AUTHORS

D R NAVEEN G AUTAM

is Managing Director at Hella India

Automotive Pvt Ltd in Gurgaon (India)

REVERSE INNOVATION —ENABLERS & OPPORTUNITIES

Reverse innovation is a phenomenon under which products are first developed considering the needs of emerg-

ing economies, matured in home locations and thereafter rolled out to developed economies as trickle-up inno-

vation. Reverse innovation can also be considered as lean innovation due to compulsions of low budget, short

development time and short product life cycle.

During the last three decades, localisation

of global designs (glocalisation) has been

successful and it has delivered excellent

results. H owever, as the epicentre of the

global growth is shifting from developed

to emerging economies, this approach

cannot further deliver the expected

results. Therefore, the next wave of global

growth and product portfolio manage-

ment will be based on reverse innovation.

There are deep conflicts between glo-

calisation and reverse innovation; any

company cannot easily replace the first

with the second, because glocalisation

will continue to dominate traditional strat-

egy for the foreseeable future. The two

models need not only co-exist, but also

need to collaborate. These requirements

of co-existence with idiosyncrasies impose

severe challenges in implementation.

Since the centralised, product-focused

structures and practices have made multi-

nationals so successful at glocalisation,

they are actually getting in the way of

Traditional Route

Alternative Route

54 w w w .a u t o t e c h r e v i e w .c o m

COV ER S T ORY INNOVATION & SUSTAINABILITY

reverse innovation. This requires a decen-

tralised, local-market focus structure.

H owever, some of the successful example

within and outside of the auto industry

will continue to motivate and ensure faith

in reverse innovation.

“ In May 2009, General Electric

announced that over the next six years it

would spend $ 3 bn to create at least 100

healthcare innovations that would sub-

stantially lower costs, increase access, and

improve quality. Two products it high-

lighted at the time — a $ 1,000 handheld

electrocardiogram device and a portable,

PC-based ultrasound machine that sells

for as little as $ 15,000 — are revolution-

ary, and not just because of their small

size and low price. They’re also extraordi-

nary because they originally were devel-

oped for markets in emerging economies

(the ECG device for rural India and the

ultrasound machine for rural China) and

are now being sold in the United States,

where they’re pioneering new uses for

such machines.” – as noted in an article

titled “ H ow GE Is Disrupting Itself” by the

H arvard Business Review.

E NAB LE RS O F RE VE RS E

INNO VATIO NS

A. AUTONOMY AND CLEAR PROFIT AND LOSS

RESPONSIBILIT Y OF LOCAL INNOVATION TEAMS:

Almost all of the people and resources

dedicated to reverse innovation efforts

must be based and managed in the local

market. These local growth teams need to

have P&L responsibilities and the power

to decide, which products to develop for

their markets and how to make, sell, and

service them. Once products have proven

themselves in emerging markets, they

must be taken global, which may involve

pioneering radically new applications,

establishing lower price points, and even

using the innovations to cannibalise

higher-margin products in developed

countries.

B. UNLEARNING OF THE INNOVATION APPROACH

FROM MATURE MARKETS:

Teams in emerging economies involved in

reverse innovation need to unlearn some

of the traditional approaches of design

and manufacturing. These approaches

might have been inherited from their

headquarters during the glocalisation

phase (as the past learning creates hin-

drance in new ways of thinking). The

traditional innovation, development and

sustainability cycle needs to be

relearned as new technology or new

customer requirements are in general

not the driving force for reverse

innovation.

As shown in ➊, the traditional inno-

vation cycle, innovation interfaces with

development that creates a globally

acceptable and sustainable solution is

not suitable for reverse innovation. The

major difference comes from the “ inno-

vative development” interface, which

triggers innovations during the develop-

ment and lands through innovation into

sustainability via the “ sustainable innova-

tion” phase. The sustainability of innova-

tion in this context primarily comes from

low development budget and affordability

(low target cost) of the market. The suc-

cess of reverse innovation and its sustain-

ability is primarily driven by the market

acceptability at the right price point.

C. ABILIT Y TO LEVERAGE ON TECHNOLOGY AND

RESOURCES AVAIL ABLE AT THE PARENT COM-

PANY:

Even though autonomy is advocated for

reverse innovation teams in emerging

economies, access to the existing technol-

ogy and valuable knowledge resources at

the parent company is very important for

the success of reverse innovation. This

access is an additional lever towards fur-

ther cutting down the cost and risk during

innovative development. This is the most

challenging part of facilitation and there-

fore, needs close monitoring from the top

and commitment at the middle and work-

ing levels.

O P P O RTUNITIE S O F RE VE RS E

INNO VATIO N

A. ROBUST DESIGN REQUIREMENTS CONSIDER-

ING ABUSIVE ENVIRONMENT – HORN AS AN EX-

AMPLE:

Some products need to experience the

most abusive functional requirements in

the emerging market, such as the horn.

The uses of horn in mature economies are

much different compared to how it is

used in developing economies. In most of

the developed countries, horns are rarely

used on the roads and are considered as a

safety device to be used in emergency

conditions only. Therefore, the life expec-

tancy in terms of the number of cycles is

certainly low.

H owever, in developing countries

(especially in south-east Asia), horns are

used very differently. These are consid-

ered as devices to show presence on the

road or claim the space from the visible

part of the road as belligerent tradition.

Furthermore, the device creates an appeal

towards vehicle size, power and the stout-

ness perception. Customers on the roads

try to mimic the sound of horn to create a

feeling of more valuable vehicle by

upgrading their horns. Therefore, much

more stringent design and value addition

is required in the innovation and during

the development of horns in emerging

economies.

H ella has successfully matured the

tough horn variants in the domestic mar-

ket and now these mature designs are

being rolled out in mature economies.

B. TOUGH TARGET PRICING DUE TO AFFORDABIL-

IT Y – VEHICLE ELECTRONICS:

The innovative development of products

in emerging markets needs to be built on

cost-intensive optimisation, using right

cost architecture and competitive develop-

mental cost structure. The low volumes

force standardisation, however, using

modularisation required flexibility can be

offered. Low volumes also demand low

development cost, therefore, requires

innovative ways to optimise developmen-

tal costs. Several automotive electronic

suppliers have attempted this approach

and H ella has demonstrated (in the Body

Innova�on

Sustainability

Sustainable development

Innova-tive

develo-pment

Sustainable innovation

GlocalisationReverseinnovation

Development

55a u t o t e c h r e v i e w Januar y 2013 Vo lume 2 | Is sue 1

➊ Innovation cycle, the alternative approach for

glocalisation and reverse innovation

Electronics domain) that it can be accom-

plished. Using several designs and manu-

facturing levers, such as the right level of

automation during testing and manufac-

turing, module-based reuse rather than

full design adaptation can offer flexibility

across platforms and variants.

Furthermore, after developing and roll-

ing out the ‘common man’s’ car in India,

Tata Motors is now planning to sell an

upgraded version of the Tata Nano (Nano

Europa) in western markets. This is possi-

ble only as the entire product creation

mindset during Nano innovation was gov-

erned with the affordability of target cus-

tomer group.

C. LEAPFROG IN THE TECHNOLOGY:

Emerging economies experience lack of

infrastructure, which is taken for granted

in developed economies for any product

launch. As a result, the same product

based on proven technology from mature

economies cannot be rolled out. There-

fore, sometimes a technological leapfrog

is required to overcome the infrastructural

constraints. Electric vehicles in China and

mobile phones in India are very good

examples of this success. H owever, the

success is yet to be qualified as reverse

innovation as these products have not yet

found their way back into developed

economies.

C O NC LUS IO N

Reverse innovation can be reworded or

reconfigured for context specific applica-

bility; however, as it is the demand of the

current time and the destiny of the future,

it can neither be retarded nor be stopped.

Ignoring reverse innovation can cost

many companies, especially today’s world

class multinationals, greater loss than a

missed opportunity abroad. It can inflict

pain or even a severe damage in their

own well-established home market.

REFERENCES

[1] FVijay Govindarajan, Chris Trimble, Reverse

Innovation: Create Far From Home, Win Every-

where, Harvard Business Review Press, 2012.

[2] Vijay Govindarajan, Reverse Innovation Play-

book, Harvard Business Review, April 2012, pp

104-108,

[3] Jeffrey R. Immelt, Vijay Govindarajan, and

Chris Trimble, How GE Is Disrupting Itself, Har-

vard Business Review, Oct 2009, pp 56–65

[4] Vijay Govindarajan, Jeffrey Immelt, Chris Trim-

ble, How GE Is Disrupting Itself, Harvard Business

Review, October 2009, 87(10), pp. 56–65

[5] Vijay Govindarajan, Chris Trimble, The CEO’s

Role in Business Model Reinvention, Harvard

Business Review, January 2011

[6] Vikas Khanvelka, Reverse Innovation: Trend,

strategy and advantages it brings to India, Busi-

ness Standard, Sept 28, 2011.

[7] Debdatta Bandyopadhyay, Reverse Innovation

and the Role of a Strategist, Management, Janu-

ary 2012, pp 1081-1086,

[8] Atul Wad, Sustainability and Innovation in De-

veloping Countries, Engineering for the Develop-

ing World Seminar Series, Jan 8, 2008.

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14 INTERVIEW

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COV ER S T ORY INNOVATION & SUSTAINABILITY