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GLOBALIZATION –
Past, Present & the Future




ANKUR SHARMA
info@ankursharma.co.in
+91 9886403253
Follow me on Twitter: @ankurdinesh




* Adapted from Vijay Govindarajan’s webinar - Reverse Innovation:
A New Strategy for Creating the Future
The Globalization Journey
   Phase 1: Globalizing market presence
    The concept Globalization emerged right after World War II because there were many war-torn nations who wanted to take
    advantage of US expertise in technology and Industrial arena to improve upon their nation’s condition. So if seen closer, the
    concept, Globalization is in itself is a relatively new concept. This phase saw developed countries/economies exerting
    primarily their market presence in terms of trade wherein one economy sold their goods to other economy without any
    adaption.


   Phase 2: Globalizing the Resource base
    The second phase of Globalization saw the mobilization of resource bases and not just goods and hence many
    organizations from developed countries moved to NICs and/or developing countries or otherwise simply to other developed
    countries to establish their marketing or finance operations and R&D labs.


   Phase 3: Glocalization
    The third phase saw a lot of products and services from developed countries coming to NICs like India and China with a lot
    of adoption primarily aimed for these countries. These adoptions were done to bring the cost the down and to make them
    easily sellable for these countries. However, these adoption strategies were usually decided in the parent country and not in
    the target country, thus making them fail more often than not. For example, when Ford motors (http://www.ford.com/)
    decided to enter India for the first time in 1990s, they decided to enter the market with their 20K USD mid-segment car and
    customized to bring it in India at the rate of 15K USD. The customization for this car, meant for India was done in Detroit,
    US. During the customization process, the engineers decided to get away with the power windows of the back seats in the
    car to bring the cost down, unaware of the fact that anyone in India during 1990s who would buy a car worth 15K USD,
    would also have a chauffeur and hence the power windows were left for the chauffer instead of the car owner. As a result,
    the 15K USD car with which Ford motors entered India failed miserably to attract customers. Most US companies are still in
    "Glocalization" phase, however they do a better job at localizing their products/services now, learning from their
    experiences.
The Next Globalization Challenge
   Phase 4: Reverse Innovation
    A reverse innovation is any innovation likely to be adopted first in the developing world. Increasingly we see companies
    developing products in countries like China and India and then distribute them globally. The concept is just not restricted
    with products. It can and will happen with Services, Management Ideas and leadership techniques. For example, “Micro-
    Finance” and “Microcredit” was conceptualized in Bangladesh by Muhammad Yunus
    (http://en.wikipedia.org/wiki/Muhammad_Yunus) and has spread now to 100 countries including US transforming people’s
    life.




Why Reverse Innovation?
   The Income Gulf
    Emerging markets have customer's discontinuity because there is a clear paradox in these markets - They are usually
    large, fast growing economies with very low per capita income. Hence the innovation opportunities are more




Pricing Strategy for low-cost Reverse Innovation products
   The margin won't be high but gross margin or %age margin can be high
   The volume is the key since you can sell them in both developing and developed nations
   You can sell the same without any fixed cost (R&D etc.) when you take the product to developed countries, since you have
    already spent that fixed cost to develop the product in developing countries.
The conventional machine
Reverse Innovation @ Work

 GE India (http://www.ge.com/in/) R&D labs produced a portable USD 400
 ECG machine (MAC-I where I stands for India) so that the strata of society
 who could not afford to go to hospitals which house 10KUSD ECG machines
 can benefit from it. They did the following 5 innovations to make MAC-I
 (Portable ECG M/C) usable for everyone who needs it:

 I.     Low Cost - The original machine costs 10K USD while this cost 400USD;
        there is no way GE could bring down 9,500 USD cost down, so they built
        MAC-I ground up, from scratch!
 II.    Easy to Use – This machine has only 2 buttons – green and red. Since most
        of the rural India still does not have qualified doctors to run the ECG machines,
        the machine could be used by any medical attendant.
 III.   Easy to Service – If it breaks down in a remote village, you do not need to
        come to town to repair it. Any electrician could do it.
 IV.    Portable – It is so lightweight and portable that it can be carried anywhere
        in a back-pack
 V.     Battery driven – Since electricity is still a luxury in rural India, it runs on
        battery and one charging can take 500 ECGs




                                                                                              MAC-I (Portable ECG M/C)
More Examples of Reverse Innovation

   Partners In Health (http://www.pih.org/home2.html) is an organization which is not global but still uses reverse innovation


   Netbook is a 10 Billion USD opportunity and is a result of Reverse Opportunity, since it emerged from the idea of a
    computer for less than 1000 USD


   Tata Nano, a USD 1000 car by Tata Motors is conceptualized and manufactured in India and will be launched in Europe
    and USA in 2011 and 2012 respectively

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Globalization Past,Present and The Future

  • 1. GLOBALIZATION – Past, Present & the Future ANKUR SHARMA info@ankursharma.co.in +91 9886403253 Follow me on Twitter: @ankurdinesh * Adapted from Vijay Govindarajan’s webinar - Reverse Innovation: A New Strategy for Creating the Future
  • 2. The Globalization Journey  Phase 1: Globalizing market presence The concept Globalization emerged right after World War II because there were many war-torn nations who wanted to take advantage of US expertise in technology and Industrial arena to improve upon their nation’s condition. So if seen closer, the concept, Globalization is in itself is a relatively new concept. This phase saw developed countries/economies exerting primarily their market presence in terms of trade wherein one economy sold their goods to other economy without any adaption.  Phase 2: Globalizing the Resource base The second phase of Globalization saw the mobilization of resource bases and not just goods and hence many organizations from developed countries moved to NICs and/or developing countries or otherwise simply to other developed countries to establish their marketing or finance operations and R&D labs.  Phase 3: Glocalization The third phase saw a lot of products and services from developed countries coming to NICs like India and China with a lot of adoption primarily aimed for these countries. These adoptions were done to bring the cost the down and to make them easily sellable for these countries. However, these adoption strategies were usually decided in the parent country and not in the target country, thus making them fail more often than not. For example, when Ford motors (http://www.ford.com/) decided to enter India for the first time in 1990s, they decided to enter the market with their 20K USD mid-segment car and customized to bring it in India at the rate of 15K USD. The customization for this car, meant for India was done in Detroit, US. During the customization process, the engineers decided to get away with the power windows of the back seats in the car to bring the cost down, unaware of the fact that anyone in India during 1990s who would buy a car worth 15K USD, would also have a chauffeur and hence the power windows were left for the chauffer instead of the car owner. As a result, the 15K USD car with which Ford motors entered India failed miserably to attract customers. Most US companies are still in "Glocalization" phase, however they do a better job at localizing their products/services now, learning from their experiences.
  • 3. The Next Globalization Challenge  Phase 4: Reverse Innovation A reverse innovation is any innovation likely to be adopted first in the developing world. Increasingly we see companies developing products in countries like China and India and then distribute them globally. The concept is just not restricted with products. It can and will happen with Services, Management Ideas and leadership techniques. For example, “Micro- Finance” and “Microcredit” was conceptualized in Bangladesh by Muhammad Yunus (http://en.wikipedia.org/wiki/Muhammad_Yunus) and has spread now to 100 countries including US transforming people’s life. Why Reverse Innovation?  The Income Gulf Emerging markets have customer's discontinuity because there is a clear paradox in these markets - They are usually large, fast growing economies with very low per capita income. Hence the innovation opportunities are more Pricing Strategy for low-cost Reverse Innovation products  The margin won't be high but gross margin or %age margin can be high  The volume is the key since you can sell them in both developing and developed nations  You can sell the same without any fixed cost (R&D etc.) when you take the product to developed countries, since you have already spent that fixed cost to develop the product in developing countries.
  • 4. The conventional machine Reverse Innovation @ Work GE India (http://www.ge.com/in/) R&D labs produced a portable USD 400 ECG machine (MAC-I where I stands for India) so that the strata of society who could not afford to go to hospitals which house 10KUSD ECG machines can benefit from it. They did the following 5 innovations to make MAC-I (Portable ECG M/C) usable for everyone who needs it: I. Low Cost - The original machine costs 10K USD while this cost 400USD; there is no way GE could bring down 9,500 USD cost down, so they built MAC-I ground up, from scratch! II. Easy to Use – This machine has only 2 buttons – green and red. Since most of the rural India still does not have qualified doctors to run the ECG machines, the machine could be used by any medical attendant. III. Easy to Service – If it breaks down in a remote village, you do not need to come to town to repair it. Any electrician could do it. IV. Portable – It is so lightweight and portable that it can be carried anywhere in a back-pack V. Battery driven – Since electricity is still a luxury in rural India, it runs on battery and one charging can take 500 ECGs MAC-I (Portable ECG M/C)
  • 5. More Examples of Reverse Innovation  Partners In Health (http://www.pih.org/home2.html) is an organization which is not global but still uses reverse innovation  Netbook is a 10 Billion USD opportunity and is a result of Reverse Opportunity, since it emerged from the idea of a computer for less than 1000 USD  Tata Nano, a USD 1000 car by Tata Motors is conceptualized and manufactured in India and will be launched in Europe and USA in 2011 and 2012 respectively