Sunday, November 10, 2013

Software Update: IBM Software Results: Software Growth Moderates


All the big software hardware guys are having issues as cheaper computing services come on line. Aivars Lode Avantce


Software Update: IBM Software Results: Software Growth Moderates
  
Sluggish SepQ Software results from IBM (covered by JPM analyst Mark Moskowitz) contrast with strong results in the prior quarter (though 2Q had the benefit of some slipped deals from 1Q), and together with recent earnings from ORCL and RHT and pre-announcements from CTXS and TDC, suggest a challenging demand environment for software. We estimate IBM’s total Software revenues and Key Branded Middleware (KBMW) grew only about 1% and 2% on an organic, cc basis, respectively, though management noted that the Software pipeline heading into 4Q was “strong”.
·         Tepid organic, cc Software growth. We estimate IBM’s aggregate Software business grew 1% y/y on an organic, cc basis, compared to about +4%, -1%, and +3% in the last three quarters, respectively. We estimate organic, cc KBMW growth was 2% y/y, compared to +8%, -1%, and +4% in the last three quarters, respectively.
·         Weak sequential KBMW growth. Total KBMW revenue declined sequentially by 14%, the biggest sequential decline we have on record. However, sequential KBMW growth in 2Q13 was the strongest 2Q performance in seven years, suggesting a more difficult sequential compare for 3Q than in years past.
·         What do IBM’s results mean for SepQ software industry results? We believe IBM’s results likely do not bode well for the sector near term, particularly after sluggish results reported by AugQ-ending companies ORCL and RHT, in addition to pre-announcements from CTXS and TDC. We continue to expect sluggish aggregate demand from European and US governments near term, and believe that weakness from the Financial Services may continue, though vendors have reported improvements in the vertical.
·         MIPS shipments grew 56% y/yMIPS shipments grew 56% y/y in the SepQ, representing the fourth consecutive quarter of growth (after declining growth in the previous five quarters before 4Q12). Management attributed this growth primarily to specialty engines, which were up more than 90% during the quarter, and to a lesser extent to the launch of a new Z series mid-range server. While MIPS grew at what appears to be a healthy rate, we note the easy comp of a 2% y/y decline in the year ago quarter. We do not believe that this MIPS shipment number will impact mainframe software industry revenue in the near-to-mid term, contrary to what some investors appear to believe.

Amazon wins case versus IBM


Big blue losing out to Amazon. Aivars Lode Avantce

Amazon wins case versus IBM
Big Blue vows to appeal ruling

EDITOR'S NOTE: This article was originally published on FCW.com.
Amazon Web Services scored a major victory against IBM in the battle to build the cloud computing infrastructure for the CIA, NSA and the rest of the intelligence community.
On Oct. 7, U.S. Court of Federal Claims Judge Thomas Wheeler ruled in favor of AWS, which had challenged the scope of and need for corrective action taken by the CIA in response to recommendations made by the Government Accountability office in June.
Wheeler’s ruling came just a few hours after the conclusion of oral arguments that were closed to the public. His legal opinion is not yet public record, but the ruling essentially overturns GAO’s sustainment of a bid protest filed by IBM after AWS was awarded a cloud computing contract worth up to $600 million.
As important a victory as this is for AWS's quest to cement itself as a major player in the federal cloud market, Big Blue is not conceding. IBM issued a statement immediately following the ruling, stating that it plans to appeal the decision.Both companies have since rebid on the CIA’s procurement, but it appears from Wheeler’s ruling that the rebids are now moot. AWS’s original contract with the CIA, which FCW first reported in March, could stand as is, though it may yet include some modifications suggested by GAO.
“We are disappointed with the ruling from the U.S. Court of Federal Claims, reversing the GAO's recommendation to reopen the competition and correct flaws in the bidding process,” the statement said. “IBM plans to appeal this decision. This court decision seems especially inappropriate in light of the current times, since IBM's bid was superior in many ways, including being substantially more cost-effective. In addition, IBM has for decades supplied the government with proven mission-critical operations. The company remains committed to provide secure, reliable and robust cloud solutions to federal agencies."
The CIA declined to comment when contacted by FCW about the Oct. 7 ruling. And AWS declined to make a statement until its prospective customer had weighed in on the ruling.

Viral Marketing


Interesting graph of the adoption rate of certain technologies from a big VC DFJ. Aivars Lode Avantce



Google's Schmidt: Google Now approach could go enterprise


Google providing cheaper computing challenging the enterprise providers. Aivars Lode Avantce.


Google's Schmidt: Google Now approach could go enterprise

Summary: Google executive chairman Eric Schmidt tells CIOs they need to blow up their infrastructure pronto, argues Android is secure and covers a lot of turf.

By Larry Dignan for Between the Lines | October 7, 2013 -- 21:53 GMT (14:53 PDT)
ORLANDO — Eric Schmidt, executive chairman of Google, said that the concepts and interface behind Google Now could be applied to corporations, which are asking whether the Web card approach could apply to real work.

Schmidt, speaking at the Gartner Symposium ITXpo, was predictably peppered with questions about the search giant's enterprise ambitions.
The Google Now approach, which works well with consumers, could be applied to the enterprise with some artificial intelligence help scanning corporate data sets.
Schmidt said Google is experimenting with how Google Now could work within the enterprise. Schmidt said it could take the Google Now approach to calculate workflows in a corporation and look into being analytical.
"It should be possible to take that approach to any data set with current AI techniques," said Schmidt. Business analytics could be applied to an enterprise Google Now much like navigation, he added.
The theme from Schmidt was that the enterprise buying landscape will change dramatically. Schmidt said the licensing model deployed by Oracle and others won't persist. Today, there's a hybrid cloud and on-premise model, which is a second phase of leaving a licensing model behind.
Gartner's Emerging Technologies
  • Google's Schmidt: Google Now approach could go enterprise
  • 3D printing: Supply chain gains but IP, bioprinting risks loom
  • For IT of 2020, big data explosion presents life, death security risks
  • CIOs see Google as most innovative
  • BYOD circa 2018 will challenge enterprise IT
"The third phase (of enterprise disruption) is driven by tablets and it looks like the majority of enterprise computing will happen on mobile devices. It broke the model. It looks to me you're going to have to dismantle existing infrastructure to work in the mobile model. It's happening right before your eyes."
If correct, enterprises will have to shed legacy infrastructure to compete. Companies will have to piggyback on the faster innovation cycle of consumer technologies such as the cloud.
For instance, Schmidt mocked current infrastructure. For instance, virtual private networks (VPNs) aren't totally secure. "It's a terrible architecture," he said.
Schmidt asked the audience for a show of hands if you're sure the Chinese aren't in your network right now. Four hands out of about 4,000 raised. When asked whether he was sure Google's network didn't have the Chinese poking around, Schmidt said he was — because Google checks every second. Schmidt also quipped that the U.S. government couldn't say the Chinese weren't poking around the network — since it's out of commission at the moment.
Among other key themes from Schmidt:
  • Don't settle for technical cul de sacs. Schmidt said companies need to beware of innovating themselves into a corner. He also said that companies need to think about fixing large problems — way bigger than what they're tackling today.
  • Embrace bottoms up management. Young technologists will always know more than management. Smart execs will use that reality to their advantage. Managers should always say to young technologists: "Tell me something new that may matter in five to 10 years."
  • Commitment to the enterprise. "Thousand of employees are working on enterprise applications," said Schmidt. Schmidt acknowledged that he didn't quite understand how sharing would be the primary feature for Google Apps and Docs.
  • Getting people out of email. Schmidt said that people love email and companies run on it. Schmidt argued that email doesn't need to be replaced by collaboration tools.
  • Google Compute Cloud is faster than the competitors. Schmidt said Google's Cloud is designed to be faster than Amazon Web Services and it is winning deals because of that. Schmidt said no matter who wins in the cloud enterprises "have to make the transition" to public infrastructure.
  • Android has the most unit volume and is a platform that's robust based on usage. Schmidt also shot down the Android fragmentation argument. "The key thing is that everyone has agreed to keep the app store compatible," said Schmidt. "When you buy an Android phone the apps are compatible."
  • What industry is most ripe for innovation? "Almost every business can become more efficient with some software developers," said Schmidt. "Any industry without software developers embedded someplace is going to lag."
  • Research on aging. Schmidt said the effort is hard core research on what causes humans to expire. Calico will take some time to play out. "Google has a fair amount of cash on its balance sheet and we can make this bet," said Schmidt. "Innovation is always risky." Schmidt said it wants to make big innovation bets on large issues. Transportation is another key area. "Transportation is a mess," said Schmidt. "It needs to be solved."

MongoDB Raises $150 Million


The new Oracle over 90% of the worlds data has been created in the last two years. Aivars Lode Avantce

Execution. That one word is more often than not the difference between innovation, failure and success. It sounds simple enough. But the reality is anything but. Without the successful integration of ideas at the back end, innovation doesn't happen. 

With BEI Back End of Innovation 2013 quickly approaching, we wanted to get an expert’s point of view on innovation strategy in today’s increasingly complex and competitive business landscape. We were in luck. Maria B. Thompson, Director of Innovation Strategy, Intellectual Asset Management, Office of the CTO at Motorola Solutions, sat down with us to discuss innovation strategy, execution, and culture. Here is what she had to say:

IIR: What is a fundamental characteristic to lead innovation?
Thompson: Abstract and analogous thinking skills are paramount to leading innovation. In order to coach and mentor others to unleash their collective creativity, one must be able to reframe problems and solutions in generic ways, so diverse-thinking non subject matter experts in the domain of the problem can engage, and bring their creative perspectives to bear on a broader solution space.

IIR: What best practices support successful innovation execution? What typically stands in its way?

Thompson: The key aspect for successful execution on innovation is dedicated time and resources for conversion of the original idea to a commercial high-business-value product or service. In our experience, conversion must be treated as a first-class program deliverable, with time allocated in Program Plans and Performance Management evaluation systems. Our global Innovation Champions all have a Performance Management goal to spend 20 percent of their time on Innovation, which includes acting as evangelists for the best ideas and concepts that should be resourced and moved onto our product roadmaps.

IIR: What is the key to building an internal innovation culture?

Thompson: It takes a village. In other words, you need to have a “social” network of change catalysts committed to the innovation cause. We call these catalysts “Innovation Champions” and “Inventor Mentors.” These change catalysts are role models for innovation and inventing and co-resident at all global sites. They are selected for their past contributions to innovative products, features and services, and have performance goals they are measured on with regard to their efforts to support an innovation culture and to increase innovation yield within and across businesses.

IIR: What is the biggest obstacle you faced in your innovation strategy? How did you overcome it?

Thompson: Time and resource allocation. PDW, Performance Management, but mostly executive sponsorship. Without senior leadership supporting and visibly recognizing employees for their efforts in prioritizing forward-looking work, people will prioritize “business-as-usual.”

IIR: What advice would you would give companies who are creating a corporate innovation strategy?

Thompson: Start by building on innovative work people are already doing. Prioritize the most important and strategic areas and communicate, communicate, communicate. Recognize ongoing efforts aligned with these priorities, support them, and reward them. Help everyone - across all functions- understand how they can contribute to the innovation pipeline – it is not only the engineering or research role to be innovative!

Thompson will be speaking at BEI 2013 November 18-20 in Santa Clara, CA.

Execution takes time. Just taking initiative alone will not get innovation to work. BEI makes innovation happen. Join us in November as we put innovation to work in real-time, for real results.

The Difference Between Innovation Failure and Success


The difference between innovation failure and success an interesting read. Aivars Lode Avantce

Execution. That one word is more often than not the difference between innovation, failure and success. It sounds simple enough. But the reality is anything but. Without the successful integration of ideas at the back end, innovation doesn't happen. 

With BEI Back End of Innovation 2013 quickly approaching, we wanted to get an expert’s point of view on innovation strategy in today’s increasingly complex and competitive business landscape. We were in luck. Maria B. Thompson, Director of Innovation Strategy, Intellectual Asset Management, Office of the CTO at Motorola Solutions, sat down with us to discuss innovation strategy, execution, and culture. Here is what she had to say:

IIR: What is a fundamental characteristic to lead innovation?
Thompson: Abstract and analogous thinking skills are paramount to leading innovation. In order to coach and mentor others to unleash their collective creativity, one must be able to reframe problems and solutions in generic ways, so diverse-thinking non subject matter experts in the domain of the problem can engage, and bring their creative perspectives to bear on a broader solution space.

IIR: What best practices support successful innovation execution? What typically stands in its way?

Thompson: The key aspect for successful execution on innovation is dedicated time and resources for conversion of the original idea to a commercial high-business-value product or service. In our experience, conversion must be treated as a first-class program deliverable, with time allocated in Program Plans and Performance Management evaluation systems. Our global Innovation Champions all have a Performance Management goal to spend 20 percent of their time on Innovation, which includes acting as evangelists for the best ideas and concepts that should be resourced and moved onto our product roadmaps.

IIR: What is the key to building an internal innovation culture?

Thompson: It takes a village. In other words, you need to have a “social” network of change catalysts committed to the innovation cause. We call these catalysts “Innovation Champions” and “Inventor Mentors.” These change catalysts are role models for innovation and inventing and co-resident at all global sites. They are selected for their past contributions to innovative products, features and services, and have performance goals they are measured on with regard to their efforts to support an innovation culture and to increase innovation yield within and across businesses.

IIR: What is the biggest obstacle you faced in your innovation strategy? How did you overcome it?

Thompson: Time and resource allocation. PDW, Performance Management, but mostly executive sponsorship. Without senior leadership supporting and visibly recognizing employees for their efforts in prioritizing forward-looking work, people will prioritize “business-as-usual.”

IIR: What advice would you would give companies who are creating a corporate innovation strategy?

Thompson: Start by building on innovative work people are already doing. Prioritize the most important and strategic areas and communicate, communicate, communicate. Recognize ongoing efforts aligned with these priorities, support them, and reward them. Help everyone - across all functions- understand how they can contribute to the innovation pipeline – it is not only the engineering or research role to be innovative!

Thompson will be speaking at BEI 2013 November 18-20 in Santa Clara, CA.

Execution takes time. Just taking initiative alone will not get innovation to work. BEI makes innovation happen. Join us in November as we put innovation to work in real-time, for real results.

Reverse Innovation

Great piece on if you want to expand globally and how to bring back innovation to developed markets from elsewhere. Aivars Lode Avantce

Reverse Innovation

Create Far From Home, Win Everywhere
by Vijay Govindarajan and Chris Trimble
Copyright 2012 Vijay Govindarajan and Chris Trimble Summarized by permission of Harvard Business Review Traditionally, innovation occurred primarily in developed economies.

  • As the world economy shifts, the nature of innovation changes.
  • “Reverse innovation” is the process by which firms create new products for and in emerging economies that they then sell in developed markets.
  • Reverse innovation requires you to see beyond your current “dominant” mind-set.
  • Emerging and developed economies are divided by gaps in “performance, infrastructure, sustainability, regulations” and consumers’ “preferences.”
  • Less-developed nations have fewer regulations but tougher sustainability demands.
  • Most outsiders who attempt to innovate for emerging economies fail to account for local needs or realities.
  • To innovate in a developing economy, you need a substantial physical presence there.
  • Hire from within emerging economies and station staff there, including expats from developed nations.
  • Your teams in target economies need a clean start and the power to make growth- related decisions.


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Rating (10 is best)
Overall Applicability Innovation Style
   9             8              10           9 
Relevance
“Historically, reverse innovations have been rare.”
“The shift in emphasis from exporting to emerging markets to innovating for emerging markets is a significant culture change.”
Summary
What You Will Learn
In this Abstract, you will learn:r1) How to define “reverse innovation,” 2) How it works and 3) Why it is so important.
Recommendation
This lovely, persuasive work couples the focused repetition of a good textbook with the lively style of an entertaining article. Academics and authors Vijay Govindarajan and Chris Trimble show how to harness “reverse innovation,” in which firms create products for and in emerging economies that lead to innovative goods for the developed world. The authors provide enticing data about the quick growth of developing economies compared to slower growth in developed economies. getAbstract recommends this accessible treatise to executives at companies with a global presence and to those interested in cultural differences, creativity and diversity.
The Time and Need for “Reverse Innovation”
Historically, most innovation occurred in developed countries because their populations could afford and demand progress and technological advancement. Businesspeople usually believe that emerging economies lag behind and don’t need to innovate to catch up because they can import what they require from the developed world. This reasoning fuels “glocalization,” which means that firms create products globally but sell “lightly modified versions” to less developed markets.
This worldview is no longer accurate. Emerging economies’ markets are fundamentally dissimilar to those of developed nations. Due to variations in culture and context, consumers need and want different things and possess a different kind of purchasing power. For example, when Walmart moved into South America, its “big box” formula did not work. Customers didn’t have enough money to “buy in bulk,” and – because most customers took the bus, rode a bike or walked – they could carry home only limited amounts. Walmart devised smaller stores to fit the marketplace. When these downsized facilities proved successful, Walmart opened “small-mart” stores in North America, creating a new market. This is reverse innovation – that is, an innovation that emerges from the developing world, which applies it first, and moves to the developed world.
Some 85% of the world’s population lives in “poor countries.” These nations’ economies are growing faster than developed countries’ economies, sometimes twice as fast. These emerging economies will provide “at least two-thirds of world GDP growth for decades to come.”
“The Five Paths to Reverse Innovation”
The developing world differs radically from the developed world, and each national culture possesses unique qualities. Despite these distinctions, reverse innovation follows five general patterns or paths. These paths navigate the “five needs gaps” that separate the developed and developing worlds. Successful reverse innovation recognizes and exploits these gaps as different cultures produce their own products and export them to the developed world:
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  1. “The performance gap” – In established economies, producers offer moderately differentiated versions of their products: one with top performance, one with 80% of that performance at 80% of the price, and the like. Emerging economies need radically cheaper products – say, 50% performance at 15% of the developed world price. But there is a limit: Developing nations’ consumers will accept lower standards, but they won’t pay for 15% performance. Firms must diligently track trends that close the performance gap.
  2. The infrastructure gap” – Developing economies usually lack infrastructure, but when they create new frameworks, they are likely to be state of the art because demand is strong and development starts from scratch with no existing constraints. A lack of infrastructure generates resourcefulness and leapfrogging adaptation. For example, rural Morocco’s cellphone service is more advanced than rural Vermont’s. The developing world is narrowing the infrastructure gap but not by reproducing solutions from the developed world. For example, India generates more solar and wind power proportionally than the US and provides power with many small natural gas or bio-gas generators.
  3. The sustainability gap” – Developing nations face different environmental issues than developed nations, and this variation drives innovation. For example, air pollution in China fuels consumer interest in electric cars. Poor countries experience environmental issues intensely and will develop new, local solutions.
  4. The regulatory gap” – Companies encounter less regulation in the developing world, and that allows them to develop new products more quickly, though sometimes without the developed world’s parameters, such as consumer safety provisions. As economies develop, regulation will follow.
  5. The preference gap” – Developing world customers want locally appropriate products – not necessarily the same products that are popular in the developed world. For example, to satisfy the Indian market, PepsiCo created crackers made from lentils, not corn.
Managing Reverse Innovation
Your firm’s success may endanger its reverse innovation progress. You achieved your success in a particular kind of market and culture. When one way of doing business works, it produces a “dominant logic” through which a company understands and interprets the world. But the world has changed. Now the former developing world offers a diverse spectrum of emerging economies. Your dominant logic can lead you astray as you enter those markets. You must be open-minded. Domineering corporate mind-sets break down into five distinct levels:
  1. “Levelonethinking”–Thisapproachtreatsemergingeconomiesasiftheyarenot worth attention, as if it is still 1970. Few companies feel that way anymore.
  2. “Leveltwothinking”–Atthispoint,firmsseekonlytosellexistingproductstothe upper economic echelons of developing nations. This view assumes that emerging economies are slowly creating a liquid upper class that will come to you, eager for your products. But the developing world does not mirror the history of the developed world. India’s GNP is rising, and its streets are crowded with motorbikes, not horses.
  3. “Level three thinking” – This viewpoint, though limited, recognizes that different markets face different realities. Yet, this rationale holds that “customization is sufficient,” believing that firms can slightly alter existing products or approaches to suit emerging markets. Level three marketing “treats rich and poor countries equivalently” and ignores social, technological and economic realities, such as the
“When new ideas or approaches come along, they often trigger an immune response.”
“Those who practice reverse innovation must sometimes contend with potent internal opposition – frequently cloaked in devotion to the status quo.”
“Developing economies are different. They are not just a little bit different; they are night-and-day different.”
“It is impossible
to fully capture the growth opportunities in the developing world without developing new solutions from scratch. Reverse innovation is clean- slate innovation.”
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fact that emerging economies have more customers, but less money. Picture selling refrigerators in India: Rural India has unreliable electricity, so any design that depends on constant power won’t work. The market demands a fridge that functions despite power outages, even if the level of performance is inferior. Emerging economies need products designed for their realities.
4. “Level four thinking” – These companies understand winning in emerging economies “requires innovation.” Such firms start with a clean slate and ask basic innovation questions: Who are the customers, what value can the company bring them and what’s the best way to deliver it? One possible pitfall of level four is that firms might generate inexpensive versions of existing technologies rather than cheap new technologies, assuming that low price is the only limiting factor. Chinese consumers don’t want technology that’s discounted because it is old; they want technology designed to work cheaply within China’s infrastructure.
5. “Levelfivethinking”–Thesefirmsknowthat“stakesareglobal”now.Atlevelfive, an organization knows how to escape dominant, developed-world logic and adopt a new perspective.
The leaders of companies at levels one through four often fear that margins in developing markets are too slender to produce profits, but countless examples prove them wrong. They fear that because their company’s strength is technological, they won’t be able to provide “ultralow-cost” alternatives. And they fear that manufacturing cheaper products for poorer countries will “cannibalize sales” of their higher priced products. That risk is present, but many companies thrive on offering products at a range of “price points.”
Level five requires thinking about the globe as your market. Decide if you should “shift the center of gravity of [your] organization to emerging markets?” Study a map of the world and mark where you think the greatest growth will occur in the near future. Then mark the locations where you have personnel. Usually, the marks will be in different places. Most companies face this severe disconnect between their future markets and the current locations of their staff and leaders.
At level five, your firm should move people who make essential decisions into growing economies’ home nations. Change your leadership structure to create positions responsible for guiding growth in developing countries. Then increase your research budget and encourage inexpensive experimentation. Let your employees know that you see growing economies as “incubation centers for global growth and innovation.”
You must build expertise in developing economies. Appoint directors and upper-level managers from these countries. Give rising workers within the company “multiyear expatriate assignments.” Provide brief “immersion experiences” for as many executives as possible. Build social connections between executives from developed economies and emerging economies. Hold conferences and educational seminars in developing countries. Your leaders should take “symbolic personal actions” to demonstrate the importance of emerging economies. While changing your company’s mind-set is essential, it is not sufficient. You must also change how you manage your company. Changes to company mind-sets are gradual and can take years to mature. By contrast, the organizational changes you should make will be sudden, even abrupt.
To avoid getting bogged down in your existing corporate structure, start “special organizational units” specifically for reverse innovation. These “local growth teams” (LGTs) start from scratch with a fresh structure but remain connected to their parent company so they can strategically exploit its resource base. Starting from scratch Reverse Innovation getAbstract © 2012 4 of 5
“Fundamentally, all innovation, including reverse innovation, is about assessing needs and developing solutions.”
“Manage reverse innovation initiatives as disciplined experiments,
with a focus on resolving critical unknowns quickly and inexpensively.”

“As the world economy grows, the clashes between economic activity and environmental concerns will only become more severe.”
“Situate innovators in emerging markets and empower these innovators to take initiative to solve local customer problems.”
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frees them from the organization’s dominant logic, while having global resources helps these specialized start-ups challenge local companies. LGTs engage in “disciplined experimentation” focused on “resolving critical unknowns” about their endeavors. Evaluate LGTs with special performance metrics adapted to local conditions and crafted to track and reward innovation. Judge them by what they learn. LGTs must revise their plans often, unlike established firms that can use “the past...as a reliable guide to the future.”
Reverse Innovation in Action
Logitech’s entry into the Chinese computer mouse market demonstrates how companies can both stumble and triumph when dealing with reverse innovation. Logitech saw the demand for information technology exploding worldwide and mistakenly thought that users everywhere had the same needs. Logitech executives assumed that their expertise would let them successfully market their computer mouse in China. Instead, a Chinese competitor undercut their price: Rapoo offered a $15 mouse that was equivalent to Logitech’s $50 model. More crucial, Logitech failed to see that its product didn’t meet the unique needs of Chinese consumers. China’s high population density means that apartments are crammed together and that a mouse needs more shielding to fight jamming signals from neighbors. Chinese mouse users also require greater range, since they use the same device to operate their televisions. After stumbling badly, Logitech eventually started an LGT, which redesigned its mouse to satisfy Chinese market realities. This meant changing both the technology and the price, which Logitech did successfully.
The world’s poorer nations desperately need better health care, but many of the developed world’s health care solutions don’t fit developing economies. Paul Farmer, Harvard- trained in both medicine and anthropology, witnessed this in Haiti. When trying to deal with a local tuberculosis outbreak, Farmer found that access to proper medication was only part of the solution. He developed a system of “community health workers” who became “partners in health” with their patients and helped them address multiple factors that contributed to disease, from poor nutrition to illiteracy. Farmer helped people far more cheaply than “rich world” medicine could. His treatments cost $150 to $200, compared with at least $15,000 in the US. Other doctors have since transplanted this approach to Peru and to poor neighborhoods in the US, where it disrupted existing medical systems.
PepsiCo’s experiences in India provide a model of the crucial principles of reverse innovation. PepsiCo’s CEO Indra Nooyi is Indian, which gives the company expertise in the nation’s economy. PepsiCo also models a conscious commitment to reach out to emerging economies and to learn from them. When PepsiCo’s chief scientific officer, Mehmood Khan, developed healthier snacks, he drew on the corporation’s experience with its baked (not fried) Aliva cracker, which is designed to incorporate local dietary practices. Its recipe blends lentils, wheat and rice bran oil (not palm oil) because rice is common in India; rice bran oil is also cheaper and healthier, so it helps combat India’s high rate of heart disease. Aliva used novel packaging to protect the cracker and draw the eye. Throughout the product development process, PepsiCo employed local talent supported by global resources. The firm gave local teams “freedom within a frame”: If they aligned the product with “global brand standards,” they could develop it as they saw fit.