Tapping into developed economies for higher profit margins is an old game today. The world is changing, and the market is currently shifting away from old business practices. Entrepreneurs are no longer looking to find the most developed country for launching products. 

Rather, they are now shifting towards filling the gap often ignored, and I can tell you, the result is surprisingly positive. 

Meeting the basic needs of people in the developing world and improving the same services in developed countries is promising. What one person considers a need is considered a luxury by another. And reverse innovation aims to close the gap between these desires and needs.

What Does Reverse Innovation Mean?

The reverse innovation concept is given by Vijay Govindarajan, the founding director of Tuck’s Centre for Global Leadership. As per the definition of reverse innovation, it refers to innovations that start in underdeveloped countries and then spread to developed countries.

Reverse innovation, of course, is an opportunity to learn and improve on what you already know. It has the advantage of reducing the expenses of competing and serves the forgotten markets.

However, you should not confuse reverse innovation with sustainable innovations. Reverse innovation is a method of “de-featuring” products to their basics. This helps make them cheaper for the people in developing nations and home markets.

Many corporate giants have succeeded in manufacturing products in developing economies and selling them in developed markets. Coca-Cola, GE, Harmon, Microsoft, Nestlé, PepsiCo, Procter & Gamble, Renault, and Levi Strauss are a few examples.

Main Reason For The Rise Of Reverse Innovation

The rise of reverse innovation has contributed a lot to the current state of entrepreneurship. It has helped increase the success rates of entrepreneurs and companies. But what led to the rise of this revolution in the first place? 

The revenue gap between the developed and emerging markets drives reserve innovation into existence. 

• Earlier, companies used to design and manufacture products in the developed markets. Next, they would de-feature and export them to the developing countries. 

• This process gradually changed into designing and scaling-down in the developed world. But, the manufacturing and producing took place in the developing countries. It was further replaced by everything happening in the latter location.

• However, what reversed the exports or inspired companies to start fresh in the emerging markets and export from there was the realisation of the unnecessary.

The customers in developed countries today want products that are not just affordable but simpler and authentic. The unnecessary hype in the features that skyrocket the prices stands unravelled in front of the people today. 

With digitalisation in picture, the competition is fierce, no doubt. However, what disrupts the picture further is the rise of the solution to this, reverse innovation.

India’s low-cost vehicles and cellphones are designed specifically for the Indian market. But consider adding a few advanced features to such products while maintaining their simplicity and authenticity and exporting them to the United States.

No brakes on the profits and customer satisfaction. A business model that is appealing and highly functional. Who would have imagined that?

Benefits Of Reverse Innovation To A Developing Country

Today, reverse innovation is changing industry standards, market demands, and global growth. Ignoring it could cost multinational corporations a lot of money.

The following are the three key advantages of reverse innovation for a developing country:

1. It enables the developing country’s native customers to receive better items in terms of price and quality.
2. Companies are investing more money in long-term technical infrastructure that allows for better engineering.
3. It leads to increased employment rates and living standards in the developing world. 

Nestle Maggi, India’s favourite midnight snack, is one of the best examples of reverse innovation in India. Maggi, which was originally created for rural India and Pakistan, has grown into a global craze. As a healthful and cost-effective alternative, it has now found a market in Australia and New Zealand.

PepsiCo, which developed Aliva with the help of local people and global resources, is another example of reverse innovation. Aliva is a salty cracker created by Indians for Indian customers, yet it has the potential to appeal to a global audience.

Similarly, Harman created a completely new automobile infotainment system for emerging markets in China and India. And provided functionality comparable to the other expensive products at half the price and one-third the cost. It has now generated more than $5 billion globally.

Reverse Innovation In Entrepreneurship

The market changes every day, bringing in new trends and inventions.  And who is more suited to come up with ideas than entrepreneurs? 

Entrepreneurs need reverse innovation because it allows them to be more creative, uncover new opportunities, and gain a competitive edge. It also motivates you to think about your products and services from the perspective of your customers.

In addition, reverse innovation is cost-effective. It has the potential to be a great help to small firms and startups, as well as a catalyst for disruptive innovation. Therefore, entrepreneurs must use reverse innovation strategies to stay on the top of the competition.

To Sum It Up

Reverse innovation means trying to create equal opportunities in the world. Entrepreneurs who want to stay competitive in the market need to think beyond the box. But this innovation does not have to be restricted inside the corporate walls. It needs to be implemented where it is needed. 

I believe to use reverse innovation effectively, you must have a solid awareness of cultural differences and market value. It’s just as crucial to meet local requirements as it is to keep up with foreign markets. 

So, make use of reverse innovation in marketing. Be aware of the pros and cons of reverse innovation to steer in the right direction.

Remember, needs will always be there in the developing and the developed world. Desire is a luxury. 

When you start separating the two for customers and tell them that there are affordable and effective alternatives, there’s no way you wouldn’t be in the history of most successful entrepreneurs one day.