'Next Google may come from India, but not the next Viagra'

A lot of innovation is happening in India, just that it is not known globally, say Nirmalya Kumar and Phanish Puranam, professors at the London Business School.

Their latest book, India Inside, published by Harvard Business
Review Press, talks about how a lot of  innovation happening here is invisible, while what is visible is often frugal engineering,
carried out with limited resources and tied to the low purchasing power among the majority population here. Priyanka Golikeri met the professor duo during their recent visit to Bangalore. Excerpts from the interview:

The book begins by asking where are the Indian Googles, iPods and Viagras? Does India really need them to show it is innovation-driven?
What you are asking is whether innovation is synonymous with having these global brands. That’s a limited perspective. A lot of innovation which goes on in India is invisible. Now the question is why invisible innovations matter. The book says that even if India never produces a single iPod or Google or Viagra, the invisible innovations it creates are important enough to have consequences for economies around the world.

Since when did multinational companies start noticing innovation from India?
It started some 25 years ago, say around 1985. Not much happened in the 80s. In the 1990s, it started slowly but now it has become more apparent. It’s the story of the last decade. Qualitatively also, what Indians were doing in the last decade was different from the previous one or the one before that. Then, it was about localising products for the Indian market. Taking American products and localising them. Now, it’s about creating products for markets beyond India. Also, there is a lot of innovation in terms of business and management practices happening in India.

Will there be an increase in the kind and number of products that are made in India and exported?
‘Made in India’ is different from researched and developed in India. India is still not very competitive when it comes to manufacturing. Manufacturing depends on the cost structure and the product. Manufacturing may or may not happen here as it is generally part of the global supply chain. In the global supply chain they look at minimising costs and also the distribution costs. In India, manufacturing is not the cheapest in the world. Even the logistics costs are high. To get a product from Bangalore to a port for export might cost as much as from that port to the end destination.

So where would the bulk of manufacturing happen? China?
China is the world’s factory right now. But that doesn’t mean it will continue to be the world’s factory 10 or 20 years from now.

So, ‘developed in India’ would be a better term compared with ‘made in India’?
Developed in India means not just other developing countries. Some of it goes back to developed economies as well. It’s not just creating a cheaper product. It’s a smarter product which takes out the frills and keeps key features intact. There are various interpretations of this ‘made in India’ term. Does it imply developed in India, manufactured in India, developed and manufactured by Indian companies owned by Indians or what else? Even if Indians are working on it but the owner is a non-Indian, some people will not take it as Indian. We think as long as it’s done by Indians in India, who owns the company is really not important. In India companies are owned by families. MNCs are not owned as such by any family or person. Shares are held in multiple countries. Who owns Microsoft? Sometimes people ask where are the Indian innovations. The definition they are applying is such that it implies there are no innovations in any country. They say it has to be owned, developed and manufactured by Indians. By this definition we do not have any country which has an innovation.

What role does education play in inculcating an innovative bent of mind?
Can innovativeness be taught in schools? Don’t know the answer to that. Indian education system is said to be rote-based. Now how true that is, is really not very clear. Indians by nature are highly rebellious people and quite questioning by nature. May be the system doesn’t have a formal way of encouraging creativity, but we think that Indians who come from that system do turn creative. Secondly, Indian society in general is not like Japan or Sweden where everybody tries to be the same. Here originality is encouraged. So is individuality. The zest to be different is prevalent. People want to look different. There is no single driver for innovativeness. But in the Indian context, the urge to be different is an important driver.

What makes a person an entrepreneur?
We think the zest to differentiate yourself from others is a very Indian trait. The Indian diaspora has always been entrepreneurial. Indian businesses have always been entrepreneurial. Being innovative is not the same as being entrepreneurial. Entrepreneurial means wealth creation. Indians are more than well represented in that.

Does government play a role in encouraging innovation?
Yes, an enormous role, by not putting in place constraints and enhancing infrastructure. Post liberalisation, subsidies were given and bureaucracy was reduced. But there is something called education infrastructure. We have the IITs and IISc. But we need more. India needs to be not just a services shop for the world but a R&D shop for the world.

How can it be done?
It can be done by prioritising. By that we mean instead of taking the government budget and giving it to all universities equally, it should be prioritised as to which varsities will be engaged in research and which will be engaged only in teaching and academics. And allocate budget accordingly. Categorise colleges as research-led or academia-led. So, the research-focused institutes will create a strong research environment. It is happening in the US and China.

So, basically prioritise and focus on core competencies?
Exactly. India might never develop a Viagra, but it can be the generics capital of the world. We might not overtake Silicon Valley, but build on frugal engineering by developing low-cost products like Tata Nano. We have to make our choices clear. We will not play the space game but play the mobile technology game. Going back to the Viagra. It takes a billion dollars to make a Viagra. And you can’t say I will make just one billion dollar product since there is a risk of failure. So, you might have to make 10 such products requiring billions of dollars to make. And then you might get three blockbusters. We don’t have investment of six, seven or eight billion dollars and this is a game where returns are not assured till the product enters the market. There is uncertainty. At Pfizer, they have the cash flows, the mechanisms, they have developed the systems. So it’s unlikely that India can do a Viagra type of innovation. But a Google type of innovation is more likely as you can have one person sitting all by himself who can launch it. A Google type of innovation can happen anytime. May be even tomorrow.

There is innovation taking place in rural parts of the country. How significant is that from your perspective?
People recognise that out of curiosity. But whether such innovations have capability, we really doubt. The scope is limited as the opportunities in rural areas are limited. If you talk to any ambitious person in the rural areas, 99% of the time he will say he wants to go to the city. Our book is focused on the impact of Indian innovation on the rest of the world. So, these kinds of innovations are probably the last on that list. That doesn’t mean they will never make an impact.

Which are the products from India a global audience thinks of in terms of innovation?
May be the Nano. Don’t think anything beyond that.

What about the tablet Akash?
Not really. It’s not known outside the country. We are referring to the man on the street. May be in business schools yes, but not the man on the street.

So, how long will it take for India to become R&D-focused from being services-led?
Oh, it depends. It will take time. It took Japan 30-40 years to be where they are now. It took Korea 30-40 years. It took China 30-40 years. So, for India also it will take time. But some innovative companies will come out of India. That’s for sure. Just like LG, Samsung came out of Korea. Even China has the likes of Huawei. That will happen in India.