“Reverse innovation” : a cultural shift for business growth in the twenty-teens

Posted by Nick, account manager

We recently read an interesting article on the Harvard Business Review website on the shift in GE's culture from glocalisation towards adopting "reverse innovation" as a means of growth beyond its developed markets.

Glocalisation is the widely-used practice of developing one product for a company's key local market and distributing it globally with little change to accommodate local requirements. This means that local, especially developing, markets with different requirements are only skimmed. The impetus for change away from this practice is twofold: the global recession has encouraged multinationals to look to faster-growing developing ELDCs for sustained growth and recovery, and the rapid development of traditionally "third world" countries, often with large low-salaried populations, as competitors to market leaders on the world stage.

GE's solution was to adopt a mix of high-level R&D centres in more traditionally "advanced" nations, but to also create local R&D centres, and eventually local P&L-responsible teams, in India, China and other developing countries. The local teams have developed lower cost (selling prices that are, maybe, 15% of the company's higher-level products) items that meet the requirements of their locality. A prime example is the development of GE's portable ultrasound system. Working as an attachment to a laptop, the system met the demand for easy-to-use portable ultrasound devices that could be taken to patients who weren't able to travel to central clinics (which also couldn't fund large, expensive, fixed devices). The "reverse" part of this innovation was to then introduce the portable system back into the US and other core markets, but to segment the product offering and grow the market without cannibalising sales of higher-level products.

This is evidence enough that innovative companies operating in today's connected world have to think differently and react quickly in order to maintain a lead against both traditional competitors and newly-emerging competing fronts. As product development costs and time decrease, it is only through a combination of building brand and demonstrating real value that companies can truly see a "return on innovation".

The full article (subscription may be required) can be read at http://hbr.harvardbusiness.org/2009/10/how-ge-is-disrupting-itself/ar/1