Reverse Innovation - Apple Beware?

I just finished reading Reverse Innovation by Vijay Govindrajan. As expected, the book is a fascinating read with numerous case studies. One point that came through loud and clear was that although the concept of reverse innovation is quite simple, implementing it with success is anything but. The traditional flow of innovations in our economy has been from the developed to the developing nations. Vijay calls this phenomenon "glocalization" in which companies take successful products that they have created for customers in their Western markets and modify them, most often by stripping off many of their features, for distribution all around the world at lower price points. And while glocalization has proved effective in reaching the top segments of the market in developing nations—buyers with needs and resources similar to those in the developed world, it has not proved to be an effective market penetration strategy. The reason - most growth opportunities in emerging markets are not at the top but in the middle market and below, where the gaps between customers’ needs and those of their developed-world counterparts are enormous. Reverse innovation promotes a new, bottom up approach that starts with the recognition that if you want to succeed in emerging markets, you must innovate for them. While success in ripe developing markets might be reason enough to embrace reverse innovation, there is more good news. Because the global economy is richly interconnected, innovations developed for emerging economies can be extended to the developed world. And as Vijay demonstrates with detailed case studies, such "extensions" generally occur in two phases - first in under served, niche areas of the developed markets and then "disruptively" in the mainstream markets.

Now, what was that about Apple?
Today I was reading an HBR blog entry that was talking about some of the problems Apple is facing with its hugely popular and successful iPhones in China. One critical problem is input. To date Apple's U.S.centric R&D efforts have failed to produce a Chinese-friendly input system. This is a serious problem, because texting is an integral part of Chinese life. As a workaround, Chinese iPhone owners jailbreak their phones and install third-party software that drastically simplifies the process. And then there is Siri - the most attractive new feature in the iPhone 4S. Well, Siri does not work in Chinese and even struggles in English if you have a strong Chinese accent.

So, in other words, Chinese users are cobbling together an iPhone experience from a variety of sources, and the overall experience is not very good. All of this is good news for Apple competitors Samsung, HTC, and Microsoft/Nokia. Chinese consumers are hungry for someone to develop an ecosystem that makes smart phones easy to use in their ecosystem/context/environment. Or maybe the winner will be a local player such as ZTE and Huawei. In any case, the winner will more than likely not be a company that develops its hardware, software, and the ecosystem from a U.S. perspective. (Hint - can anyone say reverse innovation?)

The Bottom Line - While Apple is the dominant force in the global smart-phone market today, that dominance could be very short-lived if Apple is not careful. It seems that Apple's leadership would be well advised to read Vijay Govindrajan's latest book on Reverse Innovation.