The $2,000 Car

Increasingly, Western companies are developing products in countries like China and India, and then distributing them globally. For example, GE developed an ultra-low-cost ultrasound for rural China which is now marketed in over 100 countries. Logitech developed an affordable mouse for the China market which sells for (the Chinese equivalent of) $19.99 and which they now sell in Europe and the U.S. Deere & Company developed a small tractor, the 35-horsepower Krish, built and priced specifically for the India market, competing head on with the Indian market leader, Mahindra & Mahindra. Deere now uses Krish-style features in products sold all over the world. We call this phenomenon reverse innovation — any innovation that is adopted first in the developing world, and then later in the developed world.

Surprisingly, such innovations defy gravity and flow uphill from the poor to the rich.

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