Q 659. How can reverse innovation help a company achieve product market fit in a new geography? Provide some examples where it has been successfully done. What are its potential benefits and challenges for a global organization?

 

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The methodology of creating new products/ services in developing countries, rather than developed countries is called Reverse Innovation. This, slightly contronversial subject, was introduced by Jeff Immelt (Chairman and CEO of General Electrics), Vijay Govindarajan (Professor of International Business) and Chris Trimble.

By applying concepts and innovations in developing countries, the success can then be transferred to the developed countries.

 

Implementing Reverse Innovation is developing countries/ emerging markets, helps them in the following ways:

1. Cost: Solutions implemented in emerging markets generally tend to be less expensive. This helps in creating a wider market for adaptability and usage.
2. Accessibility: Since the cost is low, these markets are able to access the products/ services more easily and that helps in achieving a larger sample size of usage feedback.
3. Prototype: Upon successful implementation in developing countries, these products can be taken to developed countries with a higher degree of confidence of success.

Some examples of Reverse Innovation in the Indian market:

1. Tata Nano car
2. Tata Swacch water purifier
3. Pepsico Kurkure
4. Low cost Air Conditioners by multiple brands
5. Vicks Honey Cough

The benefits of Reverse Innovation are:

1. Learning opportunities: By running cost efficient prototypes, companies can learn from mistakes made and best practises shared during the journey. This helps them in perfecting the product for future developments.
2. More innovations: Multiple iterations of the product can help companies come up with more innovations that they could potentially prototype in the developing markets.
3. Testing out the market: New products in developing countries help the manufacturers do a thorough testing of the emerging market and apply the concepts in the developed countries.

Challenges in deploying Reverse Innovation:

1. High investment cost: Since new products are being developed and even though the market is developing countries, high costs such as customer acquisition, market strategy, infrastructure and distribution.
2. Acceptance of change: Since reverse innovation relies of product disruption, accepting these new products are usually a challenge. Classic example of the Tata Nano car. Conceptually good but the sales weren't as expected by Tata.
3. Environmental hazards: New products generally do not focus on environmental impact, thus carbon emission is high and recycling is not a priority.

Reverse innovation:

 Reverse innovation, also sometimes called frugal innovation or trickle-up innovation, flips the traditional development process on its head. Instead of creating products for developed markets first and then adapting them for developing economies, reverse innovation starts with the needs of developing markets and then brings those innovations, often with tweaks, to wealthier countries.

 

Reverse innovation can be a powerful tool for companies looking to establish product-market fit in a new geographic market, particularly developing economies.

 

Here's how: 

• Understanding Resource Constraints: By developing solutions with limited resources in mind (common in developing economies), companies can create products that are simpler, more affordable, and more durable - qualities often valued globally.
• Addressing Unmet Needs: Developing markets often have unique needs not addressed by existing products. Reverse innovation encourages companies to identify these gaps and create solutions specifically tailored to the local context.
• Early Market Testing: Launching a product in a developing market with less stringent regulations allows for faster iteration and testing before a broader rollout.

Reverse innovation encourages companies to develop with these constraints in mind, leading to:

• Simpler designs: Less complex products are generally cheaper to produce and maintain.
• Focus on core functionalities: Fancy features get stripped away, leaving a product that does the essential job well.
• Resourcefulness: Finding creative solutions using readily available materials and technologies.

The result? Products that are not only successful in developing markets but can also be adapted and find new markets in developed economies, often appealing to customers who value affordability and practicality.

 

Benefits for Global Organizations:

 

• Cost Reduction: Streamlined designs and focus on core functionalities can lead to cost savings that benefit all markets.
• Increased Innovation: The focus on resource constraints can spur fresh ideas applicable globally.
• New Market Access: Products developed for developing markets can open doors to entirely new customer segments in developed economies.

Challenges of Reverse Innovation:

• Internal Resistance: Companies may struggle to adapt their existing processes and mindsets to a more frugal approach.
• Quality Perception: Products designed for developing markets might be perceived as inferior in more developed markets.
• Brand Management: Balancing the brand image across different product lines catering to varied markets. 

By overcoming these challenges, companies can leverage reverse innovation to achieve global product-market fit and unlock new growth opportunities.

 

 

Examples of Successful Reverse Innovation:

 

Nestlé's Chilled Maggi cubes: This single-serving, pre-cooked Maggi variant, created for India's on-the-go consumers, has become a popular option in other markets.

 

GE Healthcare's Maci ECG machine: Designed to be used in remote areas of India with limited electricity, this portable ECG device is battery-powered and very affordable. It's become a valuable tool for medical professionals worldwide because of its simplicity and effectiveness.

 

Ericsson's low-bandwidth mobile network solutions: Created for emerging markets with limited network infrastructure, these solutions allow for efficient mobile phone service in remote areas. They've been adopted by carriers in other parts of the world facing similar challenges.

 

Unilever's Pureit water purifier: Designed for rural India where clean water is scarce, this affordable, in-home water purifier uses readily available chlorine tablets to disinfect water. It's now sold in multiple developing countries.

In principe, reverse innovation start by focusing on needs and/ or exigence in developping products for low income markets and later fitted to others.

nowaday companies put a lot of efforts on deleting unnecessary future in develelopped country product to reduce cost and make them accessible to low income markets.

for exemple:

GE developed an ultrq portable cardiograph for American Market low cost around 80% less than similar one originally build for Indian and China doctors.

Jayanth has provided the best answer to this question. Well done!