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Developing Innovation

April 18, 2012 3 minute Read by John Prestbo

For the U.S.economy to achieve 4% growth, innovation will be a key ingredient. But in this globalized 21st century, innovation no longer emanates solely from developed nations. Great ideas can be found in the poorest, seemingly most backward developing economies, and we are wise to not ignore them. That’s the message of a new book titled “Reverse Innovation: Create Far from Home, Win Everywhere.” The authors are Vijay Govindarajan and Chris Trimble, two Dartmouth business professors and frequent collaborators. I haven’t read the book yet, but I want to bring it to your attention immediately. My interest was sparked by Alan Murray’s enthusiastic review in The Wall Street Journal. Rather than innovation flowing from rich to poor countries, as it has traditionally, it is starting to also move in the reverse direction. Increasingly, the review summarizes, “business success is coming from companies that use their knowledge and resources to create innovative new products for developing countries and then adapt those products to satisfy demands in the developed world.” General Electric Co. is among the examples cited in the book’s review. In 2002 GE was frustrated because in China customers were not buying its ultrasound medical scanners because they were too costly. GE began producing lower-quality, compact, portable scanners that were priced at just 15% of the low-end traditional model. The Chinese snapped them up — as did customers in other developing countries as well. Even in more advanced nations the scanners became popular with paramedics and emergency rooms. Tapping into this reverse flow of innovation will require many U.S.business people to adjust their thinking. In the GE example, executives had to get past the notion that a much-cheaper version of a product would “cannibalize” sales of the high-margin models. Innovation results from seeing things in a new way, and now that includes innovation itself. For your convenience, here is a link to the book’s Amazon page, where it boasts a rating of 4.9 out of 5.


Author

John Prestbo
John Prestbo

2012 Economic Growth Fellow

John Prestbo is retired as editor and executive director of Dow Jones Indexes. Previously he was markets editor at The Wall Street Journal. He has co-authored or edited several books over the past 30 years. The most recent is “The Market’s Measure: An Illustrated History of America Told Through the Dow Jones Industrial Average,” published in 1999 by Dow Jones Indexes. His column, Indexed Investor, appears on the highly regarded “MarketWatch” business and finance website. He received his bachelor's and master's degrees from Northwestern University.

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