Strategic Management

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Framework

In the past, most innovation was happening in developed countries because their populations could afford the progress and technological advancements. Businesspeople usually believe that economies that are emerging are a few steps behind and don’t need to catch up as they can import what they need from those countries that are already developed. This worldview is no longer and accurate view. Countries that are emerging are basically not the same as those of developed countries. Based on variations in culture and context, the consumers from emerging countries need and want different things and have a different kind of purchasing power. For example, the American retail king in Walmart moved into various countries, South America being one of them. Walmart failed to look at the culture and see the threats that it would be up against and kept true to its mission statement and failed as South Americans do not buy in bulk, buying a lot for less has never been in there way of thinking, they buy a little bit at a time as most of them ride the bus, bikes or walk and could only carry home a limited amount of items. After Walmart seen that their initial way of going into this marketplace failed, they did what they needed to do and regrouped and changed their way of doing business and went to a smaller store model to fit the marketplace. I also saw this in Germany when I lived there; Germans always shop either day to day or a few days at a time. They have smaller refrigerators and can’t keep a bulk of food items stored in them. Walmart changed there as well to the smaller stores to ensure they would meet the needs of the consumer. Walmart has taken this smaller approach back to America opening up Walmart Express stores that are less than 40,000 square feet. (David F., pg 9) Approximately 85% of the world’s population lives in poor countries. These countries’ economies are growing faster than developed countries’ economies, sometimes twice as fast. In order for big businesses to hit the mark in two thirds of the world’s markets they will need to change how they think and look at reverse innovation as their solution to their growing business.

Major Points

Historically, innovation occurred mainly in developed countries. •As the world economy shifts, the nature of innovation changes. •“Reverse Innovation” is the process by which firms create new products for and in emerging countries that they then sell in developed markets. •Reverse innovation makes you see outside our current way of thinking. •Most outsiders who attempt to innovate for emerging countries fail to take into account for the local needs and realities. •To innovate in a developing country, you need to have a significant physical presence within that country. •You need to hire from within emerging countries and have staff there, including expats from developed countries.

Methodology and Epistemology

Reverse Innovation has five paths and five levels of thinking. The five paths navigate the “five need gaps” that separate the developed from the developing world. A business that is going to be successful recognizes and exploits these gaps. These gaps are: The Performance Gap, The infrastructure Gap, The Sustainability Gap, The Regulatory Gap, and The Preference Gap. The performance gap in established economies is where producers offer moderately different versions of their products. (Govindarajan, V. and Trimble C.) The infrastructure gap in developing economies tends to lack infrastructure, but when a new framework is created they are more likely to be state of the art. (Govindarajan, V. and Trimble C.) The sustainability gap in developing countries tend to face different environmental issues than developed countries, and this seems to drive innovation. (Govindarajan, V. and Trimble C.) The...
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