 Am I creating a market or entering a market?

GE decided that it no longer wanted to

supply high-end products for one extreme end of users in India but rather wants to make
a larger impact for the majority in BoP market. It not only entered the healthcare market
but also created a new market equilibrium where products were 20%,30%, 50% and
even 90% cheaper than existing imported solutions.

 What business am I in? GE went from being in the imported products business, to a
partnership business with Wipro, and then towards an R&D and frugal innovation-
powered business after adopting the ‘In India, for India’ slogan.
 Who are my customers? GE’s customers in India went from those who bought high-
margin, high-end products to those who were extremely price sensitive and required
basic healthcare facilities. This also meant that GE had to develop its own distribution
systems and create a deeper value chain in order to serve this customer segment.

All of this had a significant impact on reverse innovations as GE was able to create new optimal
solutions by using design freedoms specifically available in India (such as using dust resistant
ticket machines as ECG printers), analyze specific situations where the products will be used (in
areas without electricity, out of reach for experts, and limited infrastructure), and also was able
to test product prototypes with consumers (through MART).
Nestlé’s “Pure Life” initiative in Pakistan in 1998 is an example of how a product’s success in
an emerging market paved its way for success in more than 40 countries including developed
nations such as USA. Another example is of Maggi which was developed for Pakistani and
Indian markets but was later also marketed as a healthy eating alternative in Australia and New
Zealand.
1. Can GE disrupt developed markets with reverse innovations and super value products in a
sustainable manner? If so, then what should be the key elements of the related strategy?
What are the related risks and the options to mitigate these risks? Specifically how should
GE market baby warmer in the developed markets? Can you think of another company
that has a similar opportunity to disrupt developed markets through reverse innovations?

The success of Mac 800 and other super value products outside India shows that the company
can disrupt and market its products in a sustainable manner. If GE decides to aggressively
pursue this objective, it would have to make relevant additions to its strategy. This is because
GE India currently operates in quadrant 4 of the Ansoff Matrix (see Exhibit 4) while catering to
the Indian BoP market, for the developed economies market, it would operate in quadrant 1.
This means the strategy would continue to be of diversification in India, but Product
Development strategy would also have to be incorporated in order to accommodate developed
markets. This product development strategy would imply that value added products are created
in such a way that a higher price can be charged for them (as it was done with Freedom Chair
and Grit Freedom Chair). Interestingly five similar factors that GE has used in India, will still
be crucial to its success in the developed market as well.

These are the product being of better value than the status quo, relevant to local context,
simple to understand, easily tested, and visible to others (DePasse & Lee, 2013). However, the
implications of each of these requirements would be different in developed economies as
compared to the BoP market of India and it goes without saying, success in one does not
guarantee success in another. Additionally, the strategy would also greatly differ regarding the
basis of competitive advantage between the two markets. Where in India the competitive
advantage comes from research, businesses in mature markets gain a positional competitive
advantage through branding. This means that while the engineers and product developers are
king in the Indian market, the marketing department will lead the way in a developed
economy.
Two major risks of introducing super value reverse innovated products from BoP to developed
economies are of cannibalization and brand equity. Offering low-cost solutions might increase
the number of people who can afford the products in developed markets but will also shift
high-end customers of the business towards a low-price range. This means that the margins on
products sourced from LIC (low-income countries) to HIC’s (high income countries) cannot
be as high as are of products developed specifically for HIC markets. Especially, if the value
addition in the HIC products is not clearly evident, its consumers would be least likely to pay a
higher premium in comparison to LIC consumers. Secondly, products developed for LICs
have a higher focus on functionality rather than embellishments, these countries also spend
more on R&D and less on marketing. So, these products coming from LIC might not be able to
meet customer perceptions of the GE brand in HIC markets.For GE’s Baby Warmer marketing
in the developed market, the emphasis can be made from a ‘need’ to ‘desire’, and rather than
marketing the product to healthcare providers (likes it does in India) the product can be
marketed directly to consumers for keeping their premature children warm at home. The
product can be sold in colder regions for taking children out, replacing regular strollers. Use of
Kevlar limits the need for temperature sensor to be replaced often, showing that it can survive
at -home usage.
An NGO called “Teach the World” has come up with a value chain that offers primary
education to children at home even if they limited capacity smartphones and even analog
phones. An education model that does not rest on the premise of stable internet connection and
sound hardware has the potential to offer solutions in HIC’s as well because even 20%
population in the advanced economies lacks internet access (WorldBank). Similarly, if P&G
develops laundry detergents specifically for hand-washing clothes, it can also be sold in
developed markets where hand-washing is a requirement for delicate and expensive clothes