Innovation - An Indian Perspective
WHAT ROLE CAN INDIA PLAY IN THIS ERA OF INNOVATION?

Interview with Arindam Banerjee

What is the relevance of innovation for the successful and not so successful companies of today?

I would really look at the Infosys-Google gap. No, I'm not bashing Infosys here-I have a lot of friends there-but there is a gap that has to be noticed.

Google is arguably the hottest company in Silicon valley, while Infosys, clearly is one of India's best known. Infosys has ten times the employees that Google has and has been around for about 23 years, while Google has been around only for six years. But, the difference in market capitalization is staggering - Google is well over two times as valuable as Infosys. It is worth over $25 bn, while Infosys is just over $12 bn, the last I checked.

This does not mean that Infosys is not successful, but that its long-term growth is predicated upon creating intellectual property (read innovations) that it can brand and sell for high margins. This is how some of the Indian companies can become large enough to have market caps of $50 bn-$60 bn.

But, it is more than just the numbers. Google is now a household name and in fact, its part of our vocabulary- "googling" is a word that I often hear in nightly sit-coms. The question is, what will it take for an Indian company to get there. The answer at least "starts" with innovation.

I was recently involved as an expert witness, in a case where a small company had sold some of its patents to a Fortune 50 company for nearly $500 mn. This company with fairly nominal sales had, through a set of good ideas produced over a few years, managed to get the kind of cash infusion, that most companies struggle to achieve. This shows you the possibilities.

Having said this I would like to point out, that innovation is not just about owning a handful of patents, or just the technology idea. It is about the entire end-to-end management of innovation, from management of the idea, shaping products around the idea, building a successful business model around it, pricing it and readying it for easy adoption, amongst other things.

Innovation without this end-to-end value chain does not help the companies that create it. Let me give you one example- I worked at a Fortune 50 company, that had a large research lab separate from its product divisions, but I would consistently notice that most of the adopted innovations would actually come from small research groups working surreptitiously within the product divisions themselves, instead of the large heavily funded research lab. The reason - the research groups within the divisions were just better connected to the end-to-end value chains and could produce work that fit the business needs much better. It is this connectivity between innovation and business needs that successful companies like 3M have consistently created.

In fact, it is this connectivity that I find in most successful companies, that have been around for a long time.

What role do you think India can play in this era of innovation?

You know, when I compare the graduating classes, say from Stanford, with my graduating class from IIT-Kharagpur, I think my class at IIT, on the average was better intellectually. Similarly, when I was running labs in the UK and India concurrently, I noticed that after some initial hiccups, the overall work done by the Indian teams was far better than the work coming from the corresponding UK teams. It is this innate ability of Indians that we must utilize for going forward.

Indians already dominate most non-defense centers of innovation within the US-this for a country whose engine of growth is innovation. The question is, why can't this happen within India, too. We produce a very large number of qualified professionals, every year. Indians represent a group of people, if appropriately rewarded, can be very flexible and hard working. The question is what can we do with these basic ingredients of successful manpower and size?

The answer has to start with our own unique needs. India as a country has unique needs. So, for example, we could produce $400 tractor add-on. This would not make sense for US farms, but would be eminently usable anywhere in South East Asia and Africa. The point is, India could become the center of innovation for low-priced but very appropriate products for the entire under-developed world. Believe me, the US engineers are not going to worry about producing a $400 tractor add-on, but for Indian farmers, this becomes heaven sent.

The next place where India can play a role is in using innovation to build large, successful, multi- national companies. I mean companies the size of an Oracle or a 3M. To do so, companies in India will have to dominate in one or two segments with products that are clearly identified as theirs.

This means innovation, innovation at a cost, i.e., one-fifth of what it would cost in a western nation. So, for example, when we created an AIDS cocktail that was just as effective as those from the international drug majors, but at a fraction of the price, we created a stir. We just need to do a lot more of that. We need to focus on places, where we can create a difference immediately, such as IT, pharma, healthcare, automobile parts and so on. Doing so, will allow our nascent billion dollar firms to shoot past the $10 bn mark in revenues.

Finally, in terms of our national defense, innovation is important. We spend ridiculous amounts on buying jets from countries like France, if our aerospace program succeeds, we could save many millions of dollars in our defense budgets within the next decade. Similiarly, once you have technology of your own, the armtwisting that major powers can exercise on countries like India, also dissipates. You will notice that as our LCA nears operational status with our airforce, we'll start getting a lot more offers from the US companies wanting to sell us stuff at prices that they would not consider at this point in time. India lives in a dangerous part of the world, but we need to convert this into an asset by using innovation to develop a defense industry that can access a large part of the world defense market-this will not only bring in a lot of foreign exchange for us, but also get rid of the unnecessary arm twisting that is foisted on India these days.

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