“More value, lower price”—While the phrase may sound like a gimmicky slogan used by companies to lure you in their store, it’s actually the profound and substantial mantra of Vijay Govindarajan’s revolutionary concept, “reverse innovation.”
Dartmouth’s Vijay Govindarajan spoke about his concept of “reverse innovation” during the 2012 Dean’s Distinguished Scholar Lecture Series. (view more photos)
Govindarajan, widely known as VG, spoke at Mays Business School as a part of the 2012 Dean’s Distinguished Scholar Lecture Series. Dean Jerry Strawser states the purpose of the series is “to bring speakers here to change the way we think and look at business”—and VG is the world’s trailblazer of disruptive thinking.
Currently the Earl C. Daum 1924 Professor of International Business and the Founding Director of the Center for Global Leadership at the Tuck School of Business at Dartmouth College, VG has come a long way from his humble beginnings in a poor family and small village in India. He is the 2008 Professor-in-Residence and Chief Innovation Consultant for General Electric, and has worked with 25 percent of the Fortune 500 corporations including: Boeing, Coca-Cola, Colgate, Deere, FedEx, Hewlett-Packard, IBM, J.P. Morgan Chase, Johnson & Johnson, New York Times, Procter & Gamble, Sony and Wal-Mart as a strategy coach. In addition, the innovation maven has a portfolio of prestigious accolades, including a ranking of #3 on the Thinkers 50 list of the world’s most influential business thinkers.
VG has published several award-winning books on strategy and innovation, his most recent being the New York Times and Wall Street Journal best-selling book, Reverse Innovation. In his lecture, VG described the avant-garde concept of “reverse innovation” as “innovating in poor countries and selling in rich,” unpacking the idea with several thought-provoking examples.
“In America,” VG says, “an ECG machine costs about $25,000. How can rural India afford this?” He explained that GE recently set out to create a more efficient, $500 portable ECG machine that cost five cents a scan, “conquering rural India.” VG discussed other examples of innovating for the poor, including an Indian hospital that reduced the cost of open-heart surgery from $50,000 to $2,000, increasing the quality of the procedures by “mass-producing heart surgery” and allowing surgeons to specialize in specific operations. VG also used the example of Thailand’s Dr. J, who developed a more durable $30 (versus the U.S. average cost of $20,000) artificial leg made from recycled plastic yogurt containers. “Amputee technicians approached the job with passion, not as work,” VG says.
Vijay Govindarajan (left) and Mays Dean Jerry Strawser (view more photos)
VG’s examples all point back to his original idea — companies must develop products with “a lot more value, at a lot lower cost.” If companies were to adopt this idea, VG says, they would tap into new, much more populated markets of poor, yet fully capable and intelligent people. “Not even Apple can deny the billions of dollars in sales from creating a $10 iPod Nano and selling it to the millions in poorer countries.
VG took the concept of reverse innovation and applied it to housing. “A house should be a human right,” he says. He developed the idea of a “$300 house”—a house for the poor and homeless that cost $300, including labor and materials to build it. What started as a brief blog post for Harvard Business School, the idea of a $300 house has expanded into its own website and has picked up followers from around the world. Passionate people have submitted numerous plans for the house concept and multiple influential leaders and businesses endorse the idea.
According to VG, poor people have the same desires and needs as the rich, “So why can’t they have access to the same things?” The “American dominant logic” in poorer markets is no longer working, Govindarajan says, and reverse innovation is no longer optional for American companies. “It’s no longer, ‘What can America create for these countries?’ The new question is, ‘How can India help you?’”