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 / Winter 2012 / Issue 69(originally published by Booz & Company)


Best Business Books 2012: Innovation

And so reverse innovation begins: As companies work to bridge the five gaps in emerging markets, they create products that can ultimately disrupt developed markets, à la Clayton Christensen’s “innovator’s dilemma.” Witness how the One Laptop per Child initiative inspired the development of netbooks, and how GE Healthcare’s $500 MAC portable electrocardiogram developed in India for the Indian market enabled the company to create an affordable unit that U.S. physicians wanted for their offices.

Of course, working in a new culture can be daunting. Several years ago, the USC Stevens Center for Innovation sent student teams supported by the Deshpande Foundation to southern India with the goal of creating scalable solutions to social problems. But the moment the students landed, everything defied their expectations. The local residents were dealing with countless problems of agriculture, sanitation, education, and healthcare that were no longer considered relevant in the U.S., and they were doing so within a different cultural context.

Happily, however, the students were able to take advantage of a technological context that is far different from what it was decades ago. In emerging markets, aspiring innovators can now apply 21st-century technology to 20th-century problems, without being hampered by the legacy infrastructure of developed markets. This is how one student team was able to develop a text messaging system that immediately and inexpensively distributed public health information among healthcare workers across the region — and it’s also why I am likely to get better cell phone coverage in Sichuan or Sri Lanka than on Sand Hill Road in the middle of Silicon Valley. Thus, new market and technology contexts provide fertile soil for innovative leaps.

Govindarajan and Trimble acknowledge the difficulties of innovating in emerging economies and offer practical solutions for managing those difficulties, derived from their study of companies that have successfully achieved reverse innovation. For example, they suggest creating dedicated local growth teams (LGTs). An LGT, they write, is a “small, cross-functional entrepreneurial unit physically located in the emerging market.” Because an LGT’s job is experimentation, its results should be measured by the learning it produces rather than financial results. This can be a challenge for corporations accustomed to measuring the bottom line.

Given their legacy frameworks, multinational corporations may find it much more difficult to embrace and pursue reverse innovation than will small companies and startups. But the authors argue that whenever a large corporation’s experiment succeeds, its powerful networks will put the corporation in the best position to capitalize on it in developed markets.

Reverse Innovation is concisely written and clearly structured, but its concepts aren’t entirely new. Govindarajan and Trimble briefly mention some of the antecedents in an appendix, but not John Hagel III and John Seely Brown, who coined the term innovation blowback in 2005 to describe the likelihood of new innovations originating from the developing world. Despite this oversight, Reverse Innovation provides a compelling argument and a practical road map for companies that want to tap the context of developing countries as a valuable new resource for innovation.

In the Context of the Cloud

In contrast to The Wide Lens and Reverse Innovation, Thomas M. Koulopoulos’s latest book, Cloud Surfing: A New Way to Think about Risk, Innovation, Scale, and Success, is not really about innovation per se. Rather, it’s about a profound global shift affecting the context of innovation — the emergence of the digital cloud network. This is a fundamental change that we all must understand in order to innovate — and to survive technological change — in the coming years.

Koulopoulos, the CEO and founder of technology research and consulting firm Delphi Group, defines the cloud as “an evolving, intelligent, infinitely scalable, always available, real-time collection of technology, content, and human resources that can be accessed as and when needed.” It is best known for providing the computing infrastructure that enables fast-growing companies to scale almost instantly and without heavy up-front capital expenditures.

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