For decades, General Electric and other industrial-goods manufacturers based in rich countries grew by developing high-end products at home and distributing them globally, with some adaptations to local conditions—an approach known as glocalization. Now they must do an about-face and learn to bring low-end products created specifically for emerging markets into wealthy markets.
That process, called reverse innovation, isn’t easy to master. It requires a decentralized, local-market focus that clashes with the centralized, product-focused structure that multinationals have evolved for glocalization. In this article, Immelt, GE’s CEO, and Govindarajan and Trimble, of Dartmouth’s Tuck School of Business, describe how GE has dealt with that challenge.
An anomaly within the ultrasound unit of GE Healthcare provided the blueprint. Because China’s poorly funded rural clinics couldn’t afford the company’s sophisticated ultrasound machines, a local team built a cheap, portable ultrasound out of a laptop equipped with special peripherals and software. It not only became a hit in China but jump-started growth in the developed world by pioneering applications for situations where portability is critical, such as at accident sites.
The team succeeded because a top executive championed it and gave it unprecedented autonomy. GE has since set up more than a dozen similar operations in an effort to expand beyond the premium segments in developing countries—and to preempt emerging giants from disrupting GE’s sales at home.