Reverse innovation

A General Overview

Max BioccaMarco Solfato

Objective of the presentation

Explain the overall framework of Reverse Innovation.

Provide a description of industrial dynamics.

Compare Multinational vs Local firms

The role of R&DConclusion.

HISTORYGLOBALIZATION 

GLOCALIZATION 

LOCAL INNOVATION

REVERSE INNOVATION

What is Reverse Innovation

1. Design a new product/service for emerging countries market facing a new price-performance paradigm

2. Export the product in the developed world

New Price-Performance Paradigm

1. Income gap between rich countries and developing ones. (key driver)

2. Different & new demand: youthful, open minded and adventurous.

3. Infrastructure gap.4. Sustainability gap.

Two key aspects of a new approach to innovation

1. Emerging markets will evolve in a different manner to developed countries

2. Solutions that address the specific requirements of developing countries can be adapted for the developed world.

Important of Reverse Innovation for MNEs

Presence in future markets-avoids emergence of new competitors.-understand the market and visibility (collaboration)

Implementation of a new corporation mentality (fast time to market)-acquisition of human capital-new innovation strategy

Governments provide funds

How to implement Reverse Innovation?

Decision-making localized in emerging market.

The local organization connected to global technology.

Experiment-and learn approach.Outsource and collaboration.

Institutional InnovationIs a new approach to re-think

company’s structure.redefining the NETWORK that bring

together independent entities.flexible reconfiguration capability

& long-term relationshipssophisticated approaches to

capability leverage in scalable business.

R&DMNEs are developing an open

innovation model outsourcing R&D in emerging economies.

Growing important of patents and joint venture because of increasing competition.(appropriability)

Decentralization & focus on local-market

people and resources based and managed in the local market.

Local Growth Teams (LGTs) must have the decision-making authority

LGT must have access to company resources

Successful local product must be taken global with pioneering approach

Problems for MNEslower-priced products could

weaken the brand and cannibalize existing sales.

lower-priced products drag down overall margins

R&D effort can be diverted to more profitable projects.

shorter-term payoffs distract from a sustainable strategy.

Industry AnalysisExplain the theory behind

Reverse Innovation through data.Sample NOT- reliableAnalysis of 4 aspect through

dummy-variable:- company- product & market- strategy- the entrepreneur

The company

is the activity related to previous activity yes(1) no (0)

multinational(1) or national (0) company

dimension of company smal(0) medium(1) or big(2)

new company (1) or old company(0)

in a city(1) or in a rural area (0)

was the technology previously owned by the company yes(1) no (0)

0 1 2 3 4 5 6 7

2

1

0

Reinvented product in :

use

dimension

price

technology

0 1 2 3 4 5 6 7 8

yes

no

created new market? yes(1) no (0)

satisfied existing demand?yes(1) no (0)

many consumers?yes(1) no (0)

0 1 2 3 4 5 6 7 8

yes

no

Product & Market

Competitive advantage :

economy of scale

integration

knowledge of consumer needs

price

R&D

0 1 2 3 4 5 6 7 8

yes

no

implementation process exploration(0) or ex-

ploitation (1)

serves foreing markets with same technology

yes(1) no (0)

0 1 2 3 4 5 6 7 8

yes

no

Strategy

The Entrepreneur

a user?

national enterpreneur? yes(1) no (0)

0 1 2 3 4 5 6 7 8

yesno

Local innovatorsDeeper understanding of local

consumers. Local resources (low).Local capabilities.Higher passion for addressing

local problemsHigher flexibilityLocal networks

ConclusionReverse innovation is an opportunity of

sustain growth for countries and companies.

Requires flexibility and the ability to meet the consumer needs.

Glocalization and Reverse innovation need to cooperate and the companies need to be on both sides of this strategy.

It is crucial initiative to create innovation for the developed world.

Q & A ?

Thank you for your attention