B.S. Prakash

Will innovation in products or processes on a global scale become the next wave?

CAN INDIA aspire to be a hub for innovation on a global scale? In its external economic dimension, can this be the next big opportunity for India? These questions assume importance as the search for new options and directions to maintain growth and create employment has to be a constant for us. Moving beyond India's now well established success in information technology, are there any unique possibilities in innovation?

These reflections emanate from several stimulating discussions in Silicon Valley, which is itself recognised as a global centre for innovation. To mention only two recent events, the National Association of Software and Service Companies (NASSCOM) together with The Economist magazine organised a Conference in October 2006 on India as the next hotspot for innovation. In December 2006, a seminar at Stanford University in California looked at the "fluidisation of the location of work" that may lead to new types of design and product development requiring sophisticated mental inputs capable of being undertaken in India. More about the findings from these later. But aside from academic analysis, we already see a number of emerging partnerships between global and Indian entities to leverage the advantages that are inherent in working together, which go well beyond the now familiar area of outsourcing. What are these?

Before addressing the issue, it may be useful to briefly look at what is innovation. The dictionary definition of innovation is "the process of making improvements by introducing something new." But a more useful idea is that of Peter Drucker, the management guru, who saw innovation as "the change that creates a new dimension of performance." Innovation is thus not invention, nor is it basic research, but essentially some form of improvement that typically adds value to an existing process or product. It is doing something different and better that multiplies the utility, or brings down the cost, or enhances the value of a known entity.

If innovation involves an aptitude to do things differently, does the Indian mind have it? This is debatable, but it can be seen that we do have some attributes that are relevant. To begin with, both common sense and empirical evidence tell us that some of the conditions that foster out-of-the-box solutions include scarcity and need. If necessity is the mother of invention, scarcity may be the mother of its cousin, innovation. Secondly, a constant exposure to diversity and a ready acceptance of things being handled differently instead of uniformity or conformity also influences mental attitudes. Anyone who knows India would agree that we have this trait and that to try out flexible solutions to vexing problems is a part of the Indian reality. Going beyond these necessity-induced traits, there are other attributes that characterise us: valuing knowledge and education, respect for mental work, a propensity to take shortcuts, an "argumentative mind." If this is true, it could be postulated that the spirit of innovation is not alien to the Indian mind.

If all this is so, it will be asked, how is it that we do not have too many success stories in developing new solutions? Why is there no established track record of innovation in products or processes?

It is a fair question. The answers may lie not in the psychological realm of the "Indian mindset," but elsewhere. First, it may be noted that the Indian mind has not lacked in experimentation or innovation in non-material realms be it techniques of yoga or meditation or ahimsa as a political tool. Turning to the material and the management world, our economic and social environment in previous decades may have played a role in limiting the innovative spirit. The controlled economy, the over-regulation, the limits on expansion and scaling up of enterprises had probably affected innovative thinking in business. Further, an insular approach and sheltered markets may have lessened the need to aggressively seek new solutions. All this has no doubt changed in the last decade. With the acceptance of globalisation, the resulting competition and opportunities for unfettered expansion, we are already seeing Indian business entities succeed with new and innovative approaches. Some of the notable success stories hitherto relate to innovation in supply chain, marketing, services or in the business model itself. There are case studies Amul, the Mumbai dabbawalla (lunch carrier) system, shampoo in a sachet to reach the rural market, the cellphone explosion these illustrate business in India adapting practices uniquely suited to Indian conditions and thus creating opportunities for growth.

Can this accelerate and will innovation in new products or processes on a global scale become the next wave? The discussions mentioned above and this writer's own professional interactions with Silicon Valley companies point towards some new directions.

Significant growth area

The NASSCOM-commissioned study by a major consulting firm concludes that Engineering Services Outsourcing (known as ESO) may be a significant growth area. The concept here is that of specialised manufacturing (as distinct from mass manufacturing) using sophisticated skills and techniques, including but not limited to IT skills. The process includes designing new products or making improvements in them and bringing an affordable product to the market as fast as possible. It was interesting to note from the discussions that the Indian advantage in this process is not in cost alone, though with the large pool of professionals this is indeed a factor. But apart from the cost, the size and the quality of the multi-disciplinary talent available are also regarded as crucial in a globally competitive environment. An additional factor is the large size of the Indian domestic market that makes product development in India an attractive proposition since a prospect in both the Indian and the global market gives any such operation the economies of scale.

Thus the attraction of India as a locale is based on cost, talent, market, and innovation arbitrage, as the management jargon has it. For all these reasons today more than half the Fortune 500 companies are already present in India and many have a research and development or a design centre to use some of these advantages.

In the Stanford seminar, "the globalisation of product development" was deemed as the inevitable next stage. This is because in recent years, high technology companies, say for instance mobile phone manufacturers have faced increasing pressures to innovate new products with rich features, bring them to developing country markets as fast as possible and before competitors, sell them at ever lower prices and sustain their operations on the basis of large volumes. In these circumstances, new locales for design, development, and manufacturing become attractive. Some of the interesting examples mentioned were in chip design, memory systems or medical equipment. Other examples already well on the way are in the automotive components field, pharmaceuticals, aerospace, and in some process innovations.

According to the NASSCOM study, even if India aims at 20 per cent of the total size of the ESO market by 2020, the volume of the business can be in the range of $60 billion which can match the revenues from the IT services. It is a sizable chunk and, what is more, is likely to generate significant employment too.

Familiar constraints

The constraints in working towards these objectives are familiar. Mention was made of the infrastructure constraints power, roads, ports; lack of experienced management professionals despite the large numbers; and the need to have new urban centres to act as innovation hubs. Though these are formidable constraints, it is also known that the Indian establishment, both in government and industry, is acutely aware of them.

As the world changes and as India too changes and gets more integrated into the global system, there will be newer opportunities. Innovation is one of them. We have to work intelligently towards harnessing these opportunities to create another success story.

(The writer is India's Consul-General in San Francisco and can be reached at cg@cgisf.org.)