Saturday, September 2, 2017

Book Review: 'Reverse Innovation' by Vijay Govindarajan

"Therefore those who were scattered went everywhere preaching the word." -- Acts 8:4 (NKJV)

The modern corporation began with a structure that followed the traditional organizational principles of military organizations: rank matters; processes are rigid; control is central; the boss is always right (even when she or he is wrong). In the last sixty years, there have been mighty efforts to soften and adjust that structure so that local knowledge and autonomy can have full sway. Despite well-meaning efforts to create global structures that work, greater decentralization and looseness of authority, and an interest in creating more disruptive innovation, the process of developing and expanding technology, marketing approaches, and sales efforts continues to begin from the home market and extend slowly out to poorer and smaller countries . . . not dissimilar to the ways that kingdoms used to use the colonies to "impose" the home country culture and extract low-cost labor and raw materials. In a way, it's just human nature. That's not to defend it, but to simply understand the phenomenon.

Reverse Innovation looks at a handful of cases (mostly involving American multinationals) that show the potential benefits of starting market, business model, offering, and technology development from the largest underdeveloped countries. In doing so, the case for such innovation proceeds well beyond The Fortune at the Bottom of the Pyramid argument to also identify that:

1. Such innovations develop improvements that can be extended to large numbers of customers.
2. The innovations eventually can become sources of major growth in advanced countries by opening new ways to use offerings.
3. The multinational has substantial advantages in doing this in terms of being able to draw on worldwide talent to solve difficult problems and the infrastructure in place to expand useful innovations from poorer countries and poorer people into new markets and new applications.
4. In an open source world, this can be a good way to break down the preference for "not invented here" being rejected in capable companies.

I found the case histories to be more revealing than the more general text. The cases were well chosen and well documented. I felt I learned more about underdeveloped country issues for poor people than I knew before. That was a blessing.

I was surprised to see how many companies had been taking a technology first approach to producing lots of bells and whistles rather than beginning with studying potential user needs. Those parts of the book suggest a lot of managers fell asleep during their marketing 101 classes.

The most intriguing part of the book for me came in the subtle observations about how to accomplish such changes organizationally. I wondered if there might not be alternative ways to do this that would work even better, such as having venture funding for partially owned entities staffed with long-time company employees with an entrepreneurial flair and bent.

The book contains many helpful lists and questions that make it much easier to apply what is described.

You may find Part 1 to be a little repetitive and oversimplified. You'll be relieved when you get to Part 2 where the writing is more varied and interesting, filled with more interesting details. Don't miss the appendices. They provide good guides to implementation and future research. Nicely done!

If you don't work for a multinational, you may be a little puzzled by how to use the book. The key lesson here is that you should learn from successful models in underdeveloped countries to deal with issues affected poorer people in the more developed countries. Chapter Twelve provides a modest example that will probably intrigue you.

The book could have been improved by also looking at what multinationals based in other countries have been doing in this regard. Some of them were originally based in what were then underdeveloped countries. Much of the text reminded me of descriptions of Korean and Taiwanese companies moving beyond Asia in the 1950s and 1960s.

Good work!

Editor's note: This review has been published with the permission of Donald Mitchell. Like what you read? Subscribe to the SFRB's free daily email notice so you can be up-to-date on our latest articles. Scroll up this page to the sign-up field on your right.