Eighteenth Naval Tata Memorial Lecture

Final Version (dated 12 August, 2010)

Indian Decade of Innovation

R.A. Mashelkar, FRS President, Global Research Alliance

Monday, 30th August 2010

1 I feel deeply privileged and honoured to have been invited to give the 18 th Naval Tata

Memorial Lecture. Naval Tata was a doyen among industrialists, a unique philosopher of employer-employee relations, a compassionate administrator, a humane social worker, and above all, a very special human being. His sustained commitment to creating a congenial climate at the national level for industrial harmony through healthy and mutually respectful industrial relations between labour and management was truly unmatched. I greatly appreciate this opportunity to pay my tribute to this great son of

India.

This lecture, associated with the name of Tatas, means something special for me. It was Sir Dorab Tata Trust Scholarship of Rs.60 per month for six years, fifty years ago, that helped a boy, who would have otherwise left his studies, since his poor widowed mother could not afford to pay for his higher education. But for the House of Tatas, this boy would not be standing before you and delivering the 18th Naval Tata Memorial

Lecture.

But House of Tatas is much more than one giving thousands of Mashelkars an opportunity to become something in their lives. House of Tatas is not just a House of

Wealth, it is a House of Ethics. It is a House of National Pride. It is a House that has upheld our national prestige for over a century. Let us proudly recall the events of a century.

2 House of Tatas and National Pride

In the early 20th century, when Jamsetji Tata wanted to produce steel, he was ridiculed.

Sir Fredrick Upcot went to the extent of saying “We will eat every pound of steel, if you can produce it”. In his mind, it was impossible for an Indian company to produce steel.

Yet the irony is that not only did the Tatas produce steel in the early part of the 20 th century, with the establishment of Tata Steel in 1907, but exactly after one hundred years, they were producing steel in England’s backyard, when the acquisition of Corus was completed in the year 2007!

But then the story after India’s independence continues to be even more exciting. The technological innovations by Tatas have made the nation even prouder. It was British

Morris Oxford that was being sold as Indian Ambassador on Indian roads. Within less than 50 years, it was Tata Indica that started getting sold as City Rover on London roads! And then came the acquisition itself of Jaguar Land Rover, something that took the entire world by surprise.

By an interesting coincidence, both Ratan Tata and I were there in Cambridge

University in late June this year. On 21 June morning, Ratan Tata got an honorary doctorate from Cambridge University, a great honour indeed. In the evening of 21 June,

I gave the Inaugural BP Lecture at Judge Business School of Cambridge University. A dinner was hosted in the honour of Ratan Tata by the Cambridge University on 20 June. 3 I was also invited to attend the dinner. During the dinner, a Cambridge Professor sitting next to me pointed towards Ratan Tata and said ‘Do you know, you are looking at a man, who is the number one employer in the manufacturing industry in UK’. I was, of course, very proud to hear that. Can you imagine the wheels turning the full circle and an Indian becoming the biggest employer in manufacturing industry in Britiain, a country that ruled over India for 200 years!

Ladies and Gentlemen, that is why I say House of Tatas is a House of National Pride.

And that is why I would further add that this lecture is not only a tribute to Naval Tata but also to the spirit of Tatas.

Indian Decade of Innovation

Indian Innovation is the theme of my lecture today. This lecture on Innovation is triggered from the address of our President to the Indian parliament on 4 June 2009.

The President had made a promise to the nation.

“My Government will ensure that its policies for education and science and technology are imbued with a spirit of innovation so that the creativity of a billion people is unleashed. The next ten years would be dedicated as a Decade of Innovation”.

Our Prime Minister promptly responded to this clarion call. In his speech at the Indian

Science Congress on 3rd January 2010 in Trivandrum, he declared:

4 “ Our Government has declared 2010-2020 as the ‘Decade of Innovation’. …… We cannot continue with business as usual. …… The country must develop an Innovation

Ecosystem to stimulate innovations. Innovators must be challenged to produce solutions our society needs. And innovative solutions with potential must be nurtured and rapidly applied”.

So 2010-2020, ladies and gentlemen, is the Indian decade of innovation.

How is India doing on innovation? World Economic Forum has produced an innovation capacity index for 134 countries in 2008. The ranking is India (35), as against Brazil

(27), China (25), UK (14), South Korea (9), USA (6) and Japan (2). What should we do in this ‘Indian Decade of Innovation’ by which we can climb to be amongst the top few?

Let me give you some of my thoughts on how by the end of this `Indian Decade of

Innovation,’ we could create an ‘Innovative India’ with a difference.

Down the Memory Lane

When I heard our Prime Minister’s announcement, I went down the memory lane. The incident is linked to an award that was again associated with the name of Tatas. I remember receiving the JRD Corporate Leadership Award on 21 February 1999 at the hands of the then Hon’ble Vice President of India. In winning this award, I succeeded my friend Narayana Murthy (Infosys) and I was followed next year by Azim Premji 5 (WIPRO). Giving this award, really meant for businessmen, to a scientist was itself an innovation! But after all, innovation is all about doing things differently!

Be that as it may, I had ended my award lecture with a passionate appeal:

“ ” Finally, 1999 should be the year, where we should launch a powerful national innovation movement to propel us into the next millennium. It is only through the process of innovation that knowledge can be converted into wealth and social good.

Through this movement, every citizen, every constituent of India must become an innovator. The I in India, should not stand for imitation and inhibition, it must stand for innovation. The I in IIT must stand for innovation. The I in industry, the I in CSIR must stand for innovation. The I in every individual Indian must stand for innovation. It is only this innovative India that will signal to the rest of the world, that we are not a hesitant nation, unsure of our place in the new global order, but a confident one, that is raring to go and be a leader in the comity of nations”.

So I am personally delighted that the decade of innovation (2010-2020) has been formally announced by the Prime Minister of India.

Innovation : A Buzz Word Around the World

But it is not India alone. It is the whole world that is buzzing with ‘innovation’.

6 European Union (EU) had declared 2009 as the year of creativity and innovation. On

June 7th last year, the US President Obama, in his Cairo address, said ‘education and innovation will be the currency of the 21st century’. During 2-5 June, 2009 the first

Global Innovation Leaders Summit (I-20), fashioned on G-20, was held in San

Francisco. I was invited to represent India. I-20 accepted Norway’s suggestion of introducing a Nobel Prize for innovation. So ‘innovation’ dominated the agenda from

New Delhi to Trivandrum and Cairo to San Francisco. Why?

Why Innovation

Why is innovation important in the first place? It is with innovation alone that one can translate knowledge into economic growth and social well being. Innovation leads to a new and better product or service, or a new and more efficient, or less costly way of producing, delivering, or using that product or service. Innovation paves the way to get more output or welfare from limited resources.

But then what is innovation itself? A brief but powerful definition of innovation due to

Schumpeter, which has stood the test of time, is “Innovation is a successful exploitation of a new idea.” Here the key words are “new idea”, “exploitation,” and

“successful.”

7 What Innovation is and What it is Not

First the issue of a ‘new idea.’

The idea may be new to the world as a whole, new to a country, new to a sector, or new to an individual. These distinctions are important, particularly from the perspective of developing countries, because there is a tremendous amount of knowledge available easily, and for free, which they are not using. If countries or firms devise better policies to acquire and exploit that knowledge effectively, they can greatly improve the prospects of their growth and welfare.

Then there is the word “exploitation.”

This word lays emphasis on the fact that an idea must have been executed successfully so that we have products in the market place that are actually used by the consumer, or a service that is actually used by the intended beneficiaries. Here mere “demonstration” of an idea in a laboratory, may be through the construction of a prototype, does not suffice. Many such prototypes lie in our national laboratories and in our universities without finding a place in the market. They do not constitute innovation.

And finally, there is the word “successful.”

This means the idea has been executed in a successful way, capturing the speed, scale and sustainability that goes with success. If the idea is not executed speedily, 8 then the competitors may capture the markets, leaving the original innovator high and dry. If the scale is not what the idea was meant to capture, then again it will not be considered successful. And finally, if the sustainability is not achieved, then again the innovation will not be successful.

Dabbawalas: A Successful Indian Innovation

Let me illustrate the essence of a successful innovation by citing an Indian innovation that has the key words, ‘new idea’, ‘exploitation’ and ‘successful’ written all over it.

Just look around in this city of Mumbai. A humble tiffin delivery network comprising

3500 dabbawalas, delivers around 150,000 lunch boxes to citizens in Mumbai each day.

The dabbawalas have the six sigma rating or an efficiency rating of 99.999999, which means one error in one million transactions. This rating has been given to them by

Forbes Global, the famous American business weekly. Now, these are largely illiterate dabbawalas. Their secret lies in a coding system devised over the years. Each dabba is marked in an indelible ink with an alphanumeric code of about 10 characters. In terms of price and the reliability of delivery, say compared to a Federal Express System, dabbawalas remain unbeatable. Their business models have become a class room study in some management institutes.

You can see that the innovation by our Dabbawalas meets the definition of innovation that we had articulated earlier. First is the ‘new idea’ of using alphanumeric code of about 10 numerics. Second is the issue of ‘exploitation’. It is actually used in practice. Finally, it is

9 ‘successful’, because it is used to deliver 150,000 lunch boxes each day. And also it is sustainable, since it is being used for years now.

Need for a National Innovation Ecosystem

Our Dabbawalas were successful. But have we been always successful in India in making the innovation journey from an idea to its successful execution in the Indian market place? Not always. Raman effect was discovered in India but its successful application in making Raman scanners came from abroad. It was Sir J.C. Bose, who originally invented the idea of an iron-mercury-iron coherer, which formed the basis of wireless. But it was Marconi, who not only got credited with the patents on wireless but also its subsequent commercialization. And the journey continues even today. Ashok Jhunjhunwala of IIT, Madras developed the wireless local loop technology. It got implemented first in Madagascar, Angola and Brazil before it did so in India! And I can go on giving more such examples.

Why do we fail in completing the journey from an Indian mind to an Indian market place? Because India lacks a powerful national innovation ecosystem. And that is why our Prime Minister has given a priority to our creating a ‘National Innovation Ecosystem’. How do we build such a system?

The essential elements of a powerful innovation ecosystem comprise physical, intellectual, social and cultural constructs. Beyond mere research labs, it includes idea incubators, technology parks, conducive intellectual property rights regime, enlightened regulatory systems, academics who believe in not just ‘publish or perish’, but ‘patent, publish and prosper’, potent inventor-investor engagement, and passionate innovation leaders.

The essential elements of innovation ecosystems also involve organizational autonomy & flexibility, Institutional integrity, risk capital, web access, utility & tools, multi 10 disciplinary collaborations, incentivized young talent engagement with diaspora & global talent, innovative media, outreach programs, etc. I am very hopeful that the National Innovation Council set up under the dynamic leadership of Sam Pitroda will help build such ecosystem as we begin the design and execution of this Indian Decade of Innovation.

Inclusive Innovation Strategy for India

Innovation today is widely recognized as a major source of competitiveness and economic growth for all countries – advanced and emerging economies alike. Its significant role in creating jobs, generating incomes and improving living standards is now well understood. But while commonly perceived to be only applicable to a small number of relatively successful emerging economies, innovation has the ability to

‘include’ hundreds of millions of resource-poor people as its beneficiaries and innovators. Instead of viewing innovation strictly in terms of competitiveness and as a strategy to support high value-added employment, it should also be conceived as a means of providing ever larger sections of people in the bottom of the pyramid access to essential necessities of life. This means a focus on `inclusive innovation’.

Fundamental Shift in Paradigm: Getting “More from Less for More”

The drivers for innovation in the developed world were centered on getting more

(performance and productivity) from les (physical, financial, human capital) for more

(profit and value to the share holder. The drivers in the developing world would be to get

11 more (performance or productivity) from les (cost) for more and more (people). Let us understand more fully the evolution of this concept.

Let us deal with some paradigm shifts. ‘More from less’ was always central to innovation. Reduction of time, money, space to achieve a given objective was always at the heart of innovation. Our ancestors were riding on horses. But as humanity progressed, we did not go for horses that ran faster. We innovated to create bicycles, scooters, trains, cars, aeroplanes, etc. That was doing it faster. The price of a computer fell from a few hundred thousand dollars to a few hundred dollars in a matter of couple of decades. That was doing it at a lesser cost. Mainframe computer occupied the size of the room. Now we have a computer on our lap, a laptop. That is doing it in a smaller size. All these are innovations.

However, as societies became affluent, more comfort, more leisure, more functionality was demanded. This drove the movement of innovation for getting ‘more from more’.

From an ordinary car costing a few thousand dollars to a luxury car costing a few hundred thousand dollars was a typical example of ‘more for more’.

When it came to the poor, however, it was always ‘less from less’. A rich could ride home in his Mercedes or Toyota, whereas a poor had to use a bicycle, scooter or a motorcycle, whether they could afford.

We want to move to a new paradigm. From ‘more from more’ and `less from less’ to

‘more from less for more’. In this new paradigm, we are saying that the poor will have the ‘same functional and emotional experience’ as the rich have for a fraction of the 12 price. A two wheeler scooter holder in India today can afford buying world’s cheapest car, Tata Nano, costing $ 2000. And this car is a proper car. It is comfortable, fuel efficient and environmental friendly. So this is not only an example of ‘more from less’ but it is also an example of getting ‘more from less for more and more people’. So this is an example of an innovation, which is not just ‘exclusive’ for a few rich people – but is truly ‘inclusive’.

The object of inclusive innovation is not to produce low performance, ‘cheap’ knock-off version of rich country technologies so that they can be marketed to poor people.

Rather, the objective is to harness sophisticated science and technology know-how to invent, design produce, and distribute, primarily via private sector SMEs, high performance technologies at prices that can be afforded by billions of people at the

Bottom of the Pyramid.

India’s Indovation

Contextual factors have undoubtedly facilitated the growth of Indian inclusive innovation, which I like to term as Indovation in India. Let us examine these in some detail.

First, the country’s political leaders experimented with socialism for more than four decades, which kept out foreign capital and technologies, but spurred local innovation.

Indian engineers, backed by government funding, developed some of the lowest cost

13 nuclear weapons, rockets, imaging techniques, supercomputers by depending only on their own ingenuity.

Second, the Indian economy didn’t start growing until the 1990s, so local companies were small. For example, in 2008, India’s then largest pharmaceutical company,

Ranbaxy, made $800 million in revenues, which was 60 times less than the $48 billion that Pfizer made and nine times less than what the U.S. giant budgeted for research.

Indian entrepreneurs, therefore, developed a penchant for undertaking small projects and using capital carefully. They’ve changed their approach to scale since 1991, but they maintain an unwavering focus on capital efficiency.

Third, local companies know that while India has both rich and poor people, catering only to the rich limits their market. Most target the aspiring middle class family, which lives on $5,000 a year. As a result, they were forced to develop value-for-money products and services by changing the price-performance equation.

And fourth, the most important driver happens to be India’s innovation mind-set. Some

Indian leaders had the audacity to question the conventional wisdom. With increasing frequency, these leaders were rejecting established ways of doing business in favour of new practices. The mix of miniscule research budgets, small size, low prices, and big ambitions had created the need to think and manage differently. Indeed it is fair to say that the combination of extreme scarcity and extreme aspiration ignited the Indian innovation.

14 From Incremental to Disruptive Innovation

India specializes in creating not just ‘low cost’ but ‘ultra low cost’ products and services.

In other words, not just ‘affordable’ but ‘extremely affordable’ products and services.

This required, not `incremental’ but `disruptive’ innovation. Here are some examples.

To how many of the following questions can we answer in ‘Yes’?

 Can we make a Hepatitis-B vaccine costing US$20 per dose available at a price

that is 40 times less?

 Can we make a psoriasis treatment costing US$20,000 available at a price that

is 200 times less?

 Can we make a comfortable, safe and fuel efficient car available, not at

US$20,000, but at a price that is 10 times less?

 Can we make an artificial foot costing US$10,000 made available at a price that

is 300 times less?

 Can we make a high quality cataract eye surgery available, not at US$3,000,

but at a price that is 100 times less?

The answer to all of these is `yes’! These are not just dreams— they have been achieved already in India — but on a limited scale.

The Role of Government

How did these innovations come about? The Hepatitis B vaccine developed by

Varaprasad Reddy’s Shantha Biotech was initially supported by the SPREAD project set 15 up with World Bank Support by the Government of India. It was later on funded by the

Technology Development Board of Department of Science & Technology of Government of India. The Psoriasis treatment was developed by Lupin with funding through the New

Millennium Indian Technology Leadership Initiative (NMITLI) operated by Council of

Scientific & Industrial Research through the Government of India funding. The rest of the innovations, namely the Tata Nano Car ($ 2000), the cataract eye surgery ($ 30) by

Aravind Eye Care and the Jaipur Foot ($ 30) were all designed, developed and delivered by private initiatives.

Indian Inclusive Innovation (I3) Initiative

Government’s active involvement can make a big difference. We saw an excellent example of this recently. Our HRD minister Kapil Sibal unveiled a novel access-cum- computing device priced at $35.

The device – a cross between I-Pad and tablet PC, which is charged by a solar panel is designed by experts at IIT, Kanpur, Kharagpur, Madras and Indian Institute of Science,

Bangalore.

However, now there is a word of caution. CSIR’s NMITLI initiative led to the creation of

Mobilis, a cheap mobile personal computer in the year 2005. In fact, the then S&T

Minister Kapil Sibal and I, in my role as the Director General of CSIR, launched it together in May 2005 in New Delhi. But Mobilis is still not in the market place!

16 Remember the definition of innovation. It is a successful `exploitation’ of a new idea – not a successful demonstration. But our dynamic HRD Minister is very keen to see that millions of Indian school children benefit from this `Indovation’ of low cost $35 computer.

This gives me confidence that we will draw lessons from Mobilis and make sure that in this case, we live up to the real definition of an innovation – successful exploitation of a new idea – and millions of Indian children will benefit from this inclusive Indian innovation.

In this `Decade of Innovation’, the Government will have a major responsibility to drive the innovation agenda. This will have to be done through a creation of forward looking skills and education policy, creation of systems of innovation in public service delivery, creation of roadmaps for innovation, facilitation of connections between universities, manufacturers, users and regulators, funding & driving high quality research & business innovations, bringing appropriate strategic research to consumer markets, promotion of innovative policies, facilitation of exchange of innovations between public and private and finally, initiating a nationwide innovation movement.

Going forward, It is important that the Government of India launches an Indian Inclusive

Innovation (I3) initiative. The Government can create special drivers for inclusive innovation by :

 Targeted funding  Institutional mandates to drive the Ìndian inclusive innovation’ agenda  Suitably designed incentivisation (including fiscal) for all stake holders  Government procurement and price preference on products meeting the ìnclusive innovation’ mandate  Conducive policy frameworks to promote Ìndian inclusive innovation’.

17 The funding should be targeted for the following activities

1. Grand challenges : Setting ambitious targets in diverse areas and invite competitive bids from across the nation (e.g. ultra low cost rural refrigerator, ultra low cost rural electrification, ultra low cost internet access, extremely affordable drugs, ultra low cost vaccines and diagnostics, etc.) 2. Early stage financing: Creating special instruments to provide early stage financing to support innovative breakthroughs in ìnclusive innovation’ 3. Promoting diffusion: Prototyping, scaling up and wide scale deployment of proven technologies (including grass root innovations), belonging to the ìnclusive innovation’ class. 4. High technology acquisition for Inclusion: Acquiring a cluster of unencumbered patents or technology at an early state and developing these further for ìnclusive innovation’. 5. Creation of Inclusive Innovation zones (IIZs) on the lines of SEZs: The Government can give special considerations for facilitating the “less” part of the “more from less for more”.

Creating MLM firms

If `Indian Decade of Innovation’ has to achieve the objective of inclusive innovation successfully, then we will also need leadership from industrial enterprises, who will be committed to delivering `More from Less for More People’. We will call these firms, which deliver `more from less for more’ as MLM firms.

But what markets should MLM firms serve? C.K. Prahalad1 in his seminal book `Fortune at the Bottom of the Pyramid’ (Wharton Publishing School, NJ, 2006) drew attention to

18 the fact that 4 billion people with income levels of less than 2 US dollars a day, do provide a market of a few trillion dollars. So the MLM firms have access to these markets.

2 R.A. Mashelkar (http://www.ideasrs.com/docs) in his conceptual design of ‘Gandhian

Engineering’ focused on the More from Less for More (MLM) paradigm, emphasizing the process by which we could deliver products and services that met the MLM criteria and served the BOP markets.

Prahalad and Mashelkar combined their thinking of BOP and MLM to produce a paper recently in Harvard Business Review (July-August 2010), which was entitled

`Innovation’s Holy Grail’.

The paper primarily focuses on Indian examples in telecom (cheapest phone calls), automotive industry (cheapest passenger car in the world), etc. to show how MLM products and services can be created by firms, which develop the MLM culture.

Prahalad and Mashelkar also identified five drives for the MLM firms. These are reproduced below.

i. Develop a deep commitment to serving the unserved.

MLM CEOs must develop a deep commitment to inclusive growth, which will force them to think of unserved customers, be they rural poor who don’t have access to telephones or urban poor who don’t get emergency medical services. Companies often start by asking: “Given our cost structure, which segments can

19 we serve?”They should ask: “Given that we need to cater to the unserved, what should our cost structure be?

ii. Articulate and embrace a clear vision

MLM CEOs must have clear visions of what they want to accomplish. In addition, their visions always have a human dimension: for example, helping poor Indians travel safely and affordably with their families; using connectivity to improve people’s work and lives; and enabling patients to buy cheap medicines. iii. Set very ambitious goals to foster an entrepreneurial spirit

MLM CEOs must establish ambitious goals and clear time frames for achieving them. Companies should ask: “What is our an-on-the-moon project?” Or, as they do in India’s boardrooms: “What is our Nano project?” iv. Accept that constraints will always exist, and creatively operate within them.

MLM leaders must force project teams to work within self-imposed boundaries that stem from a deep understanding of consumers. That will result in a novel, outside-in view of innovation. The language inside their organizations was about consumers as people, suppliers as partners, and employees as innovators. v. Focus on people, not just shareholder wealth and profits.

MLM CEO’s must continuously ask “What if we change the way we operate to reduce costs and focus on return on capital employed, not just on operating margins? If we reduce prices enough and make our products available to the poor, won’t there be explosive growth as they quickly find uses for and buy our offerings?”

20 And Finally

The Indian Decade of Innovation (2010-2020) is a grand opportunity. It stems from the visionary declaration of our President and the passionate championing of our Prime Minister of this very concept of Decade of Innovation.

What should we see at the end of this decade of innovation? As a starter, it will be great to see India achieve a place amongst the top ten of the innovative nations in the world.

But it is not about getting into the top league alone. It is about a change in our culture, in our society.

It is about achieving innovation led inclusive development and growth.

It is about not `some Indians’ doing well, but `India’ doing well.

It is about innovation being a way of life for a billion plus Indians.

It is about a freedom of a billion plus minds from fear of risk taking and adventure.

And it is also about innovative India rapidly moving, through the innovation route, to becoming a truly inclusive society, where the distinction on the basis of income, caste, religion and language melts away.

It is about Indian Innovation, that is `Indovation’ becoming a model for the rest of the world to follow.