What is Reverse Innovation?

Reverse Innovation (also called frugal innovation or trickle-up innovation) is the strategy of innovating in emerging (or developing) markets and then distributing/marketing these innovations in developed markets. Many companies are developing products in emerging countries like China and India and then distributing them globally.

Who coined or introduced the ‘reverse innovation’ concept?

Vijay Govindarajan. He is the Earl C. Daum 1924 Professor of International Business at the Tuck School of Business and founding director of Tuck’s Center for Global Leadership.

Examples of Reverse Innovation:

Tata Motors – Tata Nano

While companies like Ford set up its global automobile platform in India and catered to the niche premium segments in India, Tata introduced the Tata Nano for the price conscious consumer in India in 2009. Tata plans to launch Tata Nano in Europe and U.S. subsequently.

GE – GE MAC 800

GE’s innovation on the GE MAC 400 to build a portable low-cost ECG machine to cater to the rural population who cannot afford expensive health care was launched as an improved version a year later in 2009, in U.S. as MAC 800.

Procter and Gamble (P&G) – Vicks Honey Cough – Honey-based cold remedy

P&G’s (Vicks Honey Cough) honey-based cold remedy developed in Mexico found success in European and the United States market.

Nestle – Low-cost, low-fat dried noodles

Nestle’s Maggi brand – Low-cost, low-fat dried noodles developed for rural India and Pakistan found a market in Australia and New Zealand as a healthy and budget-friendly alternative.

Xerox – Innovation Managers

Xerox has employed two researchers who will look for inventions and products from Indian start-ups that Xerox can use for North America. The company calls them as ‘innovation managers’

Microsoft – Starter Edition

Microsoft is using its Starter edition’s (targeted at not so technically savvy customers in poor countries and with low-end personal computers) simplified help menu and videos into future U.S. editions of its Windows operating system.

Nokia – New business models

Nokia’s classified ads in Kenya are being tested as new business models. Nokia also incorporated new features in its devices meant for U.S. customers after observing phone sharing in Ghana

Hewlett-Packard (HP) – Research Labs in India

HP intends to use its research lab to adapt Web-interface applications for mobile phones in Asia and Africa to other developed markets.

Godrej – Chotukool Refrigerator

In February 2010, Godrej Group’s appliances division, Godrej & Boyce Manufacturing Co Ltd test-marketed a low-cost (dubbed the world’s lowest-priced model at Rs 3,250) refrigerator targeted mainly at rural areas and poor customers in India. The product runs without a compressor on a battery and cooling chips. The company wants to use a community-led distribution model (as an alternative channel of distribution) to push for product growth.

Tata – Swacch – World’s cheapest water purifier

Swacch means clean in Hindi. Tata launched the water purifier – Tata Swacch targeting the rural market in India with the cheapest water purifier in the market. The product does not require running water, power or boiling and uses paddy husk ash as a filter. It also uses silver nanotechnology. It can give purified water enough to provide a family of five drinking water for a year. The company feels it will open a whole new market.

Pepsico – Kurkure and Aliva

Pepsi is planning to give developed markets (particularly West Asia) a taste of its salted snack Kurkure (and also another snack Aliva). The product enjoys huge success in India and has become a Rs 700 crore brand within a decade of its launch. The success is attributed to product innovation and a good marketing strategy. E.g. Made from corn, rice and gram flour, zero per cent trans fats and no cholesterol, Rs-3 small packs for pushing sales in the lower-tier towns.

Bharat Forge – Maintenance Management Practice

The best practices group at Bharat Forge, a large Indian manufacturer and exporter of automobile components implemented a maintenance management practice it developed in India (developed over 15 to 18 years) in its units it acquired in countries (known for sophisticated engineering) in Germany, Sweden and U.S. The maintenance management process focused on minimizing downtime during machine maintenance and has an advanced information system that predicts problems before they happen. Consequently, Bharat Forge plants globally are very efficient and have an average down time of less than 10 per cent.

KFC – Taco Bell – Yum! Restaurants

KFC test-marketed Krushers, a range of chilled drinks in the cold beverages segment in India and Australia and plans to introduce it to other markets. The launch in India was very successful as ‘Krushers’ accounts for 8 per cent of KFC’s beverage sales in India.

Yum! Restaurant’s Tex-Mex chain Taco Bell has one Indian-designed dessert (tortilla filled with melted dark chocolate) on Taco Bell’s US menus.

Husk Power Systems

In India, Husk Power Systems brings light to rural population (over 50,000) by using locally grown rice husks to produce electricity (a unique and cost-effective biomass gasification technology). The company has also received seed capital from Shell foundation in 2009 to scale up operations.

LG – Low-cost Air Conditioners (AC)

South Korea based LG Electronics (LG) planned to develop low-cost air conditioners targeting the middle and lower-middle classes in India. Their goal was to manufacture air conditioners at the cost of air coolers which were very common.

Renault – Logan

Renault designed a low-cost model of its brand Logan for Eastern European markets. It also sold in the Western European markets later on.

Better Place – Smart Grid of Battery charging/Swap terminals

In Israel, Better Place, a electric vehicle (EV) services provider (creates systems and infrastructure that support the use of electric cars), created an intelligent grid of battery-charging terminals and battery-swap stations. The company is now present in many countries like China, Japan, Australia, the U.S., Canada, France and Denmark.

GE India – Steam Turbines

In 2010, GE’s Indian arm tied up with Triveni Engineering and Industries Ltd to manufacture steam turbines in the 30-100MW range. The company plans to then take advantage of lower input costs incurred in manufacturing and export these products to markets in West Asia, Indonesia, Europe and Latin America.

Coca-Cola – eKOCool

Coca-Cola’s Indian arm Hindustan Coca-Cola Beverages introduced eKOCool, a chest cooler operating on solar energy with a capacity to store about 4 dozen 300 ml glass bottles. The innovation also charges a mobile and solar lanterns. Coca-Cola has plans to pilot the innovation in different cities in India and may be it will introduce it in other developed countries as well.

Vodafone – Zoozoos

Vodafone, which operates in more than 30 countries has plans to make its lovable characters – Zoozoos go international. Zoozoos the black-and-white animated creatures, in fact are actual human beings and are quite a rage in India where they were launched in marketing ads and look like aliens and speak an alien language. But the brand message is very clear to people across all age groups. Vodafone has also licensed the characters (and accessories) for retail merchandise across India.

Coca-Cola – Minute Maid’s Pulpy

Minute Maid’s Pulpy was extremely popular in China. It was basically an orange juice with pulp. Coca-Cola introduced it in other countries as well.

Wal-Mart – Small format stores in Mexico

Wal-Mart learnt a lesson in Mexico. Mexican shoppers preferred smaller stores compared to the large format stores Wal-Mart had in the U.S. By 2012, Wal-Mart had 1,250 small stores (Bodegas Aurrera stores) out of 2,138 stores in Mexico. Wal-Mart then opened similar small-format stores in the U.S. and Latin America.

Levi’s – dENiZEN brand imported to the U.S.

In 2010, Levi Strauss & Co. launched its dENiZEN brand jeans in China. This was the company’s first brand launched outside of the United States. With success, the brand quickly spread to India, South Korea, Singapore and Pakistan markets. In July 2011, the brand began selling in the U.S. in Target stores.

Amazon’s BOLD hiring strategy in India

In 2011, Amazon launched a unique hiring programme in India called Building Operations Leadership (BOLD). BOLD is a MBA hiring programme wherein the company takes in students with around two to four years of pre-MBA work experience. This practice differs from its global leadership development programme ‘Pathways’ which requires prior work experience of 7.5 years. With its success, BOLD is being introduced in other markets as well.