The Origin and Trend of Reverse Innovation
The phrase “reverse innovation,” which was invented by professors Chris Trimble and Vijay Govindarajan of Dartmouth University, describes any breakthrough that is first offered in developing nations with the goal of subsequently being promoted in developed or western markets. Trickle-up innovation is another term for reverse innovation.
With their growing disposable incomes and the largest and fastest-growing middle class with higher than before spending capacities, developing nations like India are becoming increasingly attractive as target markets for many international businesses looking to expand into or strengthen their position.
These days, the multinational corporations in pursuance of simply surviving in the market are quickly embracing reverse innovation as a strategy to leave their mark on the global market. This is because it allows them to access new emerging markets and open up new growth avenues by creating whole new demographics.
Furthermore, these markets provide as a benchmark for them to gauge consumer reaction to the product they want to introduce to the western market later on, with additional features that meet their requirements and expectations.
Tata Nano, which the corporation intends to rebrand as Tata Europa and launch in the western market as an upgraded or sophisticated model. Another example of reverse innovation is the $1000 General Electric electrocardiogram equipment that was created in Bangalore.
While Reverse Innovation has been associated with more disruptive ideas or has assisted corporations in creating completely new goods, it is not the only application of this strategy.
How Would India Benefit From Reverse Innovation?
Reverse innovation would primarily cause an additional industrialization boom. The Indian economy would see an increase in FDIs as more and more multinational corporations chose to produce and/or develop new products in India for both domestic and international markets.
Furthermore, indigenous multinational corporations would naturally increase their investments to build state-of-the-art R&D facilities that would inspire cutting edge innovation and engineering. Likewise, it would result in more job possibilities for engineers and better, more reasonably priced products that would meet the needs of the consumer market.
By erasing national boundaries, reverse innovation is bringing nations and international markets even closer together and advancing the idea of “one world, one market.” In addition to increasing the impact of cross-economic reliance and making cross-border production and marketing feasible and successful, reverse innovation would accelerate globalisation.
Better goods with a wide range of possibilities available at affordable costs for customers. Businesses are spending more to develop the long-term IT infrastructure that would support cutting-edge engineering. Consequently, it would promote industrialization even more.
Why Is This In News?
GE Healthcare declared on March 26 that it would make an incredible ₹8,000 crores of investments in India over the following five years. GE Healthcare’s primary goal when it originally opened for business in India was to supply hospitals and doctors in the nation with its pricey medical equipment, which included CT, MRI, and ultrasound devices.
The plan was to develop items in wealthy nations and market them in low-income areas.They have to be creative in order to offer Indian consumers what they needed. GE did not want to make it for them. Thus, in order to decide what to develop, the engineering and research team needed to be in India and have a thorough understanding of the nation.
The cost of the ECG machine was only ₹35,000. By contrast, the other flagship products from GE were priced over ₹2 lakhs.
But at that point, GE understood that this ground-breaking gadget didn’t have to be limited to India. It’s useful even for developed markets. Before thereafter, first responders in both the American and European markets started utilising it as well.
This is ‘reverse innovation’.
Conclusion
Reverse innovation, as simple it may seem, is anything but. And the reason for this is that management frequently worries that exporting these low-cost goods could cause sales of higher-margin products in other nations to decline.
Consider the audio manufacturer Harman. Dinesh Paliwal took over as the company’s new CEO in 2007. Upon examining the company’s premium automotive infotainment segment, he observed that although it generated 70% of the $3 billion in revenue for the company, the growth had reached a saturation point. He chose to change the plot as a result. His intention was to highlight developing economies like India.
On top of that, by 2012, 40% of the division’s $10.9 billion in new sales came from these product breakthroughs. “Reverse” innovation has a problem because it presumes that wealthy nations are where invention naturally flows.
