May 15, 2012 Leave a comment
Which way does innovation flow? Traditionally, products and services have been thought of as originating in advanced economies, which have a more suitable environment for technological development than do developing countries. Authors Vijay Govindarajan and Chris Trimble would argue that the reverse is also true.
Deputy managing editor of the Wall Street Journal Alan Murray reviewed Govindarajan and Trimble’s new book Reverse Innovation, which provides a different model of successful product innovation. Rather than taking products designed for developed countries’ demands, businesses have increasingly been doing the reverse – creating “innovative new products for developing countries” and adapting them “to satisfy demands in the developed world.” Murray provides several of the authors’ examples of “reverse innovation” in his article, including General Electric’s inexpensive compact ultrasound medical scanners that were originally developed for the Chinese market, but became successful just about everywhere.
However, “reverse innovation” is held back by the low profit margins of the developing world. To combat this obstacle, Govindarajan and Trimble promote “local growth teams,” which Murray describes as “small, cross-functional, entrepreneurial groups located in emerging markets” that can both effectively utilize advanced technologies and cater to local markets.
Indeed, finding a way to mitigate these barriers to innovation could greatly help developed countries address significant problems such as rising health care costs. Reverse Innocation authors use the example of Narayana Hrudayalaya hospital in India, which had benefited from “process innovation” – the key to lowering the cost of open-heart surgery to around $2000, about a tenth of what it costs in the U.S.
Posted by: Pokyee Yu
Sources: The Wall Street Journal, Reverse Innovation
Photo Credit: Reverse Innovation. By Vijay Govindarajan and Chris Trimble. 229 pages. Harvard Business Review Press. $30