Manufacturers can benefit from introducing reverse-innovation products into markets with a higher price point. Some may be apprehensive, however, if they are already selling a version with a good reputation and commercial success. 

So, what can you do to differentiate the two products?

The goal of reverse innovation is not to replace products that are already successful in market segments for which your company has a strong foothold. Rather, a reverse innovation should bring new value—opening new opportunities, customers, and market shares that were previously unattainable by your standard product line. 

The key is being strategic about differentiation. For example, GE Healthcare’s low-cost ultrasound machine was adopted by new consumers like EMTs, emergency room technicians and anesthesiologists. It did not displace the market for high-end, highly featured ultrasound machines used by wealthy hospitals for procedures such as imaging unborn babies.

An Example From the Power Tool Industry

However, there is always the risk of cannibalization—when a manufacturer’s new product takes away market share from an existing product. Any company that wants to extend its brands vertically to higher or lower market segments must mitigate this risk. 

Power tool companies that define their brand by coloring all of their tools yellow (DeWalt), red (Milwaukee) or blue (Makita) particularly face this challenge by needing to segment different classes and qualities of the same type of tool while maintaining brand recognition.

When companies like DeWalt started selling lower-cost versions of their tools in big-box stores like Home Depot, they would often get flack from customers for cheapening their product line. Indeed, members of the MIT GEAR Lab, Amos Winter’s research group, were frustrated by the “cheapened” cordless drills bought at Home Depot, compared to the much more robust variants purchased through specialty tool suppliers that catered to professionals.

DeWalt didn’t do anything wrong, nor cheat its customers in any way—the lower-cost drills were likely satisfactory for the average homeowner, whereas a professional may have preferred the heavier-duty and longer-lasting tool. The issue was poor product differentiation.

DeWalt has evolved its design language over the past decade to more clearly differentiate between its low-cost mass consumer tools and their high-end professional models. The cordless drills offered in 2012 looked almost identical in silhouette. They even shared very similar design language, such as the ribbing on the butt of the motor housing. On the high-cost drill, this ribbing was functional rubber bumpers to prevent breakage when the drill was dropped; on the low-end tool, the ribbing was cosmetic only, making the motor housing more susceptible to cracking during impacts.

The high-cost drill had better batteries, which you can tell store more energy because they are taller than the lower-cost variants, but looked very similar because they were colored black except for the yellow neck, which was hidden when inserted into the drill. DeWalt did include some features for the keen-eyed consumer to distinguish its higher-quality products, such as a metal gearbox (indicating metal rather than plastic gears) and XRP branding.

DeWalt’s current drill offerings have added features to help the consumer differentiate between quality and justify cost. Let’s look at two DeWalt drill kits sold on Amazon, the low-cost one for $99 and the high-cost for $206.

You can see that the modern high-cost version includes many cues to its higher quality and performance:

• A distinctly different silhouette compared to the low-cost drill
• A stubbier design to more easily fit between wall studs when doing construction
• An all-metal chuck and gearbox
• XR branding on all components
• More complicated and futuristic rubber over-molding on the grip to make the tool look modern
• Yellow bodied-batteries indicating 2.0 Ah of energy storage, rather than the black 1.5 Ah batteries that come with the low-cost drill
• A metal belt hook for carrying the tool around a worksite, and a hard plastic carrying case.

With these design features, DeWalt has improved its product differentiation while retaining the strong (yellow) brand, identifiable to anyone who uses power tools.

The differentiators were all achieved through unique features. DeWalt was able to place its drill offerings at two distinctly different market segments, separated by a 2X price point, by including features that cater to different customers.

Features can be used to delight, provide necessary performance or satisfy basic needs. Ostensibly, both modern DeWalt drills provide the same core value: they can drill things and drive screws. However, DeWalt chose to include features like longer battery life, gear strength and smaller body size to appeal to its upmarket consumers.

Land Rover Differentiation, From Military to Consumer

A strategy like DeWalt’s can be employed to avoid cannibalization by your reverse innovation—you can make distinctly different product variants that share the same core value, to appeal to different customers even if they are in the same market (like U.S. drill shoppers who buy tools at Home Depot or Amazon) with chosen features that resonate with consumers.

Mercedes-Benz pulled this trick with one of its most successful reverse innovations. In 1979, the company introduced a utilitarian 4x4 for military use called the W460, similar in form and function to the Land Rover Defender used by the UK military. Variants of the W460 are still in production to this day, and the model is the second-longest running in the company’s history after Unimog trucks. It is unlikely that most people reading this have ever heard of the W460. 

However, anyone who lives in affluent communities around the world, or who keeps tabs on the latest automotive style of film/sports/music stars, will undoubtedly know its reverse innovation variation: the Mercedes Benz G-Wagon. These luxurious SUVs sell for upwards of a quarter million dollars because of their powerful engines, plush interiors and premier sound systems—features that are irrelevant or wasteful for the military.

Both the civilian G-Wagon and the military version shared the same underpinnings until 2018; the current G-Wagon has a different body and chassis but retains the rugged aesthetics of the original. Mercedes successfully avoided cannibalization, and was able to sell a vehicle with the same core value to influencers and infantry, by successfully segmenting markets through features and pricing. 

This article is an excerpt from the book Global by Design: How to Create Innovations that Scale, Travel and Transform (Harvard Business Review Press: August 2026). It is used with permission.