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Reverse Innovation at Speres: A Case Study in China

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FEATURE ARTICLE

Reverse Innovation at Speres

A Case Study in China
One company’s reverse innovation experience reveals how internal resistance can hamper the reversal of the technology flow—
and how it can be overcome.

Simone Corsi, Alberto Di Minin, and Andrea Piccaluga

OVERVIEW: Reverse innovation is not always either foreseeable or explicitly pursued by Western companies operating in
emerging economies. Sometimes, it arises from the initiative of the foreign subsidiary and results when products initially
intended strictly for an emerging market threaten the primary market of the parent company. This has been the case for
Speres, an Italian company that developed a product exclusively for the Chinese market that, surprisingly, was eventually
more successful in Europe than in the market for which it was developed. The development of the product presented chal-
lenges and difficulties to be dealt with at both the subsidiary and the corporate levels.
KEYWORDS: Reverse innovation, China, Emerging economies

The role of emerging economies as potential sources of global
innovation has been increasingly acknowledged (see, for in-
stance, Immelt, Govindarajan, and Trimble 2009; Govindarajan
and Trimble 2012). Thanks to a combination of progressively
Simone Corsi is the program manager for the Lancaster China Catalyst Pro-
gramme at Lancaster University and research associate at the Research In-
stitute on Global R&D Management (GLORAD) at Tongji University. He has
been a postdoctoral research fellow at the Istituto di Management of Scuola
Superiore Sant’Anna (Pisa, Italy), where he earned his PhD in management.
His research focuses on foreign R&D investment in emerging economies
and reverse innovation. s.corsi@lancaster.ac.uk
Alberto Di Minin is assistant professor of strategy at the Istituto di Management–
Scuola Superiore Sant’Anna (Pisa, Italy); a visiting professor at the De-
partment of Operations, Organization and Human Resources–Twente
University in the Netherlands; and a research fellow with the Berkeley
Roundtable on the International Economy. His research and teaching deal
with the appropriability of innovation. In particular, he focuses on open in-
novation and business model innovation. He also works on technology
transfer, intellectual property, and R&D management. His publications have
appeared in California Management Review, Journal of International Business
Studies, R&D Management Journal, and Research Policy. a.diminin@sssup.it
Andrea Piccaluga is professor of innovation management at the Istituto di
Management, Scuola Superiore Sant’Anna (Pisa, Italy), where he is the dep-
uty director and coordinator of the PhD program in management. He is a
member of the board of Netval, the Italian network of university technology
transfer offices and responsible of the annual survey of Proton Europe. He
holds a PhD from Scuola Superiore Sant’Anna and a Master in Technology
and Innovation Management from SPRU (University of Sussex). He is an
associate editor of R&D Management Journal and has published books
and papers in the fields of R&D management and technology transfer.
a.piccaluga@sssup.it
DOI: 10.5437/08956308X5704215
selective foreign direct investment and strategic R&D poli-
cies, developing economies have gained a foothold in global
innovation. An increasing number of companies from emerg-
ing economies are now entering global markets with prod-
ucts developed in their countries of origin (Govindarajan and
Ramamurti 2011). At the same time, Western firms are at-
tempting to harness the economic and innovation energy of
developing countries by developing local R&D centers and
even full subsidiaries. In either case, the result is often what
Immelt, Govindarajan, and Trimble (2009) christened reverse
innovation—innovation that makes its way from the develop-
ing world to Western consumers.
In spite of the wealth of work on reverse innovation, it
remains difficult to understand what specific dynamics
facilitate reverse innovation in an organization. Western
companies typically take an ethnocentric approach, seeing
innovation as a process triggered by actors located in ad-
vanced economies while emerging economies represent no
more than interesting markets or passive recipients of the
outputs of these processes. This line of thinking may cause
Western multinationals to miss the innovation potential of
their emerging market subsidiaries, and hence to miss out
on important market opportunities. This was the approach
taken by Speres, a mid-sized Italian high-tech company,
when it sought to move into the Chinese market with mod-
ified versions of its European products.
However, Speres quickly discovered that success in China
would require a product developed to meet the needs of its
Chinese customers. The company then sought to develop a

28 | Research-Technology Management • July—August 2014

product for the Chinese market based on inputs from its Chi-
nese subsidiary; that product eventually became a successful
entrant in the company’s offerings for Western customers.
The case is an example of how a product idea originated in a
Chinese subsidiary of a Western firm may be absorbed and
deployed by the Western headquarters, demonstrating how
the risk of intra-organizational conflict in product and tech-
nology development may be negotiated. Our case company
managed, almost by chance, to resolve the issues connected
to reverse innovation, such as cannibalization and loss of sales
margin, that are discussed by Govindarajan and Ramamurti
(2011). The company did so with prudent planning of the
commercialization of different versions of the same product
in different markets and with the support of one of their
managers, who was the real trigger of the process.
Background: China and Speres
China, with its astonishing GDP growth over the last 30 years
and its demonstrated ability to build its own technological
and scientific base, is a quintessential example of the growing
economic power of developing nations. China is now the
originator of more patent applications than any other nation;
it surpassed the United States in 2012 in terms of the cumu-
lative number of patent applications filed through its intel-
lectual property office (WIPO 2013). Chinese companies are
succeeding in international markets thanks to increasing
technological skills, and they are disrupting global competi-
tion in a few industries by entering advanced markets with
innovations created for developing markets, such as Haier’s
white goods and Huawei’s mobile technologies (Zeng and
Williamson 2007).
Western multinational corporations have recognized the
opportunity represented by these trends and sought ways to
exploit them. The literature has provided some cases of
Western companies successfully engaging in reverse inno-
vation: General Electric’s portable electriocardiogram, de-
veloped in India and later sold in Europe and the United
States, and P&G’s Vicks Cough Syrup with Honey, developed
in Venezuela and commercialized first in Mexico and then
in the United States, are just two examples (Govindarajan
and Trimble 2012). Recognizing the emergence of a new
innovation dynamic, researchers have coined a number of
terms to describe it, including disruptive innovation from
emerging economies (Hart and Christensen 2002), inno-
vation for the bottom of the pyramid (Prahalad 2004),
frugal innovation (Zeschky, Widenmayer, and Gassmann
2011), and reverse innovation (Immelt, Govindarajan, and
Trimble 2009). None of these terms sufficiently captures the
internal dynamics that drive or hamper successful reverse
innovation, including internal resistance to the spread of a
developing market product into primary markets and the
fear of cannibalization.
Speres,1 a mid-sized manufacturer of air-conditioning,
commercial refrigeration, and humidification systems with
sales of €160 million in 2012, has been operating in China
since 1997. In 2005, Speres set up a production subsid-
iary supported by an R&D lab in China, motivated by strong
Reverse Innovation at Speres
Western multinational corporations
have recognized the opportunity
represented by these trends and sought
ways to exploit them.
strategic considerations, including the need to serve ex-
isting Western customers with production facilities in China
and explore opportunities in the Chinese domestic market.
As the President of Speres Group (a former CEO of Speres
China) pointed out, “Being in China allows us to maintain a
competitive position from a threat coming from Chinese
competitors . . . which are becoming global and if you want
to learn from them how they produce/sell products to the
rest of the world you got to be here.”
Speres’s Chinese R&D lab, which is staffed primarily by
software developers, was originally intended to adapt the
company’s European products for the Chinese market. How-
ever, when it became clear that Speres needed to create a
product specifically for the Chinese market, the subsidiary
and its lab were asked to provide Speres headquarters in Italy
with specifications for a product specifically targeting the
Chinese market. The outcome was a product developed in
Italy on the basis of technical specifications provided by the
Chinese subsidiary. That product was eventually unexpect-
edly successful on the European market. Despite the strong
market potential of the innovation, the company faced inter-
nal resistance to the extension of the product’s market and
the risk of cannibalizing its existing products in the European
market.
This case study is part of a larger study on R&D interna-
tionalization in China (see “The Study,” p. 30). The case anal-
ysis began with the collection of data from secondary sources,
which provided an overview of the company in terms of its
international and innovation activities. We then interviewed
managers at the company’s Italian headquarters and at the
Chinese subsidiary. Finally, we compiled case reports based
on analysis of secondary and case data and triangulated our
conclusions with research partners to minimize narration
bias.
Identifying the Need
When it began to develop its first China-specific product in
2007, the company already had a long engagement in China,
first entering the Chinese market through an existing com-
mercial branch in Hong Kong (Table 1). However, it quickly
became evident to the management team that the market
deserved more attention, and in 2005, the company set up a
Chinese production site, supported by an R&D lab made up
1
The name of the company, as well as those of managers, has been anony-
mized upon request of the company. Other information regarding the com-
pany, such as localization and size, are real.
July—August 2014 | 29
 The Study
This case study was performed in the context of a larger proj-
ect, “Reversing the international flow of innovation: How the
Chinese market triggers reverse innovation” (Corsi 2012). The
work’s primary goal is to define a theoretical framework to ana-
lyze and describe reverse innovation phenomena. The project
focused on Italian companies that had internationalized part of
their R&D activities to China, studying how their innovative ac-
tivities at the corporate level were influenced by host-country
factors. The four companies included were selected on the ba-
sis of their having R&D activities in China that play a significant
role in their global innovation strategies.
The study sought to explore how companies can leverage
these factors to trigger reverse innovation dynamics. Our goal
was to examine what we see as the ultimate phase of R&D mat-
uration: the analysis and reinterpretation of innovative inputs
from indigenous business environments for global production.
The strength and sense of urgency of state regulations of pri-
vate enterprises in China, plus the increasing relevance of the
Chinese market, make China an obvious region to look for this
sort of maturation. Given the novelty of the topic and its explor-
atory nature, we adopted a case study methodology (Eisenhardt
1989; Gibbert, Ruigrok, and Wicki 2008) to support a first analy-
sis of the dynamics that govern such a phenomenon.
The empirical analysis is based on four in-depth case stud-
ies carried out through interviews of managers at the partici-
pating companies’ headquarters and Chinese subsidiaries.
by a team of 20 software engineers; the focus of the lab was
on software development and market intelligence. From
2005 to 2007, the Chinese subsidiary operated successfully,
serving Western customers in China and Chinese companies
whose products were exported to advanced markets with the
company’s standard technological platforms, imported from
Italy and adapted for the local market.
However, the European management team became
concerned that the company did not appear to be growing in
the Chinese domestic market, which had been the primary
TABLE 1. ChinaPc development timeline
Late 1990s
2005
2007
2008
June 2009
2010
2011
30 | Research-Technology Management
Interviews were conducted face to face, in Italian for headquar-
ter managers and in Italian or English for subsidiary managers.
To avoid narration effects and respondent bias, we collected
data through several different sources. Secondary data was
gathered from a number of sources such as companies’ web-
sites, Lexis Nexis Academic, Il Sole 24 Ore Database, One
Source–Business Information, and internal company docu-
ments (including balance sheets). Databases were searched
using a combination of keywords that included companies’
names and selected terms relating to global and reverse inno-
vation. Second, we conducted semistructured interviews with
companies’ managers at the headquarters.
Data collected in the first two phases were triangulated to avoid
misinterpretation and improve the validity of data (Eisenhardt
1989; Yin 2003). This was done by generating a report based
on collected information and material for each company; these
reports were then circulated and discussed among research
partners in order to develop a more objective reading of the
data.
In the third phase of the study, we conducted on-site inter-
views with the managers of the companies’ Chinese subsidiar-
ies. Secondary data were again triangulated with these further
contributions and single-case integrated reports have been
produced. Reports have again been circulated and discussed
among the authors and other researchers and they have been
returned to companies for feedback and validation.
objective of establishing the subsidiary. A detailed investi-
gation by Speres China’s management team revealed that
the company’s standard technological platforms, which it
had simply transplanted from Italy, were not suitable for
the local market, which had different technological needs
and a stronger price focus.
Mario Rossi, Speres China’s general manager, analyzed
the products of Chinese competitors, even visiting some
companies, to learn the “secret recipe” for electronic control-
lers for industrial air conditioning and refrigeration systems
Speres enters China market through a commercial branch in Hong Kong
Production site and R&D center are established in China to
serve foreign customers and Chinese companies manufacturing
products for Western markets
Speres China scans Chinese competitors for new product attributes,
transmits technical specifications to Italian development team
(project leader: Roberto Verdi)
ChinaPc is finalized, but not commercialized outside of China
for risk of cannibalizing Western products
ChinaPc is adapted for European markets, with addition of
programmability and elimination of several features to avoid
cannibalizing high-end products
ItalyPc is updated, becoming ItalyPc2
ChinaPc is “liberalized” and sold in China in its programmable edition
Reverse Innovation at Speres
that would attract Chinese customers. The first thing Rossi
realized was that these companies adopted a business model
based on strong customization with very little attention to
technical standards. The most common practice was to de-
liver highly personalized, preprogrammed products within
three weeks of the initial order. This was made possible by
very lean organizational structures that allowed these com-
panies to provide clients with highly customized software in
a few days for simple solutions and a couple of weeks for
more complex ones.
Pursuing Rossi’s insight, the management of the Chinese
subsidiary analyzed in detail the product portfolio of one Chi-
nese competitor to identify technical differences between the
competitor’s offerings and Speres’s portfolio, identifying four
main differences that distinguished Chinese products from
Speres’s offerings:
• Chinese companies used a unipolar electronic expansion
valve that offers limited thermodynamic performance
but requires only a very simple electronic control, as op-
posed to the complex control systems needed by the bi-
polar valves used by Speres and other Western companies.
This simpler control system allowed a cost saving of 3
percent or more at a performance level that was suffi-
cient for the local market.
• Chinese producers used a 230-volt system with an inte-
grated transformer, in contrast to Speres’s 24-volt sys-
tems with external transformers.
• Chinese controllers were able to interact with all of the
sensors and devices in the Chinese products, which
tended to have many more such components than Euro-
pean products; Speres’s products could not control all of
the sensors included in Chinese machinery.
• Chinese products typically did not have a digital input or
analog opto-isolated output, making Speres’s solutions,
which integrated opto-isolated digital inputs and analog
outputs, more expensive to implement.
As Mario Rossi described the situation in an interview with
us, “Chinese companies have changed the rules of the game
by leveraging on their volumes. Whereas we used a complex,
technologically sophisticated solution, they drew from the
consumer market and reduced the number of functions of
each device.” Those simpler, less sophisticated solutions bet-
ter fit the needs of the Chinese market.
In short, the Chinese companies were able to develop
products to meet the specific requirements of the local mar-
ket. Speres’s products had been successful in the initial years
of the company’s activity in China, but local companies had
gained the expertise to design and manufacture new prod-
ucts by themselves. In addition, Chinese companies adopted
an organizational strategy that allowed them to split the
problems and pursue them using a modular approach. This
was particularly evident in chillers, in which modularity is
very unpopular in Europe but widely adopted in China.
Speres China lacked some key competencies to compete
well in this market. The subsidiary was not flexible or fast
Reverse Innovation at Speres
Developing such a product would go
against the company’s usual technical
design approach.
enough to customize solutions for the preprogrammed prod-
ucts typical of the Chinese market. And, although the Chi-
nese subsidiary had high quality standards, a strong
commercial network, and a talented team of software devel-
opers, it had no skills in terms of electronic hardware
design.
Designing a Product for the Market
In order for Speres China to compete with Chinese companies,
the management team realized, it would have to make some
technical changes in its products. It would have to develop an
electronic board for each module and link the boards through
a serial connection. Furthermore, it would have to integrate
the controller for the unipolar expansion valve to increase the
number of outputs of the European standard version, inte-
grate a 230-volt power supply system, and adopt minimal digi-
tal and analog interfaces. To make things more complicated,
the technology sold by Chinese companies was prepro-
grammed, while Speres traditionally provides programmable
products.
Rossi identified two fundamental drivers that would
structure his team’s efforts to develop a new product for the
Chinese market, to be produced in China:
• Simplicity. Eliminate most of the functions and applica-
tions of the European standard version. These functions
were considered crucial in Western markets because
they had always been provided in the past, but in prac-
tice they contributed only marginally to the general ef-
ficacy of the technology.
• Cost. Create a product with the same functionality—
although with a less refined implementation—at a
50 percent lower cost.
Mario Rossi knew that developing such a product would go
against the company’s usual technical design approach: “If
as a European engineer I need a 200 kw refrigerating ma-
chine, I usually take a single compressor that has this power.
Chinese companies on the other hand prefer to put in line
a number of small revolving compressors that reach that
power in combination. We thought they were wrong. We
thought that our solution was the best because . . . the Chi-
nese approach . . . [is] of a lower quality and reliability.”
Approaching the Chinese market meant rethinking these
core assumptions.
To ensure this happened, Rossi kept in close contact with
the project leader for the new product, Roberto Verdi. This
close contact was an important element in the product devel-
opment, as it allowed Rossi to deploy his knowledge and
July—August 2014 | 31
authority to shape the project outcome. Being an Italian with
a strong knowledge of Speres’s corporate culture enabled
Rossi to transmit the technical specifications of the new
product in a way that would be understood and accepted by
the headquarters team. As Rossi pointed out, the new prod-
uct specifications challenged not only the culture of Speres
but also the technological trajectories that had been followed
by the European and American markets up to that point. In
that context, Rossi said, “Having two Italian managers look-
ing at Chinese products and providing Italian designers with
technical specifications has been essential. If the information
had been provided by Chinese managers, nobody would
have listened to them.” Rossi was not, however, able to en-
sure the appropriate attention was given to the development
of the new product at headquarters. The top management
dedicated only a two-person team to the new product,
where, as Rossi told us, “we needed six people doing the job.”
Equipped with Rossi’s analysis and information, Speres’s
product development team started to design an electronic
microprocessor controller for the Chinese market. At the
same time, managers from the Chinese subsidiary intensified
their contacts with potential customers and the sales force
was informed about the development of this new product in
order to start pre-commercial activities. Rossi himself strongly
promoted the new product with the subsidiary’s most impor-
tant customers and invited his sales force to do the same,
creating high expectations for a technology developed explic-
itly for the Chinese market but with a Western peculiarity
that would have given Chinese companies with more flexi-
bility: programmability.
After a year of work, Speres’s product designers delivered
a surprise based on the technical specifications provided by
the Chinese subsidiary: a more powerful, programmable
electronic controller than those already in the company port-
folio (ChinaPC), at 50 percent of the cost of those other prod-
ucts, with applications in the air conditioning business where
Speres is most present.
Exploiting the Innovation in the Chinese Market
Corporate management realized quickly that the new prod-
uct came with a big risk. Although it was technologically dif-
ferent, the new product was perfectly compatible with
Western systems, leading Speres’s leadership to fear that it
could cannibalize some of the company’s products on the Eu-
ropean market. As the sales and marketing director told us,
“There is a risk that by ‘shooting’ the product in China, we
also shoot behind our front lines back in Europe.” Once
Western customers operating in China saw the product—and
its price—they might have requested it for their operations in
Europe or the United States. The product’s lower cost could
also have enabled Speres to penetrate the residential market
in Europe, but the management team judged risk of canni-
balization to be too high.
As a result, after several meetings and discussions between
the Chinese and Italian marketing divisions, the Italian manage-
ment decided the product would be sold in a preprogrammed
version. This decision accomplished two goals: having the new
32 | Research-Technology Management
product more in line with Chinese competitors’ products and
limiting the possibility of commercialization in Europe and the
United States, which relied on programmability.
This move from a programmable to a preprogrammed
version had several consequences. First, the re-engineering
of the product created wide differences between the compa-
ny’s established products and the Chinese model, resulting in
an additional, more complex workload for engineers and de-
signers. Furthermore, the modification of the product forced
several changes in the production line, which Chinese work-
ers had to adapt to.
Finally, removing the attribute that made this product
unique in the Chinese market (programmability) had a
somewhat demoralizing effect on the Chinese sales force. As
a result, the sales team was no longer as proactive, and sales
did not take off as they were expected to. This is particularly
important in the context of Chinese culture. As Rossi told us,
“Chinese commercial agents sell themselves before selling a
product. On my suggestion, they had created strong expecta-
tions among their clients for the incoming product. Once they
realized these expectations would be disregarded, they stopped
visiting clients and waited for more information from us.” Cir-
cumstances deteriorated further when technical problems
emerged with electromagnetic interference beween the prod-
uct and other electronic systems working in the same environ-
ment. Solving these problems took four additional months,
and interest in the product declined further.
In June 2009, Rossi was relocated to Italy and was suc-
ceeded as the head of the Chinese branch by John Smith.
Smith, who was neither Italian nor Chinese and did not en-
joy Rossi’s long history with the company, was appointed be-
cause of his proven commercial experience—he had an
excellent track record of sales for a Western competitor in
China—and because Speres could not identify an Italian in-
sider to supervise Chinese operations.
However, Smith had limited knowledge of the product
and weaker ties with the Italian headquarters. This ham-
pered his integration with headquarters and further weak-
ened the product’s reception in China.
Exploiting the Innovation in the European Market
Once the product was launched, the headquarters manage-
ment team reconsidered their decision to limit commercial-
ization of the product in the West. Given the potential of the
product to expand the company’s market and open new
market segments, Speres decided to study the possibility of
commercializing it on the European market. To meet the
needs of European customers, the programmable version
was restored and some functions were reduced or eliminated
to mitigate the risk of cannibalization. The company also un-
dertook another unsual step to avoid cannibalization: the
product was not included in the company catalogue and was
not sold through the usual distribution channels. Rather, it
was introduced only to customers who were unable to afford
the premium product, and who were vulnerable to low-cost
competitors. As Rossi explained the approach,“Could we
lower the price of ItalyPc that we had been selling for 10
Reverse Innovation at Speres
years? No. So we showed them ChinaPc, explaining its po-
tential.” In this way, ChinaPc became a very useful tool for
maintaining market share during the economic crisis. As the
Group Chief Product Development Officer told us, on visits
to customers to whom sales had dropped by 20 or 30 percent
after the crisis, the Speres team “realized rather quickly that
our premium products were not affordable to them. When
they turn them down, we showed them the ChinaPC.”
ChinaPc was well received by the European market,
and Speres was able to penetrate new market segments
that were populated by some existing customers, including
the residential market. This offered an additional advan-
tage, in that these markets are characterized by lower
competition.
Follow-Up Developments and Market Results
In 2010, Speres developed a new product in the top segment,
ItalyPc2, which had a superior performance to ChinaPc. As a
result, the Italian management no longer saw ChinaPc as
a cannibalization threat and allowed the repositioning of a
new version of ChinaPc on the European market. This Euro-
pean version restored functions that had been removed. The
product, which is offered in China only in the prepro-
grammed version, holds a small market share in that coun-
try; 85 percent of its sales are now in Europe.
The future of Speres in China entails some further chal-
lenges the company is still trying to address:
• Size of customer companies: Speres’s customer base in
China is made up mostly of small or medium-sized com-
panies, which do not buy in large volumes and do not
provide the grounds for creating a standard. Speres care-
fully follows every client, assuming that some of these will
grow big enough in the future to set a standard, but none
of them has so far achieved the volume of European cus-
tomers, which order thousands of pieces at a time.
• Preprogramming: Speres’s flexibility in offering a pre-
programmed product has improved in recent years, but
the company still struggles to compete with Chinese
companies who are able to customize software in very
short timeframes.
• Customer retention: The highly dynamic market and
strong price orientation of Chinese companies make re-
taining customers in China difficult. Speres China’s cus-
tomer retention rate, although comparable to that of
Chinese companies, is not comparable with the rate
Speres enjoys in the West.
Lessons Learned
Although the dynamics that led to Speres’s development of a
globally successful product were not the fruits of a structured
process or strategy, a few key lessons can be drawn from the
company’s example.
First, it is important to recognize that, although the de-
velopment of ChinaPc did not follow a formalized process,
the innovation did emerge in three clear steps: problem
identification, analysis of local competitor products, and
Reverse Innovation at Speres
ChinaPc became a very useful tool for
maintaining market share during the
economic crisis.
transmission of product attributes to the headquarters de-
velopment team.
1. Problem identification: Most western companies fail to
question the appropriateness of their technology for emerg-
ing markets. Speres’s awareness of not having the appropri-
ate technology solution for the Chinese market, and the
company’s willingness to explore local needs in depth, was
the first step in this reverse innovation process.
2. Analysis of local competitors: The evaluation of ex-
isting products that were succeeding in the market re-
vealed exactly where Speres’s technology didn’t fit and
helped the China team to develop technical specifica-
tions and attributes for the new product.
3. Transmission of product attributes to headquarters:
This was a crucial moment, as it required clear commu-
nication, not only of the technical specifications for the
product but also of the particular conditions driving
those specifications. Integrating them into the company’s
innovation process required the headquarters team to be
open and flexible.
In short, as John Smith, Rossi’s successor as CEO of Speres
China, recognized, Speres’s reverse innovation process re-
sulted from a synthesis of headquarters and subsidiary
strengths: “We understand our customers’ requirements
from our competitors’ products. And from those products we
learned how to cut costs down but of course we do things
differently. We offer much more than our competitors thanks
to the support of our HQ.”
Speres’s journey through those steps offers three key les-
sons for those seeking to catalize deliberate reverse innova-
tion. Having champions with influence in the emerging
market and at headquarters, recognizing the possibility of in-
novation in emerging economies, and assembling a global
team are all crucial to successful reverse innovation.
1. A champion is crucial. In our case, Mario Rossi triggered
the development process, organized it, and saw it
through development. The identification of new product
Having champions with influence in the
emerging market and at headquarters is
crucial to successful reverse innovation.
July—August 2014 | 33
 attributes was made possible by Rossi’s ability to immerse
himself in the local business environment and gain the
trust of its actors. Success in product development relied
heavily on Rossi’s knowledge of Speres’s corporate cul-
ture and technology, which allowed him to build trust
and gain the endorsement of managers back at
headquarters.
2. Recognize that innovation can be generated in emerging econo-
mies. The ChinaPc project was set up to respond to the
needs of the Chinese market, without considering the
potential for commercialization in advanced markets. In
a globalized market where knowledge and technology
are widely dispersed, companies need to adopt a technol-
ogy or idea-sourcing strategy that includes emerging
economies as potential contributors. This approach re-
quires not only a financial investment but also a change
in mindset. Because nobody at the company’s Italian
headquarters saw the potential for a valuable new prod-
uct offering from ideas generated in China, the ChinaPc
project did not receive the support it needed—Roberto
Verdi led the development of the product with a team of
two people when six or seven were needed. This slowed
the delivery of the product modifications and narrowed
the number of managers who understood the purpose of
the project.
3. For global innovation, you need a global team. Intercultural de-
sign teams bring diversity and an array of different perspec-
tives to the projects. At Speres, the experience and strong
technological base of Italian product developers was sup-
ported by an original, and China-specific, view of the mar-
ket needs provided by members of the Chinese subsidiary.
Such an approach requires strong, public support from cor-
porate management and leaders at the subsidiary with ap-
propriate autonomy and authority.
Conclusion
As the President of Speres Group told us, “New product mod-
els will surely be developed passing through the Chinese
market: simpler, cheaper, and more solid products.” The role
of China in the global innovation setting will be more and
more important.
In a world where emerging markets lead global growth
and companies from emerging economies gain a foothold in
advanced markets, it is essential to know how to approach
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those markets. It is even more necessary to bring back from
those markets technologies that might open new business
opportunities in the developed world. As Govindarajan and
Trimble (2012) have noted, there are a lot of opportunities
for foreign companies stemming from their business in
emerging economies. While global innovations may result
from emerging market products, a perceived risk of cannibal-
ization and cultural mismatches can stymie this process. The
case of Speres illustrates how internal resistance can hamper
the reversal of the technology flow. Although Speres didn’t
plan for reverse innovation, its experience suggests how
managers embarking intentionally on such a course might
proceed.
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Reverse Innovation at Speres