Embrace The Reverse Innovation That Is Happening

 

I posted a blog called “Its so cool to be a Reverse Innovator” which I talk about Reverse Innovation – the process by which a company discovers new growth streams by utilizing its natural strengths to develop new products and services in developing countries and transposing it in developed countries with new competitive advantages.

 

I came across this social health innovation, called Embrace; where students at Stanford worked on a design challenge to create a baby incubator that would cost less than 1% of the price of a traditional, $20,000 incubator.

 

 

According to Jane Chen, CEO and Founder of Embrace; about 4 million low-birth weight babies die within the first 28 days of life because their bodies don’t have enough fat to regulate their body temperature. The problem was that traditional incubators are high in cost and require a constant supply of electricity.  Many people that live in rural villages in India for instance have low incomes and limited access to electricity.


 

Chen and her team developed (after much iteration), a miniature sleeping bag that can stays at a constant temperature for up to 6 hours by using an innovative wax-like material with tubes of hot water running through the sleeping bag.   With the baby’s natural heat and the wax-like tubes, the sleeping bag is able to maintain a constant temperature of 37 degrees Celsius (or 98 Fahrenheit).

 

 

Now, if it costs $20,000 for a traditional incubator, how competitive would this product be if it was sold in developed countries like USA? 

 

 

Embrace essentially created a new business model what will not necessarily impact the traditional incubator market.

 

Here is a video explaining the concept and the challenge by Jane Chen:


 

I have been recently seeing more and more reviews and stories on the topic of Reverse Innovation.   Could it be maybe Vijay Govindarajan’s recently released his new book entitled Reverse Innovation or maybe Im getting more aware of examples that fit this type of innovation, nevertheless I thought I write something brief.

 

When I think of Reverse Innovation two concepts come to mind.  The use of applied Design Thinking and Lean Start Up methodologies. More I read about Reverse Innovation the more I think about these two methodologies being used to develop products and services under new constraints.

 

Reverse innovation is the process where a product (or/and service) is essentially created, sold and used within a developing market but (and this is where the magic happens)  it is ultimately transposed into a developed market but with significant competitive advantage or changed business model.

 

Why I say it’s a combination of applied Design Thinking and Lean Start Up is because it combines the empathy aspect of Design thinking by looking at a countries environmental characteristics and constraints (i.e. low income, low standards of living, high rates of population growth & dependency burdens, general poor infrastructure and market distribution) and applies an iterative product development approach by wokring on minimal viable product (MVP) to test assumptions, validate learnings and either pivot or progress.

 

There are a lot of examples but the one I came across that I liked was the GE Healthcare and how they went out and asked the question:

 

How might we provide affordable and simple to use high tech-technology health in developing regions?”

 

According a GE report  in India; about 75 percent of medical professionals work in urban centers, leaving 3/4 of the India’s 1.2 population to be served by just 25% and these are most in very rural areas.

 

Backed by GE Healthcare’s strengths including: global infrastructure, strong brand reputation, partner relationships and scientific knowledge; the team successfully developed a low-cost electrocardiogram machine for the India market.  The machine came to a cost $800 compared to hospital-class units that range from $2,000 to $10,000. Either way; that is a cost-savings of 60% to 92%.

 

Now let me ask you this; if you had a product that was 92% cheaper and just as superior on the market do you think you have a competitive advantage?

 

GE Healthcare’s low-cost electrocardiogram has subsequently been marketed and sold in China and in the US with great success – and without losing substantial revenue on their existing products in this category.

 

Key thing for me is that constraints breeds creativity and innovation, and Reverse Innovation is really a way by which a company can leverage its own existing strengths by applying it in a new context that  leadings to new growth streams.

 

Check out the video below:


 

 Further reading