Reverse Innovation

When I read the title Reverse Innovation – the new book by Harvard Business Review Press – by Vijay Govindarajan and Chris Trimble, I was very curious!

One of the first sentences that caught my attention was from Ratan N. Tata from India “This book explains how innovations are increasingly originating in developing countries and flowing back to rich ones”. I recalled the second base of disruptive technology presented by Clayton Christensen in his book The Innovator’s Dilemma:  “disruptive technologies typically are first commercialized in emerging or insignificant markets”. But, perhaps Reverse Innovation is Disruptive?

In rich nations, home markets are mature and saturated and the gap between these and emerging economies is closing. No longer will innovations traverse the globe in only one direction, from developed countries to developing ones. They will also flow in reverse. Most of the world’s untapped buying power is in the emerging markets of Asia, South Asia, Eastern Europe, Africa and Latin America.

V. Govindarajan explains throughout his book that “To win everywhere, you must learn to create far from home”, and “Innovating for emerging markets, rather than simply exporting, can unlock a world of opportunities for multinationals”. Reverse Innovation shows leaders and senior managers how to make innovation in emerging markets happen.

The book highlights the tribulations and triumphs of some of the world’s leading companies. Here is a taste of Reverse Innovation’s GE, Gatorade, Wal-Mart and NH Hospital cases:

GE: V. Govindarajan spent two years (2008-2010) advising to GE as a Reverse Innovation laboratory. For GE to win in the US, they must win in India and China first. One of the successful innovations was to create a portable, low-cost ultrasound machine in China.

Gatorade: The doctor at the University of Florida who created the Gatorade drink for help to rehydrate players of football team – the Gators, before this, in earlier in the 1960’s, was with a medical group to Bangladesh to help with epidemic outbreaks of cholera. There he discovered a centuries-old local treatment for the severe diarrhea caused by cholera- By giving carbohydrate and sugar in the solution with salt, uptake was quicker, and patients rehydrated faster. The doctor saw a common problem in the need for rapid rehydration. He thought if such treatment worked well for cholera patients, it would surely work for healthy football players.

Wal-Mart: When this giant retailer entered emerging markets in Central and South America, it discovered that it couldn’t simply export its retail formula. They had to be radically scaled down its big box. The company innovated creating a version of the Wal-Mart store similar to the more “cozy” retail outlets common in Mexico, Brazil and Argentina. By 2011, Wal-Mart was bringing the “small-mart” concept back to the US. For one thing, its big-box market was saturated. Many US consumers were suffering from big-box fatigue.

NH Hospital: Narayana Hrudayalaya (NH) hospital has transformed health care in India by performing open-heart surgery for just $2000, compared to upward of $20000 in the US. The hospital’s success can only partially be explained by India’s lower cost of labor. The real magic is in process innovation. NH used several industrial concepts like Ford’s Model T and Lean process: standardization, specialization of labor, economies of scale and assembly line production. NH hospital is bringing its innovate business model to the rich world, building a hospital in the Cayman Islands (an hour’s flight from Miami) to treat uninsured Americans at 50 percent below US prices.

In this manner, as the book says 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.

The new reality is that the future lies far from home! Reverse Innovation is not optional. It is oxygen.

image credit: Harvard Business Review Press

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Geovanny Romero, NPDP, is a professional with great experience in manufacturing and innovation process with a variety of companies in Latam and Europe. His main interests are focused in Productivity, New Product Development and Lean Innovation Management. You can connect with him on Twitter @geovanny_romero