review of india inside

7/31/2019 Review of India Inside

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Team Member Name Roll No

Natasha Baisiwala 10

Rahul Naidu 17

Rashmi Upadhyay 19

Rima Shah 20

Sneha Verenkar 27EX-PGDM BATCH 2011-13

GROUP 5

REVIEW OF BOOK INDIA INSIDE


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Introduction . 3

The Authors .. 6

Chapter 1: Where are Indian Googles, iPods, and Viagras? .. 5

Chapter 2: Globally Segmented Innovation ..

Chapter 5: Management InnovationThe Global Delivery Model .

Chapter 6: Visible Innovation: Frugal Engineering ..

Chapter 7: Indias Innovation Challenge - Overcoming Institutional Constraints ...

Chapter8The Future of Indian Innovation


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Introduction

It took a decade of after economic liberalisation in 1991 to get the business houses and

economy in order. Prior to that the working class, would migrate to Western countries insearch of greener pastures. But with changing social demographics and technological

development back home made people return to our homeland. This was beginning of our

advent in field of Innovation.

This book takes us on a journey of innovation done in India or by Indians which prima facie

may not be visible but present in a large way impacting our lives through various phases in

the growing economy.

The Authors

Dr. Nirmalaya Kumar is Professor of Marketing at the London business school. Hecompleted his MBA at the University of Illinois at Chicago in 1986 and obtained his Ph.D. inmarketing at the Kellogg School of management in 1991. He is currently a Professor ofMarketing and Co-Director of Aditya Birla India Centre at London Business School.

He previously served on the faculty of Harvard Business School, IMD-International Institutefor Management Development (Switzerland), and Kellogg School of Management at

Northwestern University.

He has authored five books on marketing and business-related topics. He is notable forproposing the culture of "3Vs": valued customer, value proposition and value network,explained in his book Marketing as Strategy: Understanding the CEO's Agenda for DrivingGrowth and Innovation.

Dr. Phanish Puranam is Professor in the Strategy and International Management Area at theLondon Business School (LBS). He obtained his PhD at the Wharton School of the

University of Pennsylvania. His research and consulting are centered on the organization ofinter-firm relationships-alliances, acquisitions and outsourcing arrangements.

His research has appeared in the California Management Review, Sloan ManagementReview, Strategic Management Journal, Academy of Management Journal, EuropeanManagement Journal, Advances in Strategic Management and the Financial Times MasteringManagement series. He is also a Visiting Professor at the Indian School of Business, apartnership between Wharton, Kellogg and London Business School.


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Chapter 1: Where are Indian Googles, iPods, and Viagras?

Over two decades, India has established itself as the global hub for software development and

back-office services. In many of these segments, India has achieved a dominant share of the

offshore market. India accounts to almost 50% of the global process outsourcing industry.

However many managers in India do not agree to this kind of a business model to which

India is gradually migrating. They compare two firms in the IT sector: Microsoft and Infosys

founded by two great visionaries of our times at a space of 5 years from each other. The

difference in these firms is their business model adopted by these firms. Former is focused on

developing innovative products, latter in providing services. The irony of the fact is that

many of Microsofts programmers are Indians. Currently even big firms in India have

realised that the next challenge is to move from outsourced and made in India to Imagined

and owned in India.

This brought forth the few questions Is innovation an Intellectual Property of the West?, Is

innovation practiced in East? , Are the people in East capable of doing CREATIVE

STUFF?

The 2010 Business Week ranking of the most innovative companies in the world shows that

lot of Japanese & Korean companies known incapable of innovation managed to secure at

least 3 places in the first 10. This ranking had a lot Indian companies; along with the Tata

group at 17th place a major contributor to the nations wealth.

But even then a common myth observed and expressed by developed countries is Indians

dont do Innovation. This comes from those who thrive and survive on Innovation driven

economy.

The reason for such an opinion was the regimented and rote based Indian educational system

which killed creativity. But who created Hotmail (Sabeer Bhatia), Pentium Chip (Vinod

Dham)? These & many more people like them are Indian innovators of various new products

or founders of companies (Sun Microsystems). These people managed to succeed in this

regimented and rote based educational system back in India and were therefore able to


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succeed in other parts of the world. So it was not educational system that was responsible but

the will and vision for innovation which was lacking in the Indians companies and mangers.

This brings us back to the doubt raised whether Do Indians really do Innovation. This doubt

can be erased by the numbers given by international patents applications in United States

where contribution of inventors with Indian-heritage names has increased considerably

between 1998 & 2006. This book therefore tries to break the myth observed by many people

that Indians dont do innovation. These critics fail to realise that in India where finding fixes,

workarounds or shortcuts is a way of life popularly or colloquially called as JUGAAD; in

such a country INNOVATION is a way of life.

Do Indians do Innovation? Yes and No, depending on how innovation is defined or

perceived. What is Innovation?To create something new or something different. This word

is used so often that it seems to have almost lost its meaning.

"Innovation," the word, was first seen in the 1540s. It comes from the Latin word innovatus,

which means 'to renew or change' and is made up of two words: in which means "into" and

novus which means "new." So, to innovate is to go into the new. The term innovation may

refer to either radical or incremental changes to products, processes or services. The often

unspoken goal of innovation is to solve a problem. Innovation is an important topic in the

study of economics, business, technology, sociology, and engineering. Since innovation is

also considered a major driver of the economy, the factors that lead to innovation are also

considered to be critical to policy makers.

Steve Jobs, one of biggest innovators of the decade quoted Innovation as But innovation

comes from people meeting up in the hallways or calling each other at 10:30 at night with a

new idea, or because they realized something that shoots holes in how we've been thinking

about a problem.

Innovation is actually the most important aspect of a business, its what makes it stand out

among the market place, prevents it from going stagnant, helps it to grow and drives society,

and humanity, forwards. Innovation does not only apply to products however, but to the

business models themselves - to the delivery and the service and here is where the true

meaning of innovation lies.


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One great example of innovation in a swamped market place is the DVD rental company that

works by post. Here you choose a DVD then keep it as long as you want with no fees until

you decide to send it back in exchange for the next film. This changes the way DVD rental

works - streamlining it to make it easier for the customer and for the business which can

attract them away from the older systems. This business model was transformative meaning

that there was currently nothing like it on the market which straight away got people

interested.

Rather its important that the company continues to innovate and to streamline every aspect

of its process as it grows. The old adage if it aint broke dont fix it really doesnt apply

here as theres always room for improvement - and thats the part of business thats creative,

fun and worthwhile to the customer and society. If your company simply churns out orders

without making any changes to its structure then it will quickly be replaced by younger more

innovative companies that perform the same task in a more efficient way, or that adapt to new

technologies. Even if there is no threat of competition then streamlining your business

through innovations will earn you more profit, generate more publicity and provide a better

service for your customers.

This is where few successful companies understand the meaning of innovation however and

most continue to work a set structure. The most successful companies however realize this

mistake however and encourage innovation in the work place. Google for example allow their

staff to spend something like 30% of their time pursuing their own creative interests which,

has lead to innovations such as Google Maps and Google Adsense which have genuinely

changed the way we live and made Google in phenomenon more than a search engine thus by

staying innovative Google have remained at the top of their game and driven us into the

future.

Thus coming back to the Indian context of innovation, the book captures innovation in two

types: Visible to end consumers and Invisible to end consumers. Research conducted by the

authors shows that India is present in substantial innovation taking place in the form of

invisible to the end consumers.

Diagram on page nine


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The book captures Indian innovation story through these pointers in the subsequent chapters

which would make any Indian proud.

Mainly, 4 types of innovation originating from India remain invisible to end consumers

around the world and have been a decade in the making:

1. Globally segmented innovation led by primarily by major multinationalcorporations that have set up captive innovation and R&D centers in India.

In chapter 2, a large number of global MNCs have setup captive R& D centers in India

which is used as a platform for generating innovation for global markets. These

companies have developed global products from their Indian R&D centers, just as the

companies have done from the R&D centers in the West. For example: Intel launched its

Xeon 7400 series in 2008, the first chip wholly designed and developed out of its

Bengaluru center.

2. Outsourcing innovation to Indian firms where R&D services are provided oncontract to support new product development for consumers in the developed world.

In chapter 3 authors discuss how Indian companies have created an estimated $20 billion

market in offshoring of R&D services. For example: HCL Technologies helped in

development of Boeings 787 Dreamliner for which HCL designed 2 mission critical

systems: first to avert airborne collision and another to enable landings in zero visibility.

3. Process innovation through an injection of intelligence by Indian firms.Chapter 4 reveals that process innovation is increasingly surfacing as the Indian industry

because of a phenomenon we call the injection of intelligence. The availability of low-

cost, high skilled labour in India has led to the assignment of over-qualified personnel to

relatively routine jobs, which sometimes results in surprisingly effective process

innovations, even in what were previously considered mature or low-tech settings. For

example: 24/7 Customer began as traditional call center company, it now develops

various analytical tools that enable in predictive modelling to add value to customer

service.


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4. Managing innovation of the global delivery model to effectively bring global scaleand cost efficiencies to previously locally clustered service processes.

Chapter 5 examines this as the most invisible of Indian innovationsthe global service

delivery model. The model is not product or a process innovation but rather a

management innovation, a new way of managing globally distributed work.

Thus Indian presence is noticeably large in the invisible submerged portion.

The book tries to find answers to questions like what it would take for firms to build visible

Indian innovation, in terms of products and services branded for global end users. Such

visible innovation has powerful brand-building effects for both India and its companies. As

many Indian policymakers hold the view that building globally visible products is almost a

matter of national pride to demonstrate that India has arrived on the global economic stage.

Chapter 6 demonstrates a new class of innovative products that build on what is essentially a

meta-process innovationfrugal engineeringto develop products for the budget-

constrained Indian consumers.

Chapter 7 acknowledges and analyses several significant constraints that are, at the very least,

irritants yet significant impediments to Indias potential to become an important innovation

engine of the world.

In 2020, the median age in India will be 28, China would have 37, USA would have 38,

Western Europe would have 45 and 49 in Japan. This gives enough reason to be optimist

about the Indian Innovation story based on the mighty labour pools. Also the Indian

companies and captive units are pursuing several creative strategies to overcome these

challenges including using repats as talent pool and backward integration into education

through the adoption of schools and universities.

The Emerging Innovation Challenge to the West

Indias emergence as a global innovation hub has important implications for the developed

world. Rise of India will lead to the inevitable decline of the West due changing economic

positions. The book intends to raise some important questions, which will enable one tounderstand; how critical is it for India to move from Made to India toImagined and


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owned in India. The authors also provide a set of recommendations to business managers

and policy makers of Indian companies and MNCs related to the kind of innovation currently

pursued.

The Challenge for Western MNCs

MNCs will face challenges on 2 major areas:

Sinking skill ladders : A skill ladder in a career or profession implies that to do highly

sophisticated, innovative work, a person must have engaged in less sophisticated work in the

earlier stages of his or her career. For example: A person becoming a investment banker must

first serve as an analyst. But with the R&D centers moving out of the West and the low value

(monetary terms) but high value addition job done outside the western countries, there will be

dearth of high level leaders to lead such firms. Considering that most western countries have

strict immigration policies, it would be difficult for these MNCs to move people across

countries and continents.

The browning of the Top management: The challenge for the Western MNCs lies in

rapidly adapting their internal organizations to a new locus of innovation and growth.

The Challenge for Policy Makers in the Developed World

The rise of the two Asian giantsIndia and China will affect the Western economies as the

there will be tussle between maintaining the high standard of living of the Western people

against the low-cost labour competition from China, India and other South East Asian

countries.

Immediate responses by the Western policymakers are:

Developed countries could adopt restricting of offshore in technology-intensivesectors, curbing immigration to minimize the transfer of jobs from current students to

visiting foreigners and reducing scholarships to foreign students in western

universities.

There has reversal of cultures from East to West and West to the East i.e the Easternculture of living in harmony with nature and keeping materialism to limited extent is


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being replaced with the Western culture to pursue ambition, wealth and growth

unabashed. The attempt of Western Policymakers would be to stress on the

implementation of eastern values to lead in innovation and higher standard of living.

Accepting the huge innovation capacities in India & China. Creating competitivecapacities in the eastern countries by funding the education sectors in these countries

for driving the growth of Western countries.

Recommendations to the Policymakers

It should have lax rules for highly skilled and talented migrants to enter Westerncountries and contribute to the onshore activity. While Western institutions can help

build the educational infrastructure in India and other countries.

Accept that certain innovations are possible only in Eastern hubs due to costadvantages. They should focus on taking advantage from this and strengthen

capacities that can flourish in the West and which are undiversifiable.


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Chapter 2: Globally Segmented Innovation

How MNCs can leverage Indian Talent?

In this chapter book captures how the Indian innovation talent works across the B2B space of

which there is hardly any mention. For many firms, developing new products for consumers

around the world is the most visible display of innovationthe real deal. It requires different

skills to mange some other firms product or services and to conceptualize a new product or

service idea from conception to final sale.

However this understanding ignores the innovation which takes place in the B2B space. The

new product developments are segmented across geographies but visible only in the B2B

context.

We Helped Develop Everything Im Talking About Right Here

This is notion held by most researchers in the Indian R&D captive units which help create

products like a transparent roof made of polycarbonate used in South Shanghai SouthRailway station, a car bumper which self destructs on impact or a potable cardiogram that is

slightly larger than a laptop. The markets for these products are truly global from US to

Europe spreading across Asia and Africa as well.

This resulted in increasing patenting in the U.S by MNCs subsidiaries in India, both in terms

of number of R&D units patenting and the number of patents from each R&D unit. With

these truly novel and unique technology developments for global markets, global consumers

are rarely aware of the Indian contribution to the innovation that takes place in the B2B

space. Thus the innovation is visible to the business units only i.e within or outside the MNCs

irrespective of the end user.


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The idea of segmentation of R&D activities has resulted in 2 types:

Vertical Segmentation: This captures customers requirements, generate product

specification, search for technological solutions for required product specification, generate

prototypes and make and sell the process. Thus it is process innovation.

Horizontal Segmentation: In this type the various components required in the product are

developed in parallel across various units and assembled at one common destination which

supports the final interface of these components.

Thus either type of segmentation would be invisible to final consumer unless he queries the

salesman whether his component was created in which country provided; he is aware of the

fact that MNC has R&D units at other than home country. It wraps a cloak of invisibility

around the innovation taking across R&D units in India.

An Unavoidable Destination

This chapter also explains as to why do MNCs are keen on setting up R&D centers across

geographies. The key factors are:

Proximity to markets Access to technical talent in the labor force Strong IP regime If the market is lead market i.e. the standards & specifications set by the market are

accepted worldwide. India is emerging a key player as lead market.

For example AstraZenecas R&D unit in Bengaluru focuses on tropical diseases. The benefits

of this research are accrued by the society, rather than the MNC itself however it would be

sound economic decision in terms of investment cost and profits. This research would help

patients all across the world and not just India. Also any further research in drugs of any other

disease can be done easily with little modification to the existing unit.

A lot of companies admit the fact that their growth has been possible because of setting up

R&D centers in India which would not have been possible in U.S or Europe. Reasons mainly

were cost benefits but these slowly moved to availability of technical talent in India.


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MNCs are now giving Indian captive units complete responsibility of horizontalsegmentation of an innovation project based on the successful execution of vertical

segmentation of an innovation project.

MNCs are moving to India not because of cost saving advantage but to leverage thescale of talent available in India.

After decades of seeing India as a lagging market, India is now perceived as leadmarket in certain industries where new products or services are introduced.

Western Policymakers confident of retaining highly paid innovation in the West should

be aware of:

Leading MNCs see India as an unavoidable destination for innovation for theirmarkets worldwide.

The vertical and horizontal segmentation of innovation activity makes Indiancontribution invisible and therefore cannot claim sole credit for the innovation;

similarly none of the other R&D centers in the West can do so either.

MNCs with India are observing faster migration to higher-value added projects atthese R&D centers.

MNCs are simultaneously ramping up R&D centers in the West and East not just innumbers but also in head count.

India counterparts attempting to develop new innovative products have to overcome the

following hurdles:

Weak IP protection led Indian firms not to seek new product development as sourceof competitive advantage.

India was not a lead market for product or services, but a follower of global trends. Gaining Deep insights is essential for developing new products which for faraway

markets was difficult on a standalone basis.

Indians firms could easily compete on cost, but they have to develop expertise tocompete on the new product development.

Indian firms need to get into the game of High-Risk & High-Returns of new productdevelopment.

Indian firms have substantial potential to improve innovation capability and overcomethe hurdles via spillover effects from MNC innovation centers.


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Chapter 5: Management InnovationThe Global Delivery Model

As discussed in the previous chapters, innovation in India is primarily invisible to the end

consumer, even though we have been the largest its developers and Indias unconditional

support in product and process development. In the following chapter the authors have

discussed implementation of new management practices, process, structures, execution, core

methodology adopted for achieving innovation. Management Innovation is the advanced

parlance for managing globally distributed work.

The global services delivery model is a key transformation in enabling the availability of

services/ products to end consumers. The model tightly integrates tasks which were formerly

performed by employees in one location working for a single company and can now take on a

distributed format, such that different parts of the work are executed in different geographies

and by different organisations. The global services delivery model was conceptually created

to deliver IT and back-end services to Western clients, but it has eventually become

fundamental to other kinds of invisible innovations as well.

Key spaces impacted by the global services delivery model:

Back-office services, Call centers, IT development, Legal services, Product engineering services, Life sciencesR&D, Animation and film special effects.

The prime advantages are obvious and include the ability to1:

Execute the work where the best expertise exists at the lowest possible costs, Take advantage of time zone differences for round-the-clock efforts, and Achieve some level of risk diversification by building redundancy across locations.

1Adapted from the book itself


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However, the potential challenges are equally obvious, that is, how to get people to work

effectively across the following and impede global competition:

Natural barriers (cultural, distance)

Manufactured barriers (tariffs, import duties) Organisational barriers (management, policies)

The barriers discussed above are gradually reducing because jobs have become more

contestable once there is proof of concept that the same work can be done remotely.

What is the Global Service Delivery Model?

The global services delivery model reconceptualises formerly physically collated activities by

breaking them up into sub tasks that can be handled in different geographical locations, and it

specifies the necessary means for reintegrating this work. Such a model however is not easy

to implement, as many later adopters have learned, because of complex coordination

problems inherent in this structure.

The attraction of wage arbitrage and specialisation has resulted in promoting the growth of

the global service delivery in India. It is highly presumed that tasks which are standardised,

routine, mundane can be delivered through the global model. However, this is a

misconception. Research reflects that, it is the ability to execute a take remotely has relation

to whether the work itself is simple and standardised. It is the links across the subtasks which

are required to be managed across distances. These links mainly need to be clear and well

described which will eventually enable transfer the most unstructured and creative tasks

geographically. Shared knowledge through common companys trainings facilitates

anticipation of how an employee would respond to the problems faced in typical situations.

Well documentation of processes results in smooth transition of knowledge else it will keep

the employee in ambiguity. Similarly, coordination across processes is easier when the

interactions between the process and its surroundings are simple, minimal, standardised and

well documented or otherwise easy to accomplish. For instance, coordination through

technology has helped engineers gain knowledge about their work and achieve cognitive

collocation and thus success. Both knowledge transfer related and coordination related

challenges can create significant organisational overhead expenses and can absorb up to 15 to

25 percent of the gains from wage arbitrage.


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How does the model exactly work?

Offshoring begins with an on-site visit by a small team of vendor personnel, usuallycalled the migration team or transition team to understand the details of the process.

Next the vendor team has to determine how it will deal with interdependencies acrossprocesses.

o The vendor team must decide how to manage this link between employees ondifferent sides of the globe either by mapping out all possible situations or

interaction through e-mail, telephone etc.

The vendor team now moves to the offshore location, where it forms the core of theteam that implements the transition.

o Now develops the knowledge transfer and business process is performedparallel at both locations,

o Further bugs get worked out of the offshore process, and both offshore and on-site personnel learn from their experience.

Finally, post transfer of work to the new location, the focus shifts to ensuringintegrated efforts across locations.

o Hands-off communication, data transfers.o Follow-the-sun strategy, that is, work moves from one location to another as

the working day ends in one location and begins in another.


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Chapter 6: Visible Innovation: Frugal Engineering

In this chapter the authors share their comparative insights on visible Innovations originatingin the West and the visible innovations that increasingly originate in India. The 3D movieThe Hubble provoked their thoughts and raised a question in their mind whether Indiacould ever reach such levels of innovation. The movie had put them in a historical frame ofmind to question the conventional wisdom that innovation is a uniquely Western advantage.

Historically, nationalistic competitive impulses have spurred innovationthe Soviet Unionssuccess in sending manned missions to space prompted President John F. Kennedy tochallenge creative minds in NASA and the rest of the United States to put a man on the moonwithin a decade. The demonstration effect on the confidence and competence of a nationshould not be underestimated. Similarly, highprofile, visible innovationsquiteindependent of their commercial viability- could be important means for emerging countriesto demonstrate they have arrived on the global stage. Thus, for companies from emerging

markets, the development of innovative products to sell to the world, especially to the endconsumers could mean greater corporate reputation and brand equity.

Ambitious Indian companies do realize the above fact. Mahindra & Mahindras ViceChairman Anand Mahindra firmly believes that innovative product extension is the key toreach masses of consumers who are unfamiliar with the brand/product. On a similar thought,the development of innovative Nano Car by Tata Motors not only bought far more globalawareness than did any of the firms previous achievements in its seventy-year history, it alsomade Tata gain sixth place onBusiness Weekslist of the worlds fifty most innovativecompanies for the paradigm shift.

Even though India and Indian companies want to prove themselves, the West still maintains astrong lead in the visible innovation race due to its innovative products. However, aninteresting aspect about this fact is that for innovations particularly the ones linked closely tobasic science, West is in lead but for innovations that have naturally germinated in contextIndia does hold its own position.

Innovations in the West and in India

The authors do agree that United States is unmatched in its innovation capabilities, especiallyin exploration related to science. The majority of Nobel Prize winners in the sciences performtheir research at U.S. universities that encourage curiosity, knowledge building, and thecountrys long-term competitive advantage resulting in break through products and services.Therefore, in short run, countries like India and China cannot compete effectively with U.S.on innovations that are built from long term studies and break through in the basic sciences.This implies that both India and China will only be able to compete for such innovations onlyif they dramatically change their basic sciences infrastructure. China is still attempting thechange but India is not.


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Secondly, these countries can neither compete directly on high-value-added innovationsintroduced by companies as these require a deep understanding of developed marketspopulated by rich customers. One such example is iPad which was not developed fromcareful market research instead was invented to satisfy unarticulated consumer needs. Itssales record of one million within twenty-eight days of its launch in the U.S. market proved

the basis of the invention.

Thus, the West and companies from the developed markets have an advantage by igniting thedesires of consumer for innovative products irrespective of cost. The emerging markets likeIndia and China struggle constantly to develop products that may appeal to consumers whoare unknown to the physical, economic, emotional and experiential realities of their owndomestic markets. In contrast with affluent consumers of iPad, the budget constrainedconsumers in India; mobile phone is the technology device of choice and necessity. The lowpriced access to communications technology by telecommunications companies in India hasled to more people having access to cell phones than to clean toilets.

The above differences between the expensive iPad and cheap mobile phone services highlightthe different trajectories of developed emerging markets. Therefore, developed marketsconsumer technology innovations are built for an ever-expanding bandwidth network laterprogressing to fancy, costly and more network and status built devices, whereas, theemerging markets focus on the new uses for cheap basic innovations.

An interesting thought raised by authors here is about the Global leadership in an industry asan outcome of the demanding domestic consumers and as a result leading domesticcompanies exist in such industries. Similarly, in India, innovation is a direct response to theneeds of the Indian marketplace, where consumers are both demanding and budgetconstrained. The Indian consumers are viewed as value conscious as they probe deeper into

the value of the product derived. This psyche of Indian consumer pushes the companies inIndian market to a corner, thus, leading to differentiated products. Thus, Indias budgetconstrained consumers led to the emergence of capabilities for a certain kind of innovation inIndia.

Frugal Engineering: Indias Engine for Visible Innovation

The authors in earlier Chapters 2 through 5 have discussed about the invisible innovations

which were triggered by availability of highly skilled employees at low prices in India,

whereas, in this chapter, they have highlighted the visible innovations from India that have

been catalyzed by the need to serve markets with low purchasing power.

However, it is not just making things cheaper; there is something more to this approach

which is Frugal Engineering- a term coined by Carlos Ghoshn, Head-Renault Nissan. The

term signifies achieving more with fewer resources.This shouldnt be confused with or used

interchangeably withJugaad (making fixes and resigning to current constraints). Frugal

Engineering is a systematic approach to making current constraints irrelevantor less

important. This was developed due to low purchasing power among the majority of vast

Indian consumers and it is one of the foundations on which Indian innovation gains global

visibility.


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An interesting example shared here is that of Maggi brand dried noodles by Nestl. It was

sold only to rural Pakistan and India for about twenty cents per serving. In 2008, the company

began promoting Maggi in Australia and New Zealand as a budget friendly health food with

no oil, less salt and no monosodium glutamate. Thus, the fundamental re-think of a product

that accompanies frugal engineering efforts in an emerging market may lead to solutions thatare also valuable in developed markets.

The authors have shared their further analysis on the research done on frugal engineering by

them. This type of innovation is a distinctive paradigm for new product development. They

have identified few related set of distinctive dimensions and underlying capabilities such as:

Robustness: This refers to the stability in the face of variations in the openingenvironment. In India since there is harsh environment due to huge variances, the

setting affects the priorities that drive product development and innovation. For

instance, Nokia has managed to gain a dominant share of the Indian market and hashired more people in India as compared to other countries that resulted in developing

features in India market which inventors in other countries may never imagine. Each

of Nokias three Indian R&D centres is an integral part of firms global R&D

infrastructure.

Portability: Many innovators believe that services must be taken to people. This isdue to the space constraints and the need to transport products to rural areas in India.

As a result, small and lightweight became highly desirable product attributes.

Defeaturing: This consists of feature rationalization or re-focuses on features thattend to accumulate in products overtime. Firms can avoid implementing features that

do little to enhance the actual products in India. For instance, Siemens in India

supports its innovation with a billion-euro investment dedicated solely to develop and

adapt products for the local market. Thus, products in markets like India need to focus

on simplicity instead of sophistication.

Leapfrog Technology: Infrastructure gaps in India have positively affected Indianinnovation by forcing entrepreneurs and companies to adopt technologies that make

reliance on existing infrastructure simply irrelevant. Interesting innovations that were

an outcome from this are battery-powered, ultra low cost refrigerator resistant to

power cuts for rural areas. In contrast, people in West due to constant access to

electricity have little motivation to pursue innovation.

Megascale production: India has market segments which if captured could help firmsdrive costs down by way of massive scale-mega production. This is due to the

massive population of the country. The low priced generic versions of life saving

drugs brought down the treatment cost drastically due to large scale production in

India. These drugs are also extensively exported to low and middle income countriesby India.


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Service Ecosystems: These achieve low costs, highlight product features and thusbroaden products appeal. The small repair shops and other business are the classic

cases of service ecosystems that help firms enlarge their product markets.

Recommendations

Based on their research and analysis, the authors conclude that innovations in India may not

be a result of breakthroughs in the basic science or for rich customers until the science

infrastructure and the purchasing power of Indian consumers improve dramatically. The

innovations in this country is in the context that makes frugal product development a natural

practice for the consumers who are in the fastest growing segments in the world.

Thus, successful visible innovation in India is the outcome of frugal engineering for budget-

constrained consumers and invisible innovation is the outcome of budget conserving talent.

This impacts managers and policy makers in the following ways as described by the authors:

MNCs stand to benefit by tapping into Indian frugal engineering:- The resulting innovations can be offered in India as a complete product line to

meet the needs of different segments of consumers

- The innovations can be offered in other budget-constrained, emerging markets.- The MNCs gain unique offerings for budget-constrained niche segments in

developed markets.

- The innovations can be used to help improve and simplify products that arecurrently offered to high-end consumers of the developed markets

Western policy makers should consider how frugal engineering practices may help toprovide cost efficient public servicesin healthcare, for instance.

Best practices in frugal engineering are unlikely to come from a textbook. It is up tosophisticated Indian engineers and managers in companies to create a set of standards,

a body of knowledge, and a community of practitioners around the concept, much asit has been created for quality management or the Toyota production system. Policy

makers in India can help encourage research and training in codified frugal-

engineering practices, once these have developed sufficiently. Indian companies and

MNCs operating in India need to leverage the capability that the country is

developing for frugal engineering. These capabilities enable product development

with the following features:

- Develop product robustness to harsh and varying operating conditions


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Needed at the front lines of innovation, Indian produces very few Science & TechnologyPHDs as compared to the rest of the developed and developing countries.

Only about 10% of the collage aged population actually goes

to college. Even the flagship institutions in India like the Indian Institute of Management &Indian Institute of Technology are notoriously understaffed. These indicators forewarn adangerous shortfall of the talent pool for the future. The talent available is seriously waybelow the rate at which India is growing. We are anyways short of talented resources andadministrators and now we face a risk of absolute shortfall in the near future if we continuethis way.

In a country of Indias size it is shameful that total no of

PhDs we produce in a year is almost equal or sometimes less than that produced by a singleleading Science & Technology University in America. The Indian educational system is notonly failing at producing new PhDs but also failing to create new knowledge and innovation.

If we look at the U.S patents granted by Patent & Trademark Office between 1976 and 2006,Indian universities are virtually invisible.

Research Productivity in India: The Case of Management Knowledge

A close look at India in a field of management research shows even more horrific picture andthe state of management education. The three IIMs along with the few private institutions

dominated the Indian Business School landscape until 1980. The competition of gettingadmissions in to IIMs was intense. They had to select a few hundred students from thehundreds of thousands of students who had applied. Yet while the Indian business schoolswere teaching highly motivated students, there is little evidence that faculties are creatinginnovative ideas through research. A database of FT for management research shows as littleas 5 articles per year for the entire country.

First in 1990s the most productive research was not done by

Indian business schools but Indian Statistical Institute in New Delhi & Kolkata. However in2000 the B-Schools started taking the lead. Amazingly a new B-School like ISB has taken alead in management research even after publishing their first article in 2004.The aspiration tobuild a world class research culture and substantial investment in infrastructure and facultysalaries at the ISB has created this intellectual advantage. Even IIMs have done well so far

without the support of such advantages. Perhaps this is signal that there might be many moreways to creating a culture of innovation and they all may not be expensive.

The quantity shortfall is not the only issue, even quality is a great concern. During theresearch for this book the authors met many leading R&D heads in Indian MNCs and allwere of the opinion most of the talent graduating from universities is not employable. This isa serious concern and reflects the poor state of education system. NASSCOM estimates morethan 50% of the Science and Technology graduates in India are not functionally effective insoftware oriented jobs.


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Even though we have leading technology institutes in the world but they produce handful ofgraduates based on the technology needs of the country. The shortage of PhD has createdeven more alarming problem for the future. The shortage of faculty which can teach the nextgeneration of Science and Technology students.

Historically large numbers of technology graduatesleave the country for better jobs and pays taking the knowledge with them. Contributing tothis is lack of public spending on education in India only 0.6 % of GDP as compared to 1.3%of china or 2.6% of USA. In addition strict government overview makes it even difficult foruniversities to work effectively due to bureaucracy.

There are some sign of changes. In late 2009 forexample, Indias central government allowed the CSIRs advanced institutes of Science &Technology to become autonomous university. The steps allow the institute to prepare thestudents for real world. But perhaps the most interesting initiatives are emerging from private

sector, in which many players effectively backward integrate themselves into the productionof their own talent. Almost all IT companies are collaborating with universities to supplycourse materials and their business. Backward integration is not only limited to IT servicescompanies many product based companies such as Intel, AstraZeneca, Hero Honda, TataMotors , Ispat Steel etc. Have come forward and realised that if most of the graduatingstudents are not hireable mainly due to age old curriculums and lack of research opportunitiesthen they should step in and hand hold the universities in developing their curriculum. Theysoon realised the challenges of working with government colleges and also the fact that theycannot train everyone. They used Train the trainer model whereby they conducted trainingand consulting for tier 1 collages and these tier 1 colleges will in turn pass on the sameknowledge to tier 2 collages. This way through collaboration with all institutes private sectorhas been able bring about some changes in the education system in the country.

Beyond training new talents companies are also lookingfor Indians settled abroad or studying in foreign universities and trying to bring them back.Recent records show that brain drain has reduced in India as compared to the 90s and alsomany Indians who were settled abroad are now returning due to better opportunities availableback home. This is very beneficial to the companies as they not only bring knowledge ofworking in a matured and developed market but also the connections they have developedover the years.

Protecting Intellectual Property

The Indian IP regime has historically denied patents for chemicals, foods and drugs (butsupported process patents), as well as all forms of patents protection for agriculture andhorticultural products. The context of such restrictive legislation enacted in 1970, highlightedits purpose of protecting national interest, because foreign companies help most of the patentsthat time. Widespread fears predicted that foreign patents would prevent domesticcompetition with imported items, such that Indians could not access goods at cheaper prices.The original legislation may have helped India but the overall result was general lack ofsophistication when it came to importance of IP and its protection. Since mid 1990 Indian

government has therefore issued forth a series of amendments to the IP regime; a landmarkwas the harmonization of Indias IP regime with the global TRIPS standards in 2005. The


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numbers since then tell an encouraging story. In 2008 there were 35218 patent applicationsfiled almost double than that in 2005. Yet many international Pharmaceutical companies havefaced the brunt of Indias IP system. Novartis CEO Daniel Vasella says In principle you can

discover in India, you can do research. There has been some increase in the protection ofIntellectual Property but its not up to the standard I would expect to make an investment into

discoveryled research. Only time will tell whether Indian IP will eventually gain the sameconfidence as its Western counterparts.

In the meantime companies with IP to protect cannot justwait passively for the regime to improve or watch their secrets being stolen away. To dealwith this problem many companies have formed internal IP regime. A set of policies andpractices which aims at protecting companies IP from leaking internally no matter how thelegislation is outside. Many MNCs segment their innovation categories. Innovations which ifcopied will not yield much financial benefits to the person stealing. Many Pharmaceuticalcompanies with research in India focus on developing drugs which are mostly needed inunderdeveloped companies that way it is not required in the India market and less incentives

for people trying to steal the IP. Companies have realised training and awareness can create alot of difference among employees. In many companies these policies are covered duringinduction itself and lot of emphasis is laid on protecting IP and companies try to instil asense of personal and local pride with this. Companies manage IP by classifying documentsbased on its sensitivity. Like many confidential and sensitive documents cannot be printed sothis means you cant just walk away with data. Its also important the companies show how

serious they are about protecting their IP and only then this sense of responsibility can becreated among employees. Finally many companies conduct regular risk analysis in whichthe check with IP exposure.

Putting the Venture back in Indian Venture Capital

Even if Indian innovators, particularly entrepreneurs, can overcome weak IP regimes and findtalent among shortages, they still must address the challenge of access to capital. India hasgrowing and active venture capital industry, but with many domestic and internationalplayers fighting for investment opportunities, certain peculiar features of the industry make itdifficult to access capital for entrepreneurs who aim to design global products.

The first wave of interest in Indias venture capital

industry occurred during the dot-com boom. But after 2001 few venture capitalist left

standing and those who followed their footsteps, exhibited lower risk taking appetite. At thesame time their desire for higher returns in the Indian market grew. Combination of thesefactors they were mostly funding coffee shop chains, pathology labs such venture whichwould yield guaranteed returns; investing in a venture which might be next Apple does notexcite them because it might not be the next Apple. Fortunately though this situation ischanging and many Venture Capitalists are focused on investing in companies which arelooking to innovate and create world class product or services. An angel investor communityis also becoming more active, filling the gap for funding request less than $ 3 million in themarket. For example the collectively organised Indian Angel Network brings together highly

successful entrepreneurs and CEOs from India and around who are interested in investing in

start up/ early stage ventures which have a potential of creating disproportionate value.


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Recommendations

The gaps in Indias innovation infrastructure are obvious and have even begun to be discusses

explicitly by the countrys politicians and leaders.

MNCs can overcome weak IP regime by taking the following steps:- Actively manage the portfolio of projects across the countries to limit Indian

exposure.- Raise IP awareness in Indian units.- Put in place a disciplined process to prevent leakage.

MNCs can help overcome mirage of mighty labour pools in various ways:- Use backward integration into education to produce their own talent.- Adopt campuses to improve quality of output.- Train the trainer through courses and internships for faculty.- Seek repats or bring back qualified Indians who have settled outside.

Western policy makers need to retain their advantage over the emerging markets withrespect to ease of doing business, transparency, and enforcement of contracts, whilecontinuing to encourage the academic and industry linkages for innovation.

The innovation regime in India must overcome three key obstacles:- Mirage the mighty labour pool.- Uncertainty around IP protection- Venture Capital availability

Indian policy makers must see increasing educational opportunities and research capacityat all levels as the single biggest constraint to developing Indias potential to be an

innovation powerhouse.


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Chapter8 The Future of Indian Innovation

The time has come for Indian science to once again think big; think out of the box; and thinkahead of the times. This year...... we also usher in to the Decade of innovation.

---- Manmohan Singh, Prime Minister of India 2011Indian Science conference opening address

In fifteenth century, when China was world largest economy and its seagoing expertise wassubstantially ahead of Europes, the Asian countries pioneered new methods of sailing that

made it possible to cross oceans more easily. But Europe rather than China was the mainbeneficiary of these advances, because the geographical fact that Western Europe was onlythree thousand miles from the west coast of North America meant Europeans instead ofChinese colonized the New world.

The internet has made what was considered Indias curse

and public policy failure the growth of population in to its biggest strength. Much of theinnovation mentioned in this book and coming out of India has been possible only due tointernet. By linking the needs of the rich, developed countries to low cost labor in India, Indiahas become the back office of the world. In this book author has clearly shown innovation isslowly but surely becoming a competitive advantage for India.

To the skeptics who keep asking where are the Indian Google, I-pod and Viagras? Authorsretort is this is a wrong question. Much of Indian innovation is invisible. Given the growthand size of India as well as china these are interesting market by themselves. The visibleinnovation emerging from India will be of a different typeone based on frugal engineering(e.g.: Nano or GEs ECG machine) or of the leapfrog variety in new industries. Some of it

may find a home in West, but it may matter a little even if it does not.

For MNCs from developed world, its quite possible that soon the skill ladder will force thebrowning of the top management team. And is talent, markets and leadership moves east,

then it is impossible for the political centre of gravity not to follow the suit.


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