Emerging wisdom Inside India

At the Indian Science Conference earlier this year, Manmohan Singh, the prime minister of India, sounded a rallying call for Indian scientists: “The time has come for Indian science to once again think big; think out of the box; and think ahead of the times.” He heralded a “Decade of Innovation”.

All well and good but, as Nirmalya Kumar and Phanish Puranam point out in India Inside, for Indians innovation is actually not the great undiscovered land which — largely Western — stereotypes suggest. The stereotype is that Indians don’t really do innovation. Bright ideas are bizarrely regarded as a Western preserve. Indians make good accountants and programmers, but are not the best for innovation…. After all, where are the Indian Googles, iPods and Viagras?

In order to refute this common refrain, Kumar and Puranam offer a compelling array of statistics and observations. They point out that Vinod Khosla founded Sun Microsystems; Sabeer Bhatia created Hotmail; Kanwai Rehki helped develop Ethernet; Narinder Kapany was there at the start of fibre optics; and Vinod Dham was involved in the development of the Pentium chip. All are Indians. Indeed, 26 per cent of start-ups in Silicon Valley have an Indian as a founder or a co-founder. Silicon Valley (and the world) owes a considerable and continuing debt to innovative Indians.

Meanwhile, in India, daily life offers constant testimony to the innovativeness of Indians. The popular vocabulary of India includes the word “jugaad”. This means to make do or improvise. Indians are masters of jugaad, they fix and mend, find smart solutions to day-to-day technological and other travails. “If you think about innovation more broadly as any novel way of creating value and distributing it, there is a lot of innovation going on in India,” says Puranam.

Also, more formally, India is now home to an array of technological centres for Western multinationals. GE employs 4,300 researchers at its John F Welch Technology Centre in Bengaluru. This means that one in six technologists who work for GE work at the centre. Intel’s Xeon 7400 chip, launched in 2008, was designed and developed from its Bengaluru centre. There are many more such examples.

An interesting twist also comes in what Puranam and Kumar describe as “the injection of intelligence phenomena”. Puranam explains: “If you take certain activities which are done essentially by very low-skilled, low-wageworkers in the West — things like call centres — and run them in countries like India where the people doing these things are often highly qualified, you get a surprising result: they actually inject a level of intelligence into these processes which nobody has attempted to do in the West for the last two decades. So you see innovation even in these very, very boring industries which you would never see in the West.”

Beyond reverse innovation

The ramifications of the hidden innovativeness of India are many and explored in detail by Kumar and Puranam. Over three years, they interviewed managers of multinational companies that have R&D operations in India, as well as Indian companies doing R&D in India.

“We realised that the question — where are the Indian Googles, iPods and Viagras — is the wrong question. The right question is: Where is the innovation? Today, in multinational companies, innovation is not done in one location,” says Kumar. “The old model of innovation was that R&D was centred usually in the home country, or in the lead market, which was another developed country. Innovation today in multinational companies is highly segmented globally. If you look at Apple’s iPod, the design was done in America, the manufacturing is done in China, the interface was developed in the UK, and the software was written in India. So, do you say it is an American invention? Yes, it’s an American invention, but no new product today is being developed only out of one country. It’s a multicountry approach and multinationals have become very good at setting up these different units across the world, differentiating them to use different pools of expertise, and then integrating them to create a complete product.”

This, say Kumar and Puranam, is not a case of “reverse innovation”. This concept was created by the Tuck professor Vijay Govindarajan to explain the development of products in emerging markets and then their sale in developed markets. “The idea of reverse innovation to us already implies a world that’s passed, because it says innovation is only innovation if it ends up in the developed world,” says Puranam. “India and China are so large and are going to be so important that companies need to get out of this mentality that if you develop something there, it’s only worthwhile if it goes to the rest of the developed world. If it goes to India and China, it remains there, it’s big enough and bright enough and profitable enough. If something is big in America nobody asks, is it big in the rest of the world?”

Kumar and Puranam contend that what is happening is the rise of globally coordinated distributed R&D processes. This means that no one country can claim they developed a particular product. (In this they draw a distinction between India and China. In China a lot of the innovation which is being carried out could be categorised as traditional R&D which effectively localises products for the Chinese market.)

The major thrust of India Inside is that innovation is practiced in India but, for uninquisitive observers, it is largely hidden. Like the chips inside your computer, Indian innovation is quietly and efficiently going about its work, a crucial part of any chain of innovation. Amazon may be regarded as the American online pioneer but purchases from its website may be processed out of India using software written by Indians on a website in whose development Indians also had a hand.

For Kumar, the research behind the book was eye-opening. His last look at India — India’s Global Powerhouses — celebrated the rise of a new generation of Indian multinationals, but also mourned the lack of Indian innovation. “In India’s Global Powerhouses, I ended by saying Indian companies are going global, but they need to do innovation. This research revealed to me there is a lot of innovation happening in India, it’s just that I had never seen it or heard about it, because it’s invisible.”

Of course, the undercurrent to India Inside is that if India can do innovation, where does this leave its competing nations in the developed world? Innovation, after all, according to an array of experts, including Tom Friedman, is the West’s key competitive advantage of the future.

What is the developed world left with? All is not lost — not yet, anyway. Kumar and Puranam point to educational institutions and the ease of doing business as remaining competitive advantages for developed nations. The trouble, of course, is that governmental cuts instigated by the financial crisis and recession may serve to undermine this educational advantage.

“One of our main recommendations is: recession or no recession, this is not the time to cut back on university research funding. It is worth remembering that the R&D that has made America great was mostly government funded. It was funded through NASA, the military, university grants and the National Science Foundation.

“That system that the US had was an incredible innovation-generating machine and there’s no equivalent of that system in India,” warns Puranam.

President Barack Obama has noted the need for government support for innovation: “Our free enterprise system is what drives innovation. But because it’s not always profitable for companies to invest in basic research, throughout history our government has provided cutting-edge scientists and inventors with the support that they need.”

Plus polarity

There is some breathing space. “India and China may create the next MIT, but they haven’t for the moment. So they don’t have those kinds of educational systems that can generate the masses of educated people needed to keep the growth engine going. So, even though there’s a billion people, there’s a severe shortage of managers, technical experts and engineers in India,” observes Kumar. Interestingly, when it comes to education, the Indian system of rote learning is often held up as a barrier to innovativeness. Again, the success of innovative Indians in the US and elsewhere who have come through this educational system suggests this is also a red herring.

Even so, Puranam and Kumar argue that the biggest single thing that can stop India’s growth story is if it can’t provide enough educational opportunities and educational institutions to educate the huge demographic dividend that India is going to receive in the form of an additional 250 million working age people in the next 20 years. A lot of infrastructure investment is required. As it stands, Indians are the largest foreign student body in every country, outside India. This appears unlikely to change.

India Inside makes it clear that the polarity of the business world has shifted. This is especially true in the area of executive talent.

Indians and Chinese used to come to the West looking for jobs. Now, there is a huge and developing opportunity for Westerners looking for jobs in India and China. As a result, the Indian government needs to be encouraged to make it easier for Europeans and Americans to get visas to work in India. Says Kumar: “We have to move our people from the West to the East and we have to make it easier, and we have to pressure China and India to be as open to Western people as Westerners have been to Indian and Chinese immigrants.” The new war for talent is heating up and is liable to set corporate agendas over the next decade.