Reverse innovation is a term used to describe an increasingly popular practice of developing new innovations in emerging markets and distributing them globally. Reverse, they call it, because this is the mirror image of a long-established practice to innovate for the needs of developed markets and export slightly modified versions to the rest of the world.
Now, the income gap that exists between emerging markets and the more developed ones is what explains its popularity – it is cheaper to innovate in lower cost geographies and to adopt only success stories for the developed markets.
Here is an idea: a similar opportunity exists at a smaller scale, between start-ups and established multinationals – it would be cheaper to innovate by experimenting at start-up level and adopting only the successful models for use in the established company.
Wait a minute, does this not already happen under the label open innovation?
Well, to some degree, it does. However, open innovation is mostly appropriate to solve technical problems, which do not require disclosing proprietary information pertaining to the company that initiates the challenge.
What I suggest is a model that would premeditatedly create and/or support start-ups that are building their business model specifically in answer to a challenge initiated by an established multinational company, via a relationship governed by non-disclosure agreements.
The established company gets to experiment with several solutions at low cost and only adopt the concept proved successful. The start-ups benefit from access to resources and the promise of either a prearranged exit-strategy (buy-out) or a guaranteed contract to supply the innovation.
Admittedly, there is much and more to discuss about the pros and cons of adopting such an approach to innovation. What I like most about it, is the natural synergy that just waits to be exploited.
A typical entrepreneur is high in the ability to generate fresh thinking, but low in the ability to execute. The typical C-suite executive is high in the ability to execute, but may be low in the ability to unlearn proven ways of thinking – especially when his company is very successful.
Since creating value requires both fresh thinking and an ability to execute, building platforms that connect fledgling entrepreneurs with seasoned executives may be a territory worth exploring.