reverse Innovation, one must conclude that they are right. The dynamics of the world market are indeed changing. It used to be that innovations flowed from developed nations to developing ones. That’s no longer the case–they increasingly flow in the opposite direction.
The big idea is this: Innovation is more and more flowing uphill, and the future of innovation lies in emerging markets. Today’s poor countries are being tapped for breakthrough innovations that can unlock new markets in the rich world.
So what does this mean?
It means that if you’re planning to prosper in business now and in the future, the enormous opportunity that lies in innovating for emerging markets is something you simply can’t ignore. If you think that poorer countries are irrelevant, that it’s okay to just sit tight and wait for them to develop, or that customizing your products and services is sufficient, Reverse Innovation suggests you may wake up one day in the not so distant future to find yourself too far behind the curve to recover. Buh-bye!
Consider Reverse Innovation to be your go-to guide to an important trend in progress. The authors, both of the Tuck School of Business at Dartmouth, explain where, when, and why reverse innovation is on the rise, and why the implications are so profound–for nations, for companies, and for individuals. They demonstrate through eight compelling case studies how to achieve explosive growth in emerging economies, and detail both the rules of the game and tricks of the trade.
The first step, though, is to change your thinking. While most business professionalsin the U.S. recognize that emerging markets have become today’s last source of growth, most simply modify and export products that they developed for and in America, essentially relegating emerging markets to a second tier priority. To exploit the full potential of emerging markets, though, you must head in the opposite direction. You must innovate specifically for and in developing countries to create breakthroughs that will then be adopted here at home.
That’s a mind shift for most. But luckily, Reverse Innovation illustrates what works and what doesn’t. We get to learn from both wins and the missteps of others.
We learn, for example, how Pepsico drew upon local teams and global resources to develop a new savory cracker created by Indians for the Indian market, but with high global potential.
We learn how, before employing reverse innovation, Logitech almost lost leadership of computer accessories in China to an unexpected Chinese rival with a better understanding of local needs.
We learn how P&G developed a globally successful feminine hygiene product in Mexico after discovering why its American product was losing market share to rivals there.
We learn how, in China and India, Harman designed from scratch a completely new infotainment system for emerging markets with functionality similar to their high-end products at half the price and one-third the cost, and generated more than $3 billion in new business.
These examples show, though, that the biggest hurdles to reverse innovation are not scientific, technical, or budgetary. They are not company size-oriented. They are managerial and organizational, and with the right mindset and tools, they can be overcome by any manager or owner.
Better yet, the evidence in Reverse Innovation shows that companies can earn the same or even better margins and return on investment for a low-cost product designed for, say, China or India, than for a higher cost current product at home.
The result is a win-win at home and abroad.
