The rise of emerging will force Western companies to recognize new approaches. competitors and rethink their own innovation Conventional wisdom has long held that innovation is strength of West and that what gets developed in West is modified and transferred to the Rest. But reality of recent years does not support this assumption. In point of fact, we're seeing a rise in number of innovations coming from emerging markets, and we're seeing even more in way of influence from emerging in way that innovation is conceived of, executed, and delivered. Innovation happens where need meets opportunity. In emerging markets, these needs are often very basic, particularly for those at bottom of economic pyramid ( Prahalad 2004 ). As creative ideas for meeting those basic needs are translated into compelling innovations, emerging are becoming hotbeds of innovation in areas ranging from healthcare to water to transportation. And innovation activities in emerging are having profound impacts on West; indeed, products created in and for emerging are now finding eager buyers in developed nations. Once called reverse innovation ( Immelt, Govindarajan, and Trimble 2009 ), and now also known as frugal or constraint-based innovation ( Economist 2010 ), this reversal of traditional flow of innovation is both reshaping consumer demands and forcing Western companies to rethink their ideas about innovation and how it happens. Emerging markets have often been associated with BRIC countries-Brazil, Russia, India, and China-but companies seeking to better understand emerging and frugal innovation must now look much further afield, as regions around world emerge as incubators of innovation. This article highlights some recent developments in emerging and provides some insight into how innovation model driving these emerging differs from model invoked by their Western counterparts. Innovation Hotbeds What does a desalinization project in Israel or United Arab Emirates have in common with mobile banking in Kenya or Tata Nano car in India? At first blush, very little. But these places, and these products, are emblematic of innovation power that has been fermenting in rest of world and that is now poised to take full advantage of globalization. Bloomberg BusinessWeek 's 2010 ranking of 50 most innovative companies included 15 Asian companies; more than one fifth of entrants on list were anchored in emerging economies ( Arndt and Einhorn 2010 ). Many of those are evolving specializations in areas that are particularly important for their home economies ( Figure 1 ). We' ve chosen to emphasize four areas: mobile banking, microfinance, and social media; transportation; energy and natural resources; and healthcare. In calling out innovation hotbeds, we're not attempting to be all-inclusive, but rather to highlight confluence of factors that is now driving emergence of truly innovative products and services from unexpected corners of world. Mobile Banking, Microfinance, and Social Media Want to be at center of mobile banking and mobile wallet? Go to Kenya. The M-PESA program, a joint venture between Vodaphone and Safaricom, has revolutionized way that local farmers and small business owners manage their money. These entrepreneurs and farmers go to market with goods and keep track of purchases and expenditures using their cell phones. Cell phones replace bricks-and-mortar bank, providing unbanked access to credit, an easy way of paying bills, and seamless tracking of their expenditures and incremental wealth accumulations-all via text messages. The underlying enablers of this mobile banking revolution lie not only in a rethinking of way financial institutions work, but also in innovations in cell phones to accommodate habits of emerging-market users, such as phones that can store multiple contact lists to allow multiple users to share a phone. …