One of the forceful presenters at a recent event of SPIN (Software Process Improvement Network), Chennai, was Tathagat Varma, Sr Director-Business Operations, Yahoo! Software Development India Pvt Ltd, Bangalore. Speaking on innovation, Tathagat emphasised that today’s customers expect top-quality innovative solutions in less time and lesser dollars than ever before, and that competing on ‘cost arbitrage’ or ‘part quality’ is necessary but not enough.

“As the premier digital media company, Yahoo! places a strong emphasis on innovation,” he noted, during a brief interaction with Business Line. “Being in the consumer Internet space, innovation directly relates to our ability to adapt to a fast-changing market environment.” Our conversation continued over the email, on the theme ‘Creating an innovation ecosystem in the IT industry.’

Excerpts from the interview.

Why do we need an ecosystem to foster a culture of innovation in the IT industry?

Back in the old days, most R&D was capex-driven. You needed large investments to have the latest and the greatest gizmos and co-located teams to conduct research and drive them into innovative products. Innovation was something typically led by large companies. However, globalisation and the Internet have made it possible for talent to be located anywhere and yet collaborate in real-time.

For instance, P&G made a compelling case in a 2006 HBR article that, for every P&G researcher, there were 200 scientists elsewhere in the world who were just as good, so instead of a pure R&D, they decided to get in ‘C&D’ (Connect & Develop) innovation model and set a target of 50 per cent products from ideas originated externally! And the model works for them.

In the IT industry, we are confronted with similar challenges. No company can have all the top minds on its payroll. And, with the technology obsolescence rate being so high, most players can’t specialise in every single technology. Further, some of the most complex problems require cross-industry collaboration at various levels. Having a robust ecosystem of freelancers, app developers, researchers, early adopters, and VCs is but a necessity for the IT industry today.

What are the components of such an ecosystem? And, how is it built?

A vibrant innovation ecosystem consists of many stakeholders. Talent is the first and foremost. A rich pool of talent with diverse experience and skill-set can bring about market-place disruptions. Academia, another stakeholder, plays a big role in developing such talent. Today’s business environment requires creating a mindset shift from the traditional career paths to encourage risk-taking, challenging status quo, ability to think differently and be more adaptive. University and colleges have a significant role to play in shaping this kind of talent base. The talent needs to be supported by a free flow of risk capital. Venture community, including angel networks and incubation firms, help accelerate innovation. Apart from these, a key enabler for innovation ecosystem is in the form of industry bodies that help create, support and grow an environment conducive for innovation.

What we are seeing today in India is a strong early sign of a growing innovation ecosystem. There are over 800 start-ups today. Over 50 venture capital/ private equity firms have India presence, funding local start-ups. Some VC firms also have India-specific funds. There are over 200 angels. We are also seeing a surge in angel networks. Over 20 incubators are in existence funding and supporting nascent start-ups.

Last but not the least, established, global players need to have a system in place that not only harnesses but actually fosters the growth of local ecosystem. This is the reason companies like Yahoo! have opened up their APIs so local tech community can build applications on top of that. We do see lot of other companies having large developer network programme, but most are way too regulated with a tight agenda. I think companies have to be more liberal and generous on this front.

Would you like to describe a few examples of effective innovation ecosystems in the technology space?

When you look globally, Ycombinator is a great example. The amount of learning they are able to offer to a start-up in a 3-month period is simply amazing, be it matchmaking with the angel investors, or weekly talks with successful start-up founders, or the help with legal and paperwork. Back home, I think IITM Research Park and NSRCEL at IIMB are wonderful initiatives to support aspiring start-ups with valuable alumni, industry and trade body connections. Even though it is too early in the day to see market-leading successes from them, these are important initiatives in the right direction.

We are seeing the emergence of collaborative innovation ecosystem in India. With start-up entry barrier getting lower every year, there is a strongly felt need for academia, investment communities, technology firms and industry bodies to work closely. Some examples are that of large firms like Intel and Cisco starting their own investment arms. Other example is a collaboration of IAN (Indian Angel Network) with multiple incubators to work together to provide a one-stop-shop solution for entrepreneurs.

Are there challenges in creating an innovation ecosystem in the IT industry?

Talent and capital mobility are primary hurdles to cross for an innovation ecosystem. Apart from these, there are some friction-points that we need to take care of. Trust and commitment are essential among various stakeholders. Today we carry a burden of the past when it comes to industry-university relations. We also need stronger industry body relations with the government to create a more business-friendly environment in India.

Another area that needs improvement is the role that large organisations like Yahoo, Google, Microsoft, Cisco etc., play today. The R&D centres can demonstrate thought leadership and support growth of ecosystem. With many of these centres maturing over the years and building a strong base of leadership, they can help propel ecosystem growth.

Can campuses play a role in grooming the IT students for productive roles in the industry’s innovation ecosystem?

Absolutely! Let’s not forget that many great companies of our time like Yahoo!, Google, Facebook and Dell, just to name a few, were founded when their founders were still at the campus. I guess risk-taking ability is probably the highest at that stage in life, and the brain is constantly churning out new and bold ideas. At Yahoo!, we recognise this and undertake several initiatives to partner with top-tier India campuses like the IITs.

Our industry-leading university hack day program (more popularly known as “HackU”) has been instrumental in bringing students face to face with some of the finest problems to be tackled in the Internet space, and allows students to live life as a tech geek and product developer in 24 hours ‘hackathons’. We have conducted these events in IITs, IISc, IIIT Hyderabad and IIIT Bangalore so far, producing more than 150 cool Web applications.

Our Key Scientific Challenges programme specifically targets PhD students and enables winners who submit research proposals as part of this global competition to collaborate with Yahoo! scientists in diverse areas ranging from new search experiences to Web information management to computational advertising. We have had winners in the past 3 years from IISc, IIT Bombay, IIIT Hyderabad and IIT Kharagpur, which is a testimonial for Yahoo!’s efforts to catalyse world-class research from India which in turn is a need of the hour.

We also conduct Summer School on advanced topics such as diverse as machine learning and information retrieval every year at a campus of our choice. 150+ participants from all over India spread across industry and academia were deeply engaged in learning and insightful discussions for over a week in June 2010. Initiatives such as this go a long way in fulfilling the imminent demand for trained manpower in corporate research and could in turn result in influential products in the near future.

Your views on how companies should measure their innovation performance.

There might be multiple perspectives depending on how one views the ‘success’ of an innovation programme. For example, how many of the radical innovation ideas actually take-off as new product launches? This could be a very impactful metric, but might also overshadow everyday efforts behind incremental innovation.

Another interesting metric is also how much ‘democratised’ your innovation model is - does every engineer in the team feel empowered and passionate to identify creative ways to solve a problem better and pursue down the innovation path? Toyota is a well-researched case in point where shop-floor workers file thousands of incremental innovation ideas that collectively make its car-making process perhaps the best in the world. Considering that, in an average company, not everyone might be able to participate in a radical innovation programme, this is a key way to instil the spirit of innovation in people and create a funnel for game-changing innovation.

In the technology space, filing of patents is a very important indicator. However, one must be careful not to just look at the number of patents as the sole indicator. There must be adequate business-worthiness as well.

Any other points of interest.

We have programmes to facilitate ecosystem development and build stronger and strategic relationship with external stakeholders like partners, developer community, start-ups, academia, students, industry bodies, and investment community. Internally, we also have programmes to drive innovation into products. We believe that, unless ideas turn into reality, the job is not done. From an employee engagement perspective, too, innovation plays a key role in creating meaningful and interesting challenges.

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