The Bottlenecks to Innovation in India

The Bottlenecks to Innovation in India

Written by Dr. Seshadri Kumar, 07 December, 2013; Published 25 February, 2014

Copyright © Dr. Seshadri Kumar.  All Rights Reserved.

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Disclaimer: All the opinions expressed in this article are the opinions of Dr. Seshadri Kumar alone and should not be construed to mean the opinions of any other person or organization, unless explicitly stated otherwise in the article.

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Abstract

India has long had a tradition of imitation rather than innovation; of not taking risks; and, therefore, of rarely setting international touchstones of quality and excellence.  India needs to develop an “innovation culture” if it needs to acquire the DNA to consistently excel in leapfrog innovation rather than incremental innovation.  Critical to such an innovation culture are five factors: the encouragement and development of a questioning mindset by breaking traditional Indian ideas of absolute, unquestioning obedience to teachers, parents, and other authority figures; the development of higher education systems that encourage students to do independent research work; stringent, merit-based performance management structures; the emphasizing of Indian role models in excellence and innovation; and a recognition by industry of the long-term importance of leapfrog innovation in order that they may embrace the risks inherent in such ventures and trade short-term for long-term thinking.

Introduction

McKinsey ran their Reimagining India Essay Contest last year, for which they accepted entries until 12 December 2013 and recently announced the winners.  I was not one of the winners, but am presenting here the essay I submitted to their contest.

They had three topics on which one could write an essay.  I chose the topic that was presented thus:

How can “innovation capitalism” drive India’s technological and economic development?

“If the environment is changing rapidly, then you want to bias your system toward change, flexibility, and adaptability. You want to foster what I call “innovation capitalism” versus “incumbency capitalism.” Incumbency capitalism relies on generous depreciation rules that favor big established players, those who have the most capital and can pay for $400 million plants. Innovation capitalism offers generous R&D tax credits that favor start-ups, people with ideas, who are willing to experiment and create.”

—Vinod Khosla, “How to Win at Leapfrog”

Consequently, I submitted an essay on what I saw as the barriers to leapfrog innovation in India and how I believed they could be overcome.  That essay is presented here.  There was a word limit of 1000 words for the essay. 

Readers are cautioned that I come from an engineering/scientific background and my approach to innovation and creativity is naturally coloured by my experiences in the scientific world.  In particular, I have rarely found path-breaking, innovative work to be easy.  There is a lot of work (and attendant pain) involved.  I mention this explicitly here because there is (I state this in the essay below as well) a popular perception that innovation (and especially leapfrog innovation) is simply “looking at the world with different lenses” or other similar metaphors.  I don’t believe it is that easy.  Even if an initial insight comes so easily, qualifying it so that it becomes a true innovation is a lot of work.  That has been my experience.

My Essay Entry for the Contest

Mr. Khosla is right that India needs to have a flexible, leapfrogging model of innovation.  But at a more fundamental level, India lacks an innovation “culture” – and this mindset problem makes it very hard for Indians to adopt the “innovation capitalism” that Mr. Khosla alludes to.  This must first be tackled if Indians are to take advantage of innovation capitalism.

A word of caution is necessary in understanding what innovation really connotes.  It is a popular misconception that innovation is merely looking at the world with different “eyes,” such as the oft-cited example of using washing machines to make lassi; and that it does not require deep knowledge or expertise.  That is, indeed, true for the low-hanging fruit, but for deeper and more lasting innovation, technical excellence is an indispensable complement to creative thinking.

Innovation, at its core, is a practical enterprise.  A new idea that never crosses the threshold from academic curiosity to practical implementation does not meet the yardstick of innovation.  The role of industry in fostering innovation is, therefore, critical.

The Indian private sector has, indeed, allocated funds to R&D for decades, but by and large this has been utilized in imitation rather than innovation.  For proof of the same, consider that India did not have an indigenous automaker making cars with home-grown technology until Tata unveiled the Indica in 1998.

This timidity has been in evidence in practically every industry.  My father, who was a chemistry professor and industrial consultant, cited the example of an Indian company that asked its engineers to develop the scaled-up design for a new chemical plant on paper, for which my father had helped the company develop the chemistry in the lab; at the last minute, the company developed cold feet, discarded the indigenous design, and imported the entire plant from Switzerland.

There are five main reasons for this timidity.  The first is a reluctance to question the status quo.  The second is a lack of training in original thinking in higher educational institutions.  The third is the legacy of decades of socialism.  The fourth is the lack of Indian role models in technological innovation.  The fifth is a lack of understanding on how to address the risks involved in innovation.  Below I address each of these.

1.       To innovate, one must be willing to ask both the question of the curious learner – “why?” – as well as the question of the disruptive thinker – “why not?”  The traditional problem in India is that, from kindergarten through PhD, one is taught to never question the teacher, the guru – an attitude that stems from ancient Hindu tradition.  This has to change.

2.      Much of what passes for research in Indian universities is second-rate work.  There are, indeed, a few brilliant professors in Indian centres of excellence such as the IITs or IISc.  These professors use graduate students to advance their research, but generally do not succeed in inculcating in their students a spirit of independence and an ability to define problems.  These students find their way into Indian industrial R&D and, while they can follow a pre-defined research direction, they find it difficult to chart new paths – the activity that is at the heart of innovation.

3.      In a capitalistic system, your job is never secure – as a researcher, there is a push for you to stretch yourself to innovate for the market, to take risks and prove yourself.  In socialism, on the other hand, since annual pay raises and regular promotions are more or less guaranteed with an “average” level of performance, why put in the extra effort? Performance management strategies, including giving appropriate pay for performance and delinking salaries from politics, are necessary if Indian government agencies are to be more innovative.

4.      There are only a few organizations such as Tata, Aravind Eye Care, Narayana Hrudayalaya, and C-DAC that Indians can draw inspiration from when looking for role models in technological innovation.  Very often, Indian scientists and their managers are hampered by the belief that they cannot do truly innovative work; that real innovation can only happen in the west.  As India produces more innovation leaders, this problem will gradually go away.

5.      Leapfrog innovation, by definition, is something that has not been done before, and is not a “me-too” type of endeavour, where some minor tweaks are done to an existing product or process.  It is, therefore, inherently risky.  Work involves time and hence money and so, companies’ financial policies regarding R&D determine their attitude towards leapfrog innovation – i.e., towards significant inputs of time and money that don’t have guaranteed returns.  A good example of an organization that understands how to take risks is the American company 3M – one of the world’s most innovative companies, known for products like Post-It^TM.  In 3M, while 85% of their researchers’ time is to be spent on clearly-defined projects, with milestones, deliverables, and timelines, the remaining 15% is their own, to work on whatever “blue-sky” projects that they can define, with no questions asked, and no penalty for failure.  3M’s extraordinary success as an innovative company reflects the success of this policy, and should inspire other companies to do the same.

The Indian system has changed since liberalization and the arrival of MNC companies which have set up their R&D centres in India.  This is a positive first step, since these companies bring with them the culture of innovation that is part of their survival DNA.  However, the people who work in these centres are still often recruited from the older school of thinking in India, and it will take some time to change them and the innovation landscape in India. 

Indian industry leaders need to rise to the challenge and build innovative organizations – organizations that value creativity, innovation, and risk-taking – and reward excellence.  This involves grooming the right research leaders who can set the example, allowing R&D scientists the freedom to explore that is the fount of leapfrog innovation, and ruthlessly enforcing a meritocracy.