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TEDx Talks
Published: 2012-03-02
Source: https://www.youtube.com/watch?v=ztna1lt_LZE
historically multinationals innovative in which countries like the U. S. and sold those products in poor countries like India the horse and the mission is doing exactly the opposite it's about innovating in a poor country like India and selling those products in a rich country like the US it will appear completely counter intuitive because you think about it it's perfectly logical to see why the poor man
would want a rich man's product Richmond is bringing a cop poor man wants to come which man has a cell phone for men once a cell phone but it is not that logical to see why yet rich man would want a poor man's product that's the essence of reverse innovation I contend that there's going to be probably the most significant growth opportunity for American corporations going
forward what a soul who works in the mission has two components first you can't simply export to poor countries are developing economies you have to innovate debt that's step one step two is take those innovations and really bring them to rich countries why is this going to be a significant phenomena let's look at some facts what this block tells you is that on a bar fight
point five billion people in the so called developing economies that tells me developing economies have bulk of the consuming base but portal slice of these economies the GDP a poor countries is about thirteen trillion dollars even if you apply a modest growth rate five percent you do the math five percent on thirty trillion is one point five trillion dollars of incremental growth that's one thousand five
hundred billion dollars of incremental growth developing economies are huge they have massive consumption basis but that still doesn't tell you why do you need to integrate their and we understand what you need to have it if you look at another statistic which is what I have got here is GDP per capita when you look at the GDP per capita think about India the GDP per capita
in India is about three thousand dollars the GDP per capita in the US is about fifty thousand dollars Dennis Nore business Margaret created for middle America bad the mas market but upper income is fifty thousand dollars you can go and try to capture middle India bad the mass market but competent chemistry Dawson dollars you have to innovate what is happening yes you can imagine it this
way in a rich country there was one person that thousand dollars to spend in a poor country they're not pose some people each a one dollar to spend a portal consumption is the same but the fundamental difference isn't the demand structure let's take an example of how to worsen the mission works this is general electric in their health care business in the healthcare business GE mix
products like cat scum of in modern machines ultrasounds xray machines and this one which is an electrocardiogram an ECG machine this machine probably costs about twenty five thousand dollars and this comes with a very sophisticated custom print though because you go to print the CG that plus another twenty five thousand dollars this is a fifty thousand dollar machine really powerful machine innocent millions of life's now
G. used to sell this machine in India certainly that is felt person the hospital from India who could afford to buy if people symbolic Whitman but the question asked what aboard the remaining ninety percent of India remaining ninety percent of India is in rural India they can't afford this fifty thousand dollar price back not only that him Gorman India that are more hospitals that means fishermen
come on board of the hospital the hospital has to come to the patient that means you're going to take this machine and gore book to gold in rural India this machine this two hundred pounds nearly impossible put it on your back back and we'll both go off but even if you manage somehow to take this machine in a bus or something to the village this machine
operates him host parent you moral India electricity ace a them unavailable are unreliable but even if you manage to find electricity this machine it's a very very sophisticated machine has to be operated by a very trained doctors inside this machine comes with a five hundred page user's manual in rural India that are more doctors but my point is still ninety percent of Indians also have a
heart attack we need to somehow find a solution a couple of years ago G. in the middle of five hundred dollars ECG machine squall mac India contrast five hundred dollars worthless fifty thousand dollars in fact in my we up thinking P. one to unlock I've been India you you better have a ten percent solution if you want to unlock rural India you better have a one
percent solution that means of a product of hundred dollars in do you wish you'd better cost ten dollars in the urban India you bet boss one dollar in rural India not only that this much in the other five hundred dollar machine stream the portables in fact it this less than that can of coca Cola so I can put it in my backpack and go door to
door father this machine operates on batteries stream the critical improve Lindy and this machine is extremely easy to operate probably you can't quite see it this machine only has two buttons there is a green button and then there is a red button you press the green button it works if you press the red button it's as long as you know how to read traffic signs you
should be able to operate this machine my point is this is creating a whole new exciting market in India but the real bonus is this machine is not currently being sold in a hundred and fifty importing transforming healthcare in the richest country in the world the United States of America now how was that creating got in the US imagine there's an accident on the highway and
I'm ambulances going deaf contact the fifty thousand dollar machine inside that I'm been but I can put a pocket size and iPod slice five hundred dollar equipment into the emblem I also imagine ectrodactyly us in a hospital for instance the operating room it's got the passion the surgeon the merciless equipment a chocolate you couldn't be in the for people from all of the equipment into the
operating room but I can bring this five hundred dollars you G. machine such examples are plenty in fact the previous speaker talked about how pathetic did healthcare system in the U. S. this take for instance some of the revolution stardom taking place in India there was a hospital in India because I've been I give as dusk cataract surgery for thirty dollars what probably because people from
dollars from upwards in the US that's another cost hospital called image hospital which is doing open heart surgery hot open heart surgery for two thousand dollars what might cost them over a hundred thousand dollars in the US now this cost difference cannot be explained simply by labor cost differences between the two countries this is about breakthrough innovation in fact even such ridiculously low price points quality
in these hospitals is world class because poor blonde one low cost products they want value yet much hospital for instance one of the various you measure quality in their heart bypass surgery is mortality rate thirty days after surgery but in that hospital d'amato looted thirty days after surgery use one point four percent the U. S. average is two so they got what possibility I have very
low price point the beauty is in the mission you fuck him much hospital for instance Bice what plastic Whitman what you're going to see in male clinic our mass general is exactly what they have then you may wonder such work plus equipment costing very high prices how are they able to bring the cost down they use it five hundred times more if you can use the
same resource five hundred times more the cost the petition comes down in fact we have many many examples a breakthrough in the mission in just about every sect of given the lack of infrastructure in poor countries they all face leapfrog you to the next generation of technology we have seen different telecommunications that they have skip landlines and gone to the satellite forms but when they go
to some of the forms there also you able do you live in services which a boot off the familar platform lake more by the banking like telemedicine all of because China is bring building its energy infrastructure for the first time they leap frog and become global leaders in renewable energy technologies like solar and wind alright take a look at transportation that is a company in India
called Pablo mortars which has launched the bottom Manal the two thousand dollar prize you get bored the pilot of that innovation if somebody told you five years ago you can actually make an internal combustion driven automobile put two thousand dollars you will say get out of here cost of a DVD player in a BMW is a lot more than two thousand dollars aunt take a look
at outlaw low cost hosting I don't own article twelve months ago about what country built at three hundred dollar house for the poor my argument was based on today in this world that are seventy five million people one homeless seventy five million that's the face of United Kingdom sleep on payments for whom sky is the only roof you should really write even insects have homeless would
not even a spider has a home was it not I say hosting is a human right and he does demolition of a global movement the list goes on unfortunately most corporations have divided the world into two the other seven billion people they've divided into two three million who are rich enough who can afford the products we make today and the four billion poor we have left
to charity to take it off governments could take out of this is a lot more to think we have to bring the four billion poured into the consuming this if you want to bring the four billion poured into the consuming this Yukon give the product the three billion richer consumer you'll have to fundamentally members and my point is the in the missions for the poor will
come to transform the life of the people in the rich countries all the innovations and renewable technology it's taking place in poor countries will ultimately rebuild energy infrastructure in the U. this is such a big opportunity how well are American corporations position to capitalize on the reverse innovation unfortunately they have not been position in fact most American corporations especially winners all they struggle in emerging markets
I'm the reason they struggle in emerging markets if they use the American logic the American mindset the American dominant logic to unlock emerging markets it doesn't work let me give you an example Kellogg's is a global leader in the breakfast cereal market making brands like conflicts Kellogg is a complete non player in India which is perhaps one of the largest and fastest growing breakfast cereal markets
in the world I'm Kellogg things they have already eliminated from India because in India damaged the little of conflicts then they make banana conflicts then they make mango conflicts under thing they have in the middle but also if you who have gone to India are familiar with how Indians eat breakfast for instance Indians low hot breakfast so you pour hot milk on your CD of I
don't care whether this plane conflicts Armando conflicts all but I'm a conflict it becomes somewhat who wants you but but when the Indians who are consuming conflicts are Indians who live like Americans or poor Paul milk on the country senior executives sitting in Chicago for Kellogg's might say well a small sales revenue in India's okay once Indians become more civilized they will come to my conflicts
my point death in a multi polar world who defines who is foolish and who's not if American companies have to capture this enormous opportunity universe in the mission them they have to fundamentally change the dominant logic but nobody emerging markets going off this question what is the market for make transplant a global strategy this is saying how can I place my conflicts into the breakfast cereal
market in India you're lost you spread should I ask the question what is the strategy for that month can I understand in a deep way what the customer problems on import countries and then try to use my global capabilities to engage in fundamental innovation we all know one thing double up world has slowed down and the growth the shifting to developing country but if you want
a tough job growth you must end of it but you must have a different piloting for innovation then what we have in the US in the U. S. all or part of them putting the mission this let's bring more money and as the previous speaker talked about that's what we have done in had gas your honor to solve healthcare problems he said medical science and medical
technology you push the frontiers of it but even ask about cost it's not even a second consideration it's the last in the U. S. whenever we want to admit it me said you got the blank check let's go spend money importantly if you have delivered by spending less money because they don't have a source in fact important clears you have to do a lot more but
lot less you have to offer a lot of value to the customer but didn't it'll cost you have to do more with less but lots of people therefore the innovation paradigm has to change from value for money to value for many and if you want a really Freud value for many then you have to engage in full in the fish in fact Harvard Business Review press
is going to publish a book called reverse innovation which outlines how do you expect the mask of the spark but here is the really scary thing if American companies don't go over some addition that doesn't mean poor people in poor countries are going to wait forever some local company will do that in a mish but it does that innovation they will come and disrupt American companies
on a short by the way the end that's hospital that I was talking to you about the two thousand dollars open heart surgery as we speak they're opening up to Dawson bet cardiac hospital in Camden islands the lot just party a hospital in the world and came on islands is a sixty minute flight from Miami to attend to the American positions forty percent of the cost
the people here the Watson the mission is not optional it is oxygen it is the very oxygen ritual fuel future brought for American companies in America if America has to remain strong we have to be asked curious about the problems the people in poor countries as we are aboard the problems of people in rich countries there were some emissions represents the most significant growth opportunity for
