Vijay Govindarajan

When a multinational corporation learns to generate successful innovations in emerging markets and then exports that knowledge and those innovations to the developed world, new business possibilities suddenly burst forth. The limits imposed by its traditional operations become surmountable, and the company can rethink all its products and attack new markets in search of growth.

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Reverse innovation&#8212;developing ideas in an emerging market and coaxing them to flow uphill to Western markets&#8212;poses immense challenges, because it requires a company to overcome the institutionalized thinking that guides its actions. That&#8217;s why the experience of the automobile-infotainment division of Harman International is so impressive. The U.S.-based business, known for ultrasophisticated dashboard audiovisual systems designed by German engineers, developed a radically simpler and cheaper way of creating products in emerging markets and then applied what it had learned in the process to its product-&#173;development centers in the West. 
Harman did this using a two-part approach: radical change from below combined with astute leadership from above. A small team based in India and China set audacious goals, created a new organizational structure, and adopted new design methods, while the chief executive, Dinesh C. Paliwal, rebranded the company&#8217;s future, shifted the corporate center of gravity to emerging markets, made sure that legacy units continued to thrive, and averted conflict between old and new.

A Reverse-Innovation Playbook

Reverse innovation—developing ideas in an emerging market and coaxing them to flow uphill to Western markets—poses immense challenges, because it requires a company to overcome the institutionalized thinking that guides its actions. That’s why the experience of the automobile-infotainment division of Harman International is so impressive. The U.S.-based business, known for ultrasophisticated dashboard audiovisual systems designed by German engineers, developed a radically simpler and cheaper way of creating products in emerging markets and then applied what it had learned in the process to its product-­development centers in the West. Harman did this using a two-part approach: radical change from below combined with astute leadership from above. A small team based in India and China set audacious goals, created a new organizational structure, and adopted new design methods, while the chief executive, Dinesh C. Paliwal, rebranded the company’s future, shifted the corporate center of gravity to emerging markets, made sure that legacy units continued to thrive, and averted conflict between old and new.

A Reverse-Innovation Playbook

Summary.

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