Trickle-up innovation or reverse innovation, is a new product development technique. Traditionally, products would be designed and manufactured for the developed markets and later be customised for the developing markets. The term refers to the process by which companies in emerging markets produce inexpensive goods and services to meet the needs of the poor and then repackage them as cost-effective innovations for Western buyers. Here, innovators have a chance to establish a strong customer base which would be loyal since the product was originally developed for this market only.
This new innovation does not only help the companies from emerging markets, but also the emerging economies as a whole. When such companies go international, they promote their home economies and other smaller companies may also piggyback in the new, bigger markets.
The emerging economies have an edge when it comes to innovation since they can leapfrog. Already established companies will think before investing in upgrading their legacy systems. This is not a problem with start-ups and smaller, relatively newer businesses in the developing countries. This is the opportunity for small businesses or business developers. One reason that Reverse Innovation will find increasing adoption is the fact that innovative products and services tend to initially be adopted by those with the greatest pain. Another reason that companies will expand their innovation strategies to include Reverse Innovation is the fact that often the breakthroughs that drive innovation come from working with extreme users. Extreme users and those with the greatest need for innovation are equally likely to be found in the developing world as in the developed world – opening the door for Trickle-Up Innovation.
“We are in the cusp of something interesting. The key contribution of poor countries will be to make existing products and services incredibly inexpensive and easy to use,” says Ravi Ramamurti, a Distinguished Professor of International Business and Strategy at Northeastern University.