From the Businessworld issue on Indian innovation (you need to register to read articles - but registration is free)
Squeeze The Dry Towel
Innovation has to happen in a much more organised manner if India is to be counted among the world’s greatest nations.
In all this debate over whether India is innovating enough, there is yet another subtext. Is the kind of innovation that is already happening here the right variety?
There is a pattern to the innovation emerging out of India. Most of it revolves around price — essentially making a product or a service more affordable (therefore, accessible) to a larger mass of people. While there is nothing wrong with an emphasis on what management thinker C.K. Prahalad calls the ‘bottom-of-the-pyramid’ approach, the question is — is price innovation enough for us?
Innovation practitioners say, yes. They argue that innovation has to be in the context of a nation’s socio-economic framework and its economic imperatives. In the US, for example, innovations are typically in technology and products, since labour is expensive there.
Madhukar Shukla, professor at XLRI, says not much is being done to address this segment of the market: “There is a vast market at the bottom of the pyramid. It also makes business sense.”
One derivative of the bottom-of-the-pyramid mindset is the emphasis most Indian companies have begun paying to thrift. And that, in turn, have made many of them globally competitive, especially in manufacturing.
Take automobile components. Says Baba Kalyani, CMD, Bharat Forge, one of India’s most innovative auto-component companies: “We started by placing emphasis on improving cost efficiencies, enhancing product quality and rationalising internal processes. We then leveraged the domestic market to build an export orientation by creating international-scale capacities.”
But the real issue is whether too much emphasis on price-led innovation will prevent Indians from making an iPod, or even a Walkman. Says Ravi Kant, managing director, Tata Motors: “Price is one peg. But you must identify the need the product will cater to. With Ace, we identified both.”
XLRI’s Shukla, however, argues that even if India were to create an iPod, lack of marketing muscle would not allow it to exploit the global market. “The XP launch cost Microsoft close to $800 million. Can any Indian company match that?” he says.
He may have a point, but there are ways of getting around this issue. One is through collaboration, as Indian pharma companies doing high-end R&D have shown. (A company develops the molecule and then farms out the trials, marketing, etc., to partners.)
Another solution that Indian companies, especially in the manufacturing sector, seem to have hit upon is to look at expanding in other structurally similar markets, mainly in Africa and some parts of central and South-east Asia. Given that a bottom-of-the-pyramid approach works equally well there, Indian companies are extending innovations developed for India to these markets.
The Tata Group, for example, almost has a complete South Africa strategy, where the company is selling everything from cars to telecom to hotels. Again, Tata Motors has recently sold 228 buses, originally developed for India, to the Democratic Republic of Congo. Given their cost structures, it would be fair to assume that the Tata buses would have an advantage over buses from the US or Europe.
The journey that BW took over the past few weeks — talking to academics, consultants, and meeting with companies and non-profit organisations actually practising innovation — to see first-hand innovation at work demonstrated one reality unequivocally: Indians believe the country needs to do things differently if it wants to count itself amongst the world’s great nations. Some innovators are stuck for cash, some for guidance, some for people, but the spark exists. It is now for us as a nation to fan that spark into a flame.
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