Driven by MNCs for the most part, a lot of interesting reverse innovations are being explored in the Indian marketplace, and they are bringing in a wide array of interesting possibilities. While that is great news for the Indian customer, what does it portend for the future of India Inc?
Right from the most primitive annals of corporate history to the present day, innovation remains a complex aspect of corporate strategy. It almost seems a foregone conclusion that companies that do not innovate and listen to their customer are destined to die a slow, and extremely painful death. However, leading business researchers have also shocked us often with the opposite argument – that if firms tend to innovate too much and focus too much on the customer, they may be equally pushing their luck to dangerous levels and beyond the proverbial cliff’s edge. The most popular, arguably, is leading management thinker Clayton M. Christensen. The following assertion from him in his bestseller titled “The Innovator’s Dilemma”, perhaps, aptly summarises his thought process, “Many of what are now widely accepted principles of good management are, in fact, only situationally appropriate. There are times at which it is right not to listen to customers, right to invest in developing lower-performance products that promise lower margins, and right to aggressively pursue small, rather than substantial, markets.” He has articulated that innovation has to be carefully matched to market needs and trends as well as organisational resources & capabilities.
Indian industry and academia seems to be taking Christensen only too seriously, if data on our innovation outcomes is taken into account. On INSEAD’s Global Innovation Index 2012, India scores a lowly 35.7 and a rank of 64. The index ranks countries in terms of the kind of input that drives innovation as well as the outcomes of innovation activity. The report highlights how innovation has so many different meanings in India, and is often used to imply short term fixes, which we call jugaad. A comparison of Gross Domestic Expenditure on R&D shows that US ($402 billion), China ($152 billion) & Japan ($138 billion) account for over 50% of global R&D expenditure ( ) on a PPP basis. India’s R&D spend is still low at around $24.44 billion (2007). As far as applications filed in their respective patent offices go, US (490,226), China (391,177) and Japan (344,598) lead again as per WIPO data for 2010, while India lags pathetically with 34,287 applications at its office in 2009. A research by Sunil Mani, Professor at Centre for Developed Industries cited that the top five R&D centres notched up 1021 patents from 2006-2011, and in comparison, the 38 NSIR laboratories could win only 432.
Within this state of affairs, ‘Reverse Innovation’, is like a breath of fresh air. The key here is not about India’s innovation capabilities, but about the market’s potential, which makes innovation specific to India compellingly relevant. In the 1990s, MNCs started seriously looking at India as a market and slowly as a manufacturing base. The next paradigm shift is to move R&D teams closer to the market, analyse its most pressing problems and develop solutions from scratch. The INSEAD report we mentioned earlier supports this view, as it says that the innovation paradigm in India, rather than being focussed on R&D spends, talent pools and patents, is increasingly centred on “production of solutions that are affordable and accessible to people with very low incomes.”
Right from the most primitive annals of corporate history to the present day, innovation remains a complex aspect of corporate strategy. It almost seems a foregone conclusion that companies that do not innovate and listen to their customer are destined to die a slow, and extremely painful death. However, leading business researchers have also shocked us often with the opposite argument – that if firms tend to innovate too much and focus too much on the customer, they may be equally pushing their luck to dangerous levels and beyond the proverbial cliff’s edge. The most popular, arguably, is leading management thinker Clayton M. Christensen. The following assertion from him in his bestseller titled “The Innovator’s Dilemma”, perhaps, aptly summarises his thought process, “Many of what are now widely accepted principles of good management are, in fact, only situationally appropriate. There are times at which it is right not to listen to customers, right to invest in developing lower-performance products that promise lower margins, and right to aggressively pursue small, rather than substantial, markets.” He has articulated that innovation has to be carefully matched to market needs and trends as well as organisational resources & capabilities.
Indian industry and academia seems to be taking Christensen only too seriously, if data on our innovation outcomes is taken into account. On INSEAD’s Global Innovation Index 2012, India scores a lowly 35.7 and a rank of 64. The index ranks countries in terms of the kind of input that drives innovation as well as the outcomes of innovation activity. The report highlights how innovation has so many different meanings in India, and is often used to imply short term fixes, which we call jugaad. A comparison of Gross Domestic Expenditure on R&D shows that US ($402 billion), China ($152 billion) & Japan ($138 billion) account for over 50% of global R&D expenditure ( ) on a PPP basis. India’s R&D spend is still low at around $24.44 billion (2007). As far as applications filed in their respective patent offices go, US (490,226), China (391,177) and Japan (344,598) lead again as per WIPO data for 2010, while India lags pathetically with 34,287 applications at its office in 2009. A research by Sunil Mani, Professor at Centre for Developed Industries cited that the top five R&D centres notched up 1021 patents from 2006-2011, and in comparison, the 38 NSIR laboratories could win only 432.
Within this state of affairs, ‘Reverse Innovation’, is like a breath of fresh air. The key here is not about India’s innovation capabilities, but about the market’s potential, which makes innovation specific to India compellingly relevant. In the 1990s, MNCs started seriously looking at India as a market and slowly as a manufacturing base. The next paradigm shift is to move R&D teams closer to the market, analyse its most pressing problems and develop solutions from scratch. The INSEAD report we mentioned earlier supports this view, as it says that the innovation paradigm in India, rather than being focussed on R&D spends, talent pools and patents, is increasingly centred on “production of solutions that are affordable and accessible to people with very low incomes.”
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