Whitespace: Reverse innovation - developing world lessons for innovators

Issue 58: February 2010

A growing number of innovators are choosing to ignore everything they know about bringing new ideas to life.

They're rejecting the age-old model that sees R&D emanating predominantly in richer countries, and are instead embracing the benefits of 'reverse innovation' – innovation that's likely to be adopted first in the developing world.

This reserve innovation trend doesn't simply equate to outsourcing. It's about fostering innovation in emerging markets and then exporting new ideas and fresh approaches back to wealthy countries.

Global companies like GE, Nestlé and Renault have found this process can result in new products that are cheaper, more sustainable and ideally successful in both developing and mature economies.

Reversing the norm

Reverse innovation has emerged out of the realisation that growth is slowing in the developed world. The solution, according Tuck Business School professor Vijay Govindarajan, is to look beyond the way richer countries think and capitalise on the idea that 'necessity is the mother of invention'.

To support his case Govindarajan claims reverse innovation is the outcome of the following historical periods of innovation:

Globalisation – innovation takes place in rich countries with products de-featured so they are affordable in emerging markets

Glocalisation – development of de-featured products is localised in emerging markets to make the most of cheaper labour costs

Local innovation – design takes place in emerging markets to suit local needs and cost imperatives

Reverse innovation – less expensive yet still high tech products are both designed and manufactured in emerging markets and then exported to richer countries

For Govindarajan reverse innovation isn't a fad. He claims it will power the future of innovation provided global corporations become as adept at innovating aboard as they are at home.

It's all about simplicity

The ultimate benefit of reverse innovation, according to a recent Blogging Innovation post, is simplicity. It's claimed the approach offers an antidote to the increasingly feature-heavy and often bloated products developed in the West.

By embracing a 'trickle-up' approach to new ideas, innovators are forced to challenge their perspectives as well as the complexity of many products and services; in other words, they are forced to start with a blank canvas instead of merely tinkering with exiting concepts.

Reverse innovation in action

One of the most discussed examples of reverse innovation has resulted from the 'one laptop per child' scheme that was designed to bring mass computing to the developing world.

The idea was to create a super-cheap portable computer that only performed the basics; the outcome was the netbook, a concept that's been successfully exported back to the developed world.

GE is currently receiving a lot of kudos for its reverse innovation. The company envisaged an iPhone sized portable ultrasound machine for developing markets that's also proved to be a cost effective medical breakthrough for the rest of the world.

Also in the electronics sector, Fast Company reports that Nokia is currently developing a mobile phone delivered free classifieds service in Kenya that enables people to browse and shop using voice commands.

And as a result of success at home with the world's cheapest car, Indian carmaker Tata plans to launch its no-frills Nano into European markets.

A ubiquitous solution?

Clearly global players are in a strong position to take advantage of reverse innovation but companies of all sizes are also capable of prospering from the concept.

C.K. Prahalad, author of The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits, suggests the complementary concept of 'service ecosystems' can provide innovation opportunities for smaller players.

This paradigm sees established companies fostering relationships with developing world innovators. An example might be a partnership with video-game cafés in Africa where gamers test offerings such as online identity verification.

Or SMEs could consider exploring the 'anti-complexity' theme of reverse innovation without going overseas at all.

It all starts with a few simple questions: Is a product, service or process you think is sophisticated actually bloated? What benefits could evolve from taking the complexity out of a product?

Here to stay

However reverse innovation manifests, one thing is for sure: in our increasingly globalised business world the concept will soon lose its 'next big thing' tag and become an R&D program staple.

Reverse innovation is not destined to completely take over from home-grown innovation but rather it's arrived to complement it; to offer solutions that result from innovation born through necessity, and to foster the development of skills in poorer economies. For those reasons alone, it's a trend that's well worth noting.

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