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Reverse Innovation for Growth

Article by John Prestbo April 25, 2012 //   3 minute read

My previous blog about the book “Reverse Innovation: Create Far from Home, Win Everywhere” wasn’t strong enough. Now that I have actually read the book, I believe its pages reveal a strategy that businesses must embrace to speed the growth of the U.S. economy to 4% a year. Here are three of the book’s many lessons that struck me:

• The habit of exporting “rich world” technology to developing-world markets will have only limited success. Instead, companies should innovate directly for the developing world, after conducting intense “clean slate” research to find out what people living in developing countries really need and want. In many instances, this “market-back” approach (as opposed to “technology-out”) will result in mostly new products and services rather than barely modified versions of best-sellers in the developed world.

• Often these new products and services will end up delivering 70% or 80% of the functionality found in comparable rich-world offerings but at 15% or so of the price. Developing good-enough quality at prices poor people can afford is both the challenge and opportunity of reverse innovation. It is the difference, the book says, between products built for a customer with $10 to spend versus 10 customers with $1 each to spend.

• The “reverse” part of reverse innovation relates to spreading these new products and services throughout the developing world and even into the rich world. Sometimes the products succeed just the way they are — many developed-economy customers also like “good-enough” quality at low prices — but sometimes they must be tweaked for various reasons. Some companies find these reverse-innovation products broadening their market base in ways their traditional thinking wouldn’t have allowed them to try.

The book quotes Jeffrey Immelt, who as CEO has made reverse innovation a strategic priority at General Electric: “If we don’t come up with innovations in poor countries and take them global, new competitors from the developing world . . .will. That’s a bracing prospect.” He calls these new competitors “emerging giants.” Many experts agree that developing nations will be the drivers of global economic growth in this century. For the United States to participate in that growth — and to defend our own turf from emerging giants — our companies need to practice what this book preaches.