In my last post I discussed the grim outlook for traditional high-tech innovation that was presented at the World Innovation Forum and World Business Forum in 2009.
One of the speakers at the innovation conference was Vijay Govindarajan (VG). VG stated that the largest growth in innovation will be experienced outside of the United States (as well as other developing countries). However, he offered a ray of hope for employees at large corporations when he introduced the concept of reverse innovation. In order to fully understand reverse innovation, it’s worth reviewing VG’s strategy of 3-Box Management.
Three-box innovation strategy dictates that the majority of corporate resources should be placed in Box 1: Manage the Present. This box represents the continued development of existing products to yield most of a corporation’s revenue. Employees supporting this box focus on existing customers and processes, and they continue to leverage their existing competencies. In essence, this box “funds” the development of innovation within a corporation. Some companies fall into the trap of spending close to 100 percent of their resources in this box.
Vijay advises corporations to allocate portions of their resources to Box 2 and Box 3 as well as tried-and-true Box 1. Box 2 selectively abandons the past by “forgetting” most of what is known about the products built in Box 1, including why they were built and whom they were built to satisfy. This break from tradition enables an innovator to take existing products into completely different markets.
Box 3 is a more radical approach to innovation. It completely ignores current processes and products and prominently targets the future.
In the past, Vijay advised corporations to track their investments in these three boxes. For example, a corporation might employ an 85-10-5 approach, or a 75-15-10 approach.
Given the changing global dynamic, Vijay warns that the 3-box approach becomes more difficult to manage. It does not work when Box 2 and Box 3 activities are based only in the United States. Unfortunately, many companies are in this unenviable position because they have yet to recognize the global phenomenon that Vijay refers to as reverse innovation.
Reverse innovation occurs when new ideas and products are generated in developing markets and exported back to wealthier countries. This can occur in large corporations that have progressed through the five phases of reverse innovation, as depicted below (graphic re-drawn from VG’s website)
I will elaborate further on the ramifications of reverse innovation in future posts. If a corporation can adjust their global mindset, and if employees can begin to innovate with global influence, this situation presents an attractive job opportunity for employees desiring a global experience.
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