BUSINESS innovation in the emerging world has got to the point where all those individual advances add up to more than the sum of their parts. Just as Japan’s quality circles and just-in-time delivery were part of a new system called “lean production”, so the emerging world’s reverse innovation and frugal production are part of a new approach to management.
This new management paradigm pushes two familiar ideas beyond their previous limits: that the customer is king, and that economies of scale can produce radical reductions in unit costs. Companies are starting with the needs of some of the world’s poorest people and redesigning not just products but entire production processes to meet those needs. This can involve changing the definition of a customer to take in all sorts of people who were previously excluded from the market economy. It means cutting costs to the bone and eliminating all but the most essential features of a product or service. And it often stretches the idea of economies of scale beyond what the emerging Japanese giants of the 1970s could aspire to. Most companies in developing countries have access to large domestic markets and all of them have opportunities for mergers and acquisitions that did not exist a few decades ago.
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