Bootstrapping or Reverse Innovation?

Date: May 12, 2014

It’s hard to believe it’s been a year since Emma, Chris, and I completed the MBA program at Rice. A few weekends ago we celebrated our first anniversary as alumni at reunion weekend at the Jones School. During the weekend festivities we participated in executive education sessions from some of our favorite professors.

One of the highlights of the weekend was a lecture from Dr. Prashant Kale on Competing in Emerging Markets. Prashant is a Corporate Strategy professor at Rice with an emphasis on healthcare. The case study presented in class was for GE Healthcare’s Global Medical Systems Business. While the case study and analysis during the executive education session was a slimmed down version of the strategy cases during the MBA program, the point of the analysis was to consider a relatively straightforward business problem from a different perspective and think about how we can apply that to our practical work experience.

In this case, GE Healthcare was trying to decide if an international expansion strategy was best executed locally, glocally (local adaptations for a global product), or through global centers of excellence.  As with most strategy cases, there is no right answer to the question – even with the benefit of hindsight. The real lesson from this case was the unexpected consequence that GE Healthcare found. GE Healthcare did not see the cost savings they anticipated (not even close). The massive benefit for GE Healthcare was the development and success of Reverse Innovation. For example, an ultrasound machine that traditionally sold for $500,000 in the US was reconfigured, redesigned, and sold in other markets for $50,000.

As entrepreneurs, we live a similar life every day; we look for the most cost efficient and inventive ways to support our business. Some people call it bootstrapping, but is bootstrapping so different from Reverse Innovation? In either case, the business is looking for success in unusual places and if a successful opportunities is found, the company often pivots to serve a new market. The biggest difference between the bootstrapping and Reverse Innovation is where the funding for the business comes from. It’s hard to imagine calling GE Healthcare’s result of “In China For China” bootstrapping. Reverse Innovation sounds like a much more elegant and corporate term.

So, the next time you hear an entrepreneur talk about bootstrapping their business to find success, suggest a new spin – they’ve used Reverse Innovation and reached a new market.


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