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Reverse Innovation: What does it Mean?

Reverse Innovation:  What does it Mean?

Say the phrase “reverse innovation” and you’re likely to get a befuddled stare from most executives concerned about business innovation in Asia.

Reverse innovation is any innovation that is produced in a developing world and then sold to a first world. It seems counterintuitive to many. After all, wouldn’t a product developed in a rich country like the United States be much more successful and reliable than one developed in a poorer nation?

Not necessarily, according to Dr. Vijay Govindarajan, author of the NYT bestseller “Reverse Innovation.” He uses the broken United States healthcare system as a perfect example of an innovation created in the West that is not the best in the world. With its high prices, many of which can bankrupt even the wealthiest family with its high cost, and its low quality and access which is not universal, even now you can see how this Western innovation stands in crisis. In fact, Dr. Govindarajan innovated a cheaper alternative to an electrocardiography machine – one that took into account the constraints from developing it in India.

Why should Companies choose to Reverse Innovate in Asia?

By reversing innovation, you begin to rid the world of the money problem: the idea that for successful innovations to occur, they must occur in a rich country. Establishing innovations in a developing nation that are then used in ‘rich’ countries you show that innovations can and do occur in developing nations. Businesses should strive not to only proper and advance Western countries but to also provide innovations that can assist poorer nations as well.

Reverse innovation also represents one of the most substantial growth opportunities for businesses everywhere. Dr. Govindarajan believes that reverse innovation will change all global industries including healthcare, transportation, and tele-communications and will help solve the problems of the poor in ways that charity and money alone cannot do.

Business Innovation in Asia

The majority if reverse innovation cited in Dr. Govindarajan’s examples are taking place in India. As an example, he explains the innovated artificial leg that was of superior quality than those created in the West. The reasoning? In India many make their living by farming and must walk to other areas since they have no other means of transportation. This meant that an artificial leg had to be of high quality and withstand the rigors of farming and rural life.

With a billion potential customers living in Eastern Asia, reverse innovation is indeed a lucrative business opportunity. So is the opportunity for selling these innovations to Americans. With the economy at an all-time low and unemployment and the poverty level at an all-time high, low-cost, high quality innovations could be just what the doctor ordered. Many companies have even begun to market their Asian reverse innovations to market in the West, proving that they can sell and sell well.

Reverse innovation in Asia is an emerging business opportunity not only for the East’s executives concerned with business innovation in Asia but also for the West. If Western based businesses hope to survive the decline of the economy and low-grade products, they may want to take notes from Asia and its reverse innovation.

Sources: 1, 2