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The path to 'super innovation' in India

August 13, 2004

Part I: Can India produce billion-dollar innovations?
Part II: How India can innovate like the US
Part III: Innovation - Where India succeeded and failed

In the last of this four-part series, Arindam Banerji discusses ways in which India can create a system that automatically fills the gaps in its innovation infrastructure.

Few organisations in India come forward to recognise and reward rural innovations and inventions. Unfortunately, only one or two non-governmental organisations here and there and a Council of Scientific and Industrial Research group are amongst the visible promoters of Indianised innovation.

This is nowhere near enough. The amount of money spent on manufacturing centres, even for smart materials, is pathetically insufficient.

Remember, it took the United States about nine years, starting from concept in 1946 to build a fully functional nuclear submarine by 1955. India has spent decades and is only now getting within sniffing distance of this engineering feat.

Creating spot improvements will just not do. How do we create the system that will automatically fill the gaps in our innovation infrastructure? And what are the gaps?

The Institutionalised Innovation Gap

1. Lack of money: Money makes things happen and, in India, we simply spend way too little on research. Without money, it is not even possible to put it to good use. No one expects us to have the kind of money that the US has, but consider this: 'India's total R&D budget is less than $3 billion. In the US, one company, General Motors, alone has an R&D budget of $10 billion.'

It is not that the money does not exist -- in fact, as reports: 'India Inc is sitting on a mountain of cash, which is growing every year. By the end of 2002-03, the top private companies had Rs 46,424 crore (Rs 464.24 billion) in cash and cash equivalent -- investments and loans and advances to subsidiaries.'

2. Not enough research fodder: Simply put, even in a large country like ours, the percentage of people who go in for higher education matters: the higher this percentage, the better the odds that we produce another Nobel Laureate S Chandrasekhar.

CSIR Director General Dr R A Mashelkar says: 'Only 66 percent of our children go to school, only 30 percent of them go up to 10th standard, and only 40 percent of them pass. That makes it 6 percent, as against, say Korea for which the corresponding figure is about 70 percent. So, with 6 percent we are talking about a tip of the iceberg."

'But what does that tip of the iceberg deliver? Last year, we exported $9.7 billion worth of software. Do you know how many contributed to this export? Only 50,000 software engineers. That is 0.05 percent of our population, and it contributed to almost 10 per cent of our exports.'

Of course, now if we could get close to the numbers that South Korea has going in for higher education, think about how well the odds may improve. But, often, personal economics drives the ability of a person to go in for higher education in India, not intellect. This also skews the odds in India.

3. Lack of faith and initiatives: Here's what got my goat recently: 'Some veterans of the Indian technology industry are truly sceptical about the potential of Indian R&D. Lakshmi Narayanan, Chief Executive Officer, Cognizant Technology, a New Jersey-based IT-services firm with big operations in India, argues that the country does not yet have the capability to develop its own intellectual property.'

'"So far," he says, "R&D's contribution to overall growth is minuscule, and where multinationals, such as Cisco Systems and Nortel, have contracted work out to Indian services firms it has been in upgrading old products, not developing new lines.'

I know that often all that prevents indigenous Indian companies from developing technology is the creation of a culture that encourages risk-taking and innovation -- but without top-level commitment to make such changes to the culture, things usually do not change. But, I do recognise that things can be turned around, since I've seen this being done in at least one Indian company through new management coming in and banging heads to get employees culturally aggressive about innovation.

4. Too many ideas, too little implementation: We, and I'm being pejorative about us here, tend to have hazaar good ideas, but few implementation plans.

So, yesterday some maha-shai writes to me: 'we have 650 million people below 35 years of age. How to convert this powerhouse into an advantage to take Bharat on to a fast-track development process?'

'Can we,' he goes on, 'start with a massive national mission for creating a National Water Grid, a National Power Grid (doubling of electric power generation using Fast Breeder Reactor Technology, National Chemical and Health Mission), development of chemicals and pharmaceuticals sectors integrated with herbal medicines and National Grains Mission (doubling agricultural production to 400 million tonne during the next 5 years to generate an exportable surplus of high-value agricultural produce)?'

That is this vidvaan's opening gambit. My answer to his entirely unimplementable harangue: 'Saar, how will you get started on this plan?'

Of course, this is only part of the problem.

The other part is a complete lack of will to put our money where our mouth is. Everytime I write one of these strategy papers, some industry consortium-wallahs will salivate and write back: 'We must do something immediately, saar -- tomorrow morning, if possible.' And then deathly silence follows for months on end.

You see, it turns out that some glittering India-terrorist trade exhibition in Lahore, offers a lot more free beer and adda sessions, than any real initiative could promise.

5. Unreachable Ideas: Here's a word of warning: if you have any idea that requires the human resource development ministry to do something constructive, you can forget it. India has a better chance of winning the World Cup than that happening.

Lord only knows, that there are a million-and-a-half ways to improve engineering education in India, but who is listening? The previous HRD minister made the introduction of astrology his first priority, and the present one has made 'de-Indianising' and 're-Pakistanisation' of our text books the first priority.

So you are left with trying to figure out ways of working around strategies that need contributions from this critical ministry. Such questions and constraints got me thinking. Should we really desire to start changing the scientific and technology profile of India drastically? After all, it is issues like these that we'll have to resolve.

There are many different and innovative approaches to start solving some of these problems: the question is where do we start?

Starting points

Analysis-paralysis and beating down each others' ideas has plagued some of the work in this arena. The goal once again is not to change large landscapes within Indian academia and corporations, but to selectively target places where we can start making multiplicative impact.

So, I start with a set of points, to initiate this debate:

1. Strategically linked corporate research: Encourage and help Indian companies with revenues larger than $50 million to create research organisations that are strategically linked to their businesses/products. The standard model of research labs is often too wasteful for Indian conditions.

In fact, even in large US corporations, often skunk-works research efforts within commercial divisions end up creating far better research results than formal research groups within labs.

What are necessary are research organisations whose metrics of success are very closely tied to the added successes of business products of the company.

2. Exploiting university research: University technology research in India has two primary characteristics: it is cheap and for the most part (exceptional situations do exist) the researchers have very little understanding of business ground realities and needs of businesses.

Yes, that's true for the large part -- in spite of the industry-academia nexus that is flourishing in parts. The solution to this is to allow smaller companies to get some of their core research and advanced development work done by university researchers.

I have used this approach very effectively with second- and third-tier universities here in the US and, believe me, it works out very well for the universities in improving the impact of their research and for the corporations in increasing the value of their products.

Closely tying research goals and metrics between universities and corporations take some work -- in less capable universities this work can be simply advanced development with a timeline 1 to 2 years ahead of current technologies -- while, in larger national labs and institutes, the work should be focused on time-lines of 3 to 6 years or more.

3. Changing work cultures: While some people have started rewarding employees for patents, that is not good enough. Two things are important to note. First, most large Indian technology/IT companies that I'm familiar with have no inherent culture of innovation. Second, having been in the patent creation business long enough, it's not difficult to discern that most patents are really never going to cause a licensing frenzy.

Thus, measuring senior technology employee success based upon delivery and innovation is important. The first is well understood, but the latter must be based on effective-patent successes. Promotion of a work culture that increases innovation, but also tries to increase the impact of this innovation is the key. . .

This must, however, receive significant executive support within India Inc. This has to be a top-down effort within our corporations.

4. Changing the face of university research: Research in many of the top universities of the world has already moved from the 'publish-or-perish' model to the 'IPO-or-perish' model. Some of this may be too large a transition to make happen in India on a large scale, but it is certainly possible to start making changes.

Some incubators do exist in places like the IITs, but governmental support to financial institutions that fund university participation in incubators will engender a broad change in the effectiveness of university research.

It is important for state and central governments to reduce the financial risks of setting up incubators for financial institutions: even a 20 per cent reduction of risk will dramatically increase the boldness of the innovations.

Cross-university incubators that pull in entrepreneurs and allow university researchers to contribute also will allow young Indian scientists to chase some degree of financial success while choosing to stay on at Indian research and academic institutions.

Here NirmaLabs' effort is a step in the right direction -- but, while having the current 20 to 30 incubators is good, we need many dozens of incubators that are connected to universities, and have the kind of management, that can shepherd young innovators and faculty.

5. Rewarding good ideas and research: Indian scientists and academics often get paid a pittance compared to even engineers with bachelor's degrees and minimal experience in, say, computer science. Changing governmental guidelines in pay scales will happen only in geological time-scales, but it is possible to reward outstanding work at all levels of academia and research institutions, including government work.

Corporate awards and charities that measure and award outstanding work of young scientists all such institutions will open up paths of success and also promote competitive innovation. It is, for example, important to give cash rewards and recognition to the best scientists of DRDO, who may otherwise not get it for their work. So what if this recognition and cash comes from non-governmental sources.

This is where NGOs, charitable organisations and even venture capitalists can contribute -- rewarding risk-taking and research accomplishments at all levels can only help engender path-breaking work in India.

6. Indianise institutional investments in India: Innovative ideas in the Indian context need not look like successful ideas of the American industry; neither do they have to be focussed on the same issues. In India, focus on extremely cheap agricultural innovations, building up low-cost companies in the North-East or investments in a broadly distributable processed food products, may be far more important than in other countries.

Reducing the investment risks of companies that fund efforts in these arenas, through state and central funds will help change the focus of Indian investments.

Organisations like RIN (Rural Innovation Network) and NIF (National Innovation Foundation) are few and far between -- there is a much stronger need to grease the path to markets for ideas coming from rural India or to create better opportunities in areas where few opportunities exist today.

There is clearly a paucity of NGOs that can help identify such grassroots innovations and ease their path of success.

7. Leverage global Indian resources: The footprint of Indians in the US innovation business is massive. Simply put, the experience and insights of Indian researchers and scientists in Europe and the US need to be leveraged better. Within the vast numbers of super-experienced research and innovation leaders of Indian origin, many would like to contribute back to India.

How do we tap this resource and goodwill?

Forming an Innovation Council that does provide top-notch innovation leadership to Indian organisations, universities and corporations at a modest price must be considered.

This is where leading industrialists need to step in and set up such institutions and make their services available to a vast range of institutions and corporations within India. The wealth of knowledge and experience exists -- we need to make the obvious connections to help India.

8. Coordinate and complete value chain of innovation: The new idea itself forms only the nub of what it takes to make an innovation successful. Everything -- from raising money to pursuing the work, finding the right target customers, identifying the most appropriate path to the market and the shaping the invention to make it easy to adopt -- is critical in deciding the success of innovations.

Each link and nexus of innovation from venture capitalists to innovators, from incubators to academia, from corporations to high-schools must be fed, oiled and nourished for innovation. Again, I expect little real help from the central government, but NGOs, NRIs, corporations sitting on unused cash, fund managers in risk-capital institutions, must start getting this message and start acting on each of the above points.

Simple things like ubiquitous cash awards for high-school innovation competitions, business plan competitions amongst engineering students in second- and third-tier engineering schools (not just IITs), NGOs (like RIN that focus on the micro-enterprise and rural innovations only), and encouraging paid 2 to 3 year sojourns for top Indian innovators from across the globe in our technology institutions -- all these are viable ideas and must be pursued.

In conclusion

This century is India's: innovation on a large scale is a way out of many of India's miseries. Now the question is: who will do this? Here, I can simply hope and pray that organizations like the CII, FICCI and Nasscom step up to the plate.

We all would like to see the next cellphone-like society-transforming invention to come from an Indian corporation or university. After all, if our pharma scientists and doctors can make a similar impact with AIDS drugs and HIV vaccines why not in other areas? Why not in India, really, why not?

So, I end with a few appropriate words from Subroto Bagchi of Mindtree Inc:

'We have been a nation that supplied to the world raw materials, rather than finished products -- granite, rather than the monument's design. For decades, most Indian companies have focused on supplying grey matter that is equivalent to quarried granite and raw silk. This behavior is driven by a desire to live off the land, to do what has the least risk and low value-add. As a nation, we need to break that mould.' 

'Yves Doz is a world-renowned professor at INSEAD, France. He argues that there are three layers of value someone can add, and each of the three requires a different mindset.

The lowest layer of value-add is the technical, adaptive layer. Raw granite, frozen shrimp, cotton bales and manpower: all fall into this category. You have least risk, least value-add, and lowest margins and highest susceptibility here.'

'Then comes the experiential layer. Here, you do not play on your ability to intermediate between the access to raw material and the end user of it. You 'step into the shoes' of the customer, and create valuable products and services. Confronted with the challenge of introducing a new car in Europe, Nissan flew in its car designers to Frankfurt to get a sense of what it takes to be a motorist in Europe. It is not about a car. It is about stepping into the shoes of a motorist to experientially feel the need.'

'At the highest level is what Doz calls the existential layer. This is where Sony or Mercedes Benz, or Swatch operates. They not only know how to get into the shoes of the customer, but as Doz says, "they creep into the mind of the customer." Each layer we talked about is separated from the other by a glass ceiling. If these layers represent the so-called value chain, the conclusion is that you do not go up the value chain. You decide where you want to be on the value chain, and perch yourself there.'

'India is on the cusp of interesting new times. . . we have the golden opportunity to present ourselves as designers of monuments, not suppliers of granite.' -- Subroto Bagchi in BusinessWorld.

Arindam Banerji is a scientist and an entrepreneur in the Silicon Valley. He took the usual route of going from the IITs, through a PhD in the US, to finally working in sundry research labs.

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Number of User Comments: 23

Sub: innovation

India can be innovative only if the following happen for which radical changes in the mindset of the society is needed: Scrap the Quota system ...

Posted by V.Narayanswamy

Sub: India - Innovation

U said in your article: "since I've seen this being done in at least one Indian company through new management coming in... " What is ...

Posted by Gaurav Lohiya

Sub: Impressive

Very impressive article and seems to be highly accurate. He is definitely right! There are many people in India sitting on unused money. We need ...

Posted by A J Singh

Sub: Mr Banerjee forgot one thing

I think Arindam forgot one thing. The brain drain factor. Not that we should stop the brain drain by force, but we should create reasons ...

Posted by pravesh

Sub: Innovation

Were i want to see innovations rail(both engines & coaches), buses & Ambassador cars. One look at the dirty old Indian rail engines which borrowed ...

Posted by Priya


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