dr._c.k._prahalad

8/9/2019 Dr._C.K._Prahalad

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C.K. Prahalad 1

Entrepreneurship:Antidote to Poverty &Stagnation

C.K. PrahaladPaul and Ruth McCracken Distinguished University Professor

The Ross School of Business, The University of Michigan


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C.K. Prahalad

Point of Departure

2

History of

Ag. and Ind.

Prowess

History of

Intellectual

Vitality

History of

Global Trade

& Commerce

Record of

Industrial

Devpt. ?

How

dowe

Chang

ethe

Trajectoryo

ftheR

egion?


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C.K. Prahalad

Emerging Opportunity Space

3

New Approach

to Innovation:Role of Science

Global Access

To Talent and

Markets

Increasing

Complexity:New Ecosystems

Growth

and

Change

Entrep

reneu

rship

and

Innovationa

sLe

vers?


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C.K. Prahalad

The New Opportunity

4


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C.K. Prahalad 5

The New Age of Innovation:

The Basic Thesis

Globalization Connectivity,Digitization,

Convergence,

Social Networks

A New ApproachTo Innovation &

Value Creation

+ =


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C.K. Prahalad 6

Price-Performance Envelopes are

Changing Faster than anyone Expected

1. Transistors/chip 103 106 109

2. Decrease in size of

micro-devices 10-1 10 -6

3. Computing power 1011 1015

4. Cost per MIPs($1000) 1 1M

1. DNA sequencing cost

($/BASE PAIR) 10 0.05

6. Magnetic data storage 10

4

10

11

(bits/dollar)

1970 80 90 2006

Source: Ray Kurzwell


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C.K. Prahalad 7

Discontinuities Challenge the Firm

Centric View of the World:

Consider:Convergence of Technologies,

Convergence of Industry Boundaries,

Ubiquitous ConnectivityThe Emergence of New Sciences


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C.K. Prahalad 8

Digital TV set

Digital Video Recorder

Digital Set-top BoxFlat Displays Tablet PC

PC

DVD

Stereo System Game Console

Cable TV

Satellite TV

Internet Video

Video Camera Cell Phone

Web TV

Digital

Camera

HDTV

CD PlayerMultimedia Storage

Digital Broadcasting

Electronic ToysReality TV

PDA

PCTVInteractive TV

Pager

MP3 Player

Printers

Scanners

Digital Imaging System

Telematics

Laptop

Handheld

Video on

demand

FAX

Home Networking

E-mail

Digital Jukebox

Wearable

Computer

Emerging Entertainment Space


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C.K. Prahalad 9

Consumers and the Wellness Space?

Nutritional

supplements

Health

supplements

Herbal

medicine Alternative

medicine

Nutraceuticals

Cosmaceuticals

Cosmetics

Beautyaids

Health

foods Lifestyle

drugs Therapeutics

Ayurveda

Specialtyclinics

Hospitals

Treatment

centers

Healthspa

Self

careRemote

diagnosticsMinimallyinvasive

treatments

Pharmadrugs

Medical

devices

Fitness

regimen

Remote

consultation

Drug

delivery

Genetic

screening

Personalized

medicine

Pharmacogenomics

Assisted

Living

YogaSurgery


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C.K. Prahalad 10

Consumers and the Wellness Space?

Nutritional

supplements

Health

supplements

Herbal

medicine Alternative

medicine

Nutraceuticals

Cosmaceuticals

Cosmetics

Beautyaids

Health

foods Lifestyle

drugs Therapeutics

Ayurveda

Specialtyclinics

Hospitals

Treatment

centers

Healthspa

Self

careRemote

diagnosticsMinimallyinvasive

treatments

Pharmadrugs

Medical

devices

Fitness

regimen

Remote

consultation

Drug

delivery

Genetic

screening

Personalized

medicine

Pharmacogenomics

Assisted

Living

YogaSurgery


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C.K. Prahalad 11

* Computing, Communications, Components, CE,

Software, (e.g. Philips, Sony, Dell, Microsoft, ..)

* Chemical and Electronics (e.g. Kodak)

* Mechanical and Electronics (e.g. Ford, ABB)

* PCP and Pharmaceuticals (e.g. P&G, Revlon, UL)* Food and Pharmaceuticals (e.g. UL, Nestle)

* Commodity Products and High Tech (e.g. Cargill)

* Retailing, F. Services and Databases (e.g. Wal-Mart,

Citicorp., Tesco, ..)

Fusion of New and Old Knowledge, Creation of Hybrids,

Forgetting, Learning, Harmonizing, and Investing.

Convergence of Technologies

and Markets


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C.K. Prahalad 12

The Emergence of New Sciences:

1. Brain Studies

2. Materials and Nano technology

3. Mathematics

4. Genetics5. Artificial Intelligence

6. Communications / Computing

7. Global Warming

8. Energy9. Search Engines

10.Imaging


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C.K. Prahalad 13

The Value Creation Process Based on

Advances in Science

Science:

Multiple Specialized

Fields

Major

Opportunities

(Problems)

Ageing,

Climate Change,

Chronic Diseases

Changes in

Economic

Models of

Traditional

Industriese.g. Insurance, Food

New Industriese.g. Carbon Trading


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C.K. Prahalad 14

The Innovation Paradox

Scientific Discoveriesare Increasingly

Geographically DistributedUSA, Europe, Japan, S.Korea

China, Singapore, India,..

Scientific Discoveries

are Increasingly focused

on Narrow Fields of

Specialization

# Journals

# Papers

Nobel Prize Winners

R&D Spend

# of Scientists

# of Patents

Intellectual GeographicalDiversity Diversity


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C.K. Prahalad 15



Geographically DistributedUSA, Europe, Japan, S. Korea

China, Singapore, India,



on Narrow Fields of

Specialization

# of Journals

# of papers

Nobel Prize Winners

R&D Spend

# Patents

# of Scientists


Commercial Value is Created at the

Intersection of Multiple Scientific Disciplines(e.g. Ageing, Climate Change, Chronic Disease Mgt.)


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C.K. Prahalad 16

Mapping an IP Portfolio to slowdown

Ageing

The IP Portfolio( patent portfolio)

to Slowdown

Ageing?

Role of Family and

Community

Predisposition to

disabilities

How does this

Person compare

With Cohorts?

Likelihood of

Encountering

Problems

Cognition/

Memory/Motor skills

Repairing ageing

Structures

(e.g. bones)


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C.K. Prahalad 17

Mapping an IP Portfolio to slowdown

Ageing

The IP Portfolio

( patent portfolio)

to Slowdown

Ageing?

Sociology

Genetics

Databases,

IT systems

Predictive

Modeling

Brain StudiesNew Materials

Nano Tech


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C.K. Prahalad 18



Geographically Distributed

USA, Europe, Japan,

China, Singapore, India



on Narrow Fields of

Specialization

# of Journals

# of Papers

Nobel Prize Winners

R&D Spend

# of Patents

# of Scientists


Stitching together

an IP Portfolio

is Critical

Commercial Value is Created at the

Intersection of Multiple Scientific Disciplines(e.g. Ageing, Climate Change, Chronic Diseases)


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C.K. Prahalad 19


Highly Specialized, Geographically DistributedScience Base and the Need for Harmonizing

Multiple Specialties to Create Commercially Viable

Solutions will Force us to Consider the Relative Importance of

Collaborative

Capacity

Investment

Capacity

Integrative

Capacity


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C.K. Prahalad 20

Making the Business Connection

Chronic

Disabilitye.g. Diabetes

Living with

Diabetes

Housing

Healthcare

Food

Mobility

Insurance/ Fin. Svcs.

Living a

Full Life

Travel

Safety

Community

Connectivity

Entertainment

Break

downofTra d

ition

al

Indu

stryBou

ndaries


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C.K. Prahalad 21

Innovation ParadoxBusiness Opportunities Based on:

Investment

Capacity

Collaborative

Capacity

New Business

Models

Emerging MarketsAs a Source of

Business Innovations


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C.K. Prahalad 22

Agenda for Managers:

1. WhatImpactwill theNew Sciences have onTraditional Businesses? What New Businesses

are likely to be Created? Can this be mapped?

2.How do we Reduce the Time, Risk and Costofmoving Science from the lab to Market?

3. How will theProcess of Innovation Change? What

are the Implications forHow We Manage?

4. How do we Monetize Science based Innovations?


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C.K. Prahalad

Impact ofConvergence

ConnectivityEmbedded Software

New Sciences

on Businesses

23


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C.K. Prahalad 24

Consider Cardiac Pacemakers

Patient


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C.K. Prahalad 25

Consider Cardiac Pacemakers

Patient Away Hospital

Your Doctor

Doctor onLocation

Experts

Conference

Spouse


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C.K. Prahalad 26

The Value of the Pace Maker?

1. Experience of the Patient?

2. Integration of the Experience for the Patient,

Doctor, Family, others?

3. Do we need a Network of Providers toCreate an Experience Environment?

4. Is the Pacemaker a Part of but Distinct

from the Experience?

5. What can you Monetize? How?


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C.K. Prahalad 27

Car as a Stand Alone Product or a

Node in Seamless Connectivity?

High Capacity

CC Node


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C.K. Prahalad 28

Transformation of Traditional Industries:

Truck Tires

Sell a tire

Price ?Transaction


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C.K. Prahalad 29


Truck Tires

Sell a tire

Price ?Transaction

Sell Usage,

New Business

Model

Relati

onship


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C.K. Prahalad 30


Truck Tires

Sell a tire

Price ?Transaction

Sell Usage,

Personalized

Co Created

Experience,

New Business

Model

Relati

onship


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C.K. Prahalad 31

N=1, R=G in Shoenufacturing

One size for each customer (N= 1)

Traditional

Business Model Design Center

CustomerInformation stored

Factory

Factory

Customers adjustto availableshoe sizes

Multiplecustomers

3-D Image

Customer

New Business Model

Foot Scanned

Shoes available from $80 in this model


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C.K. Prahalad 32

Traditional BusinessModel

New business model in AutoInsurance

Type of Roads Driving Habits

Peak/Off-peak Traffic

Personalized Policy for Each

Customer

Pay As youDrive

PersonalizedInsuranceContracts

New Business Model

Actuarial Data

PolicyUnderwriting

Multiple

Customers


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C.K. Prahalad 33

The case of Apple iPod

Display:

Memory(RAM)

Assembly

Playlists

News

- Wide Selection ofsongs-Personal

Preferences-Favorites based ontime of day/moods

R = G

Co-creation ofpersonalized experiences

N = 1

Global Content Providers

Transformation of the Music

Industry


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C.K. Prahalad 34

The Key Drivers of Value:

1. Personalized Experience

2. Co Creation

3. Individuals4. Thematic Communities

5. Experience Platform

6. Delivery Network


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C.K. Prahalad 35

The New Game:

N = 1

R = G

( Co creation of Personalized Experiences)

(Multi-Institutional and Multi GeographicAccess to Resources)


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C.K. Prahalad 36

The Transformation from a Product/Firm

Centric View to N=1: R=G

1910


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C.K. Prahalad 37

The Transformation from a Product/Firm

Centric View to N=1: R=G

1910 2010


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C.K. Prahalad 38

India as a Source of Innovations


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C.K. Prahalad 39

Innovations from India

Nature of

Innovation

New Bus.Capability

Disrupting

Existing

Business

Models

Source of Competence

Western Adapted, Indian

New Synthesis

Cell

Phones

EMRI/HMRI

Deep Waterdrilling

Water,

Healthcare

Tuberculosis,

Tata Nano

Param

Eka

Psoriasis

Chandrayan I


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C.K. Prahalad 40

Matrix of InnovativenessNew Market

DevelopmentLow Capital

Intensity.

SustainabilityNew

Management

Processes

New

EcosystemExamples

IT /ITES ++ +++ +++ +++ ++

Airtel ++++ +++++ ++++ +++ +++ +++

Off Shore ++ + ++ +++++ ++ ++++ +++

Drilling

Tuberclosis ++++ ++++ +++ ++++ +++

Tata Nano ++++ +++ ++++ ++++ ++++ +++

Inclusion New

Capability


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C.K. Prahalad

MNCs see this Market as an Opportunity

to Innovate

41

Outsource:

Low Cost

Low Tech

Talent Source:

Global R&D,

Innovation ?

Innovation Hub:

New Approach to

Value, Domestic &

Global Markets


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C.K. Prahalad

MNCs see this market as an opportunity

to Innovate

42

1. Computing

2. Medical Equipment

3. Water 4. Cell Phones

5. Financial Services

6. Pharma

Outsource:

Low Cost

Low Tech

Talent Source:

Global R&D,

Innovation ?

Innovation Hub:

New Approach to

Value, Domestic &

Global Markets

MNC R & D L d


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C.K. Prahalad

MNC R & D Landscape

780 MNC R&D centers are currently

being run in India

About 160,000 professionals work

for MNC R&D centers in India 81 MNC R & D centers added during

2007-08

77% of the companies are from US

Source: Zinnov Analysis, Feb 2009


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C.K. Prahalad

What is Indias Unique

Advantage?

44


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C.K. Prahalad 45

Access to New Sources of Advantage.

Access to TalentMobilizing Talent


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C.K. Prahalad46

Access to New Sources of Advantage.

Access to TalentMobilizing Talent

Global Search for

Talent

Cost, Quality,Speed, Innovation

Collaborative &Integrative Capacity


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C.K. Prahalad47

The Evolution of IT Services from India

1980 85 90 95 2000 05 10

On site

Augmentation

Application

Mtce.

App. Dev.

Off Shore (ODC)

Prod. Engg. ServicesEmbedded Systems

Y2K, Quality/process

Compliance

Product R&D

Systems Integn.

VLSI design

MNC R&D

InnovationAnalytics

Entrepreneurship

Domestic Oppty.


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C.K. Prahalad48

The Evolution of IT Services from India

1980 85 90 95 2000 05 10

On siteAugmentation

Application

Mtce.

App. Dev.

Off Shore (ODC)

Prod. Engg. Services

Embedded Systems

Y2K, Quality/process

Compliance

Product R&D

Systems Integn.

VLSI design

MNC R&D

Innovation

Analytics

Entrepreneurship

Domestic Oppty.

Cost Arb. Cost + Cost + Quality Cost+ Quality

Quality + Tech. Tech+ Innov.


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C.K. Prahalad49

The Evolution of Pharma from India

1980 85 90 95 2000 05 10

Reverse

Engineering of

Product,

Process devt.

Clinical

Trials

Chemistry

Biology

services

Target Validation

Lead OptimizationPre clinical and

clinical trials

Cost Arb. Cost Arb. + Cost + Quality Cost+ Quality

Quality ? + Tech. Tech+ Innov.

Mfg. Bulk

Chemicals

Generics


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C.K. Prahalad50

The Evolution of ITES from India

1980 85 90 95 2000 05 10

Dataentry

Data

encryption

Captive Call

centers by MNCs

Quality Process Transfer

3rd party call Centers

BPO back officeTransaction Processing

Domestic market

Infrastructure Mgt.

Appln. Mgt.

Analytics,

Legal, Tutoring,

Flexible Models

Cost Arb. Cost Arb. + Cost + Quality Cost+ Quality

Quality + Tech. Tech+ Innov.


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C.K. Prahalad51

Building an Eco System for IT

Global

(and Indian)

Customers

Own Software

Development

Facilities in India

Outsource toa US Firms-

E.g. IBM,

Accenture

Deliver based

On Indian Facilities

Outsource to an

Indian IT Firm

Ind

ianITEc

oSys t

em


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C.K. Prahalad52

Size Distribution of Indian IT Firms

1995 2000 2005 2010Size in $ M

< 25 396 1653 > 3000

26 - 100 41 41 150

100 250 18 30 30

250 - 500 6

500 1000 6> 1000 --- ---- 3

Source: NASSCOM

You Dont have to be Big to be Global

Emergence of Micro Multinationals ?


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C.K. Prahalad53

Elements of the IT Ecosystem

Wide Variety ofFirms- Large & Small.

All Global. Potential of

Micro MultinationalsDevt. Of Skills:

Quality,

Processes,Project Mgt.,

SW Methodology,

Global perspective,

Domain Knowledge,

Legal, HR skills

Entrepreneurial

Drive,Low Capital Needs,

Access to capital,

Access to skills,

Credibility,

Confidence,

Wide Variety of Service Providers to the Industry

Potential to Innovate

and Change Global

Industry Practices


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C.K. Prahalad54

Impact of India on IBMs Strategy Worldwide

Source: The Economist


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C.K. Prahalad55

Challenge to Indian

Entrepreneurs:

Developing New Strategic Capital

(Building New Managerial Processes)


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C.K. Prahalad56

Principle Number # 1:

The Essence of Entrepreneurial

Transformation

Situation A Situation B

Resources Low High

Aspirations High Low


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C.K. Prahalad57

Principle Number # 1

Aspiration > Resources

Aspiration

Leverage

Resources

Change the Game


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C.K. Prahalad58

Principle # 2: Fold the Future In

2010 2020

Extrapolation

Budgeting Orientation

Fold the Future in

InnovationOrientation


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C.K. Prahalad59

Principle # 2: Fold the Future In

2010 2020

*Clarity to Direction

*Willingness to Discover*Clear Milestones

*Speed and Stamina:

400 meters at a time but a Marathon


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C.K. Prahalad60

Principle # 3:

Focus onNextPractices

Well Known

Practices

Best

Practices

Next

Practices

AmplifyWeak Signals


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C.K. Prahalad61

Principle # 4: Constrained Innovation:

The Innovation Sandbox

Constraint # 1

Constraint # 3

Constraint

# 4Constraint

# 2


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C.K. Prahalad62

Focus on Here and Now:Tactical,

Blocking and Tackling.

Focus on New Opportunities:Aspiration > Resources,

Folding the Future in,

Focus on Next PracticesInnovation Sandbox

Thinking Differently about the Here and Now


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C.K. Prahalad63

What are the Dominant Themes:

2010-2015/2020

1. Primarily Market Based Solutions

2. Social Equity in Development

3. Co Creation and Collaboration

4. Scale

5. New Price- Performance Levels

6. Ecologically Sustainable Development

Embrace the Imperatives of Sustainable Development


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C.K. Prahalad64

The Sandbox for Economic Development

Market Based

New

Pric

e-

Performa

nce

Lev

els

Environm

enta

lly

S

usta

inab

le

Global ScaleGlobal-L

ocal

Balances

New

Governance

Social

EquityF

ocus


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C.K. Prahalad65

The Sandbox for Economic Development

Market Based

New

Pric

e-

Performa

nce

Lev

els

En

vironm

enta

lly

S

usta

inab

le

Global ScaleGlobal-L

ocal

Balances

New

Governance

Social

EquityF

ocus

Can we Build a

Consensus amongCommunities,

Business,

Politicians,

Civil Society,Bureaucrats?


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Transformation Requires:

Imagination

Passion

CourageHumanity

Humility

IntellectLuck !

dr._c.k._prahalad

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