Reverse Innovation

Recently, while ordering a gift for my brother on Indian online shopping web portal, I surfed through several electronic gadgets. I was surprised to see the price range at which Android embedded tablets were being offered for sale. For mere 37 Euros, the product was offering 1.3MP camera, built-in microphone, Android 2.2 operating system, Wi-Fi, touch screen, or another product for just 51 Euros was offering 7" Android operating system mobile phone tablet with sim card slot. The price offering is equivalent to the monthly cost of coffee for an average household in Europe.

Some days after exploring the pricing of local product offerings in India, or I would say developing countries in broader sense, I came across an article on 'Reverse innovation' which is the theoretical name assigned to the real word scenario exemplified above. The concept emerged when Jeffrey Immelt, GE Chief Executive Officer suggested exporting US products to promote employment opportunities in US manufacturing industry.  

But will the developing countries like India, China, Brazil greet developed countries' highly priced products?

The above two paragraphs provided us sufficient evidences to answer this question. No, the developing countries has explicitly exemplified with several innovative low priced electronic gadgets providing similar features as any highly priced branded product which caters to the buying capacity of their maximum locals.

Prof. Vijay Govindarajan, GEs Chief Innovative Consultant, substantiated that 'Glocalization' will not work for developing markets due to the paying capacity of their masses. For instance, $20,000 electrocardiogram machine would not be able to grab an enormous developing market, rather an inexpensive substitute. GE, thus, invented a $500 electrocardiogram machine for such economies.

The phenomenon has been named as 'Reverse Innovation' which precisely means that the developed countries look for innovating in developing economies and then bring back that novelty in developed markets. The study provide guidelines to many developed countries' innovators aspiring to expand worldwide and probably add conceptual framework to the so called theory of 'Glocalization' that most exporters are following. The diagram in this blog is my effort to elucidate the phenomenon.