We may finally solve our productivity issues by looking to emerging markets for ideas. [The government and any number of think tanks keep telling me I need to get my productivity up. Pretty much the pot calling the kettle black, but whatever, right?]
I read a marvellous article about this recently, that describes a phenomenon called Reverse Innovation. Here's the definition:
A reverse innovation is any innovation that is adopted first in the developing world.
The innovators could be anywhere, it's where the customers are that is crucial to the distinction.
Author Chris Trimble, a professor at Dartmouth College's Tuck School of Business, provides some interesting examples that challenge the common assumption that the Third World will "gradually catch up" by adopting products. Kind of a trickle-down approach to development.
The implicit assumption is that their problems and aspirations are the same. Except they aren't.
Logitech mouse example
Prof. Trimble relates the example of Logitech finding itself being outpaced in China by Rapoo. Logitech had a product line that offered increasingly powerful wireless chips only in their high-priced models, because that matches the North American market structure.
But Chinese consumers are often using a mouse to control a monitor that is being used like a television (or actually hooking the computer up to the tv monitor). Cable is too pricey, so internet video is used for entertainment. A mouse used in this way needs to have a much longer range, only available with the better chip. The other high-end features are not needed for this purpose.
Rapoo, with their better understanding of the customers' needs, provided a stripped down mouse with great range at a low price point.
Change your thinking in five ways
Prof. Trimble suggests five key differences in LDC markets that you need to get your head around if you want to innovate your way to success:
1. The performance gap. Emerging markets do not need your low-end product stripped down and reduced in price. They need a radically redesigned product that delivers good-enough functionality at a radically lower price, matching the disparity in incomes.
2. The infrastructure gap. You can't assume the presence of the same kinds of infrastructure that we enjoy in the First World, whether it's land lines, power, roads, or anything else. Everything from battery life to how to recharge to durability has to be considered from a fresh perspective.
3. The sustainability gap. Environmental concerns will play out differently in these markets.
4. The regulatory gap. Like infrastructure, the systems of regulatory approvals and consumer safety laws are still forming. This can work in your favor or against you.
5. The preferences gap. History, culture, ritual and access to different raw materials has generated different preferences in everything from food to decor to social rituals.
Clean slate product design is the prescription Prof. Trimble offers, and he describes the approach John Deere took to making a tractor for India as an example.He also suggests that teams working in this way cannot also work on First World innovation efforts, because the mindset is so different.
Emerging markets offer tremendous potential for growth, but it isn't a simple export opportunity. Immersion in the customer experience is essential for success, and the kind of innovation needed is more radical than the sustaining innovations that often work in the home market.
Scary yes. But also exciting! Perhaps even fun.
Reverse innovation and the emerging market growth imperative, by Chris Trimble. Ivey Business Journal, March-April 2012