Healthcare Innovation: Insights from the MART Conference

Last week, I wrote about the MART conference on innovation in emerging markets. One session I really liked was on healthcare innovation. Kavita Narayan who worked earlier with the Hospital Corporation of America but now works with Public Health Foundation of India (PHFI) moderated the panel energetically and well. The other panelists were Ranjit Shahani (Novartis), Vikram Damodaran (GE) and Ravi Kaushik (until recently with GE, now with Baxter).

Some contrasts came through well. A Nobel prize winning scientist from Sweden is promoting the use of his latest “perfect” catheter. It costs 20 euros, and works better than any existing one. He wants it to be used in India. The catch is that a catheter in India costs just one euro – underlining once again that even healthcare innovation has to be contextual and appropriate!

In contrast, PHFI has a new swasthya slate that can be taken to a patient’s door and communicate and store data through a mobile or android platform. It covers parameters related to key diseases and can be used by frontline health workers. Not only should this be a good diagnostic tool, it should ensure data integrity, and collection of relevant data for future epidemiological studies.

Novartis’ Argoya Parivar

Ranjit Shahani made a couple of interesting points. The first is that emerging markets should be called converging markets because they are now too important and central to be called “emerging.” The other one was about an integrative health project started by Novartis called Arogya Parivar that has both CSR and business elements to it.  

I particularly liked a chart Shahani showed where five levels on the individual/family income pyramid were linked to 5 different business approaches for Novartis in descending order of income: (1) a business-led approach with normal profitability; (2) a business-led approach with moderate profitability; (3) a shared value social venture; (4) a zero profit venture like an anti-malaria initiative; and (5) a completely philanthropic approach at the bottom of the pyramid.

Arogya Parivar today covers 10 states and 42 million people. Arogya Parivar has now spread to Kenya, Vietnam and Indonesia with appropriate modifications

A cute insight from Shahani’s talk – he put a non-Indian expat as head of the Arogya Parivar project based on CK Prahalad’s advice. In his two years, this energetic Frenchman went to every corner of India. He wasn’t explicit about this, but the argument seems to be that an Indian would not have gone deep into the field!

GE Healthcare & Emerging Markets

Vikram Damodaran of GE pointed out that most healthcare revenues come from 2.5 billion people and the other 4.5 billion people in the world don’t have access to healthcare or are badly under-served. But emerging markets have rapidly become an important part of the healthcare business landscape. GE Healthcare is now an $18B business, and 50% of this business comes from outside the original “triad” of North America, Western Europe and Japan.

GE’s program to expand its healthcare to non-traditional areas is now under the banner of Healthyimagination, a program that involves a $6 Billion commitment. But globalization of GE’s healthcare footprint started 17 years ago with the creation of distribution outposts. The company soon realised that was not enough. So, they moved towards localization – an example of this is the 300,000 square feet of supply chain created in Bangalore. But it didn’t take too long to find that there are limits to the costs that can be squeezed out through supply chain improvements.

An important milestone in the next phase was the successful “In China for China” (ICFC) programme that GE ran from 2001-06. Vikram explained how this was particularly successful in China. As part of the country’s planning process, each region / town/ village was allotted quotas of medical equipment in physical terms - e.g. one MR scanner. This was funded by the government, with no explicit cap on affordability. As a result each geography tended to buy what he described as the “biggest, meanest” machine. I imagine this must have suited GE’s product portfolio of large, powerful health equipment. This program has now been modified as “In Country for Country” to facilitate transfer to other countries.

Getting innovation right for emerging markets was a learning process. The interpretation feature in sophisticated scanners was initially removed from low-end scanners, but the company later realized that this feature would be more important in low-end scanners as they are often used by relatively unsophisticated users like General Practitioners.

Vikram expressed the view that India is a dynamic and entrepreneurial market as far as healthcare is concerned. In the US, an MR scanner is used for 9-10 cases per day, and a scan costs $1,500. In India, a scanner is used for 70 cases a day, the per scan cost could therefore be as low as $150 given the competition between providers. A dynamic market like India could be the crucible for the next round of healthcare innovation.

The Importance of Training

Kavita asked Vikram a question about the need for training. Vikram’s answer: put intelligence into the device instead, as in the case of GE’s new baby warmer where an attendant has only to worry about an alarm ringing or the ultrasound scan plane coaching assistant that helps a novice locate the scan plane. The other alternative is partnerships – GE works with an NGO called Eastmeetswest that oversees device use.

“We must be doing something right”

Ravi Kaushik, now with Baxter, injected an optimistic note into the discussion by pointing out that India’s Flipkart hit the $1 B mark in 6 years, a shorter time than it took Amazon to reach the same landmark. Hamid Karzai’s daughter had her baby delivery at Fortis Gurgaon and Karzai was quoted in the press as trusting the warm healthcare in India. Ravi’s conclusion was that “We must be doing something right.”

Barriers to healthcare innovation in India

The three panelists had distinctive perspectives on this question.

Shahani of Novartis had a predictable answer. His number 1 barrier to healthcare innovation in India is the absence of an ecosystem for intellectual property rights. He pointed out that Novartis has set up its new research centre for malaria, dengue and TB in Singapore and not in India. He particularly pinpointed the absence of data protection, leading to a situation where anyone can use the data generated in clinical trials in India.

Vikram Damodaran underlined the absence of conducive manufacturing policies. Building devices out of India is often expensive. He also pointed to a gap in the education system – there is no university that has both a good engineering school and a medical school working together. (I recall that IIT Kharagpur wanted to set up a medical school some years ago, but this got stuck in some bureaucratic and regulatory maze. I wonder what happened to that plan, and whether it is still on the cards…)

Ravi put his finger on weak academia-industry interaction and the absence of venture capital and incubators. He asked a provocative question: Why is all the funding available coming from Omidyar or the Gates foundation? Why don’t we have funds from India?

When will Universal Healthcare be achieved in India?

Kavita referred to a recent PHFI Universal healthcare report, and asked whether it can be achieved by 2020? If not by 2030?

Vikram’s view was that the Infant Mortality Rate and the Maternal Mortality Rate will come down rapidly. Cardiac screening will increase. He felt that there is a need for a comprehensive patient registry to track diversity of cancers.

Ravi thought that people put up with problems for years without taking remedial action Instead, patients have to take more responsibility for their own health.

Shahani pointed out that in spite of all the controversy around Glivec, only a very small number of patients in India pay for it while thousands get it free.

Ayush and Western Medicine

During the course of the healthcare panel, there was an interesting discussion about Indian traditional and western medicine. The audience had several adherents of holistic well-being who spoke in favour of ayush remedies. The usual debate of whether ayush should be subject to the same criteria, testing/reliability as used for western medicine came up. Vikram advocated standardization of Ayush even if it is not subject to the same standards of testing. Apparently, there have been some efforts in this direction in China.

[The summaries of different views here are as I remember them. I am responsible for any errors in reporting. Any comments on the views expressed here are the personal observations of the author.]

Innovation in Emerging Markets: Insights from MART Rural Conference

Though there has been so much interest in innovation in, and for, emerging markets, conferences on this subject rarely go below the surface and get into the challenges involved in detail. So, I must give all credit to Pradeep Kashyap, founder and head of MART Rural (a consultancy and think-tank that started with a focus on rural marketing and has now become a specialist on innovation for rural markets) for putting together one of these rare conferences on March 7, 2014 at the India Habitat Centre in New Delhi.

Some Key Insights

Speakers at the conference identified important insights, challenges and questions in innovation for emerging markets:

• Scaling is perhaps the largest unsolved problem. It’s not the same as replicating a pilot. Major resource commitment from top management is required. Pradeep Kashyap had an interesting way of capturing the futility of doing one pilot after another: “Can you have a pilot without a plane?.” Arvind Chinchure echoed a widely held view that scaling up involves partnering with government.

• Relevance is critical for innovation in emerging markets. As Pradeep Kashyap pointed out, rubber chappals replaced leather ones because rubber chappals could be washed after a day in the field without any problem. Of course, rubber chappals meet the affordability criterion as well.
• The innovation challenge in India is “75% of the functionality at 50% of the cost” – this is how Pradeep Kashyap described it.
• Innovation in India is still focused on solving basic problems. Tech-type innovators will come later. (Several speakers (including me!) referred to this).
• Along with relevance, social acceptability was emphasized. There was an interesting comment from a member of the audience: “People don’t have toilets, but have mobiles and are now moving into the internet. Isn’t that strange?” This led to a discussion on behavioral change & social context. Someone mentioned that constructing toilets in parts of rural India was not successful because open defecation gave women a chance to talk to each other and share concerns. Hence women don’t like closed toilets. Someone mentioned new toilet designs that retain the social interaction dimension!
• “Does innovation have to lead to income enhancement?” was an interesting question that was posed. This led to a discussion reminiscent of the Prahalad-Karnani debate. Pradeep Kashyap attributed e-choupal’s success to the fact that it enhanced incomes first; farmers then came and bought other things from ITC’s retail stores at the choupal. This discussion reminded me of Prahalad’s insightful comment that spending less is like earning more, so perhaps income enhancement per se does not have to be an outcome of innovation for emerging markets.
• David Wittenberg distinguished between opportunities (unvoiced needs) and problems (voiced needs). His view was that the big dollar opportunities are in the unvoiced needs. 

• But in my presentation, I put it differently by saying that what we are looking for is creative, context-relevant solutions for known needs, like Gillette’s Guard.

There was a vigorous discussion about jugaad with people predictably lined up on both sides of the debate. Proponents of structured innovation like Arvind Chinchure and Wittenberg (who makes his living from innovation consulting!) were skeptical about jugaad. Pradeep Kashyap thought that jugaad is important. I was glad to see a member of the audience raise the question of the definition of jugaad in the Radjou, Prabhu, Ahuja book and point out that their definition is very different from the way we colloquially understand the term in India. In fact, much of the debate on jugaad arises from the different connotations and definitions of the term!

Our Panel

I was on a panel with Preeti Shriniwas of RB (formerly called Reckitt Benckiser) and Nilesh Shah of the US embassy. Ranjan Malik of Erehwon was the moderator of our panel. Our brief was to look at innovation for emerging markets from a process perspective.

Preeti leads the open innovation team for RB in India. She focused on the consumer-centric innovation process at RB.  She told the story of RB’s Veet Hot Gel wax. It didn’t do well initially because people applied it too thick and didn’t use the spreader properly. Research revealed that that people preferred warm gels though the RB product did not need heating. Fortunately, RB found that heating did not reduce performance. So, they decided to go with familiarity, and not discourage people from using the wax after heating. This echoes the point about familiarity and behavioral context that was made earlier.

Preeti explained the open innovation model at RB as primarily a “Want – find – get” model that is used to fill gaps in RB’s knowledge pool. But, in the process, they sometimes come across serendipitous findings, and in these cases the model becomes a “find-want-get” process.

To me the most insightful part of Preeti’s contribution to the panel was her identification of the challenges to open innovation in India.  According to Preeti, the four main challenges are:

• Creating a steady in-flow of technologies as there are not enough proactive suppliers seeking out such partnerships
• Maintaining sustained levels of interest in suppliers/technology providers. Her experience is that many of them are not patient enough to go through the processes that a large multinational requires and want quick results. They tend to drop off if there are no immediate gains.
• Identifying the global relevance of local opportunistic ideas / innovation
• Lack of understanding and awareness of Intellectual Property & related legal arrangements leading to long delays. In one case, it took 6 months to a year just to sign a non-disclosure agreement.

For Nilesh Shah, innovation is all about the Silicon Valley breakthrough model.

I spoke about some of my current favorite examples including Bajaj Pulsar, Tata Nano, and Gillette Guard. I emphasized the importance of finding the right problems to work on, and suggested the “pain-wave-waste” model of 8 Steps to Innovation as a useful means of identifying these problems. I underlined the importance of market and consumer-centric innovation processes while contrasting the success of the Tata Ace to the relatively poor performance of the Tata Nano. I pointed out that successful innovators in emerging markets get immersed in the lives of users to understand how their needs can be met. In many cases, these needs are basic in nature, but existing solutions are not fulfilling these needs well. That’s where innovation comes in.

Postscript: Vigyanlabs Update

I wrote about Vigyanlabs about a year ago when the company was chosen for the Nasscom Innovation Award. I have been talking about his company frequently since then because they addressed an important problem (power consumption and greenhouse gas emission due to data centres) with a proprietary solution backed by a US patent.

So, it was great to meet Srinivas Varadarajan of Vigyanlabs again at the MART conference. Srinivas introduced me to his latest product – Intelligent Power Management (IPM) for the mobile phone, tablet, or laptop. It uses the same patented process (algorithm) as his product for data centers, but in this case it helps your battery last upto 50% extra after every charge. It’s sold in retail by Vigyanlabs’ partner, NCS Computech. For an MRP of Rs. 399, you get a scatch card with a key. The software itself is downloaded from the net, and is activated with the key. Not only has this created a new revenue stream for Vigyanlabs, it adds to the company’s credibility by giving an almost instant demonstration of what its software does. The company is now getting invitations from large users of batteries in the field to explore ways of extending the life of the battery after every charge!

[The MART conference had a very interesting healthcare panel. I’ll write about that next week.]

[The views expressed here are the personal views of the author.]

More Chronicles from Central India

When I meet old friends, particularly from Bangalore, they often ask curious questions about Indore. In today’s post, I’ll try to give a flavor of some of the things that make Indore tick.

Industry & Commerce in Indore

Like Ahmedabad, Indore was once a major textile hub, but textiles no longer dominate Indore’s commercial activity. Today, Indore is a centre of the soybean industry, and a trading hub. I saw a number of huge cold storage facilities in the vicinity of IIM Indore and wondered what they stored. I found out that the Malwa region to which Indore belongs is favourable to potato cultivation with the long sunny days helping potatoes from this region have a high proportion of dry matter. The owner of a cold storage plant I met uses 80% of his space to store potatoes which are then sold to food processing companies. (See a picture of potatoes being stored in an Indore cold storage facility below).

The industrial suburb of Pithampur was once promoted as the Detroit of India, and is host to the Volvo Eicher truck joint venture and Force Motors. But, today, other regions like Gurgaon-NCR, Chennai, and, more recently, Sanand/Ahmedabad have moved far ahead on the automotive map.

Indore is home to a large number of small and medium enterprises including engineering companies. Some of these making agricultural implements are located close to the IIM Indore campus.

There is some pharmaceutical activity (Cipla, Ipca Labs, etc.) in Pithampur as well, but luckily this appears to be focused on the less polluting formulation activity and not on the production of bulk drugs.

One reason for the slow development of industry in this region could be the absence of balanced infrastructure – the IIM Indore campus is located on one of the roads from Indore city to Pithampur, and there is a one km stretch of the road near Rau which is full of huge potholes. But I suspect the other, more prominent, reason could be the shortage of skilled manpower in the region.

There is a small but growing IT sector in Indore. I saw a couple of IT parks in the city, but with unfamiliar names on them. That will change soon with both TCS (at an advanced stage) and Infosys setting up development centres in Indore. In fact Infosys Chairman Narayana Murthy visited IIM Indore when he came to Indore to lay the foundation stone for the Infosys development centre (see picture aove). There has been BPO activity earlier (Mphasis has had a presence here for some time), but it never took off as far as I can make out.

The state of Madhya Pradesh has many things going for it including the image of a dynamic state government, availability of power and water, and a land bank of property already available with the government. Parts of the state lie on the proposed Mumbai-Delhi “Super corridor.” If things go well, this could mean an explosion of growth in the near future. This will pose some new challenges.

Planning & Urban Development

Indore is already a large city with a population of about 2.2 million (2011 census). Like most other Indian cities, the actual population may be higher, particularly during the day time when the city acts as a magnet for people in the neighbouring areas seeking employment.

One of the challenges Indore (like many other Indian cities) faces is planning for the future. The Indore Development Authority seems to be active – there are signboards across the city underlining its presence. Newer areas of the city like Vijay Nagar have wide roads, and there have been several drives to create green belts across the city. There is a current initiative to draw up an Indore Master Plan. But, rapid growth could very well overtake the current planning processes placing the city in a perpetual catch-up mode. We saw this happen before our eyes in Bangalore!

Citizen Activity

Luckily, Indore has a citizenry concerned about the city’s future. Recently, a local NGO, CEPRD, organised a weeklong series of environment-related talks, and it was good to see them well attended. The theme on the day I attended was “Garbage-free City” and featured a presentation on efforts that Ahmedabad is taking to manage waste better (see newspaper coverage below).

The good news about the Ahmedabad “solution” is that it looks at the problem “end-to-end” and is very systematic in its approach with good aggregate data on the types of waste being created and how these should be dealt with. There is a campaign dimension to it as well and they have some cute films showing the problems created by a failure to deal with urban waste. But the danger I could see was that the solution seemed to be technocratic with inadequate attention paid to the behavioral changes that are required to make integrated waste management work. With urban Indian lifestyles moving rapidly towards processed foods, tetrapaks and the like, the problems of waste management are going to become only worse. The other challenge is that in many cases urban middle class Indians depend on domestic help to keep things clean, and waste disposal is in the hands of the help rather than the family itself. This makes the problem of proper waste disposal even more challenging.

Indore still has the chance to develop effective waste management solutions. But, if it fails to do so, it runs the risk of going the Bangalore way from a Garden City to a Garbage City!

Tailpiece

The route I traverse most frequently in Indore is the route from IIM to the airport. For the most part, the road is wide, and as you get closer to the city, it gets more crowded. Indore city has apparently seen many greenery drives - the evidence is in the form of areas along the road cordoned off by fences for growing trees. Most of these are not lush and green but brown and somewhat scraggly; let’s see how they look at the time of the monsoon.

Traversing the main roads doesn’t give one a clear sense of what happens in the colonies within, so I was happy that some recent pipe-laying activity on one of the main thoroughfares prompted our driver to take a detour through Manish Nagar, a colony on the road to the airport. The homes are somewhat like Delhi, with shared walls, and I could just imagine that one day, with increased prosperity, Manish Nagar could look like a south Delhi residential area, packed with large cars on both sides! Today, mercifully, most homes have only a small car (typically, a Maruti) and this makes the bylanes quite navigable.

[The views expressed here are the personal views of the author.]

Innovation at Mindtree

A recent visit to Mindtree with a group of Executive MBA students from the Georgetown-ESADE Global EMBA program (GEMBA) gave me a chance to revisit current thinking on innovation in the Indian IT services industry. (The pictures in this post are from our visit).

Innovative Roots

Mindtree had unusual origins. It was “born big,” when several stalwarts of the Indian IT industry left their former employees to strike out on their own. A big chunk of the founding team had its roots in Wipro, a company which was known to support a fair degree of independent initiative. The seniority of this group (Ashok Soota had been CEO of Wipro’s IT business for several years; Bagchi, Krishna Kumar and Janakiraman were all at senior levels too) and the others who joined them meant that they had to grow fast to be able to cover their own costs! Another unusual feature of Mindtree’s founding was the prominent role played by a private equity firm in bringing the group from Wipro together with another set of qualified founders from other companies.

Mindtree lived up to this unorthodox founding by trying to become a “different” company. They emphasized consulting and technology/intellectual property based differentiation at a time when others were seeking to expand their plain vanilla services rapidly. They tried to build a distinctive organizational culture by emphasizing organizational values in hiring and promotion decisions. They were proactive on the human resource management front with a focus on employee-friendly policies. They committed resources and managerial attention to knowledge management at a relatively early juncture of their evolution, and become one of the first companies to encourage the formation of communities of practice across the company.

While this got them attention from the media and from academics in business schools, over time it seems to me that the company has become more mainstream. The touchy-feely stuff is there, but is low key. The business portfolio is also more traditional, with its $435m revenue split among BFSI, high technology, travel and retail. A bold attempt to stake out a position in handset design is no longer spoken about. One manifestation of this is that the innovation activity at Mindtree has much in common with other IT services companies! (See my earlier post on Subroto Bagchi’s recent book for more on the changes at Mindtree).

Innovation at Mindtree

As in many other technology companies, Mindtree sees innovation as a strategic initiative that is overseen by the Chief Technology Officer (CTO). The company believes that innovation should be comprehensive, inclusive and purposeful (aligned to the business). At Mindtree, inclusiveness in innovation means not only participation from across the company, but also that idea generators will be given a chance to be involved in the execution of their ideas. (This is one dimension on which Mindtree retains its focus on the individual employee).

5*50 Program

This involvement takes its most explicit form in the 5*50 program of Mindtree. This program was conceived as a means of building significant new businesses and revenue streams based on ideas from employees that could help Mindtree reach the magical $1 billion mark in revenues (currently $435 million). The original intention was to be able to build five such businesses, each with potential revenue of $50 million. In the first round, only one such business (Vm Unify Cloud Management Platform) got created. In the latest round, the company received over 50 proposals and 3 have been shortlisted. Idea generators for 5*50 proposals are expected to take ownership for their ideas.

Even before the first round of the 5*50 program, the seeds were sown when the company undertook the creation of Intelligent Video Surveillance Solutions with soft funding from a government support program (CSIR’s NMITLI). This program required collaboration with academia and research institutions and helped Mindtree understand the dynamics of such collaboration.

Mindtree’s 5*50 program is evolving. While earlier the fledgling business was sheltered within Mindtree, now the thinking is to give the team more “flesh in the game,” and make it operate more like a start-up with its staffing and operations de-linked from the parent company. Mindtree will provide mentorship, funds and infrastructure, but the hope is that reduced dependence on the company will create greater hunger for the business.

Other Initiatives

As a services company, Mindtree is constantly on the lookout for what it calls “value adds” for its customers. Customers are also open to partnerships that would help them do their own businesses better. Therefore, Mindtree minds (as Mindtree employees are called) are encouraged to scan, focus and act to identify and implement both continuous improvement and business transformation ideas that would help the client. The company conducts workshops to develop skills and techniques to help employees do this better. Generic “value adds” are categorized and put into a database for later re-use.

Mindtree’s communities of practice have grown with 85% of the workforce involved in the more than 50 active communities. The focus of these communities continues to be on learning and sharing. On an average, 2 face-to-face community events happen every day. (For a  more extensive discussion of Mindtree’s Communities of Practice and the role they play in innovation, see our book 8 Steps to Innovation).

One of the popular events at Mindtree is Osmosis, the annual technical festival. This includes events like a Techathlon (a series of contests leading up to the identification of Techie of the year), a Tech Works contest (more than 400 “value add” ideas received this year), K-Safari (an opportunity to demonstrate and showcase proofs of concept) and several webinars. An interesting addition this year was an invitation to select start-ups to set up stalls at Osmosis – the rationale was that Mindtree needs to collaborate more with the rapidly growing start-up ecosystem.

Challenges in Building an Innovation Culture

Mindtree’s management believes that a major milestone is that the company has been able to develop independent thinking and move beyond executing just what the customer indicates as its needs.

In a discussion with Mindtree’s innovation management team, I found that the challenges faced by Mindtree are not very different from those of other companies. There are people with good ideas and capabilities, but they often don’t come forward. There are several good tech ideas but converting them into impactful business ideas continues to be difficult. A few significant success stories would help inspire others to take on the challenge of innovation.

Innovation at Mindtree is not incentive or reward-driven. While cash awards are given for publications and patents, value-adds are not explicitly rewarded. However, value-adds do figure indirectly in the KRAs of delivery and account managers.

Customer Connect

The increasing power of digital collaboration tools provides an opportunity for software companies to collaborate with their clients in more explicit ways. Before we left Mindtree, we visited Digital Pumpkin, a studio designed to experiment in the retail space. Giant screens and hyper-reality provide the studio with a Star Trek feel. The studio seeks to connect the mobile phone to the store to enhance the retail experience. Mindtree’s designers are an enthusiastic bunch and they made the visit to Digital Pumpkin fun. But, I have seen similar set-ups in other IT services companies, and it remains to be seen how Mindtree is able to do something different with Digital Pumpkin.

Conclusion

The Indian IT services industry has become adept at incremental changes and improvements that help productivity or provide additional value to customers. But the big leap continues to elude most companies. The appetite to take big bets continues to be muted. 

Mindtree’s emphasis on inclusiveness and focus on communities of practice are distinctive. Its also good to see it reaching out to the startup ecosystem. But, I hope they will be able to take the lead in blazing new trails for the software industry.

[The view expressed here are the individual views of the author].

Can we build IP-based Product Businesses from India?

My interest in knowledge management has always been from the perspective of knowledge creation. So, I readily agreed to participate in the CII Knowledge Management Summit this year in a session that focused on this dimension. Ganesh Natarajan, Sharad Sharma and I were together on a panel to explore the potential of, and challenges in, the creation of intellectual property (IP)-based businesses from  India.

I began my talk with a historical perspective. For the first four decades after independence, India tried to build core industrial capabilities. The focus was on understanding, assimilating and improving on manufacturing processes. It’s only in the last two decades that we have seen some momentum building up in the arena of new product development.

IP-based Successes from India: Bajaj, Vigyanlabs, Praj & NCL

We have several examples of this trend. My favourite one is of Bajaj Auto. As a scooter maker, Bajaj restricted itself to making cosmetic changes to the Chetak. But after it entered the much more competitive motorcycle space, it came up against powerful competitors like Honda (at that time in the Hero Honda JV). After several unsuccessful attempts to adapt Kawasaki’s bikes to the Indian market, Bajaj was finally successful when it developed and launched the Pulsar around 2001. The Pulsar offered power and style at a reasonable price and operating cost to a new young generation of bike riders who wanted something more than the efficiency of Hero Honda’s Splendor. At the heart of the Pulsar’s engine, was Digital Twin Spark Ignition (DTSi) technology, a patented method of overcoming the traditional trade-off between power and fuel-efficiency. The DTSi patent itself has been the subject of litigation over questions of novelty and non-obviousness, but the Bajaj Pulsar is certainly a landmark in terms of a successful Indian product riding on IP covered by a patent.

In some of my earlier posts, I wrote about other companies that are doing a good job of IP-based innovation. Vigyanlabs, winner of the 2013 Nasscom award for technology innovation, has a novel solution to reduce power consumption in data centers – the core of this is covered by a US patent. Praj Industries started by developing improved continuous process technologies for fermentation of cane molasses, but is today doing research at the molecular level so that it can convert different types of waste into next generation biofuels. Praj already has patents covering processes to produce ethanol from lignocellulosic material, and I presume more patent applications will follow.

Our public research institutions have also been successful in creating core IP that is at the heart of commercial products. To give just one example, Dr. Sivaram and his team at the National Chemical Laboratory (NCL) created a microencapsulation technology covered by 6 US patents that is today being used by Procter & Gamble in their high end Downy fabric softeners for controlled release of perfume that lasts many days after the clothes have been washed.

Yet, Challenges Remain…

I recently met Anjan Mukherjee, co-founder of HyCa Technologies. HyCa has been a pioneer in the development of hydrodynamic cavitation, a technology that has applications in areas as diverse as treatment of effluents and ballast water. Anjan and his team have won several awards, and been invited as guests of different countries. But, commercialization on a big enough scale has eluded HyCa so far. One of the main reasons for this is the absence of an effective public procurement system for new technologies. While in most countries public procurement helps in certifying and establishing locally-developed technologies, in India the rules of public procurement are loaded against the purchase of novel technologies developed in India.

The Indian pharmaceutical industry graphically portrays some of the other challenges in building IP-based product businesses from India. While the leading Indian pharmaceutical companies were already strong in process innovation, they invested in new drug development when India decided to sign the GATT/WTO agreement in the mid-1990s. But, after some early success in out-licensing molecules at early stages of the drug development process, they have found the big wins hard to come by. As a result, some of them either sold out or cut back on new drug development.

Why is it so tough to develop new drugs out of India? The combination of large upfront investments, a long gestation period  (trials and approval can take 10+ years) and uncertain outcomes (a drug can fail in advanced trials, rendering several years of effort infructuous) make drug development challenging anywhere. But, in India, this is compounded  by the absence of knowledgeable and patient capital, and a lack of deep expertise in biotechnology and disease mechanisms. Recent curbs on clinical trials in India have made the trial process more expensive and cumbersome. Local regulators lack the sophistication and expertise to make a rigorous assessment of a new drug. IP protection is also an issue with Indian IP laws perceived as being against new drug development.

Many Challenges are Ubiquitous

But, in fairness to the Indian environment, some challenges in IP-based product development exist everywhere. Even in the US, the assumed Shangri La for new product development. I often relate the story of Robert Kearns, who invented the first intermittent windshield wiper. He applied for a patent, and then offered his technology to the automotive majors. They didn’t license his technology, but introduced similar products of their own some years later. Kearns sued Ford and Chrysler, but won a pyrrhic victory – by the time he won in the courts, he suffered several personal losses. If this David vs. Goliath battle can play out in the US, one can only imagine the challenges of defending one’s patents in  India.

Apart from the IP itself, there is the importance of the possession of complementary assets in getting value out of IP. In many industries including biotech-based Pharma, in order to make money you need to have a good understanding of the regulatory process, staying power and resources to complete trials and the ability to market your product if you want to capture a major part of the value created by your IP.

Conclusions

India has the potential to build IP-based, product businesses. We have people with ideas, in many areas we have people who have gained deep expertise, and access to funding is improving.

But there are serious weaknesses as well including the absence of support from public procurement, regulatory gaps, absence of specialised funders, and shortages of talent, and infrastructure that can be used on a shared, chargeable basis.

The keys to success include the ability to stay the course (for a much longer time than in developed markets), internationalization, and getting the business/commercialization model right. I can’t over-emphasize the internationalization dimension – other countries can be much more accepting of new, cutting-edge technologies; you get a large enough market to amortise the cost of your development; and Indian customers are more positive once you have proven yourself elsewhere.

[The views expressed here are the personal views of the author.]