Renowned Business Expert Speaks on Reverse Innovation
SEOUL, August 26, 2013 – Asia Society Korea Center’s first event as part of Big Thinkers/small dinners took place with special guest Dr. Vijay Govindarajan. Dr. Govindarajan is the author of the New York Times and Wall Street Journal bestselling book, “Reverse Innovation.” He is widely regarded as one of the world’s leading experts on strategy and innovation and is currently the Earl C. Daum 1924 Professor of International Business at the Tuck School of Business at Dartmouth College. Along with General Electric’s CEO Jeff Immelt, he pioneered the concept of reverse innovation, which indicates “any innovation that is adopted first in the developing world.”
At this dinner lecture, Dr. Govindarajan shared in detail about the concept of reverse innovation. Traditionally, companies innovated in “rich countries” such as the United States and sold those products in “poor countries” such as India. “Reverse innovation is doing exactly the opposite,” Dr. Govindarajan explained. “It’s about innovating in a poor country like India and selling those products in a rich country like the U.S.”
Noting how counterintuitive this seemed, he went on to share successful cases of reverse innovation. Despite out-spending all other countries in the world, the American healthcare system is characterized by out-of-control costs, not necessarily the best quality, and no universal access. While it may seem logical that rich countries are better equipped to make healthcare innovations, Dr. Govindarajan illustrated how innovative experiments based on ultra low-cost, world-class quality, and universal access were taking place in developing countries.
For instance, while Dr. Govindarajan worked as the Chief Innovation Consultant at General Electric, he helped develop a $500 electrocardiography (ECG) machine in India that eventually became a new innovation in the U.S. GE Healthcare’s original ECG machine cost $20,000 and weighed 500 pounds, effectively making it inaccessible for Indians living in rural areas. In the process of developing the $500 ECG machine, GE Healthcare had to work with constraints including the lack of electricity, hospitals, and trained doctors in rural India. In addition, people in rural India made only about $2 a day, so the ECG machine’s service had to be very affordable.
GE Healthcare created the $500 ECG machine that met all of the challenges by making it lightweight (it weighs as much as a can of soda), battery-operated, and extremely low-cost at only 10 cents per scan. On one battery charge, the machine could make 750 scans and was very easy to use. “My rule of thumb is, if you want to convert non consumers into consumers in urban India, you'd better come up with a 10% solution,” Dr. Govindarajan said. “If you want to convert non consumers into consumers in rural India, you'd better come up with a 1% solution.”
This innovation is now in use throughout 220 countries including the U.S. in a prime example of reverse innovation. The $500 ECG machine was adapted for use in American ambulances, where its portability turned out to be a great benefit. “Historically, we always thought that innovation starts in rich countries because they have rich consumers who can afford to pay for the innovation,” Dr. Govindarajan said. “Then, it trickles down to the rest of the world. Whereas, this $500 ECG machine tells you that innovation can defy gravity and move from a poor country to a rich country.”
Dr. Govindarajan answered numerous questions from the attendees regarding reverse innovation. A representative of the UN World Food Programme asked Dr. Govindarajan about his advice to fight global huger, noting that the WFP recently created an innovation division with an R&D team and considered innovation very important to solving the issue. Dr. Govindarajan stated that the most complex problems in the world could not be solved by charity. "Charity is not scalable - there is not enough money in the world to donate ourselves out of poverty," he said. "The only way we can solve the most complex problems we have is through innovation."
"If you want to solve the problem of hunger, it has to be the challenge of business," Dr. Govindarajan said, because business knows how to innovate, scale, and execute. "Business will come in and play only if they're making money." He added that, "In my opinion, making money is an honorable thing. There is nothing wrong in business making a reasonable return on investment on solving social problems. My point is, business should help everybody share in their value creation."
About Big Thinkers/small dinners
Asia Society's Big Thinkers/small dinners series was created to foster communication on topics relating to Asia and the United States. Each dinner features a special guest around whom interesting conversation and thought can flow. The special guest can come from a variety of fields: politics, business, arts or popular culture. These very special evenings are designed to generate new ideas and to provide broader appreciation and understanding of opportunities in Asia.