Sunday, March 3, 2013

Innovation in India will not flourish without demand

In my earlier analyses of the evolution of the ecosystem for innovation in India, I tended to believe that the main challenges were with the inputs to innovation (supply side) and the innovation processes within organizations. My assumption was that, post-liberalization and the new intellectual property rights regime, the demand side had improved. But some discussions and happenings in recent months are forcing me to re-think this position.

Consider the following:

  • On March 1, I attended an event organized by the Indo-American Chamber of Commerce in Bangalore titled “Local Innovation: Key to Globalization.” Professor Pankaj Chandra spoke about the transformation of companies in the Rajkot cluster like Patel Brass Works into flexible and responsive manufacturing firms. And, where do they get their business from? - largely from companies outside India.

  • After Professor Chandra’s presentation, a manufacturing entrepreneur lamented that in spite of offering quality and a competitive price he was unable to get any orders from the Indian market.

  • At the same event there was a wonderful presentation by Prashanth Sakhamuri of Hind High Vaccum Private Ltd., Bangalore (HHV). Started in 1965 out of the Instrumentation department of the Indian Institute of Science, it became a major supplier to Indian strategic programmes like Space and Atomic Energy. Some of HHV’s significant achievements include a hypersonic wind tunnel designed and executed with other partners to test space vehicles for re-entry; a rotary vacuum brazing furnace used for the GSLV launch vehicle (thanks to a unique design that allows for rotation of components during brazing, the furnace can finish the process in 1 cycle instead of 7 otherwise!) and an aerospace engine welding technology installation for the Sukhoi aircraft at Koraput. This is a completely robotic facility that uses a unique combination of an external robot and internal robots – the external robot is used to control the internal robots as there are small differences in the sheet metal configuration of one fighter compared to another. However, in spite of all these significant demonstrations of their technological prowess, HHV was finding it increasingly difficult to sustain itself on the domestic market alone, The CVC guidelines resulted in projects being given to companies with the lowest bids even though they often lacked the technological capabilities to execute the projects. Long term growth prospects looked uncertain, and HHV had to finally turn to the international market to control its own destiny.

  • At iSPIRT, we have been hearing more and more instances of how small Indian product companies are kept out by large (MNC) rivals by persuading customers to include experience and installed base pre-qualification criteria that a small product company can never hope to meet. We have put out a Blue Paper flagging these issues, and asking for policy changes.

  • Kishore Ramisetty of Intel’s Ideas2Reality programme recently told me about how a mobile Automated Teller Machine designed in India around an Intel chip had more than a million installations outside India before it started selling in the domestic market.

Other regulatory issues are also stifling innovation:

  • Revised clinical trials regulations issued by the government within the last month have brought the clinical trial industry to its knees. This was one part of the pharmaceutical innovation process that was getting some traction in India, but the recent changes in regulation though intended to stop illegal or unethical trials are only likely to result in legitimate trials shifting elsewhere.

  • Last October, an expert panel appointed by the Supreme Court of India recommended that trials of all genetically-modified crops in India be stopped for the next ten years. Even though the Supreme Court did not uphold this recommendation fully, now many state governments are setting up panels of their own to provide an additional layer of scrutiny to the central government’s process. While there is no doubt that food security and safety is important, most people would have serious doubts about whether this scrutiny by the state governments would be a scientific process, or just another rent-collecting activity.

As Sunil Mani has pointed out in his recent review of the new Science, Technology & Innovation Policy (STIP) in the Economic & Political Weekly, the STIP is focused on supply side initiatives. What all these instances I have listed above suggest is that without attention to the demand side and regulatory issues, none of our dreams for Indian innovation will be realized.

1 comment:

  1. As an entrepreneur and a small one at that, I agree entirely with your assessment, or in your words re-assessment of the demand side of innovation in our system.

    Regulatory policy makers and bureaucrats continue to remain suspicious of 'business men' and 'banias' a thing of the past and hence are so out of sync. Market orientation even for some of the vendors to government run/owned entities should be their own re-orientation. Today's businessmen come from all 'castes' are articulate, ambitious, social, concerned citizens, especially the first generation.

    On the industry side, whether it is internal R&D or externally sourced via trusted vendors, big or small, a merit orientation, value and outcome based assessment, and most importantly boldness behind their intent to innovate. Sometimes I wonder if our industry captains are ambitious on things beyond the financial ratios that they are focused on, while expecting a old mindset government to provide a industry benefiting policy framework.

    My question to policy makers and industry captains is who will commit and when will they stop passing the buck? We need to banish this phrase 'we are like this only!'