Reverse Innovation From Emerging Markets

Reverse innovation from emerging markets July 19, 2010 5:59am | Share The model of emerging market innovation tha t most people have in mind is a multinational corpor ation pioneers a novel product or service in their sophisticate d home market, drops some features and cuts the price, and then exports the stripped- down innovation into emerging markets. Increasing ly, however, innovation flows the other way. Companies develop a product that appeals to emerging market consumers who combine discerning tastes with low disposable income, then managers quickly recognize that these products would appeal to some segments within mature markets as well. At a recent London Business School panel on multinationals in emerging marke ts, I h ad the chance to discuss this reverse innovation with Paul Bulcke, CEO Nestlé; Anshu Jain, who runs Deutsche Bank¶s investment banking business; Vittorio Colao , the CEO of Vodafone; and John Connolly , the global chairman of Deloitte. y Distinguish between emerging consumers and emerging markets. Paul noted that Nestlé distinguishes between emerging markets and emerging consumers, the one billion people who will enter the cash economy in the next several years and purchase branded food for the first time. Nestlé has identified consumer segments in mature markets that share characteristics with emerging consumers. In Europe, Nestlé has identified pensioners, students, migrants, unemployed adults, and single parents overseeing a large household as categories that respond well to products introduced in emerging markets. In France, for example, Nestlé promoted Maggi brand Halal products to that country¶s estimated 5 million Muslim consumers, and experienced a sales spike of almost five times average during Ramadan y Reshape business model not the product alone. Nestlé has created a category called ³popularly positione d products,´ PPP for short, to target these consumers . The business model for these products is tailored to the emerging consumer, including daily purchasing in mom and pop shops, radio versus television advertising, nutritional supplements targeted at local needs. Paul mentioned that emerging market competitors excel at building these new business models because they are unencumbered by traditional models. Nestlé has also set up R&D centers in emerging markets including the Ivory Coast and Chile to understand local tastes and nutritional requirements. In

Reverse Innovation From Emerging Markets

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