Group 7 presents

A REVERSE-INNOVATION PLAYBOOK

REVERSE INNOVATION

Developing ideas in an emerging market and coaxing them to flow uphill to Western markets Not easy - poses immense challenges

Involves changes such

Throwing out old organizational structures to create new ones from scratch Revamping product-development and manufacturing methods Reorienting the sales force

HARMAN INTERNATIONAL

US-based business

Products Ultra-sophisticated dashboard audio-visual systems designed by German Engineers

HOW DID THEY DO IT

2-part approach: Radical change from below combined with astute leadership from above A small team based in India and China:

set audacious goals created a new organizational structure adopted new design methods

CEO, Dinesh Paliwal:

rebranded the companys future shifted the corporate center of gravity to emerging markets ensured that legacy units continued to thrive averted conflict between old and new

RESULTS

Approach enabled Harman to offer unprecedented range of products along the continuum of markets, from low-end to luxury

EXECUTING RADICAL CHANGE

Infotainment division

makes factory-installed system that integrate GPS navigation, music, video, cell phone and internet In 2007, led in the luxury car segment with 70% market share Accounted for $2 billion (2/3rd of total revenues)

Luxury segment had little room for growth or margin improvements Paliwal sought new opportunities in emerging markets Tried to enter through glocalization Scaled-down infotainment systems had performed poorly

EXECUTING RADICAL CHANGE

Paliwal commissioned a new project in 2008 Saras Rethinking location, staffing, incentives and reporting structure

S/w team in India and h/w team in China Team was familiar with emerging markets and deeply rooted in the company culture 3 Engineers from Germany and US each to maintain connection with the traditional centers

Dinesh Paliwal

Sachin Lawande

Arvind Baalu

Kelei Shen

EXECUTING RADICAL CHANGE

Setting audacious targets

Creating products whose functionality would resemble that of the division existing systems, but at half the price and one-third the cost

Rethinking engineering processes

Scalability Simplicity Modularity Third-party solutions Standard technologies Cross-functional, unspecialized, experimental, adaptive and lean approach to work

EXECUTING RADICAL CHANGE

In less than a year, the team designed a new architecture and used it to build an infotainment system that closely resembled the high-end systems in functioning and met cost and price targets

OVERCOMING RESISTANCE

Initial resistance from all corners of the company

Multiple attempts to de-rail the project and follow conservative path

Top Management support (Paliwals) was crucial during such phase

Salespeople were suspicious of new products. Considered it as low quality products Were worried about low commissions associated with cheaper products

OVERCOMING RESISTANCE

By inviting customers to visit development centers and reassuring them about new approach credence Top management had to strictly order Salespeople to present new products to customers Assuring Salespeople that new low price products would not eat up their commissions rather with larger volume base, it will shoot up Once, Toyota accepted Saras, concerns melted away gradually

CHANGE FROM BELOW AND ABOVE

This approach helps in bypassing traditional thinking and integrate new logic into product Product Level Actions

Establish radical goals Practice clean slate organizational design Leverage global resources Choose team leaders without conflicting interests

Top Level Actions

Rebranding the companys future Shifting people and power to emerging economics

CHANGE FROM BELOW AND ABOVE

Increasing R&D spending in emerging markets and focusing on local needs Bulking up on emerging-market knowledge and expertise Ensuring that legacy businesses continue to thrive and calming fears of product cannibalization

Reverse innovation is not only about product but also a lot about mindset. Harmans balanced approach (between radical thinking and measured guidance) has led to company being well positioned to put its innovation across spectrum of market worldwide.