Reverse Innovation Reloaded..!!

The role of emerging markets

In fact, the needs and opportunities in the developing world are so different from those in the developed world that the very first requirements for reverse innovation success are humility and curiosity. One must let go of what he has learned, what he has seen, and what has brought him the greatest successes. In fact, it is best to assume that one have just landed on Mars.

Developing countries will become R&D labs for breakthrough innovations in diverse fields as housing, transportation, energy, health care, entertainment, telecommunications, financial services, clean water and many more.

Reverse innovation has the potential to transform wealth in the world. Growth in developed countries has slowed down. Much of the growth is now in developing countries. The 2008 financial crisis and the more recent debt crisis [in Europe] have only exacerbated this situation. As such, we are likely to see the center of gravity for innovation shifting from rich to poor countries.

How would Reverse Innovation benefit India?

Primarily Reverse Innovation would lead to further boom in industrialization. As more and more multinationals adopt and opt to produce and/or invent new products in India for local as well as western markets, the Indian economy would witness an increase in FDIs and also the indigenous multinationals would instinctively raise their investments to build advanced R&D facilities that would inspire cutting edge innovation and engineering. It also means the engineers would experience higher employment opportunities, and the consumer market would profit from better products developed to cater to their needs at reasonable prices.

Besides OEMs, Reverse Innovation would also lead to the overall development of the entire eco-system comprising of Tier I and II suppliers, technology vendors, educational institutions which support, fortify and facilitate this unprecedented growth through concurrent engineering, providing smart and agile engineering and production solutions to complex challenges, and development of resources.

Implications of reverse innovation for developed countries

If Western multinationals do not innovate for customers in developing countries, they not only stand to lose growth in these countries, the implications are far worse. Emerging giants will do the innovation and bring those innovations into rich countries and disrupt multinationals. We are already seeing strong local players such as Tata, Mahindra, Haier, Lenovo, Goldwind, Suzlon, Cemex and Embraer. The list will increase, no doubt. The biggest competitors for multinationals are local companies from emerging markets.

For multinational corporations, reverse innovation is not a "nice to have" boost to revenue growth rates. It will power the future -- not just in emerging markets, but everywhere. Many tremendous rich-world business opportunities will arise first in emerging markets. To compete, global corporations must be just as nimble innovating abroad as they are at home. The future is far from home.

Way forward..!!

The emerging economies have the world’s highest projected economic growth rates by a wide margin. The possibility of missing out on such growth should be more than enough to compel many of today’s multinationals to tackle the challenge of reverse innovation. And, again, the full implications of standing aside while others tackle the reverse innovation challenge are even more consequential. Failure abroad can lead to failure at home.

Innovation is expensive and risky. As such, it is hardly surprising that many established global companies discount the need to innovate when competing in emerging markets. How can it make sense to spend heavily on an innovation for a market in which customers have so little money?

Because in an ever lengthening list of industries, it is the only way to win.