Reverse innovation is developing products and services in emerging markets first before introducing them to developed markets. General Electric's Vijay Govindarajan coined the term. Products tailored for emerging markets can form platforms for new global products. Typically companies start by removing expensive features from existing products for emerging markets. Reverse innovation leads to locally-created products in emerging markets that are later upgraded for developed markets if successful. Examples include Tata's low-cost Nano car and a cheaper electrocardiogram machine developed in India and now sold globally. Limitations include income, infrastructure, and sustainability gaps between emerging and developed markets.

1. REVERSE
INNOVATION
Neeraj Vig
12BSPHH010601
Section- C

2. VIJAY GOVINDARAJAN SAYS
 “Reverse inno­va­tion will trans­form just about every
industry, including energy, health­care, trans­porta­
tion, housing, and con­sumer prod­ucts,” ­ Govin­
darajan, who coined the term in 2009 while working as
a chief inno­va­tion con­sul­tant at Gen­eral Electric.

3. WHAT IS REVERSE INNOVATION?
 Historically , MNC developed New
product in the developed countries &
sold it to the emerging economy.
 Reverse innovation is just doing the
opposite
 It develop the products in the
emerging
markets (developing world) & sell it to
the
developed world.

5. STRATEGIC VIEW OF REVERSE
INNOVTION.
Reverse innovation:
1. Adapted in poor countries
2. Trickle up in rich countries
Reference : Exploring Corporate Strategies.

6. WHY REVERSE INNOVATION?
 The main economics growth of the coming
years will be in developing countries .
 They are the non customers, international
organizations could access.
 Products tailored to their needs, could
form a platform for new global products.
 Global organizations have to develop new
structures and a mindset to capture those
markets.

7. HOW THINGS WORK
 Typically, companies start their globalization
efforts by removing expensive features from their
established product, and attempt to sell these de-
featured products in the developing world.
 This approach, unfortunately, is not very
competitive, and targets only the most affluent
segments of society in these developing countries.
 Reverse innovation, on the other hand, leads to
products which are created locally in developing
countries, tested in local markets, and, if
successful, then upgraded for sale and delivery in
the developed world.

8. ADVANTAGES OF REVERSE
INNOVATION

9. LEAP FROGGING
 Politically, the businesses which were concentrated
towards the developed countries, expand in the
developing nations especially the manufacturing and
R&D, termed as ‘Globalization’.
34.3% 31.1%
25.9% 24.1%
13.5% 11.2%
9.5% 14.2%
2% 2.9%
2007 2012
Shares of global R&D’s spending1
USA EU Japan China India
112 94 68 66
1652
465
115 121
China India Russia Brazil
# of patents registered in USA
by countries of origin1
2000 2010

10. YES!! IT’S AFFORDABLE…
 Traditionally, the West was the hub
for R&D.
 However, with changing times, much
the R&D centres have enrooted their
base towards the developing parts of
the world, to save cost and for better
human capital.
 Manufacturing tycoons like China are
betting on this theory so as boost their
stagnant economy.
Source : CNBC

11. SERVICE ECOSYSTEMS
 Service Ecosystems literally
translates, testing services the
economical way.
 Developing and servicing in the
western countries involves a lot of
capital.
 India and Philippines are
occasionally termed as the Outer
hubs for IT services.
 BPO’s, Call Centres are the perfect
example for service ecosystems.

12. NEW APPLICATIONS…
 Products developed and tested in
emerging economies actually provide
a base for their launch in the
developed markets.
 Applications are subject to ‘PPP’,
hence, companies may get a new
perspective for their application in
the 1st
world.
 Classic example of which is P&G’s ‘I
want education programme’
conducted in Nigeria and Kenya.

13. CLASSIC EXAMPLES OF REVERSE
INNOVATION.
 Tata Nano, a low budget car
introduced in India, costing $2,000 is
all set to launch it’s new version in the
European markets.
 The car will be modified according to
the taste and preference of the users
in Europe and will be sold at a higher
price, thus backing the ‘Leapfrog
Strategy’.

15. EXAMPLE II
 What we just saw, is another example of
Reverse Innovation.
 Electro-cardio machine in US costs
anything around $3,500-4,000. Doctors in
India invented a much portable and
cheaper version of the machine which
costs only $500.
 This machine is now sold in 90 countries.
 GE has struck an intriguing balance in
the case of healthcare in India. By
creating lower-cost end-user
solutions, they’ve actually been able to
create an entirely new market, primed for
expansion globally.

16. WHAT ARE THE LIMITATIONS OF
REVERSE INNOVATION?

17. INCOME GAP
 The first is created by the income gap between
rich countries and developing ones.
 Because per-capita incomes are so low in the
developing world, conditions are ripe for
innovations that offer decent quality at an
ultralow price — that is, a 50% solution at a 5%
price.
 At first, the 50% solution is unattractive in the
rich world, but eventually, performance rises to
the point that it is attractive in the rich world.
This is clearly also a disruptive innovation story,
where A is performance or quality and B is price.

18. INFRASTRUCTURE GAP
 The second is created by the infrastructure
gap between rich countries and developing ones.
Most of the infrastructure (energy, transportation,
telecom, and so forth) in the developing world has
yet to be built.
 As such, demand for new infrastructure
technologies is much higher in the developing
world than it is in the rich world, where demand
for infrastructure is created primarily by the need
to replace existing infrastructure. This is not an
illustration of disruptive innovation.

19. SUSTAINABILITY GAP
 The third is created by the sustainability
gap between rich countries and developing ones.
 Many developing nations are confronted with
environmental constraints far sooner in their
path of economic development than rich nations
were.
 Desalination technologies, for example, are likely
to be adopted in places like Northern Africa
before the desert southwest in the United States
needs them. This is also not an illustration of
disruptive innovation.