Innovation is the key


"Innovate or stagnate?could well be a warning sign on the road to economic growth in this century. Historically too, those societies that remained static faced decline. On the other hand, the tremendous burst of scientific discoveries and technological innovation in Europe and the US over the last two centuries has fuelled the power and prosperity of these nations. However, till recently, it was also possible to achieve prosperity through adaptation of technology and efficient production. This is rapidly changing in a technological world, with the economy being driven by knowledge industries, it is the innovators who will prosper.

For many centuries, creativity flowered in India ?manifested in dance, painting, sculpture and literature. Fields like astronomy, mathematics and medicine also flourished. Colonialism, and the consequent restrictions on freedom, considerably constrained this. Creativity and innovation, which share many common elements, slowed down very considerably. We need to get these back on track, because innovations create intellectual capital which is, today, often more valuable than financial capital.

Innovation offers a great opportunity but also poses a great challenge for India. The challenge is particularly serious in those sectors which are globalised, because major innovations have the potential to completely disrupt existing work-flows and radically alter processes. For example, revolutionary tools for software development (software that writes software) could have a huge impact on India’s IT sector. Similarly, next generation voice recognition systems, combined with rapid advances in related areas, could affect the call centre industry. Such technological challenges can be met only by organiszations that are nimble, adaptable and innovative. A classic example of this is IBM: a mammoth organisation that reinvented itself when faced with the prospect of its main-frame computer business being threatened by the then new-fangled Personal Computer and other developments. Today IBM ?now as much a services company as a hardware one ?continues to prosper, thanks to innovative thinking.

While rapidly-evolving technologies pose a challenge and threat, there is also a huge opportunity for India. Countries and organisations around the world are looking for partners who can bring them value. Initially, the India-advantage was based primarily on cost-arbitrage ?whether it was in manufacturing or in services. Now, those who came for cost, have stayed and grown because of the quality, productivity and rapidly scaleable skills available in India. Thus, better customer service and reduced time-to-market have become as important as cost. These will continue to be important factors, and India’s unique advantages in delivering these will ensure large on-going business. However, when we look at the next phase of growth, it is clear that this will be fuelled by innovation.

In areas like IT software, services and BPO, India has an enviable reputation for efficiency, quality and low cost. On these counts, as on skills and scalability, we are way ahead of any competition. However, customers are now looking beyond this. No longer do they want to move 30 processes to India and have each done efficiently at lower cost; instead, they are looking for ways of reducing the 30 processes to 10. It is here that innovation comes in, and is at least as important as efficiency.

This is best exemplified by the apocryphal ?though supposedly true ? story from early days of the space programme. NASA required astronauts to make notes while in space. It put out a request for proposals and selected a contractor after careful evaluation. After months of work and a million dollar budget, the contractor delivered, as required, a ball-point pen that could write in the low-gravity environment of space. Meanwhile, the Soviets, faced with the same problem, solved it by using a pencil! A perceptive customer of India’s IT industry expressed the view that had the problem been outsourced to India, NASA would have got the zero-g writing instrument quicker and cheaper, but it would yet have been a ball-point and not a pencil.

Innovation, like creativity, thrives in an environment of freedom, diversity and tolerance of dissent. While India has these characteristics, few of our potential competitors in the knowledge industry share these. China, for example, is a comparatively homogeneous country, with limitations on both freedom and dissent. Russia too is somewhat similarly placed. Even the US is far less diverse than India, especially with regard to language, ethnicity and culture. It is, therefore, in our interest to protect and foster our societal diversities, just as we seek to actively safeguard the bio-diversity of our forests, flora and fauna.

It is, however, not enough to only have the right ambience for innovation, it is also necessary to develop the overall supportive “eco-system? This requires incubation facilities, funding (angel funding, venture capital and commercial credit), mentoring and marketing. What is needed are fully-equipped incubation centres, where one can walk in with an idea and walk out, a few months later, with a product (software or hardware) or at least with a full business plan. These could be in universities, research laboratories or in software parks / export zones, enabling industry-academia synergy.

To stimulate innovation and encourage entrepreneurship and risk-taking amongst people with bright ideas, we suggest a India Innovation Initiative, with a fund of Rs, 200 crore a year to give no-strings grants for promising ideas. This would complement the National Innovation Fund, which already exists and funds small-scale innovations in the rural economy, based mainly on the exceptional work by Prof. Anil Gupta of IIM, Ahmedabad.

Of prime importance at this stage is the need to recognise the challenge of innovation, and to create wide-spread understanding of the importance of innovation for the future of the Indian economy. Actions will then need to be taken on a number of fronts ?from the education system (which often stifles creativity, especially through rote-learning and information-based tests) to the funding and patenting aspects. We, as a country, are extremely well-positioned to take advantage of innovation as an economic force multiplier. All we have to do is to play our cards correctly.

Kiran Karnik
Source: Economic Times