Friday, April 20, 2012

Naushad Forbes on Innovation

For Indian companies, design (rather than technology) may be a better source of differentiation and value addition, and provide a useful frame for exploratory efforts - this was the key theme of the presentation by Naushad Forbes, Chairman CII National Innovation Council & Director, Forbes Marshall Ltd. (FM) at the CII Innovation Forum at IIM Bangalore yesterday.

Naushad has been an important influence on my thinking on innovation. The book he wrote with David Weld – From Followers to Leaders (Routledge) – develops the idea of the importance of design in more detail.

Naushad covered a lot of useful but familiar ground in his talk. He started by identifying and dispelling several myths about innovation. The six myths he identified were:

  • Innovation = creativity, innovation = invention, innovation does not involve imitation;

  • Innovation has to involve high technology

  • Innovation required heroic inventors

  • Innovation means a radical leap forward

  • Innovation starts with research

  • Innovation has to be new to the world

Naushad observed that prior to 1991, innovation in India meant only indigenisation. But things have changed, particularly in the last decade, where the impressive growth of Indian companies has resulted in a major increase in self-confidence. This bodes well for Indian companies’ efforts to innovate more in the period of slower growth we find ourselves in today.

CII is working on two initiatives to support industry in its innovation journey. The first is the development of the right metrics for innovation at the level of the firm as well as the country. Naushad pointed out that while the country’s R&D intensity has remained pretty much the same over the last two decades, there has been a major change in the innovation landscape and we need to find ways to measure this. At the level of the firm, the effort is to develop metrics that can be used both for self-assessment as well as indentifying the most innovative firms. The second initiative is mapping gaps in the innovation process with the objective of finding ways to plug these gaps.

Innovation at Forbes Marshall

But the most interesting part of Naushad’s talk related to the efforts of his company, FM, to enhance its innovation capabilities. FM’s innovation efforts centre around four initiatives: (1) add value through process innovation; (2) “get clever” and move from process improvements to the creation of proprietary products and technologies; (3) build R&D and design capabilities; and (4) create a culture of innovation. Naushad mentioned that it makes sense to start with less risky steps like documentation and codification (which, incidentally, are quite difficult to implement in the Indian context) before moving on to the development of new technologies and products.

In building a culture of innovation, FM has found that there are some necessary ingredients:

  • A shared drive to catch up and forge ahead across the company (needs to be built if it does not exist)

  • Getting the right incentives for innovation in place (citing Jim Adams, Naushad said the crux of the matter is “how do you treat failure vs how do you treat not trying” – in most large companies, employees face no penalty for not trying but run major risks to their careers if they fail).

  • Overcoming two important barriers: “Not Invented Here” and “Foreign is Better”

  • Setting the right business velocity – neither chalta hai, nor “quicky quicky”

  • Encouragement of experimentation and failure – this is hardly a trivial issue. Naushad gave an interesting example from FM where the top management at one time authorised 20 managers across the company to spend upto Rs. 10 lakhs each on experimentation with no questions asked about the results. What happened? One manager spent the whole amount, another manager half the amount, but all the other managers spent nothing. The lesson? You need to create “demand” for innovation as well.

  • Getting the right balance between exploiting old knowledge and exploring new knowledge.
Metrics for Innovation

In terms of metrics, Naushad mentioned that value-added per person and its growth over time was the most important metric used at FM. However, even this metric is best looked at in a relative sense – FM’s value added per employee has gone up 5 times in the last 13 years, but compared to its Joint Venture partners, it is still half as productive though the gap has come down from 6:1 to 2:1. Naushad cautioned against using a single metric for innovation and suggested a combination of value added per person, new product revenue as a percentage of sales, intellectual property, codification of knowledge and a measure of reaching innovation/NPD gates on time.

Naushad pointed out that old patents are a useful source of technical information. He reminded the audience that the purpose of the patent system is not only to reward inventors but share information and knowledge. Naushad cautioned against using intellectual property rights measures as the sole metric for innovation.

The talk ended with some interesting questions and observations. How important is passion for innovation? (yes, but then passion is required to do anything well); Can you start innovating late in life? (why not?); though exploration is important, exploitation and execution remains critical (Naushad’s pithy comment: “If you get weak at execution, you stop existing as a firm”); and the importance of throwing out challenges (almost always results in better innovation).


  1. Thanks for sharing this, Rishi. Quite a detailed account. Did Naushad mentioned how "not trying" is discouraged at FM?

    I liked the example of allocating experimentation fund to managers. One manager spent the whole amount while most spent nothing. I am not convinced of the conclusion though. My experience shows that designing experiments especially low-cost experiments is also a skill and many managers are poor at it. It can also be taught and practiced systematically. This does not mean generating demand for innovation is not important.

  2. Amit Gupta EPGP 4April 22, 2012 at 6:29 AM

    Thanks Rishi Sir for posting majority of Dr. Naushad's speech. During the speech Dr. Naushad mentioned about two way relation between Exploitation and Exploration. As per my understanding, Exploration should be autonomus and independent working as the performance ambiguity is alwyas high in this but if Exploitation, which works on low to medium performance ambiguity, is related with exploration than there will always be pressure of achieving targets/deadlines and that doesn't help in serving the purpose of innovation. What are your thoughts about it? Shouldn't Exploration be independent , having no relation with Exploitation?

  3. It is always a nice experience to explore Naushad's thoughts. Thanks a lot for posting. Really interesting.