Local Growth Teams (LGTs)
Local Growth Teams (LGTs) are autonomous, decentralized business units that multinational corporations establish in emerging markets to execute reverse innovation. The concept was formalized by Vijay Govindarajan and Chris Trimble in Reverse Innovation: Create Far From Home, Win Everywhere (2012). LGTs are designed to overcome the organizational inertia that prevents Western multinationals from innovating effectively for developing-market consumers.[1]
The Structural Problem
Multinational corporations face a fundamental tension: their existing processes, metrics, and culture are optimized for developed-market customers. When tasked with serving emerging markets, these organizations naturally default to Glocalization — modifying existing products rather than creating new ones from scratch.
LGTs solve this by creating a structurally separate unit with the authority, incentives, and mandate to operate differently.
Core Principles
Complete Autonomy
LGTs must have full Profit & Loss (P&L) responsibility. They cannot be treated as cost centers or regional sales offices. This autonomy extends to:
- Product decisions: What to build, at what price point, with what features.
- Manufacturing decisions: Where and how to produce.
- Go-to-market decisions: How to distribute, price, and promote.
- Talent decisions: Whom to hire, how to compensate, and how to organize.
Clean-Slate Mandate
The LGT must be explicitly freed from the parent company's legacy processes, technologies, and assumptions. This includes:
- No obligation to use the parent's existing supply chain.
- No requirement to integrate with the parent's ERP or IT systems.
- Permission to fail differently — accepting risk profiles that the parent company would normally reject.
Global Backing
While local in focus, LGTs must have the authority to draw on the multinational's global resources:
- Access to global R&D and intellectual property.
- Ability to leverage the parent's capital markets and balance sheet.
- Permission to use the parent's brand where advantageous.
Why LGTs Succeed Where Other Structures Fail
| Structure | Outcome |
|---|---|
| Central R&D with local sales offices | Glocalization — feature stripping |
| Joint ventures with local partners | Knowledge leakage, strategic misalignment |
| Acquired local brands | Integration failure, talent loss |
| Local Growth Teams | Clean-sheet innovation, global scalability |
Case Study: Logitech's LGT in China
As documented in Reverse Innovation, Logitech faced a severe threat from Chinese rival Rapoo, which sold wireless mice at one-third the cost. Logitech established a localized team in China with full autonomy to engineer a response. The team designed a mouse with simpler software and less memory that still performed essential functions, slashing the entry-level price from $50 to $19.99. The product shipped 4.5 million units in its first year and was scaled globally.[2]
Relationship to Other Concepts
- Reverse Innovation — LGTs are the primary organizational mechanism for executing reverse innovation. The note's case studies (GE, Logitech, Renault/Dacia, P&G) all relied on some form of local autonomy.
- Glocalization — LGTs are the structural antidote to glocalization's centralized decision-making model.
- Every Business Is a Software Business - Core Frameworks and Enterprise Transformation — LGTs mirror the cross-functional pods that software-centric enterprises use to maintain agility at scale.
- Effectuation — LGTs operate in an effectual logic: they start with available means (local knowledge, parent resources) and co-create solutions with local partners, rather than executing a predetermined plan from headquarters.
References
Govindarajan, Vijay, and Chris Trimble. Reverse Innovation: Create Far From Home, Win Everywhere. Boston: Harvard Business Review Press, 2012. ↩︎
Tuck School of Business at Dartmouth. "Reverse Innovation." https://tuck.dartmouth.edu/news/articles/reverse-type ↩︎