SAN FRANCISCO, January 25, 2010 - Navi Radjou is Executive Director of the Centre for India & Global Business at the Judge Business School at Cambridge University. His research interests include studying the rise of emerging markets like India as both a source and market for tech innovations. He led the firm's analysis of how globalized innovation is driving new collaborative market structures and organizational models like Global Innovation networks. In 2008, he published his research on Indian innovation in a 10-part report series titled India: The Innovation Giant (Re) Awakens. An expert on Indian innovation, Radjou maintains a blog titled "Made in India" on Harvard Business Online.
Radjou was at Asia Society Northern California to participate in a talk entitled "Indovations: Driving Global Innovations from Emerging Markets." In this exclusive interview with Asia Society Northern California's Neha Sakhuja, Radjou talks about the need for turbo-charging India's growth with innovations which have the potential to push India's 70 percent rural population out of poverty. He introduces us to the Indian entrepreneur who adopts the strategy of "more for less for more" in a country defined by adversity of infrastructure and capital.
Are Indian innovations relevant in other parts of the world? Is there an inherent "Indian way" of innovating? If so, what are the unique attributes of this model?
Indian innovations are relevant for rest of the world for very simple reasons. If you look at the factors that lead innovation in India—liberty, connectivity, and diversity—all are affected by frugality. Scarcity of infrastructure, capital, human resources are all driving a frugal mindset, which are leading to innovations that are inherently affordable, accessible, and sustainable by nature.
These innovations are also going to be relevant for other emerging markets like China, Brazil, and South Africa, which also face scarcity of natural resources and capital. Any innovation taking place in India in the domain of health care, education, and banking may even be relevant for mature markets like the US and Europe. Take the example of the Nano car developed by the TATA Motors group. It has been developed for $2,500 US, which seems pretty low cost, but it is also a high quality car that can find a niche in emerging markets. Interestingly, as more and more consumers are becoming environmentally conscious in Europe and America and the economic downturn is pushing for a frugal mindset, one can predict a Nano rolling down the streets of San Francisco and New York within a matter of few years.
You have authored a report titled "India: The Innovation Giant (Re) Awakens." What were your findings, and what are the origins of the report?
The report was written when I was vice president of Forester Research and it was primarily to showcase the different innovations coming out from India that are relevant not only for India but for the rest of the world. The title was supposed to be very provocative and wanted to explain to the world that India has always been an innovation giant. It is just that it fell asleep for a few centuries in the second millennium but is now coming back with full vengeance. Over the last few centuries, of course, India has become the dominant place for technological and scientific innovation. Looking ahead in the next 50 years on, you can clearly see that India is going to come back to the center stage of the world and start contributing more innovations across different industries.
Next: "In a country like India, adversity surrounds you in every part of your life."
What defines an Indian entrepreneur? Are there certain principles which characteristically define Indian entrepreneurs?
Indeed. The research we are doing right now at the center is to formalize and codify certain innovative principles which Indians adopt. We have identified four. First is frugality—Indians are very parsimonious in the way they use resources. Second is inclusiveness—they think every citizen in India can become a potential customer.
Third is the principle of collaboration. What you see among new entrepreneurs is that they inherently partner—they understand they have to partner with local NGOs and local communities if they want to help bring the innovation to the masses. Fourthly, flexibility and adaptability, both in thinking and action. In a country like India, adversity surrounds you in every part of your life. So if you want to be successful in surviving in this environment, you have to be adaptive. We have to embody the principle notion that you have to be malleable in terms of your business model and also in terms of your process. All these principles epitomize the Indian entrepreneur.
How can India scale up existing initiatives on innovations?
I think the way that has to happen is through an ecosystem which includes large companies, small enterprises, universities, venture capitalists, public sector, and finally NGOs.
What we are seeing in India presently is that innovations are taking place at a very small scale. But what hasn't happened yet is the emergence of a network that can integrate all these innovations together and help scale them up. This is going to change in the future because one is now observing increasing partnerships between large companies and small entrepreneurs. So small entrepreneurs may come up with a proof of concept, they might implement in one or two villages and eventually partner with a large company that can take their idea and replicate across hundreds of these villages. So you will see the emergence of this ecosystem facilitating the scaling up of all these small-scale innovations.
How can innovation help India achieve faster and sustained growth? How can we foster innovations that target social and economic challenges like poverty, lack of health care?
I think it's a very good question. Economic growth hasn't yet bought tangible benefits for the masses. When I say masses I am talking about the 70 percent of India's population, which lives in the rural areas. So the innovations you are going to see coming out from India in the next coming decades are going to facilitate what I call inclusion in banking, health care and energy. To give you an idea, nearly 600 million Indians today live without electricity, and the same number if not more don't even have a bank account. If you look at health care, imagine how mobile technology can actually bring health care to the people in villages as opposed to people traveling to the cities to get treated. Similarly, in the areas of banking, mobile technology can help people in rural areas to receive and transmit money. Obopay Inc., a US based company, is one such example. It is providing affordable banking services via mobile phones to poor people in rural areas in India and Bangladesh. I think the real story of India is going to be how innovations help those people who live in the rural areas and by upgrading their lifestyle and living standards. That's a fantastic story of economic uplifting at a scale no other country has seen before.
Next: "How does one ignite the young Indian mind?"
What are the major roadblocks to up scaling innovations in India?
First things first, there is no shortage of innovation spirit! If you look at the missing ingredients, first is the absence of a regulatory framework that allows universities which have a lot of interesting intellectual property locked in their labs to share with the private sector. In US, they have something called the Bayh-Dole act, which enables US universities to transfer their technology to private sector. We don't have that in India.
Second, is the lack of venture capital at the early stage. Seed investment allows entrepreneurs to bootstrap their enterprise and that is missing in India.
Though we do see a change now. Individuals like Mr. Narayana Murthy, founder of India-based Infosys Technologies, has started his own venture capital fund which supports early entrepreneur firms. You will see more capital coming from this enlightened type of heroes helping grow the entrepreneurial companies.
Half of India's population is under the age of 25 years. How can Indian companies harness the entrepreneurial energy of India's nearly 650 million youth?
With half the population under 25 and a national workforce that is expected to account for 25 percent of the global workforce in 2020, India has a vast talent to tap into. However, you cannot just tap in to by focusing on skill development.
Getting the kids to dream requires a whole lot of vocational training. A shift from producing talent to nurturing talent is required. India has attempted to achieve economies of scale by producing as many students as possible using a rigidly defined curriculum that couldn't be tailored to accommodate students' individual needs. But now parents, educators, and even policy makers are pushing for a student-centric training program which is vital for reducing dropout rates in schools and building knowledge based economy.
How does one ignite the young Indian mind? You need to come up with a myth like putting a man on the moon. Inspire the kids to think big in the first place. This may sound a bit wishy-washy, but I think it's very important to have a sense of mission and purpose that is communicated to the youth of India. We need role models, visionaries, corporate leaders, and charismatic leaders.
Next: "Top-down is a bad idea."
In an article of yours titled "Polycentric Innovation: A New Mandate for Multinationals," you talk about "de-Westernizing" global business models as an approach for encouraging innovations for emerging markets. What is this concept of polycentric innovation, and how is it relevant for today's economic environment?
If you look at the concept of globalization in the last four decades, most companies that claim to be global companies are organized in a very ethnocentric fashion. If you look at top car companies in Detroit, they may have their sales and marketing operations and factories worldwide. But the decision making power at the top level comes from the headquarters, which are typically based in US or European cities. I believe, if you really want to succeed in these emerging markets, then you have to shift more decision making power to these emerging markets. You need to find a mechanism, a polycentric organization mode, where you start creating new hubs of decision-making.
One company that is practicing this polycentric innovation is CISCO with its Global Center of East (GCE) headquarters in Bangalore. The GCE acts as a de facto second headquarters, and CISCO can now initiate an entire R&D project end to end, and commercialize it and manage it as well. That I think is polycentric innovation.
Compared to China, how does India fare in terms of innovation?
I think the difference between the Chinese and Indian innovation models is very simple. The Chinese innovation model is top-down and Indian innovation model is very bottom-up. This is due to the difference in political systems in both the countries.
Let's look at one sector, energy. If you look at the way China is going after renewable energy, it's not just a few megawatts of solar power but gigawatts of solar power. Size matters in China and a lot of their big projects are driven by government. In India, if you take solar energy it's very interesting. The first batch of entrepreneurs who got into solar lantern business are all small-scale entrepreneurs. SELCO Solar Pvt. Ltd, a Bangalore-based company which distributes solar energy to rural areas is one such example.
In China the role of the state is very big and the innovations led in China require a clear direction, where you have a proven innovation and you basically say you want to scale it up. But when you are trying to pilot new ideas, top-down is a bad idea. Bottom-up allows you to experiment and you can have thousands of experimentation all across the country and the best one will win. It is a Darwinian system of picking a winner.
Next: Radjou's top five Indian innovations
Over the course of last 10 years India has been known as a place for business processing, but recently there has been a shift toward moving up the value chain. Has this created scope for a new movement for innovation?
What you are going to see is a very interesting shift. A new division of labor is emerging across India. For example, some of the low-paid call centers will still be in India. Some firms say they are going to move to the Philippines, Malaysia, and Vietnam. They might to some extent. But what will happen is some of the jobs will move from Bangalore not to Manila but to smaller Indian cities like Nagpur, Nashik, and Thiruvananthapuram. These are basically secondary cities which have good infrastructure and human capital. This is something very exciting because with new jobs being generated in these second- and third-tier cities, we can practice inclusive and equitable growth. The second thing that is going to happen is that as these relatively low-paid jobs move to secondary cities, the workers in large cities are going to move up the value chain.
So with polycentric innovation if you look at CISCO, they do employ engineers, but they are increasingly employing more managers. My prediction is that within 10 to 15 years at CISCO and other MNCs, what you will see is an equal if not 40 to 60 percent distribution, where 40 percent of the talent will be managers who are handling projects with global impact, and 60 percent will be engineers developing products. That's going to be fundamentally different from what we see today, where 90 percent of workforce is made up of engineers. That's why I see India moving up the value chain, from execution-focused workers to management workers.
Who are some of the most interesting innovators from India who are doing pioneering work?
Two sectors important for India are health care and energy. Health care because we don't have a health care system. In the US, we talk about reforming the health care system, but in India we don't even have one. So if you look at Dr. Devi Shetty, a Bangalore-based heart surgeon, he practices this system of inclusive innovation by providing heart surgeries to people from poor economic backgrounds at a very low price. What we have to create is a model that allows more people in India to avail of health care at a very low cost. The strategy is "more for less for more." Deliver more health care for less cost for more Indians. Dr. Shetty has cracked the code on that. His model is very successful in India and is going to be brought to Cayman Islands, so that US patients can also afford low cost/high quality health care.
In the energy sector, Harish Hande heads SELCO, a company which distributes solar lighting systems to poor people across India. The company has installed this system for 100,000 households. So this person brings light literally and figuratively speaking to people's lives. Electricity is a luxury for people in rural areas, but he has found a business model to make it affordable.
So again the business model both these people have adopted is not about providing goods or services for free. You can use the market mechanisms of supply and demand to identify what is a price point that demand can bear and then come up with and supply the right products. These two innovators have come up with an innovative business model that allows them to deliver more value at less cost for more Indians.
What, according to you, are the top five innovations from India?
2) Life Tools (developed by Nokia)
3) Solar Energy initiatives for rural markets such as SELCO
4) Microfinance and micro-payment solutions (e.g., Obopay)
5) Affordable healthcare solutions (e.g., Dr Devi Shetty's cardiac surgery hospitals, Dr Mohan's Mobile Clinic).