Question

What are the similarities and differences between GE’s traditional innovation and reverse innovation?

Answer 1

Traditional and reverse innovation are similar in the way that both strategies work to create a new and innovative product to tap the consumers. Both strategies utilize the first-mover advantage in an attempt to create a market for their product.

The difference between the two lies in the market the firm is trying to penetrate.

With traditional innovation, firms create a product in developed markets and then try to use these to sell in emerging markets. Generally, these companies initiate their globalization efforts by removing expensive features from their established product, and attempt to sell these less featured products in the developing world. However, this approach is not very competitive, and targets only the most affluent segments of society in these developing countries due to the low per-capita income prevalent there.

Reverse innovation is a term referring to an innovation seen first in the developing world. Reverse innovation focuses on developing innovative products for emerging markets that are feasible and low-cost. Reverse innovation leads to products which are created locally in developing countries, and if it is successful then upgraded for sale and delivery in the developed world. In this way, firms have found that these products satisfy a large market segment that was not tapped before.