In Part 1 of GE's series on “reverse innovation,” Dartmouth professor Vijay Govindarajan explained how GE is literally reversing its traditional business model — which is the subject of the just-published Harvard Business Review article he co-authored, “How GE is Disrupting Itself.” Rather than sell modified versions of its Western products to emerging markets — as it has for decades — GE is now developing local technologies in these regions and then distributing them globally. In Part 2 of his podcast, released on September 23, VG — as he is widely known — explains why companies pursuing reverse innovation need a different organizational structure if they are going to successfully shift power to where the growth is and build new products from the ground up.
Going local: VG says that reverse innovation, in which products are developed in and for emerging markets and then marketed globally, “isn’t optional; it’s oxygen.”
Vijay Govindarajan is GE’s chief innovation consultant and Professor of International Business and director of the Center for Global Leadership at the Tuck School of Business at Dartmouth.
Co-authored by GE chairman and CEO Jeff Immelt; VG; and Chris Trimble, who is also on the faculty of Tuck and a consultant with GE, the article describes reverse innovation as necessary, but extremely difficult. As VG says in the audio link below, power and profit and loss responsibility have traditionally been concentrated in global business units that are headquartered in the developed world. Although this model has enormous advantages, “it makes reverse innovation impossible.”
The solution to solving the reverse innovation problem, the authors say, is to establish and empower what GE calls local growth teams that “have P&L responsibility; the power to decide which products to develop for their markets and how to make, sell, and service them; and the right to draw from the company’s global resources,” they write. The key is for these teams to take an “experiment and learn approach” in which they “spend a little and learn a lot.”
In Part 3 of GE's reverse innovation series, Omar Ishrak, CEO of GE Healthcare Systems, will describe his experience developing GE’s successful local growth team in China that led to GE’s latest ultrasound products.
* Read “GE CEO: ‘Reverse Innovation’ Model Required For Success” from Dow Jones
* Read “Reverse innovation: How GE is disrupting itself” on GE Reports
* Read “GE’s Immelt Says ‘Reverse Innovation’ Needed for Global Growth” from Bloomberg
* Learn more about VG’s work at vg-tuck.com
* Read GE Reports’ recent story with VG, “Winning micro customers in mega markets”
* Read a follow-up story with VG, “Localized breakthroughs go global”
Anyone interested in globalization and innovation — from business executives, to students, to general audiences — can sign up for VG’s newsletter, Vijay Govindarajan’s Innovation Quarterly, and read his blog at: vijaygovindarajan.com
