How GE is disrupting itself? Executive summary Though having been launching products in emerging markets for few decades, GE’s leaders realized that it is vital to change their business model not only to reach their full potential growth but also for defensive reasons. Authors called the progress used to complete that task reverse innovation. Reverse innovation is all about decentralization and local market focus such as local based and managed market, which is believed to be able to make GE more successful in developing countries.
However it is completely opposite toglobalizationthat created unsolved conflicts between two strategies. In this article authors will reveal to us what GE did to overcome these conflicts. In the realization that emerging markets are very different to markets in developed countries, they realized the necessity of adjusting the business model to adapt to the new environments, which may lead to two core assumptions: * Emerging economics will largely evolve in the same way that wealthy economics did. Products that address developing countries, special needs can’t be sold in developed countries because they are not good enough to compete there. However research and analysis over India’s markets gave us the different results. It is reported that emerging market could develop even greater than in developed countries because of their great willingness to adopt new innovations. And on the contrary products that have been launched in emerging market could possibly create new markets in developed world.
For deeper understanding, the conflict is not only about the strategy which make globalization successful might make reserve innovation impossible and in return. It also lies at the executives who are not familiar to the new markets. Being aware of the difficulty company has to face when changing long established structures and attitudes, however for the sake of opportunity of future growth, GE came out with new business model called Local Growth Team model (LGT). LGT and its five critical principles are xplained more clearly via example of launching compact ultrasound in China: * Shift power to where the growth is: give broader power to local authority to their executive leaders of GE in China. * Build new offerings from the ground up: start with new architecture which is to shift hardware form to software form in order to make it easier to carry. * Building LGTs from the ground up, like new companies: rewrite completely new value chain such as local recruiting, target customers as the dealers etc. * Customize objectives, targets, and metrics: learning by testing and experiments. Have the LGT report to someone high in the organization to maintain the strong support from the top and to mediate conflicts between the team and the global business. Overall the biggest challenge of GE is mentioned about is to change the mind-set of managers who have spent their careers excelling at globalization. Personal arguments People have been talking about globalization for whole decades, and now we are introduced to a new definition of the vital business model of future: Reserve innovation together with the rising of Asia in 12st century.
Being aware of it and learning how to deal with it is skills and mind-set each manager has to have to compete in global market in future. One interesting thing is that GE considered reserve innovation as future strategy for a long termgoals. The idea of changing business model when needed to create value at large, especially when it is applied globally, might create the advantage of competitiveness for GE in globalization in future.
However for near future, LGT doesn’t mention how we can actually adjust the cooperation to run the new strategy (LGT only concerned about strategy of production, technologyand marketing). As authors pointed out in the article globalization is so “ dominant” today because it has worked well in the past. However it might depend on which industry and how easily the division/brand/product or company globalizes. The question is which the reverse innovation model would be most appropriately for them to do to accomplish the long-term and the short-term.