In March 2009, Logitech formed a special team with an urgent mission. The maker of computer peripherals, especially keyboards and mice, had been caught off-guard when consumers in China unexpectedly fell in love with a new mouse that was not Logitech’s. The company closely monitored its direct rivals, especially Microsoft, but this market insurgency was engineered by a Chinese company called Rapoo, at best a faint blip on Logitech’s radar screen.What? Reverse innovation?
You may think that this storyline, in which a healthy multinational finds itself under siege from a developing world upstart, is unlikely or unusual. If so, think again. Thanks to the rising phenomenon of reverse innovation, we can expect that the scene that played out at Logitech will repeat itself in industry after industry.
Reverse innovation definedBe careful of assumptions rick folks! You may find you have them exactly BACKWARDS. Haw haw.
A reverse innovation is any innovation that is adopted first in the developing world. To be clear: What makes an innovation a reverse innovation has nothing to do with where the innovators are, and it has nothing to do with where the companies are. It has only to do with where the customers are.
Historically, reverse innovation has been a rare phenomenon. In fact, the logic for innovations flowing downhill, from the rich world to the developing world, is natural and intuitive. After all, it is the richest customers in the richest countries that will always demand the newest technologies. In due time, the costs of new technologies come down, and incomes in the developing world rise. As a result, innovations trickle down. Right?
Be careful. The intuitive assumption that poor countries are engaged in a process of gradually catching up with the rich world has become toxic. It is a strategic blind spot that has the potential to sink an increasingly common aspiration: to generate high growth in the emerging economies. The assumption can even inflict long-term damage in home markets. That is because surprisingly often, reverse innovations defy gravity and flow uphill to the rich world. As a result, a defeat in a developing country half a world away can lead directly to a stinging blow in your own back yard.