Best-selling author Vijay Govindarajan predicts your next big innovation will come from an emerging market.
Vijay Govindarajan is a Dartmouth College business professor, acclaimed author, and former “chief innovation consultant” at GE. He’s made news over the past few years as one of the central figures in a movement to come up with design ideas for a $300 house for impoverished countries. The goal is to design, build, and deploy a simple dwelling that keeps a family safe from the weather, allows them to sleep at night, and gives them a bit of dignity. The $300 house project is a social strategy, but organizations are looking at creating new products for developing countries as business strategies. And it’s out of that mindset that Govindarajan is turning his focus to innovating innovation—but this time, doing it in reverse.
Whereas many organizations look for the next big product idea to come from—and to serve—the most developed economies, Govindarajan thinks the markets with the most promise are in developing ones. As he points out, the products designed for the “poor world” are a promising profit center, and even marketable in the richer ones. He calls this concept “reverse innovation,” and it’s both the topic and the title of his newest book.
To be successful at reverse innovation: “The whole game is HR,” Govindarajan says. Attracting, developing, and retaining talent in emerging markets is the most critical factor to driving innovation there. Reverse Innovation is packed with examples of companies such as Logitech, P&G, GE, PepsiCo and Deere & Company that have done it well. In this interview with GO, he offers additional insights into how HR can support these efforts and be catalysts of reverse innovation.
authored by Vijay Govindaraja
GO: What is reverse innovation?
Govindarajan: Historically, multinationals innovated in rich countries and tried to sell those same products in poor countries. Reverse innovation is doing exactly the opposite. An example I give in my book is Deere & Company. They originally tried to sell their American tractors to Indian farmers. It wasn’t until they used a locally based team to design a smaller, cheaper tractor that served more purposes that they had success in India. And the tractor that they designed for that market is the basis of new product lines for China and other markets.
GO: Tell us more about HR's role.
Govindarajan: To support this kind of innovation, it’s about building the organizational capability through talent. And that’s up to HR professionals. Building R&D capability, marketing capability, supply chain capability, and others in poor countries is going to be the single biggest HR challenge going forward.
And in countries like India and China, it’s a paradox because there is scarcity amongst plenty. For example, even though there are a lot of engineers who are graduating in India and China, the top engineers are the same engineers everybody wants. The scarcity is even more acute at the management level and leadership level if you want to recruit somebody who’s got 10 to 15 years’ experience. There is a tremendous war for talent and winning the war is the key to success in reverse innovation—and it’s the complete responsibility of HR people. And therefore, a company's human resource function has to be at the cutting edge.
GO: What are some of the other considerations for HR to address to help drive innovation in developing countries?
Govindarajan: In the U.S., it takes about four months to place all of our MBA students from top schools like Harvard and Wharton in jobs. In India, it takes just four hours to place all their top graduates. You can't do multiple interviews; you have to make your decision very fast. And consider this: Infosys in India recruits 40,000 software engineers every year: 40,000! Imagine how you develop this huge group! The recruits in India have tremendous technical talent, but they lack what I call “the last mile.” They don’t have good interpersonal, problem-solving, or critical-thinking skills, so you have to have your own corporate university to develop these skills.
GO: You propose the creation of local growth teams (LGTs) to drive reverse innovation. These are cross-functional, entrepreneurial units located in the targeted emerging market. How can HR support this approach?
Govindarajan: HR needs to step up and be keepers of the talent. The LGT is nothing more than building teams in poor countries. So it's all about HR. The whole game is HR!
GO: What are some of the key skills necessary for an LGT team member?
Govindarajan: Actually, HR people can play a role in picking leaders for three roles related to LGTs. Number one is the leader of the LGT. They have to be picked carefully because the leader of the LGT should not be just technically competent, but also a humble person who can work in partnership with the global organization. The second is leaders of the global teams the LGTs will work with, such as a global business unit leader. These leaders typically command greater resources and are more extensively connected within an organization, but sometimes their interests can seem in conflict. So they also have to be someone who is willing to work with the LGT. And third is the leader who supervises both of these people—typically a senior vice president. That person has to be able to resolve conflict because no matter who you put in charge of an LGT or a global business unit, you're going to have conflicts. So, conflict resolution is a critical requirement for the leader at the top.
GO: In your book you talk about the value of technical experts: either local people who provide a unique view of the market’s specific needs, or traveling experts who bring the expertise needed to help a local team solve the problem. Do you think there’s a missed opportunity to focus on high potential experts?
Govindarajan: Absolutely. They are prime candidates for expat assignments to drive reverse innovation. When we move the technical people, they take their knowledge and capability with them. It also builds a sense of humility because the technical expert/expat begins to understand and build a global mindset. I always say, move them to countries that are as disconnected as possible. I don't mean physical distance; I mean cultural, economic, linguistic, and linguistically diverse countries that are as distant from each other as possible so it really doubles up that global mindset, which is what is critical for reverse innovation.
Vijay Govindarajan’s latest book, Reverse Innovation, is available now at bookstores and through major online book retailers.