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Microsoft, GE look to emerging markets for reverse innovation and profits

September 29th, 2009 | 4 Comments | Posted in Business, General, Politics, Technology, Travel

GE's healthcare reverse innovations

When GE chief executive Jeffrey Immelt wrote in this month’s Harvard Business Review that GE’s “Success in developing countries is a prerequisite for continued vitality in developed ones” and as a result the company was full on adopting the reverse innovation model, he sent shockwaves through the US-based business world. Looking at the numbers though, who could argue. The HBR article explains that “GE’s revenues outside the United States soared from $4.8 billion, or 19% of total revenues, in 1980, to $97 billion, or more than half of the total, in 2008.” all while the global economic crisis surged on.

… (business leaders) are shifting their energies from managing the present—surviving the financial and economic meltdowns—to creating the future. But we worry that too few U.S. business leaders have recognized that the future is far from home. Indeed, many of the innovations that propel global economic growth over the next few decades will originate in the developing world. – BusinessWeek

While the idea of reverse innovation – or trickle up innovation as the business practice is sometimes called – is nothing new, the business climate is ripe for it’s large scale adoption. With the global economy in peril, and waning consumer confidence particularly in the west, multinationals are increasingly seeking alternatives to old revenue and product development models. Reverse innovation – creating entry-level products for developing nations and then repackaging them for sale in richer nations – solves many problems for multinationals including reducing product development costs and increasing revenue by diversifying globally. But to truly see the gains of a reverse innovation business practice companies must make an honest effort to observe what makes it profitable; most importantly, understanding how emerging markets like China, India, Brazil and Africa, have become politically stable, more self reliant, and how innovation is now driven locally.

In a Businessweek article, C.K. Prahalad, author of the newly reissued The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits gave 5 tips for trickle up business innovation:

  • Affordable Products – Emerging nations can’t afford goods priced for the U.S. and Western Europe, which pushes companies to find inexpensive materials or manufacturing options.
  • ‘Leapfrog’ Technologies – Developing countries lack 20th century infrastructure and so have fast-forwarded to newer technologies such as mobile phones or solar energy.
  • Service ‘Ecosystems’ – Entrepreneurs in poor nations often must rely on others for help, creating new partnerships like video-game cafés where gamers test offerings such as online identity verification.
  • Robust Systems – Emerging markets require products that work in rugged conditions. A gadget sturdy enough to survive monsoons can handle spilled coffee in Boston or San Diego.
  • New Applications – Customers in poor countries have few product choices, providing market openings for add-ons that update and extend the lives of existing merchandise.

More on Reverse Innovation / Trickle Up Innovation

Interview: GE’s Vijay Govindarajan, chief innovation consultant, Discusses `Reverse Innovation’ (Bloomberg audio)
Vijay Govindarajan talks with Bloomberg’s Tom Keene and Ken Prewitt about technological “reverse innovation,” or developing products in emerging countries such as China and India for sale there.

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Interview: Microsoft’s Trickle-Up Strategy – (Businessweek audio)
Microsoft is looking to developing-world audiences for inspiration on new products for the U.S. Now it is also increasingly hunting for R&D talent among students in emerging markets. The company’s Amit Mital explains.

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Feature: Innovation Trickles in a New Direction – (Businessweek video)

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The long-lasting impact of 2010 World Cup on S. Africa

September 23rd, 2009 | 1 Comment | Posted in Business, Events, Games, General, Politics, Travel
2010 FIFA World Cup
Image by coda via Flickr

This guest post by John Kim

The Olympics and FIFA World Cup are often hailed as huge boons for their host countries or cities. At least that is how they are described prior to the event. Local organizing committees, civic and business leaders, and celebrities alike sell the economic, social, and cultural benefits of hosting international games.

But history has shown that the bold projections and promises are not generally met. A few noted successes have been the Barcelona Summer Olympics in 1992 and the 2000 Sydney Summer Olympics. Barcelona is hailed as a good example of using the Olympics as an opportunity for making long-term investments in the city’s infrastructure. Sydney’s event is noted as contributing to the successful branding of the city and country resulting in increased tourism.

But there have been many that have not lived up to their promise such as the 1976 Montreal Olympics. Vast structures were built only to never be used again and leaving the city and taxpayers deep in debt.

What will be South Africa’s legacy? No doubt the event will bring a huge boost to the GDP from tourism and the sale of merchandise. Efforts are being made to increase the footballing infrastructure in support of the next generation of South African footballers. Intra-city transport systems will see vast improvements. And large new stadiums are being built all around the country, which have contributed to the direct employment of many South Africans. But what will happen when the games are gone and preparations are being made for Brazil in 2014? What will happen to these gleaming and impressive new stadiums; the 94,000 person capacity Soccer City in Soweto. How will the local communities benefit in the long-term from these efforts and expenses?

The 2010 World Cup in South Africa, more than any before, comes with a huge responsibility to all involved; it needs to be a success. And it needs to be a launching pad. I argue that more than ever before multi-national corporations, long-time sponsors of the events, need to embrace this opportunity and make an even greater contribution to the country, beyond the usual sponsorship efforts. Corporations can help make a lasting impact, for themselves (increased brand awareness and market penetration), and more importantly, for the country and its people.
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John Kim has his master’s in public policy from Georgetown University and has worked in Morocco, South Africa, and Malawi. He blogs about the World Cup and corporate social responsibility (CSR) at www.WorldCupCSR.wordpress.com and you can follow him on Twitter @WorldCupCSR.

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