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Reverse innovation 2.0: More MNCs take India's frugal engineering global

Times of India:  July, 2015

Mumbai: A new top-loading washing machine developed - based on feedback from Indian consumers - by Samsung India's research and development lab in Chennai for the Indian market is now a bestseller in South Korea. What's more, it's altering the culture of washing clothes in the distant Asian market, where front-load machines was a distinct trend.

South Korean chaebol Samsung is not the only global company which is taking advantage of frugal engineering and cheaper development costs in India to make products here which are both cost-effective and relevant for the global market. By the festive season, French car maker Renault is introducing a new car in the Indian market, which was conceived and built from scratch by its Indian R&D as part of another frugal engineering strategy championed by Carlos Ghosn, chairman and CEO of the Renault-Nissan Alliance. Part of Ghosn's pet project, the car - Kwid, priced around Rs 3-4 lakh - would be launched in other markets globally over time.

Started by the likes of GE and Philips in the healthcare space, reverse innovation is witnessing a new wave of ideas in sectors like consumer durables, automobiles and foods as well. It's a process by which MNCs manufacture cost-effective products through local R&D, designed for the local markets and which are ultimately launched globally.

Samsung's ActivWash brought the top-loading machines back in vogue in South Korea, cornering over 40% of the top-loader segment. "ActivWash is an example of a product that we made for India, but soon got recognized for its utility across our shores," Ranjivjit Singh, senior VP, corporate marketing, Samsung India Electronics, said. Project "Dhobighat', as it was called, was conceptualized, developed and launched in India last year and now, an ActivWash sells every 2 minutes in South Korea. Samsung showcased the product at CES Las Vegas - the world's top consumer electronics show - earlier this year where it grabbed both eyeballs and reviews.

Arch rival LG too has developed a few products in India, which it now plans to sell in South East Asia and Middle-East and Africa region. Innovations from India such as mosquito Away Technology ACs, smart refrigerator 2.0 and a top-load washing machine are all included in its list of exports by the year-end.

BSH Household Appliances (BSH), which sells domestic appliances under the Bosch and Siemens brand, too has worked on some India-specific innovations on its washing machines. An Indian washing machine to give shortest wash cycles was introduced in other ASEAN countries subsequently. Another product, designed to give up to 10% better drying efficiency, is now being explored for other ASEAN countries as consumers there have a similar requirement. "BSH is continuously working on innovations and reverse innovation to improvise and offer the best experience to its discerning consumers," Gunjan Srivastava, MD & CEO, BSH said.

Customization is rampant in the food industry as well. Burger King, which has opened around 17 restaurants so far in India, has developed products that are unique to the Indian market. "This is the only experience in the world where we have started from zero. In most other markets where we have launched in the last 4-5 years, we have come in with our core menu. In India, we have a mutton whopper, a chicken whopper, a veg crispy product that are unique to India," Jose E Cil, global president, Burger King, said. Burger King is open to the idea of exporting the concept to other parts of the world, such as the UK.

On the other hand, Mondelez India (erstwhile Cadbury), which pioneered the development of visi-coolers, about 10 years ago, has recently deployed a new technology in these low-cost refrigeration systems to Malaysia. Visi-coolers help in the storage of products like chocolate. Several countries are now conducting in-store trials for this technology.

Coca-Cola India, too, developed a visi-cooler for the Indian market, which was later introduced in other parts of the world. Similarly, Hindustan Unilever's Pureit water purifier, an Indian innovation that was launched to tackle the problem of safe drinking water, was later made available in several markets like Indonesia, China, Africa and Brazil.

Historically, companies innovated in a rich country like the US and sold those products in a poor country like India. Reverse innovation is doing just the opposite. Vijay Govindarajan, Coxe Distinguished Professor at Tuck at Dartmouth & Marvin Bower Fellow at Harvard Business School, said innovation is being adopted first in a poor country now as customers here are fundamentally different from customers in rich countries. Rich countries, on the other hand, have the money to spend on innovation as those countries have customers with purchasing power to buy expensive products.

Take, for instance, healthcare. India has 1.2 billion people who need healthcare but majority of them do not have much to spend. "We have, relatively speaking, fewer hospitals to take care of this huge population as compared to the US. The only way India can solve its problem is through breakthrough innovations in healthcare that can deliver world-class quality at highly affordable prices," said Govindarajan, who believes India can lead the world in breakthrough innovations in education and renewable energy.

"When India can innovate world-class quality products at ultra-low costs, those products will appeal to customers all over the world," he said.

India's space programme may not have sent a spacecraft to explore the outer rings of the solar system yet, but India has helped global companies supply small, but significant products and process ideas initially designed exclusively for the Indian market to be later used by consumers across the world.