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And
this
led
to
reverse
innovation?
In short, GE created a portable low-cost ultrasound machine, somewhere in
the neighbourhood of $15,000, a fraction of the cost of the bulky US
machines. And that has opened up a huge market in China and India. Now
that same portable ultrasound machine is now coming into the US and
creating new applications. This is a great example of reverse innovation.
Might this provide GE a chance to grow its business in India as
well?
Most multinational companies, such as GE, have tried to sell their US
products in poorer countries such as India and China; but, again, there was a
serious mismatch in possible applications and pricing. That means they were
capturing only one per cent of the opportunity in those countries. But, going
forward, those countries are going to represent a huge growth opportunity. In
fact, I believe that in the next 25 years the biggest growth opportunity for
multinationals will be customers in poor countries. Which is why reverse
innovation is important to GE and similar companies.
This represents a lot of big changes going forward. For example,
where will companies be doing their research and development in
the
future?
The biggest change for American or European multinationals will be to shift
the centre of gravity to where the innovation will take place. That means it is
an organizational challenge. You have to put the resources where the
opportunities are. That means you have to localize product development, you
have to localize sourcing, you have to localize strategic marketing capability.
This probably represents the biggest required shift in mindset for the leaders
of multinationals.
How long has GE been practising reverse innovation?
Its a relatively new concept. I would say it has caught on within the last five
years. While India and China opened up their borders in the last 15 years, its
really in the last five years that we have seen Western companies developing
products based on what emerging markets need, want and can pay for.
I dont sense that every major corporation is moving in this
direction.
Whats
holding
them
back?
Probably the biggest problem of reverse innovation being adopted in large
companies is the companies historical success. Glocalization, taking global
products and selling them with some adaptation in local markets, requires a
fundamentally different organizational architecture; and the more you succeed
in (and dedicate most of your corporate resources to) glocalization, the more
you are going to find it difficult to do a good job in reverse innovation. Thats
probably the biggest bottleneck, historical success. Companies will move in
this direction as more success stories evolve, such as the portable low-cost
ultrasound machine.
have a global mindset? So I say the biggest challenge for Americans and other
multinational
CEOs
is
to
embed
that
mindset.
Jeff Immelt is still relatively new as GEs CEO, but do you think this will
become his legacy?
One of the remarkable things about General Electric is that it is a hundredplus year old company, and the only way a company can survive that long is if
it obsoletes itself in terms of products and solutions. This is the real hallmark
of GE: that they are willing to change; they are willing to embrace new ways of
competing. To that end, every effective CEO puts a new strategic frame on the
company he or she leads not because the old frame was irrelevant but
because its a new environment, its a new world. The strategic frame that
Immelt is putting in place (without losing the performance and discipline that
Jack Welch put in place) is adding innovation to supply. Immelts legacy will
be judged by how well he was able to incorporate innovation inside a company
known for efficiency.
You have a unique role inside a modern corporation, professor in
residence.
How
did
that
happen?
About 10 years ago, I gave the keynote address at a conference at which Susan
Peters, the Chief Learning Officer of GE, was also a speaker. I really enjoyed
her talk, so I congratulated her on it. She, in turn, asked me what kinds of
things I work on, and I told her about my work on reverse innovation. About
five years later, I met Immelt when he gave the commencement speech at
Dartmouth College, where I have been on the faculty of its Tuck School of
Business for some time. I had a half-hour meeting with him, during which I
told him about my work in innovation. So, when Immelt and Peters were
talking about bringing in an academic to push their thinking, my name came
up. It was kind of a series of fortunate accidents, and I think very few
academics get this kind of an opportunity.
Whats
your
job
at
GE?
My role consists of three things to teach, guide and consult. I teach the top
600 officers of GE about the best thinking in innovation. The difference
between the guiding and consulting parts is that I work more deeply on a few
projects when I consult, whereas, when I guide, I am talking to a number of
GE executives about issues on their plates. There is no typical day. That is the
beauty of this work with GE. Its been probably the most intellectually
challenging growth opportunity I have had.
Did
that
surprise
you?
What really surprised me is that I never thought that one person could have an
impact, particularly on a large company such as GE with 300,000-plus
employees. Amazingly, I found that, as an outsider, I have some strength that
an insider does not have even though I dont have a big title there, I dont have
a big budget and I dont have a big business to run. I think I can make a