Innovation holds the key for future growth
By B. Yerram Raju*
Indian scientists are making waves after the successful launch of satellite to Moon. Startups in IT and ITES are again making a mark. But why are we still not on the cloud when it came to manufacturing? Is it just access to finance? I do not think so. The reason: we are lagging behind innovation.
What is innovation?
-- Innovation is all about creating value and increasing productivity, and therefore growth of businesses. MIT professor Bill Aulet says innovation, in the business sense, is an invention that generates value – or as he puts it: Innovation=Invention X Commercialization.
In today’s technology-driven world, how does one respond to the challenge of moving ahead of others – not one day or two, not even an year or two, but every day and every year. Or else exit. Every year the mortality rate of enterprises in European SMEs is 50 percent. The list of top 500 Business firms is not the same in any country and every year.
Innovate, innovate and innovate is the mantra for staying competitive, as Mashelkar puts it.
Innovation is not a one-shot deal. It’s about anticipating trends and linking innovation to sustainability. This requires building a culture of innovation in firms. Some companies trumpet with the appointment of Chief Innovation Officer. Everybody else in the company think that innovation is the job of CIO.
The four essentials to innovation are: 1. Make every employee feel the market; 2. Let every employee carefully document his observations; 3. Turn observations into ideas; 4. Test the ideas for commercialisation through practice.
Percy Spencer, an American Engineer of 1940s noticed while working on radar that microwaves are melting a chocolate in his pocket. He soon began experimenting with corn and eggs and this resulted in the creation of microwave oven.
Pheroz Dastoor of Apsara Hygiene products was likewise obsessed with R&D. Pheroze’s R&D came up with a saccharine free toothpaste and this met with immediate response because it contained natural sweeteners. When the market responded negatively from homoeopathic medicine users, Dastoor came up with a toothpaste without mint. By the end of 1993, four types of Auromere entered the American market. To capture the suspicious German market a fifth auromere variant as a chemical free toothpaste was introduced there. It has now become a household name when it comes to mouthwashes, shampoos, gels and soaps in USA, Europe and Germany. Exim Bank India lent all the support required. After all who did not hear Vicco Turmeric of this company?
Differentiation as a strategy allows a firm to be unique in industry along some dimensions that are widely valued by buyers. “These Companies are organized for systematic entrepreneurship and purposeful innovation” (Peter F. Drucker 1985).
The days of reengineering and adaptation as a furtherance of innovation are over with the compliance to TRIPS agreement under WTO arrangement rapped up in the amendments to the Patents Act (1995, 2002 and the ordinance of 31st December 2004).
The grant of patents can be opposed on the grounds that include (i) the invention for which the patent has been claimed was publicly known or publicly used in India, (ii) the invention is obvious and does not involve and inventive steep, (iii) the invention is not patentable under Patents Act 1970, (iv) the wrong geographical indication of the material used in the invention, and (v) the invention on which the patent is claimed forms part of the traditional knowledge whether in India or elsewhere.
Basing on geographical specificity, product patents can be obtained, and the game started winning: Pochampally sarees was accorded the product patents in 2005. Kondapally and Etikoppaka toys or Narsapur laces, Muradabad brassware etc have also sought such patents. Applications for patent rights are surfeit.
Therefore, SMEs of today and tomorrow would be in a different framework of deriving competitive advantage.
Competitive advantage for most MSMEs would therefore lie in cost-effective innovations that are scalable. In most cases where the size/scale is going to be constraint for gaining the competitive advantage, they should clusterize, share their strategies within the cluster and move to stay and grow in the market.
Furthermore, greater scope and more opportunities exist for inter-firm linkages to enhance collective efficiency, technological and innovation capabilities and hence competitiveness. Subcontracting and outsourcing opportunities both in manufacturing and ICT firms are on the rise. Cross-border supply chains have widened and deepened the potential and avenues for SME involvement. Information and Biotechnology in the knowledge management areas have been contributing to resilience and flexibility of economic activities and to enhancing productivity.
McKinsey (April 2015) has come up with eight engagements for innovation: Aspire; Choose; Discover; Evolve; Accelerate; Scale; Extend; Mobilise. These eight engagements call for innovation vision and model, careful planning, strategic interventions, required growth contribution from innovation and cascaded targets with accountability. It has been noticed, while there is no dearth for fresh creative insights, the ability of firms to determine which ideas would support and scale.
Considering every startup as innovation would be fooling ourselves. They are truly contributing to enlarging the applications to various spheres of customer engagement. Innovations have to happen in manufacturing sector, and this calls for the firms to invest in risk and such investments have to come from calibrated funding on soft terms. “Not to innovate is the single largest reason for the decline of the existing organizations.” (Peter F. Drucker 1989)
*The Author is an economist and Risk Management Specialist. The views are personal.