危 wēi  danger

GE, and many other large industrial manufacturers has harnessed a strategy of ‘glocalization’ to grow.  In short, glocalization is a strategy of developing products for the developed world and then exporting them, with minor modification, to developing markets.  The problem is that growth in the US and EU is expected to remain tepid at 1-3% for a prolonged period and it has become clear that the needs of the emerging economies don’t always match those of the developed world – most often the products over-deliver.

机 jī opportunity

GE sees real value in reversing the ‘glocalization’ process.  It is focusing on building centres of innovation in emerging markets in order to optimize products for local needs.  This approach, coined ‘reverse innovation’ by Harvard Business Review enables GE to harness the rapid growth of emerging markets, defend against emerging disruptors and create new value segments in the developed world.  For example, a GE Local Growth Team developed a portable ultrasound for the Chinese market that it sold at $30k (a US-developed high end machine cost over $100k).   GE has subsequently managed to reduce the price to $15k and in doing so has seen emerging market sales soar and has sold the unit into new applications in the developed world.

how about…

• investing in the development of products for price-conscious emerging markets (then adapting them for developed markets rather than vica-versa)
• acquiring or partnering with an emerging market player as a source of low-cost disruptive products
• building innovation centres in the most demanding markets, rather than close to the head office

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