An insight into reverse innovation and Indian perspective to it.

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