How should India innovate to lead the world for emerging markets?
India has a long tradition of innovation. The iron pillar of Delhi, erected during Chandragupta’s time, stays without corrosion even after millennia. The weighing scale, which predates banking, is traced to the Indus Valley civilisation. And it was scientist J C Bose who carried out the first public demonstration of microwave transmission.
Changing face of India
Despite the headstart, colonial exploitation forced India to miss out on the Industrial Revolution. It was only after independence that India took its first steps towards self-sufficiency. In the first decade after independence, India invested in science and technology infrastructure. The temple of India’s technology education, the IITs, came up; the country established DRDO, CSIR, and the early signs of a steel revolution began. In the 1960s and the 1970s, changes took place, focused primarily on indigenisation. The green revolution, the power plants and the rise of the auto and auto components industry, pharmaceutical and IT industry were proof of this trend. Then, in the late 1980s and 1990s, India went through a phase of globalistion accompanied by privatisation, with both education and industry leading to the development of home-grown R&D.
The 2000s brought in the concept Frugal Innovation. Inventors devised low-cost solutions to meet the needs of the market, keeping in mind financial, material and institutional constraints. Interestingly, frugal innovation led to Reverse Innovation and India became a test bed for fast-tracking innovations. Many global MNCs established global centers of Technology and Innovation.
Science, technology and innovation are the key terms that must be understood. ‘Science’ is a systemised body of knowledge, and to that extent, it is global. ‘Technology’ refers to the application of knowledge within a defined boundary and to that extent is context-specific. ‘Innovation’ is the conversion of technology to create products and services with a commercial value that fulfill the needs of the market and the customer.
In the early 20th century, basic science laboratories paved the way for fundamental research. The DuPont experimental station and the AT&T Bell labs are examples. Such vertically integrated scientific labs are rare today because they are disconnected from the market. A period of project-based R&D models followed the era of fundamental research. During this phase, India was considered an R&D base where the locally available STEM talent was used. From 2010, this outlook has changed significantly and India is now considered a favourable destination for developing technology that addresses the exclusive challenges of emerging markets.
Where India is now
India has a large and growing consumer base, with a per capita income (in PPP terms) of over US$ 6000 in 2016, and an anticipated GDP growth of 7 per cent in the coming years.
India’s upwardly mobile consumer base provides a unique opportunity. It creates a demand for technologically advanced products, solutions and services. But, they need to be frugal and this calls for innovation of a different kind that the West is not familiar. India has a large talent pool and has the third largest technical workforce in the world. There are several policies aimed at projecting India as a science and technology powerhouse. India has a large global diaspora that works at cutting edge of technology areas and is keen to give back to India. Indians have demonstrated the ability to skip generation(s) of technology and are adept at the use of ICT. Finally, digitalisation of the economy has brought in scale possibilities in a fragmented market that was unthinkable in the pre-digital era.
Increasing R&D spend
India also sees increasing R&D investments. By 2020, the number of R&D centres will climb to 1200 and their workforce is expected to rise by an additional 57 per cent. The R&D spending in India is currently at a low 0.9 per cent of the GDP (in 2014). Despite that, India is on the world map when it comes to contribution to high-quality scientific research at low costs. The World Intellectual Property Organisation (WIPO) stated in March 2017 that India is emerging as a global leader in Frugal and Demand Driven Innovation.
India’s growth potential highest
India is the most attractive marketplace in the coming decade, as its growth potential is the highest amongst large economies. The growing next-gen workforce will be better trained and educated than the current one. By 2025, India’s consuming class is expected to triple to 90m households. And it is a market that is being primed for innovative products and services.
We cannot blindly copy the traditional western models of innovation. We must consider the following distinct features of the Indian market due to several reasons.
a. The Indian market, unlike the west, is highly fragmented. Many functions, from raw material sourcing to logistics and distribution of final product, have a significant element of non-formal structures. In a country that is culturally and geographically diverse, this opens up the possibility of different route-to-market strategies.
b. Indian customers are value conscious while staying open to exploring options. They continuously seek solutions that are tailored to meet their demands. This is as it should be since there can be no one-size-fits-all.
c. Due to a lack of standardisation, access to reliable electric power and potable water, the Indian customer is often paying 3 – 8 times the material value of the product and services that she consumes. This anomaly calls for a fundamentally different approach of “Value Chain Innovation,” to reduce the price point.
d. We need to set up the right R&D and business models that promote open networked innovation which includes crowd-sourcing and collaborations with partners, startups and academia.
e. We need to Scale Out, rather than Scale-Up. We must examine sustainable, localised production and franchising models, where manufacturing and services are integral to each other. The focus must be on modularity and upgradability. We must be ready to experiment and act quickly, as the upwardly mobile Indian middle class is moving up the value chain rapidly.
f. Most importantly, we need to keep the customer at the centre and provide solutions that are customised but at the cost of mass scale manufacturing.
Innovation by the Saint-Gobain group
Saint-Gobain realized that setting up the institutional models that promote close partnerships between businesses and R&D teams to create collaborative ecosystems that foster innovation through open and networked working is critical. To develop products, solutions and services that are suited to the Indian market and similar hot-humid countries, the Group has taken various initiatives. These initiatives include the development of new businesses (and new business models like franchising) and setting up of an R&D centre, Saint-Gobain Research India (SGRI), in Chennai, that is unique. SGRI is co-located with IIT Madras at their Research Park. It is part of an ecosystem that fosters innovation through collaboration with academia and partnerships with start-up companies.
To embrace the challenges of a rapidly evolving environment, the Saint-Gobain Group has developed five attitudes that are particularly relevant to the Indian context.
The first of these attitudes is to cultivate customer intimacy, which means the emphasis is always on identifying customer needs, to proactively provide creative solutions. Second is to act as an entrepreneur with a result-driven mindset. A third is to rapidly innovate and experiment with new solutions by anticipating changes in markets, customers, and technologies. Experiment but fail fast. Fourth is to be agile and flexible in embracing changes and being an active part of it. And fifth is to build an open and engaging culture that promotes a collaborative ecosystem in an inclusive environment.
In the spirit of these attitudes, the Group’s businesses, in close collaboration with the R&D team are innovating unique ways to address the Indian market. For example, an ongoing experiment aims at solving India’s need for lower-income housing. In this technology, homes are built using gypsum-based, pre-fabricated composite panels with concrete fillings in cavities. The turnaround time is under 30 days and the construction is cost-effective.
What needs to be done
To innovate for 2030, India must develop the right R&D models along with multiple axes.
Develop an Open Networked Innovation. Use cross-functional teams that promote collaboration with stakeholders including academia, startups, suppliers, fabricators, etc. The process should also include mechanisms for encouraging crowd-sourcing for tapping into the talent of an extended pool.
Understand the customer in depth. As part of the innovation process, innovate using shorter learning cycles and race from customer insight to the development of a minimum viable product. Further iterations to refine the product can be performed incrementally while receiving constant feedback from the customer. The customer thus becomes a co-creator in the innovation process for the development of solutions.
Scale-out vs. Scale-up. It is essential to localize production to be able to respond and deliver to the customer quickly. Franchising models where manufacturing and services are fused together will help address the trends of comprehensive product portfolio and new customer micro-segments in emerging markets such as India.
Transversal Innovation. This involves the use of multiple process technologies that are combined in innovative ways to build unique products and services. This Combinatorial Innovation is at the heart of meeting customers’ emerging demands.
Agility, rapid decision-making, and short learning cycles are vital for creating these business and R&D models in India.
What does all this add up to
To sum up, India is currently poised to innovate not just for her, but the rest of the world as well. The aspirational target for R&D spending in India by 2030, is around 2.4 per cent of the country’s GDP (from approximately 0.9 per cent currently). When combined with the right models for innovation, this can result in a dramatic change in the standard of living, productivity and the overall vibrancy of Indian economy. Of course, the number of patents and scientific publications would rise exponentially. The ideas proposed in this article, when embraced, have the potential to solve the real needs of all sections of our society (affordable housing, healthcare, education, skills, sustainability and digitalisation) on an unimaginable scale. We can do all this in a significantly more sustainable way than when the West and China went through similar stages of development.
Are the MNCs and Indian companies ready to change and adapt rapidly to this new context?