A New Chapter for Sahamati

Can public-tech usher in cash-flow lending at scale for small businesses? We will soon find out. Early pilots of the Open Credit Enablement Network (OCEN) have gone well. But they were without a key ingredient – the Account Aggregator (AA) system. Last September, AA went live for the public. Since then, it’s been doing well. More than a million consents have happened and growing at a good clip of ~60-65% MoM. Many banks are now connected to the system. SEBI-regulated entities are also joining in. Goods and Services Tax Network (GSTN) data should come in soon. All this augurs well for cash-flow lending for GST-paying MSMEs. 

One significant learning from this India Stack effort is that public-tech has a dual role. It has to help innovators innovate better while simultaneously assisting regulators in regulating more effectively. Of course, this is easier said than done! But this is what good design of public-tech is about. For instance, OCEN helps regulators bring much-needed discipline to the wild world of digital lending by helping each type of market player stay in their lane. At the same time, OCEN also powers innovation by these market players in underwriting, disbursement control, and collections. 

The public-tech in AA is the Data Empowerment and Protection Architecture (DEPA). Unsurprisingly, DEPA also plays a dual role by helping regulators regulate better, and market players innovate faster. We need thoughtful interaction between the market players and the regulator to leverage this. Sahamati is an answer to this need. It was incubated in 2019 to be a market collective of AA players with the expectation that it will become a Self-Regulating Organization (SRO) one day. It is a market catalyst for the AA ecosystem to grow better.

Sahamati Flying the Nest

Today we are announcing that Sahamati is exiting iSPIRT’s incubation and assuming an independent role. For the past three years, BG Mahesh and his team have steered Sahamati with diligence and a sense of mission. As a result, it has now built its own credibility amongst market participants. 

Sahamati becoming independent is a big moment for the AA ecosystem. Sahamati has been making exemplary contributions to the ecosystem. Despite not having a formal status of an SRO, Sahamati has crafted a certification framework and empaneled certifiers to enhance the AA system’s interoperability. It has also harmonized legal agreements through a common participation terms and a dispute resolution system.

One of our core volunteers in the DEPA/AA effort – Siddharth Shetty (also a Co-Founder of Sahamati) – has moved full-time to Sahamati. This shift improves the odds of Sahamati success. 

This is also a big moment for iSPIRT.

iSPIRT is as much about building public-tech as it is about creating new ecosystem institutions to bring playgrounds to life. Having Sahamati become independent at this time releases iSPIRT volunteer cycles for the unfinished data agenda of getting the Public Credit Registry (PCR) and the system for Non-Personal Data (NPD, also referred to as the Training Data Cycle) in place for cash-flow lending. We will now be able to focus on these items better. 

In our incubation of Sahamati, we have benefitted from the learnings of two early attempts in setting up SROs. Our first market collective incubation was Digital India Collective for Empowerment (DICE) for Drones. DICE never took off despite the efforts of a committed and enthusiastic anchor volunteer. We were also actively involved in the creation of DLAI. Sadly, DLAI pivoted away from its mission to serve India-2 and ended up focusing on India-1. While this was good for its members in the short term, it didn’t address the larger mission of bringing cash-flow lending to small businesses. So, we had to restart our SRO efforts there, and now CredAll is being incubated as an MSME cash-flow lending SRO. 

Happily, thanks to Reserve Bank of India, Securities and Exchange Board of India, Insurance Regulatory and Development Authority of India, and Pension Fund Regulatory and Development Authority, the AA system has momentum today. Sahamati is plugged into this momentum. As long as it doesn’t make any unforced errors by failing to prevent mission capture by donors and market participants, its contribution to the AA ecosystem will only grow. We are excited about its prospects and fully confident in its ability to foster a healthy AA ecosystem.

Who owns Yoga?

Yoga is owned by yogis and ashrams, not by AYUSH Ministry or market players. Likewise, public-tech is often a result of no-greed and no-glory volunteering rather than a creation of a Ministry or market participants. DEPA is an example of this. iSPIRT recognizes its responsibility to keep evolving DEPA. This is also crucial for globalization of DEPA.

There is much to learn from MOSIP in this regard. Today, it is the most successful global Digital Public Good from India. More than 70m citizens in various countries have received their country ID using this system, which is snowballing. MOSIP is based in IIIT Bangalore, and its institutional structure has been instrumental to its successful globalization. Why does this matter?

Take Electronic Voting Machines (EVMs) as an example. Despite their extraordinary success in India, they haven’t been adopted by any other country. The main reason is that the creation and governance of public-tech are in the hands of the Govt. of India, and this worries other Governments. MOSIP breaks this jinx. The MOSIP experience has given us a ton of learnings on how to take our DPGs global. Our decision to make Sahamati independent gives us more cycles to apply these learnings to DEPA going global.

Cautious Optimism

Human spirit is the ability to face the uncertainty of the future with curiosity and optimism – Bernard Beckett

Sahamati will now fly on its own. I will admit that there was some trepidation in our iSPIRT core group about whether this is the right time to make Sahamati independent. Getting the timing right is never easy.

We wish Sahamati the best and hope that it becomes a model market collective for the financial industry. We, at iSPIRT, will of course, always be available for guidance or help at all times. 

Within iSPIRT, there is much that remains to be done. Many other things in the pipeline need to be brought to life. We have two decades of work before us to fully ‘rewrite the script of the nation’!

[With inputs from Sanjay Anandaram, Sanjay Jain, Jyothi Iyengar, Prof. Das, Prof. Rajagopalan, BG Mahesh, and many others]

A Fond Sendoff

Today we are giving a fond sendoff to Praveen Hari and Venky Hariharan as they transition out of full-time volunteering and onto new challenges! This is a bittersweet moment: as excited as we are about their future plans, we can’t help but feel a sense of loss. We will most certainly miss their selfless energy in our mission to democratize credit in India.

Democratizing credit is vital for India’s future. This particular breed of the societal problem needs a jugalbandi between public platforms like India Stack and market players like banks, NBFCs, and Fintechs – a kind of jugalbandi that is new to our ecosystem. To bring it about, it needed catalysts like Praveen and Venky.

Praveen has been iSPIRT’s ‘dynamo’ behind flow-based lending. He has done innumerable learning sessions, pulled together countless borrower pools, knocked partnerships together, and was instrumental in the design of “Type-4” loans. He has been the go-to person on all things around flow-based lending for lenders, loan service providers (LSPs), technology providers, sophisticated model builders, and VCs. His can-do spirit is legendary: he has been an inspiring blend of thought-leadership and hustle for all of us volunteers in iSPIRT. Because of this, his name will be forever etched into the history of flow-based lending in India.

Venky anchored our Fintech Leapfrog Council (FTLC) efforts from the very beginning and took on the challenging task of helping incumbent banks embrace non-linear change. Since its launch, FTLC has been instrumental in kicking off a number of market experiments and has helped banks think through their strategies around UPI, BBPS, cash flow based lending, and the technology and data governance changes they need to transition to a new era.

Venky’s soft-spoken approach masks a determination to get difficult things done. His charm is legendary, and he used it to help leaders of FTLC banks practice intentional unlearning. This collective effort has moved the industry forward, helped the banks prepare for a more dynamic future, and set the stage for partnership between banks and new age technology and Fintech players.

As quintessential iSPIRT volunteers, both Praveen and Venky have created enormous ecosystem value, and they did it for the mission. Many market players benefited from their work, and (as is iSPIRT custom) not one paisa flowed to either of them. This selfless volunteering is the iSPIRT way. After subsisting on a small Living Wage as full-time volunteers, it is time for Praveen and Venky to move on.

New Beginnings
Praveen is planning to become an entrepreneur again. After his two month cooling off period, he will launch his new startup. We, for one, are hoping that this startup will be in the flow-based lending space! We are rooting for him to be the Jonathan Rosenberg of flow-based lending: Jonathan was instrumental in bringing SIP Protocol to life as an IETF standard, and in helping to create Skype as a winning implementation of SIP Protocol as its Chief Technology Strategist. We hope Praveen’s path will have a similar trajectory, both in direction and impact! In parallel, he will continue to volunteer part-time for our PSP Connect (formerly M&A Connect) program where he has been active since the beginning. He will no longer be involved in our policy work.

Venky is moving to IDFC Institute to create a new Data Governance Network. We are at the cusp of a new data regime and data economy in India driven by Data Empowerment and Protection Architecture (DEPA), something that is very different from the paths taken by the US, Europe, and China. This Network will bring evidence-based inputs into the policy and practice of data governance; in this new world of data, it is key to secure empowerment and protection of each individual. Alongside this important new responsibility, Venky plans to keep volunteering part-time with iSPIRT on our software patents initiative where he has been active for many years.

When our full-time volunteers roll off to new challenges, they are a gift to the ecosystem. They carry with them an emboldened sense of what India can be, and an energized plan to make new things happen – in turn creating new capacity in the market.

Shifting Gears: Playground Orchestration
iSPIRT has been at work on the societal problem of democratizing credit for the last 4-5 years. We have made considerable progress, yet more needs to be done: Rajni is not yet being served as we would like it.

After some soul-searching, we realized that the next phase of ecosystem building for credit democratization needs a more deliberate orchestration of market and state actors.  Meghana Reddyreddy, a power volunteer, will drive this phase; she will don the mantle of Playground Orchestrator for Democratizing Credit.

Volunteering with iSPIRT
Our central tenet is that societal problems are solved by market players. To come up with truly innovative solutions, these market players need various kinds of public goods – scaleable public platforms, supportive policy and procedural guidelines, transformational market catalysts, and world-class playbooks – to succeed. Our volunteers build these public goods in a selfless fashion. They are often the most talented and driven folks in the ecosystem. Some do this public goods building on weekends. Others, like Praveen and Venky, take a year or two off from their career to do this.  

If you want to be one of these volunteers, read our Volunteer Handbook (https://pn.ispirt.in/presenting-the-ispirt-volunteer-handbook/) and feel free to reach out to us.

By Sharad Sharma, Pramod Varma, Siddharth Shetty for Volunteer Fellow Council and Pankaj Jaju for Donor Council.

Understanding iSPIRT’s Entrepreneur Connect

There is confusion about how iSPIRT engages with entrepreneurs. This post explains to our engagement model so that the expectations are clear. iSPIRT’s mission is to make India into a Product Nation. iSPIRT believes that startups are a critical catalyst in this mission. In-line with the mission, we help entrepreneurs navigate market and mindset shifts so that some of them can become trailblazers and category leaders.

Market Shifts

Some years back global mid-market business applications, delivered as SaaS, had to deal with the ubiquity of mobile. This shift upended the SaaS industry. Now, another such market shift is underway in global SaaS – with AI/ML being one factor in this evolution.

Similar shifts are happening in the India market too. UPI is shaking up the old payments market. JIO’s cheap bandwidth is shifting the digital entertainment landscape. And, India Stack is opening up Bharat (India-2) to digital financial products.

At iSPIRT, we try to help market players navigate these shifts through Bootcamps, Teardowns, Roundtables, and Cohorts (BTRC).

We know that reading market shifts isn’t easy. Like stock market bubbles, market shifts are fully clear only in hindsight. In the middle, there is an open question whether this is a valid market shift or not (similar to whether the stock market is in a bubble or not). There are strong opinions on both sides till the singularity moment happens. The singularity moment is usually someone going bust by failing to see the shift (e.g. Chillr going bust due to UPI) or becoming a trailblazer by leveraging the shift (e.g. PhonePe’s meteoric rise).

Startups are made or unmade on their bets on market shifts. Bill Gates’ epiphany that browser was a big market shift saved Microsoft. Netflix is what it is today on account of its proactive shift from ground to cloud. Closer home, Zoho has constantly reinvented itself.

Founders have a responsibility to catch the shifts. At iSPIRT, we have a strong opinion on some market shifts and work with the founders who embrace these shifts.

Creating Trailblazers through Winning Implementations

We are now tieing our BTRC work to specific market-shifts and mindset-shifts. We will only work with those startups that have a conviction about these market/mindset-shifts (i.e., they are not on the fence), are hungry (and are willing to exploit the shift to get ahead) and can apply what they have learned from iSPIRT Mavens to make better products.

Another change is that we will work with young or old, big or small startups. In the past, we worked with only startups in the “happy-confused” stage.

We are making these changes to improve outcomes. Over the last four years, our BTRC engagements have generated very high NPS (Net Promoter Scores) but many of our startups continue to struggle with their growth ceilings, be it an ARR threshold of $1M, $5M, $10M… or whether it is a scalable yet repeatable product-market fit.

What hasn’t changed is our bias for working with a few startups instead of many. Right from the beginning, iSPIRT’s Playbooks Pillar has been about making a deep impact on a few startups rather than a shallow impact on many. For instance, our first PNGrowth had 186 startups. They had been selected from 600+ that applied. In the end, we concluded that we needed even better curation. So, our PNGrowth#2 had only 50 startups.

The other thing that hasn’t changed is we remain blind to whether the startup is VC funded or bootstrapped. All we are looking for are startups that have the conviction about the market/mindset-shift, the hunger to make a difference and the inner capacity to apply what you learn. We want them to be trailblazers in the ecosystem.

Supported Market/Mindset Shifts

Presently we support 10 market/mindset-shifts. These are:

  1. AI/ML Shift in SaaS – Adapt AI into your SaaS products and business models to create meaningful differentiation and compete on a global level playing field.

  2. Shift to Platform Products – Develop and leverage internal platforms to power a product bouquet. Building enterprise-grade products on a common base at fractional cost allows for a defensible strategy against market shifts or expanding market segments.

  3. Engaging Potential Strategic Partners (PSP) – PSPs are critical for scale and pitching to them is very different from pitching to customers and investors. Additionally, PSPs also offer an opportunity to co-create a growth path to future products & investments.

  4. Flow-based lending – Going after the untapped “largest lending opportunity in the world”.

  5. Bill payments – What credit and corporate cards were to West, bill payments will be to India due to Bharat Bill Pay System (BBPS).

  6. UPI 2.0 – Mass-market payments and new-age collections.

  7. Mutual Fund democratization – Build products and platforms that bring informal savings into the formal sector.

  8. From License Raj to Permissions Artefact for Drones – Platform approach to provisioning airspace from the government.

  9. Microinsurance for Bharat – Build products and platforms that reimagine Agri insurance on the back of India Stack and upcoming Digital Sky drone policy.

  10. Data Empowerment and Protection Architecture (DEPA) – with usage in financial, healthcare and telecom sectors.

This is a fluid list. There will be additions and deletions over time.

Keep in mind that we are trying to replicate for all these market/mindset-shifts what we managed to do for Desk Marketing and Selling (DMS). We focussed on DMS in early 2014 thanks to Mavens like Suresh Sambandam (KissFlow), Girish Mathrubootham (Freshworks), and Krish Subramaniam (Chargebee). Now DMS has gone mainstream and many sources of help are available to the founders.

Seeking Wave#2 Partners

The DMS success has been important for iSPIRT. It has given us the confidence that our BTRC work can meaningfully help startups navigate the market/mindset-shifts. We have also learned that the market/mindset-shift happens in two waves. Wave#1 touches a few early adopters. If one or more of them create winning implementations to become trailblazers, then the rest of the ecosystem jumps in. This is Wave#2. Majority of our startups embrace the market-shift in Wave#2.

iSPIRT’s model is geared to help only Wave#1 players. We falter when it comes to supporting Wave#2 folks. Our volunteer model works best with cutting-edge stuff and small cohorts.

Accelerators and commercial players are better positioned to serve the hundreds of startups embracing the market/mindset-shift in Wave#2. Together, Wave#1 and Wave#2, can produce great outcomes like the thriving AI ecosystem in Toronto.

To ensure that Wave#2 goes well, we have decided to include potential Wave#2 helpers (e.g., Accelerators, VCs, boutique advisory firms and other ecosystem builders) in our Wave#1 work (on a, needless to say, free basis). Some of these BTRC Scale Partners have been identified. If you see yourself as a Wave#2 helper who would like to get involved in our Wave#1 work, please reach out to us.

Best Adopters

As many of you know, iSPIRT isn’t an accelerator (like TLabs), a community (like Headstart), a coworking space (like THub) or a trade body. We are a think-and-do-tank that builds playbooks, societal platforms, policies, and markets. Market players like startups use these public goods to offer best solutions to the market.

If we are missing out on helping you, please let us know by filling out this form. You can also reach out to one of our volunteers here:

Chintan Mehta: AI shift in SaaS, Shift to Platform Products, Engaging PSPs

Praveen Hari: Flow-based lending

Jaishankar AL: Bill payments

Tanuj Bhojwani: Permissions Artefact for Drones

Nikhil Kumar: UPI2.0, MF democratization, Microinsurance for Bharat

Siddharth Shetty: Data Empowerment and Protection Architecture (DEPA)

Meghana Reddyreddy: Wave#2 Partners

We are always looking for high-quality volunteers. In case you’re interested in volunteering, please reach out to one of the existing volunteers or write to us at [email protected]

Presenting the iSPIRT Volunteer Handbook

New Year Greetings from Product Nation

We are happy to present the iSPIRT Volunteer Handbook.

The volunteer model that underpins iSPIRT has been around since 2009. Every three years we write about our volunteer model so that others can learn from it and build their own volunteer networks.

There are many kinds of volunteer networks. iSPIRT is a volunteer network that builds public goods. Therefore we take inspiration from Linux, Wikipedia, and others. Over the years we have found that no two volunteer networks are alike. Each has its own personality, its own way of resolving disputes and driving excellence. In fact, we find that heterogeneity across volunteer networks is increasing. At the same time, they are becoming more homogenous on the inside. Keep this in mind when you look to replicate some of the practices and values of iSPIRT in your own volunteer network.

In contrast to our 2014 update, this time our self-reflection about the volunteer model is in the form of a Volunteer Handbook. By explaining the inner workings of iSPIRT more clearly, we hope to make our current and future volunteers more effective. We are always looking for high-quality volunteers. In case you’re interested in volunteering, please reach out to one of the existing volunteers or write to us at [email protected].

The handbook can be accessed below

The End Doesn’t Justify The Means: A Public Statement

[Given the course of events that have unfurled recently, iSPIRT created IGCC to investigate, and strengthen governance. Sharad Sharma, who has previously apologized and accepted responsibility on Twitter, has reflected further on the topic, and written this post. We are putting it out to ensure that this starts the right discussion inside iSPIRT and outside – Sanjay Jain]

There will be a time when we must choose between what is easy and what is right. It is our choices that show what we truly are, far more than our abilities.” – Albus Dumbledore

What is IndiaStack

Over the last week, iSPIRT has asked itself fundamental questions on who we are and how we conduct ourselves. As a pro-bono partner in the development of the India Stack, this team has had the privilege of designing systems that have eventually seen adoption by the state in a quest to solve said hard problems. Our work results in technology platforms that have positively impacted the lives of hundreds of millions of Indians. However, technology is merely a tool whose potential for misuse must be checked. This demands accountability both of the tool and its makers.

No system is perfect. And when one embarks on an endeavor to build a public platform that impacts an entire nation of over a billion people, some imperfections are bound to emerge. These imperfections should rightly attract criticism and concern from civil society. It is at this point that a natural conflict develops. Between the individuals that built the system with a great degree of dedication, application, and indeed love, and the individuals that are wary of how the said system can be used against the very people it was meant to benefit.

This conflict when left to fester without a set of rules of engagement is bound to devolve into an uncivil discourse that attacks and hurts people on each side, without actually achieving the objective that both parties hold very dearly. We are blessed and privileged that we can build for and speak for millions of our countrymen. Our privilege stems from our education, our abilities, our stature, our connections, and our life’s work. And for the most part, it must be acknowledged that individuals on both sides of this divide tirelessly endeavor to leverage this privilege to better the lives of those less fortunate among us. We build and speak, for our people. And so it is our responsibility that we conduct ourselves with dignity, grace, and generosity of spirit, while fiercely battling on the right path to that better future.

And on that count, I as one of the builders have stumbled. I condoned uncivil behavior by some anonymous handles over a period of ten days. I have owned up to this transgression. It was investigated internally by the iSPIRT Governing Council: Sudham as a team stands dissolved, and I will no longer be communicating on behalf of iSPIRT externally for 4 months.

I am clear the end cannot, and should not justify the means. But the larger lesson here is that we must develop systems and processes internally, and a framework and principles within which we will operate.

In the process of building, there is a set of factors that influence policy making. And this pie chart is an indicative representation of these factors.

IndiaStack2

Facts on the ground: Half of policy making is the policy itself and the data points in reality that led to it. It comprises of everything from the problems the policy endeavours to address, the people who are victims of these problems, previous attempts to solve them, and the data that can back up this approach. It was traditionally a major chunk of all that was needed to make a policy, particularly in a highly centralized society where a chosen few had the privilege and the power to craft and enforce said policies.

Mainstream media was the other major pillar of policy making. By serving as the primary medium of crafting public perception of millions, a chosen few reporters and their editors had the privilege of being the exclusive custodians of the court of public opinion. If you wanted to get the word out and have the people be on your side, these were the people you’d turn to.

The most significant shift in policy making in decades is the rise of social media. The emergence of platforms where individuals could transform into influencers by consistently generating unfiltered content is shifting the balance of power in the perception game. An ever increasing audience of online content consumers now turn to these platforms for their news and information. So much so that it has become a primary source of news for these early adopters.

A simplistic but useful rubric to describe the nature of discourse on social media is to classify into two categories, namely civil and uncivil. Civil discourse is exactly what is sounds like, a respectful engagement, where all parties concerned conduct themselves with a degree of basic human decency. And while the conversation may be informed, or not, backed by facts or utterly fabricated, the debate never descends below a certain level of decorum. In such discourse, there is always room for one to see the reasoning of the other side. It leaves space for empathy. And empathy is the foundation of collaboration. Both parties in such conversations can at times work together once it’s made clear that their objectives are aligned.

On the other hand, there is another side to the conversation on social media. Specifically, the kind that tends to unravel on Twitter. Uncivil discourse is marked by abuse and trolling — where one willfully sows discord and makes inflammatory, extraneous, often untruthful remarks about a topic or an individual with the express purpose of upsetting the target to evoke an emotional response. Such conversations often find themselves unfolding through anonymous handles that can employ such tactics without fear of retribution. Such behavior is malicious and dishonorable, and in the long run saps the soul of the perpetrators themselves, while simultaneously hurting the targets. It is the lowest form of engagement that leaves both parties poorer for it.

Having danced with such tactics myself for ten days in May, I can say with certainty that it is conduct unbecoming of our prior actions and accomplishments. Put it simply, I have learnt my lesson. One that should have been painfully clear to begin with. Such behavior — uncivil comments made while hiding behind anonymity — is loathsome and abhorrent. And I will never engage in or condone such methods ever again.

That brings me to the question, how does one stand up for what one has built, and the cause of inclusion that it aims to serve, while accommodating the concerns of its detractors? To answer this, here is a set of potential principles.

  • True North: If one truly believes their work to be the right thing, it must be showcased in both the intent of how one chooses to engage with critics, and in the stories of impact that showcase how what’s built has actually improved the lives of the people it aims to serve. By making the citizen our north star, and having their best interest guide our actions, we can at the very least be assured of having done the right thing. Regardless of what slings and arrows one takes in the process.
  • Empathy: To truly believe deeply in our hearts that even our harshest critics come from a place of wanting to protect the citizen and to make an effort to understand why they have framed their criticism in that manner
  • Openness: Our policies must be made visible to the community at large through various stages of evolution through discussion papers and roundtables
  • Fervor to educate: A gospel that isn’t sung is never heard. We will work hard to showcase the positive impact of our work and spread the message far and wide.
  • Commitment to civility: No trolling, no anonymity, no abuse. Ever.

Given the course of events that have unfurled recently, I accept the IGCC decisions, and reaffirm my commitment to the iSPIRT mission and values, and to help it emerge as a better organization. This will be my last public post for some time. I look forward to accomplishing our goals (the End) through Means that we can all be proud of.

iSPIRT is ending the year on a high note

ispirt-is-ending-the-year-on-a-high-note

At the beginning of the year when we wrote down our thoughts in the 2016 Annual Letter about aspects such as break away from copy paste entrepreneurship, innovation bridge with Silicon Valley, progress on open market policies, etc. we thought we will score a few wins in the year. The pace of progress has surprised us. In many areas we have exceeded our best expectations.  

The last few months have been particularly hectic for iSPIRT. Some of the wonderful work of iSPIRTers is captured in the four events that took place in the last five weeks:

#PNgrowth, Nov 25th – 28th: This intense 3-day bootcamp is grooming the future category leaders of our Software Product Industry. This was our second PNgrowth bootcamp this year. Read about it in Avinash’s evocative blogpost: Behind the scenes of $2 billion Indian startup movie #PNgrowth.

Startup Bridge India, Dec 2nd: This was our first roadshow in Silicon Valley and was done with TiE SV and Stanford University. We sought out strategic partners for 28 startups that traveled from India. This was organized by our M&A Connect Program, which is now led by Rajan. Read about the matchmaking event in a descriptive blogpost by Roxna: Startup Bridge India: Breaking Down Borders, Barriers and BS.

InnoFest #IndiaInnovates, Dec 8th: We are slowly and steadily building a community of hardware product innovators to cater to the needs of 100m families in ‘India 2’ (beyond metro). Financial inclusion will soon allow them to improve their lives using Indian products. Prathibha, the anchor volunteer behind InnoFest, captures the mood in her blogpost: InnoFest 2016 – Innovation celebrated in Bangalore, and how…

FinTech Leapfrog Council, Dec 16th: India is set to leapfrog the rest of the world in financial inclusion driven by India Stack. The FTLC program combines global best practices with a home-grown, world-class architecture for financial inclusion, and helps incumbent Indian banks create a “leapfrog roadmap” for their organizations. Venky, the anchor volunteer driving this initiative, describes the thinking behind FTLC in his blogpost: A Leapfrog moment for Indian Banking.

We are ending the year on a high note!

Next year will be a busy one for us given market inflections and the heightened expectations from us. This presents iSPIRT and each of us with a unique opportunity to contribute and make a difference.

With loads of best wishes for 2017 from all of us volunteers at iSPIRT.

Patent shift: Hope for IT innovation, not litigation

One of the persistent threats to India’s software product ecosystem is from the constant push by MNCs for allowing software patents in India.

India’s nascent software product industry is growing rapidly and is on a trajectory where we can see global brands like Amazon, Google and Facebook emerge in the next 10 years.

One of the persistent threats to India’s software product ecosystem is from the constant push by MNCs for allowing software patents in India.

The MNCs (or more often, their well paid lawyers) cleverly couch this argument by saying that this will promote “innovation” and help the domestic software industry .

To which, we at the Indian Software Product Industry Round Table (iSPIRT), would like to respond by saying, “Thanks for your concern, but let us Indians worry about innovation within our own country”.

Over the last several years, we have seen many attempts by MNCs to (mis)interpret the Indian Patents Act in such a manner that software patents will be allowed in India.

We firmly believe that software patents are a recipe for litigation and not innovation. The history of patent litigation in the US serves as a cautionary tale for India. If you are a software developer in the United States, writing code and innovating is a risky proposition. The moment you are successful, patent trolls land up, claim that you are violating their patents and try to extract royalties from you.

Research conducted by James Bessen and Michael J Meurer, explained in their widely acclaimed book “Patent Failure How Judges, Bureaucrats, and Lawyers Put Innovators at Risk”, has shown that patents in the area of software have high rate of litigation. Due to the nature of software, the boundaries of patents granted in this field are often hazy and this leads to increased litigation.

The authors in a study published in 2012 estimate that direct costs of patent assertions by patent trolls total about $29 billion accrued in 2011. In 2011, a number of mobile app developers, most of them based in the US, got legal notices from a firm called Lodsys.

The notice claimed that in-app purchases used by these apps violated the patent held by the firm and threatened them with legal action if they did not enter into a license agreement with Lodsys.

Thankfully , Indian software developers and startups have not had to encounter such frivolous legal notices until now. Individual developers and star \tups can innovate freely in India, thanks to the foresight of our parliamentarians who exempted computer programmes per se from patentable subject matter. More patents has never meant more innovation.

This is a myth that patent lawyers love spreading, as patent litigation serves to expand their market opportunities.

However, the “Guidelines for Examination of Computer Related Inventions (CRIs)” (2015 guidelines) issued by the Patent Office on August 21, 2015 could have changed the scene in India as it was worded in a manner that permitted patents in the field of software.

Although the guidelines are only meant to ensure a uniform approach by the staff of the Indian Patent Office while examining patent applications and does not constitute rule-making, these would have led to a liberal examination process resulting in grant of more patents in the area of software.

This would have made innovation in the area of software akin to step ping on a mine field. We therefore welcome the order issued by the Controller General of Patents, Designs and Trademarks dated February 19, 2016 finalising the Guidelines for Examination of Computer Related Inventions (CRIs).

It is also important to call out the role of lawyers in this discussion. Warren Buffet, the ace investor, famously said, “Never ask your barber if you need a haircut.” In a similar vein, policy makers must disregard the self-serving clamour call from lawyers for more software patents in India. Most of these lawyers stand to benefit from increased patent filing and increased litigation.

Allowing software patents would have paved the way for digital colonisation of India, since the vast majority of software patents are owned by MNCs.

We therefore applaud the Indian Patent Office for revising the guidelines and promulgating a clear test for issuing patents. We believe that these guidelines are some of the clearest guidelines anywhere in the world and we believe this will help innovation, not litigation.

The Dark Secret of India’s Start-up Boom

The Modi Government has made bold moves on the world stage. Its now time to make one at home!

By Mohandas Pai & Sharad Sharma

New-age startups are making waves. Flipkart has redefined retail. Ola is changing how we travel by taxis. PayTm is at the threshold of disrupting banks. Forus Health is attacking blindness with gusto. Eko is bringing financial inclusion to millions. Team Indus is on its way to land a rover on the moon. Nowfloats is bringing lakhs of businesses online. Pick any sector, even agriculture, and you’ll find a new-age startup gamely trying to bring about change.

These new-age startups are not like our traditional small businesses. They are peculiar in many respects. For one, they don’t play safe. They take on incumbents that are many times their size. They seek out David versus Goliath battles. They have a ‘panga’ mindset where our traditional small businessman was all about ‘dhanda’. This craziness in their DNA makes them wonderful change agents. No wonder, these new startups are transforming India from within.

We are blessed to have these new-age startups. It turns out that this new species of small businesses thrives only in a few places in the world. The most famous locale is, of course, Silicon Valley. Europe, unfortunately, is a veritable desert. South America has only Chile as a small oasis. Asia, however, looks really promising. Israel became a startup hub first, then China and now India. We are now the third largest startup ecosystem in the world.

But there is something dark about India’s startup boom. Six of the eight Unicorns have domiciled themselves outside India-in Singapore or US. In 2014, 54% of all new-age startups raising money chose to domicile outside India. Last year this number grew. It is estimated to have crossed 75%! This points to a big problem.

You might wonder why it matters where Flipkart is domiciled. For starters, when Flipkart has its IPO, Indian citizens won’t get a chance to participate in it. Worse, the intellectual property of these redomiciled companies moves to their new home. But the worst is that the money that the founders and investors make at the time of an IPO or an M&A goes to their foreign bank accounts and tends to stay there. It stymies the creation of Rupee risk-capital system in India. It makes are startups almost fully dependent on foreign capital leaving most of them starved and under-capitalized in their early years.

Startup India is an opportunity to stop the exodus. It turns out that only 34 issues, across Ministry of Finance, RBI, Ministry of Corporate Affairs and Ministry of Commerce, need to be tackled. Work has been underway on them since 23rd Oct and 60% of the issues seem to be on their way to a resolution. But this 60% fix is a recipe for failure. Unless all the 34 items are resolved, exodus will not abate. Just one friction point is enough to send the startup to Singapore, where, a welcome band awaits.

Anything that we do in Startup India without addressing the issues on the Stay-in-India Checklist is a gift to Singapore. The Modi Government has made bold moves on the world stage. Its now time to make one at home!

Mohandas Pai was the CFO and then the head of HR at Infosys. He is now Chairman, Aarin Capital Partners.

Sharad Sharma was the CEO of Yahoo India R&D. He is a co-founder of iSPIRT, a non-profit think tank that wants India to be a product nation.  

Will india make it – 2016? Big strides in software products

We need products, not services, to be global leaders, and the good news is Druva, Freshdesk, Capillary, Rategain, Savari and Julia are all either global leaders or the primary challengers in their respective categories.

For some months now, electronics has edged out gold, machinery and pearls to become India’s second-largest category of imports (after oil). Our aerospace and defence imports are also growing. We love buying all kinds of gizmos, big and small, from the West. Because of this, aerospace, defence and electronics imports are ticking time-bombs. Electronics alone will become double our oil imports in five years. The big policy question is whether we can develop viable domestic product companies in these sectors without resorting to protectionism. The short answer is: Yes!

The reason for this optimism is software products. In this area, we are holding our own. India’s software product industry is growing at a healthy clip. iSPIRT’s iSPIX (Indian Software Product Industry Index) grew by 26.6% on an annualised basis in 2015. And 80% of this growth has come from companies focussed on global markets. This is fuelled by companies like Druva, Freshdesk, Capillary and Rategain. Each one of them is either a global leader or the primary challenger in its respective category. There is also a long list of promising companies who are replicating the success in newer categories. Team Indus is attacking aerospace. Forus Health is changing preventative blindness testing across the world. Julia, an open-source language out of Bangalore and MIT, is reshaping how IOT will happen. Savari is already a top-3 player worldwide in self-driving cars. All these are new names for most people. In the glare of the Bollywood-ish publicity of our e-commerce companies, we are missing the real revolution.

Yes, like any nascent revolution, this is fragile. In fact, we recently dodged a bullet. In the run-up to prime minister Narendra Modi’s recent US trip, the Indian Patent Office hurriedly issued guidelines on computer-related inventions. Undoubtedly, they were made under pressure from some American MNCs, without realising that they were a death knell for the domestic software product industry. Luckily, good sense prevailed and 115 days later, on December 14, these guidelines were rescinded.

This near-death experience has had a positive fallout. It precipitated a coming together of minds within the government on having a proper policy for software products. As a result, a National Policy for Software Products is on the cards and should be out in a couple of months. It represents a new paradigm of policy making. For starters, it has no sops! Instead, it takes an integrative view of changes that are needed to create an enabling environment. It eliminates FERA-era norms that prevent Indian product companies from going global. It introduces missing concepts in our policy lexicon. For instance, our tax code doesn’t even have a definition for digital goods, and this, as you can imagine, results in misery for software product companies. It also tackles our archaic R&D credit system that harks back to the pre-liberalisation era and favours only large profitable companies. It is a bold policy effort that eschews tax-breaks, big budget outlays and protectionism for creating a modern policy environment for our software product companies.

Indian software products matter. This sector is the opening batsman for a new innings for India. If it runs up a good score, as it is likely it will, it will set the stage for aerospace,defence and electronics products. If India remains bereft of SPADE (i.e. Software Products, Aerospace, Defence and Electronics) product companies, it won’t be a sustainable economy in the future. Keep in mind that Microsoft generates more profit than the profits of the top-20 pure-play global IT services firms. Boeing and Airbus alone generate almost as much profit as all global airlines put together. Cisco’s profits are more than those of all European mobile operators. And Pfizer’s profits, even before its recent acquisition of Allergen, are more than the profits of top 100 hospitals in US. The value nowadays lies in products, not services.

We know how to build the world’s best hospital, airline or IT services company. But no matter how well-run Indigo Airlines is, it will not become a Embraer or Boeing. Similarly, a Narayana Hrudayalaya hospital will never bring a drug to market like a Pfizer does. Airtel or Verizon will never build a router like Cisco and Juniper do. And TCS will never be a Microsoft. Acknowledging this plain reality is the first step that we must take. Building a world-class product company needs a different mindset. You have to go all-in and bet-the-company on a market or technology shift that is underway. This mindset is new to us in India. We must nurture it so that it becomes a new strength for the country.

The stakes are high, but there is reason to be optimistic. A few smart and light-touch policy moves (in the works) can make India a global software products powerhouse. It is the first step to becoming a product-nation!

By Sharad Sharma  and Vishnu Dusad, MD, Nucleus Software

 

When it Comes to Startups, an 80% Fix is No Fix

In this polytheistic world of entrepreneurs, who is the Startup Initiative for?

There are many types of entrepreneurs. There is the self-employed vegetable-vendor type, the Thelawala. Then there is the small businessman in Okhla or Peenya who has grown to be in GST net. And how can one ignore the technology entrepreneur who graces the pages of ET every day . Even these tech startups come in many shapes and sizes. Some are after mainstream `Bharat’ consumers; others are building mass-luxury brands.Then there are fast followers in global markets or those who are rattling ferocious global players. And who can ignore startups that are filling white spaces in the safer domestic market and are aspiring to be national leaders.

What’s the one tool all successfulIn this polytheistic world of entrepreneurs, who is the Startup Initiative for? If it’s for all the various types of entrepreneurs, then it will quickly succumb to the 80% syndrome. Policy-makers will address things that are the common denominator for all types of entrepreneurs. While this is necessary , it’s not sufficient. As any product manager in the technology industry will tell you, this 80% fix is a recipe for failure.

To make a critical mass of changes, a persona-based policy making is needed. The biggest problem for Thelawala type entrepreneurs is absence of easy credit. For Peenya and Okhla business Peenya and Okhla businessmen, it is the inspector raj. For technology star raj. For technology startups it’s outdated regulations that thwart venture financing.

Each of these types of entrepreneurs is in pain today . Last year 54% of the funded technology startups redomiciled themselves outside India. This year, iSPIRT estimates, the exodus has accelerated and the number of companies redomiciling out of India will be 75% of all funded startups! There is crisis on another front too. India’s Global Innovation Index has been falling for four years in a row. We are no longer in the top 85 countries of the world! This innovation deficit has a bearing on sustainability of the entrepreneurship boom that we are witnessing right now. We are overly reliant on copy-paste entrepreneurship and this can only sustain if we keep MNCs out like China has done.

The most important decision for a policy-maker is focus on a specific type of entrepreneur. Only then the `how’ comes into focus and a cross-ministerial approach kicks in. Some of this is starting to happen. Later this week, there will be an important announcement by the Ministry of Finance about addressing venture-financing gaps in areas beyond e-commerce, neighbourhood commerce and consumer tech. There is a lot of work to be done to bring Startup India initiative to life. A nuanced henotheistic approach is needed (henotheism: involving devotion to a single god while accepting the existence of others). It can be done. Early signs give reason for cautious optimism.

 

Happy Independence Day from iSPIRT #IndiaCanInnovate #PNGrowth

It’s Independence Day today, and the last year has been one of the most exciting years in India’s product ecosystem. Just last week, the news that Sundar Pichai has taken over as the CEO of Google has been another shot in the arm for Indian techies. If ever it was the time for Indian product companies to raise the battle cry to take on the world, it is now.

Screen Shot 2015-08-14 at 6.15.42 pmIn conversations with other people in the ecosystem over the last month, there has been a realisation about the need to create what we call category leaders in the product space.

In India right now, we do not have #1 in any large category. Freshdesk (#2 in category), VWO (#2 in category), FusionCharts (#2 in category), are all virtual market leaders but these are our own unicorns.

And this in turn begs the question – do we take a route of supporting only large leaders, or multiple contenders, at which we already have the above companies killing it?

In this discussion, overwhelming support was for more number of companies; we simply need more entrepreneurs, and MORE IMPORTANTLY more product people.

These new companies we want to see don’t need to become category leaders, but category winners. And this would mean a whole new approach to building a company.

We have reimagine our team/culture, process and product to have a shot at being a category winner.

For team/culture, we need a hiring model that is tied to results from the beginning. Hiring great, not just good, talent in the early days requires hunting people down across the world, and creating a culture that scales.

For process, it starts with eschewing chewing-gum culture and thinking about solving all problems with technology in the way that allows Uber to operate with higher customer satisfaction despite having a fraction of the employees that other companies have.

Metaphorically, it is about having German Product Management, American Marketing and Russian Programmers.

For product, it comes to recreating the category, and sometimes creating a new one. And it’s also definitely about scientific and yet disruptive pricing.

Why all this on a national holiday, you might think? When else, then? Today, when we are watching the Independence Day parade in New Delhi, some of us weight think as to what significance our careers have over, say perhaps an Army jaw an who guards our borders? Isn’t his the more important job for the nation?

It certainly is, but we mustn’t forget that in our own way, our work is also aimed at making a stronger country. When we start building world class products the world uses, we are raising the bar for achievement as well. Our may not be to do and die, but maybe our role, in this quest to build India as a Product Nation, is simply to inspire the next generation.

Christening of a Tribe and Launch of Home Tour Videos

iSPIRT is not a tradebody. It is a think tank focussed on transforming India into a Product Nation. To describe the set of things we do to make this happen, we have created four Home Tour videos. They will give you a good idea of what iSPIRT is doing today through the voices of some of our anchor volunteers.

There was a trigger to create these these Home Tour videos. Recently the tribe of product entrepreneurs touched by one of iSPIRT’s programs swelled to over 1000 people! Many of them told us that they know that there is a lot going on in iSPIRT but don’t have the full picture.

As many of you know, we are believers in deep impact. We would rather touch fewer participants (entrepreneurs, policy makers, buyers) and make a big difference to their lives than go after shallow engagement with many. In light of this, having an iSPIRT tribe of 1000 software product entrepreneurs is a big moment for us. To mark this occasion, we christened this tribe as the Product Nation Founders Tribe(PNFT)! More power to them. They will make India proud.

Starting up a new company: So simple, yet so hard

I’ve seen all sides. I’ve lived in big companies. I’ve been a technology entrepreneur. I’ve also lived inside dozens of startups as a proxy entrepreneur, aka an angel investor. And I’ve seen hundreds of software product startups as a grass-roots ecosystem builder in the past eight years. My conclusion is that in the end it comes down to just two things: Mindset and Conduct.

What’s the one tool all successful (1)Entrepreneurship is a state of mind

Entrepreneurship is not just about having the greatest of ideas, knowing the best sales pitch, crafting the best marketing strategy, building the coolest products, or any of that sort of things.

Entrepreneurship is, in its unalloyed form, a state of mind. It is how you think, the way you think, and how you act. It is a state of mind that needs to be cultivated. It needs personal mastery.

Four mindset elements that really matter

Are you comfortable being the underdog? It’s only by seeing yourself as an outsider can you change the rules of the game.

Can you hold a contrarian point of view? This is what gives you a big spirit even when you are small in size.

Can you step outside your comfort zone? Having an internal, not external, driver for excellence is necessary to be world’s best at what you do.

Can you influence without control? Unless you can motivate an army of knowledge workers through empathy, storytelling and meaning-making, there is no revolution that’ll take place.

Personal code of conduct matters more than skills

Entrepreneurship is a team sport. Your rules of engagement with others matter. They determine if people will stick with you when things don’t work out.

Believe me, in the long run a personal code of conduct matters more than skills. Here is quick checklist:

Do you make things up, and make them happen? It’s all about outcome and action. It’s about producing results, not reasons. Do you keep your promises? Saying what you mean, and doing what you say is surprisingly uncommon. So making clear commitments – I’ll do my best effort or I’ll do what it takes – is often enough to stand out.

Do you give more than you get? Paying forward creates trust. Trust delivers speed and amplifies the power of collaboration. In today’s world, it’s a gamechanger.

Do you set people for success even though their definition of success is not yours? This is how you get loyalty.

You’ll find hundreds of books and websites telling you how to think, act and invest like Warren Buffett. Many people try out his investment formula but very few succeed. Why is this the case? Because, while the blueprint is pretty easy to understand, it’s really difficult to implement. Entrepreneurship is like investing and dieting–at its core it is simple, but not easy!

This blog post was written for The Economic Times. 

InTech50 – helping software product companies connect with influential CIOs from across the world

In a recent article in ET, Mohandas Pai and I suggested that if India does not produce enough product companies, our economy will not be sustainable in the future. The data is compelling. To quote from that article, “Boeing and Airbus alone generate almost as much profit as all global airlines put together. Pfizer’s profits are more than those of the top 100 hospitals in the US. Cisco’s profits are more than those of all European mobile operators. Microsoft generates more profit than those of top 20 pureplay global IT services firms.While Indigo is a very well run airline, being a Boeing creates far larger value.”

Indian entrepreneurs and businesses can be world-scale and world-class. We have demonstrated that convincingly in services. Airtel, Jet, Indigo, Apollo Hospitals, Fortis Healthcare, TCS & Infosys, etc. are fine examples of companies that are respected across the globe. There is no reason why we cannot create world-scale and world-class product companies in India. The environment is conducive for entrepreneurs to now think ‘products.’

We created iSPIRT as a non-profit think tank with the aim of accelerating the software product eco-system in India. Since our inception in 2013, iSPIRT has focused on solving tough problems that will foster software product companies in India. Making M&A happen is one such problem. iSPIRT’s M&A Connect Program has made a big difference there. The last one-year has changed that perception of India as just a software services destination, and we have now generated early but enthusiastic interest in the international markets for our software products.

Some of that change in outlook started becoming apparent when, in January 2014, Facebook acquired Little Eye Labs, a Bangalore based startup that develops performance analysis and monitoring tools for mobile app. This was followed by Yahoo’s acquisition of Bookpad, whose document-viewing product is similar to Google Docs. The latest in the series of acquisitions is that of ZipDial (a mobile and analytics company) by Twitter. Some of these acquisitions, which got significant media attention in the startup eco-system, will hopefully encourage more entrepreneurs to think products.

Another hard problem

Another problem, which is equally hard, is to do with getting quality access to big-name CIOs in US. InTech50 address this issue. It is a one-of-a-kind forum where shortlisted software product companies get an opportunity to showcase and interact with some of the most influential CIOs from India and other parts of the world. This unique platform is a springboard that provides software product companies a connect with potential customers, investors, partners and influencers – that they would otherwise find it difficult to access, and certainly impossible to access over a 2-day period. InTech50 – a collaboration between iSPIRT and Terrene Global Leadership Network – serves as a platform for recognizing the most promising software products by entrepreneurs in India. After a thorough screening of applications, 50 innovative technology startups from the software product space are shortlisted to interact face-to-face with a panel of renowned CIOs and investors from across the globe. Through their close interaction with them, these startups gain valuable insights, which can facilitate them in scaling up globally.

The event, scheduled for April 15-16th 2015, is our 2nd edition. In our inaugural InTech50 event last year, we curated some high-potential companies. The audience of CIOs and other stakeholders took note. They now recognize that India is on the cusp of becoming a product nation.

InTech50 is the only forum of its kind where startups can get unparalled access to top global CIOs and investors, closely interact with them and showcase their products extensively with the end goal of closing deals. The best part is that CIOs from across the globe will assemble right here in India with the sole objective of finding interesting software product companies that they can engage with.

Though the applications for InTech50 are closed, if you are convinced about your product and feel that it deserves every chance to be showcased at the event, you have ONE LAST CHANCE TO APPLY by getting one of the Fellows, Founder or Product Circle Donor at iSPIRT to recommend you. (You can view the list of iSPIRT Fellows).

13897639212_c86c8c02ed_cIf you are shortlisted, do work with Mentor Panels and Business Catalysts, to prepare your pitch, and interact with our team and past participants to understand how to best leverage this unique opportunity. Take a look at our illustrious panel of Business Catalysts here.

NRK Raman, Co-Founder of iFlex (instrumental in its acquisition by Oracle for a whopping USD 909 million in 2005), is driving our effrots to help product companies sharpen their pitch and presentation.

With InTech50, you have everything you need to GO BIG, right here, on a platter – the right connections, the requisite support and everything else that you’ll need in the process.

Watch this space. India is on its way to becoming a Product Nation.

Here’s how India’s “Product Nation” ambition be achieved and what the Budget can do for that ambition

The Next Google, Made in India

If you look at the Indian business landscape, you will see several successful services companies in fields like airlines (e.g. Jet, Indigo), health care (e.g. Apollo, Manipal), mobile phone services (e.g. Idea, Airtel) and IT Services (e.g. TCS, Infosys). Many of these companies are comparable to global peers, if not potential world beaters. What we don’t have are the corresponding product companies. We don’t have an aircraft maker like Boeing, a pharma company like Pfizer, a network equipment company like Cisco, or a software product company like Microsoft.

Is this is a problem? Yes. Because Boeing and Airbus alone generate almost as much profit as all global airlines put together. Pfizer’s profits are more than the profits of top 100 hospitals in US. Cisco’s profits are more than those of all European mobile operators. Microsoft generates more profit that the profits of top 20 pure-play global IT Services firms. Take a moment to digest that and it becomes clear that if India remains bereft of product companies, it won’t be a sustainable economy in the future.

Backdrop-10by11(all-english-style)-v2

Building product companies is hard, to be sure. Despite the fanfare, Tata Motors’ Nano has failed. And, sadly, Bajaj has been humbled by Honda in the last two years. In high-tech, Ittiam, despite its success in developing core intellectual property in online video, hasn’t broken into the main league. And, with our borders open to global competition, is it too far fetched to imagine that in a few years Amazon would have pipped Flipkart and Uber, not Ola, would rule our roads? We may have Indian players serving our digital consumers, but most categories might be dominated by foreign companies. Google already owns our search, Skype owns voice messaging, Facebook owns social media.

Is India destined to lose all these battles? Maybe not! But if we have to win, we have to embrace a new gameplan. Products, especially software products, are a winner-take-all business. Either you win or you are a nobody. Its not a place for the faint hearted.

In fact, tentativeness translates into a loss. It leads to sub-critical investments. We are staring at a costly example of this in the nuclear reactor industry right now. India can build 700 MW reactors. But economies of scale now kick-in at 1600 MW. Since we didn’t invest enough in the last 20 years (despite a wonderful start that Homi Bhabha gave us in 1950s), we are not a player in this large-reactor segment. So we will spend more on buying these bigger reactors from France, Russia and US in the next three years than what we have spent on our entire nuclear industry in the past 50 years! This is a really expensive failure.

If this was a one-off case it would still be okay. It is unfortunately not. In telecom, despite CDOT, CDAC and Sam Pitroda, we have only created one Tejas Networks, a nifty networking start-up from Bangalore. But, guess what? Tejas gets a pidly 1% of the annual telecom capex buys in the country. Rest is imported. We have a big rail network but no rail equipment companies. We are a generic drugs superpower but limp when it comes to new drug discoveries. These failures to create product winners don’t even faze us. We pretend it doesn’t matter.

We don’t even introspect why this is the case. When one sets out to create the world’s best hospital, airline or IT Services company, one builds in layers over years. But building a world class product company needs a different mindset. You have go all-in and bet-the-company on market or technology shift that is underway. This mindset is new to us in India. Our success in building services companies comes in the way. We have to accept this Provenance Effect; it is subtle yet significant.

To be sure, we are not the only victims of this effect. Taiwan is a victim of this too. It isn’t a player in mobile phones, ironically, because its design services legacy holds it back. Venezuela is not able to crack the chocolate market. El Ray owns the high end cocoa market, a key raw ingredient in chocolate, but comes up a cropper in high chocolates. If you ask the Belgians or Swiss, they tell you that they are a chocolate nation because they don’t have the cocoa mindset. Lack of a services industry legacy helps not just Korea but also Estonia (created Skype) and Finland (land of Nokia and Angry Bird games). It turns out that mindset matters — big time!

We have to jettison two ideas that hold us back from becoming a Product Nation! The first one is rather simple. We have to accept that no matter how well-run Indigo Airlines is it’ll not become a Embraer or Boeing. Similarly, a Narayana Hrudayalaya hospital will never bring a drug to market like a Pfizer does. Airtel or Verizon will never build a router like Cisco or Juniper do. And TCS will never be a Microsoft. Acknowledging this plain reality is the first step that we must take.

Then, we must discard our mentality of unbridled greed and reluctance to make bets — best showcased in our penchant for large Olympics contingents. Nobody cares about how many athletes you send to a sports competition, they only care about the number of medals you won. To improve odds of winning, small focussed efforts produce better results than grandiose schemes. Today, we have four times more new startups than Israel for one-sixth the outcomes. One reason is that the ecosystem enablers are narrowly sector focussed in Israel. The accelerators that help medical device companies don’t work with cyber-security start-ups there. Can’t we have a sector-focussed approach in India aiming at solar energy or medical devices, to name just two promising areas to bet on? If someone needs proof of concept: look at our performance in badminton and wrestling in India in recent years. The enablers in these sports are game-specific. Anything that smells like a generic “startup” program will have a low impact. It quite likely to be a scam!

Software product entrepreneurs when they are successful make a big economic impact in this winner-take-all world. So they are being courted worldwide. US is trying to get the Startup Visas in place for them. Canada already has a working program. Singapore has startup tax exemption. UK is in the game too. In our last budget there was a tantalizing line about “a special focus on software product startups”. Nine months have passed and nothing material has happened yet. Maybe this new budget will bring some well thought-out policies to light. This year 75% of newly funded software product startups will redomicile themselves in Singapore or US (up from 54% last year).

It is time for India to wake up to our Product Nation imperative. It is an opportunity for the NDA government to write history again. In 1998, they introduced a 108 point policy for IT services and we have the benefits around us to see. Now, they must do the same for software products. For the first time in modern India’s history, we have a chance to create world-winning products from India. The decisions we take today to support our flight to become a Product Nation will decide whether tomorrow’s Google, Viagra,Facebook, or Uber come from our nation. Act now.

Jointly written by Mohandas Pai & Sharad Sharma for Economic Times.