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.)