The Promise of Reverse Innovation
Forward Footprint

Nicholls Headshot_sketchThe expiration of the United Nations Millennium Development Goals this year brings to mind important questions. In 2000, the UN set 2015 as the deadline to eradicate global poverty, promote gender equality, achieve global primary education, reduce child mortality, improve maternal health, combat diseases, work towards environmental sustainability and create a global partnership for further improvement. In several areas, the progress weve seen since 2000 has been breathtaking. However, the under-5 child mortality rate remains at unacceptable levels in sub-Saharan Africa, Southern Asia and Oceania. Maternal health has improved, but mortality rates are still high in the above areas and the Caribbean. While womens rights and empowerment have progressed, it is not enough. Carbon dioxide emissions and deforestation continue rising, and by the UNs own count, progress in reducing the number of children out of school has slackened considerably.

All this is not to imply that the UN Millennium Development Goals have been unimportant or ineffective. Rather, examining the results of the MDGs should drive us to rethink the model for development. The UN Millennium Declaration committed all member nations to achieve eight targets but only contained two references to the private sector. Recent breakthrough innovations show that there is a massive opportunity for business to address the challenges of the 21st century maximizing profits while simultaneously improving the health and quality of life of millions, perhaps even billions, of people.

I recently had the opportunity to sit in on a class taught by Professor Vijay Govindarajan of Dartmouth College, who is also the author of the New York Times bestselling book “Reverse Innovation.” In our session, he spoke about three examples of innovation that started with the needs of the poorest and most marginalized people in mind. Govindarajan calls these people non-consumers and believes the challenge for business now is to figure out how to turn these non-consumers into consumers. This strategy leads to great business opportunities and can improve the lives of many while increasing profits.

In the early 2000s, General Electric was manufacturing and selling high-cost high-performance imaging and sensing technology to hospitals in India. This strategy, however, only allowed them to sell to facilities that targeted the top 10 percent of income earners in the country. Managers became aware of the opportunity to tap into the larger market, and a locally based research and development team got to work on a model that would be accessibly priced and portable enough for doctors to take it to remote locations.

By 2007, General Electric had developed the MAC 400, a portable electrocardiogram unit that costs around $800, as opposed to $10,000 and over for similar premium products. This innovation has allowed General Electric to tap into a new market, increase profits and experience skyrocketing sales growth. It also brought cardiac monitoring for the first time to populations that were desperately in need of it.

Some areas of Thailand are up to 70 percent covered with landmines. Thus, the incidence of lost limbs due to the devices is relatively high in the country. However, with a per capita income of less than $2,500 in 2000 and the cost of prosthetics upwards of $10,000, few injured residents had any hope of regaining mobility. Dr. Therdchai Jivacate, a local doctor, set out to develop an affordable artificial leg. To make a long story short, he sourced local material and personnel, hiring former amputees who used his product to serve as technicians to assist new users. Incredibly, his replacement limbs use recycled materials like plastic yogurt bottles and are sturdier than American prosthetics; Thai users place greater pressures on the prosthetics from farming, climbing, sitting cross-legged, etc. Dr. J, as he is known, was able to achieve this at 1 percent of the cost of prosthetics in the U.S. The result: by 2012, Dr. Js Prostheses Foundation of Thailand had provided over 25,000 people new legs.

The idea that governments and multilateral institutions should be primarily responsible for addressing the worlds development needs and that the private sector should be a secondary actor is outdated and counterproductive. Companies that aim to survive and thrive in the next century must create products that are marketable to low-income consumers in the most impoverished areas of the world. Private enterprises are well-suited to address the needs of those who are now non-consumers because, by the nature of their organization, they are results driven. Furthermore, profits allow them to sustain operations without worrying about fundraising, like nongovernmental organizations, or budget issues, as governments would.

The results of the reverse innovation that Govindarajan details have the potential to be far-reaching. More than that, Dr. Js prosthetics reduce plastic waste and provide amputees new lifekilling two birds with one stone, so to speak. Other innovators can draw on synergies to ameliorate more than one societal problem at once. Finally, the innovations that start in developing markets, like General Electrics portable electrocardiogram machine, have the potential for new uses in the developed world; General Electric’s machines are now used in ambulances to help speed up diagnoses.

If the UN’s new Sustainable Development Goals are to be successful, governments should encourage the private sectors participation. Many of the decisions that will determine how far we go in addressing the needs of non-consumers will rest on the shoulders of managers and CEOs we should not discount their roles. It is up to governments to create the right climate and incentives for innovation. But without companies taking on reverse innovation, we greatly limit the progress we can achieve.

Sebastian Nicholls is a rising senior in the School of Foreign Service. Forward Footprint
 appears every other Thursday.

Have a reaction to this article? Write a letter to the editor.

Leave a Reply

Your email address will not be published. Required fields are marked *


You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>