Years ago, in what feels now like a bygone era, large multinational businesses derived most of their revenues, and sought most of their growth, in home markets. If they looked abroad, it was typically to other rich countries.
But nothing in the global ecosystem is static. Home markets are mature and saturated. Most of the world's untapped buying power is in the emerging markets of Asia, South Asia, Eastern Europe, Africa, and Latin America. Multinationals now understand that a truly global strategy must include smart pathways to strong positions in emerging economies. For there is where the richest future growth is to be found.
Reverse innovation -- the subject of this important book -- is one of those smart pathways. It is a powerful new tool to add to your innovation capabilities. And it is certainly one of the keys to making the most of emerging-market opportunities.
As you will read in chapter 10, PepsiCo has begun to reap the benefits of reverse innovation in our snack-foods business. We, like virtually every multinational business, once approached overseas markets in the conventional way: We exported! We created products in America, and then we sent them around the world. Sometimes we made small modifications in flavor and packaging for local markets, but these were basically global products.
Now, however, we have the benefit of new insights. First, we have learned better to appreciate the important differences of people from place to place. Second, we have learned that a market wants to have its culture, values, and tastes reflected back to it in the products it chooses to consume. And, third, we have learned that people around the world -- even for all of their differences -- still have some desires in common. It seems everywhere, in our sector of the economy, people are demanding products made with natural, healthful ingredients and manufactured in a sustainable way. For us, that has meant offering products that are not just "Fun for You," but also are "Good for You."
If you look at these three insights, you will see that they combine global vision and mission with an intense focus on local needs and preferences. This mixture is at the heart of reverse innovation. The good news is that multinational businesses -- with their deep resources, broad reach, and diverse international talent base -- are ideally suited to execute such a global-local juggling act. The bad news is that it's much easier to accept the wisdom of reverse innovation than it is to put it into practice.
The tremendous value of this book is that authors Vijay Govindarajan and Chris Trimble have richly stocked it with practical lessons to go along with the underlying theory. Throughout -- and especially in the eight case-study chapters -- they show the struggles and occasional missteps that are always an important part of any transforming journey.
For me, the key insight the book holds is one that I think will feel absolutely true to any multinational executive: the lessons of what the authors call "dominant logic." Every enterprise that has enjoyed great success is both sustained and endangered by all that it has learned in the past. That is its dominant logic. The challenge of reverse innovation lies in its requirement that you set aside -- if only for certain initiatives -- the powerful logic of the past. Otherwise, it will stand in the way of the humility necessary to admit that you still have much to learn.
It is very hard for innovators in research centers in the United States to know what will appeal to -- much less delight -- consumers in Beijing or Mumbai, Nairobi or Mexico City. You have to roll up your sleeves in those places and learn by engaging with and listening to the customers there, by understanding your local rivals, and by empowering your own people, who grew up in those places, to put their regional knowledge to work.
We are none of us infallible geniuses. Along the way to doing important things -- big, valuable things -- we will all make mistakes. That is not a reason to shirk from beginning. We need to accept that mistakes are inevitable and give ourselves permission in advance to make them. Happily, the authors let you look over the shoulders of PepsiCo and many other businesses as we learn how to practice reverse innovation. You will get to see the bitter with the sweet! And it may save you from making some mistakes of your own.