Reverse innovation

Reverse innovation describes the process of transferring an innovative technology or service back from an emerging country (where it was developed or produced) to an industrialized country.

The term was popularized by Vijay Govindarajan (* 1949) from Dartmouth College . It describes innovation processes in developing and emerging countries that are supposed to lead to less capital-intensive , cheaper technologies that are adapted to local needs. The sometimes radically simple products designed in this way have export opportunities to highly developed industrial nations ( glocalization ). They have the potential to displace expensive, capital-intensive technologies that correspond to the availability of labor and capital and the high incomes in industrialized countries or those whose application requires a complex infrastructure. They can also be manufactured by global companies in developing and emerging countries . This perspective was the first to emphasize GE board member Jeffrey R. Immelt .

Demarcation

Reverse innovation differs from the well-known strategy of producing stripped-down versions of premium products for developing countries or exporting obsolete technologies there, on the one hand through their place of production, on the other hand through the orientation towards income, needs, cultural preferences (e.g. meat -Taboos, specific moral concepts) and special infrastructure conditions on site (e.g. lack of power grid, bad roads, air and water pollution). However, not only the income and infrastructure gap, but also sustainability aspects play an increasingly important role in the spread of reverse innovation. The adaptation of the products developed in this way can only succeed through the involvement of employees from the state who are not primarily committed to the technical conditions of the industrialized countries. The scarcity conditions are downright a catalyst for innovation of this often - but not necessarily - disruptive type of innovation, which is also called trickle-up innovation . While reverse innovation focuses on the chances of the profitable transfer of technology back to highly developed countries, the term adapted technology is used more in the context of development cooperation and includes e.g. Sometimes also the local “archaic” technologies. However, not only income and infrastructure gaps, but also sustainability aspects play an increasingly important role in the spread of reverse innovation.

In relation to US companies (so far no more comprehensive information is available on other markets), Govindarajan found that reverse innovation follows a 5-phase model. Accordingly, it is assumed that a company is striving for a global market presence and that the necessary resources can be provided globally. This is followed by the adaptation of global products to local needs (glocalization). The next step is the return and adaptation of these products to the domestic markets.

1. Phase: Achieve global market presence
2. Phase: Make resources globally accessible
3. Phase: Glocalization
4. Phase: reverse innovation
5. Phase: Adaptation for the world market

Examples

Well-known examples are

• the 5 dollar cell phone developed by Nokia for India
• V. Govindarajan's 300 dollar house
• the Indian Tata Nano as the most cost-effective car in the world (2,000 euros), which has not yet been exported to Europe
• a portable ultrasound machine that makes its way to India from China General Electric found
• the low-fat Maggi soup noodles from Nestlé , which - designed for Pakistan and India - reached Australia
• the bamboo bike from Ghana (though developed in the USA)
• the wheelchair developed by MIT for India and produced there, which was imported back to the USA
• in the service sector the Grameen-Bank with the waiver of formal collateral for microcredits .

The investment costs for these medium-sized technologies per job are often one to two powers of ten below those of an industrial job in an industrialized country.

Problems of implementation

Probably the most common problem with reverse innovation projects is the misjudgment of the particular economic, social and technical contexts of emerging markets. Understanding the consumer behavior of these markets, their use and application of technologies and the perception of status symbols should form the basis for product development. Accordingly, the market behavior of developing and emerging countries cannot be derived from industrialized nations. Rather, a separate consideration is required. According to a study by Govindarajan and winter can succeed, the most common five traps ( traps to circumvent) a reverse innovation project by certain design principles are followed.

1. Trap: The attempt to determine market segments based on existing products.
   At first glance, this approach appears to be faster, cheaper and less risky: Tried and tested premium products are exported to emerging and developing countries as stripped-down versions (e.g. with a simpler design or fewer product features). This carries the risk that technologies are based on preconceived solutions. However, the actual needs of the target market are not taken into account.
1. Principle: Define the problem independently of the solution.
   Giving up preformed solutions can create new opportunities for innovative products outside of the existing portfolio. In addition to the isolated consideration of the problem, the observation of market behavior can give signals that are usually not articulated directly by customers.
2. Trap: The attempt to lower the price through stripped-down versions of the premium products.
   This is based on the assumption that people in emerging and developing countries are willing to accept poorer product quality.
2. Principle: Create an optimal solution and use the freedom of design of the growth markets.
   Emerging countries do have many restrictions, but they also open up fundamental freedom. These result from the respective market conditions. Low labor costs enable cost-effective manual manufacturing options.
3. Trap: Failure to reconsider the technical requirements of emerging economies.
   The technical environment and infrastructure in emerging countries can differ greatly from those in industrialized countries. The laws of nature are valid everywhere, but the problems stem from different technical and natural factors (physics, chemistry, energetics, ecology, etc.).
3. Principle: Analyze the technical environment behind the consumer problem.
   In emerging countries, products are seen in a different technical context. Findings about the alternative use of energy, its efficiency, heat transfer etc. can satisfy consumer wishes in a new way. In addition, social and economic factors create other possible uses that need to be taken into account in product development.
4. Trap: The neglect of stakeholder interests .
   A short stay in an emerging market does not yet make an expert. Consumer needs are complex and cannot be observed, recorded and understood by product developers within a few days.
4. Principle: Get the product tested by as many stakeholders as possible.
   The success of a product can be significantly increased through the early involvement of all those involved in the value chain. In this context it is crucial who the specific end consumer is and what his needs and expectations of the product are. It is also important to consider who makes, sells, and sells the product, but also who will pay for it, repair it and ultimately use it.
5. Trap: Lack of belief that a product made for the emerging market also has global appeal.
   The assumption that western consumers are brand-conscious and react sensitively to changes in performance precludes products from emerging markets from finding acceptance, even if they are significantly cheaper.
5. Principle: Use the conditions of the emerging markets to design globally successful products.

Factors such as average income, poor infrastructure and scarcity of resources indicate which conditions are to be placed on price, product durability and material. Ultimately, the market conditions in emerging countries mean that technological achievements are produced whose features make them interesting for consumers worldwide.

Benefits of trickle-up innovation

According to the Indian-American economist CK Prahalad , international corporations and start-ups can draw valuable insights from observing the inventions and services of the emerging countries and then adapt them for the industrialized countries. Prahalad highlights five competitive advantages of innovations in developing and emerging countries, which can also be used by companies in developed industrial countries:

• Inexpensive products

Emerging countries cannot afford products from the USA or Western Europe, so they are forced to find inexpensive materials or manufacturing options.

• Skip technology

Developing countries often lack infrastructure, so they often skip entire generations of technology, which require complex networks, and are increasingly promoting new technologies such as mobile phones or solar energy, which are less dependent on a complex infrastructure.

• Service ecosystems

Entrepreneurs in poor countries often have to rely on the help of others; this creates innovative partnerships (e.g. with Internet cafés, in which an online identity check is carried out).

• Robust systems

Developing markets need technologies that have to function even under difficult conditions, e.g. B. in times of monsoons.

• New programs

Consumers in poor countries can extend the lifespan of existing programs or products by offering add-ons.

criticism

Critics reproach Govindarajan for relying almost exclusively on US examples and in particular on the practice of General Electric. In doing so, he neglects the fact that processes of technology transfer are highly culture-dependent. The empirical basis for the generalization of experiences is too narrow, the extrapolation of the General Electric case is arbitrary. There are still hardly any studies for Europe and Japan.

literature

• Vijay Govindarajan, Chris Trimble: Reverse Innovation . Harvard Business School Publishing, 2012, ISBN 978-1-4221-5764-0

Web links

• Website for the book by Vijay Govindarajan and Chris Trimble

Individual evidence

1. ↑ Rachel Layne: GE's Immelt Says 'Reverse Innovation' Needed for Global Growth . Bloomberg, September 22, 2009
2. ↑ Vijay Govindarajan, Chris Trimble: Is Reverse Innovation Like Disruptive Innovation? September 30, 2009, blogs.hbr.org
3. ^ The Case for Reverse Innovation . bloomberg.com, October 26, 2009
4. ^ Bicycles made of bamboo ( Memento from June 25, 2012 in the Internet Archive ) on fem.com; Retrieved September 10, 2012.
5. ↑ Harvard Business Review, July 2015 .
6. ↑ Hans-Gert Braun: Technology transfer - soon “the other way around”? In: NZZ , International Edition, August 22, 2012, p. 9.
7. ^ Engineering Reverse Innovations . Harvard Business Review, July 2015.
8. ↑ 5 tips for trickle-up innovation . bloomberg.com, April 6, 2009
9. ↑ Pavan Soni: Review by Vijay Govindarajan, Chris Trimble: Create Far from Home, Win Everywhere , 2012, in: Innovation Evangelist pavansoni.net  ( page no longer available , search in web archives )  Info: The link was automatically marked as broken. Please check the link according to the instructions and then remove this notice.