Definition of reverse innovation

Historically, multinationals innovated in rich countries and sold those products in poor countries. Reverse innovation is doing just the opposite. It is about innovating in poor countries and bringing those products to rich countries. Thanks to the rapid development of populous countries like China and India and the slowing growth of wealthy nations, reverse innovation has become a strategic priority.

In the 1980s, GE Healthcare led the development of big, powerful, premium priced ultrasound scanners – designed for use in US hospitals. The company then looked for additional markets overseas. With a population of more than one billion, China offered huge potential.  By 1995, however, despite having had a presence in the country for over a decade, GE Healthcare remained a marginal player in China. Sales were a mere $5 million - negligible in GE terms -  and growth was slow.

All this changed during the first decade of the 21st century. In 2002, GE introduced its first portable ultrasound scanner and by 2008, the portable product was offered for a price of $15,000, which was 15% of the cost of the traditional ultrasound. Today, the portable machine is the growth engine of GE’s ultrasound business in China.  Rather than the bulky conventional machine, the new scanner looks like a laptop computer.  In China, some patients are not treated in hospitals, therefore the equipment has to be portable. The new scanner was also cheaper - recognising that the Chinese market required “value products”.

Even more important, portable ultrasounds have created new markets in the United States. They have been put into use in non-traditional applications, sometimes in entirely unexpected ways.  They are employed, for example, in U.S. hospital environments where space is limited and patients are immobile, such as emergency rooms and operating rooms.  Between 2002 and 2008, worldwide sales from portable ultrasound products skyrocketed from $4 million to around $278 million -  an average compound annual growth rate of 50 to 60 per cent. [1]

FT Articles & Analysis

No articles are associated with this term