Book Review of Reverse Innovation: Create Far From Home, Win Everywhere by Vijay Govindarajan and Chris Trimble

Book review on “Reverse Innovation: Create Far From Home, Win Everywhere”
(By Vijay Govindarajan and Chris Trimble)

Reverse Innovation: Create Far From Home, Win Everywhere (by Vijay Govindarajan and Chris Trimble) challenge traditional thinking ways, and asks the readers to look at the developing markets for unconventional and exciting opportunities that they have to offer. The book is an eye-opener of sorts – the dynamics of global innovation are changing. Innovations are no longer restricted to the developed nations – developing nations are catching up, and fast. The authors explain where, when, and why reverse innovation is on the rise and the implications of this.

Westerners are now forced to sit up and look at the marvels of frugal innovations. Whether it’s a CEO, financier, strategist, marketer, scientist, engineer, national policymaker, or even an aspiring student, reverse innovation is a phenomenon that one needs to understand. The book has this underlying constructive spirit – not just bringing to attention the problems of corporates face but goes to suggest logical solutions to the emerging countries. And the beauty of all this - every assertion is made demonstrated by an example.

The case studies show the positive reverse innovation outcomes; however, reading between the lines highlights the numerous challenges, including championing and corporate battles needed to convert the conventional thought into innovative products as well as the underlying need to consider profit margins above all for both emerging and developed markets. This makes the book an essential read for MNCs to avoid the pitfalls of expanding into emerging markets.

The also is a natural extension of the idea of “Bottom of the Pyramid” concept by Prof. C.K. Prahlad. This is clearly demonstrated by examples of companies, like Wal-Mart, Nokia, GE, which have adapted the ideas proposed by VG (as he is better known in the business circles). This reasoning can be summarised by the following example. Necessity is the mother of “innovation”. GE, which developed portable ECG machines, was motivated by the unreliable power supply and frequent power cuts. Also, the machines needed to be used in remote, often inaccessible rural areas. GE recognized this and developed the technology and transported it to rich developed countries.

The right approach to develop a product should take in account the financial, social conditions in developing world. For example, performance of a product is expected to be 100% satisfactory in a rich country and they would be willing to pay a price higher than 100%. In a developing country with lower disposable incomes, people would be satisfied with 50% performance but demand a price of 15%. For example, Nokia concentrating on one model and making it useful for Indian conditions like adding torch light and Hindi language messaging.

Other learnings from the book include the following:
1) Best practices for new product development: The examples on Harman and John Deere explained clearly approaches to new product development, which could be used in any context, not necessarily in reverse innovation.
2) Best practices for new business group incubation: The example on LGTs gives guidelines how companies can incubate new business groups to fuel organic growth.
3) "Dominant Logic" failures – the other face of the coin: A company, which is a leader in a certain product category, tries to develop a new product category rather than better its existing product category, oblivious to the fact that a new player would have changed the benchmarks. The book discusses about change management in large MNCs: the real challenge these companies face to grow is to get over their own baggage – massive barriers thrown up by organizations that are too large, too successful, and too set in their ways.

India recently saw a whole lot of debating on Foreign Direct Investment (FDI) in various sectors including multi-brand retail. This book makes a good point that investment by the rich countries in India is beneficial to both the parties. In particular, politicians keep telling that Wal-Mart will destroy the businesses of the traditional kirana shops. The book has an illustration on how Wal-Mart discovered that its traditional super-huge-store formats was not really working in Central and South America, primarily because shoppers did not have enough money or storage space to make bulk-buying. So, the company had to develop smaller stores selling products in more manageable quantities for those markets—took this concept back home to dense urban settings in the US.

This book also forced us to think, all is not hunky-dory and there are some fundamental issues with this concept itself. The major issue of them all is whether MNCs, who generally compete on superior technology and features, can really compete with frugal local innovators in a price-sensitive, cost-driven market, given their overhead structures. Secondly, successful innovation requires innovating on multiple dimensions, like innovating on supply chain, distribution and a host of other business function to make the reverse innovation truly work. This is, however, easier said than done. MNCs are likely to find it extremely difficult to bring about revolutionary changes unless they are really determined to do so.

Final takeaways – for an MNC to bring about reverse innovation, it needs to:
(1) The process has to be top-down and champion has to be right at the top, usually the CEO;
(2) For the local growth team, the company must appoint a brilliant and politically savvy person to head the team
(3) Encourage mavericks - give them the right to ignore the conventional rules and break free from tradition
(4) Get as far as HQ, real innovation happens on the ground, on the site!