Reverse Innovation in Tech Startups: The Story of Capillary Technologies
June 21, 2013 Editor 0
At its core, reverse innovation describes solutions adopted first in poorer, emerging nations that subsequently—and disruptively—find a market in richer, developed nations. But can reverse innovation be relevant in the world of high-technology? The very definition of “high-technology” hints at something typically reserved for the developed world. Furthermore, for the past half-century, technology solutions have inevitably come from developed nations and occasionally “trickled down” to the emerging markets.
However, the story of Capillary Technologies portends a global shift of technology “trickling up” in the opposite direction. In 2009, two bright, young entrepreneurs in India saw a key pain point with local retailers, who had no ability to engage with their existing customers. So they developed an “emerging market” technology solution centered on mobile phone text messaging and low-cost cloud server networks. This new solution enabled retailers to better understand their customers, track their behavior, and deliver personalized offers based on Capillary’s predictive analytics capability. As an example, Raymonds, a famous clothing retailer in India, utilized Capillary’s solution to create a sophisticated mobile loyalty program for 1.6 million customers without using any paper forms or plastic loyalty cards.
Capillary grew their business rapidly across India and other emerging nations, generating solid revenues. Capillary’s connection to local retailers also helped them understand the deeper needs of their existing customers. This enabled them to build a full CRM (customer relationship management) solutions suite, specifically targeted towards retailers, that included associate applications, analytics, tablet/smartphone applications, and social components.
In 2011, Capillary began looking beyond emerging markets for further growth. They discovered that many of the retailers in developed nations had similar pain points as their existing retail customers. More interestingly, they realized that the retail software solutions available in developed markets were far too complex and expensive for most retailers’ segments compared with Capillary’s simpler, bottoms-up CRM based-solution.
They quickly found traction in developed nations. Retailers liked several aspects of Capillary’s solution: it elegantly focused on their core pain points, was not cumbersome to deploy, and was available on an affordable pay-as-you-go monthly pricing model with no upfront licensing fees. These disruptive advantages were primarily feasible because Capillary had initially designed, built, and deployed a cutting-edge “Big Data” solution—typically associated with developed nations—in an emerging nation.
Capillary now powers more than 10,000 stores globally for over 140 brands servicing more than 50 million consumers across 16 countries. Clients include Marks & Spencer, Nokia, Brooke Bros, Courts, Puma, Neilson, and Pizza Hut. In fact, Pizza Hut leveraged Capillary’s predictive intelligence technology to drive purchases via targeted, real-time CRM campaigns across 17,000 unique customer clusters.
Capillary’s case study illustrates that focused high-tech solutions can now be designed, deployed, and fine-tuned cost-effectively in emerging market nations. These “tried and tested” solutions are ripe for disrupting various developed-nation market segments with shorter deployment times and lower cost structures. Capillary could very well be at the forefront of a reverse innovation trend in the high-tech startup sector.
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