The Next Innovation

Where is the next great idea to shape and change your business likely to come from?  Well, perhaps not from your R&D department; perhaps not from within your own company; perhaps not from your own country.  The next innovation to impact on you and your organization is as likely to come from Mumbai as Minneapolis.

One of those charting this change in innovation’s direction is Vijay Govindarajan of the Tuck Business School. In 2008, Govindarajan took a leave of absence from Tuck to join General Electric (GE) for 24 months as the company’s first professor in residence and chief innovation consultant.

At GE, Govindarajan’s role was threefold: to teach, guide, and consult with GE managers on their innovation practices and key projects. Govindarajan also worked with Jeff Immelt, GE’s CEO, to produce the Harvard Business Review article “How GE Is Disrupting Itself” (September 2009).  The article, written with Immelt and long-term collaborator Chris Trimble, introduced the concept of reverse innovation—where, contrary to conventional expectations, innovation takes place in emerging markets and then is brought back into developed countries. Reverse innovation was rated by the Harvard Business Review as one of the big ideas of the decade. The book Reverse Innovation (with Chris Trimble) was published in 2012.

“If you think back historically, global companies innovated in their home markets, which are the developed world, and took the products they invented into the developing countries,” VG told us. “Reverse innovation is just doing the opposite; you are innovating in the emerging markets and then bringing those innovations back into developed markets.”

As an example of reverse innovation at work, VG cites the ultrasound machine. In the United States, an ultrasound machine looks like an appliance. It’s huge, it’s bulky, it costs anywhere from $100,000 to $350,000, and it can carry out very complicated applications.

In India 60 percent of the population lives in rural areas where there are no hospitals, so patients can’t go to the hospital. In large parts of India, the hospital has to come to the patient. That means that bulky machines can’t be used. The machine has to be portable. And, what customers can afford is different. In response, GE created a portable, low-cost ultrasound machine that costs around $15,000, a fraction of the cost of the bulky machines that GE sells in the United States. The new, low cost, portable machine has opened up a huge market in China and India.

And that same portable ultrasound machine is now coming into the United States and creating new applications. This epitomizes the changing innovation polarity exemplified by reverse innovation.

Of course, companies in the Western world have their own terms of innovation reference, their way of doing things.  “Probably the biggest problem in having reverse innovation work in large companies is their historical success. We’ve talked about glocalization, which is taking a global product and selling it with some adaptation in local markets, but glocalization requires a fundamentally different organizational architecture. Thus, the more you succeed in glocalization, the more you’re going to find it difficult to do a good job at reverse innovation. That’s probably the biggest bottleneck: the historical success,” says Govindarajan.

As a case in point, he points to GE’s experience.  “There was an executive in India—Raja is his name—who was head of GE Healthcare in India. Five years ago, under the glocalization model, his main responsibility was to distribute global products. And if he had to come up with a new concept to solve Indian consumers’ healthcare problems, first of all, he would have had to do it during the weekend, because during the weekdays he was busy selling global products. But even if he had written up the proposal during the weekend, he then would have had to sell the idea to the global product head, who was sitting in Milwaukee. He had probably never visited India, and he didn’t understand the problems of rural India. And even if Raja could have convinced him, there were a whole lot of other people he would have needed to convince. So it was a huge organizational challenge.”

The second area of opportunity which is unfolding is the rise of what has been called jugaad innovation or frugal innovation.  The backdrop to this idea is very simple: even after years of economic growth, emerging markets such as India remain very poor.  GDP per capita in India is around $800. In the United States, it is $50,000.  Making do with less is part of the Indian psyche by necessity. Jugaad innovation is that resilient ingenuity that people tap into to come up with very frugal products and services that deliver greater value for their fellow citizens at lower costs.

One of the idea’s champions is Navi Radjou.  A fellow of the Cambridge Judge Business School, where he is the former director of the Center for India & Global Business, Radjou is co-author (with Jaideep Prabhu and Simone Ahuja) of Jugaad Innovation: Think Frugal, Be Flexible, Generate Breakthrough Growth (2012); and (with Prasad Kaipa) From Smart to Wise (2013).  He won the 2013 Thinkers50 India Innovation Award as well as the 2013 Thinkers50 Innovation Award.

“The idea behind jugaad innovation is to provide an alternative model to the traditional model of innovation that is most prevalent in the West. So if you look at the approach to innovation in the US, Europe or even Japan, the developed countries, for the past 50 plus years, the format has been pretty much standardized. Essentially, it is a big R&D budget, and fancy R&D labs. It takes many, many months, and sometimes years, to come up with what people believe are awesome products. But many of them flop in the marketplace,” explains Radjou.

“Just because you invest in big R&D projects doesn’t make you innovative, let alone successful. This became even more important after the economic crisis that began in 2008 when companies were cash strapped. So we began to look at a different model of innovation that will continue to help companies come up with new products and services, but will be more affordable and more sustainable as well.”

The French anthropologist Claude Lévi-Strauss developed the term bricolage.  In English, the essence of jugaad lies in the term Do-it-yourself.  The Maker Movement in the United States takes some of the characteristics of jugaad innovation and applies them in a Western context.

Navi Radjou was a research analyst helping western companies focus on becoming more innovative, and spent his time in places like Boston and San Francisco, helping primarily western companies. Then in the mid-2000s he began to pay attention to what was happening in India, and particularly the IT service companies such as Tata and Infosys. As a regular visitor to India, he began to pay attention and interact more and more with entrepreneurs and corporations there.

“That’s where I began to discover the Tata group, which at that time was beginning to develop the Nano car, and other energy companies. To be blunt, I was very challenged because of the dominant Western innovation model that I was trained in. I studied in France and it was all about R&D driven innovation, and then you go to the emerging markets like India and it challenges you because you see people have very few resources, and yet they come up with a lot of clever solutions,” Radjou recalls. “So initially I dismissed the Indian approach as low cost stuff that we can’t qualify as innovation, but then I began to rethink what innovation really means. I realized that actually, what matters with any innovation is can you create more value for people? That’s really the point, and from that perspective, a lot of these solutions that are desired in India or the emerging markets actually bring a lot of value for the local community.

“That’s when I began to pay more attention and say maybe we need to begin to formalize this approach to innovation because one of the challenges for emerging markets is that there is a lot of untapped knowledge. They have been doing it for centuries, if not millennia, so they don’t really see what’s so interesting about it. But for me, as an academic, I was very excited and thinking this is exactly the doctor’s prescription for the world.”

Radjou argues that jugaad innovation is not simply an Indian phenomena.  He believes that a similar kind of incremental innovation and rapid migration is something that has been documented in a Chinese context as well. Similarly he reports that there are lots of jugaad-like approaches to innovation in Africa.

Indeed, Radjou’s favorite example of jugaad innovation at work involves IBM in Africa.  “The IBM lab in Nairobi, Kenya, is doing something fascinating, which for me is really jugaad,” he told us. “It is a culmination of low tech and high tech. So what they are doing is that they are taking a data feed from low-resolution web cams that track the traffic conditions in Nairobi streets, and then they combine that with some high-end algorithms so they can begin to provide advice on traffic management and predict traffic jams. For me that’s a fantastic example of jugaad innovation because you take what you have, which is these low resolution web cams, and rather than upgrading them, which is expensive, you start with that and you say this is all we have, and then what can I add on top of that, which is these algorithms, they have a lot of algorithm programmers.

“So that combination is creating an amazing solution that is much more affordable than if they had to go for a very high tech solution. And in the West, of course, we see that coming more in this whole ‘Maker Movement’ with the 3D printing and the technology led DIY philosophy of reimagining and reusing the objects we own. So in the West what we see is that there might be – this is my hunch – more technology enabled with regards to the jugaad revolution. So whereas in an emerging market, it might be a bit more low tech kind of jugaad movement, in the West it might come more from these emerging affordable technologies, like 3D printing, which is becoming democratized and becoming more affordable.”

Navi Radjou is a powerful disciple of jugaad innovation and of what has been labeled frugal innovation.  It strikes at the very heart of what innovation is about – problem solving with limited resources.  We are back in Apollo 13 territory.  “As these technologies become more widespread, they will provide a platform for everyday citizens to unleash their ingenuity. So I see the western story, the narrative of jugaad being the same. It’s all about tapping into ingenuity to come up with creative solutions, except that the tools might be a bit more high tech compared to emerging markets.”

Resources

Vijay Govindarajan and Chris Trimble, Reverse Innovation, Harvard Business Review Press, 2012

Navi Radjou, Jaideep Prabhu and Simone Ahuja, Jugaad Innovation: Think Frugal, Be Flexible, Generate Breakthrough Growth, Wiley, 2012

Navi Radjou and Prasad Kaipa, From Smart to Wise, Wiley, 2013

Navi Radjou and Jaideep Prabhu, Frugal Innovation, Economist Books, 2015

This was originally published in What we mean when we talk about innovation by Stuart Crainer and Des Dearlove (Infinite Ideas, 2016).