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An uneven innovator

Indians do not innovate. Consider this. India currently ranks 58th on an international innovation ranking by the Economic...

Written by Sushila Ravindranath | April 12, 2010 9:19:29 pm

Indians do not innovate. Consider this. India currently ranks 58th on an international innovation ranking by the Economic Intelligence Unit. The EIU study does not expect any dramatic changes in the ranking in the next five years. At best,India is projected to improve its rank only by one place to 57! The study suggests that India’s lower rank is because the environment is not conducive to innovation,which is reducing the efficiency of conversion of inputs to outputs. According to the 2005 World Investment Report by UNCTAD,India ranked 66th among 117 countries on the Technological Activity Index. Kuwait,Uzbekistan and Zimbabwe ranked higher than India. It is well known that India also scores badly on the Human Capital Index.

So why is India unable to be the source of major innovations on a sustained basis although it has a large talent pool? This is the question that has been bothering Rishikesha T Krishnan,Professor of Corporate Strategy,and Jamuna Raghavan,Chair Professor of Entrepreneurship,IIM Bangalore. After years of examining this paradox and extensive research,Krishnan has written a book From Jugaad to Systematic Innovation,the challenge for India. He has looked at the issues from personal,industry,academic and government perspectives.

Krishnan points out that Indians are individually creative and often come up with ingenious methods of solving the millions of problems they face. There are large numbers of grass-root innovations to prove this. During the dotcom boom,it was common to hear that the American venture capitalists would not fund a start-up unless it had a person of Indian origin as chief technology officer. Hundreds of top-ranking MNCs have set up their software development and R&D centres in India to have access to the vast talent available here.

So where are we going wrong? Says Krishnan,“Innovation is different from creativity”. While individuals display creativity,transforming individual creativity into innovation is a social and collective process. The reason why India remains an uneven innovator is because it has many barriers in its social,cultural and political fabric and these are sticky and threaten to persist for years to come. He argues that innovation is particularly important for India and has to be looked at with a sense of urgency.

People sometimes say innovation is not a major factor for our growth. India has abundant labour and a very young population. This gives us an edge over China. So,all India has to do is to coast along,based on the cost advantage it enjoys,and not really bother about concepts like innovation. This is a fallacy. Krishnan says that Indian companies have grown rapidly post-liberalisation,without much apparent need to innovate. But this phenomenon is not uncommon in economies that are freed from years of regulation. Eastern Europe has seen such growth. But once the pent-up demand for things like appliances,mobile phones and other gadgets reaches a level where companies have to target replacement demand rather than satisfy first-time buyers,the challenge would shift to coming up with new products and enhancing efficiency to be competitive.

Indian consumers often have needs which are different from consumers in other parts of the world. When there is necessity,we innovate. Krishnan gives the example of wet grinders that were developed as blenders based on Western models were not capable of delivering the batter for idli and dosa. We still have a substantial population living below the poverty line. Therefore,companies will have to come up with products and services to cater to the bottom of the pyramid. The ubiquitous sachet is an Indian invention to cater to this sector. What we have lacked is the ability to constantly come up with such innovations. When companies enter the world market with low wages as their competitive advantage,as in the case of Japan,South Korea and recently China,they soon find that they have to climb up the value chain as wages tend to creep up. Therefore,on all fronts we need to innovate fast.

Krishnan analyses the number of patents granted by the US to Indian inventors or assignees. The number of patents granted between 1995-2008 is about 11 times the number granted between 1976-1994. MNCs accounted for little over half the patents in both periods. MNC patents in the earlier period were mostly in pharma industries,while in the later period they were primarily in IT-related areas. Indian companies received only 7.5% of the patents in the earlier period and this has increased to 16% in the later years. Despite improving numbers,firms have struggled to convert their R&D investments into successful innovations. In the pharma industry (which accounts for the maximum expenditure in R&D and the maximum number of patents),not a single new drug produced by an Indian firm has crossed all barriers of clinical trials and been launched globally.

Krishnan traces the travails and triumphs of government sponsored agencies like the CSIR,C-DOT and C-DAC. He also traces the way some companies in the private sector reinvented and transformed themselves in the liberalised era. “Companies like Tata Steel,Tata Motors,M&M and the TVS Motor Company have put in efforts,investment in design and engineering to produce new products in large volumes with the latest manufacturing process.” Barring these prominent success stories,the overall performance of the Indian industries on the competitiveness front,according to Krishnan,is quite mediocre. Technology diffusion and absorption in India continues to be slow,both in manufacturing technology and in enabling information technologies. Higher levels of FDI in the manufacturing sector go to countries like China,Thailand and Malaysia.

Krishnan makes a strong plea to create supportive societal conditions for industrial innovation,among other things. The negative barriers to innovation in our culture are poor teamwork,enduring importance of upper hierarchical progression,an attitude which gives brainwork a superior position over physical work,a weak systems and strategic orientation,low tolerance of failure,a lack of confidence in innovative capabilities and a strong need for control that comes in the way of joint working with other organisations.

Our long-term success depends on our ability to overcome these barriers and innovate.

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