– We are delighted to announce the winner of the 57th annual McKinsey Award for the best Harvard Business Review article of the year: “Engineering Reverse Innovation,” by business school professor Vijay Govindarajan and engineering professor Amos G. Winter. While the concept of reverse innovation is not new (Govindarajan’s 2012 book on the topic was a New York Times bestseller), companies still struggle to create successful products for emerging economies that can be rolled out globally. To help bridge the gap between aspiration and execution, the article lays out five principles that can be used by product development teams to facilitate the process.
We sat down with the authors to learn more:
Congratulations on winning the McKinsey Award, Vijay and Amos. Why is reverse innovation important to you?
Vijay: It's very humbling to win this Award as it highlights the importance of the topic, that's what I'm most happy about. I was born and brought up in India. What I saw in India was lots of problems but very few resources. The only way to solve our problems was through innovation. We couldn’t throw money at the problems since we didn’t have the resources. So, when I came to Harvard Business School to study, I really committed myself to understanding all aspects of “innovation,” innovation for America, by American companies.
When Jeff Immelt invited me to join GE as chief innovation consultant, he sent me to India and China to see how GE could grow in those two markets by converting “non-consumers” into consumers, we had to innovate more. For example, GE makes a $20,000 EKG (electrocardiogram) machine in the US. Ninety percent of Indian hospitals can’t afford it. That doesn’t mean non-consumers don’t suffer from heart attacks. Non-consumers in the world have exactly the same heart problems as consumers. Innovation can convert the former to the latter, which is what GE did: GE created a $500 EKG machine, which opened up the whole Indian market. That high-quality, low-cost machine has now been adopted in 90 countries, including rich ones. And that’s when I coined the term “reverse innovation.”
Innovation doesn’t always have to start from a rich country and go to a poor country. It can also come in reverse—innovation can first be adopted in a poor country and then it can defy gravity and flow upwards. Jeff and I wrote an article about it in 2009. Since then, I’ve devoted a lot of my time and energy to that topic—which is how Amos found me.
Amos: At MIT, my research group focuses on creating technologies for developing markets, and so we are doing reverse innovation all the time. We are motivated by the great humanitarian challenges as well as economic potential. We design to capture those opportunities, but we’re always looking at wealthy markets as well, and asking ourselves, “OK, if we can make a high-performance and low-cost solution, what would that look like in wealthy markets as well as poor markets, and can we design for both concurrently?”
The Leveraged Freedom Chair project was motivated initially by the needs of users in the developing world, where the majority of people who need wheelchairs live in rural areas. There were no good products for users who need to travel long distances over rough ground while also having the maneuverability indoors of a small wheelchair.
As Leveraged Freedom Chair started to get exposure, users in the US, Europe, and Canada started contacting us. It turned out they wanted one too. We realized that actually there were two distinct market opportunities for this technology. So we designed a version for more wealthy markets. We now serve these two groups of users, increasing their well-being while also trying to turn a profit.
How did you come to collaborate?
Amos: A few years ago, I read Vijay’s book Reverse Innovation. As a mechanical engineer who designs stuff for developing markets, I was blown away. But Vijay's book gives a strategy perspective. If you are the engineer tasked with designing a product for this new market, the book doesn’t give you a process for how to do reverse innovation. So, I approached Vijay and we immediately found that we were kindred spirits. As we talked, we both really liked the idea of trying to describe the steps to actually do reverse innovation if you are an engineer, and in describing the overlapping standpoint of strategy in engineering.
Vijay: How can a general manager have a meaningful conversation with an engineering team about the engineering principles behind reverse innovation? How do you organize the product development process to do it? We didn’t articulate these issues in the original article (with Jeff Immelt.) It’s a marvelous journey for me to work with Amos because every innovation is a marriage between technology and strategy. Amos is a professor of engineering and I’m a professor of business. Our coming together is an example of cross-disciplinary, cross-functional, university-wide collaboration which is going to be the hallmark of academia.
Why do businesses struggle with reverse innovation?
Amos: A few reasons: the first is that since World War II, product development has been focused on wealthy markets. As an American, designing a product for US customers, I have an inherent understanding of their needs because they are very similar to my own. But when I start trying to design for, say, a 50-year-old mother of five in Tanzania who's using a wood-fired stove every day, I have no inherent understanding of that person's context. It can be very difficult to design for that person, particularly if you are not interacting with him or her directly.
The second reason is that companies that try to adapt existing products to developing economies often mistake value for cheapness. They think removing features and cutting prices will make their products appealing. But they start by stripping the value of the product, and users won’t want to buy it because it’s not good anymore. This approach hasn’t worked. So let’s instead start with these poor users and leverage the constraints they have to create very high-value technologies.
A question I get all the time is, “Why not just design cheaper, better products for rich countries?” The answer is, because we don’t have to, because people are already buying our more expensive stuff in wealthier countries. In poor countries, it’s not optional to make a product that is higher performance and lower cost. It’s a must-have if you want to succeed. You may have to make the product more robust, you may have to make it strong enough to survive a bumpy road along the delivery chain.
Vijay: Exactly. You see, I am so passionate about reverse innovation because it is one way by which we can address income inequality, the most important problem humanity faces today. Capitalists should use their capabilities and resources to innovate for the poor, thereby giving the poor income mobility. GE makes money off its highly affordable EKG machine, but at the same time GE is extending the productive life of a human being. When Amos innovated a low-cost wheelchair, he was also addressing income inequality. He’s giving someone in rural Africa mobility and the opportunity to earn more. Reverse innovation is about doing good while making money. If a corporation leverages its competencies to deliver shareholder return and at the same time addresses inequality, I think that has to be the highest form of human achievement. That is the potential of reverse innovation.
What are you both working on now?
Vijay: I’ve just finished a new book called The Three Box Solution. It’s the framework I’ve been using for the last 35 years. I put everything a company does into three boxes:
- Box 1 is about managing the present.
- Box 2 is all about selectively forgetting the past.
- Box 3 is about creating the future.
Working with organizations, I find that they focus primarily on Box 1 which is all about operational excellence. While that’s important, Boxes 2 and 3 are equally important: they’re about growth and innovation. The challenge of leadership is how you create your future, while managing the present. Reverse innovation is an example of a Box 3 strategy.
Amos: I'm working on a big problem in the developing world: agriculture. Globally, it’s the biggest employer, the biggest user of water—which is a really constrained resource in many poor countries—and one of the biggest users of electricity. My group is making solar-powered desalination systems that can function off the grid and desalinate brackish groundwater, because in India so much of the land has salty water in the ground. We’re working to make electrical grids hardier and the desalination process more energy efficient. We’re also working on low-cost, solar-powered drip irrigation systems that can enable farmers to grow more and higher value crops to rise out of poverty while minimizing water waste.
Read about last year's McKinsey Award winner.