Reverse Innovation is breakthrough innovation

Did you see last week’s Tuesday (10-20-2009) Wall Street Journal? Front page news:Indian Firms Shift Focus to the Poor . This article describes how Indian companies are unleashing their well trained engineering based workforce on the problem of delivering technological innovation to the vast numbers of poor in that country. Developed countries have not been able to make that happen, as Vijay Govindarajan has demonstrated in his book Ten Rules for Strategic Innovators,on his blog and in his countless speeches. Ford takes its Escort and tries to reduce its cost. Even if they were successful and cut the cost in half (a major success by any means), the price of the car is still unaffordable for most of the Indian population. So Indian companies have taken matters in to their own hands, and begun to fill these needs themselves.

The term that is used to describe this phenomenon is ‘reverse innovation,’ which VG describes in his recent post as “any innovation likely to be adopted first in the developing world.” . Well, that’s one way to think about it…which focuses on the path of diffusion for the innovation.

But actually, these are really, truly breakthroughs. Cars that cost $2000 will enable new forms and uses for personal transportation. Portable water purifiers the size of a water cooler, priced at $43. Cooler sized refrigerators that can run on batteries in situations where power outages occur. ….priced at $70. Wood burning stoves for $23…that burn agricultural waste rather than hardwoods, and produce no smoke. Bank branches that operate off of a smart phone network. And electrocardiograph (EKG) machines for $1000.That’s 10% the price of the standard models. All of these are listed in the WSJ article as products that are in the market today. All of them are changing the way people live, bringing new to the world performance/cost combinations. That’s breakthrough, radical, game changing innovation.

Now imagine all of the new application areas that are enabled because of these breakthroughs. The most apparent markets are obviously the impoverished, since those were the markets that these companies had in mind. But water purifiers that could be owned by individuals could allow lots of new markets.So could banking by phone. So could high efficiency stoves.Watch out,developed nations. Breakthroughs are happening everywhere.

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