Reverse Innovation: Create Far From Home, Win Everywhere [Hardcover]

Those who have read one or more of Vijay Govindarajan and Chris Trimble's previously published books (notably Ten Rules for Strategic Innovators and, more recently, The Other Side of Innovation) already know that they share a unique talent for recognizing and then explaining previously unrecognized - or under-appreciated -- business trends and their implications. In this instance, the fact that the dynamics of global innovation are not only changing, they are [begin italics] shifting [end italics] from rich countries with incumbent economies to meeting unmet needs in developing countries.

Leaders in companies that aspire to accommodate those needs must develop a mindset that is radically different, one whose core concept is reverse innovation. That is, "any innovation that is adopted first in the developing world." To develop that mindset, leaders must understand the significant differences between rich-country and poor-country needs. "Reverse innovation does not begin with inventing, but with forgetting. You must let go of what you've learned, what you've seen, and what has brought you your greatest successes. You must let go of the dominant logic that has served you well in rich countries. If you want to use today's science and technology to address unmet needs in the developing world, then you must start with humility and curiosity."

In short, think "far from home" before attempting to do business there.

Govindarajan and Trimble identify and explore five need gaps that can serve as paths to success with reverse innovation in macro markets of micro consumers. Understanding the nature, extent, and perils as well as opportunities of these need gaps will serve as the foundation of the radically different mindset to which I referred earlier. With both uncommon rigor and precision, Govindarajan and Chris Trimble explain

o What the reverse innovation challenge requires
o How to develop the reverse innovation mindset
o How to formulate an appropriate strategy based the five paths
o How to create "clean slate" innovation in emerging markets
o "The Reverse Innovation Playbook" (Nine rules to guide and inform strategy, global organization, and project organization

In Part 2, Reverse Innovation in Action," Govindarajan and Trimble shift their attention to mini-case studies of eight major companies (Chapters 5-12, Pages 75-188), citing real-world situations that demonstrate an abundance of do's and don'ts during initiatives to develop macromarkets with products that appeal to microconsumers. For example, in Chapter Six, Govindarajan and Trimble explain how Procter & Gamble realized that its success in emerging markets required it to innovate the "Un-P&G Way" because unfamiliar customer needs "trump" leading-edge technology. In Chapter Eleven, "PepsiCo's Brand-New Bag," this major multi-national company had to learn how to "think globally but snack locally"

Readers will also appreciate the provision of a "Reverse Innovation Toolkit" in Appendix A. Govindarajan and Trimble include several practical diagnostics and templates that will help business leaders expedite their reverse innovation efforts. In fact, they make brilliant use of reader-friendly devices throughout the book, notably "Playbook Lessons" and "Questions for Reflection. Here in a single volume is probably about as much as any business leader needs to help her or his global company to use reverse innovation to avoid or reverse the negative trends and tendencies that can weaken an organization when it attempts to do business in emerging markets.

It is time to throw away the slogan "Think Globally, Act Locally", which many multi-national companies have proclaimed so far. Professor Govindarajan's "Reverse Innovation" clearly shows why we should do so. Growing importance of the emerging economies stems not only from their contributions to the world economy, but also from creating new opportunities for non-consumers in under-developed areas. Furthermore, these new opportunities can expand the economic availability for diversified consumer welfare in the developed countries, as proven by the abundant cases in this book.
This book also inspires me to think of the real values that the business world must pursue. If we can make economically viable innovations for non-cosumers who are facing limited availabilities because of price, delivery, or technical barriers, we will be able to achive something more than conventional notion of business success. This may be what the world requests to the businesses in terms of the global sustainability at this time of turmoil.
"The Reverse Innovation" suggests a new slogan, "Think Locally, Act Globally".
Joungsik Lee, Executive Vice President, LG Economic Research Institute

"Therefore those who were scattered went everywhere preaching the word." -- Acts 8:4 (NKJV)

The modern corporation began with a structure that followed the traditional organizational principles of military organizations: rank matters; processes are rigid; control is central; the boss is always right (even when she or he is wrong). In the last sixty years, there have been mighty efforts to soften and adjust that structure so that local knowledge and autonomy can have full sway. Despite well-meaning efforts to create global structures that work, greater decentralization and looseness of authority, and an interest in creating more disruptive innovation, the process of developing and expanding technology, marketing approaches, and sales efforts continues to begin from the home market and extend slowly out to poorer and smaller countries . . . not dissimilar to the ways that kingdoms used to use the colonies to "impose" the home country culture and extract low-cost labor and raw materials. In a way, it's just human nature. That's not to defend it, but to simply understand the phenomenon.

Reverse Innovation looks at a handful of cases (mostly involving American multinationals) that show the potential benefits of starting market, business model, offering, and technology development from the largest underdeveloped countries. In doing so, the case for such innovation proceeds well beyond The Fortune at the Bottom of the Pyramid argument to also identify that:

1. Such innovations develop improvements that can be extended to large numbers of customers.
2. The innovations eventually can become sources of major growth in advanced countries by opening new ways to use offerings.
3. The multinational has substantial advantages in doing this in terms of being able to draw on worldwide talent to solve difficult problems and the infrastructure in place to expand useful innovations from poorer countries and poorer people into new markets and new applications.
4. In an open source world, this can be a good way to break down the preference for "not invented here" being rejected in capable companies.

I found the case histories to be more revealing than the more general text. The cases were well chosen and well documented. I felt I learned more about underdeveloped country issues for poor people than I knew before. That was a blessing.

I was surprised to see how many companies had been taking a technology first approach to producing lots of bells and whistles rather than beginning with studying potential user needs. Those parts of the book suggest a lot of managers fell asleep during their marketing 101 classes.

The most intriguing part of the book for me came in the subtle observations about how to accomplish such changes organizationally. I wondered if there might not be alternative ways to do this that would work even better, such as having venture funding for partially owned entities staffed with long-time company employees with an entrepreneurial flair and bent.

The book contains many helpful lists and questions that make it much easier to apply what is described.

You may find Part 1 to be a little repetitive and oversimplified. You'll be relieved when you get to Part 2 where the writing is more varied and interesting, filled with more interesting details. Don't miss the appendices. They provide good guides to implementation and future research. Nicely done!

If you don't work for a multinational, you may be a little puzzled by how to use the book. The key lesson here is that you should learn from successful models in underdeveloped countries to deal with issues affected poorer people in the more developed countries. Chapter Twelve provides a modest example that will probably intrigue you.

The book could have been improved by also looking at what multinationals based in other countries have been doing in this regard. Some of them were originally based in what were then underdeveloped countries. Much of the text reminded me of descriptions of Korean and Taiwanese companies moving beyond Asia in the 1950s and 1960s.

Good work!