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  • Writer's pictureGrant Rock

Reversing the Flow of Innovation

Updated: Jan 27, 2021

The idea that consumers of the developing world are continuously playing catch-up with those in the first world, is becoming outdated. More and more, we are seeing innovations ‘defy gravity’ as they ‘flow uphill’ from poor to richer markets. This trend is known as reverse innovation, and refers to instance where an innovation is adopted first in poor or emerging economies before ‘trickling up’ too richer or more developed markets, often disrupting the status quo. Traditionally multinationals have followed a simple global strategy. First innovate for home markets, then enter new markets by following a globalisation strategy. Add some minor modifications and simplifications to address local market needs and cut costs, and you have a glocalisation strategy. Contrary to this, start locally with socially embedded nuances to provide a unique solution to a large new customer base, and you have a local innovation strategy. And if this resonates in other markets, this can be the first step in the reverse innovation process. In the African context there are many day to day examples of reverse innovation such as Discovery Vitality with its shared value model that is disrupting private health insurance across Europe, the US and Canada; SA born Clickatel which created the first Global SMS Messaging Gateway and is now one of the largest global mobile text messaging enablers with headquarters in Silicon Valley; and the Cardiopad, a touch screen medical tablet, originating from Cameroon, that enables heart examinations such as the electrocardiogram (ECG) to be performed at remote, rural locations while the results of the test are transferred wirelessly to specialists who can interpret them. While there are many more examples of reverse innovation, too many to name, another great example comes from the African fintech sector where in 2004 MCel in Mozambique introduced a world mobile phone first by allowing airtime to be swapped between customers. In parallel a student from Moi University in Kenya developed mobile software that could allow customers to send, receive and withdraw money from their mobile devices. These two innovations were taken a step further by Safaricom who had already been supporting microfinance and back office banking with mobile phones. Fast forward to 2007, following a student software development project in Kenya, Safaricom launched another world first, a mobile phone-based payment and money transfer service known as M-Pesa. While M-Pesa employs almost 300,000 agents in 10 countries and is in itself a great success story, its technology, which was innovated in Africa, has been commercialised the world over, and today is seen as the ‘norm’ in markets where traditional banking penetration remains limited. Building off the success of M-Pesa and other African innovations, we are seeing more and more examples of reverse innovation coming out of Africa, especially in the FinTech sector and the payments space where access to traditional banking and payment platforms particularly in the ‘informal’ market is limited. More on that here. Emerging economies are playing a growing role in the global innovation landscape. Reverse innovation is a powerful phenomenon that has the potential to enable pivotal social and economic progress, sparking new ways to think about how and where value is created for more inclusive populations, as more and more of these ‘local’ solutions are finding their way onto the world stage. With this in mind, and with the African startup success story building at an unprecendented rate, HAVAÍC’s thesis to invest in global elevation that stems from African innovation remain on point! Ian Lessem Managing Partner

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