Inclusive,+Reverse+innovation

What is inclusive innovation?
The following is from the World Bank's S&T Action Plan. Download from []

Inclusive innovation programs are designed to help countries build the STI capacity they need to meet the daily needs of the four billion people with an income of less than two dollars a day who live at the so called “Bottom of the Pyramid” (BOP)[1]. Living in poverty, they lack access to such necessities as water and sanitation services, housing, quality education, basic health care, electricity, telephones, internet, roads, and modern financial services. Addressing the needs of the BOP is an essential component of inclusive globalization and, therefore, must be a priority objective of STI capacity building partnerships. The objective of inclusive innovation is not to produce low performance, “cheap” knock-off versions of rich country technologies so that they can be marketed to poor people. Rather, the objective is to harness sophisticated science and technology know-how to invent, design, produce, and distribute, primarily via private sector SMEs, high performance technologies at prices that can be afforded by the billions of people at the BOP. As Dr. R.A. Mashelkar declared during the December 2009 Global Forum, a vailable at: []

“The challenge [of inclusive innovation] is to deliver //high performance// products, processes and services at an ultra low price for resource poor people, from housing to transport and from medicines to computers. Such innovations should not just be //affordable// but //extremely affordable//. For achieving this, one cannot rely on just //incremental// innovation but //extreme// innovation or //disruptive// innovation. Then only can they be truly inclusive.” Inclusive innovation programs must also develop mechanisms that will encourage those at the BOP, who are typically excluded from the innovation process, to co-create and co-innovate inclusive solutions. To be inclusive, the BOP must be included in the innovation process. It is not sufficient for OECD institutions simply to parachute “inclusive” technologies into developing countries. Inclusive solutions will be much more sustainable in the long run if developing countries build the capacity to generate their own inclusive innovation solutions. Partnerships can play an important role in this capacity building process.
 * Inclusive Innovation Challenges **

Inclusive innovation programs must address two major challenges. The first is helping developing countries build indigenous research and engineering capacity so that they can handle these inclusive innovation tasks without relying entirely on outside assistance. Unfortunately, science and engineering institutions in many developing countries are currently not geared to producing inclusive innovations and addressing problems at the BOP – or at any other levels of the pyramid, either. Indeed, many of these institutions are trapped in a vicious circle, as depicted in Figure 3. Funding for science and technology is relatively low and generally not sufficient to support high quality, socially and economically relevant research. Yet requests by scientists for additional resources are often rejected on the grounds that they have not generated relevant research results with previous funding. As a result, the system remains stuck. High level political commitment will be required to establish new arrangements for STI – where more funding is provided for inclusive innovation capacity building programs to enhance the relevance and quality of the existing STI system. The second challenge relates to scaling up, marketing, and deploying new, promising inclusive innovations. These potentially valuable innovations tend to be isolated -- from each other, from potentially helpful technology commercialization and diffusion efforts, from local entrepreneurship development and support programs, and from public and private funding sources that could help take ideas from concept to prototype. For example, many inclusive innovations showcased at the World Bank’s Development Marketplace (DM), catalogued by India’s Honeybee Network, or developed by scientists and engineers working at the Global Research Alliance, CGIAR, MIT’s D-Lab, SMU, Purdue, or Arizona State University, among others remain stuck in the lab or at the prototype stage. They are not transferred to SMEs for production and distribution. Needless to say, this blunts their potential development impact. Similarly, a successful inclusive innovation that was developed for and marketed in a rural village in Africa, for example, may also be relevant for rural villages in South Asia or Central America. Unfortunately, regional cross pollination is a rare occurrence. A number of factors account for this isolation. For example, individual scientists, engineers, and inventors – irrespective of whether they are working in developing countries or at MIT’s D-Lab -- do not have the capacity to scale-up, market, and deploy their inventions and yet, at the same time, the institutions needed to handle these tasks do not exist in many developing countries. Similarly, the know-how needed to enable these institutions to operate efficiently needs to be transferred from developed to developing countries. And finally, many institutions such as MIT, Arizona State, etc. that are actively promoting inclusive innovation programs do not have the financial and technical capacity to address these institutional and training needs. The World Bank does not have laboratories to generate inclusive innovations. But in collaboration with various partners and in a series of strategic interventions targeted at various critical links in the inclusive innovation chain – R&D, product design, financing, entrepreneurship support, marketing, and distribution -- it can help to overcome these obstacles."

For more information about these issues, see the special report in the April 17 edition of The Economist entitled, **The World Turned Upside Down: Innovation in Emerging Markets** available at: [| http://www.economist.com/members/survey_paybarrier.cfm?issue=20100417&surveyCode=NA]

Also see: C.K. Prahalad, **The Fortune at the Bottom of the Pyramid**, Wharton School Publishing, 2006,


 * Mobilizing Science-Based Enterprises for Energy, Water and Medicines in Nigeria**, US National Academies, 2008, available for download at[]

and the following articles:

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 * Reverse Innovation a Popular Trend**

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 * What is Reverse Innovation?**

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 * Is Reverse Innovation Like Disruptive Innovation?**

Also see, R. A. Mashelkar and Sushil Borde, **Value for Money and for Many** __Technology Review__, India Edition, February 2010, available at: [|www.technologyreview.in]

Organizational Mechanisms of Inclusive Growth: A Critical Realistic Perspective on Scaling
@http://www.iese.edu/research/pdfs/DI-0840-E.pdf This document is password protected and does not therefore allow identification of facets - which would be helpful in this long exposition.

Emerging Markets As a Source of Disruptive Innovation: 5 case studies
@http://www.core77.com/blog/business/emerging_markets_as_a_source_of_disruptive_innovation_5_case_studies_15843.asp

"One of the most misunderstood terms in the business world is //disruptive technology//. Too many companies—and the marketers in charge of bringing these companies' innovations to market—assume that "disruptive" connotes a highly-sophisticated, high-end product with cutting-edge technology that will appeal to early adopters. Actually .... disruptive technologies were exactly those that did not appeal to entrenched market leaders because they tended to under-perform existing technologies and served a less-profitable consumer demographic..... [W]e could just as easily extend that thought to say that those innovations that are simpler, cheaper and offer value to the less profitable—those successful at the Bottom of the Pyramid (BoP), in other words—are the ones which contain seeds of disruption in markets outside of their intended audience."

Sustainable product development as practised in developing countries
@http://www.lumes.lu.se/database/alumni/98.99/theses/gr%C3%B6nvall_magnus.pdf

"Product development and technology are powerful tools when a country is developing. The development of indigenous technology is important to strengthen the domestic market and increase a country' s self-reliance. This could be done through the concept of sustainable product development. This concept lies in the intersection of three perspectives; that is, the social, the environmental and the economical perspective. However, interaction with other actors, viewed in a societal context, is more important than the use of the concept itself. In a model illustrating the most important actors, policy, indigenous technology, domestic economical development, education and indigenous knowledge are identified. The two most important actors are policies and education. A policy on increasing the education level within the population is considered as the key for a successful implementation of sustainable product development. This will provide the people with the knowledge to accept, handle and add service to the technologies."

Policy Measures to Support Inclusive and Green Business Models
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"Inclusive business – the inclusion of the poor as consumers or producers – and green business – reducing environmental impacts – are often highly interlinked. Inclusion without greening can lead to pollution, ecosystem decay and depletion of natural resources – all of which ultimately harm the poor. Focusing on greening to the exclusion of the poor can create political resistance and make environmental business models increasingly difficult to implement. Business models that focus on one set of issues at the expense of the other are thus not only difficult to justify; they are also often unviable over the long-term. Realising synergies between inclusion and greening requires innovating technologies, products and services, and, ultimately, business models. Responsible companies that aim to bring about both green and inclusive innovations need sufficient financial, technical, human and organisational resources to address the multiple challenges inherent in low-income markets in developing and emerging countries. A diverse set of actors is involved in such processes – each of them taking a different role. Mission-driven organisations, like social enterprises or market-oriented NGOs, employ market-based mechanisms to address social and environmental challenges, and often tend to take on risky and uncertain pioneering and development work. But traditional businesses are also increasingly recognising the inherent risks in business models that neglect inclusion and greening – or aim exclusively for only one of those objectives. They often take up the models and help them achieve scale. Coordination efforts and partnerships crucially support this process – driven by actors such as social investors, local intermediaries, donors and policy-makers.

The latter play a key role in supporting the efforts of the different types of organisations involved in marked-based inclusive and green innovations. First and foremost, policymakers matter in providing an appropriate infrastructure for markets, including physical infrastructure, and also regulatory frameworks that are stable and secure, yet flexible enough to allow room for experimentation. Secondly, policy-makers can influence market mechanisms by designing subsidy and incentive systems for green and inclusive innovations, helping mission-driven pioneers to survive during the pioneering phase, and allowing all players to realise market-wide strategies and economies of scale. Thirdly, policy-makers can facilitate cooperation and partnerships between actors, and provide them with the appropriate learning environment to make achieving inclusion and greening a reality."

Investing in Inclusive Innovation
@http://www.bopinc.org/blog/investing-in-inclusive-innovation/

"The people living at the BoP lack proper access to basic goods and services such as food, water, clothing and housing resulting in stringent challenges like chronic malnutrition or increase health issues. The **private sector** can play a pivotal role being a driver for sustainable growth and self- reliance of BoP communities and ultimately mitigating these challenges. For the private sector, this is also a growth avenue as the size of the overall market opportunity for essential goods and services for the BoP – housing, rural water delivery, maternal health, primary education and financial services – was estimated as representing a $400 billion to $1 trillion market opportunity over the next ten years. > **Inclusive Innovation:** > “Something new with sustainable impact for and with the BoP. The novelty can be in the form of a product, services or process. Inclusive Innovation is about harnessing science, technology and innovation know-how in order to address the needs of the BoP.

To address these markets, conventional product development and innovation strategies are most of the time incompatible with the conditions and constraints present at the BoP. There is a need to enhance the capacity of market-oriented alliances in order to tailor innovative products and services for unusual markets balancing the four A’s: //affordability, accessibility, availability// and //acceptability//, and create market based pro-poor innovations or **inclusive innovation."**

Beijing Forum Promotes Inclusive Innovation for Sustainable Growth
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 * "Inclusive Innovation" means innovation that addresses the needs of the poor, such as a $25 incubator, a $200 laptop, a $2,000 passenger car.
 * International experts shared cases of how inclusive innovations have not only increased productivity but reduced inequality in their countries.
 * To make innovations inclusive, government has a key role to play and global collaboration is also essential, they say.

Reverse innovation (also called frugal innovation or resource constraint-based innovation), reverse engineering, and inclusive innovation
Govindarajan defines reverse engineering as providing decent performance at an ultra-low price. This is quite different from the definition of inclusive innovation as providing superior performance at an ultra-low price based on an entirely different innovation process. Ram Mashelkar is talking about a profound revolution in the way we innovate and the goals we are trying to achieve; Govindarajan is talking about how GE can survive in this new market environment. But both are talking about how innovations can move from the south to the north and not only from the north to the south. The emphasis in reverse innovation seems to be that of global enterprises creating innovations in developing countries which are scalable not only across other emerging markets, but more importantly (for the global enterprise), that can be scaled up for the developed world.

What is Reverse Innovation?
@http://www.vijaygovindarajan.com/2009/10/what_is_reverse_innovation.htm

Phase 1 — Globalization —Multinationals built 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 Phases 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. Innovation still originated with home-country needs, but products and services were later modified to win in each market. To meet the budgets of customers in poor countries, they sometimes de-featured existing products.

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.” They are taking a “market-back” perspective. That is, they are starting with a zero-based assessment of customer’s needs, rather than assuming that they will only make alterations to the products they already have. As teams develop products for the local market, the company enables them to remain connected to, and to benefit from, global resource base.

Phase 4 — Reverse Innovation — If Phase 3 is “in country, for country,” 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.

Is Reverse Innovation Like Disruptive Innovation?
@http://blogs.hbr.org/hbr/hbr-now/2009/09/is-reverse-innovation-like-dis.html

"There is an overlap between reverse innovation and disruptive innovation but not a one-to-one relationship. In other words: Some, but not all, illustrations of reverse innovation are also illustrations of disruptive innovation.


 * A reverse innovation, very simply, is any innovation likely to be adopted first in the developing world.** It is so called because historically nearly all innovations have been adopted first in rich countries. We argued that reverse innovation will become more and more common, and that it presents a formidable organizational challenge for incumbent multinationals headquartered in the rich world. We also explained an organizational model for overcoming that challenge.

A //disruptive// innovation has a particular dynamic that endangers incumbents. The incumbent's product has two primary dimensions of merit, A and B. (For example, A could be quality and B could be speed of delivery.) Mainstream customers are mostly interested in A but there is a minority customer set that values B more than A. The disruptive innovation, at launch, is weak on A but strong on B. As such, it attracts only the minority. Because mainstream customers don't want it, incumbents tend to ignore the new entrant and the new technology. But over time, technology improves, and the innovation gets better and better at A. Eventually it meets the needs of mainstream customers on dimension A, and, since they also place at least some value on B, they start choosing the new product. The incumbent is suddenly disrupted; they have ignored the new technology all along."

This article explains the **relationship between reverse innovation and disruptive innovation by using** three primary situations that create the possibility of reverse innovation.