Historically, multinationals innovated in rich countries and sold those products in poor countries.Reverse innovation is doing exactly the opposite. It is about innovating in poor countries and selling those products in rich countries. Since two-thirds of world’s growth in GDP is likely come from poor countries, reverse innovation is an important phenomenon. Reverse innovation is also a significant learning opportunity for students in engineering.
Engineering graduates are good at solving problems. Once given a problem, they tackle it rigorously. But what if these individuals weren’t handed problems and instead sought them out? Engineers have an opportunity to reframe the problem space and identify a whole new set of problems if they ask this question: How do we engineer and design products to solve the world’s toughest challenges?
Some schools have already started thinking in this way. Earlier this year, I received an invitation on behalf of the Tata Center for Technology and Design and the Department of Mechanical Engineering to speak at MIT about my work on reverse innovation. The students and faculty affiliated with the Tata Center, which focuses on creating solutions for resource-constrained communities in India through academic research, are currently pursuing theses on emerging market challenges and strive to create high-performance and low-cost technologies that will be globally relevant.
On a similar note, last week, I gave a keynote speech on reverse innovation to students at University of Alabama in the Science, Technology, Engineering, and Math (STEM) disciplines. These students — majoring in fields such as engineering, biology, chemistry, and other technology-oriented areas — read my book, Reverse Innovation, over the summer. Throughout the school year, students work in teams to innovate new business models and products for problems faced by the poor. I was inspired after interacting with the smart young STEM majors. They didn’t just listen; they wanted to act. One student told me, “Your work has inspired me to change my mind-set to problems. I look forward to implementing it by visiting emerging economies.” Of all the keynotes I gave this year, the one I gave to University of Alabama STEM students is the highlight. (The fact that I got to watch the Alabama–LSU game was icing on the cake!)
The issues these two groups are studying are pressing, and other universities need to follow their lead. Out of the earth’s population, about 2 billion can afford good products whereas the remaining 5 billion are poor and are therefore nonconsumers. Innovating to solve the problems of the 5 billion poor represents the biggest opportunity for corporations. However, this also presents some of the hardest technical challenges for humanity, where we cannot simply adapt solutions used in wealthy markets. We have to innovate anew. The constraints posed by serving the poor will push innovations toward high-performance, low-cost products that have the potential to transform everyone’s life — including customers in rich countries.
Consider the following examples. The U.S.-based Harman International Industries, known for ultrasophisticated dashboard audiovisual systems for high-end automobiles, engineered a radicallysimpler and cheaper auto infotainment system for mid-price and entry-level cars in emerging markets. The company subsequently migrated the low-cost platform to serve the needs of luxury cars as well. General Electric engineered an $800 portable, battery-operated, easy-to-use electro-cardiogram (ECG) machine for rural India at a time when they were selling very powerful $10,000 ECG machines in the U.S. The $800 ECG platform is now sold in wealthy countries as well, creating new applications and additional growth for the company.
To solve poor-world problems, engineers must create technologies that meet or exceed the performance of their wealthy equivalents, but for a fraction of the price. The constraints one faces in poor countries will force them to create fundamentally new technologies; modifications to existing technologies cannot achieve the performance/price combination we need. Opportunities exist to push the price/performance paradigm in several areas including health care, energy, housing, education, clean water, and transportation, among others. Once we have created these new technologies, we can reverse innovate to modify the technology for the American context, adding features and functionality for what America demands and can support. Reverse innovation will be a catalyst for new ideas and a valuable design tool for engineers striving to create technologies that have global impact.
America is at a crossroads. We can either eke out 1 or 2 percentage points of growth by restricting ourselves to the needs of the 2 billion rich, or play the pioneering role we have played in the past by bringing the other 5 billion into the fold and ensuring a future with strong growth and indelible impact. Clearly, I would vote for the latter. American universities should offer programs where engineering students can play a big part in designing and engineering products that address the needs of people in emerging economies.
VIJAY GOVINDARAJAN
Vijay Govindarajan is the Coxe Distinguished Professor at Tuck School of Business at Dartmouth College. He is coauthor of Reverse Innovation (HBR Press, April 2012).
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