It may be hard to imagine but a growing trend in today’s world is for major consumer companies to create products in emerging markets and import them into mature markets. It’s a fairly new and radical idea known as “reverse innovation”.
Radical because a product first seen or used in the developing world before its spreads to the industrialized world essentially turns the product development process on its head.
Reverse innovation was popularized in a 2009 article written by Dartmouth professors Vijay Govindarajan and Chris Trimble along with GE’s CEO Jeffrey Immelt. In April 2012 Govindarajan and Trimble went on to publish the book Reverse Innovation.
According to the process goods are developed as inexpensive models to meet the needs of developing nations and are then repackaged as low-cost innovative goods for Western buyers.
One example of reverse innovation in action occurred when P&G developed a lower price diaper line for its Brazilian market that eventually migrated to more mature markets. The company found that parents in these mature markets who couldn’t afford the company’s more expensive diapers were willing to pay for a solution that would keep babies dry overnight. This basic tier of products that first found life on shelves in Brazil now exists around the world under different brand names, such as Simply Dry in Western Europe.
In another instance GE developed a portable battery-operated electrocardiogram machine that sells for $500. It was first meant as a solution for rural Indian markets where large expensive machines common in the U.S. were not possible. GE says the product is now making inroads here as a solution for first responders.
Levi’s Denizen brand was first launched in Asia targeting Indian and Chinese consumers and eventually found its way to U.S. consumers and retail for one-third to one-half the cost of a pair of Levi’s.
While radical in thought, reverse innovation is gaining steam. So much so in fact that in his book Govindarajan says he believes reverse innovation will permanently alter the way companies do business, as resources, talent and investment shift to poor and developing countries. He also warns this will present major marketing challenges. It makes much more sense to see why a poor man wants a rich man’s products, but with reverse innovation there is the exact opposite situation. Marketers and advertisers will have to figure out how to make the developed world want products from poorer places.