Chronicles from Central India - 1

Moving to Central India and away from the metros is a major opportunity for me to learn new things about this country. I hope to chronicle what I see and experience as I go along.

Indore Management Association Annual Convention

The All India Management Association (AIMA) promotes professional management across the country through professional events, courses (they run a well-regarded Advanced Management Programme that at one time was led by Professor C.K. Prahalad) and certifications. AIMA’s regional chapters are quite active – last year, the Madras Management Association hosted the launch of 8 Steps to Innovation in Chennai.

My first exposure to these AIMA chapters was when I was still a student at IIM Ahmedabad and participated in one of the events of the Ahmedabad Management Association (AMA). I even contributed an article (on service quality) to their newsletter. AMA has gone from strength to strength and now has its own building in Ahmedabad.

But, I was caught by surprise when I attended my first external event in Indore, the annual convention of the Indore Management Association (IMA). I started off towards the venue thinking it must be a hotel or an institutional auditorium – but when I reached, I found it was a huge indoor stadium (see picture above for a photo of the Abhay Prashal Sports Club, the venue). The floor of the indoor stadium was filled with business delegates, while the stands on the sides were largely occupied by students. As I entered, I found they were all listening in rapt attention to Management Guru Ram Charan.

Though I have read several of Ram Charan’s books, this was the first time I heard him speak. He speaks very much in the way he writes – simple, straightforward and practical. He laces his talk with several examples (primarily from US companies), many of which come from his advisory experience. His advice to managers was simple and direct – (1) clarity and specificity; (2) laser sharp dominant priorities; (3) right people; (4) reviews and dialogue; and (5) follow through. In my new role, I could see the value of this advice!

I missed the mega event of this year’s IMA convention – the day prior to the Ram Charan talk featured Amitabh Bachchan. IMA felicitated Mr. Bachchan with a lifetime achievement award, and his presence ensured wide publicity of the event in the local press.

The session I chaired followed that of Ram Charan, and had two interesting speakers. The first was Ms. Preetha Reddy of the Apollo Hospitals group (she is currently President of AIMA). Ms. Reddy chronicled the growth of Apollo Hospitals and the role of the entrepreneurial spirit displayed by her father, Dr. Pratap Reddy. I was impressed by the way Ms. Reddy displayed statesmanship in giving credit to other players in the healthcare sector like Fortis and Wockhardt in putting India on the word healthcare map. Not surprisingly, many of the questions from the audience focused on healthcare costs, and the affordability of high quality healthcare for the common man. Ms. Reddy was diplomatic in talking about the government health sector and cited the examples of the state government insurance initiatives in Karnataka and Andhra Pradesh as ways in which the government and private health providers could work together.

I was in for another surprise from the next speaker. The topic was cybersecurity and I feared that we were in for a drab presentation full of statistics. But, Mr. Rakshit Tandon proved to be like dynamite. He didn’t restrict himself to the stage but walked on to the floor of the hall to engage closely with the delegates. He was particularly adept in engaging with the student audience, slipping into their lingo and stories they could relate to. It was a masterful performance and I have no doubt that everyone who attended his talk will give at least some thought to how they can use the internet more securely, particularly in the context of banking. (The picture below shows me with Mr. Tandon.)

Local Civic Initiatives

I have had several visitors welcoming me to Indore and introducing their organizations. Clearly, there are several citizens of Indore who care deeply for their city and this region. One organization that came to meet me plans a whole week of in-depth seminars on topics related to the environment such as clean energy and solid waste disposal in early March, with each seminar addressed by experts and attended by locally influential persons. They also publish a magazine in Hindi on environmental issues. Another organization is working intensively on literacy and school education – clearly a priority area for this state. I hope to learn more about these organizations and the work they are doing during my tenure in Indore, and see how these can be related to the current debates on inclusive innovation.

UWC: A Conglomerate bound by Spiritual Ties

Among my visitors was a young group of entrepreneurs from the United Works Corporation. UWC is a conglomerate of small companies into food, wealth management, library furniture, textiles, etc. Each company is run by a young entrepreneur with a professional interest in that venture. What ties them together? - a common mentor – Shri Manoj Thakkar who inspires all of them and provides a spiritual basis for their venture. I found this new organizational form fascinating, and hope to learn more about it over time.

Indore’s BRTS

India’s cities are getting more crowded and rapid transit systems are becoming an important priority. Many Indian cities including Mumbai, Bangalore and Chennai have huge metro rail projects under implementation. One alternative to the cost and dislocation of metro rail systems is bus rapid transport. Ahmedabad has a good BRTS system, particularly on the large ring roads that have been built in the last decade, and Delhi has experimented with BRTS as well.

The dominant model for BRTS is a dedicated bus lane at the centre of the road with bus shelters at periodic intervals. Entry from the shelter to the bus is smooth, as it is on a raised platform and the buses are specially designed to allow direct entry from the platform into the bus. I was pleasantly surprised to see that some of Indore’s main roads are broad enough to accommodate the BRTS. (The only problem I have seen with the dominant BRTS design is that traveler access to the BRTS lane is sometimes difficult as you have to cross regular vehicular traffic to reach the BRTS platform at the centre of the road).

Currently, Indore allows cars to use the BRTS lanes as well, but I guess that will change once the BRTS bus frequency increases. But, I found that using the BRTS lane is a mixed blessing – though you move quickly from one intersection to another, the BRTS lane has a separate traffic signal and a green light for a shorter time, meaning that you could end up having to wait for an extra cycle of light changes to cross an intersection. I could see that this was dissuading cars from using the bus lane, so there may soon be a natural disinclination to use the BRTS lane!).

All in all, an interesting first few weeks in Indore, and I look forward to discovering more.

(The views expressed here are the personal views of the author.)

NPTEL: A Bold Initiative to Enhance the Quality of Indian Engineering Education

Engineering Education in India

Since the early 1990s, India has seen an explosion in the private provision of engineering education. This started in the southern states of Karnataka, Andhra Pradesh and Tamil Nadu, but has now spread across the country. I am not sure what the exact number of seats is on offer, but some estimates point to more than a million. Any student who aspires to study in an engineering college today can do so. Even money is not a constraint with organizations like Foundation for Excellence (FFE) giving scholarships, and programmes like Udaan run by my friend Sanjay Jain trying to make sure that unfilled seats don’t go to waste (Disclosure: I am associated with FFE).

But, as is well known, this explosion in quantity has not been matched by quality. In its report of a decade ago, the UR Rao Committee on Engineering Education identified serious gaps in the availability of qualified faculty to teach in engineering courses. Those gaps remain unfilled. Even when faculty are available, they are often graduates from the same college who turn to teaching soon after they complete their course.

NPTEL: A Creative Solution

The rainbow in this cloudy picture is provided by the National Programme on Technology Enhanced Learning (NPTEL), a government-sponsored initiative that was spearheaded by the older IITs and the Indian Institute of Science (IISc) starting in 1999. (Professor MS Ananth, former Director of IIT Madras, and one of the pioneers of NPTEL is in the picture below).

NPTEL has created videos of lectures by top professors at the IITs and IISc on a wide variety of engineering topics in tune with the curriculum of the largest technical universities in India like Anna University and Karnataka’s VTU. It is not as well known or glamorous as the Khan Academy, and was started on a modest budget of Rs. 15 crores. But, today it is a great resource for the serious student.

NPTEL has several important features. Firstly, all videos are made in broadcast quality, in professional studios. They are then converted into alternate formats such as MPEG and FLV. Each participating IIT has three studios. Secondly, there is wide availability and access. All content is streamed on Youtube and from a server at IIT Madras. If a college lacks adequate internet bandwidth, they can obtain the video lessons on CDs from the NPTEL office. Thirdly, all content is peer-reviewed and lessons follow a standard format agreed upon between the participating institutions. This ensures quality.

Over time, NPTEL covers basic engineering courses in all the engineering disciplines. Foundational science courses, and some courses in management are also a part of the course portfolio. Some specialized courses and postgraduate electives have also been included in the last few years. Courses in humanities and social sciences are the next frontier for NPTEL.

NPTEL’s Impact

The numbers are impressive. NPTEL covers 260 courses and has 18,000 videos. 1,000 colleges are using NPTEL videos in their curriculum in some form or the other. 1,200 faculty have been involved in creating content. There have been an estimated 100 million channel views.

According to Professor Ashok Jhunjhunwala of IIT Madras, a recent committee reviewing India’s National Institutes of Technology (NITs) has found that many of the toppers in the NITs use NPTEL. Clearly, the NPTEL resource is very valuable to the motivated student. However, the average student uses NPTEL for much shorter durations, as low as 1-2 hours. Another government-appointed committee on Quality Enhancement in Engineering Education is recommending that colleges use NPTEL content for about one-third of the class time, with the remaining time used by college faculty – this is to make sure that the college faculty does not feel disempowered (this is important – I remember hearing from some VTU faculty a few years ago that many faculty did not like using NPTEL content in their regular courses because it showed them in a bad light).

NPTEL: What next?

All the NPTEL material is now being transcribed and pdf files created so that students can refer to the material easily. This will also help the creation of subtitles to help students cope with the wide spectrum of accents used by Indian professors. NPTEL content is in English. There is demand for the content in local languages. This will enhance access and may increase student interest. Once the content transcription is completed, translation and dubbing will become easier to do, so that this need can be fulfilled.

NPTEL was created as a support for existing colleges, hence there is so far no independent certification based on using the NPTEL content. But with such a rich content base, independent certification for viewers who use the content and pass some prescribed tests is a distinct future option. MOOCs already offer this, though the number of participants who complete a course on a typical MOOC is less than 5%. (See my earlier post on MOOCs).

A third issue is pedagogy. NPTEL content is mainly in standard lecture format. It is not realtime. Some videos are of actual classroom content, but that still does not make it interactive for students viewing the video. Offline interaction exists for some of the courses – students can send questions and these are then answered by professors. Web-based courses are slated to start in February 2014.

But, it could be argued that NPTEL is not completely exploiting the power of the internet in terms of pedagogy. The fact that NPTEL is not “sticky” for the average student suggests that this is an important area for future work. I remember seeing a film on the Khan Academy which underlined that it made learning more interesting by making learning fun – this could be an important focus area for NPTEL in the future.

Other Government Initiatives

Credit has to be given to the IITs and the government for backing NPTEL. Buoyed by this success, the Government of India has impressive plans to improve the quality and access of higher education using Information and Communication Technology.

Under the NMEICT, government has approved Rs, 10,000 crores funding. One of the first goals of this effort is to provide 1GBPS connectivity to 400 universities and 10MBPS connectivity to 22,500 colleges (both public and private) across India. Virtual laboratories, remote access to laboratories in leading technical institutions, low-cost access devices (such as an enhanced version of Aakash), a DTH channel for every subject, a virtual technical open university, and a India-centric MOOCs platform are some of the new initiatives on the cards. As always, there are considerable implementation challenges, and legitimate questions can be raised as to how all this will be integrated together, but the government can’t be faulted for a lack of intent or aspiration.

(The information on NPTEL used in this blog is based on a presentation made by Dr. Mangala Sunderkrishnan, IIT Madras, at a meeting at MHRD. I am responsible for any errors. The views expressed here are the personal views of the author.)

Creating a Culture of Unrelenting Innovation

This is the catchy title of the new book by Professor Gerard Tellis, Professor of Marketing at the Marshall School at the University of Southern California (USC). Professor Tellis has been studying innovation for many years, straddling rigorous research approaches, practitioner-oriented books and useful tools (such as for benchmarking your innovation culture and a model for predicting disruptive innovation).

The Core Question

This new book is driven by a question that has inspired several studies in the past – “Why do great companies fail?”

Other recent books on this subject have come up with varied answers. In the most prominent of these, Jim Collins (of “Good to Great” and “Built to Last” fame) charted five stages of decline: hubris born of success; undisciplined pursuit of more; denial of risk and peril; gasping for salvation; and, finally, capitulation to irrelevance. A recurring theme in Collins’ perspective is how failure is driven by a lack of discipline – forgetting your core purpose or values or going headlong into something for which you lack the resources, passion or the ability to achieve a competitive advantage.

Another prominent failure book, “Seven Ways to Fail Big,” by Carroll and Mui identifies stubbornly staying the course (basically, inertia), betting on the wrong technology and moving into a new business that is not aligned with your competencies (even though it may appear to be) among the major ways of failing.

But for Tellis, this question has a simple answer. Great companies fail because they suffer from the incumbent’s curse. Their success leads to complacency, and they fail to continue to innovate. Examples are many – Intel with a market share of 85% in the microprocessor market and a peak market cap of $464 Billion has only a 1% market share in chips for mobile phones. With worldwide PC sales declining rapidly, it is clear that Intel has missed a trick or two. Kodak, Sony and HP are other companies that Tellis cites to make his point.

How do you combat the Incumbent’s Curse?

Tellis has a simple model to overcome the incumbent’s curse. Essentially, his answer, as reflected in the title of this book, is to create a culture for unrelenting innovation. According to Tellis, this requires three atttitudes and three practices.

The three attitudes required to create a culture for unrelenting innovation are:

• A willingness to cannibalize successful products
• A focus on future mass markets
• Embracing risk

And, the three practices are:

• Empowering product champions
• Building incentives for enterprise
• Nurturing internal markets

Several Questions

As with many books that promise to explain success or failure, this book raises several questions Consider the third practice to overcome the incumbent’s curse: nurturing internal markets. Go back to two examples that Tellis himself gives: Kodak and HP. It is well known that Kodak which missed the digital photography bus was one of the pioneers of digital photography. And, HP invented a tablet of its own way back in 2005 though it was Apple that finally created the market for tablets. In these cases,  the problem doesn’t seem to be with the ability to invent or come up with new ideas. The internal market for ideas worked, but the companies concerned failed to exploit what they created.

Of course, Tellis would argue that internal markets for ideas need to be combined with his first attitude – the willingness to cannibalise successful products. But, the issue is that everyone knows that at some point of time a company needs to be willing to cannibalise its successful products. The more difficult question is when. The “take off” of digital photography had to wait till a number of other supporting elements were in place. These include the availability of broadband internet connections at low cost; a sharp decline in the cost of storage; photo-sharing sites on the internet; and the integration of high resolution digital cameras with commonly available devices like the cellphone at low cost. In hindsight, it’s clear now that there was a point at which Kodak should have embraced digital photography, but remember that there was a big lag before digital photography came of age.

Besides, as Clayton Christensen argues so persuasively in the Innovator’s Dilemma, getting a successful business to imperil one of its star products is not a reasonable ask. Inertia can often be a rational response – that’s how companies build and sustain a successful business.

In this context, one could argue that Gary Hamel’s thesis in “Bringing Silicon Valley Inside” is relevant – companies need internal markets for resources as well as ideas if new ideas are to get to the market. (To be fair, Tellis does not restrict the notion of internal markets to ideas, but I wish he had dwelt more on how to make internal markets work.)

Besides, many companies have enlightened managements that know they need to embrace the “next big thing.” Remember that it was Andy Grove of Intel who popularized the notion that “Only the Paranoid Survive.” Yet, it’s the same Intel, that is today struggling to combat the steep decline in the number of PCs sold.  

I can’t think of too many companies that have defied the incumbent’s curse. Even if they have, it’s not been a smooth process. IBM comes to mind – but, the company had to face a crisis before Louis Gerstner could come and re-position it as a high-end services company.

How relevant is the Tellis thesis to Indian companies?

Like many books written in the US, this book seems more relevant to high technology companies than to the typical large company in India in a more traditional industry. But there is one industry that should really take the Tellis thesis seriously - the Indian IT services industry.

Clearly, IT services is no longer what it used to be. Most large companies (the main clients of Indian IT services companies) have already exploited the immediate and obvious advantages of offshoring and outsourcing. There is no apparent trigger for the next round of growth.

But, in spite of sitting on huge piles of cash, Indian IT services companies have been unwilling to embrace risk or empower product champions, two key elements of the Tellis mantra. Even when companies appear to do so, from outside it looks like one step forward and two steps back. I hope the recent news report in the Economic Times that NRN plans to spin off the Infosys Products and Platforms business is true – if it is, then this would be a momentous step in the right direction and indicate that Indian companies are at last willing to take the bull by the horns.

Concluding Comments

Culture is often a residual explanation for business phenomena – when all else fails, culture is invoked as an explanation. But this book is different. Not only does Tellis provide rigorous research to support his arguments, he has several fascinating cases and stories as well, including those of well-known companies such as Toyota, Facebook and Pfizer. Reading this book would be time well spent for anyone interested in the theory and practice of innovation. 

(The views expressed here are personal.)

Revisiting Radical Innovation in the Indian Pharma Industry

What prevents Indian companies from doing radical innovation? And, how can we build the capabilities to undertake such innovation? These are questions I have been grappling with for quite some time. [See my article in Businessline and an earlier post]

The India Special conference of the Strategic Management Society (SMS) held at ISB’s Mohali campus last month provided the opportunity to hear some insightful speakers address these issues. GV Prasad of Dr. Reddy’s Laboratories, Kannan Srikanth of ISB, Phanish Puranam of Insead and Anita McGahan of the University of Toronto were the speakers on a panel on “R&D in Emerging Economies.” Most of the discussion revolved around the pharma industry since the key industrial speaker (Mr. Prasad) is the Chairman of a major Indian pharmaceutical company.

The Indian pharma industry is an obvious candidate to take the lead on radical innovation. Pharma R&D accounts for more than a quarter of Indian industry’s investment in R&D. It is the one sector in which we have critical mass.

This was corroborated by the data presented by Professor Anita McGahan on pharma R&D from India, China and Brazil. Her study suggests that companies in these countries are making rapid strides towards becoming innovator companies. Her study which has appeared in Nature Biotechnology identified 165 innovative products in the pipelines of local companies from these countries. Interestingly, India is the largest contributor to this with about 55% of the innovative products. India’s focus is more on Chemistry-based products, while China is doing better on biopharmaceuticals. Most of the products from these countries are in early stages of development. 18% of the products identified in her study are vaccines (India is a strong player in vaccines with pioneering companies like Shanta Biotech [acquired by Sanofi] and Bharat Biotech). Professor McGahan pointed out that Indian companies in-license and collaborate more than the companies from China and Brazil.

Clearly, pharma is a sector in which we have a track record of successful innovation. So, why don’t we see more radical innovation by Indian pharma companies? Both GV Prasad and Kannan Srikanth offered some answers to this question.

GV Prasad on Innovation in the Indian pharmaceutical industry

Mr. Prasad started by pointing out that India has done a great job in providing affordable medicines to the world. Though the public health infrastructure in India is inadequate, the saving grace is the low cost availability of medicines thanks to the Indian pharmaceutical industry. Mr. Prasad attributed these low cost drugs to the phenomenal process chemistry skills in organic synthesis developed by Indian pharmaceutical companies. He pointed out that Indian companies have been the main supplier of antiretrovirals as part of the WHO’s AIDS combat efforts in Africa.

To underline India’s innovation skills, Mr. Prasad gave these examples: For one complex drug that involves 64 steps in organic synthesis, an Indian company is the only generic company to make the drug even though it has now been off patent for 3-4 years. Indian companies are #2 (after American companies) in mounting patent challenges to new drug inventors and filing Para 4 applications. An Indian company was the source of the first biosimilar for monoclonal antibodies (that provide a breakthrough in cancer therapy).

Scale, resources and risk profile

In response to questions, Mr. Prasad agreed that Indian companies have slowed down their efforts on new chemical entities. He attributed this to: Indian companies lack scale and resources. The largest Indian pharma company has annual sales of only $2.5 Billion. And, Indian companies lack the risk appetite to back a small number of high risk projects.

Mr. Prasad pointed out that initially companies like DRL chose what drugs to develop based on scientific considerations. But in many areas (like diabetes), the existing drugs are already quite effective and coming up with a new drug that is significantly better is very tough. According to Mr. Prasad, DRL is now more savvy about what drugs it tries to develop. It makes a more careful analysis of the market/therapeutic areas before choosing niches where it is possible to make a better impact. Mr. Prasad argued that there are low hanging fruit in terms of increasing efficacy and targeting specific needs.

Talent

According to Mr. Prasad, another barrier to drug development is talent. Indian scientists can solve a problem very effectively, but they can’t formulate and shape problems well. Yet, that’s a skill needed for new drug discovery. He added that our scientific research lacks depth and scale. The world over, radical ideas come from academia but Indian has only a small number of institutions that do high quality research.

Mr. Prasad explained that DRL is trying to overcome the talent problem through acquisitions. They have acquired a small company in Cambridge UK, and another one in the Netherlands (with expertise in vaccine delivery) that are potential sources of radical new ideas. The teams in these companies are complemented by Indian team members to work on further development and scaling up. In fact, in many areas, DRL is now forming global teams that can complement each other to come up with successful drugs.

Clinical Trials

Mr. Prasad identified another major barrier to drug development from India as the difficulty in doing clinical trials. The regulations have become very restrictive thanks to the influence of what he called some “misguided activists.” The result is that trials now have to be done outside India at much higher cost.

Kannan’s Srikanth’s insights into the IPR Regime & its implications for Radical Innovation

Professor Kannan Srikanth of ISB has been doing some fascinating work using patent data to track innovation in India. He cited data from his research to show that increasing multinational R&D investment in India has been accompanied by increasing patent filings in the US, not in India. This is because most of the products / technologies are being built for the global/US market. But many companies are not willing to locate sensitive R&D in India not because of poor patent protection but because of poor enforcement of trade secret protection. Indian laws are not strong on preventing employees from taking trade secrets with them to local competitors. China has a similar problem where 90 employees of Siemens are accused of having taken its magnetic levitation technology to local competitors.

Phanish Puranam: Are there workarounds?

Professor Phanish Puranam of Insead (co-author of India Inside) suggested that there are ways of using managerial ingenuity to compensate for inadequacies of IP protection. He gave the example of Intel India which has its own internal IP protocols which are far stricter than what it uses at its other sites. It enforces higher levels of data protection and documentation. For instance, an employee who left a document unprotected while using the washroom was suspended from the company. Aurigene, a subsidiary of DRL that does discovery research on a contract basis set up a US subsidiary and allowed clients to enter into contracts with this legal entity to give them a sense of greater enforceability of IP rights.

Mr. Prasad agreed with Phanish that, atleast as of today, Indian companies are banking more on ingenuity than deep innovation skills.

Conclusion

What emerged from this discussion is that the main barriers to radical innovation in the Indian pharmaceutical industry are scale, resources, attitude towards risk, and talent. But there are important external factors as well such as the regulatory environment and the IPR framework. These external factors can be addressed to an extent partly through ingenuity and partly through incurring higher costs. But it will be quite some time before the ecosystem in India becomes fully supportive of radical innovation.

[The views expressed in this blog are the personal views of the author.]