"It is best that we cannibalise ourselves than have someone elsecannibalise us," is a powerful statement. Especially, when it comesfrom Sophie Vandebroek, Chief Technology Officer of Xerox Corp., whois referring to the delicate balance that global companies have tomaintain while serving bipolar needs of developed and developingmarkets as wide ranging as the US and Uganda.
Vandebroek should know. She heads what is arguably the crucibleof innovation in computing and personal electronics-Palo AltoResearch Center. PARC, as it is called in short, gave the worldlaser printers, LCD (liquid crystal display) and optical disktechnologies, and the graphical user interface in computers (towhich Apple and Microsoft owe their fortunes in no small measure).
Xerox is betting that similar, big innovations in products andsolutions will come from Chennai, some 14,000 km away from PARC'sSilicon Valley home. Mid-March, it opened what it calls itsinnovation hub in Chennai, adding to the prowess of some 500scientists at three other centres all located in the developedworld: US, Canada and France.
The $22-billion printing and document management company is alate entrant into what business researchers and top global CEOs likeJeffrey Immelt of General Electric are calling "reverse innovation".There are variants to the theme bandied around in boardrooms andbusiness schools- some call the trend "polycentric innovation", forinstance-but in a nutshell, it is about innovating products andsolutions primarily in emerging markets with an aim to serve bothdeveloping and developed nations.
Reverse innovation as a concept would have been fictive as recentas the beginning of this decade. Historically, the multinationalinnovated in cloistered research and development (R&D) centrestypically located in the US, Europe or Japan and sent products-withminor tweaks-to markets as varied as India and Ethiopia. Suchproducts, mostly, found takers among the middle class and rich or,in rare instances like personal care products, even the poor.
"R&D stayed at home as late as the end of the 20th century," saysJaideep Prabhu, Nehru Professor of Indian Business and Enterprise atthe Judge School of Business, Cambridge University. "In the firstphase (of innovation shifting away from the developed world), thedriver was talent in countries such as India. Now, the driver is thelocal market."
For multinational corporations chasing growth, India presents asweet intersection of low-priced talent and a mass market-making forthe new innovation destination in the world. Academic VijayGovindarajan thinks the other change that has come about is thegrowing share- roughly half-of poor and developing countries in theglobal economy. "It is not possible anymore to satisfy the Indianmass market with a product developed for the American mass marketconsidering their vastly different per capita income.
The only way MNCS can capture opportunities in India is to engagein breakthrough innovation," says Govindarajan, the Earl C. Daum1924 Professor of International Business, Tuck School of Business atDartmouth, US. Govindarajan, who was the first to write aboutreverse innovation along with Immelt and fellow Tuck Schoolprofessor Chris Trimble last year, has an ominous prediction forthose who don't see this writing on the wall: if MNCs fail to act,local Indian companies will innovate and disrupt their rich, homemarkets.
This almost happened to Deere & Company, the world's #1 maker oftractors (sold under the John Deere brand) by revenues. While itsR&D facility in Pune had developed a nofrills tractor model forIndia, it never thought of selling it in the US, a market thatpredominantly buys tractors powered by engines upward of 80hp andthose that come with air conditioned cabins, global positioningsystems and other developed-market add-ons.
What India offers...
Product Innovation
Products with identical features but at a very low cost, likeGE's MAC 400 electrocardiograph.
Process Innovation
Running your operations efficiently. PepsiCo is learning fromIndia how to run its bottling plants with minimum water consumption.
Brands
Many established brands with proven low-cost models are availablein India which can generate good demand in developed markets too.
Customer Insight
India's diversity-rich, poor living in acute scarcity, sheer sizeand density of the population-offers great lessons in understandingcustomer mindset.
Business Model
New pricing strategy or distribution models. How Indian hospitalsmanage to offer high-quality healthcare at a fraction of the costcharged by hospitals in US and UK.But when tractor maker Mahindra &Mahindra began targeting customers such as hobbyfarmers or those whodo not need advanced features in the US in 2001 (it had entered themarket in 1994), John Deere woke up to an all-new market. It quicklymodified the India model (added more power) and launched it in theUS as the 5003 series. Today, about half the tractors Deere makes inIndia are exported.
A low-priced electrocardiograph designed, developed andmanufactured in India by GE Healthcare is finding takers not just inIndia and other emerging markets. The MAC 400, developed at one-third the cost of a comparable imported version, has buyers inkerbside medical assistance in the US. "The emergence of frugalmindset among consumers in developed markets and increasing demandfor 'value for money' products is accelerating the drive for reverseinnovation," points out Navi Radjou, Prabhu's colleague andExecutive Director, Centre for India & Global Business at JudgeBusiness School.
Carlos Ghosn, Chairman and CEO of the Renault-Nissan Alliance,recently related the story of his company's India experience on anengineering solution. A team each in France, Japan and India workedon identical specifications (for a problem Ghosn declined to detail)and produced solutions that were all on a par in quality. Thedifference, Ghosh told reporters in Chennai elaborating on India's"frugal engineering" DNA, was that the Indian solution cost one-fifth what the French and Japanese engineers came up with.
The trend extends into processes, brands, consumer insights andeven business models, adds Radjou, who believes the results will becomparable to the impact the Internet had on businesses. Example: AtCisco, whose focus is on education with a solution that costs lessthan Rs 50 a month for each student, Chairman and CEO John Chamberssays Sunil Mittal, Chairman, Bharti Airtel, told him about the needto "think differently for mass and volume".
Mittal's mobile phone services company is the leader in a marketwhere tariffs, as low as 30 paise a minute, are the lowest in theworld. "It has taken me a couple of years to understand the economicefficiency of that. Now, I have got the concept, now I have to learnhow to reverse it and bring it to the US, Europe or Japan," Chamberstold BT in April. Elsewhere, PepsiCo is transferring knowhow it gotin India on reducing water consumption to other locations. Itbrought down water required to produce a litre of beverage from 7.3litres in 2001 to just 2.4 litres in 2009 through processefficiencies.
India's diversity offers many lessons, too. Renault chose to setup a design studio in Mumbai not just to design cars for India butalso tap into trends that are unique to the country. "Indians wantto stand out in a crowd. That explains why there are so manydifferent colours in the interior of a car," says Jean-PhilippeSalar, Studio Chief Designer, Renault Design India. Over the lastfew years, the studio has gained such an expertise that it has beengiven the exclusive responsibility to do the colour and trim ofRenault's global concept car that is to be unveiled in 2011.
What's in it all for Indian companies? Knowledge of the localmarket, economies of distribution and an obsessive bent of mind topare costs make them the best positioned to ride the reverseinnovation wave. Tata Motors' Nano is the most visible example ofthis. There are others, too. ICICI Bank has set up a globalinnovation team that transplants ideas from one region to othermarkets.
For instance, it introduced a biometric smart card in Indiataking a cue from a similar deployment in South Africa. It alsoworked with the Indian Institute of Technology, Madras to transformfingerprinting technology on to biometric-enabled ATMs fordeployment in rural areas.
Tech services vendor Tata Consultancy Services, too, taps intoR&D capabilities available in places such as Silicon Valley toincorporate into branded solutions for various clients. At Suzlon,while some engineering work is done out of its India factories, mostof the high-end innovation including wind energy managementsolutions are carried out of its labs in Germany and TheNetherlands.
Still, the big hurdle before the Indians will be the lack ofscale to take advantage of reverse innovation and go global, saysRadjou. His solution: polycentric innovation. "Indian companiesshould innovate through partnerships. That way, the limitations ofscale can be overcome and companies can specialise around theirareas of strength," he suggests, pointing to how Procter & Gamblealready has more than half its products having R&D elements (thecompany calls it connect and develop, or C&D) from external sourcesand Nokia has partnered Reuters for data such as market prices andweather reports. Scale could be yet another challenge for Indianfirms to crack through innovation.
- Additional reporting by Josey Puliyenthuruthel
Комментариев нет:
Отправить комментарий