Innovation in India… And what it means for European Companies 1
May 27, 2011
Rishikesha T. Krishnan Professor & Area Chair, Corporate Strategy & Policy, IIM Bangalore
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TRADITIONALLY, INNOVATION IN INDIA MEANT… Competitiveness/Innovation Trajectory in Developing Countries
Learn to Produce Learn to Produce Efficiently Learn to Improve Production Learn to Improve Products
Source: 3 Forbes & Wield, 2002
Learn to Design New Products
Traditional Focus Areas 4
Absorption of imported technologies Development of local alternatives
Adaptation of processes to local materials
E.g. high ash content in coal, high sulphur content in crude
Technology transfer
E.g. for intermediates [import substitution]
Typically from laboratory to firm
Development of new processes
Particularly in industries with IPR issues e.g. pharma
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And a homegrown approach called Jugaad… For transportation…
……or making lassi!
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NOW THE THEME HAS CHANGED… Emerging Focus of Indian Innovation…
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INNOVATION FOR AFFORDABILITY, MARKET GROWTH
Here are two examples…. 8
The Tata Swach Water Purifier is a low-cost & highly effective product solving an important Indian problem
GE’s MAC400 Portable ECG machine is taking low-cost diagnostics to rural India
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INNOVATION IN INDIA IS FOCUSED ON SOLVING CRITICAL PROBLEMS…
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AT LOW COST…
“A near fanatical focus on cost reduction”
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“IF SOMEBODY COMES AND ASKS ME WHAT FANTASTIC INNOVATION SOLVED THE PROBLEM, I WOULD HAVE TO SAY THERE WAS NONE. IT WAS SMALL, SMALL THINGS THAT ENGINEERS DID.”
- GIRISH WAGH NANO PROJECT LEADER Use existing technologies creatively, and squeeze costs out of the system….
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INDIA HAS LOWEST PRICED MOBILE SERVICES.. YET TELCOS MAKE PROFITS… How do they manage this?.....
The Six Levers of Innovation 13
Business Model
Value Proposition
Product & Services
Supply Chain
Process Technologies
Target Customer
Enabling Technologies
Source: Davila, Epstein &Shelton, 2006
Technology
Bharti Airtel has architected a new business model 14
Business Model
Value Proposition
What is sold & delivered to the market: Low-cost, reliable, life-long telecommunication services
Supply Chain
How it is created & delivered to the market Outsourcing of network and IT backbone – BOT Model
Target Customer
To whom it is delivered People who would never have dreamed of owning a mobile
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SUCH BUSINESS MODEL INNOVATION EXTENDS TO AREAS LIKE HEALTHCARE…
Aravind Eye Hospital 16
Standardisation & Assembly line inspired by McDonald’s One doctor, two beds, two nurses per patient 25-30 surgeries per doctor in 6 hours! Emphasis on selection of self-motivated paramedical staff (SSLC) – responsibility to perform In-house manufacture of Intraocular lens (world market share: 10%) at a fraction of world price Almost 300,000 surgeries/year. Goal: 1 million
Source: Munshi, 2009
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AND RETAIL…
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Model Merge look and feel of mandi (traditional market) with quality, choice and convenience of modern retail Customise taking into account culture, tastes and preferences of locality Discounted prices, huge sales to address price-conscious mass market Multi-cluster,mini-bazaar rather than aisle-based design (suits family shopping) Chakki within store! Buy grains, get ground in your presence Customised stores – E.g. Sangli Sells dhotis, nine-yard saris, agricultural implements, loose oil Air-cooled not air-conditioned, advertising through All India Radio
In India…. 19
After a period when release of pent-up demand offered great growth opportunities, some markets are getting saturated New opportunities require fresh thinking BoP market is attractive, but can’t be addressed with existing products, services, or business models National problems need fresh thinking because of resource constraints Education Health
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But Innovation does not necessarily mean huge investments…
The high-leverage innovators and the companies with best overall performance distinguish themselves 21 not by the money they spend…
Booz Allen Hamilton Global Innovation Study 2006
… But by the capabilities they demonstrate in ideation, project selection, development, or commercialisation
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INNOVATIVE INDIAN COMPANIES ARE SLOWLY BUILDING UP THEIR CAPABILITIES…
TATA MOTORS
The Nano didn’t happen overnight! 23
Acquisitions to enhance innovation capabilities… 24
Acquired Nobex to access delivery technology for oral insulin & access large patent bank Acquired OM&T BV to have access to blu-ray technology
TATA MOTORS
Advanced engine technology from Daewoo Commercial vehicles; Engineering & styling from JLR
Bharat Forge
Companies like CDP and CDP-AT for advanced forging technology
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AND MAKING INNOVATIVE USE OF DESIGN…
Titan Heritage Collection 26
A journey through the streams of Indian architecture Inspired by the Lakshmi Vilas Palace, Baroda
The Kurukshetra Line
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INDIAN COMPANIES FACE SOME BARRIERS TO INNOVATION…
India Companies used to lack an innovation culture…. 28
“The greatest barrier to innovation in India is the governance culture that does not encourage innovation. Seniors tend to be judgmental and do not encourage new ideas. Indian organisations are still hierarchical and paternalistic, much more than those of other cultures….change does not have the positive connotation that it should….innovation is till not pervasive.” - Adi Godrej
Source: Chadha & Chadha, 2007
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BUT THAT’S CHANGING AS THE TOP MANAGEMENTS GET INVOLVED BY SETTING “ORBIT-SHIFTING” CHALLENGES
Source: Munshi, 2009
Orbit-shifting challenges… 30
Manufacture the slimmest water-resistant watch in the world Revolutionise personal transportation – a family of four in a car costing < Rs. 100,000 ($2,200) Eliminate needless blindness across the world Eliminate Hepatitis-B from India
Source: Munshi, 2009
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WHAT DOES THIS MEAN FOR EUROPEAN COMPANIES?
Implications for European Companies 32
Locate teams in India /other emerging markets Many
MNCs in India have initiated “In India for India” programmes GE,
Intel, Cisco, Philips, etc…
Be sensitive to local market needs Korean
Companies have done very well in India
Focus on smart applications of technology, not technology per se Allow greater autonomy to emerging market/India innovation decision making process E.g.
GE has created separate P&L for India
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THANK YOU
Additional Case Study…. 34
A Recent Success Story
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Source: ET Corporate Dossier, August 25, 2006
The Opportunity Need for a safe and comfortable “last mile” vehicle to transport goods Need to compete with 3-wheelers on cost
At the same time, 4 wheels for status
Good looks 36
Identification of User Needs
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Marketing involved early in the product development process 600 customers (drivers, owners, end-users, mechanics, opinion makers) interviewed over 6 months Performance measures translated from customer expectations rather than product specifications Customers involved at every stage
Typical Customer Statements
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“If I have a four-wheeler, then better marriage proposals will come” “Reduce the 407 to half the size and price and give it to me”
Design Objectives
Design to cost Cost
per tonne per kilometer critical Management told the team that the project would be abandoned if it didn’t meet cost requirements
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Other Innovations
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On-line bidding by suppliers Co-location of suppliers Reduction in number of suppliers Partnering approach with vendors “Slice Indica engine into half” Sales & service as close to customers as possible Dedicated “Suvidha” service network in small towns
Team Composition New concept Fresh thinking required
Refreshing mindset, Passion
Young people with good leadership abilities, network well within the organization 41
The Results
500,000 vehicles in 5 years New Organizational Dynamism
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Competitor for Maruti Omni on the anvil