How Ge Is Disrupting Itself

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How

GE

Disrupting
Itself
We call the process used to IN MAY 2009, General Elecsold modified Western develop the two machines and tric announced that over the next six years it would spend billion products to emerging take them global reverse innovation, because it’s the opposite of to create at least health-care markets. Now, to the glocalization approach that innovations that would substantially lower costs, increase access, preempt the emerging many industrial-goods manufacturers based in rich countries and improve quality. Two prodgiants, it’s trying have employed for decades. With ucts it highlighted at the time – a glocalization, companies develop , handheld electrocardiothe reverse. great products at home and then gram device and a portable, PCdistribute them worldwide, with some adaptations based ultrasound machine that sells for as little as to local conditions. It allows multinationals to make , – are revolutionary, and not just because the optimal trade-o between the global scale so of their small size and low price. They’re also excrucial to minimizing costs and the local customizatraordinary because they originally were developed tion required to maximize market share. Glocalizafor markets in emerging economies (the ECG detion worked fine in an era when rich countries acvice for rural India and the ultrasound machine for counted for the vast majority of the market and other rural China) and are now being sold in the United countries didn’t o er much opportunity. But those States, where they’re pioneering new uses for such days are over – thanks to the rapid development of machines.

Is

For decades, GE has

by Jeffrey R. Immelt, Vijay Govindarajan, and Chris Trimble
56 Harvard Business Review
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October 2009

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hbr.org

Tom Burns

hbr.org

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October 2009

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Harvard Business Review 57

How GE Is Disrupting Itself

populous countries like China and India and the slowing growth of wealthy nations. GE badly needs innovations like the low-cost ECG and ultrasound machines, not only to expand beyond high-end segments in places like China and India but also to preempt local companies in those countries – the emerging giants – from creating similar products and then using them to disrupt GE in rich countries. To put it bluntly: If GE’s businesses are to survive and prosper in the next decade, they must become as adept at reverse innovation as they are at glocalization. Success in developing countries is a prerequisite for continued vitality in developed ones. The problem is that there are deep conflicts between glocalization and reverse innovation. And the company can’t simply replace the first with the second, because glocalization will continue to dominate strategy for the foreseeable future. The two models need to do more than coexist; they need to cooperate. This is a heck of a lot easier said than done since the centralized, product-focused structures and practices that have made multinationals so successful at glocalization actually get in the way of reverse innovation, which requires a decentralized, local-market focus. Almost all the people and resources dedicated to reverse innovation e orts must be based and managed in IN BRIEF the local market. These local growth teams need to have » The model that GE and other P&L responsibility; the power industrial manufacturers have to decide which products to followed for decades – developing develop for their markets and high-end products at home and how to make, sell, and service adapting them for other markets them; and the right to draw around the world – won’t suffice as growth slows in rich nations. from the company’s global resources. Once products » To tap opportunities in emerghave proven themselves in ing markets and pioneer value emerging markets, they must segments in wealthy countries, be taken global, which may companies must learn reverse innovation: developing products in involve pioneering radically countries like...
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