Next Practices in Business Strategy

By Tuck Communications
Published Oct 21, 2009

When Professor Vijay Govindarajan took a two-year leave from the Tuck School to serve as Professor in Residence and Chief Innovation Consultant at General Electric, he expected he would be applying his long-considered theories. His current role with the company is to push its agenda on innovation, an area he has spent 30 years researching.

But instead of being the expert, he more often feels like a student. "I've come to the conclusion that there are a lot of phenomena that I haven't understood," Govindarajan says. "Now I have so many ideas, I can write for 25 years."

General Electric is on the leading edge of what he calls "next practice" in business strategy: reverse innovation. In an October article for the Harvard Business Review, co-authored with GE's chairman and CEO Jeffrey Immelt D'78 and Tuck faculty member Chris Trimble T'96, Govindarajan describes how GE is making the radical shift to this new model.

Since World War II, American companies have employed a strategy known as glocalization: they develop products at home and distribute them worldwide, making small adaptations to local conditions. They largely focused on markets in Europe and Japan, and the model was successful because those customer bases were as affluent as those at home in the U.S.

Now, Govindarajan points out, the global map has been redrawn. China and India are demanding attention as the fastest-growing markets in the world, and they warrant a new approach. The conventional product-driven one, aimed at the very rich, will only skim the surface. This is where reverse innovation becomes crucial.

The HBR article, "How GE Is Disrupting Itself," explains how this strategy has worked in the company's health care division, whose primary business is high-end medical-imaging equipment. "When you take a market-backed view," Govindarajan explains, "you ask 'What are the customer's problems in health care?' and suddenly the whole picture can change."

In rural India, for example, there are often no clinics or hospitals, so instead of patients going somewhere to receive medical care, health care providers have to go to the patients. There is also a shortage of medical doctors, so medical equipment must be easy for paramedics to use and must be portable, battery powered, and inexpensive. One such project involved a handheld electrocardiogram device that sells for $1,000. Products such as these, developed specifically for emerging markets, have also found favor in the U.S. There, they have pioneered new applications in emergency rooms and at accident sites.

GE is at the forefront of this movement toward reverse innovation, having developed more than a dozen local growth teams in China and India. But Govindarajan warns that there is much work to be done, particularly in changing the mindset of managers who have succeeded at the glocalization model. "It is a marathon race, and the fact that you are leading after 400 meters means nothing," he says.

Since he began his position with GE in January 2008, Govindarajan has visited China and India half a dozen times each. A native of India, he feels very passionate about this job. "How many academics get the opportunity to get a front-row seat and watch a real company with real managers solve real problems? It's been so much fun to learn and to give back to my home country. It's amazing when someone pays you to do that."

Vijay Govindarajan is the Earl C. Daum 1924 Professor of International Business and director of the William F. Achtmeyer Center for Global Leadership at the Tuck School of Business at Dartmouth. He works with CEOs and senior management teams to develop strategies that address tomorrow's business realities.






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