While first world countries traditionally set the pace for technological development, they’re not the only ones with good ideas.
As the need for clean and green transportation systems grows, Business Prof. Peter Adriaens said many solutions will come from emerging markets as part of a new phenomenon known as “reverse innovation,” the process in which a piece of equipment, technology or a service from a developing country is taken and redesigned for Western markets.
Car-sharing services like Zipcar are modeled after transport-sharing systems from the developing world, Adriaens said. Zipcar co-founder Robin Chase is a frequent traveler and was inspired by car-sharing programs in developing countries. New mobility companies such as this are increasingly designed through reverse innovation.
“It happens because emerging markets have an entirely different marketplace to ours,” Adriaens said.
In developed Western economies, innovation typically happens through a trickle-down process. Expensive and imperfect technologies are developed and then made cheaper as they are adopted by the mass market. This process involves scaling technology and bringing down production costs.
In emerging markets, the production system is tackled from the other side. Products that are easy, cheap and simple to use are designed for the mass market. Reverse innovation makes these products more complex and implements them in developing economies.
The first documented occurrence of reverse innovation was in health care, Adriaens said. General Electric took an electrocardiogram developed for Asian markets, then redesigned and sold it in the United States. The equipment was previously only available in hospitals due to its size, but a portable version is now available to first responders.
Adriaens is now analyzing the effect of reverse innovation on transportation in cooperation with Susan Zielinski, director of the sustainable mobility program at the University’s Transportation Research Institute and Deborah de Lange, assistant professor of global management studies at Ryerson University in Toronto. The initiative is funded by grants from Ford Motor Company and The National Collegiate Inventors and Innovators Alliance.
For American companies such as Ford, reverse innovation represents a new phenomenon. Most companies have yet to develop a strategy that incorporates it into their business model.
“Companies don’t have a reverse innovation strategy because it takes a different way of looking at the business that traditionally companies don’t do,” Adriaens said.
Companies are now actively seeking the factors that will result in reverse innovation, but there are no clear answers.
“The big problem with reverse innovation is that it’s very unpredictable,” Adriaens said.
In many ways, American companies are playing catch-up with emerging economies like China.
“China has used reverse innovation very effectively; they’ve almost institutionalized it,” Adriaens said.
Zielinski said the future of transportation might be based on interconnectivity between different forms of new mobility. She added that China is developing a new capacity for innovation in response to its booming economy.
“Information technology makes it more possible for more people to innovate on a range of levels,” Zielinski said. “Now, around the world, you have a portfolio of transportation forms that are much more equal than simple car ownership and you have the option to choose between them.”