Reverse & Frugal Innovation

1. Other than price sensitivity, what are the starkest differences between the needs of customers in developing countries and the needs of customers in developed countries? Why is it essential for companies in the developed world to understand these needs?
Typically, multinational companies of developed countries attempt to move their established products to the developing world. However, the customers’ needs of developed countries are different from the needs of developing countries’. The articles referring the frugal and reverse innovation indicate that customers of developed countries need high-end products. On the contrary, most customers of developing countries need middle-class and below products.
The articles mention that the high-end market has little room for marginal profits and potential market growth. As the result, multinational firms seek new opportunities in the emerging markets in order to look for the future growths and profits. If multinational corporations plan to export their existing successful products to the developing countries, they need to consider this fundamental difference as a key factor in order to meet the customers’ needs. Meanwhile, if companies recognize the customers’ difference, the companies can get ready for challenges of local constraints and problems before loss investment and time. Therefore, it is essential for companies to understand the difference in customer’s need between developing countries and developed ones.
2. Can you meet the needs of your customers in developing countries simply by customizing your existing offerings? When is clean-slate innovation needed? Please elaborate as appropriate from your readings and experience.
Under the traditional thinking, multinational companies trend to directly generate developed innovations or technologies in the emerging markets. Further more, the companies try to meet the needs of developing countries customers by customizing the existing offerings. However, simply customizing existing offerings has poor performances. According to these two articles, we can concluded that customizing companies’ existing offering cannot meet the needs of developing countries’ customers.
Harman is a good example. The company sensed that the lower price is the key needs in the developing countries, such as India and China. Thus, Harman made a decision that they adapted its premium products in the lower-priced market segments. That means harman simply customizing their existing products to meet the developing countries customers’ needs. The result was disappointed.
Company should consider these followings before starting a clean-slate innovation:
1) There are new demands form emerging markets.
2) The exiting companies’ products or technologies cannot meet the new requirements.
3) There are slightly opportunities that the companies can meet the customers’ need by modifying the exiting offerings.
4) The new innovation can meet the company targets, such as developing new markets, lower the production cost, expending the brand.
Harman failed to launch the modifying exciting products in emerging countries. However, the company successes in radical innovation project Saras. Saras was a project that disrupted the company transitional products. The company’s traditional was to provide customers with after-sale customization. But, Saras provides the module products without changing by customer’s requirements. Instead of after-sale customization, Saras provides cheaper but reliable quality products. As the result, Sara was very successful to sale in both emerging countries and western-countries.

3. What does the term reverse innovation mean? Is reverse innovation disruptive? Explain with appropriate examples.
The definition of reverse innovation is: The process of reverse innovation begins by focusing on needs and requirements for low-cost products in countries like India and China. Once products are developed for these markets, they are then sold elsewhere - even in the West - at low prices which creates new markets and uses for these innovations.1Reverse innovation- developing ideas in an emerging market and coaxing them to flow uphill to Western markets2.
The reverse innovation does disrupt existing process and products. A disruptive innovation is an innovation that helps create a new market and value network, and eventually disrupts an existing market and value network (over a few years or decades), displacing an earlier technology. 3
In Mr. Govindarajan’s article of A Reverse-Innovation Playbook. Harman targeted motorbikes market which was a burgeoning market. This market did not expect the infotainment system services before. Meanwhile, Harman did changes including relocation the research and development department, re-assigned staffs to new positions, set the new incentives, rebuilt the reporting structure. Harman’s infotainment system was very success in that market. After finishing the sales target ahead 2 years of the plan, the company started to transfer this successful products into western-market(existing market).
4. What are the ‘lessons learned” for successful reverse innovation, from the perspective of a multinational, as outlined in the Harman study that other companies can adopt?
The key lessons of Mr. Govindarajan study is that reverse innovation concept reminds developed countries people takes a step back to think about rising innovation powers form developing countries. Reverse innovation concept itself is an innovation thinking.
Western multinational companies keep the traditional way to modify the exiting products, process or technology to cover constraints or reduce the cost of failure. Mr. Govindarajan exhibits a real world sample to be the evidence that proves reverse innovation can be realistic and practice.
According the articles, we can learn some common difficulties when companies try to process the reverse innovation. The difficulties are including internal suspicion, customer concerns. After studying the articles, managers can anticipate these difficulties and prepare for them.
The Harman case study provides some outlines for other companies to adopt:
1) The actions should be take form below and above, both in execution level and C-level managers. Two-part approach can lead the project goes smoothly. Such as, choose team leaders without conflicting interests. The CEO fully supports the project actions and ensures the process.
2) Give the freedom to local project teams, including set the radical goals, practice clean-slate organization designs.
3) Maximizing global resources that means to combine the multinational assets. In order to maximized use the global resources. Including shifting the manpower, sharing the company’s technology.
5. When considering a local innovation, how best can you scale up from a local to global level? What are the factors and models to be considered?
In order to bring efficiency to the global level, the local innovation can scale up form a local to global level. From the economies of scale prospective, identify the innovation’s efficiency core is its high-throughput model. The model should be easy-to-use sachet delivery mechanisms. Secondly, Identify the components should be efficiently adapted to varied local settings. Thirdly, identify all factors of the adaptation is the key task for scale up from a local to global level.
Form the article of A Framework For Going Global With Local Innovation, we can find that there are three models can be adapted4.
1) The contiguous model: the solution can be expends outwards form the original hub.
2) The distant replication model: the solution can solve the specific geographic area with the original innovations.
3) The transfer and translation model: non-profit organizations transfer the knowledge and share the innovative ideas or the knowledge of operations. Profit organizations need to take the profit into consideration when process this model.