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A case study on TATA NANO:-A Reverse innovation

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The “one Lakh” car that drives one billion dreams…

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What is “Reverse innovation” & who coined this term?

Reverse Innovation is the strategy of innovating in emerging (or developing) markets and then distributing these innovations in developed markets. Many companies are developing products in emerging countries like China and India and then distributing them globally .

Vijay Govindarajan. He is the Earl C. Daum 1924 Professor of International Business at the Tuck School of Business and founding director of Tuck’s Center for Global Leadership.

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Evolution of Reverse innovation• Phase 1 — Globalization —

Multinationals build unprecedented economies of scale by selling products and services to markets all around the world. Innovation happened at home, and then the new offerings were distributed everywhere.

• Phase 2 — Glocalization — In this phase, multinationals recognized that while Phase 1 had minimized costs, they weren’t as competitive in local markets as they needed to be. Therefore, they focused on winning market share by adapting global offerings to meet local needs.

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Continued…• Phase 3 —Local Innovation

— In this phase, the first half of the reverse innovation process, multinationals are focusing on developing products “in-country, for country.”

• Phase 4 — Reverse Innovation —Phase 4 is “in country, for the world.” Multinationals complete the reverse innovation process by taking the innovations originally chartered for poor countries, adapting them, and scaling them up for worldwide use.

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A short video on Reverse innovation

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Why reverse innovation?• For decades, US multinationals

have focused their innovation efforts on the needs of rich countries and then exported their offerings around the globe. But today, they must be just as good at the reverse. They must innovate to solve the problems of the developing world -- and then bring the innovations home.

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Continued.. The income gulf Emerging markets have customer’s discontinuity

because there is a clear paradox in these markets-they are usually large fast growing economies with very low per capita income. Hence the innovation opportunities are more.

There is no way to design a product for the American mass market and then simply adapt it for the Chinese or Indian mass market. Buyers in poor countries demand solutions on an entirely different price-performance curve. They demand new, high-tech solutions that deliver ultra-low costs and “good enough” quality.

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IDEA GENERATION• ““I saw families riding

around on scooters withkids standing up and the mother carrying a baby and sitting pillion and decided to do something about it. It started as a quest for an affordable transportation solution”.

• ----RATAN TATA

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TATA NANO:A REVERSE INNOVATION• While companies like Ford

set up its global automobile platform in India and catered to the niche premium segments in India, Tata introduced the Tata Nano for the price conscious consumer in India in 2009. Tata plans to launch Tata Nano in Europe and U.S. subsequently.

In 2009, Tata Motors launched the Tata Nano — the Rs1 lakh ($2,000) people's car.

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REVERSE INNOVATION: The idea Multinational companies have to find a 10% solution to

capture the full potential in urban India and a 1% solution to capture rural India. That is to say, if a product was to sell for $100 in US, a similar solution is needed for urban India at $10 and for rural India at $1.

This is because of the income gap between US and India. The Tata Nano is targeted at the non-consumers of

automobiles in India today, namely the two-wheeler population. The two-wheelers are priced at $1,500. By introducing an automobile for $2,000, Tata Motors plans to migrate the two-wheeler population into four-wheeler users.

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Different Example of Reverse Innovation

• Tata – Swacch (World’s cheapest water purifier)

Swacch means clean in Hindi.

Tata launched the cheapest water purifier (retail prices of Rs 749 and Rs 999)and not require running water, power or boiling.

Targeting the rural market in India.

Get tremendous success. The company feels it will

open a whole new market.

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KFC – Taco Bell – Yum! Restaurants KFC test-marketed

Krushers, a range of chilled drinks in the cold beverages in India.

The launch in India was very successful.

‘Krushers’ accounts for 8 per cent of KFC’s beverage sales in India.

Plans to introduce it to other markets.

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Nokia – New business models• Nokia’s classified ads in

Kenya are being tested as new business models.

• Nokia also incorporated new features in its devices meant for U.S. customers after observing phone sharing in Ghana.

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Hewlett-Packard (HP) – Research Labs in India

HP intends to use its research lab to adapt Web-interface applications for mobile phones in Asia and Africa.

Achieve great success. other developed

markets.

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Conclusion• 'Reverse innovation isn’t optional. It is oxygen.' • Multinational companies need to change the

very way they conduct business.• The success rate of Reverse innovation is good

because products are created locally in developing countries, tested in local markets, and, if successful, then upgraded for sale and delivery in the developed world.