Cheap, Cheap, Cheap
What do a $2,500 Tata Nano, a $250 Acer Netbook, and a $1,000 General Electric handheld electrocardiogram device have in common? According to Vijay Govindarajan, a professor at Dartmouth's Tuck School of Business, all three are examples of "reverse innovation"—a concept that's becoming the next big driver of globalization. "Historically, American companies innovated in the U.S. and took those products abroad," says Govindarajan, who coauthored a Harvard Business Review article on the idea with Dartmouth colleague Chris Trimble and GE chairman Jeff Immelt in October. "Reverse innovation does the opposite: companies now innovate in poor countries and bring the products to the U.S."
Because they're designed for emerging markets, these products—like the Nano, a tiny automobile designed for India, or the GE EKG, priced far below a conventional unit—are dramatically less costly, making them appealing to frugal consumers in developed countries. Reverse innovation will also grow as multinationals devote more of their R&D budgets to creating products for faster-growing markets like China and India. Govindarajan, who's writing a book on the concept, sees many new examples of the strategy, including a $43 water purifier and a $70 portable refrigerator. "We believe reverse innovation will power the future—not just in poor countries, but everywhere," he says.
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Daniel McGinn is a national correspondent, based in Boston. He writes about management and other topics, and also helps oversee Newsweek's partnership in the Kaplan-Newsweek MBA program, which launched in late 2006.
McGinn joined Newsweek in 1992 as a summer intern. He worked in New York until 1996, when he moved to Detroit as a correspondent and bureau chief. In Detroit he covered the auto industry and other Midwest business stories. He moved to Boston in 1999. He has written cover profiles of business leaders like Bill Ford and Jack Welch, along with cover stories on topics ranging from the economy to marriage to children's television. His work as won awards from the Automotive Press Association and the National Association of Real Estate Editors, and he was twice ranked among America's 30 best young business reporters.
McGinn is a magna cum laude graduate of Boston College, and he also holds an MBA from Auburn University. His freelance writing has appeared in Wired, Inc., Fast Company and The Boston Globe Magazine. He has appeared as a guest on NBC's Today Show, NPR, CNBC and MSNBC. His first book, "HOUSE LUST: America's Obsession with our Homes," will be published by Doubleday in December 2007. A native of New Jersey, McGinn and his wife live in Massachusetts with their three children.
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