Reverse Innovation: A Conversation with Vijay Govindrajan

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Meet Vijay Govindrajan, VG to the world.      

Widely regarded as a leading expert and thinker on strategy and innovation, he is the Earl C. Daum 1924 Professor of International Business at the Tuck School of Business (Dartmouth).  More relevant from a personal perspective, he was my Professor at IIM Ahmedabad, first year, first trimester, Managerial Accounting, summer of 1974.  

While his accomplishments and awards are too numerous to list in a blog, two deserve a special round of applause.

First, Thinkers 50 recently awarded him the 2011 Breakthrough Idea Award for sparking a global conversation and challenge to build a $300 house (I was part of the effort), and ranked him number three in the definitive listing of the world’s top 50 thinkers

Second, a 2-year stint as Professor in Residence and Chief Innovation Consultant at GE, led to a celebrated HBR article on reverse innovation, co-authored with Jeff Immelt and Chris Trimble, which recently culminated into a book – Reverse Innovation: Create Far From Home, Win Everywhere.

The book was launched globally on April 10, and it is where we pick up the action.  He very kindly agreed to visit with the readers of this blog to share his thoughts on Reverse Innovation and the key themes of his book.

VG, hearty congratulations on the Thinkers 50 award, the HBR article with GE’s CEO, Jeff Immelt, and the book on Reverse Innovation, must be very heady times?

Thanks Gaurav.  Yes, heady and humbling times.  The book is the culmination of decades of research, but the reverse innovation journey is just beginning, gaining global momentum, as we speak. All that I can say is I am truly excited about the road ahead and the potential impact of reverse innovation thinking on the growth of multinationals in emerging countries.

Reverse Innovation – in a nutshell?

Historically, large multinationals, residing in rich, developed countries, innovated in their home countries, and then exported that innovation to the not so rich, developing countries.  Reverse innovation is exactly the opposite. Innovations are developed and adopted in poorer, emerging economies, and are subsequently adopted by customers and companies in richer, more developed economies.

A few examples please, to illustrate reverse innovation?

GE Ultrasound Machines – we discuss this example in the article and the book.  In markets like India, where more than 60% of the population lives in rural areas, without reliable sources of power, you can’t have effective health care service models that rely on the patient coming to the hospital, you have to take the hospital to the patient.  Large ultrasound machines that are the size of appliances and cost between $100k to $500k are impractical and cost-prohibitive.  A light, portable, PC-compatible ultrasound machine, costing as little as $15k, was developed in India to help the local market meet its needs.  This equipment is now finding its way to developed markets – an example of reverse innovation.

Gatorade – is another fine example of reverse innovation; it’s also the first case study in the book.  Quintessentially American, Gatorade actually has its roots in the treatment of cholera patients in Bangladesh and other South Asian countries.  To treat severe diarrhea caused by Cholera, patients were kept hydrated by giving them carbohydrate rich concoctions comprising of coconut water, carrot juice, and carob flour.  A centuries old tradition on that side of the world, it was a total shock to doctors trained in western medicine, who believed that putting carbohydrates in the stomachs of cholera patients would worsen their condition.  But as they say, results speak for themselves.  So, it was only a matter of time before the British Journal Lancet covered the story, and a doctor in Florida reasoned that if it is good enough to rehydrate unhealthy cholera patients, surely it must be good enough to rehydrate healthy Football players.   

In your book you state that Reverse Innovation requires a clean slate approach – interesting juxtaposition of words, slate and innovation – but that aside, please explain what constitutes a clean slate approach?

(Laughs) Yes, it is interesting, the juxtaposition of slate and innovation, now that you bring it to my attention.  By clean slate I mean that winning in emerging markets requires much more than geographic expansion, meaning it requires more than simply ramping up sales, distribution, and production.  I recommend looking at these markets with an entirely fresh set of eyes, with an intense amount of curiosity, supported by an abiding admission that the needs of these markets are different than those at home.  It will require rewriting the script, away from exporting innovations to emerging markets, to innovating in emerging markets.

You are not a big fan of the word – glocalization?

No, I am not, because at heart glocalization is still about exporting products.  Glocalization does not take into account the fact that the structure of markets and customer needs are fundamentally different in emerging markets, and hence require a set of “clean slate solutions.” (Smiles, I smile too).

What do you see as the single biggest opportunity in the coming years for multinationals?

Emerging markets becoming more than nominal contributors to the sales and growth of multinational companies.  In the next 25 years, the single biggest opportunity I see for multinationals is customers moving from rich countries to emerging/poor countries – reverse innovation should make that possible.

Reverse Innovation is where you live, and Co-Creation is where I live – do the two intersect?

(Smiles) Is that a trick question?

Not at all! (I protest – though asking VG trick questions would be quite cathartic, given all the trick questions he asked us when he taught us Managerial Accounting).

Most definitely they do.  The $300 House initiative – you were part of that movement – it also received the Thinkers 50 Breakthrough Idea 2011 award – is an excellent example where Reverse Innovation and Co-Creation intersect.  In fact I would go one step further, they don’t just intersect, they positively reinforce each other.  If the structure of markets and consumer needs are different, then so must be the architecture of solutions and customer experiences, a perfect set up for Reverse Innovation and Co-Creation to work with each other, and for end users and customers to collaborate in co-creating innovative solutions and experiences.

Could you share three key themes from your book for the benefit of busy executives who may not have had a chance to read it yet?  

Just three?

Yup, just three.

(Groans) Boy, you sure make it tough, Gaurav. (It’s my turn to smile now).

I would say the three key themes are:

  1. You must innovate, not simply export, if you want to capture the mammoth growth opportunities in the developing world. 
  2. The stakes in emerging economies are global not local. Passing up an opportunity in the developing world today may invite formidable new competition in your home markets tomorrow. 
  3. Legacy multinationals must rethink their dominant organizational logic if they are to win in an era of reverse innovation.

Thanks VG – most gracious of you to have shared your time and thoughts.  Hope we can get together again soon for another round.

Absolutely, this was a lot of fun.  You know where to find me.