Last week, I heard Professor Vijay Govindarajan speak about reverse innovation at the Front End of Innovation conference. It was an eye-opening experience to those of us schooled in Western thought.

As Govindarajan described, reverse innovation represents a radical shift in thinking because it starts with fundamentally different ground rules.

Instead of developing high-end products at home and adapting them for markets like China and India, companies practicing reverse innovation develop products, services, and business models with the constraints of emerging markets in mind.

Ford, Tata, and the magic price

Ford’s failed attempts at cracking the Indian auto market highlights the shortcomings of traditional Western innovation. Here's a little history for those of you who don't aleady know the story.

Starting with a brief to introduce an ‘extremely low cost’ vehicle for India, Ford decided to get the job done by stripping expensive options from an existing sedan. By doing this, the company managed to create a vehicle that would sell for under $20,000.

At that price tag, Ford knew it would never convert the 98% of Indians who were currently driving two wheelers – scooters and motorcycles. However, it might appeal to successful Indians - Rolls Royce and Mercedes drivers.

A serious miscalculation, as it turned out. No wealthy, status-conscious industrialist or Bollywood star would ever trade their European luxury vehicle for a Ford.

Meanwhile, Indian car manufacturer Tata attacked the ‘extremely low cost’ vehicle brief from the reverse angle. Tata chiefs reasoned the 98% of ‘two wheeler’ Indians who paid about $1500 for their scooter could be seduced into trading up to a four wheeler at, say $2000. Thus the price bar was set.

In the end, Tata didn’t manage to build a $2000 vehicle - they launched at $2500. A failed attempt to hit the company’s brief, perhaps. But a masterpiece of innovation that left Ford in the dust. The Tata was a huge success in India, and is now being exported – and emulated – around the world.

Ford’s failed innovation was a direct result of starting with a Western perspective. The company simply took a concept that worked in the West, and adapted it. Tata, on the other hand, threw away the Western model, and started with a uniquely Indian set of constraints. The rest is history.

Tata notwithstanding, reverse innovation isn’t determined by geography. In India, Grameen Bank was founded on the principles of doing exactly the reverse of leading local commercial banks. Southwest Airlines and H&M are examples of successful reverse innovation in a US, and European setting.

Green reverse innovation at home

My field of specialization is green innovation. So I set out to scope areas of interest where reverse innovation could be applied to save energy, carbon, or resources.

A news story in USA Today caught my eye, and provided a thoughtstarter.

It descrbibes new census findings that highlight a surprising increase in household size in the US. As Arthur C. Nelson, director of the Metropolitan Research Center at the University of Utah said, “The Great Recession has forced doubling up among both family and non-family members.” In particular, there has been a marked rise in multi-generation households, from 12% in 2000 to 16% in 2008. In short, many young adults were being forced to move back in with their parents.

Based on the current economic climate, I reason this problem isn't going to go away soon. And having lived with my parents in my 20’s, I know it isn’t a situation young people relish. So how do we get these young people into places they can afford?

The answer seems to lie in recalibrating expectations of home size. In Vancouver, the government has introduced the concept of eco-density, trying to entice people into downtown living by offering smaller, more reasonably priced condos. Unfortunately, like New York, even 600 square foot units are priced out of range for most people in their 20’s.

Let's look at Asia. Here's a video that still leaves me slack-jawed in amazement. 300 square foot living in style...

Strategic partnerships can make solutions like these common place. The next time you are facing an innovation challenge, don't be afraid to make dramatic changes in approach. The thinking may be the reverse of what we’re used to. But the reward can be well worth it.

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