Destination INDOVATION

Destination INDOVATION

Ever since Barack Obama took over as the President of the U.S., his primary focus has been on fostering and supporting ‘innovation’. So, what exactly is innovation from an American context? According to the President, it was about high-tech classrooms, information technology for healthcare, high-speed rails, fuel-efficient cars and efficient homes on smart electricity grids. Obama committed U.S. $100 billion towards these efforts. The central thesis was – research, innovation and education would play a key role in putting the U.S. economy back on track and more importantly enable sustainable growth. The analysis, sure, is widely agreed upon. So, does ‘innovation’ actually make sense for an emerging economy like India?  Yes, it does, but with a focus on what the country needs.

There is no doubt that corporate India has innovated for decades. Sunil Mittal built Bharti Airtel (Airtel) with a radically different business model compared to telecom majors in other countries. He outsourced everything except marketing and customer management. At some point in time, he added over a million users every month, charging them less than Rs. 1 per minute of talk time. Considering India was a late entrant into the mobile space, this was top-class innovation that put a mobile phone in the hands of a large percentage of our population.

While Airtel innovated with its operational model, the low-cost eye care provider Aravind Eye Care System (Aravind) innovated in its business process. Several years before innovation was management jargon, Dr. G. Venkataswamy founded Aravind in 1976. Aravind was born with a mission to eradicate needless blindness. Dr. Venkataswamy went after this mission with a simple plan – that of eliminating bottlenecks. Today, Aravind Eye Care performs over 1,000 surgeries per day – with systems and procedures that enable it to deliver low-cost eye care with maximum efficiency.

In some sense, Airtel and Aravind stand as examples of what innovation can do to solve India’s numerous problems. The mobile phone is critical to stay connected. Business efficiency increases. Farmers use mobile phones to check weather reports. Students need mobile phones to help them network and find jobs. Aravind helps reduce (and probably eventually solve) a major problem in rural India – blindness that can be fixed through surgery. While the U.S. is going after high-tech innovations, the key to the growth of India is necessity-driven ‘developmental innovations’ – a term we call indovations.

Our interaction with leaders of companies well-known for innovation like ITC’s eChoupal program, Google India, Honey Bee Network, Murugappa Group’s BSA Motors and other venture capital funded startups, has given us an insight into innovation and it’s processes in our country.   We have also researched and analysed case studies of Reliance Industries Limited’s Jamnagar refinery, the evolution of the Tata Nano, Future Group’s process of understanding the Indian consumer and Tata Group’s Co-Innovation Network (COIN). Based on these interviews and analysis, we have tried to answer an important question – What does it take to make indovation work?

The key factors

Encouraging people – Innovations hardly work if the employees in a company do not understand where their contribution fits into the overall scheme of things. Whether one is trying to innovate on product development or business process, building a culture of innovation that reaches out to each and every employee within the organisation is crucial. Vinay Goel, head of products at Google India says, “Problem solving is the first step toward building innovative products. But, the process of innovation starts a step before while hiring people. We hire people who are passionate about solving problems.” Google India constantly encourages employees to work on new ideas, and even offers employees 20 per cent free time to work on pet projects.

R. D. Thulasiraj, executive director at Aravind goes a step further. He believes people should be utilised effectively. At Aravind, systems are in place to ensure ophthalmologists do not waste time performing tasks that assistants or nurses can perform. Resource utilisation is a key differentiator for Aravind.

Forging partnerships – A fundamental aspect entrepreneurs and managers need to understand is that partnerships – whether it is with customers, suppliers, marketers or vendors – are crucial to build scale. Anup Gupta of venture capital firm Nexus Venture Partners says, “Whether it is an individual or a company, one cannot do everything. Finding the right partners for some aspects of your business is very important.” D. Light Design (Nexus has invested in D. Light), a startup company that sells low-cost solar power lanterns, built a great product that serves as an alternative to kerosene lamps used in villages. While it innovated on product design, it could not blindly follow the distribution model of other lighting companies. D. Light’s product was niche and was primarily used in villages. It had to tap into agriculture-based supply chains to distribute its product. D. Light had to educate the distributor about the advantages of its product, but, that has proven very useful. While it is obvious that D. Light had to innovate in product development, almost every other aspect of business – be it manufacturing, supply chain and marketing – had to be redesigned keeping this innovation in mind.

Solving problems – Irrespective of whether you run a startup or manage a large company, while conceptualising an ‘innovative’ product or service, the fundamental question you need to answer is – what is the problem you are solving for your target market?  Gupta reiterates, “The number 1 question we ask entrepreneurs is – what is the problem you are trying to solve? And, is the problem real?” Gupta believes as entrepreneurs go about building their business, they should not lose sight of their fundamental mission.

The beauty about India is that entrepreneurs and companies are constantly creating and innovating – Anup Gupta

Even for a giant such as Google, expansion in the Asia-Pacific region posed a very real problem. For the company to grow in India, China and Africa, it needed to address the problem of Internet penetration. Google India launched the Internet Bus initiative, the product managers were extremely clear about the problem they were trying to solve. Increasing penetration and awareness about the Internet would help Google India tremendously. The whole experience was designed around educating and helping people in tier-3 cities and rural areas experience the Internet. When the Google India Bus visited schools, students were given a peek into Wikipedia and other such knowledge related websites. The elders in the villages were taught about websites like Naukri.com and Shaadi.com. The overall experience was designed around helping people understand the advantages of spending time online. The company also had processes in place to see if Internet penetration in the cities and towns it visited increased after the Google India Bus visit.

Sustaining innovation – How do you ensure an innovation is sustainable? What measures are you taking to prevent a competitor from aping your innovation? Overall, what makes your innovation enhance business performance? These are questions that managers need to answer constantly.

There is no single answer to any of these questions. In fact, some companies do not mind sharing their business process to help build the overall industry. Aravind is one such example. It constantly publishes information about systems and procedures and encourages competition. Aravind believes that competition will help achieve its end mission of eradicating needless blindness. But, managers should never forget that innovation is not permanent in any context. Whether it is through newer products or feature enhancements to existing products – actively staying in touch with your customer and increasing your value proposition on a continuous basis is critical.

Perhaps, one can take a leaf out of MapMyIndia’s book. MapMyIndia, a company with the mission of mapping India, has collected data for over 15 years now and continuously updates this information with its field surveyors. Today, it faces competition from Google Maps, which is taking a completely different approach to mapping India. Google India has a new product called Map Maker which lets users rename roads, mark one-ways and even indicate locations. The question is – how does MapMyIndia redefine its strategy to take on new competition?  In this case, one could argue that one cannot match the accuracy of field surveyors and data collected over a span of 15 years. While the strategies adopted depend on the line of business, the defensibility of an innovative business venture is critical for long-term success.

Implementing processes – Thulasiraj of Aravind believes in efficiency. At Aravind, over 1,000 eye surgeries are performed every single day. The quality is top notch, and doctors continuously work at maximum efficiency.

Thulasiraj explains, “Managing bottlenecks and balancing resources is primarily what we do. A well-trained doctor can perform five basic surgeries per hour. We have to ensure that patients keep flowing in at this pace. We will have to minimise setup time between surgeries without compromising on quality. While one patient is getting operated, the other patient bed is kept ready.  Even the smallest of aspects like positioning a table is kept in mind.”

Till date, Aravind has performed over 3.5 million eye surgeries, many of these for poor people at a low-cost. Today, Aravind’s annual revenues stand at U.S. $20 million with an EBITDA (earnings before interest, taxes, depreciation and amortization) margin of 40 per cent. It plays a key role in reducing blindness and offers low-cost services to the poor. What lies at heart of all these successes is the company’s ability to utilise each and every resource – be it doctors, assistants, equipment or hospital space – efficiently and effectively.

Finding funding – Raising money for an innovative business idea, especially if it is a startup, can be tricky. If you are an entrepreneur, trying to understand how an investor evaluates your business plan will help you fine-tune your idea and make the right pitch. In addition to analysing the team and the problem you are trying to solve, venture capital and angel investors look at one other aspect – how is the problem you are trying to solve tackled today? If your solution can really propose a better solution, you have a winning business idea.

Building scale – Scale is crucial for any business venture. ITC’s eChoupal program is a wonderful example of an innovation that scaled efficiently. eChoupal is a combination of a large number of information kiosks which farmers use to sell their produce, ‘hubs’ managed by ITC that buy from these farmers and a network of companies that buy from and sell to rural India. ITC calls it a three-layered architecture where all parties involved – ITC shareholders, farmers and partners – benefit tremendously. It started as an experiment in one village, but now has expanded to 40,000 villages through 6,500 eChoupals reaching more than four million farmers. eChoupal is a prime example of rural business process innovation that has scaled efficiently.

Customer first – BSA Motors, part of the Chennai-based Murugappa Group, has constantly innovated keeping the customer in mind. Till a few years back, its bicycle brands BSA and Hercules were primarily used by ‘commute customers’. Over the last few years the trend has shifted. The bicycle is now primarily used by kids for recreation and the urban elite for fitness. BSA Motors launched the ‘fun, fitness, freedom’ campaign to reposition the bicycle. In order to re-capture the commute customer, it launched new products, a range of eScooters that are eco-friendly and cost-effective. BSA Motors innovated across business functions – marketers repositioned the bicycle and product development staff developed the green eBikes.

The big picture

Never lose sight of the big picture – the picture of how your innovation is going to benefit India? And going forward, corporate India is going to see a myriad of ideas and innovations at various levels and across sectors, including fields like e-commerce, information technology, microfinance, clean energy, education, logistics and manufacturing. And Gupta rightly says, “The beauty about India is that entrepreneurs and companies are constantly creating and innovating. Be it healthcare, logistics, Internet, or consumer businesses – people are trying out new things everyday. There is a lot of potential across many different sectors.”

So come on board; this is destination indovation!