BUILDING AN INNOVATION ECO SYSTEM IN INDIA

As Sahrawat rightly notes, the ability to take “risks” is a very important factor in incentivising innovation. And this may perhaps explain why despite our software prowess, we are still not known for any significant “innovative” IT products. Rather, the easy money that comes with our “services” model in the IT sector (where we build products for others or service their software/applications) has kept us from taking risks and building innovative IT products.

The lack of such a “risk taking” culture extends even to venture capitalists–who need to realise the importance of opening their purse strings to encourage new and innovative ideas/technologies, as opposed to betting on the traditionally “safe” products and services.

Apart from the factors that he’s mentioned, a key factor is the presence of an “innovation culture” i.e. are Indians sensitive to the importance of “innovative ideas” and do our companies have the ability to recognise and capture innovative ideas by their employees? Unless we have such an “innovation” culture, a lot of great ideas may be wasting away.

Recollect an earlier post on SPICY IP that spoke about focussing on a comprehensive Innovation Policy, of which IPR is just one component, albeit an important one (I reproduce the critical para below):

“We also need to understand that innovation is not about intellectual property alone, but is dependent on a host of other factors such as levels of skill/education, infrastructure etc. We need to therefore build a comprehensive framework for encouraging innovation. Perhaps the time is ripe to constitute another “Ayyangar” like committee to help us determine what the optimal “tautness” of our patent/innovation policy string ought to be in today’s “knowledge economy”.

Singapore bears this point out quite well. Singapore put in place a fabulous IP regime, but is not really known for its indigenous innovative capability. The patenting figures in Singapore are quite telling:

Of the total 8605 applications filed in Singapore in the year 2005, only 572 (a mere 6%) were from Singaporean nationals. In other words, if patents (or in this case, patent applications) are treated as proxies for “innovative capability” (I’m not a huge fan of this metric), then Singapore’s indigenous innovation is at an extremely low level. Contrast this with the US, where more than 50% of the total number of applications (about 400,000 yearly) are filed are by US residents.

These figures may of course stem from the fact that just as “one swallow does not a summer make”, an IP regime does not an innovative economy make…. in other words, merely having a robust IP regime does not necessarily translate to an innovative economy. Or perhaps, we need to give Singapore more time to work its indigenous patenting figures up.

Anyway, here is the text of the article by Sahrawat:

“Despite the existence of sophisticated demand conditions for automotive products in India due to the booming Indian automobile industry, an Indian innovator found more receptivity for his innovation outside India than in his own ‘home-market’.

Recently I met with a young entrepreneur who had contacted NASSCOM for some assistance related to his overseas travel. While speaking with him in order to get a better understanding of the issue, I came to know that he and his colleagues had developed an innovative application and were planning to demonstrate it to overseas automobile firms who had shown initial interest. When I queried him on whether he had met with Indian automobile firms, his response was that it is very difficult to meet with the relevant people in Indian firms and he had better response from overseas automobile firms.

The most interesting thing about this little anecdote is that despite the existence of sophisticated demand conditions for automotive products in India due to the booming Indian automobile industry, an Indian innovator found more receptivity for his innovation outside India than in his own ‘home-market’ I am quite sure that this is not a one-off happening and there are many more such examples of Indian innovators struggling to market their innovations in India, resulting in them either selling overseas or just giving up.

Innovation journey

Would an innovator in Santa Clara (USA) or Krista (Sweden) or Haifa (Israel) face this predicament? While it is difficult to say an unequivocal no, it is safe to assume that the probability of this happening would be low. A reason for this is the existence of sophisticated and mature innovation ecosystem in each of these regions which provides the supporting enablers and linkages among the various stakeholders required for an innovation to succeed in the market place. Stripped of all the verbiage, an ecosystem is nothing but a system of interconnected stakeholders (institutions and individuals) whose linkages enable efficient production, diffusion and use of new, and economically useful, knowledge. Typical constituents of an innovation ecosystem are academic institutions, firms, research institutions, venture capital firms, angel investors, national and local governments and the entrepreneur.

Reluctant to invest

Mere presence of these stakeholders is not enough. What is more important is that each of these stakeholders mutually reinforces each other by playing their role simultaneously and efficiently. Having an idea is only the first step, perhaps the easiest part of the innovation journey. Converting the idea into a commercially successful innovation in the market-place requires an innovator to have easy access to the resources of an ecosystem. In-spite of the recent surge in awareness of innovation in India, the Indian innovation ecosystem is quite immature when compared with mature ecosystem present in places like Santa Clara, Haifa, Krista etc. Even a place like Bangalore which is widely recognised as India’s innovation hub, scores quite weakly when rated on both the maturity of stakeholders and the strength of linkages between them.

Let us examine each of the stakeholders of the Indian innovation ecosystem. While risk capital availability has increased in recent times in India, most of it is deployed as later stage or private equity investments in relatively low risk areas, thereby creating a large gap in availability of seed capital, especially for high risk innovations. Firms continue to focus on factor based competitive advantages and are consequently reluctant to invest in disruptive innovations. While it is true that Indian research institutes face both a fund and skill shortage, antiquated attitudes and stifling procedures result in research outputs often being disconnected from industry needs. Government continues to tinker with the innovation related regulatory framework rather than adopting bold reforms and government innovation investments are often un-coordinated, resulting in overlaps and effort duplications. Suffering from resource and faculty shortages, the secondary and tertiary level academic institutions continue to offer curriculum and pedagogy which is hardly relevant in today’s environment. However some recent trends provide a silver lining.

Firstly, the rapid increase in the number of MNC firms establishing R&D facilities in India, will result in the creation of a pool of Indian professionals experienced in working on cutting edge technologies but more importantly who are well versed in innovation management practices of some of the leading innovative firms. Secondly, the increasing numbers of Indian Diaspora returning to India are bringing with them not only innovation experiences but more importantly their relationships with stakeholder networks of leading ecosystem. Thirdly, skills shortages and rising factor costs are forcing Indian firms to look at developing their innovation capabilities and knowledge based competitive advantages.. There is no silver bullet which can create a mature innovation ecosystem in India. It can happen only through concerted, bold and simultaneous actions by all the key stakeholders.

Intellectual Property

The Government has to undertake vigorous reform in areas of IPR enforcement, facilitate seed capital availability, promote domestic R&D, provide autonomy to educational institutions and better manage its innovation initiatives. Firms have to set their innovation aspirations high, invest in developing their innovation capabilities, forge sustainable partnership with academia and research institutes, and get rid of the ‘not invented here’ mindset. VC firms need to transform as providers of risk capital rather than safe capital by increasing investments in start-ups engaged in breakthrough innovations.

Research institutes should balance invention with innovation through increased collaboration with industry. India today stands on a unique cusp of history where one of the world’s youngest population is transforming a scarcity driven mindset into an aggressive ‘can-do’ attitude. The billion problems of India provide a fertile environment for innovations which can benefit society in India and elsewhere. However, making these innovations happen will require an ecosystem which encourages innovators to take risks and nurtures them on their innovation journey. Perhaps than Indian innovators will not have to travel overseas to have their innovations appreciated.”