Reverse Innovation & Social Entrepreneurs

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.