Mindtree bets on crowd-sourcing of business ideas to drive growth

Software exporter Mindtree is betting on internal crowd-sourcing of business ideas as it chases growth and seeks to stay in sync with the evolving technology needs of enterprises.

With the outsourcing industry confronted with rapid technology changes and exacting customers, the $437 million ( 2,750 crore) company has turned to its more than 12,000 employees to come up with innovative solutions. So far, it has commercially launched two service offerings based on ideas proposed by employees.

 Two years ago, when it first started doing it in a formal way, the company generated 120 ideas and shortlisted one, which it then estimated had the potential to generate sales of $ 50 million over five years. This year, it hopes to get some 200 ideas and shortlist 2-3 of them.

"Our customers are not only looking for services, but solutions and proactive value-add from us. We felt Mindtree has reached a certain level of maturity and it is time for us to create a platform to meet such aspirations," said Srinivasan Janakiraman, president and chief technology officer, Mindtree.

The crowd-sourcing initiative came about after the success of an employee's idea that led to a solution centered around a digital video surveillance product to help analyse digital video streams from multiple cameras to search for patterns.

 "There was a shift from analog to digital, and we wanted to ride that change," said Sharmila Saha, technology evangelist at Mindtree and originator of the idea. The success of the digital surveillance product prompted Mindtree to launch a formal process to crowd-source ideas from employees in 2011. It was called the 5/50 programme, referring to the idea's potential to garner $50 million in sales in five years.

"The real test happens when these ideas get rolled out," said Sharad Sharma, software product evangelist, angel investor and a former Yahoo! India R&D chief. Today, the digital surveillance solution has over 15 customers in the domestic and overseas markets. So far, its application has primarily been in security but Mindtree is now looking at extending it to the retail industry where there is a lot of interest in consumer behaviour.

"The employees are not just idea-givers. They should have the potential to translate it to a business," said Janakiraman.

To incentivise employees, Mindtree has instituted a reward mechanism where the employee stands to earn ten to twenty times the variable pay if the idea can be converted to a successful revenue-earning business. The employee formulates a business plan with the help of the chief strategy officer and the team and nurtures it into a business, like any entrepreneur would.

A cloud management and security software VMUnify - the result of an employee's idea from 2011 - won two customers last quarter after its launch six months ago. Mindtree expects both the cloud and the digital surveillance software to break even in the next year.

Industry body Nasscom said that more companies will look internally to generate fresh ideas.

"Clients are asking what more can you deliver and service providers often look within the organisation for new ideas. We hope to see more and more of this," said Nasscom president Som Mittal. 

 

 

Does India need innovation?

At a recent workshop on innovation, a young faculty colleague asked a very fundamental question: why does India need innovation? His argument was simple — “Look at China, it has done much better than India. It has better infrastructure, better social services, and is the manufacturing capital of the world. Why re-invent the wheel, just copy what China has done?”

So, does India need innovation?

This question needs to be answered at two levels. The first is at the level of an individual organisation, the second at the national level.

NEED FOR INNOVATION

According to economists, the need for innovation arises only once you reach the productivity frontier. And, reaching the productivity frontier just involves imitating the best practices of others.

From my experience, it’s rarely as simple as that. I am reminded of an Indian company that licensed its manufacturing technology from a Japanese company. But, in spite of its best efforts, it could not match its collaborator in terms of yield from the production line. The collaborator had some tacit knowledge about the process that was not conveyed through the formal designs and drawings that were shared with the Indian company. This might even have been deliberate - the collaborator might have wanted to prevent what has been called the boomerang effect, that is, having to face competition from a company to which it had licensed its technology. It took years of intense effort by the Indian company to catch up with its collaborator.

Indian companies had to innovate in the past to adapt processes to Indian materials and intermediates. Steel companies had to adapt their processes to the lower calorific value and higher ash content of Indian coals. Indian refineries had to put in place additional de-sulphurisation processes to use Indian crude. In the automotive sector, regulation in the form of tighter pollution control norms has been an important driver of innovation.

With foreign competitors looking at India as a large growth market, Indian companies are finding it difficult to source complete technologies from others. Even if available, they are often too expensive. And, with the growing emphasis on intellectual property, the option of copying without paying is fraught with negative consequences.

In such a situation, innovation, at least at the system level, becomes inevitable. Take the case of Tata Motors and Mahindra, both of which decided to design and manufacture cars/SUVs of their own design in the late 1990s. Their solution was to work with multiple vendors from across the world who could provide them knowhow and designs for different sub-systems that go into a vehicle. Both Tata and Mahindra had to manage innovation at the system level, playing the role of a system integrator to make sure that all the sub-system designs they were sourcing meshed well with each other.

INNOVATION FOR INDIA

At the national level, it was only around 2009 that innovation entered the policy lexicon when the Government announced its intention to observe the next decade as the decade of innovation. Why did the Government suddenly embrace innovation? It was essentially due to a realisation that given our resource endowments we could not hope to achieve our national goals within a reasonable time by imitating the developed world. The US healthcare system, for example, costs the country 20 per cent of its GDP. Emulating it would never be viable in a much poorer country such as ours, which has four times the population of the US.

The desire for innovation in India has, thus, been driven by a search for low-cost solutions to public problems. Does this mean lower quality? My faculty colleague thought that it would. He felt that we should follow the gold standard rather than make any compromise!

The main attractiveness of innovation in India is the evidence that such a trade-off is unnecessary. This is most visible in the healthcare sector where Aravind Eye Care, Lifespring Hospitals and Narayana Hrudayalaya have shown that it is possible to achieve the best international levels in terms of quality in cataract surgery, obstetrics and cardiac surgery, respectively, at costs that are much lower than anywhere else in the world.

Several innovation leaders, including R.A. Mashelkar and Anil Gupta, have taken this a step further by arguing for “good enough” solutions that permit steep decreases in costs, even if they don’t offer a perfect solution. Consider, for example, the Jaipur Foot, a prosthetic limb technology that costs 200 times less than the “latest” prosthetic options available in the developed world. This allows it to be offered to poor people for free.

LEARN FROM OTHERS

Does this mean that innovation is always the best solution? No and yes. There exist, around us, examples of others who have solved similar problems, and imitating them can be an effective way of solving our own problems. And, we don’t need to go as far as China. As Jean Dreze and Amartya Sen point out in their An Uncertain Glory: India and its Contradictions, States as diverse as Kerala, Tamil Nadu, Himachal Pradesh and Chhatisgarh are Indian “bright spots” that have founds ways to provide better public services to their citizens. Other States can learn from what these States have been doing. Yet, there will always be a need for adaptation of “best practices” to suit the local context. And, a need to involve your own people in this adaptation process to avoid rejection of new ideas due to the famous “not invented here” syndrome.

Innovation is not a mystical activity or process. It’s the application of new ideas to solve problems with resultant benefits to different stakeholders. New doesn’t necessarily mean “new to the world.” In fact, such a high degree of novelty is rare. “New” can simply mean not done before in a particular context. Successful innovation requires multiple iterations of testing and refining ideas till the problem is solved. As long as India has as many problems as it does today, innovation will have an important role to play.

(Beyond Jugaad is a monthly column. The writer is a Professor of Corporate Strategy and Policy at IIM Bangalore and author of From Jugaad to Systematic Innovation: The Challenge for India.)