Wednesday, September 23, 2009

Reverse Innovation

What exactly is reverse innovation (also called trickle-up innovation) and who is doing this? I found an article about how General Electric (GE) is changing its innovation strategy to adapt to the recession. Because of the slowing growth in rich nations GE has decided to begin developing products for emerging markets, specifically India and China, later distributing them worldwide.

In 2008, GE developed an electrocardiograph (ECG) machine for doctors in India and China and later added a few new features before introducing it in the U.S. for $2,500, 80% less than similar products. In developing the MAC 800 for the U.S. GE cut their development cost from $2 million to $225,000.

The BusinessWeek article also mentions that Nokia, Xerox, Hewlett-Packard, Microsoft, Nestle, and Proctor & Gamble are seeking ways for them to profit by developing products for emerging markets.

Below are a couple of articles on the topic.

1 comment:

  1. After reading this post it made me think about products in the U.S. that were examples of reverse innovation, however, none easily came to mind. After reading the first article I better understood the concept and how it was only really started in less developed countries (reminding me of the incubator we talked about this first class). I see the growth potential for this kind of innovation but I have two lingering questions: Could this type of innovation start in the low end markets of the U.S. and move up? And would this work for a start up? This second question directly sprung from Vijay Govindarajan’s comment that G.E. wasn’t worried about local Chinese competitors because of G.E.’s brand recognition and distribution channels among other things.