First, what is Innovation? And second, what is "Reverse Innovation'?
I have been discussing innovation within the food and beverage industry for about a year now. I have also quoted heavily from two leading Dartmouth College Tuck School of business thinkers, Vijay Govindarajan and Chris Trimble. They have written two books titled "10 Rules for Strategic Innovators" and "The Other Side of Innovation; Solving the Execution Challenge."
Just when I thought some of the brighter food and beverage minds were starting to understand the concept of food innovation in the industry, along come Govindarajan and Trimble to pop a new innovation concept upon us – the concept of "Reverse Innovation."
But this might be an area that the food industry is getting right. This concept is covered by Alan Murray, deputy managing editor of the Wall Street Journal and the author of "The Wall Street Journal Essential Guide to Management" in "Trickle-Up Development" (April 12, 2012, page A15).
Murray begins his argument for reverse engineering by stating that economic growth in the coming decades will emanate from the developing world – China, India, Brazil, Russia and other countries eager to follow their lead. In a prior week interview with Cisco's CEO, John Chambers told him that he expects developing countries to account for 70 percent of his company's business a decade from now, up from 30 percent today. Chief executives at other multinationals make similar forecasts. But as Murray states, less clear is how the companies can best participate in that growth.
The authors advise companies to "create far from home" and "win everywhere." The tendency is to assume that products and services developed for the demanding markets of the U.S., Europe and Japan, with relatively modest adaptations, will meet the needs of rapidly developing countries. After all they claim the United States has the infrastructure of innovation – the great universities, the preponderance of Nobel Prize winners, the advanced capital markets and well developed management systems. And why wouldn't the poor countries want the cornucopia of products and services developed for our enjoyment?
The authors go on to list some supporting arguments for this phenomenon. An early case dates back to the 1960s when Western doctors who went to Bangladesh to help address a cholera outbreak discovered that the locals were using a drink made of carrot juice, rice water, bananas and carob flour – a mixture of carbohydrates and sugar – to rehydrate those suffering from diarrhea. A doctor at the University of Florida read about the traditional treatment and concluded that something similar might help dehydrated football players. The result was Gatorade.
The book goes on to sight other marketing examples like a hospital in India which found a way to provide heart by-pass surgeries for $2,000, about 90 percent less expensive than in the United States and with a higher success rate. The overriding concept might be that U.S.-based companies will need to learn to make products with lower price points so that they can sell more of them to achieve profit goals.
But this may be one area that U.S. restaurant companies have already begun to understand. I state that because some restaurant chains have begrudgingly developed products preferred by locals in international markets that are sold alongside their U.S. menus such as tofu burgers in India. And it might also require executives to break old marketing models in order to achieve reverse innovation success. Even though most restaurant and food manufacturing executives are slow to grasp true food innovation, I still hold out hope a few will grab onto the opportunity – and see their corporate fortunes soar.
Please contact me at email@example.com or follow the Food Innovation Institute website (www.foodbevbiz.com) for information on two three Food Innovation 3-day workshops in Denver, Colorado:
April 30 – May 2, 2012: Food Innovation Business Principles & Processes
May 14 – 16, 2012: How to Commercialize Your New Product Ideas
July 9 – 11, 2012: How to Start Pop-Up Restaurant and Food Truck Business
Darrel Suderman, Ph.D., is president of Food Technical Consulting and founder of Food Innovation Institute. He has held senior R&D/QA leadership positions at KFC, Boston Market, Church's Chicken and Quiznos and led KFC’s development team of “Popcorn Chicken”, now a $1B international product –invented by Gene Gagliardi.