Innovation is nowadays one of the most important factors of modernity and the competitive position of business units and the entire economy. To continue developing and maintaining an advantage in the market enterprises will increasingly need to focus on radical innovation. This undoubtedly is reversed innovation. Reverse innovation is a process of developing new ideas by looking at the needs of people in emerging markets and adapting those ideas for developed countries. It’s a way to innovate that isn’t often discussed, but one that has a lot of potential. This article will provide an overview of what this concept entails, why you should care about it, and twenty business examples that have incorporated Research Innovation!
What is Reverse Innovation?
Reverse innovation is a term coined by Vijay Govindarajan and Anil K. Gupta in 2008 to describe the process of taking new ideas from rich countries and then adapting them for use in poor countries. This is done through the process of “reverse engineering.” Reverse innovation can be applied to any product that has been created with the intent to solve problems in low-income countries.
It is an innovation that starts in the developing world and then spreads to the developed ones. To be clear, what makes an innovation reverse-inventive has nothing to do with where the innovators or businesses are located. It’s all about where the consumers are concerned.
It means that Developing-world consumers cannot be distinguished from rich-world customers simply because they don’t have as much money. They also have distinct demands. To succeed in emerging markets, you must first recognize those requirements and then innovate to fulfil them.
Concept of Reverse Innovation
The idea of reverse innovation is based on studies of innovation done in poor, underdeveloped countries, which result in significantly lower costs than those produced in laboratories in wealthy nations. The main concept behind the notion is the final product’s transfer and adaptation, after which its usage and distribution in highly developed markets. This is opposed to the typical approach to innovation employed in the developed world.
It is anticipated that emerging markets will be utilized as cheap production resources on a larger scale soon – both for research and development. The notion of reverse innovation, which entails producing ideas on emerging markets and then “upstreaming” them to Western markets, is nevertheless a significant problem for businesses. It necessitates the dismantling of current production and distribution structures. By using the resources of underdeveloped markets, Western companies will be able to make more money from a single product or service by selling it in both emerging and developed economies.
Importance Of Reverse Innovation
When a multinational corporation learns to develop effective ideas in developing countries and then exports them to the developed world, new business possibilities open up. The company’s established limitations melt away, and it may reconsider all of its goods as well as enter new markets in search of growth.
Few businesses, on the other hand, go through a rebirth like this. Reverse innovation i.e. creating ideas in an emerging market and getting them to flow uphill to Western markets, is difficult because it demands a firm to break with its entrenched logic. Typically, that entails making substantial adjustments: scrapping old organizational structures and starting from scratch, changing product development strategies, and even reexamining the way a company goes to market.
The benefits of reverse innovation are both tangible and long-term in nature. On one hand, companies that adopt this new business model can increase their revenue by $300 billion over eight years (2010–2018) while benefiting countries like India with job creation, foreign investment, tax revenue, and the like.
On the other hand, companies that fail to adapt their business model will face problems with stagnating sales in developed markets while emerging economies continue growing rapidly. While these countries are not yet technologically advanced enough for many businesses to tap into them on a significant scale, they offer tremendous potential as consumers of products in the future.
Why it is Important to Have Insight on Reverse Innovation?
Jeffrey Immelt, at the time CEO of the US multinational General Electric Company, says, “If we don’t come up with innovations in poor countries and take them global, new competitors from the developing world – like Mindray, Suzlon, and Goldwind – will. That’s a bracing prospect. GE has long had tremendous respect for traditional rivals like Siemens, Philips, and Rolls-Royce. But we know how to compete with them. They will never destroy GE. The emerging giants, on the other hand, very well could”.
Who are these competitors? Mindray is located in China’s Shenzhen, produces medical devices, and competes with GE Healthcare. Goldwind is headquartered in Beijing and specializes in renewable energy. When Tulsi Tanti discovered that energy was 40-50% of his textile factory expenses and supply was unreliable, he tried various options before deciding on wind power. He built the world’s largest wind plant in 2009. Suzlon, headquartered in Bangalore, is an international supplier of renewable energy equipment that was founded at $100 and now has revenue of over USD 20 billion per year.
How Reverse Innovation is Beneficial for India?
The primary result of Reverse Innovation would be to boost industrialization. As more and more Multinational corporations choose to develop and invent new items in India for both local and global markets, the economy will see an increase in FDIs, as well as indigenous multinationals’ investments to construct cutting-edge R&D facilities that would inspire future innovation. In this way, the country can leapfrog certain developmental stages and achieve a more diversified economy relatively quickly.
A side effect of Reverse Innovation is that multinationals will move some of their low-end manufacturing to India, to be closer to these new markets. This would generate employment opportunities for the semi-skilled and unskilled workforce in the country and also improve their technical skills. India has an abundance of manpower, which can be put to good use if the manufacturing sector expands in line with Reverse Innovation.
Reverse Innovation, in turn, could help to enhance the overall ecosystem that includes Tier I and II vendors, technology providers, and education institutions that support, fortify, and enable this unprecedented explosion by allowing smart and nimble engineering and production solutions for complex problems. Thus it will lead to the creation of new resources.
Read more on Innovation in India: How is India transforming lives of masses with Innovation
Major Global Benefits
Reverse innovation is bringing countries and global markets closer by eroding the lines between them, making “one world, one market” more realistic. Reverse innovation would provide further momentum to globalization while also boosting cross-economic dependency and cross-border production and marketing viability.
- Consumers will benefit from a wider range of alternatives at competitive pricing, and producers will have more flexibility in how they make their products.
- It is expected that, as demand for advanced engineering technology rises, these organizations will invest more in developing a long-term technological infrastructure that would help support it. As a result, industrialization will be aided further.
- It would reform, and revolutionize industry standards, market imperatives, and global expansion and success strategy perspectives for the Multinationals who are constantly required to keep exploring various distinctive ways and means to become resilient in the difficult market conditions.
Top 20 Reverse Innovation Examples :
Reverse innovation has become as common as regular innovation. Following are some of the most famous examples:
Read more: Top 20 breakthrough innovations in technology
20. Tata Nano Car
Tata Motors introduced its affordable car ‘Nano’ (meaning “small one” in Hindi and Gujarati) in 2009. The Tata Nano is a rear-wheel drive, four-door car with a petrol engine that seats up to five people. It has a length of just over three meters, making it about the size of a BMW Mini.
The Nano was designed for India’s congested cities, where the majority of people use public transport. Tata wanted to produce an affordable car, which would ease traffic congestion and pollution by bringing more people onto the roads. To achieve this goal, low production costs were essential – hence its design for India’s manufacturing industry, rather than that of Western countries.
Nano has been designed specifically for developing markets such as India, China, and Brazil. It is not an exact copy of anyone’s model; it has a design that attempts to meet the needs of people living in these countries.
19. GE – GE MAC 800
The MAC 800 was a modification of the original, commercially successful MAC 400, developed by GE as an alternative to the more expensive but foldable LITEECG. The product innovation of NIBGE on the GE MAC 400 to create a portable low-cost ECG device for rural people who cannot afford high-end health care was introduced in 2009. The MAC 800 was a compact device, weighing only about 240 grams and with dimensions of 37.0 cmX19.0 cmX11.0 cm. The machine is designed to be used in field conditions with limited or no technical support and can generate an ECG in less than a minute.
18. Procter and Gamble (P&G) – Vicks Honey Cough – Honey-based cold remedy
In 2011, Procter & Gamble’s (Vicks Honey Cough) honey-based cold remedy was a hit in the European and US markets. The product was formulated specifically for emerging markets. It has been designed to melt quickly in the mouth, dissolving more rapidly than tablets or syrups that are hard and bitter on the throat. A few years ago P&G had conducted extensive research with mothers in these countries who were looking for a medicine that would not only cut short their child’s cold but also make them feel better quickly.
The Vicks Honey Cough product is an example of reverse innovation because it was designed to meet the needs of consumers in developing countries, rather than developed countries. It is a low-cost alternative to more expensive cold remedies and meets the specific needs of these markets.
17. Microsoft – Starter Edition
Microsoft plans to use its Starter edition (designed for people in developing countries without a lot of technical expertise and on low-end personal computers) simplified help menu, as well as videos, in future editions of Windows in the United States.
16. Hewlett-Packard (HP) – Research Labs in Asia and Africa
HP intends to use its research lab to adapt Web-interface applications for mobile phones in Asia and Africa to other developed markets. In India, China and Brazil, HP has been able to use local resources from the market to build a product specifically for this region. The company wants to make sure that its products will be used by as many people as possible through these kinds of efforts.
15. Godrej – Chotukool Refrigerator
In February 2010, Godrej Group’s appliances division, Godrej & Boyce Manufacturing Co Ltd, test-marketed a low-cost refrigerator (called the world’s cheapest model at Rs 3,250) aimed primarily at rural areas and impoverished customers in India. The product is powered by batteries and uses cooling chips. To promote product expansion and adoption, the company has devised a unique financing scheme for buyers.
The Chotukool refrigerator is an example of reverse innovation because it was designed to meet the needs of consumers in developing countries, rather than developed countries. It is a low-cost alternative to more expensive refrigerators and meets the specific needs of these markets.
14. Tata – Swacch – World’s cheapest water purifier
The term Swacch means “clean” in Hindi. Tata developed the water purifier – the world’s cheapest at the time of its release in India – to serve the rural sector. It does not require running water, electricity, or even boiling. The device is made out of paddy husk ash and uses silver nanotechnology. It can supply enough clean water for a family of five for a year. It will create a new market, according to the business model, for the 300 million people in rural India who still do not have access to safe drinking water.
The Swacch water purifier is an example of reverse innovation because it was designed to meet the needs of consumers in developing countries, rather than developed countries. It is a low-cost alternative to more expensive water purifiers and meets the specific needs of these markets.
13. Apple – iPod Nano (watch)
In September 2012, Apple Inc. announced its new product called the “iPod Nano Watch” which comes with a touch screen and fitness applications such as Nike+ GPS built into it. The company then introduced this unique watch in China to appeal to younger consumers who want to have the latest technology and trends.
The iPod nano Watch is an example of reverse innovation because it was designed to meet the needs of consumers in developing countries, rather than developed countries. It is a low-cost alternative to more expensive watches and meets the specific needs of these markets.
12. Pepsico – Kurkure and Aliva
Pepsi is developing a Kurkure (and possibly another snack Aliva) taste in certain markets, including West Asia. The product has been a Rs 700 crore brand in India in less than ten years since its inception. Product improvement and a strong marketing approach are credited with the success. Rs-3 small packs were used by the Indian Railways to boost sales in smaller cities. For example, it’s made of corn, rice, and gram flour, with no trans fats or cholesterol and a cost of Rs-3 per pack.
11. Bharat Forge – Maintenance Management Practice
In its factories, it acquired in countries with advanced engineering (Germany, Sweden, and the United States), Bharat Forge‘s best practices group implemented a maintenance management approach it created in India (which took 15 to 18 years to develop) in its units. The maintenance management system focused on minimizing downtime while machine maintenance was conducted, and it included an advanced information system that provided a real-time view of all machines in the factory. As a result, Bharat Forge’s global facilities are highly efficient, with an average downtime of less than 10%.
10. Husk Power Systems
In India, Husk Power Systems is using locally grown rice husks to generate electricity (a unique and cost-effective biomass gasification technology) to light up rural areas (over 50,000 people). In 2009, the firm received seed funding from the Shell Foundation to expand operations and is also in talks with agricultural cooperatives and NGOs for partnership.
9. LG – Low-cost Air Conditioners (AC)
LG Electronics (LG) intended to develop low-cost air conditioners for the middle and lower-middle classes in India. They aimed to create air conditioners that were as inexpensive as typical air coolers but with the added benefits of air conditioning (e.g., cooling a room faster and more evenly). The company succeeded in its endeavour, launching an AC that was 30% cheaper than the cheapest model available in the market at that time.
8. Better Place – Smart Grid of Battery charging/Swap terminals
In Israel, Better Place, a provider of electric vehicle (EV) services (develops systems and infrastructure to enable the use of electric cars), developed an intelligent grid of battery-charging terminals and battery-swap stations. The firm is now operational in many countries, including China, Japan, Australia, the United States, Canada, France, and Denmark, and is currently working on building networks of charging points in Israel, China, and Australia.
7. GE India – Steam Turbines
In 2010, GE’s Indian arm tied up with Triveni Engineering and Industries Ltd to manufacture steam turbines in the 30-100MW range. The company plans to then take advantage of lower input costs incurred in manufacturing and export these products to markets in West Asia, Indonesia, Europe, and Latin America.
6. Coca-Cola – eKOCool
Hindustan Coca-Cola Beverages, a subsidiary of Coca-Cola based in India, has introduced eKOCool, a solar-powered chest cooler capable of storing up to four dozen 300 ml glass bottles. The invention also charges mobile and solar lanterns. Coca-Cola is considering testing the technology in various cities across India before bringing it to other countries in the region.
5. Vodafone – Zoozoos
Vodafone, a multinational telecom provider that operates in more than 30 countries, is attempting to expand its adorable characters—Zoozoos—to other nations. Zoozoos are actual people who are black-and-white animated animals and are quite popular in India, where they appear in marketing commercials and resemble aliens while speaking an alien language. However, the brand message is readily understood by consumers of all ages. Vodafone has also granted rights to produce retail goods based on the characters and accessories (and even after they stopped production in late 2003).
4. Walmart – Small format stores in Mexico
In Mexico, as in other countries, Walmart learned a hard lesson. When compared to the big format stores that Wal-Mart had in the United States, Mexican customers preferred smaller retailers. By 2012, Wal-Mart had 1,250 small shops (Bodegas Aurrera stores) out of 2,138 outlets across Mexico. In the United States, Wal-Mart had phased out its small-format stores (Walmarts and Sam’s Club) as they found the return on investment to be poor.
Another example of this business is its $50 million investment in Chinese online retailer Yihaodian. The latter was an ordinary e-commerce site providing a platform to other retailers until it started stocking items from Walmart’s American catalogue and tried selling them through its website at prices competitive with those available on U.S.’s e-commerce sites, such as Amazon.com.
3. Levi’s – dENiZEN brand imported to the U.S.
Levi Strauss & Co. released its dENiZEN line of jeans in China in 2010. This was the company’s first brand introduced outside of the United States. The brand grew rapidly throughout India, South Korea, Singapore, and Pakistan because of its popularity. In July 2011, dENiZEN began selling in Target stores in the United States.
2. Aerobie – Sport Aeropress coffee maker for the Indian market
In India, AeroPress is a brand of sport Aeropress that was first sold in America and Canada as a single-serve coffee maker designed to produce a rich, smooth flavour without bitterness or sediment. This machine is being used by many cafes across the country.
1. Amazon’s BOLD Hiring Strategy in India
In 2011, Amazon launched a unique recruitment program in India called Building Operations Leadership (BOLD). BOLD is an MBA recruiting initiative in which the firm recruits students who have two to four years of prior pre-MBA work experience. This approach differs from Amazon’s global leadership development program “Pathways,” which requires a minimum of seven and a half years of post-baccalaureate experience.
To Conclude
Reverse innovation is a relatively new concept that has been gaining traction in the business world. It’s an innovative approach to solving problems, which can be applied universally from health care and sustainability to marketing and product development. Moreover, Reverse Innovation is an idea that could help you think about your business in new and innovative ways. It can be used to gain insights into how competitors might see the world, what customers value most highly, or why certain products are successful.
Hence, this article has provided you with an overview of what this phenomenon entails, why it should matter to your company, and examples of twenty companies that have tried reverse innovation tactics for their success. If you want more information on reverse innovation and ideas for how it can work for your company, please contact us! We would love to hear from anyone who has been involved with this process before so we can learn from each other’s experiences.