Please let me know what you think; do you agree with my point? Or do you have another point of view you'd like to share?

To see how reverse innovation applies to health services, read How Haiti is Helping America >>

See: Lessons from the Half-Pipe >>

Take a look, and please submit your comments on the site. What must we do to get back in the "race"?

BTW, in case you missed the first edition of our Innovation Quarterly, you can still get a copy by signing up >>

Under the leadership of Jeffery Immelt, GE has embarked on an ambitious journey to embrace reverse innovation. At the John F. Welch Technology Centre in Bangalore for example, you’ll find GE scientists “testing a special ‘pedestrian-safe’ bumper bar for cars, which can hit people at speed without maiming them,” or researchers are “working on locomotive engines that run on methanol extracted from grass growing alongside India’s railway lines, and on super-compact medical equipment that costs a fraction of the price of similar products in the west.”

See GE's Mano Manoharan:

The devastation we see in Haiti is unspeakable. The only thing to do is to lend a hand. One way to do so is by helping Partners in Health immediately as the organization is, in effect, the best hope for helping people on the streets.

Partners In Health was formally founded in 1987 by Paul Farmer, Thomas J. White, and Todd McCormack, joined soon thereafter by Ophelia Dahl and Jim Yong Kim. The history of Partners In Health is recounted in Pulitzer Prizewinner Tracy Kidder’s bestselling book, Mountains Beyond Mountains: The Quest of Dr. Paul Farmer, A Man Who Would Cure the World (Random House, 2003).

Tell your friends to Stand with Haiti >>

I am returning to the Tuck School after a two year assignment with General Electric as their first Professor in Residence and Chief Innovation Consultant. It has been a transformative experience indeed!

First, I got a front row seat to witnessing a great company implement breakthrough innovation. Given my interest on this topic, it was extraordinary. How many academics are lucky enough to watch real people in real companies make real decisions in real time?

Second, I assumed that one person cannot make a difference in a large company like GE with 300,000+ employees. I didn't have anyone reporting to me, I was not a P&L leader, nor I had any positional power. Despite all of this, quite to my pleasant surprise, I found GE to be a learning company- soaking up good ideas wherever they come from. As an outsider, I had one key advantage that an insider doesn't have- I am objective. When I said something in a meeting, it was the truth as I knew it. People may disagree with what I said but they never questioned my motives. I had no ax to grind. That gave my voice a good deal of influence even though I didn't have formal authority. Many of my ideas have been implemented. For instance, my 3 Box framework is now part of GE vocabulary. (See the January 2009 Harvard Business Review article by Steve Prokesch where he describes my impact inside GE.).

Third, I went to GE as a teacher- to tell them what I know about innovation. After two years, I have been humbled and I am returning to Dartmouth as a student! There is so much I don't know!! There is so much to research and uncover. Based on my work with GE, I have already published an HBR article with their CEO Jeff Immelt. But this is just the start. I have so many new ideas that I can research and write about for the next 25 years! Right now I am busy working on a book on Reverse Innovation for HBS Press. The book will draw heavily on the insights I gained working with GE.

The GE experience reinforced my strong belief that business school faculty must closely collaborate with the world of practice- it is a symbiotic learning partnership where both win.

See: The Case for 'Reverse Innovation' Now >>

Of course I talk principally about GE, but making reverse innovation a core competency is a challenge for all multinationals.

Pandit Ravi Shankar, the famous sitarist, performed at Dartmouth College on Oct 22. It was noteworthy in many ways. It was the first time in 15 years he performed solo without his daughter, Anoushka. In fact, Anoushka was supposed to accompany him but fell sick and we had the (unfortunate) pleasure of witnessing the mastero perform by himself. More importantly, Ravi Shankar is 89 years old and it was remarkable to see him mesmerize the audience at this age with the magic of his music.

As a college professor, I was reflecting on what I took away from the Panditji’s concert. Three things come to mind.

First is his passion— you have to absolutely love what you do to keep doing it when you are 89!

Second, Ravi Shankar was not performing to entertain himself or show how much he knew but he was affecting the mood and feelings of the audience— he was playing to entertain and engage the audience and help them feel happy.

Third, he connected with the audience almost instantly even though he didn’t know any one of us.

Great teachers that I have been blessed to work with over the years exhibit the same three qualities— deep passion for their subject matter, not to impress students how much they know but help students learn, and connect with each and every student from day one in a personal and intimate way.

Come to think of it, these are the same three qualities great leaders have in common as well!

I also couldn’t help relate Ravi Shankar’s life to my 3 Box theory— Box 1 is about managing the present and Box 2/3 is about creating the future and leaving a legacy. In the 1960s, as I was growing up in India, Ravi Shankar was not satisfied in Box 1, just perfecting his mastery of sitar but had the courage to venture on a journey to expose the Western audience to Indian classical music— his association with the Beatles was one element in that Box 2/3 journey. It is through the tireless and joy-filled effort of people like Ravi Shankar that the West came to understand and respect the talent base in India. Little wonder that Ravi Shankar was awarded the George Harrison Lifetime Humanitarian Award recently. We certainly owe a debt of gratitude to pioneers like Ravi Shankar for the opportunities Indians enjoy today in the U.S. and around the world.

In our article How GE is Disrupting Itself, we argued that reverse innovation will become more and more common. We also showed that it presents a formidable organizational challenge for incumbent multinationals headquartered in the rich world, and we explained an organizational model for overcoming that challenge.

The fundamental driver of reverse innovation is the income gap that exists between emerging markets and the developed countries. There is no way to design a product for the American mass market and then simply adapt it for the Chinese or Indian mass market. Buyers in poor countries demand solutions on an entirely different price-performance curve. They demand new, high-tech solutions that deliver ultra-low costs and “good enough” quality.

For us, reverse innovation is not a “nice to have” boost to revenue growth rates. We believe it will power the future — not just in poor countries, but everywhere. Many tremendous rich-world business opportunities will arise first in poor countries. To compete, global corporations must be just as nimble innovating abroad as they are at home.

The Evolution of Reverse Innovation: A Historical Perspective

The globalization journey of American multinationals has followed an evolutionary process which can be seen in distinct phases.

Phase 1 — Globalization —Multinationals built unprecedented economies of scale by selling products and services to markets all around the world. Innovation happened at home, and then the new offerings were distributed everywhere.

Phase 2 — Glocalization — In this phase, multinationals recognized that while Phases 1 had minimized costs, they weren’t as competitive in local markets as they needed to be. Therefore, they focused on winning market share by adapting global offerings to meet local needs. Innovation still originated with home-country needs, but products and services were later modified to win in each market. To meet the budgets of customers in poor countries, they sometimes de-featured existing products.

Phase 3 —Local Innovation — In this phase, the first half of the reverse innovation process, multinationals are focusing on developing products “in-country, for country.” They are taking a “market-back” perspective. That is, they are starting with a zero-based assessment of customer’s needs, rather than assuming that they will only make alterations to the products they already have. As teams develop products for the local market, the company enables them to remain connected to, and to benefit from, global resource base.

Phase 4 — Reverse Innovation — If Phase 3 is “in country, for country,” Phase 4 is “in country, for the world.” Multinationals complete the reverse innovation process by taking the innovations originally chartered for poor countries, adapting them, and scaling them up for worldwide use.

Of course this is a simplified view of the world, but in essence it holds true. Now, more than ever, success in developing countries is a prerequisite for continued vitality in developed ones.

Reverse Innovation: Organizing Principles

In our view, the "first principles" of reverse innovation are as follows:

- Reverse innovation requires a decentralized, local-market focus

- Most if not all the people and resources dedicated to reverse innovation efforts must be based and managed in the local market

- Local Growth Teams (LGTs) must have P&L responsibility (this is a key hurdle for American multinationals)

- LGTs must have the decision-making authority to choose which products to develop, how to make, sell, and service them

- LGTs must have the right (and support) to draw from the companies global resources

- Once tested and proven locally, products developed using reverse innovation must be taken global which may involve pioneering radically new applications, establishing lower price points, and even cannibalizing higher-margin products.

- Reverse innovations can be, but are not always, disruptive innovations

For more on reverse innovation, sign up for VG's Innovation Quarterly >>

When I took a two-year leave from the Tuck School to serve as Professor in Residence and Chief Innovation Consultant at General Electric, I ended up being less of the expert, and more of a student.

Now, my co-authors - Jeffrey Immelt and Chris Trimble - and I, have written a short article in the October Harvard Business Review which highlights some of our thoughts in this new reset world.

We learned that in order to succeed, we had to challenge two assumptions most global companies hold near and dear to their thinking:

1) The economies of poor countries develop in the same way that rich countries did, and
2) Products created to address poor countries’ special needs can’t be sold in the rich world because they’re not good enough to compete against existing solutions.

These assumptions we found were not true. In fact, the opposite is already happening. The reality is poor countries do not follow the same path and can actually jump ahead of rich countries. They are able to do so because of their willingness to adopt breakthrough innovations long before the rich world is ready for them.

With per capita incomes that are only a fraction of those in the rich world, they are more than happy to adopt high-tech solutions that deliver decent performance at an ultra-low cost — a 50% solution at a 5% price. We also found that because of their huge populations, countries like China and India are likely to tackle many sustainability problems years or even decades before the rich world.

In addition, we quickly saw that products created to serve these low-cost markets can also be used to create brand new markets in the developed world -- in other words, address unmet needs by creating dramatically lower price points or pioneering new applications.

In essence, that's what the article is about.

Download the article here, and sign up for our complimentary Innovation Quarterly newsletter here >>

For more insights visit GEReports.com:

- Reverse innovation: Building GE’s local growth model >>
- Reverse innovation: How GE is disrupting itself >>

Register here for Vijay Govindarajan's Innovation Quarterly - "next practices in innovation and execution in a reset world."

The overarching purpose of Vijay Govindarajan's Innovation Quarterly is to build and sustain a community of executives and academics who are deeply passionate about innovation and execution in a reset world. Specifically, we will seek to:

• Discuss the business impact of innovation, with an emphasis on execution

• Examine the strategic alternatives available to executives in specific industries- i.e., how are business models going to change?

• Explore recommendations for "disciplined innovation"

• Define and understand the critical factors that contribute to improving the chances of success

• Encourage discussions of lessons learned based on interviews and conversations with CEOs and senior innovation leaders

• Explore and discuss VG's 3-box strategic framework for innovation and execution

In essence, we’re here to help you challenge traditional industry assumptions that are no longer valid. Will you join the conversation?

One of the most difficult tasks for a newly appointed CEO is effective communication of his change agenda.

How does a change agent like Obama layout his vision in a simple and straightforward manner? How does he cut through the clutter of the competing agendas in Washington? How does he move to rebuild America?

It struck me that the three box strategy framework could be applied to U.S. government just as effectively as we apply it to business innovation.

Box 1: Managing the Present
In government, this means focusing on the pressing issues of immediate consequence like the financial crisis, for example. Obama has had to be in fire-fighting mode from day one. Despite the doomsayers, we can see evidence that our slide into recession has slowed. And we see programs like "cash for clunkers" actually make a serious difference in consumer buying patterns while simultaneously helping the environment.

Box 2: Selectively Abandon the Past
In Obama's case, he has had to work hard to change our reputation in the rest of the world. By signaling his intent to listen to our allies and partners, he has taken concrete steps to abandon Bush's policy of unilateralism. By beginning the process of closing Guantanamo, he has reversed the Bush policy on torture. He has taken a firm stance on Israel's continuing settlement policy, which demonstrates America's re-engagement in the Middle East Peace process. New roads will no longer be built in our National Parks.

Box 3: Create the Future
Nowhere has Obama met greater opposition than in his plans for the future. The status quo doesn't want change, and they are using all available resources to block it. From health care to energy to global warming, powerful special interests are creating change difficult, if not impossible. Unfortunately, we need these changes now if we are to rebuild America.

In my opinion, Obama's challenge is to frame these changes in a simple yet comprehensive way to help citizens understand what is at stake. This Wednesday's speech on Health Care Reform will provide a glimpse of whether he has taken the challenge of real change seriously. I hope for the country's sake he has.