Innovation in India FINAL REPORT Innovation in India FINAL REPORT CONTENTS CONTENTS Foreword by Liz Mohn 6 Setting the context 7 From the authors 8 Project background 9 I. Approach and methodology 11 1. Approach 11 2. Methodology 12 About this report 14 II. Innovation in India 15 A. Is India innovating – and if so, is it original? 15 B. Characteristics of innovation in India 17 C. Five archetypes of innovation in India 19 D. Types of innovators in India 28 E. Innovation at the industry level 40 III. Influencing factors 61 A. Internal influencing factors 61 B. External influencing factors 66 4 CONTENTS IV. Future projections 88 A. Future of India’s innovation landscape 88 B. Our methodology 89 C. Critical uncertainties and dimensions 90 D. Scenario development 92 E. Analysis of scenario-planning exercise 93 F. Key takeaways 95 V. Implications for Germany 96 A. Introduction 96 B. Customer: India is a large and growing customer, market and suitable test market for Germany 96 C. Competitor: With a strong base of engineering capability, India is emerging as a formidable competitor, especially in the area of frugal engineering 97 D. Collaborator: India’s role as a collaborator on innovation with Germany is developing 99 E. Talent hub: India has evolved into a high-quality source of abundant R&D capability and human capital for German firms 102 F. Ecosystem: Many large German companies want to innovate in India due to the innovation ecosystem 103 G. Key takeaways 104 VI. Recommendations 105 A. Recommendations for India 106 B. Recommendations for Germany (in the context of India) 116 C. Recommendations for Indo-German collaboration 120 Endnotes 122 Imprint 134 5 FOREWORD BY LIZ MOHN FOREWORD BY LIZ MOHN The dramatic improvements made to our quality of life, and replaces human labor in an increasing number of from medical care and life expectancy to transport and sectors, we need to have a global dialogue on how to direct communication to education and economic welfare have technological growth for the betterment of societies in been made possible by the rapid pace of innovation both industrialized and emerging economies. We also need witnessed over the last century. The pace of change has to have a global dialogue about what kind of future we want quickened significantly in the last decade as creative ideas to create together for future generations. from around the globe have fundamentally transformed established industries. Traditional business models in Asia is increasingly becoming an important source of sectors as diverse as agriculture, manufacturing, education ideas not only because of megatrends such as digitization and healthcare are being disrupted like never before. For but also because of the shift toward this part of the those who aim to remain relevant, they must do more than world in global economic dynamics. Understanding this keep apace with change and take the lead instead. phenomenon while engaging with stakeholders is crucial for Germany if it is to remain relevant in this innovation- Globalization is changing the very nature of this driven future. The Bertelsmann Stiftung’s Germany and increasingly dynamic business world. It has brought about Asia program aims to build bridges between Europe’s an unprecedented surge in prosperity in industrialized largest economy and emerging Asia that foster the creation countries that is now lifting millions of people out of of mutually beneficial and sustainable partnerships. India poverty, particularly in many formerly weaker economies is one of the few countries outside the EU with which in Asia, including China and India. The twin phenomena Germany has a strategic partnership. Whereas Indo- of globalization and ever-accelerating innovation have German diplomatic relations – established by India’s first also transformed our societies. Our world is becoming prime minister, Jawaharlal Nehru and Germany’s first increasingly integrated as trade, capital and, most postwar chancellor, Konrad Adenauer – are only sixty years importantly, ideas and people cross international borders. old, intellectual, cultural and economic relations between As a result, no single country or region can assuredly the two countries are centuries old. The shared values of maintains its hold on technological leadership. democracy, secularism and a market economy grounded in principles of social justice form the basis of a partnership In a context of ever-changing technology and markets, defined by mutual respect and benefit that allows both flexibility and the capacity to acquire new skills are countries to work together in addressing global challenges demanded of firms and employees alike in industrialized like sustainable development and inclusive growth. countries. In emerging economies, inclusive innovation serves the needs of the poor who have been bypasssed by India has recently attracted considerable attention as one of the economic growth of recent decades. At the same time, the world’s most dynamic regions for innovation. In order increasingly ubiquitous automation and digitization makes to develop a better grasp of India’s innovation potential it harder to employ the millions joining the workforce and deepen the Indo-German innovation partnership, the every year. Indeed, the exclusion of the socioeconomically Bertelsmann Stiftung commissioned the “India Innovation disadvantaged classes is one of the greatest challenges Study.” It is the first and most comprehensive study of its confronting our society. A livable society requires the kind that illustrates the landscape of innovation in India inclusion of everyone and the capacity to offer everyone a and the impact this has on the global economy. fair chance at upward mobility. In a world of ubiquitous and rapid change in everything from the economy to family I sincerely hope that this study helps deepen relations bonds, social cohesion becomes even more important as and foster creative interaction between the governments, a stable foundation. As technology drives productivity companies and, most importantly, citizens of both nations. 6 SETTING THE CONTEXT SETTING THE CONTEXT In terms of innovation, Germany ranks high on most Murali Nair global indices. This is a result of German industry’s Senior Project Manager relentless pursuit of better products and solutions coupled Bertelsmann Stiftung with an excellent academic and research network that enjoys the support of a policy environment that has been Stephan Vopel optimized over decades. However, the German advantage Program Director in the high-tech sector cannot be taken for granted and Bertelsmann Stiftung is being challenged not only by traditional competitors such as the United States, but also by emerging economies like India and China, both of which feature a growing market combined with a significant pool of highly qualified engineers and researchers. As the emerging markets mature and build infrastructures and knowledge capital on par with that present in industrialized countries, they establish themselves as both potential partners and competitors in Asian and global markets alike. Like any other aspect of the global economy, innovation is also subject to globalization. This involves more collaborative forms of corporate and academic research with market and technical inputs from experts around the world. These developments matter significantly to Germany, where high-tech exports employ almost a third of the country’s workforce. Sustaining Germany’s technological leadership is unthinkable without robust cooperation among industries and research communities between India and Germany. Fostering this kind of cooperation is at the heart of the Bertelsmann Stiftung’s “Asia Innovation” project, which includes studies on innovation in China and other countries. We aim to map the developments in innovation and offer recommendations for establishing meaningful cooperation between Germany and these dynamic economies. The findings that emerge from the various dialogues we hold with stakeholders will help us formulate key policy interventions that are designed to facilitate fruitful cooperation. We are delighted to present the India Innovation Study as the first in our series and look forward to building a constructive dialogue that draws upon on the insights featured here. 7 FROM THE AUTHORS FROM THE AUTHORS Indian innovation and its impact on developed nations Cooperation between Germany and India is already is a topic of increasing relevance in today’s world. The underway and, as the case studies in the study show, it accelerating pace of innovation across Indian-based is largely successful. However, investments overall are startups, corporate houses and multinational corporations dwarfed by the opportunity at hand. It is in the interest (MNCs) is bound to have an impact on developed nations of both nations to step up their collaboration and support such as Germany, where success has been built on each other in improving the lives of all citizens. technology and innovation. Industrialized nations need to be aware of the challenges Dr. Wilfried Aulbur and opportunities these developments create. They need to grasp India’s promise as a large and growing market Nitya Viswanathan that can be leveraged globally as a lead market for frugal products. They also need to develop an understanding of Roland Berger the fact that collaboration with India’s startup ecosystems, provides complementary skills, resources and business models that can drive global success. They also have to appreciate the fact