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Innovation in India: Where do we stand at the end of 2013?

As the new year approaches, its customary to review the year that has passed. Here is my take on where we stand on innovation at the end of 2013.

Positive Highlights of the Indian Innovation scenario in 2013

Innovation in the public/strategic sectors took two important strides. The first was the successful launch of the mission to Mars (Mangalyaan) which demonstrated India’s ability to undertake complex scientific and technological projects at low cost. The second was the initial operational clearance for the Tejas Light Combat Aircraft by the Indian Air Force.

The emergence of a new generation of Indian technology companies like Vigyanlabs, winner of the Nasscom Innovation Award in the Technological Innovation category for 2013 was another positive development. Vigyanlabs solves an important problem (high consumption of power by data centres) with a system solution that is backed by a US patent.

VigyanlabsSome of the most important innovations took place in the political sphere. Two new entities demonstrated the potential for such innovation. The success of a young political party, the Aam Aadmi party, in the Delhi elections demonstrated the value of a grassroots approach to politics backed by creative use of the social media. In Bangalore, the Bangalore Political Action Committee B.PAC seeks to be a catalyst for “good politics” by supporting candidates with a clean record. B.PAC also trains aspiring politicians.

Another timely organizational innovation was the launch of the Indian Software Product Industry Round Table (iSPIRT), a think tank devoted to the promotion of India as a power in the software product industry. Two initiatives of iSPIRT – one to connect Indian product companies with the requirements of India’s large small and medium enterprise (SME) sector, and the other to create a vibrant market for acquisition of software product companies (“M&A Connect”) have shown the potential of efforts to close the gaps that hinder the emergence of a vibrant product ecosystem [Disclosure: I am associated with iSPIRT as a member of its Founders’ Circle.]

iSPIRTMarket-driven innovation efforts by large multinational companies such as Renault (with the Duster) and Gillette (with the Guard) showed that some MNCs are coming to grips with what it takes to innovate for the Indian market. Yet, the overall MNC innovation scenario in India was mixed with some companies scaling down their efforts to use India as a base for emerging market innovation.

The Indian Industrial Innovation Scenario

2013 was a decidedly mixed year for industrial innovation in India. One of the mainstays of Indian industrial innovation, the transportation sector, had a poor year. Despite several efforts, Tata Motors was unable to revive the fortunes of the Nano, and sales remained muted. Mahindra’s earlier success in the SUV market with products like the Scorpio and XUV 500 was eclipsed by determined efforts by MNC automotive companies (Renault with the Duster, and Ford with Ecosport). By all reports, the initial results of Mahindra’s acquisition of Reva (India’s pioneering electric vehicle company) have not been great either with their first post-acquisition product, the E20 seeing only moderate success. Neither Tata nor Mahindra had successful launches during the year. In contrast, MNCs had several successful launches including Honda’s Amaze and the SUVs mentioned above.

Zydus Cadila successfully completed trials for what may become India’s first new chemical entity to reach the market. But the Indian pharmaceutical industry faced several setbacks as prominent companies came under the scanner of American and European regulators, and big names including Ranbaxy and Wockhardt faced regulatory action. Since, their ongoing operations in the bulk drugs (APIs) and generics space provide the cash to fund their innovation efforts, any setback to these businesses could have a long-term negative impact on the Indian pharmaceutical industry.

Traditional Indian business groups have begun to realize the importance of a more structured approach to innovation, but are struggling to evolve appropriate processes to do so. My co-author, Vinay Dabholkar and I received enquiries from such companies in different sectors, but few of them translated into specific assignments.

The Innovation Ecosystem

Reflecting India’s overall struggles with enhancing innovation output, India slipped two positions on the Insead/WIPO Global Innovation Index in 2013. India’s biggest weaknesses are in the institutional environment, and in higher education and R&D.

Where does India standThe latest available R&D statistics (pertaining to 2009-10, released on September 2013) show that India’s R&D expenditure as a proportion of GDP is static at around 0.88% since 2005-06. But, there are two important changes to note. The sectors accounting for the largest proportion of industrial R&D spending – pharma and transportation – continue to be the largest, but their share has come down to 27.7% and 14% respectively from 45% and 17% respectively earlier. This is a positive development as it shows other sectors increasing their R&D spend faster. The other interesting development is that private sector industry now accounts for 28.9% of all R&D expenditure and the entire industrial sector (private + public sector) for more than 34%.

Sector wise R&DOne piece of good news is that the proposed Inclusive Innovation Fund has taken a step forward with an in-principle approval of the first tranche of funding. But the operational details still seem some distance away. It looks unlikely that the Fund will be put in place before the next general elections, and it remains to be seen whether the next government will see it through to fruition.

During the year, the Department of Scientific & Industrial Research re-jigged its schemes for supporting R&D by industry. New schemes include “Patent Acquisition and Collaborative Research and Technology Development” (PACE) and “Promoting Innovation in Individuals, Start-ups and MSMEs” (PRISM). As far as I can make out, the PRISM scheme is not too different from the TePP programme that was quite popular earlier. The PACE programme provides loans for companies to acquire patented technologies and then work on them further. In the past, the common problems of government support schemes included processing time, centralization in Delhi and inadequate scale. Let’s hope the government is able to address such issues this time.

Another useful development is the incorporation of innovation into the Results Framework with which the Performance Management Division of the Government of India measures the performance of government ministries and departments. This will hopefully result in a greater focus on innovation in the government.

Conclusion

2013 wasn’t a great year for innovation in India. Industrial innovation, in particular, seems to be at the crossroads. I hope that a focus on innovation will return once we have a new government in place later this year.

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Fireflies lighting up the sky

Some years ago, Infosys and Wipro put Bangalore on the global map. Now, Bangalore is once again marching ahead. It is creating a new kind of technology ecosystem, which is culturally different from what exists today.

Today’s tech-ecosystem is about a few ‘hathi’ firms doing IT Services. Metaphorically, this is about manicured lawns, straight rows of carefully planted flowers and an occasional oak tree. In contrast, the new ecosystem is about hundreds, nay thousands, of small tech product startups. It evokes the image of a vibrant forest with fast running streams, wild flowers and bamboo shoots. If you think of the current ecosystem as a cathedral, then the new one is a bazaar.

Behind the cacophony of the new tech ecosystem are two powerful trends. The first one is about Software as a Service (SaaS). Gone are the days of buying big servers, expensive software licences and bulky implementation services. Increasingly, business software is just rented and used by employees much the same way you and I use Yahoo mail. This seemingly small shift has momentous implications.

Since a software company doesn’t need an army to sell and deploy its business application anymore, size is not an asset; focus is. So a plethora of small single-minded startups have emerged. And some of them like Zoho, InMobi and Fusion Charts are making waves around the world.

The best days are still to come. SaaS is spreading like wildfire. Doctors’ offices are using it for less than a price of a Café Coffee Day latte. Apartment complexes are using ‘ERP’ type SaaS business software for Rs15 per apartment per month. Lots of small companies in Peenya and Okhla are using world-class payroll and leave management SaaS business software for Rs10 per employee per month.

Basically, SaaS is going into nooks and crannies where no business software has gone before. Just like mobile phones brought telephony to the masses, SaaS is bringing useful business applications to all SMBs. Indian startups are at the forefront of this emerging revolution.

Complementing this SaaS trend is a grassroots movement for strengthening the tech ecosystem. Gone are the trade bodies; in its place have come in volunteer-driven think tanks and communities like iSPIRT and HasGeek. Much like the Aam Aadmi Party, they use bottoms-up participation to fuel a collective process of creating public goods that everybody consumes.

Entrepreneurs help other entrepreneurs by putting their winning (and even losing) playbooks in the public domain. All this is inspired by the amazing success of the open-source movement that created Linux and Wikipedia. Based on all this, a new glow is visible. Look out for the fireflies lighting up the sky.

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What Can Entrepreneurs Learn From Arvind Kejriwal’s Start-AAP?

Aam Aadmi Party’s success in the recent Delhi elections is nothing less than magical and as a geeky analogy, quite similar to a consumer startup hitting 1 million unique users mark in just few months of launch. Arvind is no less than an entrepreneur and AAP is no more than an early stage startup. Arvind Kejriwal’s fairytale story has so many parallels with what a typical entrepreneur in India goes through while running their startup e.g. shoestring budget, number of naysayers and other countless obstacles. AAP’s rise is so phenomenal that it naturally draws attention and calls for: what has AAP done right to get to where they are today? I looked at the top five factors that I believe make or break a startup and see how AAP has fared against them.

1. It’s about you, you and only you!

Just over two years ago Arvind sat on a fast with Anna in Ramlila Maidan with a vision to transform the country and its political establishment. In last two years he has faced challenges from left, right and center – supporters left him, parties accused him, extremists threw black ink and chappals at him – but he stood tall and kept moving with the same intensity for the cause he was fighting for. A startup is a similar emotional journey made of dreams, passion, hunger and hard work and all these qualities are driven from the attitude of the team behind the startup. It is you, your motivation, your interest, your enthusiasm, and your perseverance that make the difference in success or failure of your startup.

2. Find a crisis that you can solve

Arvind found a genuine pain point (or in fact a crisis) that most people of the country are currently facing and are desperately looking for a change. He has been absolutely clear in his version of the problem statement – from day one it has been about corruption, poor governance and lack of transparency in the system. Similarly a startup has to crystallize the problem they are trying to solve. Do you clearly understand the customer pain points? Are those pain points felt by a reasonably large audience or in Arvind’s words “aam aadmi”?

3. Your solution is not my problem

Understanding the problem is only half the battle won, many social activists other than Arvind tried to solve this problem but nobody has been able to do it the way AAP has done so far. AAP’s proposition has been clear, consistent and attacks the problem heads on. Arvind has stripped down the solution to bare minimum and made sure the core elements (such as integrity, transparency and engagement) are spot on. For a startup also it’s extremely important to have a clear understanding of core features that are really awesome in addressing the pain points. If you get this right no matter how big your competitors (or parties) are you will be able to differentiate and win over your customers.

4. Good product will sell itself…well, not really!

Many political parties before AAP have shared same sentiments on numerous issues but have never been able to nurture their ideas into a mass movement. This was not because they didn’t understand the problems or had the wrong solution but because they were not able to reach out to right people with a clear message. AAP articulated its thoughts very effectively to a common man and used all possible marketing channels. Their use of modern media and internet has been truly innovative in the political arena. In order to succeed as a startup you have to think about distribution channels from day one and not as a after thought – you should be able to articulate your proposition to the right audience in the simplest possible way.

5. Lean is not mean

AAP’s success would not have been possible if they were not diligent with the use of resources they had available. In AAP’s case their strategic focus was clear from day one, with the limited resources and shoestring budget they didn’t want to spread themselves too thin and thus only focused on Delhi elections for the time being. This ensured their efforts were concentrated. Startups often make a mistake of going after everything and expanding too soon without conquering or adequately saturating one region. Lean principle also suggests that you should think big but start small!

Arvind has led the movement very well and I hope AAP grows bigger and better as time progresses satisfying many voters and followers. I think it’s a great example and inspiration for all entrepreneurs who are thinking of or running a startup currently. It’s a clear testament of how good ideas can become really successful if executed in the right manner!