The Value of Reverse Innovation in Greening Business and Buildings

The Value of Reverse Innovation in Greening Business and Buildings

Recently I heard Professor Vijay Govindarajan speak about reverse innovation at the Front End of Innovation conference.

It was an eye-opening experience to those of us schooled in Western innovation thought.

As Govindarajan described, reverse innovation represents a radical shift in thinking because it starts with fundamentally different ground rules.

Instead of developing high-end products at home and adapting them for markets like China and India, companies practicing reverse innovation develop products with the constraints of emerging markets in mind.

Ford, Tata, and the Magic Price

Govindarajan used Ford’s failed attempts at cracking the Indian auto market to highlight the shortcomings of traditional Western innovation. Starting with a brief to introduce an "extremely low cost" vehicle for India, Ford decided to get the job done by stripping expensive options from an existing sedan. By doing this, the company managed to create a vehicle that would sell for under $20,000.

{related_content}At that price tag, Ford knew it would never convert the 98 percent of Indians who were currently driving two wheelers -- scooters and motorcycles. However, it might appeal to successful Indians -- Rolls Royce and Mercedes drivers.

A serious miscalculation, as it turned out. No wealthy, status-conscious industrialist or Bollywood star would ever trade their European luxury vehicle for a Ford.

Meanwhile, Indian car manufacturer Tata attacked the  "extremely low cost" vehicle brief from the reverse angle. Tata chiefs reasoned the 98 percent of "two-wheeler" Indians who paid about $1,500 for their scooter could be seduced into trading up to a four-wheeler at, say $2,000. Thus the price bar was set.

In the end, Tata didn’t manage to build a $2,000 vehicle -- they launched at $2,500. A failed attempt to hit the company’s brief, perhaps, but a masterpiece of innovation that left Ford in the dust. The Tata was a huge success in India, and is now being exported – and emulated – around the world.

Ford’s failed innovation was a direct result of starting with a Western perspective. The company simply took a concept that worked in the West, and adapted it. Tata, on the other hand, threw away the Western model, and started with a uniquely Indian set of constraints. The rest is history.

Tata notwithstanding, reverse innovation isn’t determined by geography. In India, Grameen Bank was founded on the principles of doing exactly the reverse of leading local commercial banks. Southwest Airlines and H&M are examples of successful reverse innovation in U.S. and European settings

Green Reverse Innovation

My field of specialization is green innovation. So I set out to scope areas of interest where reverse innovation could be applied to save energy, carbon, or resources.

A news story in USA Today caught my eye, and provided a thoughtstarter. It described new census findings that highlighted a surprising increase of household size in the U.S.

As Arthur C. Nelson, director of the Metropolitan Research Center at the University of Utah said, “The Great Recession has forced doubling up among both family and non-family members.” In particular, there has been a marked rise in multi-generation households, from 12 percent in 2000 to 16 percent in 2008. In short, many young adults were being forced to move back in with their parents.

Based on the current economic climate, I reasoned this problem wasn’t going to go away soon. And having lived with my parents in my 20s, I knew it wasn’t a situation young people relished. So how could we get these young people into places they could afford?

The answer seemed to lie in recalibrating expectations of home size. In my city, the government has introduced the concept of eco-density, trying to entice people into downtown living by offering smaller, more reasonably priced condos. Unfortunately, like New York, even the 600 square foot units are priced out of range for most people in their 20s.

So I looked to Asia. And I found a video that left me slack-jawed in amazement.

It was the story of a person living in a 300-square-foot apartment and doing it in style. Not only was it an attractive option, but it made our attempts at eco-density look like hopelessly out of touch.

Imagine setting creating a partnership between government, builders, designers, and manufacturers – all aimed at creating a chic 200-square-foot apartment based on the Hong Kong model.

If we pioneer it here, we would create jobs for builders caught in the recessionary doldrums. We’d also create incredible design innovation, manufacturing and intellectual property.

On the green front, the solution performs admirably. More people in less space means less energy used, less building materials, less driving and a greater sense of community well-being.

Best of all, it’s a solution we can export to Asia. After all, it was inspired by a problem in Asia.

The thinking may be the reverse of what we’re used to. But the reward is well worth it.

Marc Stoiber is VP of Green Innovation at Maddock Douglas, a leading innovation agency based in Chicago. Stoiber and his green team work out of Vancouver.

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