Looking for new ideas? Get yourself to the developing world(Read article summary)
From jeans to medical devices, products from India and China are disrupting markets in the West.
Could the next big breakthrough in medicine or technology come from the developing world?
We Americans mayÂ think of poorer nations as hotbeds of war and disease, a place to send our charity checks. But emerging economies are actually an invaluable breeding ground for innovations that could change lives in the United States.
In a process known as âreverse innovation,â multinational corporations are rolling out cheap, easy-to-use products in Africa, India, and China and then bringing them âhomeâ to Western markets.
Examples of reverse innovation range from the prosaic â low-cost Leviâs jeans thatÂ debuted in ChinaÂ and hit American stores last spring â to the revolutionary: a portable, seven-pound heart monitor developed by General Electric engineers inÂ Bangalore, India.
Chris TrimbleÂ is an adjunct professor at Dartmouthâs Tuck School of Business and has written an influentialÂ bookÂ on reverse innovation with his âsuper starâ (according to The Economist) colleague Vijay Govindarajan.
In an interview withÂ Latitude News, Trimble argued that globalization is forcing big, bureaucratic companies like GE and Proctor & Gamble to change the way they do business.
âEmerging economies,â he says, âare the globeâs high-growth hotspots, and most of the worldâs growth over the next two decades will be there. It used to be that you could grow a big corporation at a good clip in just the US, Europe, and Japan. Thatâs not the reality anymore.â
In order to stay competitive in the global marketplace, Western companies have discovered they must tap into emerging economies, where experts predict that 90 percent of the worldâs middle classÂ will live by 2030. And multinationals canât just âdumb downâ existing products for consumers in the developing world by stripping away features and lowering the price.
âIf youâre trying to serve the people that live rich in poor countries, the old model is fine,â says Trimble. âBut the needs of the middle class in the developing world are rising dramatically. The challenge when you go from the U. to, say, India is that where before you had one consumer with $10 to spend, now you have 10 consumers with $1 to spend. So thereâs no way you can take your rich-world company and just customize your product for the middle class.â
Other experts agree.
âYou really have to start from scratch,â says Joanne LawrenceÂ , a professor at the Hult International Business School in Boston. âItâs not business as usual. These are different places with different markets, different consumers, and different needs.â
For example, Lawrence explains, India is a very poor country with a very high rate of heart disease. But GEâs standard electrocardiogram (ECG) heart monitor wouldnât do much good there. It weighs 65 lbs., costs thousands of dollars, and requires a good deal of electricity and training to use. In India, most people donât live near a hospital or clinic, and the power supply can be intermittent at best.
So GE engineers in Bangalore designed theÂ MAC 400, which is hand-held, runs on batteries, and retails for just $800. Lawrence says that the product has great potential for poorer rural and urban areas in America, as well as emergency rooms and doctorsâ offices.
Chris Trimble points to another GE product, a cheap and portable ultrasound device called theÂ VscanÂ that wasÂ developed in China and is now for sale in the US. âThe current generation of kids is the last one that will need stethoscopes to dress up as doctors,â he says. âThe next one will be carrying around these hand-held ultrasound devices.â
Reverse innovation has actually been happening for a long time, according toÂ Mike Grandinetti, who teaches entrepreneurship at Hult. The sports drink Gatorade, for example, was born in 1965 after University of Florida scientists noticed a study showing that carbohydrate-rich drinks helped save the lives of Bangladeshi cholera patients (itâs called Gatorade after Floridaâs football team, the Gators, who used the drink to re-hydrate).
But Grandinetti argues reverse, or âfrugal,â innovation has a lot of room for growth as consumers and corporations look to cut costs. âLook whatâs happened to the global economy,â he says. âThereâs no question people are living on different budgets than they have in the past. The West has moved to a different mindset about purchasing, and there are all sorts of opportunities for innovation at the bottom of the pyramid.â
Reverse innovation is, in part, a defensive strategy. Foreign companies like Tata (cars), Mahindra (tractors), Mindray (health care) and Lenovo (technology) are all making cheap products and selling them in domestic and, increasingly, Western markets. If big multinationals donât keep up, theyâll find their markets have been âcannibalizedâ by low-cost competitors from abroad.
And Trimble says Western corporations still have a long way to go:
âReverse innovation is still an emerging phenomenon. Companies are working on it, doing some things â but not everything â right. Itâs tough because these are companies like GE, like Pepsi, like Proctor & Gamble, that have grown up in a different world.
âIf you look at these big multinationals,â he says, âwhile they may have both a technology and a sales team in India, chances are theyâre not even in the same city. And chances are they report back to different people in the US.â
For Trimble, perhaps the most important take-away of reverse innovation is what it means for todayâs students. âFor young people to be successful later on,â he argues, âtheyâll have to be just as curious about the needs and opportunities of places like Brazil and India and Japan as they are of those in the US. Thatâs pretty daunting.
âThere are places in America that are very worldly. But for the most part, this country is pretty insular, and itâs going to be an enormous challenge for us.â
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