Sunday, November 4, 2012

Sweden & India: Innovation & Entrepreneurship

Sweden celebrated the birth anniversary of Alfred Nobel last week with a series of events in India centered around innovation. I had the pleasure and privilege of being a part of the CEO Round Table convened by Swedish Ambassador Harald Sandberg on November 1. On this occasion, senior executives of Swedish companies in India, and other invitees from the government and academia joined the Swedish Minister for Enterprise Annie Loof, and Indian Planning Commission member Arun Maira to discuss what India and Sweden could learn from each other on innovation.

Innovation in Sweden: A Historical Perspective

Our gracious host, Ambassador Sandberg, set the stage for the discussion with his introductory remarks. He identified four important historical milestones going back to the mid-19th century that paved the way for the emergence of Sweden as a modern industrial state. The first was the transition from feudalism to transparency. The second was a focus on literacy and education – 6 years of mandatory education was prescribed for Swedes as far back as 1850. The third was liberal reforms and deregulation. And, the fourth, an emphasis on free trade, again going back to the 1850s.

In discussions at our table, Enrico Deiaco of the Swedish Agency for Growth Policy Analysis emphasized the importance of deregulation in creating a healthy climate for the growth of Swedish enterprise. He clarified that Sweden’s initial focus was on education (rather than research) and creating good engineering talent was an important objective. He pointed out that Swedish enterprises started by licensing external knowledge and patents from others – Ericsson, for example, started by licensing Bell technology from the United States. But, Swedish companies subsequently graduated to creating their own knowledge and intellectual property. He added that Sweden’s external focus was inevitable given its small size and population (currently about 9 million).

Swedish Society, Education

I was struck by some important differences in education and society between India and Sweden. The Swedish education system, right from school is more open and practice-oriented. Joakim Bystrom of Absolicon Solar Concentrator described how he made a model of his first solar concentrator in his weekly carpentry class. His idea was developed further in an Inventors’ Club. The Swedish education system is now trying to bring ideas of entrepreneurship into the school curriculum.

Swedish society and Swedish companies are relatively free of hierarchy. In Sweden, it is perfectly acceptable to question your boss. (I am sure that can be traced back to the efforts to remove feudalism in the 19th century!) This lack of hierarchy leads to a better climate for ideas within the organization.

Sweden’s Accomplishments…and Challenges

An important insight came from Joakim Bystrom, the Swedish entrepreneur from Absolicon Solar Concentrator. His region of Sweden has a population of only 250,000, but has a complete “regional innovation system” that has been crafted in the last 15 years: an incubator, several innovation funds, and close to 50 people focused on enhancing innovation in the region. Bystrom has so far been able to raise capital proportionate to his needs at different stages of growth of his enterprise – starting with investments from friends and family, and awards from innovation contests, graduating to soft loans, angel investments, and support from the Swedish Energy Agency. He is now ready for venture capital. At least in his case, the Swedish innovation system appears to have delivered what he needed, and when he needed it!

Sweden does very well on global innovation rankings, largely it appears due to the high investment in R&D and innovation (about 3.7% of GDP). However, this doesn’t necessarily translate into new products and services. Instead it is reflected in the competitiveness of large Swedish enterprises (through higher productivity) and is manifested as enhanced living standards for the Swedish people. The high R&D intensity is driven largely by industry with government accounting for just 20% of R&D investments.

Many of the Swedes participating observed that Sweden is good at innovation but not necessarily at entrepreneurship – from this, I understood that much of the innovation is driven by large companies, and not by start-ups and small companies (though efforts are afoot to change this). In contrast, they observed that India is good at entrepreneurship but perhaps not as strong at innovation (by which, they mean R&D-driven products and processes). I guess that’s a fair characterization! Participants also referred to Sweden’s strength in “systematic innovation”: good processes to develop ideas and implement them.

But Sweden is not resting on its achievements. Swedish Minister for Enterprise Annie Loof described how Sweden’s new innovation strategy (released just last month) was created through a participatory process. She underlined the importance of an innovation strategy that has people in mind, and that people can relate to. Given Sweden’s past and its priorities, it’s not surprising that the new innovation strategy focuses on three important goals – meeting global societal challenges such as climate change and ecological concerns; increasing competitiveness and creating more jobs; and delivering public services of higher quality.

What should we learn from Sweden?

Sweden has a good record of innovation in the 20th century. Some of its prominent innovations are the computer mouse, the ball bearing, tetra pak packaging, and the heart pacemaker. So, it’s tempting to look to Sweden for ideas on how to strengthen innovation in India.

But, transferring “best practices” or policies from one country to another that has a completely different history and context is never easy. As some of the participants in the Round Table observed, Sweden is smaller than half of Mumbai! Issues of relevance and applicability come up almost immediately.

In his summing up, Arun Maira and the group flagged four themes emerging from the discussion that seemed important for India – education, connections and collaboration, finding partners, and finance. There was little disagreement that education in India needs to change, but there was concern about how long that could take to happen. On finance, Arun said that the National Innovation Council is seized of the issue, and plans to set up a Social/Affordable Innovation Fund that would provide small ticket funding for innovations with potential social impact.

“Connection and collaboration” provoked some interesting debate. Within Sweden, collaboration seems to be easy due to a lack of hierarchy, and high levels of trust. Social homogeneity helps, as does Fika, informal discussion sessions over coffee that punctuate Swedish organizational life. Rajeev Chopra of Philips pointed out that Japan and Korea are hierarchical too, but seemed to have got more innovative over time. He asked whether we can’t take hierarchy as a given and find ways around it. Kiran Karnik wondered aloud whether Japan and Korea are really that innovative or whether they are better at imitation and scaling up. Others demurred, pointing to the Toyota Production System and the growth of Korean companies like Samsung. Arun Maira commented that perhaps hierarchy is not the issue but how you use it – e.g., on the shop floor, Japanese companies are very open to workers’ ideas through their Kaizen programmes; but once the ideas are generated, they defer to senior management in terms to decide which ideas should be implemented.


The discussion at the Round Table reinforced some points I made in From Jugaad to Systematic Innovation: The Challenge for India and kindled some ideas I have had since. Social and cultural barriers such as excessive hierarchy, fear of failure, and the difficulties we face on working together in team often hold us back from achieving our full innovation potential. Organizations can overcome these barriers by providing a supportive context for innovation that builds confidence in our innovation capabilities (see my recent Outlook Business column for more on this theme). While some organizations in India (notably the Tata group) have instituted awards that recognize people who tried hard but failed, more fundamental organizational change may be required so that legends are built around those that failed but still succeeded.

As for innovation policy, decentralization is definitely the way to go. India is too large and too complex for innovation to be supported by “one size fits all” innovation policies run out of Delhi. We need to build regional innovation systems that can support innovation at the local level. The state level is a good place to start, and it’s good to see Karnataka taking the lead in developing state-level innovation policies.

But more than anything else, there much to be said for deregulation and transparency. People in our country can then shift the focus of their ingenuity to products, services, processes and business models rather than applying it to find ways around rules and regulations. Just imagine how much thought and creativity must have gone into the complex ownership structures and financing arrangements that are being talked about in the press today – if only the same energy could have been focused on innovation that could make a positive difference!

Last but not the least, building innovation capabilities is a long-term play, not a short-term one. Changes in policies and more fundamental social changes can take decades to show results. Today, Sweden benefits from changes that were initiated more than 150 years ago! Though we take pride in our ancient heritage and timelessness, our policies and decisions seldom demonstrate the long-term perspective such a hoary history should generate!

1 comment:

  1. For more information on the Swedish comapny Absolion Solar Concentrator AB, see