Reverse Innovation:
Create far from Home, Win everywhere.
Authors: Vijay
Govindarajan and Chris Trimble.
Let us say you ask an engineering team to build a bridge that would
handle a normal load of say, 1000 vehicles an hour each weighing two tons for
city A. After the design is done, you want to reuse the design for city B.
Based on city B's requirements, if you enhance your requirements to handle the
heavy duty traffic both in terms of tonnage and traffic, most of the structural
assumptions used in original design would no longer be valid. Very likely, it
would have to start everything from ground zero – simply, the structure is not
suited for an upgrade but needs full revamp. Hence, engineers would
rather prefer to design the bridge to sustain the target load from the outset
rather than start with a rooftop bridge and enhance it to support the railroad
level traffic. Nevertheless, innovation’s history, specially in business, has been mostly focused on high
affordability regions and then it migrates to medium and low affordability
regions by systematically “de-featuring” the product or service as the case may
be.
Conceptually, I felt reverse innovation is antithesis of the
aforementioned design principle. It
betokens an approach where innovation would originate from low affordability regions
and systematically migrates to high affordability regions. Prof Vijay Govindarajan (VG) and Chris Trimble
talk about this concept in a detailed fashion with copious number of compelling
case studies some of which read like a novel. Case studies are from Logitech,
EMC, Harman, GE, Pepsi, P&G, Deere and host of such well known corporations.
Per authors, there are 5 levels of thinking.
Level-1: Only
the rich world matters. Poor regions are too small a market to worry about.
Level-2: In
poor regions, there is an opportunity only at the top of the pyramid.
Level-3: For emerging markets, we would customize our current
offerings to match differing needs
Level-4: Emerging
markets’ needs are vastly different. We have to design things from the scratch.
Level-5:
Stakes are global and not local.
They also talk about 5 gaps that get closed over time.
(1) Performance (2) Infrastructure (3) Sustainability (4) Regulatory (5)
Preference
This categorization provides a robust conceptual
framework to build the narration. Rest
of the book is replete with case studies followed by couple of appendixes that
would neatly serve as a tool kit to try our ideas.
In short, if you export –
you lose. If you innovate – you win.
The main idea is this:
Decide the market price that you would sell at and work backwards
towards the desirable cost structure. Counter intuitive, it may seem, but it
puts a set of market verified constraints and hence if they are met, usually it
turns out well and becomes a blockbuster at times. It means, being resourceful
matters more than access to copious set of resources. The stress is on “Frugal, Functional and good enough quality”
as opposed to “Cutting edge, features rich, new and fancy applications”. To
support this point, I cannot resist telling a story (not in the book).
One of the high growth corporations opened its first European
branch in the heart of London. While the location was great, the road had lot
of pubs. Hence, in the nights, people after drinking started throwing up in
front of the office as they passed by. It became a routine practice to start most
mornings with a major clean up.
Obviously, this nuisance would have to be fixed. The chief administrative
person raised this topic in every meeting possible but cost of implementing a
fix, like fixing a camera(s), monitoring that area and informing police proved very
expensive and couldn’t be taken up. Finally, a shoe string budget was given to
him to fix it. Instead of complaining about that budget, he tried an interesting
experiment. He put a conspicuous camera and a big warning board that people who
defile that place could be potentially prosecuted. The Camera, however, was
powered but not connected anywhere to monitor! Yet, it served the purpose of
bringing down misdemeanor to a near-zero level - a clear case of frugal and functional.
One of the major assumptions the authors debunk is that poor
regions would follow the same trajectory as rich regions. Invariably, it is not
so.They skip certain steps. For example,
direct investment in mobile infrastructure rather than in old telephone
networks (POTS) now. Table 3-1 in chapter 3, comprehensively summarizes the
dominant logic and reverse innovation strategies. It is very easy to
intuitively feel that the authors have it correct. But,our mental models and
other orientation are so diametrically opposite, it would take a while to put it
in practice.
Celebrated German mathematician Carl
Gustav Jacobi once remarked that, “man
muss immer umkehren” which translates to “Invert, always invert.” Jacobi believed that the solution for many
difficult and intractable problems in mathematics could be found if the
problems were expressed in the inverse. Prof VG and team are giving us the
Jocobian version for innovation and it is evident from the emerging case
studies, we will benefit phenomenally through such inversion.
Thanks for reading this far.
Regards
madhu
