The document discusses how developing countries are becoming more economically significant globally due to their large populations and rapid GDP growth. While people in developed nations each spend more, the total spending in developing nations is vast due to their large populations where each person spends a little. The document advocates for innovation to meet the needs of developing countries, noting opportunities in areas like more affordable products, different infrastructure needs, sustainability issues, regulatory environments, and local preferences. It provides examples of companies like Mahindra and a hospital in Nepal that innovated to succeed in developing markets and then brought those innovations to developed countries through "reverse innovation".

1. By
Dr. Swatantra Kumar
Professor
Shri SiddhiVinayaka Institute of Management

2.  Developed to Developing world
Developed
World
Developing
World

3.  Developing to Developed world
Developed
World
Developing
World

4.  Population
 85% of the people (5.8 billion)
live in poor countries
 Total GDP
 In total GDP China is No. 2;
India – No. 4
 Total GDP of poor countries is
roughly $35Trillion (half of
World GDP)

5.  Projected GDP Growth rates
 China and India (Double as compared to Rich
countries)
 GDP per capita
 US – 6th; China – 94; India - 128
 Point is simple
 In rich countries there are few people who each
spend a lot
 In Developing world there are a lot of people who
each spend a little.
Either way, total spending is vast

6.  One person with 10 Dollars
 10 persons with 1 Dollar each
It requires innovation
Reverse innovation

7.  The performance gap
 50% solution at 15% price (StrippingVs. radical
innovation)
 The infrastructure gap
 Opportunity not a constraint (GE Healthcare)
 The sustainability gap
 China air pollution (500 on scale of 1-500) –
Electric Car (BYD)

8.  The regulatory gap
 High regulationVs. low regulation (Under
regulation at times provides opportunities to
experiment)
 The preferences gap
 Different worlds different preferences (CornVs
Lentils based products – PepsiCo)
Innovators win, exporters loose

9. Marginalized
market today
Mainstream
market tomorrow

10. Level one thinking:
poor countries are
irrelevant
Level two thinking:
just sit tight
Level three thinking:
customization is
sufficient
Level four: winning
requires innovation
Level five: the stakes
are global not local

11.  M&M founded in 1945 as a steelmaker,
entered agriculture market in around 1965
(partnered with international harvester).
 1994 – Mahindra entered US market
 Affordable, fuel efficient tractors
 In US Deere & Co. was the dominant player.
 MUSA avoided competing with Deere. Started
selling the product to hobby farmers,
landscapers, and building contractors
 Machine was reliable, sturdy and priced to sell,
with few modifications such as supersized seats
and larger break pedals.

12.  It build close relationships with small dealerships,
particularly family-run operations.
 Run on JIT basis. Offering to deliver a tractor within 24-
48 hours.
 Also facilitated financing, made close relationship with
customers (10-15% buyers got calls from its president)
 MUSA sales growth averaged 40% per year, from 1999
to 2006

13.  Deere got baffled by this and started short term
cash incentives to lure the buyers.
 Mahindra fired back with an ad featuring the
headline “Deere John, I have found someone
new”
 Contrary to that Deere has largely been a failure
in Indian market.
 Consequently M&M became the number-one
tractor maker worldwide, as measured by units
sold.

15.  Open heart surgery for just $2,000
 US price - $ 20,000
 Despite the ultra-low price, NH hospital’s new
profit margins are slightly higher than USA
 Quality: its mortality rates within 30 days of
bypass surgery is 1.4% as compared to US
average of 1.9%
 The real magic lies in process innovation
 Standardization, specialization of labour,
economies of scale, and assembly line
production (just Like Henry Ford)

16.  Extensive resource utilization
– expensive equipments are
used five times more as
compared to USA.
 Specialization of doctors in
specific type of surgery.
 Surgeons perform two to
three times more procedures.
 This accelerates learning,
improves skills, and increases
quality.

17.  Now they are building a large 2000 bed
hospital in the Cayman islands (close to USA)
– an hour’s flight from Miami
 Reverse Innovation