REVERSE INNOVATION

CREATE FAR FROM HOME, WIN EVERYWHERE

Penned By:Vijay Govindarajan

Chris Trimble

Enlightened By:Sneh Shah (C010)

Sanket Patel (D002)

Bhavik Doshi (B013)

INTRODUCTION What is Innovation?

Innovation is a process of taking new ideas to satisfied customers. It is the conversion of new knowledge into new products and services.

Developed country

Developing world

WHAT IS REVERSE INNOVATION?

It is the reverse process of innovation.

Developed country

Developing world Very rare

Developing nations are engaged in a evolutionary process of catching up with the rich world in both

1) Economically

2) Technologically

Developing country don’t need innovation that is why glocalization strategy makes the perfect sense.

Reverse innovation is a counterintuitive. Examples

1. Wal – Mart

2. Narayana hrudayalaya Hospital

“Reverse Innovation is not a optional. It is oxygen.”

THE FIVE PATHS OF REVERSE INNOVATION

We can take this five needs gap as the starting points for the reverse innovation opportunities.

1. The Performance gap

2. The Infrastructure gap

3. The Sustainability gap

4. The Regulatory gap

5. The Preference gap

THE PERFORMANCE GAPTYPICAL GOOD-BETTER-BEST PRODUCT LINE.

DEVELOPING NATIONS ARE MOST EAGER FOR BREAKTHROUGH NEW TECHNOLOGY THAT DELIVERS DECENT PERFORMANCE AT AN ULTRA LOW COST. (50% SOLUTION AT 15% PRICE)

Product

Performance (%)

Price (%)

Good 80 80

Better 90 90

Best 100 100

Example: Nokia

THE INFRASTRUCTURE GAP

Rich world has extensive infrastructure in place while poor world does not.

New product can be developed in rich world under this assumption.

Example: GE

THE SUSTAINABILITY GAP

As the world economy grows, the clashes between economic activity and environmental concerns will become more severe.

On a scale of 1 to 500 (Where 1 is cleanest and 500 dirtiest) Beijing often hits 500 whereas 100 would be acceptable for USA.

Example : BYD electric car

In rich world due to their older economies and its culture and legal traditions, has advanced regulatory system that, when applied effectively, fair and consumers and workplace safe.

While in developing countries innovations may enjoy the advantage of lower frictions and faster progress.

Example: Diagnostics for All

THE REGULATORY GAP

THE PREFERENCE GAP Each country has distinct tastes and preference.

Innovations efforts must take these differences into account.

COMPLETING THE REVERSE INNOVATION

CYCLE: WINNING EVERYWHERE

TRENDS THAT CLOSE THE FIVE NEEDS GAPS

Gap Description Trend

Performance Because of their low incomes, customers in poor countries are prepared to make significant sacrifices in performance at the right place.

First, technology improvements raise performance to the point that rich world customers are interested.Second, tighter budget in which countries force consideration of ultra low price auction.

Infrastructure Fully built,emerging economy infrastructure are under construction

Aging infrastructure in rich world will need to be replaced.

Sustainability Poor countries face many of the most daunting sustainability challenges on the planet.

Sustainability pressures rise in the rich world.

Regulatory Emerging country – less developed In rich world eventually approve new technologies or revise regulatory requirements.

Preference Each country has distinct tastes and preferences.

Customers in rich world are influenced by poor country preferences.

CHANGING THE MIND-SET

• The Shift in emphasis from exporting to emerging markets to innovating for emerging market is a significant culture change.

• A philosopher George Santayana Famously wrote, “Those who do not remember the past are condemned to repeat it.”

• Vijay Govindarajan slightly modify his quote as follows, “Multinational business that cannot selectively forget the past are condemned to repeat it even as the world around them changes. “

Poor Country are Irrelevant

Just sit Tight

Customization is sufficient

Winning Requires Innovation

The Stakes are global, Not Local

1

2

3

4

5

Level of Thinking

Dominant Logic of Glocalization V/S Reverse

innovation StrategiesGlocalization Reverse Innovation

Optimize products for the developed world customer

Best Solution for the emerging market customer.

Premium price, high-margin orientation Low price, high-volume orientation

Technology Push; product out approach Customer centric; market-back approach

Look for Customer to sell products Identify customer pain and develop products to solve customer problems

Sell products to current consumers of the product

Create new consumption among noncustomer

Gain market share Create market share

Leverage Current Core Competencies Build new core competencies

Cutting edge, technologies sophisticated performance-rich products with many features, new and fancy applications

Frugal, functional, good-enough quality products

Use developed world products to transform emerging markets

Build new global growth platforms based in emerging markets

Shifting the centre of gravity to emerging markets

Station critical decision makers in

poor countries

Create new seniors executive roles with

oversight of emerging markets

Increase R&D spending in

emerging markets and focus it on local

needs

Encourage emerging market P&L to

conduct low-cost experiments

Champions the nations that

emerging markets can be incubation centres for global

growth and innovation

Bulking Up on Emerging Markets Knowledge and Expertise

Change the composition of the board of directors and top management team to include leaders with deep experience in emerging markets

Assign individuals to multiplayer expatriate assignment in the developing world

Give rich- country executive short durations immersion experiences in poor countries

Increase the strength of social ties between rich world and developing

Hold board meetings, senior management meetings and executive education programme in developing countries

KEY IDEAS FOR REVERSE INNOVATION

• Surface and challenge assumptions that support Glocalization but that inhibit reverse innovation.

• Move People , Power and money to where the growth is the developing countries.

• Create a reverse innovation mind set throughout the corporation.

• Create separate business scorecards for developing nations with full income statements and an emphasis on growth metrics.

Manage stress between local growth teams(LGTs) and global Organisation• Emphasis that reverse innovation does replace Glocalization.

• Help LGTs leverages global resources by identifying and solidifying valuable connections between the LGTs and global organisation.

• Protect LGT resources.

• LGTs rely on help from the global organisation, add resources so that the global organisation can do two jobs.

1 )Excel at outgoing 2) support LGTs

• Through an internal accounting transfer, make LGTs pay for the help they get from the global organisation.

• Help the LGT recruit good internal connectors – people who understand both the needs of emerging market and pressures of the global business.

Managing Disciplined Experiments

Create a custom

scorecard

Revise Plans

Frequently

Hold LGT Leaders

Accountable for

learning, not for result

against plan

Fully Exploiting

Global Opportuni

ties

GE HEALTHCARE – TECHNOLOGY IN DOCTOR’S BAG

• GE started developing 2001

• Traditional ECG machine costing $ 50,000

• GE – Dominant manufacturers of medical-imaging, diagnostics and health-information technologies

• High-end devices are typically heavy and cumbersome to carry

INDIAN SCENARIO Both patients and clinics has far less to spend than their western counter parts

The problem of the Indian market

Low cost to patients Low capital cost Portability Battery power Ease of use Ease of maintenance and repairs

ADVANTAGE INDIA – MACINDIA

Development of MacIndia, a portable ECG machine costing only $500

Easy to operate with only two buttons

Battery operated, No external power source required

Easy to carry in Doctor’s bag

MEDTRONIC – HEALTHY HEART FOR ALL

Heart Disease – No.1 killer in India

India accounts for 60% of world’s heart disease

Only 7 in a million people have implantable pacemaker as

compared to 750 in a million in US

Thus company needed breakthrough innovation not in

technology but in the business model

IDENTIFYING BARRIERS Four key-barriers preventing patients from receiving cardiac care:

1. Lack of patient awareness to health and medical needs

2. Lack of proper diagnostics

3. Inability of patients to navigate the care pathway

4. Affordability

Data collected from several months of field research into the patient treatment cycle

DEVELOPING BUSINESS MODEL

Four Building Blocks:

1. Go direct-to-patient (Reach out to people)

2. Develop the new ecosystem (Raise awareness and drive participation)

3. Manage the pipeline (Screening camp with telemedicine technology)

4. Ensure affordability (First-ever consumer financial plan for pacemakers)

Business model became basis for “Healthy Heart for All” initiative