Blackman Auditorium, Reverse Innovation Lecture (c) Northeastern News

Reverse Innovation & Social Entrepreneurs

by Dr. Sophie Bacq

On March 11, 2013, we had the oppor­tu­nity to wel­come Dr. Vijay Govindarajan—known as VG— as part of Pres­i­dent Aoun’s Speaker Series on “Pro­files in Inno­va­tion”. Earl C. Daum 1924 Pro­fes­sor of Inter­na­tional Busi­ness at the Tuck School of Busi­ness at Dart­mouth Col­lege, VG is widely regarded as one of the world’s lead­ing experts on strat­egy and innovation.

VG shared with us his vision of tomorrow’s inno­va­tion lead­ers, anchored in the con­cept of “reverse inno­va­tion”. Reverse inno­va­tion is char­ac­ter­ized by ultra low-cost, high qual­ity and uni­ver­sal access to address the needs of deprived pop­u­la­tions in urban and rural areas of the devel­op­ing world. Such inno­va­tion is “reverse” when it is brought “back” to devel­oped coun­tries such as the US. The con­cept of reverse inno­va­tion poten­tially applies to all indus­tries, from telecom­mu­ni­ca­tions and trans­porta­tion, through edu­ca­tion, to health care.

For instance, a highly sophis­ti­cated and pow­er­ful elec­tro­car­dio­gram (ECG) machine costs no less than $50,000 in the US. Such a machine could not be adapted to the con­di­tions of rural India: first, its cost is highly unaf­ford­able by the patients; sec­ond, it depends heav­ily on elec­tric­ity which is highly unre­li­able in this region of the world; third, it is much too heavy to be trans­ported to remote areas. To address the need for ECG machines by Indian patients as well as the unsuit­abil­ity of the exist­ing solu­tion, a rad­i­cal inno­va­tor man­aged to pro­duce easy-to-use, high-quality ECG machines that are highly afford­able, weigh lighter than a can of soda and oper­ate on bat­tery, enabling hun­dreds of scans in var­i­ous areas. This rad­i­cal inno­va­tion has been brought to the US to deal with road acci­dent sit­u­a­tions that require reli­able, portable equipment.

VG fur­ther cited the exam­ple of the Narayana Hru­day­alaya (NH) car­diac Hos­pi­tal in Ban­ga­lore, India, which deliv­ers high-quality open-heart surg­eries at $2,000 when they cost $50,000 in the US, and uses dif­fer­en­tial pric­ing to treat all patients, even those who can­not afford it. Dr. Govin­dara­jan went on cit­ing exam­ples of arti­fi­cial legs made of recy­cled yogurt plas­tic cups in Thai­land, or of a $300 house.

Reverse inno­va­tion is not about reduc­ing costs; it is about “doing more with less”. Accord­ing to VG, the big cor­po­ra­tions of this world should have an inter­est because there is profit to be made. Huge profit. Indeed, with only 1 bil­lion on this earth hav­ing full access to the prod­ucts and ser­vices they need, this leaves a mar­ket oppor­tu­nity of 6 bil­lion con­sumers! “Poor peo­ple have the same needs as rich peo­ple but need dif­fer­ent solutions.”

Of course, reverse inno­va­tion is not with­out pos­ing chal­lenges. Chang­ing the dom­i­nant logic that high price relates to high qual­ity and that this high qual­ity can only takes place in the US is one of them. This implies chang­ing the inno­va­tion par­a­digm “from value for money to value for many”. As VG con­cluded, the United States need to restore the spirit on which they were built—the spirit that wor­thy ideas are global and can orig­i­nate from anywhere.

Which role do social entre­pre­neurs play in this pic­ture? Their role is likely to be multi-faceted. First, social entre­pre­neurs are likely to be these inno­va­tors who come up with appro­pri­ate and afford­able solu­tions for the 6 bil­lion who are under-served. More than the decision-makers in large cor­po­ra­tions who, as stressed by VG, too often decide on the inno­va­tion dol­lars while sit­ting com­fort­ably in their US head­quar­ters, social entre­pre­neurs are the needed field play­ers who will make the nec­es­sary local con­nec­tions, and come up with a solu­tion catered to the ben­e­fi­cia­ries’ needs. Sec­ond, I also see an impor­tant role to be played by the so-called “social intrapreneurs”—employees of a com­pany who are dri­ven by bring­ing social change and demon­strate an entre­pre­neur­ial mind­set. Research on social intrapre­neur­ship has been grow­ing fast in the past few years and one can only expect this trend to con­tinue, espe­cially based on VG’s argu­ment that US com­pa­nies are cur­rently not well posi­tioned to cap­ture the oppor­tu­ni­ties pre­sented by reverse innovation.

Finally, I believe that social entre­pre­neurs are the best posi­tioned to help change men­tal­i­ties. Numer­ous exam­ples of suc­cess­ful social entre­pre­neurs have demon­strated inno­v­a­tive ways to bridge the busi­ness and social log­ics, which have been con­ceived as antag­o­nis­tic for a long time. Indeed, cap­i­tal­ism has been dri­ving cor­po­ra­tions’ actions whereas social wel­fare has been left up to gov­ern­ments and non­prof­its. But every­day, social entre­pre­neurs are work­ing hard to close the gap and prove that one can do good and do well. Because social entre­pre­neurs spark off solu­tions that will address the needs of both the devel­op­ing and devel­oped worlds, and are at the root of changes in men­tal­i­ties, they are promised to a bright future.