Dr. Rishikesh T. Krishnan
Strategic Management Area & Director, IIM Indore
Email: email@example.com; Phone: 0731-2439501
The Indian economy has grown rapidly in the last 25 years and is already one of the largest economies in the world. Innovation is considered to be an important pre-requisite to sustain this growth. In this paper, our objective was to understand the who, where, what and when of innovation of India so as to understand its trajectory in the past, and how it’s likely to evolve in the future.
We noted that there appear to be two different innovation systems existing in India. The first is science-based and formal. It originated in India’s national research laboratories but is today best manifested in the large network of multinational R&D centres in India. The second is relatively informal, frugal and based primarily on ingenuity and adaptation of local resources. It is this latter system that pervades small enterprises and the social sector. We also noted that few Indian companies are pushing technological boundaries; instead, most of them are focused on innovation within the technological frontier.
Thanks to initiatives of the Government like the Atal Innovation Mission, better availability of venture finance, and the creative energies of India’s young population, India today is one of the largest centres for start-ups. Yet these start-ups appeared to be predominantly imitative in nature and are focused on adapting globally successful models to the Indian environment.
Innovation in India can also be understood using an inward-outward lens. Local firms use frugal adaptation approaches to address the local market whereas MNCs and firms in the few externally oriented industries of India (e.g. Information Technology and Pharmaceuticals) seek to use Indian resources (primarily people) to address the world market.
We used patent data to map the nature of technological innovation happening in India. Specifically, we considered data from the US Patent & Trademark Office to track the number of US Patents granted to inventors in India or Indian assignees. While there has been a major increase in the number of patent awarded to Indian inventors or assignees over the years, our analysis shows that multinational enterprises account for much of this increase. They dominate the patents awarded to Indian inventors or assignees and between 2009 and 2016 they accounted for 79% of the patents awarded. Indian domestic companies as a whole averaged only a little over 400 US patents per year from 2009 to 2016. The success in patenting by multinational enterprises in India shows that Indians are inventive if provided the right environment. But the patent data also supports the earlier observation that Indian firms are inward-focused, and more adaptive than innovative.
Our analysis of innovation by Indian companies suggests that its most distinctive characteristic is “the pursuit of affordability or reducing cost through process innovation, organizational innovation, product development with frugal focus and the overarching ability and mind-set to do more with less as captured by the Jugaad approach.” Process innovation, organizational innovation and “jugaad” (creative improvisation) have been the mainstays of the approach to innovation by Indian firms.
The paper ends by identifying the important trends that characterise the future of innovation in India. The growth and penetration of the mobile phone network with low cost data connectivity has provided a useful platform for e-commerce and Fintech start-ups. More start-ups are moving into Fintech because of the JAM Jan Dhan Yojana; Aadhaar; Mudra loans) platform. Indian start-ups are also moving into machine learning and artificial intelligence. However, India continues to have significant gaps in the hardware that complements India’s software prowess.
Start-ups have also forged useful relationships with large companies as the latter are concerned about their core businesses being disrupted. Large multinational enterprises and industry associations like NASSCOM have created platforms to support the creation and growth of start-ups. Government initiatives like the Atal Innovation Mission have facilitated this trend. The shift to artificial intelligence opens new avenues for the Indian R&D centres of multinational enterprises. Many of these enterprises are looking to their Indian R&D subsidiaries to lead efforts in the new technologies that are rapidly taking over their businesses.
Implications for Policy and Firm Strategy:
In the past India missed the bus in some emerging technologies like semiconductors and nanotechnology. A major priority for public policy should be facilitating the creation of Indian capabilities in newly emerging technologies so that India does not miss out again. While government’s support for start-ups is a step in the right direction, a more focussed effort to build capabilities and leadership in certain emerging domains may be necessary.
Of particular importance will be establishing a position on the manufacturing side of new technologies and not on the software side alone. The need for this is underlined by India’s experience in telecommunications where India is one of the largest markets for handsets in the world, software written in India drives many of these handsets, but until recently almost all the handsets were being imported into the country.
Indian companies have the challenge of integrating their traditional skills in adaptive innovation with some bold attempts at new technology development. Discontinuities offer opportunities for leap-frogging, and Indian companies need to embrace these changes. Start-ups can adopt multiple approaches. The first is to use their superior understanding of Indian needs to craft solutions that are especially suited to these needs. These solutions would require a combination of frugality and technology adaptation and would be targeted at the middle and lower tiers of the consumer pyramid who are value-seeking but resource-constrained. A second set of start-ups could use India as a base but target global markets based on rapid technology development. India would be their testing ground but the market would be global. A third set of start-ups could be like the successful ones at present, i.e. adapting internationally successful business models to India and then rapidly scaling them up in one of the world’s largest consumer markets.
ORIGINAL ARTICLE: Rishikesha T. Krishnan & Shameen Prashantham (2018). Innovation in and from India: The Who, Where, What and When. Global Strategy Journal (in press)