Reverse Innovation

General Electric developed several medical devices in emerging markets that were a little simpler and a lot less expensive. In China, they developed a compact portable ultrasound machine from scratch. It cost just $15,000 compared with over $100,000 for their high-end model. Although it didn't have all the bells and whistles, it was a hit in China's rural clinics. That's when G.E. realized that American doctors could use it too. Not to compete with the more expensive product, but for new uses. In situations where portability was important or space was tight. This is what Vijay Govindarajan and Chris Trimble call reverse innovation. Not only does it result in products that address market needs in emerging economies, it also creates new sales opportunities in developed ones. Reverse innovation can be tough to pull off but there are two reasons to try. First, because emerging markets have larger populations and lower per capita GDP's, they're especially sensitive to many of the forces affecting competition in global markets today. Products built for emerging markets are more likely to be well suited to issues that ultimately affect every market. Second, as emerging market companies grow, they'll be looking to export their own products often at much lower prices, which incumbent firms will find tough to beat. Practicing reverse innovation today will help protect incumbent firms from being disrupted by low cost competitors tomorrow.