After a year of work, Speres's product designers delivered a surprise based on the technical specifications provided by the Chinese subsidiary: a more powerful, programmable electronic controller than those already in the company portfolio (ChinaPC), at 50 percent of the cost of those other products, with applications in the air conditioning business where Speres is most present.
The product's lower cost could also have enabled Speres to penetrate the residential market in Europe, but the management team judged risk of cannibalization to be too high.
Smith, who was neither Italian nor Chinese and did not enjoy Rossi's long history with the company, was appointed because of his proven commercial experience--he had an excellent track record of sales for a Western competitor in China--and because Speres could not identify an Italian insider to supervise Chinese operations.
Given the potential of the product to expand the company's market and open new market segments, Speres decided to study the possibility of commercializing it on the European market.
ChinaPc was well received by the European market, and Speres was able to penetrate new market segments that were populated by some existing customers, including the residential market.
In 2010, Speres developed a new product in the top segment, ItalyPc2, which had a superior performance to ChinaPc.
The future of Speres in China entails some further challenges the company is still trying to address:
Speres carefully follows every client, assuming that some of these will grow big enough in the future to set a standard, but none of them has so far achieved the volume of European customers, which order thousands of pieces at a time.
Speres China's customer retention rate, although comparable to that of Chinese companies, is not comparable with the rate Speres enjoys in the West.
In short, as John Smith, Rossi's successor as CEO of Speres China, recognized, Speres's reverse innovation process resulted from a synthesis of headquarters and subsidiary strengths: "We understand our customers' requirements from our competitors' products.