In recent years, scholars have researched and published on “reverse innovation”, i.e. how to harness and channel innovations from the periphery to the Centre.
Since future growth markets (India, China, Brazil, etc.) are in the periphery of New York or Basel headquartered multinationals, a topic of academic attention has climbed the rank of CEO’s priorities. Then, is always right to leverage knowledge, ideas and innovations. It is intuitive, there is value to extract and is in sync with the new global economy set-up. The answer at the top of the western multinationals has been: Let’s go for it, now! Let’s rally the troop and make “reverse innovation” a strategic priority.
The issue faced by many in their first attempts is the following: for years, multinationals – particularly Anglo-Saxons ones – have operated, fine tuned, optimized an organizational model which reins against “reverse innovations”. In fact, most of them are organized according to an imperialistic model:
- The Center-periphery flow of decisions and communications is only one-way;
- They pursue all economies allowed by a systemic use of global synergies (product management and branding, production and supply chain, purchasing of goods and services);
- They are not “geography oriented”, but tend to create global business lines across countries favouring so global synergies through standardization vs. local flexibility;
- They adopt a pattern of centralized planning and control of resources allocation;
- They adopt centralized control systems relating to support functions (Administration & Finance, HR, IT);
- They allow spend signature powers with narrow limits, constraining so local entrepreneurial initiatives.
Fundamentally, many western multinationals tend to reduce the decision-making autonomy at local level to achieve “ideological and cultural” and operational cohesion on a global bases with the aim to maximize standardization and synergies of scope and scale. With such a model – often perfected over the years and pervading all company’s policies and procedures – “reverse innovation” breaks the mould. It is like swimming on the opposite direction of white waters without being a salmon!
It is not by rallying the troop and making “reverse innovation” the strategic priority of the year that multinationals will make it. If they aspire to extract the full value, they need to deeply revise their current model and design a new type of organization, a global one. I look forward to hear your comments. I would also greatly appreciate suggestions on pioneer global companies which are setting the example on “reverse innovation”.