3356 Acn Innovating High Performance

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Innovating for High

Performance in India

A Research Report


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Forewords 04

Executive summary 07

The imperative to innovate now 10

Evolving opportunities 13

Rising costs of inaction 15

Obstacles to innovation 15

Innovating for high performance in India 17

Market focus and position: Where to focus innovation? 20

Distinctive capabilities: What capabilities are needed to innovate? 24

Performance anatomy: How to innovate? 27

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Contents

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Businesses in India stand at a threshold, facing aunique set of circumstances that offer an unrivalledopportunity for higher growth over the next decade.

Yet such growth is far from assured, and will requirefocused, disciplined management and an emphasison innovation to unlock value. Indian entrepreneurswill also need to navigate numerous complexchallenges that can impede innovation.

To navigate these challenges and usher in a new eraof sustainable growth, businesses will need to answerthree questions: Where should we innovate? Whatcapabilities do we need to innovate? And how do weinnovate? These questions are the focus of this study.

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I am indeed honored to chair the AIMA ATUL did or for that matter millions Innovation is about doing thingsconference on innovation, and the joy of grassroots Indian innovations. But differently, making a big difference,is doubled with my most respected as India aspires to assume the position making impossible possible. Mahatmafriend Gopal being the co-chair. of an advanced and an affluent nation, Gandhi took on the might of the

it needs to worry about such indicators British Empire by mobilizing millions ofLet me congratulate AIMA warmly fortoo. So how do we get into the top people. Seemed impossible, but he did

identifying innovation as a keyleague of innovating nations? it. His strategy fulfilled all the criteria

differentiator for the future and alsoof innovation. He did things differently,

urging all of us to prepare for the next The second challenge is that Indianmade a big difference and achieved

big wave. This initiative is very timely. genes express themselves in Siliconwhat everyone considered as

Why do I say so? Valley, but not in Indus Valley.impossible. What were his weapons?

Innovation converts knowledge intoThe next 10 years would be dedicated Ahimsa and Swadeshi!

wealth. We should therefore, recognizeas a decade of innovation were the

that Saraswati and Lakshmi should What inspiration can we draw fromwords used by the President of India to

coexist. George Whitesides from Mahatma Gandhis life and work thatconclude her address to the Parliament

Harvard is the highest cited scientist in will help us create a paradigm shift inon June 4, 2009. On June 7, 2009 US

the world and the market innovation landscape of todays India?President Obama, in his Cairo address

capitalization of his research-based It is the recognition of the emergencesaid education and innovation will becompanies is over US$20 billion. of Gandhian Engineering.

the currency of the 21st century.Unfortunately, there are no Whitesides

During 3-5 June, 2009 the first Global Gandhian engineering is all aboutin India. Such academic

Innovation Leaders Summit (I-20), getting more from less for more andentrepreneurship is missing in India.

fashioned on G-20, was held in San more people of the world.How do we address this gap?

Francisco. I was invited to representCorporates so far innovated hard to get

India. I-20 accepted Norways Thirdly, we fail in completing themore (productivity) from less resource

suggestion of introducing a Nobel Prize journey from an Indian mind to an(human, physical, financial capital) for

for innovation. So from Delhi to Cairo Indian market place. This is becausemore (profit, share holder value). But

to San Francisco, the buzz was around India lacks a robust nationalcan they also embrace Gandhian

innovation. innovation ecosystem. The essentialEngineering by getting more

elements of a powerful ecosystemThis buzz has been around for a while (performance) for less (cost) for more

comprise physical, intellectual andthough. For instance, the names of the and more (people) in fact all thosecultural constructs. Beyond mereministries of science and technology in unfortunate 4 billion people, whose

research labs it includes ideaArgentina, Australia, Spain, South income levels are less than US$2 a day?

incubators, technology parks,Africa, Malaysia, UK, etc. have been

conducive intellectual property rights Getting it for billions of `have notschanged with the word innovation

regime, enlightened regulatory means making products and servicesexplicitly included. So why is innovation

systems, academics who believe in not available not just at `low cost but atsuddenly gaining such a currency?

just publish or perish, but patent, `ultra-low cost and that too at theInnovation Led Growth, Innovation Led publish and prosper, innovation in same level of performance.Recovery, Innovation Led education and education in innovation,

For instance, can we make a laptopCompetitiveness are not mere slogans, potent inventor-investor engagement,

costing US$2000 available at US$100?they are a hard reality. So it is time we existence of adventure capital, etc. So

Can we make a Hepatitis-B vaccinerecognize the onset of this new big we all must strive to create a National

costing US$40 per dose available atwave and ride on it. Innovation Eco-System. US$0.40 per dose? Can we make aHowever, what are the challenges that Fourthly, we need to move psoriasis treatment costing US$20,000I see in creating Indias own big wave expeditiously on the agenda on available at US$100? Can we make aon innovation? innovation led inclusive growth, so comfortable, safe and fuel efficient car

that we can include those unfortunate available, not at US$20,000, but atThe first is that Indias world ranking

millions, who have been excluded US$2000? Can we make an artificialon innovation is low. Among 130

today. So where do we draw our foot costing US$10,000, madecountries, India is ranked only 41 in

inspiration for such an inclusive available at US$30? Can we make athe innovation index. Even Malaysia

innovation? high-quality cataract eye surgery made(25) and China (37) are ahead of India.

available, not at US$3000, but atSingapore and Korea are in the top 10. When it comes to the inclusion of the

US$30?Well, one can always dismiss such common man, think of Mahatmarankings by saying that these do not Gandhi and you cannot go wrong. He

take into account the game changing was one of the greatest innovators ofinnovations of the type that NIRMA or the 20th century. Why?

Forewords

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05

All these sound impossible. But all It is this new spirit of innovation thatthese have been made possible. should drive the 21st century IndianWhere? I am proud to say, they are all innovation agenda. And that isIndian innovations. beginning to happen. So far, Indian

innovators were happy in providingSuch Indian innovations lead to notproducts that were first to India. Not

just àffordable solutions butto the world. Ratan Tatas Nano

èxtremely affordable solutions. Forchanged all that. Firmly based on the

achieving this, one cannot rely on justGandhian Engineering principle of

ìncremental innovation but èxtremegetting more from less for more, it

innovation or `disruptive innovation.created a product, that was first to the

But how do we make extremeworld.

innovation a way of life? This willrequire a paradigm shift in our way of Let the spirit of the Nano be thethinking, planning, acting and inspiration for the emergence of adelivering. resurgent innovative India. And let the

spirit of more from less for more driveAbove all, for achieving all this, we

the innovation agenda for the wholeneed innovation leaders who breakworld, since this spirit alone can solve

traditional mindsets, which are bigthe man-made problems from global

barriers for innovation. Too riskyeconomic meltdown to global climate

Suppose it fails? Impossible Neverchange.

done before Somebody has alreadytried it. All of us are familiar with thisline of thinking. While most of us fallvictims to this kind of thinking,innovation leaders stand apart withtheir thinking and action.

R.A. MashelkarWhat do they do differently? Chairman,Innovation leaders grow a small idea AIMA Global Innovation Conference

into a fantastic opportunity. Theyconvert problems into opportunities.They have hindsight, foresight, andinsight. They set quantum goals. Theyinvest considerable mindshare infuture growth and the next big change.They drive discontinuity and encouragerisk. They find opportunities whereothers see nothing.

Mahatma Gandhi was one such Indianinnovator and Jamshedji Tata wasanother one.

In the early 20th century whenJamshedji Tata wanted to producesteel, he was ridiculed. Sir FrederickUpcott went to the extent of sayingWe will eat every pound of steel, ifyou can produce it. In his mind, it wasimpossible for an Indian company toproduce steel. Yet the irony is that notonly did the Tatas produce steel, butalso in the early 21st century theyproduced steel in Englands backyard Corus Steel.


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06

The transition from global downturn to Our vision must therefore be to helpeconomic recovery is ushering in a new lay a solid foundation for national andperiod of change for India and international competitiveness throughindustries located on Indian soil. A focused innovation. This report takes a

unique set of circumstances are small step in providing a framework forunfolding in India that offer it an businesses towards building such aunrivalled opportunity for higher foundation.growth over the next decade. Thesegrowth opportunities, if harnessedproperly, hold the potential to helpbusinesses and the Indian economysecure competitive sources of longterm value. Anish Gupta

Managing PartnerProductsInnovation is going to be key for

Operating Group,businesses on this journey, but the

Accenture Indiatype of innovation required will be

significantly different from traditionalnorms and practices. Innovation willhave to deliver business growth whilesimultaneously unlocking value forlarge sections of society associatedwith unfolding growth opportunitiestypical to India. The process ofinnovation will have to be moredemocratic and participatory, but notlose its focus and ability to deliverspeedily. It will require activeparticipation from people within andoutside the organization who live and

breathe change and are not daunted bythe prospect of failure.

This report, which draws on survey andinterview-based research conducted

jointly by the All India ManagementAssociation and Accenture, revealssome of the key areas of innovationthat Indian businesses must look toenter. These are the areas that havethe potential to transform India intoan innovation hub, unlocking sourcesof long term value from emerging

opportunities for both businesses andsociety.

This report also provides insight on thedistinctive capabilities that businessesneed to develop in order to implementnew models of innovation as well asthe culture that businesses need toengenderboth within and outside theorganizationto support this shifttowards nurturing innovation drivenmindsets.

As we look towards an uncertain

future, only a concerted focus oninnovation can position India andIndian companies competitively on thepath towards sustainable growth.


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Executive summaryIndia has been at the forefront of what demography. It can become the ladderAccenture calls the rise of the multi- for Indian companies to climb thepolar world for some time. In this value chain in their industries.An increasing number of young peopleworld, economic power is becoming from Indias leading colleges and

A concerted focus on innovation nowdispersed as emerging markets compete business schools are shunning will position India for growth in themore strongly with the traditional conventional jobs and exploring next 10 years, help Indian companieseconomic powers of the developed world. entrepreneurial opportunities. India- sell their offerings in global markets,

based businesses should capitalize onIndia is well positioned in many attract high-value internationalthis trend. Entrepreneurs help generaterespects for a new era of growth in the investment to India and begina steady stream of viable businessmulti-polar world. It is facing a unique addressing a wide range of economicideas. Some of these ideas, if backedset of circumstances that offer an and social problems.up with timely and targeted support,unrivalled opportunity for highercould become breakthrough products,growth over the next decade:services, and business models thatbenefit not only companies but alsosociety overall.

Indian businesses have profited andgrown by tapping a massive university- Environment-friendly goods andeducated, English-speaking talent pool services are in demand worldwide, andat a cost unmatched in developed Indias unique circumstances give it aneconomies. This pool is only going to advantage in satisfying this demand,expand in the coming years. However, especially in manufacturing. This mayIndias competitive advantage in the seem paradoxical, given that Indiasarea of talent, fuelled by its demographic manufacturing industry has long beendividend, has come under increasing considered the big sleeper of thethreat from other emerging economies. nations economy. However, unlike inIn the face of global competition, many other large developing

Indian business leaders cannot look to economies that have maturelabor-cost arbitrage as a sustainable manufacturing sectors, India has thesource of competitive advantage. opportunity to grow its nascentInstead, they must evolve and learn to manufacturing industry from thecompete on the basis of value. ground up with climate-friendly

technologies.

But such opportunities will count forlittle if they do not ultimately translateinto new sources of revenues for Indian

Several forces will greatly expand the companies and more sustainablesize of Indias rural markets in the near growth for India at large. With itsfuture. These forces include sustained increasing integration into the world

increases in the prices of agricultural economy, India must build thecommodities, expanded government structures and capabilities that willinvestment in rural infrastructure, and help it withstand economic shocks andproliferating employment opportunities sustain high growth rates far into thein the services sectors in rural future.locations. Indian businesses should

The key is innovation: Indian businessalso set their sights on the massive

leaders must understand the newopportunity represented by the

products and services, processes andcountrys rural populations. To make

ways of working and doing businessinroads into these expanding rural

that will help propel India into theconsumer markets, Indian businesses

next phase of growth and position itmust do more than just offer low-cost

ahead of its emerging-marketproduct variants and set up

competitors. Innovation will enabledistribution channels. Their primary companies to unlock value from thechallenge will be to incubate demand

opportunities presented by greenfor their products in these previously

manufacturing, entrepreneurship, ruralunserved markets.

consumer markets and Indias

Entrepreneurial spirit

Indias demographic

dividend Green manufacturing

An expanding ruralconsumer market


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to make the most of these opportunitiesAchieving and sustaining highfor society and business simultaneously.performance in Indias complexThe report identifies four ways ofenvironment will need a firmcreating such distinctive capabilities:commitment from business leaders

towards innovation.! Deploy unconventional methods todefine customer needs and identifyTo understand what would be thepotential new markets to servenext-generation innovation areas for

India and businesses operating in India, ! Build the right organizational andwe interviewed about 50 business technological infrastructure and useleaders, representing large and small infrastructure as a differentiator forcompanies across all major industries. execution of innovation strategiesWe also conducted a pulse survey of

! Hire and train people who are willing200 end-consumers to understandand able to come up with ideas and totheir perspectives on the future ofexperiment with theminnovation in India.

! Draw insights from business modelsBased on the primary research andin other sectors to enhance innovationsecondary data, Accenture hasprowessidentified a framework that can help

executives innovate for high

performance such that they cansimultaneously unlock value for theirAligning everyone behind the companyscompanies and society from emergingstrategy to unlock value from emerginggrowth opportunities. The frameworkgrowth opportunities for itself andhas three principles:society requires conscientious steps tonurture mindsets within and outsidethe firm. We identify five such processesthat companies need to adopt toachieve this goal:

Indian companies must identify! Democratize the innovation processbusiness areas in which businessto make employees feel involved andmodel, process or product innovations,to ensure that they are motivated tocan create long-term value not onlycontribute their ideasfor themselves but also (by extension)

for society overall. Based on the primary ! Instill fearlessness among employeesresearch, this report identifies five such allowing them to push their abilities inbusiness areas having the potential to the active pursuit of innovationtransform India into an innovation

! Stimulate innovation by givinghub, which can help unlock sources ofemployees freedom to innovate withinlong term value for both businessesdefined boundaries, and by reducingand society:fear of failure

! Agriculture! Perpetuate innovation through networks

! Biotechnology and pharmaceuticals of employees and create structuredprocesses for transmitting ideas

! Delivery of education, healthcare

and financial services ! Nurture innovative mindsets outsidethe firm by effectively engaging with

! Information and communicationstalent that can drive innovation of thetechnologiesfuture

! Green technologies

In order to deliver value out of macroopportunities for society and forthemselves simultaneously, businessesneed to posses distinctive capabilities.These capabilities must not only facilitate

in helping businesses acquire greaterand different insight into the opportunityat hand but also provide it with thesupport to deliver cutting-edge innovations

Performance anatomy

Market focus andposition

Distinctive capabilities


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The imperative to

innovate now

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The key is innovation: IndianIndia has been at the forefront ofbusinesses must understand the newwhat Accenture calls the rise of theproducts and services, processes andmulti-polar world for some time. Inways of working and doing businessthis world, economic power is becomingthat will help propel India into thedispersed as emerging markets gainnext phase of growth and position itrapidly on the traditional economicahead of its emerging-marketpowers of the developed world.competitors.

India is well positioned in manyBut what are these precise growthrespects for a new era of growth in theopportunities upon which Indianmulti-polar world. It possesses a youngcompanies can seek to capitalize?and still growing workforce, an

abundance of entrepreneurial drive

and vigor, a highly competitiveinternational services sector,significant potential in nascentindustries such as greenmanufacturing and massive untappedconsumer demand in its ruralpopulations. But such opportunitieswill count for little if they do notultimately translate into new sourcesof revenue for Indian companies andmore sustainable growth for India atlarge. With its increasing integrationinto the world economy, India must

build the structures and capabilitiesthat will help it withstand economicshocks and sustain high growth ratesfar into the future.

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Indias demographicdividend

An expanding ruralconsumer market

Indian businesses have successfullycapitalized on labor-cost arbitrage toput India on the world map as a majorexporter of services, a competitivemanufacturing and sourcing hub and acenter for low-cost, high-qualityresearch and development (R&D).

These businesses have profited andgrown by tapping into a largeuniversity-educated, English-speakingtalent pool at a cost unmatched in

of Software and Services Companies India increased to 160 million, and thedeveloped economies. This pool is only(NASSCOM) has identified a likely total value of goods they consumedgoing to expand in coming years. Indiashortfall of half a million IT more than doubled to US$155 billion.is home to 20 percent of the worldsprofessionals by 2010. During that decade, consumption bypeople, and one-third of Indians are

rural households in India rose at a rateunder 15 years of age. The United The challenge for Indian businesses isof about 8 percent per annum.Nations Population Division forecasts to ensure that they have a sufficientMoreover, the annual consumption perthat, between 2010 and 2030, Indias supply of appropriately skilledhousehold in rural India jumped fromworking-age population will grow by employees to sustain their growth and 3US$618 to US$968 in the same period.around 240 million peoplea much to remain competitive in the global

larger figure than in any other economy. Several forces will greatly expand theemerging economy (see Figure 1). size of Indias rural markets in the near

Building Indias future pipeline offuture. These forces include sustainedHowever, Indias competitive talent demands innovative thinkingincreases in the prices of agriculturaladvantage in the area of talent, fuelled that targets people from an early age.commodities, expanded governmentby its demographic dividend, has come New Delhibased Hole In The Wallinvestment in rural infrastructure, andunder increasing threat from other Education Ltd. is taking steps to helpproliferating employment opportunities2emerging economies. For example, India surmount this challenge. Thisin the services sectors in rural locations.Brazil, China, the Philippines and organization is bringing education to

Vietnam are developing talent pools low-income urban neighborhoods by What will this mean for businesses? Awith key skills, including English- embedding rugged computers into report titled Rural Retail: The Nextlanguage capabilities. Indias labor- buildings exterior walls. Neighborhood Phase in Retailing from thecost arbitrage advantage is already residents use the computers as Confederation of Indian Industry (CII)eroding in the IT-services sector, which community learning stationsbrowsing and YES BANK predicts that rural retailemploys 4 million people and accounts the Internet, playing games, and markets in India will be worth about

4for 7 percent of Indias GDP. Over the accessing educational materials, all US$58 billion by 2015. Rural marketpast few years, the international cost without the need of a teacher. A revenues for life insurers are expectedadvantage of that sector has narrowed 5departure from Indias traditional rote- to reach US$2.9 billion by 2015.1by almost half.

based educational system, these According to another report, the size oflearning stations have encouraged a the rural pharmaceutical market inIn the face of global competition,

6self-driven, experimental attitude 2015 will reach US$4.8 billion.Indian businesses cannot look to labor-toward learning that may helpcost arbitrage as a sustainable source

To make inroads into these expandingresidents acquire knowledge and skills.of competitive advantage. Instead, they rural consumer markets, Indianmust evolve and compete on the basis

businesses must do more than justof value. offer low-cost product variants and set

up distribution channels. Their primaryCompeting in higher-value sectors willchallenge will be to incubate demandrequire a talent pool attuned to this

Indian businesses should also set their for their products in these previouslychanging business need. But the pacesights on the massive opportunity unserved markets.of demand growth in many sectors hasrepresented by the countrys ruraloutstripped the supply of qualified Godrej has set out to stimulate this

populations. During 1996, rural Indiastalent, creating a critical shortage of demand. Chotukool is a small cooling118 million households consumed onlymanpower with the appropriate skills.device inspired by the idea to addressUS$73 billion worth of goods. In 2006,For example, the National Association the basic cooling needs of the peoplethe total number of rural households in

Evolving opportunitiesFigure 1: Forecasted change in working-age population (15-64 years),

2010-2030 (million)

250

200

150

100

50

0

-50India Brazil Mexico China South

KoreaRussia

241

18 13 10 -4 -17

Source: United Nations Population Division, World Population Prospects: The 2008 Revision

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at an affordable cost. Using advancedsolid state technology to cool insteadof traditional compressors, Chotukoolhas a storage volume of about 30 litersand has a light-weight plastic body,making it easily movable. Theunconventional top opening ensurescold air settles down in the cabinet to

minimize heat loss and powerconsumption. Priced between Rs. 3250to Rs. 3750 (US$65 to US$75), theChotukool is being test-marketed inthe state of Maharashtra.

Through such innovation in productsand business models, Indian businessescan play a vital role in stimulating andsustaining income and consumptionlevels in rural communitieshealing

Entrepreneurs Park (TREC-STEP). It manufacturing technology called thethe widening rural-urban divide inreceives its funding from part of the Plough Share Mixer that eliminates theliving standards and consumption

US$1 million that Cisco committed in need for steam required by traditionalpatterns. 2006 to promote microfinance and ICT production methods. Thanks to thisentrepreneurship globally. The program new process, HUL expects to earnsupports ICT businesses run by former 15,000 certified emission reductionand current Cisco Networking (CER) credits a year, worth aboutEntrepreneurs drive innovation, and

8Academy students. Cisco plans to use US$150,000.India is home to more and more ofthe technologies developed throughthem. In fact, an increasing number of According to the UK Department ofthese programs to generate newyoung people from Indias leading Business Innovation and Skills, India isgrowth. For Cisco, then, this initiativecolleges and business schools are the third largest market in low-carbonincubates new ideas and products andshunning conventional jobs and and green goods and services, with ais not just a corporate socialexploring entrepreneurial opportunities. 6 percent share in the US$5 trillion7responsibility exercise.

global market. A study by leadingThe 2008 Global Entrepreneurshipglobal investment bank HSBC found

Monitor report showed that the that green technologies and industriesproportion of people aged 18-64 whoin India are likely to attract spendingare involved in entrepreneurial activity Environment-friendly goods andof around US$150 billion betweenwas significantly higher (27.6 percent) services are in demand worldwide, and 92008 and 2017.than in other emerging economies, Indias unique circumstances give it an

such as Mexico and Russia advantage in satisfying this demand, Failure to grasp this opportunity could(see Figure 2), and on a par with Brazil. especially in manufacturing. This may have serious consequences. India, with

seem paradoxical, given that Indias its burgeoning population andIndia-based businesses should capitalizemanufacturing industry has long been increasing global demand for itson this advantageous position.considered the big sleeper of the products, will face serious pressures onEntrepreneurs help generate a steadynations economy. Indeed, the share of its natural resources and dramaticstream of viable business ideas. Somemanufacturing in Indias GDP has deterioration in environmentalof these ideas, if backed up with timelyremained almost static at around 15.5 conditions. Even though Indias per-and targeted support, could becomepercent for the last decade. capita carbon emission levels arebreakthrough products, services, and

currently far below those in developedbusiness models that benefit not only However, unlike in many other largeeconomies, its ballooning populationcompanies but also society overall. developing economies that havecombined with rising consumptionmature manufacturing sectors, IndiaSome organizations are finding ways levels will present increasinglyhas the opportunity to grow itsto foster and leverage entrepreneurial daunting environmental challengesnascent manufacturing industry fromspirit within India. Consider the over the coming decades.the ground up with climate-friendlyinformation and communications

technologies. Other economies willtechnologies (ICT) entrepreneurshiphave to invest heavily to retool theirdevelopment program launched inexisting manufacturing operations for2008 in the southern Indian state ofenvironment-friendliness.Tamil Nadu. The program arose

through a partnership between Cisco Soap manufacturer Hindustan UnileverSystems, the Small Industries (HUL) is one Indian company that hasDevelopment Bank of India (SIDBI) and recently greened its manufacturingTiruchirappalli Regional Engineering process. In collaboration with itsCollege-Science and Technology Anglo-Dutch parent, HUL developed a

Entrepreneurial spirit

Green manufacturing

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Figure 2: Prevalence of entrepreneurial activity as a percent of total labor force

Source: Global Entrepreneurship Monitor 2008 Executive Report

Country Overall Entrepreneurial Activity(% of people aged 18-64 involvedin entrepreneurial activity)

Brazil

India

Mexico

Russia

26.4

27.6

17.8

4.4


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A concerted focus on innovation now and skills to consumers can helpwill position India for growth in the cultivate a pool of talent with thenext 10 years, help Indian companies knowledge, energy and capabilities.sell their offerings in global markets, Indian businesses need to seize those

attract high-value international opportunities. Workers with theseinvestment to India and begin advantages gain access to higher-paidaddressing a wide range of economic employment opportunities, and haveand social problems. Conversely, a more money to spend on consumerfailure to raise innovation levels will products and services.

jeopardize much of Indias recentInnovation can become the ladder for

economic achievements. Such failureIndian companies to climb the value

could also consign some sectors to thechain in their industries. For example,

fringes of international markets as aproduct and business-model

new generation of lower-costinnovations focused on developing and

emerging-market economies challengeintegrating cost-competitive green

Indias position in its traditional areastechnologies into manufacturing can

of strength.

endow Indian companies with first-Innovation enables companies to mover advantages. Development andunlock value from the opportunities deployment of such greenpresented by green manufacturing, technologies across sectors willentrepreneurship, rural consumer simultaneously help conserve preciousmarkets and Indias demography. For natural resources.example, innovative business modelsfor delivering healthcare, education

Rising costs of inaction

Unbalanced potential Difficulty getting to Infrastructure gapsscaleInnovation in India is characterized by Accessibility to innovation

a general lack of balance. Although infrastructuresuch as venture capital,India has sometimes been dubbed thesome Indian companies have technology laboratories, and mentoringgraveyard of good ideas. Many usefulcontributed cutting-edge best required for innovations to thrive tendinnovations never fulfill theirpractices to the world, these to be weak in India. As a result,commercial potential because ofenterprises are relatively few in processes vital to innovation, such asinnovators inability to convert ideasnumber. And they are traditionally carving out an appropriate businessinto scalable business offerings.

concentrated in islands of model to ensure scalability ofCumbersome government regulations,excellenceindustries such as innovation and taking a businessthe lack of social support forautomotive, biotechnology, prototype to the market continue to beentrepreneurship and deficientpharmaceuticals, software and critical obstacles for a majority oftechnology infrastructure make ittelecommunications. Areas such as innovators in India. In addition, laxdifficult for innovators to replicate andagriculture, education, healthcare and administration and enforcement ofscale their ideas into viable businessfinancial servicesdespite arguably intellectual property rights discouragesmodels. Yet Indianswith theirexerting a larger impact on quality of entrepreneurs from embarking on newimmense diversity of cultural habitslife in Indiastill suffer from a relative ventures.and income levelsneed innovativelack of innovation.products and services. To transformgreat ideas into viable offerings,innovators must find the right target

marketsthose untapped consumersegments with the greatest potentialto stimulate widespread interest intheir offerings.

Obstacles to innovation

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enterprises can create long-term value aspiring Indian innovators, we haveTo achieve and sustain high

not only for themselves but also (by identified four such critical capabilities.performance while simultaneouslyextension) for society overall. Drawing Chapter 3 of this report discusses themunlocking value from growthon insights from our primary research, in detail and provides examples of howopportunities for society and itsChapter 2 of this report identifies five they are already being nurtured in somebusiness in Indias complexsuch business areas (see Figure 3) and enterprises.environment, business leaders willprovides examples of Indian innovationneed to make a firm commitment to Performance anatomy: Aligningin action.innovation. Accenture has identified everyone behind the companys

a framework that can help executives Distinctive capabilities: High performers strategy to unlock value from emerginginnovate for high performance. The know which capabilities distinguish growth opportunities for itself andframework has three principles: them from competitors, and they use society requires conscientious steps to

those capabilities to create value and nurture mindsets within and outsideMarket focus and position: High enhance their practices. In order to the firm. High performers work to alignperformers articulate where and how

deliver value out of macro opportunities everyone behind the companysthey will compete, and the resulting for society and for itself simultaneously, strategy. In Chapter 4, we identify fivestrategies guide decision-making. To businesses need to possess distinctive such processes that are already beingapply this principle, Indian companies capabilities. These capabilities must adopted by a number of companies inmust identify business areas (such as not only facilitate in helping businesses India.biotechnology or pharmaceuticals) in acquire greater and different insightwhich innovation can be used to into the opportunity at hand, but alsounlock value from Indias emerging provide it with the support to deliveropportunities. Through business model, cuttingedge innovations to make theprocess or product innovations, Indian most of these opportunities. For

Innovating for high

performance in India

Figure 3: Innovating for high performance in India

Take a holistic approach to identify business areas where innovation is most critical

Select areas where innovation can be utilized to unlock long term value for your company and society

Market Focus

& Position

Distinctive

Capabilities

PerformanceAnatomy

Democratize the process of innovation

Instill fearlessness

Agriculture Biotechnology &Pharmaceuticals

Delivery of Education,Healthcare andFinancial Services

Information andCommunicationsTechnologies

GreenTechnologies

Develop innovation capabilities that will differentiate a high performer

Use infrastructure as

a differentiator

Build the rightorganizational andtechnologicalinfrastructure to deliverscalable innovation

Hire and train peoplewho are naturallywilling and able tocome up withinnovative ideas

Make innovation a

natural process

Identify, draw andexecute radicalinsights from a varietyof business models

Adopt new business

models at speed

Nurture innovation-driven organizational mindsets

Encourage rebound from failures

Deploy unconventional

methods to identifyand define needs

Look beyond the useof traditional tools toidentify innovationopportunities

Employ networks to share ideas across the company

Nurture innovative mindsets outside the firm

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10

Figure 4: Patent activity by non-residents, 2006 (percentage of total patents filed or granted)

South Korea

Patents filed

Patents granted

Innovation in India todayEconomic growth in Indiafuelled by replicating and adopting existingtwo decades of economic reforms and technologies and ideas to serve locala large pool of low-cost, English- markets. And their innovation effortsspeaking, university-educated have been skewed toward improving

talenthas enabled India to position processes and operations in a searchitself as a major destination for for cheaper, simpler and more flexibleinvestment in high-tech innovation. business models.Numerous multinational companies

Although the central government hasand a handful of large Indian

tripled its investment in R&D in itscompanies have tapped this potential,

budgets for 20072012, India still hasmaking India home to some of the

a long way to go before it featuresmost extensive research and

prominently on the global innovationdevelopment (R&D) centers in the world.

map. Developed countries investmentHowever, despite pockets of innovative in R&D averages 2.5 percent of GNP;activity in certain sectors such as Indias target is 2 percent by 2012.automobiles, information and Patent statistics suggest additional

communications technologies and cause for concern. Although non-pharmaceuticals, innovation remains residents file a large proportion of theisolated in small segments of the patent applications made in India, theyeconomy. Most workers have jobs in account for a smaller share of eventualthe informal sector, which is patents granted. This runs counter tocharacterized by low productivity and the trend seen in most other majorlow-skill activities. Innovation by emerging economies (see Figure 4). ItIndian companies has largely been indicates that India needs to improveincremental or applied. Indian companies the openness and efficiency of its systemhave proved very successful at for protecting intellectual property.

Note: Data is from 2006 or latest year availableSource: World Intellectual Property Organization, "World Patent Report 2008"

Mexico Brazil India China Russia0%

20%

60%

80%

100%

120%

96%99%

84%91%

82%

68%

42%

57%

26%

18%25%

26%

40%

18


19/32

Research methodologyThe primary research findings in thisstudy are based on a quantitativesurvey supplemented by qualitativeinterviews with 50 senior business

leaders, academics and scholars, aswell as a pulse survey of 200consumers (see Figure 5).

The interviews and surveys with seniorbusiness leaders, academics andscholars focused on understandingtheir views on next-generationinnovations as well as the barriers andenablers to innovation (external andinternal to their institutions).

The focus of the consumer pulse surveywas to understand the end consumers

perspective on the future of innovationin India.

Resources 10%

Public Services 8%

ProfessionalServices 16% Products 40%

Financial Services 8%

Communicationsand High Tech18%

ResourcesChemicalsEnergyMetals & MiningUtilities

Electronics & High Technology

Media & EntertainmentTelecommunications

BankingInsurance

Communications and High Tech

Financial Services

ProductsAutomotiveConsumer Goods & ServicesIndustrial EquipmentPharmaceuticals & HealthcareRetailTravel & Transportation

ConsultingIT Services

EducationGovernmentIndustry Associations

Professional Services

Public Services

Figure 5: Breakup of business survey responses by industry group

19


20/32

20

Market focus and positionWhere to focus innovation?


21/32

India has huge innovation

opportunities but limited resources

available for innovation. Thus

companies must makethe rightchoices about where to innovate.Askedwhat they see as key areas

transforming India into an innovation

hub having the potential to unlock

sources of long term value for

businesses and society parallely, 87

percent of the Indian business leaders

we surveyed selected information and

communications technologies (ICT)

(see Figure 6). The other most

common business areas identified

were biotechnology; the delivery of

education, healthcare and financial

services; and agriculture.

We asked the same question to

consumers in New Delhi and Mumbai(see Figure 7). They identified deliveryof education, health and financialservices as the key area of potential.Agriculture came second for them. Asnoted by an employee of a private-sector firm in Mumbai, Innovation iscritical in agriculture to give all of usfood at affordable prices. Innovationin low-carbon and green technologywas also a higher priority for thisgroup than it was for business leaders.

Taken together, our survey findingspoint to five areas in which Indianbusinesses must innovate to createlong-term value for both themselves aswell as society. We discuss each ofthese areas below.

Agriculture was probably the firstsector in India to benefit fromdisruptive innovation. The greenrevolution, supported by the

introduction of government extensionservices and minimum prices for crops,ushered in an era of income and foodsecurity for a section of Indian farmers.

Unfortunately, the agricultural systemfailed to use the innovation ecosystemcreated during the green revolution tointroduce the next generation of

10disruptive innovations. In addition,owing to an absence of scalablebusiness models, India has failed totransform agriculture into agribusiness,except in certain pockets of the

11country. Approximately 70 percent ofIndias rural population still dependson agricultural activities for itslivelihood. Hence, agricultural

Agriculture

21

Figure 6: Innovation focus to address growth opportunities findings from

business-leader survey

Figure 7: Innovation focus to address growth opportunities findings from

consumer pulse survey

Information & communicationstechnologies

Biotechnology

Delivery of education, healthcare and financialservices

Agriculture

Pharmaceuticals

Outsourcing

Rural/Grassroots innovation

Space research

Nanotechnology

Green technologies

Bio-informatics

Infrastructure project execution and maintenance

High-tech manufacturing and design

Financial products

0% 20% 40% 60% 80% 100%

11%

13%

16%

24%

26%

26%

26%

32%

32%

32%

39%

47%

63%

87%

Green technologies

Agriculture

Pharmaceuticals

Information & communications technologies

Infrastructure project execution and maintenance

Biotechnology

Rural/Grassroots innovation

Nanotechnology

High-tech manufacturing and design

Financial products

Bio-informatics

Space research

0% 10% 20% 40% 50% 60%

Delivery of education, healthcare and financialservices

30%

13%

16%

18%

19%

20%

28%

28%

32%

34%

38%

40%

41%

52%

% of responses

% of responses


22/32

innovations will play a major role in Consider the problem of diarrhea,bringing social and economic growth which kills approximately 120,000to rural communities. children in India every year. Rotavirus

is the main cause of this scourge inThe potential of business-model

infants. A vaccine to eliminate thisinnovation is illustrated by Hariyali

problem is critical, as Bharat Biotech Similarly, innovation in the delivery ofKisaan Bazaar, a company that has arecognizes. With a vision to offer education, healthcare and financialchain of more than 300 rural stores.affordable, safe and effective services can help Indians surmount the

Each store offers one-stop shopping healthcare solutions to combat economic and social challengesfor country dwellers needingmankind's most dreaded illnesses, confronting them. As repeatedlyeverything from farming equipment,Bharat Biotechs rotavirus vaccine acknowledged by the Indian governmentsseeds and fertilizer to apparel,116E entered phase III human studies Five Year Plans, ineffective delivery andtelevisions and shampoo. But thein March 2009. The company plans to inappropriate quality have particularlycompany is also a pioneer in businessspend US$30 million on phase III hurt Indias education and healthcaremodel innovation, offering an array ofclinical trials alone, testing the vaccine systems. Studies conducted by thebundled services to rural consumersmainly in India on 6,800 healthy Planning Commission of India showand farmers, including financial andinfants. If the rotavirus vaccine proves that these problems stem from pooragricultural advice. It employssuccessful during this phase, Bharat targeting of resources, improperagronomists to educate farmers onBiotech expects to launch it by 2011. planning and execution, inappropriatehow to improve productivity and yield.

knowledge-transfer and poorThese experts interact with farmers on Bharat Biotech has a history of

accessibility for consumers.a daily basis, helping them to extract innovating extremely affordablemore value from their produce through vaccines for deadly infections. For Indias literacy rate of 65 percent isbetter storage and through selling to example, one dose of its vaccine one of the lowest in Asia, even thoughhigher-price markets. against Hepatitis B costs just Rs. 11 the share of GDP spent on education is

(US$0.20). A single dose is cheaper on par with the Asian average of 3.6This business model creates a virtuous15than even the price of a liter of bottled percent. The proportion of trainedcycle. The bundled services have helped 13

water in India. youths in India ranks among the lowestincrease rural householdsin the world. According to the Nationalincomeswhich in turn has expanded Biotechnology delivers benefits beyondSample Survey (61st Round), onlydemand for the consumer products improved healthcare. The Oilzapper isabout 2 percent of 15-to-29 year oldssold at Hariyali Kisaan Bazaar centers. a case in point. Developed by Thehave received formal vocationalBy creating and transferring value from Energy and Resources Institute (TERI)training, and only another 8 percentits innovative business model to rural after seven years of research, andhave received non-formal vocational

households, the company is now partly supported by the Indian training (for example, many workersselling a larger suite of consumer governments Department ofacquire skills during employmentproducts per household to a greater Biotechnology, the Oilzapper is awithout any formal support from theirnumber of households. bacterial solution that helpsemployers).decompose oil sludge, a major

polluting waste product from oil- In addition, Indias education systemrefining activities. Indias largest oil suffers from outdated curricula andcompanies now use this solution to methods of teaching that promote rotetreat their oil-sludge waste, making learning and impede innovativeInnovations in biotechnology andtheir manufacturing processes more thinking. Indias business leaderspharmaceuticals are essential if Indiaclimate-friendly while also reducing complain that only a small fraction ofis to realize the full potential of itswaste-disposal costs. More than 5,000 the countrys graduates have thedemographic dividend. Indiashectares of cropland contaminated knowledge and skills required to moveperformance in the area of health

with crude oil spills have already been directly into jobs in modern companies.suffers by comparison with all but thereclaimed in different parts of India, The head of R&D at one of Indiasleast-developed countries. The infantand more than 26,000 tonnes of oily largest oil and gas companiesmortality rate in India stands at 56 persludge have been successfully treated lamented that only 10 percent of the1000 live births, as compared with anwith Oilzapper. Such innovations have engineering graduates that Indiaaverage rate of 23 per 1000 among thepotential even beyond their domestic produces annually are actuallyremaining BRIC economies (Brazil,application, often opening up lucrative employable. The R&D head of one ofRussia and China). According tobusiness opportunities in overseas the largest automotive companies inUNICEF, 46 percent of Indias childrenmarkets. For example, Abu Dhabi India expressed the same concern.under the age of five are malnourished,National Oil Company and Kuwait Oil

making India the poorest performer in 14 Similar problems afflict IndiasCompany are both using Oilzapper.12South Asia on this measure. UNICEF healthcare system. Public expenditurecontinues to emphasize that the global on health as a share of GDP is only 0.9

achievement of the multilateral UN percent of GDP, while the average indevelopmental goals will hinge on how less-developed countries is 2.8 percent.well India can deliver healthcare to its As little as 35 percent of the totalchildren and adults. population has access to modern

Delivery of education,healthcare and financialservices

Biotechnology andpharmaceuticals

22


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23

medicine. The situation is even worse of the villages in India have bank files online, rent applications and18in rural parts of India, where only 20 access the features of a desktopbranches. Access to other financial

percent of the nations doctors, 25 through a normal web browserall atservices such as savings accounts andpercent of its dispensaries and 40 a price that is as affordable as cable TV.life, health and crop insurance also

16percent of its hospitals are located. remains limited for the rural poor.

Indias burgeoning services sector isRecognizing the latent demand lying

expected to benefit from thisBusiness leaders must recognize thatuntapped in such markets, YES BANK

technological breakthrough. Companieseducation and healthcare are notinitiated an innovative rural-financing

in this sector will be able to significantlysolely the governments responsibility. program that has benefited more than reduce costs associated with theThey must look for opportunities to2,000 farmers in the state of Jammu

purchase of software and electronicinnovate in this area. And they mustand Kashmir. The program extends

storage space (a major share of capitalresist any impulse to relegate this workfinancing of US$3.5 million for six

costs for businesspeople who areto the sidelines under the rubric ofmonths to bee-keeping nomadic

setting up a new enterprise). Bharticorporate social responsibility.farmers in North India by transferring

Airtel, Indias largest mobile telecomInnovation in this area is critical to thecredit risk from the farmers to the

operator, has already signed andevelopment of high-performancestocks of honey kept in warehouses.

agreement to offer Nivios softwarebusiness throughout India, as only aHow does this transfer work? YES

solutions to its customers on ahealthy, educated populace can realizeBANK has enrolled Kashmir Apiaries

monthly rental basis. The telecom giantthe potential offered by IndiasExports (KAE), a large honey processor

recently launched this service offeringdemographic dividend.and one of the largest exporters of

under the brand name of Airtel OnlineSigns of hope are emerging. For honey from India, in the scheme. KAE 21

Desktop.example, in the area of education, extended a purchase commitment at aMicrosoft India signed a Memorandum pre-determined price for the honeyof Understanding with the government supplied by various small farmers,of Maharashtra in 2009 to enhance the providing the bank with greater credit In many respects, India offers a fertile19adoption of ICT in schools and to build assurance for the commodity. testing ground for many types of greenthe employability of future workers in innovation. Energy intensity in Indianthe state. Three IT training academies industries counts among the highest inset up by Microsoft in Maharashtra the world. Of all industrial sectors inwill train 6,000 teachers who are India, manufacturing is the largestalready teaching in schools as well as consumer of commercial energy.100,000 aspiring teachers over the Accounting for one-fifth of India'snext two years. Microsoft will also ICT is closely linked to economic GDP, the manufacturing sector

train the teachers to share their new growth and development. According to consumes about half the countrysknowledge with other teachers outside a study by the Indian Council for energy generated for industrial use.the program. Research on International Economic Energy consumption per unit of

Relations, a 10 percent increase in production in the manufacturing ofAdditionally, the initiative will deploymobile phone penetration in Indian aluminum, cement, paper, steel andthe Microsoft Digital Literacystates delivers on average a 1.2 textiles is much higher in India than incurriculum to students in grades 11

22percent annual increase in economic other developing countries.and 12. The curriculum consists of self-20

output.paced, multimedia learning modulesAdoption of green technologies will

that introduce the fundamentals of Success in ICT products and services not only help save resources, but willcomputing to first-time users. Once has underpinned much of Indias stellar also give products manufactured withstudents complete the modules, their growth performance in recent years. such technologies a sharperlearning will be assessed. Those who But given the advent of a new competitive edge in a globalpass will be awarded a Microsoft generation of ICT innovation, India

marketplace increasingly conscious ofcertificate. As an important part of this cannot afford to rest on its laurels. its ecological responsibilities. Forskill-building initiative, the modules

example, since 2006, Indian Oil hasCloud computing is one example ofalso focus on teaching soft skillsbeen collaborating with Indias majorsuch innovation. This technology givesincluding English speaking and basicautomobile manufacturers to developorganizations an alternative to buyingsocial skills, further preparing studentsand test the commercial feasibility of17 and maintaining costly in-house ICTfor employment. hydrogen as a fuel. Indian Oilinfrastructure and enables users toestablished Indias first hydrogen fuelFinally, while not as obviously critical securely access their businessstation in January 2009 and isas healthcare and education services, applications whenever they want toexpected to open many more in theinnovations in financial services are and wherever they are. Because therecapital city of New Delhi in 2010 toemerging in India. Despite the large is no hardware or software to buy,coincide with the Commonwealthsize and depth of the Indian financial entrepreneurs can avoid many up-frontGames.system, poor citizens, especially in costs and the risk of low returns on IT

rural sections of India, still have investments. For example, Nivios cloudlimited access to formal financial computing platform lets users storeservices. As acknowledged by theReserve Bank of India, only 5.2 percent

Green technologies

Information andcommunicationstechnologies


24/32

24

Distinctive capabilitiesWhat capabilities are needed

to innovate?


25/32

The second building block of high

performance concerns distinctive

capabilities: hard-to-replicate

capabilities that enable a company to

produce offerings of unique value to

their customers. In India, forward-

thinking companies are using four

approaches to identify and exploit

their distinctive capabilities in service

of innovation.

Companies that are looking in the rightbusiness areas for innovationopportunities can still fail to spot theright opportunities. This occurs if they

are using traditional tools to identify Most important, this initiative made itpotential new markets to serve. Forpossible for young people, housewivesexample, companies tend to use sampleand entrepreneurs in semi-urban andsurveys to identify their customersrural areas with access to a computerneeds. Many such surveys are not Companies seeking to innovate must and an Internet connection torepresentative, but they still become have the right organizational and participate in financial markets.the basis for an entire innovation technological infrastructure. A rigid

strategy and its execution. infrastructure can severely impedeexecution of innovation strategies.Dainik Bhaskar, a newspaper group,Fifty percent of the C-level executiveschallenged the conventional wisdom of In seeking to build a distinctivewe interviewed claimed an unevenidentifying consumer needs through innovation capability, organizations

23 and inadequate infrastructure setupsurveys. When the group aspired to must hire and train people who are

as one of the main barriers tolaunch a newspaper in the city of Jaipur willing and able to come up with ideasinnovation (see Figure 8).with a print run of 50,000 copies, it and to experiment with them. One ofInfrastructure is especially critical fordecided to conduct an exercise to Indias largest oil retailers has tailoredachieving scale in commercializingunderstand readership patterns. The its recruitment strategies to suit itsproduct and service innovations.exercise entailed meeting as many as innovation needs. The company targets

200,000 potential customers in Jaipur. graduates from non-elite engineeringICICI is one Indian organization thatcolleges, on the assumption that studentshas strived to put in place theDainik Bhaskar used the interviewfrom these institutions have few pre-infrastructure essential to innovation.process to involve potential customersconceived notions and prejudices, andThe first bank in India to introducein the design and development of thethat they possess a strong desire toonline banking, ICICI used a flexibleproposed newspaper, by asking consumersexperiment.technological platform to capturewhat they were not getting from their

lessons from customer experiencescurrent newspaper and how they The company encourages these neweasily. Armed with the insights

would like their needs to be addressed. hires to participate in knowledge-generated by this process, the bankThrough this approach, the group building activities directly and indirectlywas able to personalize its services forgained potential readers confidence. related to their core functional area,each customer, reduce transactionAfter completing the interviews, the such as enhancing the quality of fuelerrors, and schedule customerresearch team returned to all 200,000 being utilized by the customer, andrepresentatives meetings with clientshouseholds and showed them the reducing theft. The company then letsat times convenient to customers.results. Dainik Bhaskar used these employees test the ideas they gathered

interactions as an opportunity to during these knowledge-buildingInternalizing lessons learned from itstransform the respondents into actual sessions, by providing them support toonline banking initiative, ICICI thencustomers by offering a guarantee conduct real-life experiments.launched an online brokerage platform.bond that promised them a subscription This platform integrated ICICIs Before recruiting innovators, however,price of Rs. 1.50 per copya deal business processes for cash companies must establish processes forcompared to the newsstand price of management, banking and brokerage facilitating, recognizing and rewardingRs. 2.00. These efforts paid off: the and provided customers with a single innovation. Otherwise, newly hirednew paper launched with a circulation window to complete a range of bright minds can become frustrated,of more than 170,000 copies on its transactions. and their entrepreneurial spiritfirst day the highest circulation of

extinguished.any paper in the city of Jaipur.

Deploy unconventionalmethods to definecustomer needs

Use infrastructure as adifferentiator

Recruit for innovation

25

Figure 8: Key external challenges to innovation

Lack of effective collaboration betweenindustry, universities and R&D labs

Uneven and inadequate infrastructure

Excessive government regulations

Weakness in IPR enforcement

Innovations are slow to reach market

Skill shortages

Insufficient external funding options(venture/seed capital)

Insufficient external pressure to innovate

Lack of collaboration with other firms

Insufficient growth of markets

0% 10% 20% 30% 40% 50% 60% 70%

3%

11%

18%

21%

24%

29%

34%

37%

50%

66%

% of responses


26/32

Rapidly adopt newbusiness models

one of the largest retailers of

petroleum products to leverage thevast distribution chain that the fuelretailer had across India.

Drawing insights from business modelsBut this distribution strategy was justin other sectors can enhance aone element in the companys businesscompanys innovation capabilities.model. Max New York Life also devisedResults from our interviews suggesta low-premium product that would notthat business-model innovation is toponly provide insurance cover but alsoof mind for many senior executives,act as a savings instrument for aroundwith more than half of them rating it115 million households sub-optimallyas a key type of innovation for theserviced by organized financial servicesfuture (see Figure 9).industry. The companys aim has been

Life Insurance products in India offer to bring low-income, rural and urbanan apt illustration of what business- populations into the circle of thosemodel innovation can do. Traditionally, who have access to financial services.such products have been marketed In return, the company has gainedthrough one-to-one channels; for access to Indias vast underservedexample, agents using personal market.relationships with policyholders to sellthe products. Max New York Life, aleading private life insurance player,learned from the business models ofmobile-service providers andcollaborated with retail chains toextend its reach in rural markets and

to service the under served urbanpopulation. In 2008, it partnered with

26

Figure 9: Innovation types that will dominate India in the future

% of

responses

0%

20%

40%

60%

80%

100%

Brand

26%

Business

Model

50%

Managerial

21%

Process

16%

Product

45%

Service

39%


27/32

Performance anatomyHow to innovate?

27


28/32

Indian business leaders must nurture

an innovation mindset throughout

their organization if they hope to

identify emerging opportunities and

execute their distinctive capabilities

to create win-win opportunities for

themselves and people. The following

five actions can help foster that

mindset.

In democratized organizations, a largenumber of employees feel involved andare motivated to contribute their ideas.Such open environments provide aforum for employees to provide freshthinking that can lead to innovations.More important, these environments

accelerate the innovation process.

The rollout of Tata Motors Indica,Indias first indigenously built car, lessthan three years after its inception,would not have been possible withoutworkers participation in the they introduced a slew of timely have been brought about by externalinnovation process. Equipment innovations in the areas of pricing, factors, such as changing marketoperators, organized as parts of self- packaging, marketing and supply chain, conditions. Needless to say, thisdirected teams, were encouraged to which finally resulted in strengthening process has become an integral part of

25share their ideas with designers. This the position of Marico in the coconut Tatas innovation culture.sharing catalyzed the generation of a oil segment. The learning fuelled manylarger number of ideas and encouraged other innovations that Marico

team members to make suggestions for undertook on Kaya Healthcare andimprovements. The results could be Saffola.seen in a more satisfying workenvironment for employees, moreefficient processes and ultimately the Getting employees to think ofspeedy as well as timely rollout of the promising new ideas is not easy. One

24vehicle. way to do it is to perpetuateBusinesses can further stimulate

innovation through networks ofinnovation by giving employeesemployees. Companies must createfreedom to innovate within definedstructured processes for transmittingboundaries, and by reducing the fear of

Fear can cause insecure behavior, ideas and teaching the principles offailure. In 2007, The Tata Groupresulting in operational paralysis in the innovation to all employees. SuchInnovation Forum added an unusualextreme. Fearless teams seek out new processes further nurture an

category of recognition to its Group-situations and are not afraid to do new innovation mindset within a firm,wide Innovista program. The categorythings, removing escape buttons, something almost 40 percent of ourwas named Dare to Try a categorystretching their minds, and pushing executive interviewees identified asunder which teams from companiestheir abilities further than they crucial for the future (see Figure 10).within the Tata Group were asked tothought possible.

send in innovations that failed to get YES BANK exemplifies this approach.By instilling a sense of fearlessness to the marketplace. In 2009, 28 Tata The bank has set up a crack teamwithin its workforce, Marico has been Group companies filed their called CDIS (Corporate Development,able to get the best of innovations innovations under the Dare to Try Innovation and Strategy) whose task isdelivered during the most crucial category, up from only six in 2007. to spot and implement potentiallytimes. When its footprint in the valuable new ideas. CDIS is alsoBy instituting this award, the Groupcoconut oil segment was threatened by responsible for evangelizing innovationhas found a way to reward risk takersa player much larger than its size, across the organization. To further

and reduce the fear of failure.Marico transformed itself into a inculcate an innovation mindset acrossInnovators in the company now have acombative organization based on its branches and employees, YES BANKplatform to discuss and learn frominnovative ideas of its fearless is also planning to launch Innovationtheir failures. Moreover, this processworkforce. Within a short span of time, circles small groups that will tacklehas shed light on creative errors that

Democratize theinnovation process

Employ networks toshare ideas across thecompany

Encourage rebound fromfailures

Instill fearlessness

28

Figure 10: Enablers of innovation in the future

Nurturing innovation

Increased entrepreneurship

Inspirational leadership

Identification of markets at the bottom

of the pyramidIncreased competition

Enhancement in quality of infrastructurerequired for innovation

Increased access to desired talent

Increased collaboration with firms

Increased government spending on innovation

Formation of innovation clusters

Increased per capita incomes in India

Increased access to differentfunding instruments

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

3%

3%

5%

11 %

13 %

13 %

16 %

18 %

18 %

26 %

32 %

39 %

% of responses


29/32

29

innovation in a structured manner. Thisapart, YES BANK has a group of 125mentors and a Branch ExecutiveLeadership Team (BELT), who networkwith employees across branches to

26think differently.

Engaging with talent either directly orthrough different channels to createfuture innovators is critical. This callsfor proactively engaging with a varietyof stakeholders towards creating aninstitutional and regulatoryenvironment facilitating sustained andproductive engagement withinnovative minds outside companies.Such engagements can either bethrough formal or informal channels.

Recognizing the importance ofnurturing innovative mindsets outsidethe company, one of the pioneeringbiotechnology firms in the countryworked with the Department ofBiotechnology, Ministry of Science andTechnology to establish the SmallBusiness Innovation Research Initiative(SBIRI) that provides risk capital toinnovators in the biotech industry.

SBIRI supports high risk, innovativepre-proof of concept research andearly stage development (phase-I)projects as well as late stagedevelopment and commercialization as(phase-II) projects. This initiative has avery strict screening procedure thatonly selects disruptive innovations andthe smartest of ideas.

According to the senior executive ofthis leading biotechnology firm suchengagements act as a testing lab for

the best ideas and encourage a largernumber of research scholars comingout of universities to venture intoturning their ideas into commerciallyviable innovations. This initiative todayhas helped in facilitating researchtowards development of cost-effectivemedication for life threateningdiseases such as prostrate, breastcancer and typhoid.

Nurture innovativemindsets outside thefirm


30/32

A realistic goalEven thinking about stepping up a Achieving high performance through

companys innovation efforts can be innovation will require disciplined

intimidating. But it is essential if management of the entire innovation

Indian business leaders hope to processfrom insight development to

harness the unique advantages of their marketplace launch. If companies can

surroundings and innovate effectively. recognize the right areas for

innovation, create the distinctiveIndia stands at a threshold, where

capabilities needed to execute theirmany companies have the potential to

innovation strategies and foster anbecome high performers over the next

entrepreneurial mindset in theirdecade by effectively unlocking long

workforces, they will lay a solidterm value from growth opportunities

foundation for national andunfolding in India. To fulfill that

international competitiveness and forpotential, business leaders must stay

high living standards throughout India.focused on their companies growthopportunities and use innovation to

grasp these opportunities.

30


31/32

13 25Vaccine cheaper than a bottle of Encourage 'creative errors' to fosterReferencemineral water, DNA, February 24, spirit of risk taking, Economic

1 2009, http://www.bharatbio Times, October 9, 2009,The Coming Death of Indiantech.com/ Bharat%20Biotech% http://economictimes.indiatimes.comOutsourcing, Forbes.com, February20Story%20DNA%20India.pdf /features/corporate-29, 2008.

dossier/Encourage-creative-errors-142 Oilzapper: eliminate crude oil spills,For more on this initiative please to-foster-spirit-of-risk-manage oily sludge, TERI Caseread at: http://www.hole-in-the- taking/articleshow/5104324.cms

Studies, http://www.teriin.org/wall.com/abouthiwel.html 26index.php?option=com_casestudy&t Banking on Innovation, M. Anand,3 NSSO 2006-07 findings. ask=details&sid=6 Outlook Business, September 19,4 2009.15Rural retail opportunity expected to UNESCO Institute of Statistics.

grow to Rs. 2400 billion,16

Whats ailing healthcare in India?,http://www.moneycontrol.com/news/Business Line (The Hindu), Augustbusiness/rural-retail-opportunity-22, 2008.expected-to-grow-to-rs-

172400bn_305251.html Maharashtra Government and5 Microsoft India sign Education Alliance,Rural market revenues for life

information sourced from Officialinsurers to touch US$ 2.9 billion byPress Release from Microsoft India,2015, June 1, 2008,

http://www.microsoft.com/india/http://www.livemint.com/2008/06/0 msindia/Details.aspx?Id=1741121848/Rural-mkt-revenues-for-18life-in.html Reserve Bank of India IT players

6 indifferent to financial inclusion,Rural pharma: next engine forJuly 19, 2009, http://www.indiamicrogrowth for industry, Gopal Modi,finance.com/microfinance/rbi-nbfc/April 5, 2008, http://sify.com/financereserve-bank-of-india-it-players-/fullstory.php?a=jegnFoagehf&title=indifferent-to-financial-inclusion.htmlRural_pharma_Next_engine_of_gro

19wth_for_the_industry&tag=rural YES BANK bags Deal of the Year7 Award, April 4, 2007,Microcapital Story: Cisco, SIDBI and

http://www.yesbank.inTREC-STEP Partner to Create ICT/releasedisp.php?pid=277Entrepreneurship Pilot Project in

20Tamil Nadu, India, www.microca The Impact of Mobile Phones,pital.org, November 25, 2008. Moving the Debate Forward, Policy

8 Paper Series. No. 9, ICRIER.HUL soaps away the CO2 footprint,21Business Standard, September 23, http://airtel.nivio.com/ store.html

2009.22

Determinants of Energy Intensity: A9Time ripe for a green revolution: Preliminary Investigation of Indianexperts, Mandakini Gahlot, Manufacturing, Sahu, Santosh andSeptember 25, 2009, Narayanan, K, IIT-Bombay, April 16,http://www.expressindia.com/ latest- 2009.news/time-ripe-for-a-green-

23This case study has been developedeconomic-revolution-xperts/521253/based on the chapter titled Dainik10

Agricultural R&D in India: Growth, Bhaskar: No. 1 from Day One in theEquity and Institutional Changes, publication titled How 11 Indianschapter VIII from the book Indias Pulled off the Impossible MakingAgricultural Challenges: Reflections Breakthrough Innovation Happen,on Policy, Technology and other Porus Munshi, Marico Innovationissues, CENTAD. Foundation Erehwon Innovation

11 Consulting, Collins Business, 2009.Agri-business and Rural24Management in India-Issues and Tata Indica: Indias first

Challenges, Dr. V. Basil Hans, indigenously designed car, in theSeptember 21, 2008, Electronic copy publication Innovation andavailable at: Innovativeness The Tatahttp://ssrn.com/abstract=1271622 experience, B Bowonder, Shambhu

12 Kumar, Rajeev Kumar, and AmitState of Asia Pacific s ChildrenShridharan, May 2009.Report, UNICEF, 2008.

AuthorsRaghav Narsalay, Aarohi Sen

Project TeamRahul Chakravarti, Katharine Hirst,Mamta Kapur, Smriti Mathur

Senior Editorial TeamTim E. Cooper, Anish Gupta,David Light, Paul F. Nunes,Armen Ovanessoff, Mark Purdy,Matthew C. Robinson

We would also like to thank thefollowing individuals for theircontributions to this study:Anish Augustine, Aseem Kumar,Kamal Singh, Giri Subramanyam,Rekha Sethi and Susan Scott-Ker

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