There’s this series of videos of Harvard Business Publishing on YouTube I came across recently, a good number of which are dedicated to the theme of innovation. One of them, which I found to be of relevance to markets like India is a short interview of Prof.Vijay Govindarajan, Earl C. Daum Professor of International Business at Tuck School of Business (Dartmouth College). (To know more about Prof.VG, as he is popularly known, visit here and his blog)
In this video, VG is asked as to what must managers do to facilitate innovation in their organizations. To this, VG points out that “Change is less of a technical problem, but more of a mindset issue, an organizational issue”. To deal with this, he proposes injecting new blood into an organization; in fact, he feels that the new recruits must be from an area of technology different from the organization’s core technical expertise.
As to how should an organization deal with resistance to change, he recommends three steps-
1. People, according to him, respond to how they are measured and rewarded. So to a large extent, performance measurement criteria dictate talent’s attitude and approach to innovation.
2. As a corollary to the first step, he says innovation by definition means doing something different, which also means, that failure is to be expected and tolerated (but not necessarily encouraged…). Therefore, this needs to be factored in the performance measurement mechanism of the organization.
3. The third step is to inculcate the willingness to collaborate. To quote him, “creativity is an individual effort, whereas innovation is commercialization of creativity, which requires organizational effort”.
I think each and every one of VG’s observations applies to our (Indian) business models because they are perceived as “safe” business models (with increasingly notable exceptions, without doubt). This reality or perception needs to be changed because the openness and ability to accept and absorb failure is absolutely central to fostering and sustaining innovation (I shall deal with this point at a more operational level in the next post).
Ironically, there is no dearth of entrepreneurs in India and the popular opinion about India vis-a-vis China is that we are seen as having keener entrepreneurial spirits, and yet this does not seem to translate to greater emphasis on innovation. Is this because we lack resources, creative or capital, or the heart to withstand “innovational” setbacks, or more importantly, team work? This probably calls for some serious introspection.
When asked to name the top 3 innovations that come to his mind, VG names Tata Nano as one of them and says there are lessons for developed markets to learn from the Nano experience. He says that the first take-away is to realize that “emerging markets, like India and China, are fundamentally different from developed markets”.
Both India and China together account for 2.5 billion people and VG says “there’s 5000 years of pent up demand”. That said, he observes that India and China have “micro-customers”, which forces players from developed markets to devise “ultra low-cost business models”.
In other words, he says, the very same products, which players from developed markets vend in their domestic markets, have to be “reinvented” for them to find acceptance in India and China. In the process, he says, there’s a good chance these reinvented low-cost products for emerging markets may disrupt the business models of the players in their home markets.
Simply put, a cheaper Ipod for India could play truant with Apple’s plans in the US. This probably explains (and I could be wrong here) why products are released in phases across markets so that, by the time a cheaper version (cost-wise) of a product X is introduced in India, the demand for X is more or less on the decline in the developed market; or probably, an advanced version has caught the fancy of the customers in the developed markets and X does not figure any more in their list of choices.
The Legal Angle
The “hard” legal inference that one could probably draw from the above hypothesis in the video, is that simultaneous/co-extensive IP (patent) protection for an advanced technology in developed and emerging markets serve different purposes- strictly speaking, protection makes commercial sense in the developed market, but serves a defensive purpose in the emerging market.
Stated otherwise, as regards IP protection, there’s an immediate need in the developed markets to ensure that competitors do not end up enjoying the fruits of one entity’s research and development efforts; however, as far as the emerging market is concerned, the idea or reason behind patent protection could be to ensure that, although the demand for the product may not be as high as it is in a developed market, low-cost manufacturers in the emerging market are excluded from commercializing the technology.
This way, players from developed markets may stand a decent chance of selling their high-cost products at comparable costs even in developed markets. Of course, all this is based on the assumption that there is some demand in the emerging markets.
Even in the absence of demand, IP protection in emerging markets could always have a psychological effect- players from developed markets could continue to project their technological superiority by flaunting the number of patents they hold.
These are preliminary thoughts (not in any way novel) and I hope to build on them soon. In the next few posts, we’l discuss “reverse innovation” and the similarities between legal and scientific research.