Reverse innovation and global mobility strategies at General Electric and Reckitt Benckiser

¶ … Immelt et al. (2009). Becht (2010) discusses how RB (Reckitt Benckiser) has developed the global entrepreneurship skills of its top managers using global mobility strategy. The global mobility strategy is that the company does not allow its top manager to assume a managerial position in his country origin, the company only allows managers to assume managerial positions in other countries. The company has used this strategy to increase the overall revenue. The downside of this strategy is that it could to the relocation problem for a spouse and consequently leading to a divorce.

On the other hand, Immelt et al. (2009) reveal how General Electric (GE) has used reverse innovation to develop low cost products for the emerging economies and later bring them back to wealthy countries such as the United States. The company has been able to enjoy market advantages in emerging economies using this strategy. The downside of the reverse innovation is that bringing in the products designed with reverse innovation into the wealthy countries might weaken the GE high-priced and high-quality brand in the developed countries.

Introduction

Objective of this report is to provide the case analysis of an article tiled "How GE is Disrupting itself." (Immelt, Govindarajan, and Trimble, 2009) and the article titled "Building a Company without Borders." (Becht, 2010).

Goal of the Author

The goal of the author is to demonstrate how GE (General Electric) uses unconventional reverse innovation model to develop inexpensive portable, PC-based ultrasound machine and handheld electrocardiogram device for the emerging economies and bring them back to other wealthy nations such as the United States.

Key arguments

The author reveals how GE focuses on the reverse innovation to tap the market opportunities in the emerging markets. The company believes that the sophisticated products developed for the wealthy nations such as the United States would face market challenges in the emerging economies because the emerging economies do not have sophisticated facilities to implement sophisticated products designed for the developed economies. The author provides the difference between reverse innovation and glocalization.

Reverse Innovation and Glocalization

The author defines reverse innovation as the process used to develop low costs PC-based ultrasound machine and handheld electrocardiogram devices in order to exploit market opportunities of emerging economies. On the other hand, glocalization is the process where multinational companies develop great products and take them global with some adaptation to suit the local market conditions. The product adaptation makes companies to achieve market advantages in emerging economies such as India and China.

Challenges companies face with Glocalization

The challenges that GE faced with glocalization makes reverse innovation become more attractive. The ultrasound machines that the company developed in the late 1980 using glocalization model failed to achieve a market success in the emerging economies. However, the company realized that products that could achieve market success in India and China must be portable, easy-to-use and be very cheap based on the different priorities of hospitals in India and China.

Importance of Reverse Innovation

GE focuses on reverse innovation because glocalization is no longer tenable within the modern business environment. Reverse innovation is used to tap the opportunities in the emerging economies. Typically, reverse innovation model is less dependent on the acquisitions because the company will be able to develop products that meet the specific needs of emerging economies. GE uses a reverse innovation by developing a low cost Compact Ultrasound combined with a regular laptop for the emerging economies. The company has been able to achieve market advantages with the portable ultrasound machine because the machine records $278 million of the GE line of product.

Key Arguments

The company operates in more than 60 countries and its top 400 managers are from 60 different nationalities. The company has developed culture of global mobility to create global entrepreneurships in order to develop new ideas.

Importance of RB Global Citizenship Model

The author demonstrates how the company global mobility has paid off because the company has been able to generate between 35% and 40% of the net revenue from the global cross-fertilization that the company implements. For example, RB has been able to develop all-in-one dishwater tablet with Finish idea, which has now become leader in the market category making the company to outpace all its competitors.

RB Global Business Design Strategy

RB business design is based on using postmerger technique where the company uses mixed national cultures into the company operations. Typically, the company moves managers from one side of the merger to another country. For example, an Italian is the head of the UK business. An American is in charge of German business. A Frenchman in the Russian business a Dutch is running a U.S. business, a Belgian in the Brazilian business, while an Indian is in charge of Chinese business.

Performance-Based Remuneration of RB

The author further reveals how RB facilitates the global mobility by designing a compensation to foster innovative and entrepreneurship culture. The company uses the performances oriented pay system to foster a strong growth. The company pay system consists of "base salary, short-term incentives, and long-term incentives." (Becht 2010, P 106). The real benefit is from bonus where managers who meet the target set by the company receive 40% of the base salary. However, a manager who blows out the targets could earn a bonus reaching 144%.

Conflict Implemented in RB

The author reveals how the company allows employee to express their opinion about the product development. However, the company expects people to come with facts about their proposal as well as getting 80% alignment and 100% agreement to allow company to make positive decision about the proposal.

Critic/Comments

The global citizenship model that RB implements is good because it allows top managers to develop global entrepreneurship skills. Downside of this strategy is that the global transfer could create the relocation problem for spouse consequently leading to a divorce. RB creates an environment where its top managers could relocate as little as three days, however, the company does not think of a spouse who is working in another company and has assumed a top position in that company. It would be challenging for a spouse to move with his/her husband/wife to another country and resigning from his or her job position.