The Challenge of "Reverse Innovation"

MNC Structures can impede innovation flows….


In the mid-1970s, the Xerox Corporation faced the first real threat to its domination of the photocopying industry. This threat did not come from IBM or Kodak, the large American companies that had entered the industry. Instead it came from Canon and Ricoh, at that time relatively small Japanese companies.

Xerox had fortified the technological lead it enjoyed due to its patent-protected technology with strong customer relationships, a renowned service network, and a business model built around leasing large and fast copiers to central photocopying facilities within company locations. Realizing that they couldn’t possibly beat Xerox in head-on competition, Canon and Ricoh chose to change the rules of the game. They sold small, relatively slow copiers with limited functionality yet high reliability to individual managers within companies who were looking for options to meet their own copying needs.

Xerox was caught on the wrong foot. With a large base of machines leased out to customers, it was difficult for the company to shift to a model of outright sales. Further, within the US operations, they lacked a small copier product that could compete with what the Japanese were offering.

Ironically though, Xerox’s Japanese affiliate – Fuji Xerox, a joint venture with Fuji Photo Film – had developed small copiers of its own that were particularly suited to the Japanese market. Yet, in a typical case of one-way information flows that often seems to characterize MNCs, Xerox failed to immediately recognize or exploit the products created by Fuji Xerox to compete more effectively with Canon and Ricoh in the US market. By the time they did it was too late.

…But subsidiary initiative can at least deal with local competitive challenges

Innovation by MNC subsidiaries and affiliates has happened in the past when subsidiaries have had to be locally responsive to competitive challenges. In India, we saw the celebrated case of how Hindustan Lever launched Wheel to combat Nirma in the detergent marketplace. In the process, Hindustan Lever had to “borrow” several aspects of its business model from its local Indian competitors. But, such innovations often remained restricted to the host country market, and in the past were seen more as aberrations than an integral part of the company’s strategy.

In several MNCs, subsidiaries still struggle to get the authority to create new products for specific needs of their markets. Subsidiary leaders often have to display entrepreneurship or initiative to overcome the dominant logic that products and technologies flow from the headquarters to the subsidiary and not vice versa.

Govindarajan & Trimble argue for a new logic

In Reverse Innovation (Harvard Business Review Press, 2012), Vijay Govindarajan (VG) and Chris Trimble argue that multinationals need to change this perspective of innovation. And they go one step further – MNCs should not only encourage subsidiaries in large emerging markets to develop “lower cost + lower performance” products for their markets, but should actively create structures and processes to support such innovation.

The rationale for this is simple. Emerging markets are the growth markets of the future, but existing products and services are often not well-suited to these markets – they are over-designed, have too many unnecessary features, and are hence too expensive. If MNCs fail to develop products for emerging markets, they will not only lose out on important growth opportunities, but could potentially create well endowed competitors from these markets who could ultimately threaten them in their home markets.

Reverse Innovation contains some insightful case studies of companies like GE, P&G and Logitech that strategically created products for emerging markets, some of which have subsequently found markets in the developed world as well. The authors call this phenomenon “reverse innovation” because of this latter phenomenon. This constitutes a flow of innovation in a direction opposite to that of what we traditionally saw in MNCs (like in the Xerox story with which I started this post). And, the authors believe that this reverse flow may well be important for the developed world as they face declining growth, lower disposable incomes, and increasing ecological concerns.

The Challenges of Reverse Innovation

I have some reservations about the use of the term “reverse innovation.” It seems somewhat patronizing to the developing world. Notwithstanding this, it appears to be sticking, thanks in no small measure to the Harvard Business Review article by the authors of this book, and GE chairman Jeff Immelt.

But, more importantly, there are some fundamental issues with this phenomenon itself. The first issue is whether MNCs, whose competitive advantage comes traditionally from superior technology and features, can really compete in a price-sensitive, cost-driven market. Anecdotal evidence from the Indian market suggests that GE (the focal company of this book – one of the authors, VG, was a consultant and Professor in Residence at the company) has been struggling to make a commercial success of its reverse-innovated ECG machines and associated products because local competitors have been undercutting GE’s prices. This raises the question of whether, given their overhead structures, MNCs can ever hope to compete on cost with frugal local competitors.

This doubt is reinforced by one of the case studies in the book about a P&G sanitary napkin product specially developed for the Mexican market which suggests that this product enjoys less intellectual property protection than a typical P&G product does, presumably because it doesn’t have such a high degree of proprietary technology in it. At least in India, if it’s a competition for better adaptation and cost efficiency, I would be inclined to put my money on local companies to prevail.

Successful innovation often involves innovating on multiple dimensions. Studies by Doblin, an innovation consulting firm now owned by the Monitor Group, suggest that innovations are more likely to be successful if they incorporate innovation in at least 6 of the 10 dimensions of innovation they have identified. This suggests that MNCs will have to innovate on supply chain, distribution and a host of other business dimensions if they are to make reverse innovation work. (This is reinforced by Hindustan Lever’s success with Wheel where they did exactly that). But, it will be difficult for MNC subsidiaries to make that many changes unless they are really determined to do so. It’s tough to imagine the average GE channel partner selling high ticket price medical equipment being interested in selling low-priced scanners, and the challenge of setting up alternate distribution channels (which the authors say GE is doing) shouldn’t be underestimated.

While the authors should be congratulated for taking the bull by its horns in asking MNCs to embrace complete bottom-up product design if they want to be relevant in emerging markets, they should in my view put greater emphasis on the criticality of fundamental changes in business models that will be required for these newly designed products to be successful in these markets.

And, finally, I wonder whether Clayton Christensen’s theory of disruptive innovation (see my earlier post comparing disruptive and radical innovation) isn’t adequate to describe the nature of innovation VG and Trimble advocate. If so, the major contribution of this book is the emphasis on the changes needed in MNC structures and processes to facilitate such innovation by MNC subsidiaries in emerging markets.

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.

Conclusion

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!

Stanford University's Amazing Contribution to Innovation & Entrepreneurship - and what we can learn from it

What do Hewlett Packard, Google, Yahoo!, LinkedIn, and Cisco have in common? Well, apart from being legendary companies in the IT industry, all of them had at least one Stanford University alumnus in their founding team. And though Stanford alumni’s prowess in technology is well known, their alumni have been co-founders of companies in a host of other domains including apparel (The Gap), financial services (Charles Schwab himself is a Stanford alum), and athletic shoes (Phil Knight of Nike is another Stanford alum).


A just released study of Stanford’s contribution to entrepreneurship and innovation by Charles Eesley and William Miller is based on the findings of a survey of Stanford alumni conducted in 2011 (see graphic below). They estimate that firms with links that can be traced to Stanford account for revenues of $ 2.7 trillion per year. Close to 30% of Stanford alumni have been involved at some time in founding an enterprise or a non-profit. And, about half the enterprises founded by Stanford alumni can be classified as moderately or highly innovative. These are impressive statistics for one university!

Entrepreneurship at the Heart of Stanford’s Founding

Stanford was created out of a forced entrepreneurial event. According to legend, Leland Stanford and his wife Jane wanted to make a sizeable contribution to Harvard after they lost their only son. But Harvard didn’t respond respectfully to Stanford, so he decided to set up his own university instead. Soon after, Senator Stanford died leaving his wife Jane to hold the fort. And, Jane Stanford had to struggle to keep the fledgling university going. This included pledging her jewellery to raise money to keep the University running!

Role of Fred Terman

The roots of Stanford University’s support for entrepreneurs and innovation are attributed to Fred Terman who successively headed the Electrical Engineering Department and the School of Engineering, and later became the Provost of the University. On the one hand, Terman used the post-Second World War expansion of the US government’s science funding programs to attract talented faculty and create outstanding academic research programs. On the other, he personally supported entrepreneurship by his students and alumni.

Terman was personally involved in helping Bill Hewlett and Dave Packard set up what is today HP, the highly respected global leader in information technology. His support included ideas for their first products, and a research assistantship that allowed Hewlett to move back to the west coast from a job at General Electric. As Dean, Terman encouraged faculty to get out of the University and learn about the creative things being done in industry, and, as Provost, Terman extended this thinking to departments other than Engineering. Stanford became famous for the porous boundaries between the university and start-ups emanating from ideas on campus. Today, the success of companies like Google underlines the importance of the seeds sown by Fred Terman sixty years ago.

Terman persuaded Stanford’s trustees to use the university’s large land bank to set up the Stanford Industrial Park. Terman focused on attracting high technology companies to the Park. These companies became the nucleus of what is today Silicon Valley. Some of Bill Shockley’s associates founded Fairchild Semiconductor, the parent of Intel and the semiconductor industry. Terman can thus take some credit for the growth and evolution of this industry as well.

Entrepreneurship at Stanford Today

Many of the ideas that get put into practice in firms started by Stanford students or alumni have their origins in research being done on campus. As Eesley and Miller document in their report, Google founders Page and Brin met as Computer Science graduate students at Stanford. They worked together on a National Science Foundation (NSF) project to find effective ways to search digital libraries. Their legendary “Page Rank” algorithm had its origins in the “BackRub” method they devised to search digital libraries efficiently. Their academic advisers at Stanford as well as the Stanford Office of Technology Licensing were closely involved in getting Google off the ground!

Stanford has several entrepreneurship courses, many of which are co-taught by successful Stanford alumni entrepreneurs and venture capitalists. The study indicates that a good number of Stanford alumni entrepreneurs attended these courses. A contemporary driver of innovation and entrepreneurship has been the Design School which promotes user-centric design thinking. The D-School’s course on Innovation for Extreme Affordability was the seed of Embrace, a company well known for developing low-cost infant warmers as a substitute for expensive incubators.

But, more than anything else, Stanford has the advantage of being located at the centre of one of the most innovative ecosystems in the world. Silicon Valley literally breathes ideas and new ventures, and it’s difficult to escape the infectious atmosphere. More creative and entrepreneurial types make a natural beeline for Stanford reinforcing the network effect.

What does this mean for India?

According to the IIT Alumni Impact Study of 2008, about 11% of IIT alumni are (or have been) in an entrepreneurial role (includes venture capital and private equity). Companies in which at least one IITian was a co-founder account for $171B revenues annually. Though obviously much smaller than Stanford’s numbers, these are not too bad considering that two thirds of the companies started by IIT alumni are in India. These include iconic names like Infosys (NRN did his MTech from IIT Kanpur; Nandan Nilekani his BTech from IIT Bombay; and Kris Gopalakrishnan did his Masters from IIT Madras). And this is in spite of the absence of anything like the Silicon Valley environment in India. Clearly the payoffs for the economy from good higher education are substantial.

In fact, the takeaway from all this was best expressed by Sanjay Anandaram (serial entrepreneur, investor and entrepreneurship evangelist) in an email he sent me recently: “When will our regulators learn that entrepreneurship, not crony capitalism and crony socialism, creates jobs and wealth and therefore create the necessary environment that stimulates entrepreneurship?”

[The part of this post referring to Fred Terman’s role draws on my article “Learning How to Innovate from Stanford,” Edu Tech, December 2009, pp. 54-55]

Titan Industries: The 3M of India?

In an earlier post, I chronicled the story of 3M, often regarded to be the company that has most successfully sustained a strong innovation culture over an extended period of time. Though several Indian companies have developed a reputation for innovation in recent years, we would be hard pressed to identify a company like 3M that has innovation in its DNA. But, if there is one company that could challenge this notion, it is Titan Industries Ltd., India’s largest watchmaker, jewellery giant, and retail pioneer.

A Creative Start

Titan started off on a creative note in the mid-1980s. The dominant watchmaker at that time, HMT, sold watches that operated either on the basis of the traditional hand-winding mechanism, or “automatic” watches that depended on the vibration and movement of the wrist to keep the watch going. Instead, Titan introduced battery-powered quartz watches that were more accurate as well as sleek. HMT had allowed the distribution channels to control the availability and price of its watches; instead, Titan created a modern retail experience for its consumers, and in the process became perhaps the first Indian company to apply a sophisticated understanding of consumer behavior to retail store layout. Titan’s first CEO, Xerxes Desai, an aesthete himself, set up a full-fledged design studio in the company that has today become the best corporate design facility in the country. Titan also made a mark for itself through its signature brand and marketing campaigns with several memorable commercials. Thus, Titan embraced innovation in technology, design, branding/marketing, and distribution right from its early years. Besides, it developed strong internal competencies in manufacturing and quality that were required for the watch business.

The Challenge of the Jewellery Business

Buoyed by its success in the watch business, and seeking frontiers for growth, Titan used its strengths in design, marketing, distribution, and manufacturing to venture into jewellery, a business believed to be too traditional and “unorganized” to be amenable to the methods of organized industry. Titan’s early years in the jewellery industry were exciting from a design standpoint, but did not translate into significant financial results. In fact, the jewellery business continued to lose money till 2003. Initially, the company was too far ahead of the market and consumers found its designs too “western” for its taste; once the company realized this and moved towards more traditional designs, it came up against the challenges of competing with small jewellery makers all over the country who have strong customer relationships as well as a reputation for sharp business practices!

Ironically, it is the jewellery business that has been the engine for Innovation 2.0 at Titan. Strategically, the company realized that it needed to identify areas in the jewellery production, sale and distribution process in which it could take advantage of its size, brand, and processes. At the same time, they would need to involve their employees and other stakeholders in transforming the business.

Innovation 2.0 from Tanishq

The challenges faced in the jewellery business made Tanishq, the jewellery business of Titan, embrace innovation. Arguably the most visible innovation in the jewellery business was the introduction of Karat meters at Tanishq stores which enabled customers to measure the purity of the gold in the jewellery they are buying. This one innovation helped Titan to emphasize the trust and quality associated with the Tata and Titan brands, and at the same time question the quality of gold being sold by its unorganized competitors.

But the jewellery business has gone well beyond the karat meters by embracing an employee-driven innovation programme.

Since 2004, the business has run an innovation campaign every year based on a different theme. The first campaign, “What is New?” in 2004, had a simple objective: the identification and implementation of 5 new ideas by every supervisor on the shopfloor. The 2006 campaign revolved around an “HOD Fund” – to accelerate the pace of innovation, every Head of Department was authorized to spend upto Rs. 1 lakh on each idea coming out of his department without seeking approvals from senior management. The 2008 campaign identified a catchy theme that became the basis for some of the most successful innovations at Tanishq: “Simplify and Automate.” But, from the point of view of developing sustainable innovation capabilities at Titan (and making it India’s 3M equivalent), the most important initiative/campaign was the creation of the “Innovation School of Management” (ISM).

By 2008, Titan’s jewellery business found that though innovation had been a mantra for more than five years, only 15% employees were actively engaged in innovation. The business faced a challenging question: How important is participation? “Very important” was their conclusion on the basis that if 15% employees could achieve so much (see examples below), wouldn’t the benefits of more participation be much greater? This was the seed for the creation of the ISM which has the objective of training all stakeholders to be innovators by 2014-15.

ISM consists of a 6-month course, and focuses on shopfloor employees. It’s a very formal process, which starts with the issue of an academic-style prospectus. ISM begins with a 3-day training workshop to learn the tools and techniques of creative problem-solving. Participants then form teams and choose a challenge to work on from 10 challenges already identified by the company. In the next few months, they get 4 hours a week to work on the project, and 2 hours a week of mentoring. More than 200 employees have been trained under the ISM umbrella so far.

The 2010 campaign embraced the concept of open innovation. Sticky problems faced by the business were posted on a Tata group internal website. This open innovation platform proved to be quite effective as 7 such problems were “cracked” by other Tata group companies.

The 2011 campaign extended beyond the company’s organizational boundaries to include the network of “karigars” (craftsmen) who make jewellery for the company. This campaign was two-pronged: on the one hand it sought to get the karigars involved in the innovation process; on the other, it tried to make them think and behave differently by holding a challenge contest to see who could make the lightest weight jewellery to a given design [Conventionally, in India, heavier jewellery is considered more valuable because the price of jewellery is a direct function of the weight of gold in the jewellery].

In the last few years, Titan has been one of the best performers on the Indian stockmarket. A major driver of this has been the rapid increase in sales and profits of the jewellery business. The company estimates that 30% of the jewellery division’s profits have come from innovation in manufacturing and integrated supply chain.

Where did these gains come from? Here are some examples:

• In the conventional stone-setting process, one person could set 100 stones per day. This constrained scaling up the operations. Thanks to a new, patented, mould-setting process developed by employees, today an employee can set 1,500 stones per day. The new process does not require specialized skills and can hence be performed by any employee.

• Earlier, the company could create 150 prototypes for new products per month. Now thanks to a newly developed “virtual stone-setting process,” the business can create more than 1,000 prototypes per month.

• A complex piece of jewellery can have dozens of stones. In the conventional jewellery-making process, the diamonds needed for a particular piece of jewellery are manually selected and placed in a bag before the piece of jewellery is put together. Earlier, Titan’s jewellery business employed 40 people to do diamond bagging, and could pack 800 bags per day. Today, Titan has created the world’s first automated process for diamond bagging using a robot that took 4 years to design and build. This robot can pack 2,500 bags per day.

• Earlier, the cycle time to make plain gold jewellery was 30 days. This cost the company money in terms of the cost of carrying a large gold inventory as also the risk of large quantities of gold lying with craftsmen who were not company employees. In a series of process improvements developed in conjunction with the craftsmen, the cycle time has been reduced to 3 days.

• A decade ago, gold loss in the jewellery manufacturing process was as high as 5% and the company had to use elaborate processes to recover gold powder from the manufacturing process. Today, thanks to various process innovations, Titan is a world leader with only 0.15% gold lost in the manufacturing process. The company estimates that thanks to these innovations it averted the loss of 55Kg of gold in 2011-12.

Innovation in Technology…

Most of the innovation described above were in the areas of manufacturing and supply chain management. But, Titan has made serious efforts to innovate in technology as well. A decade ago, Titan’s watch division took on the challenge of making the world’s slimmest, water-resistant watch. The result was The Edge, developed through the efforts of Titan’s technology innovation team and its manufacturing group. More recently, Titan developed a new HTSE (“High Tech Self Energized”) watch – a watch that can be powered by solar energy. The technology for such watches is closely held, and the company lacked experience in critical areas like development of Application Specific Integrated Circuits (ASICs) required for such products. Again, the company kept the faith and persisted in spite of several failures and has now broken into the ranks of companies that possess the capability to create such watches.

…..And in Marketing

All the innovations listed above are outside what is often considered Titan’s distinctive competence, i.e., marketing. Over the years, Titan has built multiple brands and sub-brands (Titan, Sonata, Raga, Fastrack, EyePlus, GoldPlus, to name a few), often with creative advertising campaigns. Fastrack is one of India’s biggest youth brands, and naturally uses social media and the internet extensively in reaching out to its marketplace. GoldPlus is a new gold jewellery mass market brand built to reach out to Tier 2 and Tier 3 towns across India, and has a social marketing angle to it as well. Titan’s marketing innovations deserve a separate blogpost!

The Underlying Philosophy

While Titan’s focus on innovation has undoubtedly been driven by a quest for better business results, its foundation lies in a belief in human potential and achievement. As Bhaskar Bhat, Titan’s Managing Director says, “We should innovate to create value for all our stakeholders and meaning for ourselves.” Take the ISM for instance – it is predicated on an assumption that operators on the shopfloor can, if given the right skills, time, and space, come up with good ideas to improve the efficiency of operations. In fact, the Titan management strongly believes that everyone has two jobs – doing your own job effectively, and finding new and better ways to do your job. In this, Titan reminds me of two other legendary companies – 3M, for its belief in individual initiative, and Toyota, for its belief in continuous improvement.

The company’s belief in individual potential and development is more than skin deep. Over a decade ago, when the company was contemplating major changes in its strategy and operations, Titan sponsored an education programme for its union leaders at IIMB – this is the only instance I am aware of an Indian company investing in executive education for its union leaders. The initiative to involve karigars in the innovation process described above took several years of effort, and involved taking care of several basic needs of the karigars first (better working conditions, welfare schemes, etc.); yet the company kept its faith and persisted in working with them till an environment of trust and mutual belief was built up.

A belief in individual potential, and confidence in the ability of groups of people to do extraordinary things. These can’t be faked. That’s why building an innovation culture is as much about leadership as it is about structures and processes.

[Disclosure: I worked with Titan in designing an innovation programme for its managers at IIMB last year. But I do not have any ongoing pecuniary relationship with the company. Examples in this post are taken from talks given by Mr. L.R. Natarajan, head of Titan’s New Business Division, and earlier architect of the manufacturing innovations programme at Tanishq.]

Why aren't we at the forefront of technological innovation?

In a recent column in Outlook Business magazine, I argued that a lack of confidence in our innovation capabilities is the main reason that we are not at the forefront of technological innovation.

Innovation in Indonesia - and what we can learn from it

I just spent the best part of a week in Jakarta, Indonesia. The occasion was the National Science & Technology Development Forum, organised by PAPPIPTEK, a research centre focusing on Science & Technology Development. This is a part of LIPI, the Indonesian Institute of Sciences. I gave a talk at the Forum, but will return to that in a later blogpost. In the meantime, here are some insights into innovation in Indonesian industry that I gleaned from my interaction during my visit.

Innovation in Indonesian Industry

The overall innovation story in Indonesia doesn’t sound too different from that of India - low spending on R&D, limited interaction between academia/research institutions and industry, and a lack of confidence in local research capabilities. Of course, there are some significant differences as well. Indonesia has not had the benefit of two powerful Indian growth engines – software and pharmaceuticals.

But, during my short stay in Indonesia, I saw at least two bright spots that signify Indonesia’s innovation potential.

PT Bukaka

During my stay in Jakarta, I had the opportunity to join a group from the NSTD Forum that visited Bukaka, a large engineering conglomerate located on the outskirts of the city, on the way to Bogor. Founded in 1978, Bukaka has industrial units that design and manufacture steel bridges; manufacture forgings for a variety of industries; build special purpose vehicles (like fire fighters, not the financial type SPVs!); execute hydel power projects on an EPC basis; etc.

But the impressive dimension of Bukaka is the senior management’s “can-do” attitude, willingness to learn by doing, and refusal to be daunted by the complexity of engineering or the nature of competition. A good example of this is Bukaka’s diversification into the aerobridge business. Bukaka entered the aerobridge business without prior experience and without a formal technical collaboration. But today it is a significant player in the manufacture and installation of aerobridges in Asia with significant installations in Japan, Hong Kong and India. I visited the aerobridge assembly facility – several elegantly engineered aerobridges were ready and awaiting testing and dispatch to Japan and India.

Looking at Bukaka’s success in the aerobridge domain made me wonder why Indian companies couldn’t have done something similar. I am sure a company like L&T, for example, has the engineering competence to design and manufacture aerobridges. My hunch is that Indian companies would have hesitated to make the upfront investments in R&D/engineering that would have been required to emulate Bukaka. That’s a pity because our reluctance to make such investments prevents us from getting into products like aerobridges that have considerable visibility and branding potential.

What also impressed me about Bukaka was the clarity of the senior management about the company’s strategy and where their competitive advantage lies. In response to a question about why Bukaka doesn’t make trucks, the company representative present explained how Bukaka’s advantage is in custom-built products that have a high engineering content rather than in mass production where they would have to compete with well endowed global companies with long experience in the field.

Warsito Taruno and EdWar Technology

Dr. Warsito Taruno was a star speaker at the NSTD Forum. Dr. Taruno is a pioneer of the Electrical Capacitance Volume Tomography (ECVT) field. His work in this field goes back to his days as a student at Shizuoka University in Japan where he was awarded his PhD degree. Later, he worked at Ohio State University, leading to outstanding publications and patents for extending the ECVT domain.

ECVT allows 4-dimensional tomography scanning and is very useful in early detection of breast cancer. Other applications of ECVT include power plant simulation and non-destructive testing.

Dr. Taruno moved back to Indonesia over 5 years ago and today leads teams doing research in the ECVT field and also developing and selling ECVT systems. ECVT work involves straddling disciplines as diverse as electronics and signal processing, high performance computing and sensors, and industrial process imaging and medical physics. Dr. Taruno strongly advocated building open innovation networks straddling academia and industry, citing the experience of the Virtual Center of Industrial Process Tomography and the OSU industrial Consortium.

Dr. Taruno is also pioneering electrocapacitance cancer (ECC) therapy. According to him, ECC therapy has the advantages of being non-invasive, non-oral, non –contact and is based on low voltage and dielectric polarization with limited side-effects. He has developed a wired and computed “suit” that can be worn for breast cancer therapy. According to information available on Indonesian websites, Dr. Taruno used ECC therapy to control breast cancer in his sister. However, it is not clear whether ECC therapy has gone through the trials and tests usually required of medical devices and technologies; some comments by the Indonesian medical fraternity suggest that his methods still need to be validated.

But notwithstanding these issues, Dr. Taruno is a good example of an accomplished scientist returning to Indonesia to pursue advanced science and technology. So far, he seems to be succeeding. Dr. Taruno should be a powerful catalyst for advanced yet practical science and technology in Indonesia. He has a strong sense that technology development and commercialization must go hand in hand. He believes that open innovation and strategic partnerships are the way forward. Stressing that cooperation is a more critical requirement than funding, he underlines that self-belief drives research.

In India, I haven’t seen too many scientists like Dr. Taruno who are able to straddle theory and practice. He seems to enjoy support from the Indonesian government and perform both academic and business roles (something that is again difficult in India) with ease. If Dr. Taruno is representative of what’s happening in Indonesia, it appears that in its own quiet way, Indonesia is creating powerful technology companies for the future.

Software start-ups

I didn’t have a chance to meet any Indonesian software start-ups, but I did have an opportunity to talk to Purnama Alamsyah, a researcher at LIPI. Purnama’s research shows that the success rate of software start-ups in Indonesia is very low – only 5 out of 500 start-ups he has been tracking are moving forward. While funding is a challenge, Purnama attributes quick technological changes and difficulties in sales / conversion of products into revenues for the low success rate. But, he says that the environment is quite dynamic, with new start-ups being created rapidly and existing start-ups morphing into new ones if and when their current business model doesn’t work. So, we should watch out for Indonesian software companies in the future.

Conclusion

In my short exposure to Indonesian industry, I got a glimpse of what is possible in that country, as also in other developing countries. Both Bukaka and Dr. Taruno impressed me by their intense desire to innovate to succeed. I was impressed by their quiet confidence based on their expertise and willingness to overcome odds. Both of their experiences underline the importance of openness to external inputs yet at the same time not giving up on internal efforts. They should be an inspiration not only to Indonesian innovators but to Indian innovators as well.

Industry-Academia Collaboration: Lessons from the Indian Automotive Industry

In a recently published paper*, Srivardhini Jha and I studied the nature of collaboration between academia and industry in the Indian automotive industry. After pharmaceuticals, transportation is the second largest target area for Indian industry’s R&D funding. The Indian automotive industry has been dynamic with players like Tata Motors, Mahindra and Bajaj actively involved in creating their own portfolios of new products.

This study was part of a comparative study of innovation in the automotive industry in India, Vietnam, Indonesia and Thailand supported by the Economic Research Institute of ASEAN and East Asia and piloted by Professors Atsushi Sunami and Patarapong Intarakumnerd at the Graduate Institute of Policy Studies (GRIPS), Tokyo.

With all these countries investing in creating domestic automotive capabilities, we wanted to see what role academia played in supporting innovation, and how government policy could help strengthen this process.

Research Questions

What is the nature of collaboration between industry and academia in the Indian automotive sector? How has the collaboration impacted the industry and academia respectively?

What role has the government played in Industry-university (IU) collaboration? What are the implications of any such intervention?

To answer these questions, we took an in-depth look at 3 Original Equipment Manufacturers, 2 component suppliers/manufacturers, and 3 research groups active in automotive related work in leading Indian institutions.

Key Findings

IU interaction for competency development and training in companies appears to be the most significant form of interaction.

The second most prevalent form of interaction is for analytical studies, testing, etc. i.e., companies are contracting with universities to provide research services.

IU collaboration is clustered around a handful of IITs and the Indian Institute of Science.

Investment by companies in research partnerships outside the umbrella of the government’s CAR program is rare.

The relative absence of research partnerships is not due to IP ownership issues, but because the cost and complexity involved in commercializing university research that is science and engineering research oriented (and not application oriented) is high.

Conclusions
Companies, driven by solving immediate or near-term problems, are focusing on assimilating and building on known technology from international vendors rather than creating new technology in-house or with university partnerships.

As a result, in a mature industry like the automotive industry, Government programs such as the Collaborative Auto Research Program (CAR) are useful in bringing industry and academia closer together though they may not result in technology transfer. It would be worthwhile to continue with such sector-specific models to build closer collaboration between academia and industry.

(* Full Reference of the paper: Krishnan, Rishikesha T., and Srivardhini K. Jha “Innovation in the Indian Automotive Industry: The Role of Academic & Public Research Institutions,” Asian Journal of Technology Innovation, Vol. 20, No. S1, 2012, pp. 67-84.)