Real Leaders

The Innovation of the Future Works in Reverse

In business, you have to think outside the box to beat the competition. This often means expanding internationally earlier and more effectively. To do this, you need to be thinking ahead. This doesn’t mean taking an expensive Western product and producing it more cheaply (as Apple did with the iPhone 5c). Rather, it means looking at ways to start with a lower-cost, more efficient — and ultimately, more useful — product. The answer is reverse innovation.

How Reverse Innovation Works

Many established companies use the traditional strategy of taking existing products, removing expensive features, and trying to market them in less-developed countries. One of the biggest problems with this is that these products frequently only target the upper strata of the socioeconomic divide, which means you miss out on a much bigger customer base. On the other hand, reverse innovation acknowledges that ingenuity can go both ways. In places like India and China, populations are immense, and resources are scarce.

People have to be more creative — more innovative — to solve problems. This makes it easy for established businesses to study the cultures and develop new products based on the adaptations they observe. Once those products are successful in the developing world, they can be adapted and sold to the developed world.

An excellent philosophy that centers on reverse innovation is Jugaad innovation. Jugaad is a Hindi word that roughly means “overcoming harsh constraints by improvising an effective solution using limited resources.” For business, it means forming a deep understanding of what enables the developing world’s workarounds to lead to new, successful products using the same resourcefulness.

The Benefits of Starting Small

Unlike expansion methods that start with products established in the West and trying to adapt them, reverse innovation begins in a setting where resourcefulness is a necessity. It cuts down on waste and losses by designing with scarcity in mind in the first place. Ideas are pre-tested and refined with cheap, available materials in local conditions before they are commercialized.

One of the challenges of many product innovation efforts is doing too much too soon, meaning that products are prototyped at an invested cost and complexity level long before they have been fully tested and refined for the customer. By observing the workarounds and adaptations in the developing world, a whole level of experimentation has already taken place that will not need to be replicated. The idea in use is a tested and confirmed concept, making the steps to introduce it to the developed world much easier.

How Did We Get So Systematized?

These days, efficiency and the Six Sigma approach dominate big business strategy, which consequently leaves little room for creativity and innovation. But it wasn’t always this way. America used to be filled with reverse innovators. The can-do spirit of the pioneers and the frugal, flexible mindset common in the Industrial Revolution drove this country forward. But technology got faster and faster, and we became obsessed with cutting waste. Businesses worked hard to make the most of the technological advances available, and the pace of life sped up.

We opted for systematized, predictable processes over innovation, and now it’s something we have to consciously pursue. Yet many companies are succeeding in their pursuit — and they’re using reverse innovation. GE Healthcare had doctors in India and China who needed to give patients ultrasounds. But a standard ultrasound machine is huge and costs anywhere from $100,000 to $350,000.

It needs to be housed in a clean, stable environment. In India, where more than two-thirds of the population lives in rural areas, it’s unrealistic to expect patients to be able to reach a hospital. So GE Healthcare developed a portable ultrasound machine that can go to patients. It now sells the machine in the U.S. at an 80 percent markdown compared to similar products. The Aravind Eye Care System is another great reverse innovator.

Founded by Govindappa Venkataswamy in India in 1976, the company has performed over 4 million operations thanks to its fast-food style, high-volume assembly. Aravind also developed an intraocular lens (manufactured by its subsidiary, Aurolab) at a fraction of the cost of imports. Building on these breakthroughs, salaUno has replicated the Aravind model in Mexico. Over the past year, salaUno has carried out 133 cataract operations a month — free of charge. Doctors from the developed world have beaten a path to the door of Aravind to learn their techniques and take them home.

Applying Reverse Innovation to Service Businesses

Reverse innovation is amazing for product-based companies, but service-based companies face the challenge of identifying analogous activities happening in other cultures. Here are several strategies that can help you overcome that challenge.

1. Find local partners.

Working with local organizations will give you unique insights. And don’t forget to consider NGOs — they’ve been working on the ground all over the world for years.

2. Spend time on the ground.

Try to experience for yourself how service transactions play out. This is where observation is key. Analyzing and forming a clear understanding of insights based on what you see will lead to great opportunities for your enterprise.

3. Study great examples.

One of the most spectacular services in the developing world to observe is the dabbawallas of Mumbai. They have created an exemplary low-cost food delivery system that thrives in a place where human capital makes up for technological shortfalls. No matter what your field of expertise, if you’re looking to expand internationally, consider reverse innovation.

Take the strategy that will give you increased efficiency and less waste, even as you put resources toward innovation. Use the innovation of the future to stay ahead of the competition.

Andrew (Drew) C. Marshall is the Principal of Primed Associates, an innovation consultancy. He lives in central New Jersey and works with clients across the U.S. and around the world. He is a co-host of a weekly innovation-focused Twitter chat, #innochat; the founder, host, and producer of Ignite Princeton; and a contributor to the Innovation Excellence blog. He is also providing support for the implementation of the Design Thinking for Scholars model with the Network of Leadership Scholars (a network within the Academy of Management).


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