In the previous decades, most large corporations have practiced glocalization: developing products in rich countries, then distributing them around the world, adapting the products slightly for different local markets.
According to Tuck School of Business at Dartmouth professor Vijay Govindarajan, these days of glocalization may be drawing to a close. He wrote in the recent Harvard Business Review article, “How GE is Disrupting Itself“:
Glocalization worked fine in an era when rich countries accounted for the vast majority of the market, and other countries didn’t offer much opportunity. But those days are over — thanks to the rapid development of populous countries like China and India and the slowing growth of wealthy nations.
Govindarajan spent two years on leave from Tuck to become General Electric’s Professor in Residence and Chief Innovation Consultant, and observed GE practicing “reverse innovation,” which Govindarajan believes is on its way to becoming a dominant business strategy.
As he explains in the article, GE introduced innovative health care products for rural China and rural India, a portable ultrasound machine and a handheld electrocardiogram device. Now the devices are being sold in the United States, which is finding new uses for them.
He says that mastering reverse innovation will be key to the continued success of giant corporations like GE in the next decade:
GE badly needs innovations like the low-cost ECG and ultrasound machines, not only to expand beyond high-end segments in places like China and India but also to preempt local companies in those countries — the emerging giants — from creating similar products and then using them to disrupt GE in rich countries.
Govindarajan’s HBR article, co-written with Jeffrey R. Immelt and Chris Trimble, looks closely at GE’s case and makes the argument for the importance of reverse innovation in great detail. The article is long, but well worth the read.
Image courtesy of Flickr user Max-B, CC 2.0.
