Where innovation meets culture
Why should I read this document?
In many ways, India’s rise as a modern global economic power began with the unshackling of its economy in the early 1990s. What was then dubbed as India’s economic liberalisation program set up the stage for a wave of socio-economic changes. For decades, India’s smartest minds left their shores in one of the biggest brain drains in modern history. The opening up of the economy didn’t just start a reverse brain drain but also fuelled a new wave of innovation as Indian companies and Multi National Corporations (MNCs) tried to develop products and services that matched the unique needs of India’s booming consumer class. Jugaad, the Indian version of innovation, became the mantra for brands that looked to find cost-effective solutions. What began as make-shift, band-aid solutions graduated to frugal engineering and now a whole new wave of digital transformation has super-charged India’s innovation drive. India is now an important global R&D hub for many global corporations.
When modern India began its journey as an independent republic in 1950 the country chose a protectionist approach with a focus on import substitution. That changed in 1991 when the Indian economy opted for what has now come to be known as LPG-isation – liberalisation, privatisation and globalisation. It also sparked a reverse brain drain as many creative Indian minds returned to cash in on the opportunities.
During the initial decades of the protectionist economy, most Indian businesses had to grapple with limited resources. It’s somewhere here that the seeds for Jugaad (an Indian expression that’s now found its way into management case studies) or innovation were sown. The initial innovation was more about make-shift, short-term solutions that tended to place cost and resource efficiencies over high quality or longevity. In India, there has been an acceptance of imperfection; nothing has to be perfect nor has to go exactly as planned. As the consumer market began to explode, the focus shifted from frugal innovation to reverse innovation. Local companies began to understand the Indian consumer while MNCs gave some of these innovations a global stage. A wave of Indian creative minds began to return to India adding further impetus to innovation and a culture of start-ups. A recent NASSCOM-Zinnov report ranked India as the 3rd biggest start-up hub in the world.
Many future innovations are likely to take place in India and China, this is where the bulk of the customers are. Many MNCs have large R&D hubs in India – Samsung’s largest research centre outside Korea is in Bengaluru, India. The most recent shot in the arm for innovation in India was the onset of the pandemic that has fostered a culture of innovation driven by an accelerating pace of digitalisation. 64% of respondents of a 2020 Microsoft-IDC study affirmed that innovation in products and services has become easier in the post-COVID-19 era, as compared to 32.5% prior to the pandemic. India is seeing an innovation climate like never before and it has evolved from being quick-fix solutions to becoming one of the world’s innovation R&D labs.
For decades innovation in India was synonymous with jugaad. The debate around the exact definition or translation of this buzzword symbolised India’s early innovation story. Is Jugaad innovation or a quick fix or a disregard of rules and processes with the sole focus of finding a solution that optimises limited resources? That definition gradually changed with a changing Indian consumer in an economy that finally opened its doors to the world in the 1990s. It didn’t just bring a slew of international products and experiences but also started the reverse brain drain of some of the best Indian minds who had made their mark in Silicon Valley. It provided the fuel for India’s start-up culture.
Many global brands also started to wear a different hat to understand the Indian consumer and began developing products for the Indian market that were then packaged for other global markets. A process of reverse innovation began. Finally, the onset of the pandemic ensured many agile Indian companies embraced digitalisation creating a third wave of sorts in India’s modern innovation story.
A country full of contradictions
India is one of the world’s oldest cultures and yet a young nation that turns 75 this year as a modern independent nation. It’s also a country driven by a young population. With a median age of 28.4, India is a much younger nation than China or the USA (Both with a median age above 38). The clash between ancient culture and young population brings a unique set of challenges and opportunities.
It’s a country of contradictions: there are powerful social norms, tight constraints and little tolerance for deviance from norms. And yet there is a tolerance for deviance from rules - as shortcut methods usually take precedence. While past studies found people in East Asian cultures were less creative than individuals from Western cultures. However, more recent studies found East Asian cultures can be more creative when the innovation provides more usefulness than novelty appeal.
Uncertainty avoidance and the acceptance of imperfection
Dutch social psychologist Geert Hofstede, who studied cultures of different countries for 40 years noted that in India, there is acceptance of imperfection; “nothing has to be perfect nor has to go exactly as planned. Rules are often in place just to be circumvented and one relies on innovative methods to bypass the system." In Hofstede’s 6D model of National Culture that deciphers country cultures across six dimensions, India scores 40 on Uncertainty Avoidance. This dimension understands how a society deals with the fact that the future can never be known: should we try to control the future or just let it happen?
India scores 40 on this dimension and thus has a medium-low preference for avoiding uncertainty. India is traditionally a patient country where tolerance for the unexpected is high. A word used often is “adjust” and it means a wide range of things, from turning a blind eye to rules being flouted to finding a unique and inventive solution to a seemingly insurmountable problem. There is a saying that “nothing is impossible” in India, as long as one knows how to “adjust”.
The evolution of innovation in modern India
India gained independence from the British and became a republic in 1950. The first four decades became a ‘License Raj’. The focus was on import substitution; unlike many other developing nations, India possessed a large domestic market. Companies were given licenses by the government to operate. Even this system created a perverse sense of innovation as entrepreneurs had to think out of the box to circumvent restrictions and manage with scarce resources. It was somewhere here that the seeds for Jugaad or innovation were sown. The initial innovation was more about make-shift, short-term solutions that tended to place cost and resource efficiencies over high quality or longevity. However, improvisation-based approaches are usually unreliable, not repeatable and not scalable. Indian consumers were often bereft of choices, making do with low-cost products that in some cases didn’t score on quality.
The Indian economy opened up in the early 1990s as the government embarked on a massive ‘Economic Liberalisation’ program that was marked by the privatisation and globalisation of the Indian economy. Indian companies had to become more competitive while multinational companies had to tailor products for the Indian market once they realised that the value-driven Indian consumer was quite different from his/her global counterparts. The 1990s provided the first catalyst for India’s reverse brain drain. Many of the country’s most innovative minds who had made their mark on the global stage including Silicon Valley returned, setting the platform for India’s start-up revolution. As more and more MNCs set up shop in India, they also began to set up R&D centres that initially addressed the needs of Indian consumers and gradually developed solutions for a global market.
The third wave was a product of the pandemic that has fostered an innovation-driven culture by an accelerating pace of digitalisation. Companies in India seem to have responded to the challenges posed by the pandemic by leveraging a better digital infrastructure and leveraging technology to their advantage. The Indian government’s strong call for ‘Vocal for Local’ and India’s progression on the Global Innovation Index have also been key ingredients in this mix.
From frugal engineering to reverse innovation
When Toyota decided to build a car for India and take it to the rest of the world, the company put together a team of 2,000 engineers from India and Japan. The brief was simple: build a high-quality, low cost car. The Etios was launched in India and then debuted in Brazil, South African and China. Historically, MNCs designed products in developed markets and adapted them for the rest of the world — the technology came first, the pricing followed. But reverse innovation or trickle-up innovation refers to the opposite. It refers to low-cost, but high value products developed primarily for emerging markets that eventually graduate to the developing world.
Vijay Govindarajan, professor of international business at the Tuck School of Business at Dartmouth College, calls it ‘reverse innovation’. “Historically, innovations have always happened in rich countries,” he points out, “But in the future, innovations will have to take place in countries like India and China, because this is where the bulk of the customers are. The needs are more pressing here and the sheer volumes will justify the investments that will be required for developing the appropriate products.” GE’s Mac 400, an ultra-portable electrocardiogram (ECG) machine is case in point. The device was fully conceptualised, designed, sourced and manufactured in India according to the requirements of local customers. With the Indian market in mind, the MAC 400 is priced at one-third that of imported ECG systems of similar quality.
“Reverse innovation has two parts,” says Govindarajan. “First is to innovate in India. Here local companies have the edge since they understand the consumer. The second step is to take innovation global. Here, multinationals have an edge because they have global brand name and distribution.”
In the 4th edition of a NASSCOM-Zinnov report titled “Indian Start-up Ecosystem 2018: Approaching Escape Velocity,” India has been ranked the 3rd biggest start-up hub in the world. The study revealed that the number of advanced technology start-ups increased by 50% from 2017, with Data Analytics, Artificial Intelligence and IoT witnessing the fastest adoption. More Tier 2/Tier 3 cities are emerging as start-up hubs, and more experienced professionals are taking the entrepreneurial route. According to the report, Bangalore is now one of the fastest growing tech start-up hubs in the world. A total of 1,200 tech-start-ups were added to the list in 2018 alone.
Vocal for Local
In May 2020, during the announcement of a COVID-19 related economic package, Prime Minister Narendra Modi first mentioned his vision of an Aatmanirbhar Bharat (self-reliant India) - COVID-19 phase has taught the nation that we must make ‘local’ the mantra of our lives. Global brands that are present today were once local; they became global when people started supporting them. Hence, starting today, every Indian must become vocal for local.
According to an IBEF report, in September 2020, India moved four places up to reach the 48th rank, breaking into the list of top countries in the Global Innovation Index (GII) for the first time. This shows that the Indian businesses and MSMEs, which strived to adapt to technological advancements, have moved upwards despite facing disruptive times.
A culture of innovation fuels business resilience and economic recovery
This was the key takeaway from a Microsoft-IDC study in 2020 that surveyed 439 business decision makers and 438 workers in India within a 6-month period, before and since COVID-19. The findings of this in-depth study are a clear indicator that India’s innovation story has entered a third phase, fuelled by the wide-scale adoption of digitalisation:
77% of Indian organisations have found innovation to be critical or important to their performance and resilience
78% of organisations in India are accelerating the pace of digitalisation in response to the crisis
64% of respondents say innovation in products and services has become easier in the post-COVID-19 era, as compared to 32.5% prior to the pandemic
The study found that in a short span of six months, organisations in India have increased their ability to innovate by 4% by maturing their Culture of Innovation.
According to the survey, 64% of respondents acknowledged that innovation has become easier in the post-COVID-19 era. Prior to the pandemic, only 32.5% of Indian businesses found innovation in their products and services easy.
Short case study
Paisabazaar.com, India’s largest digital marketplace for lending products, is driving technology innovation in its offerings. Showcasing a new technology feature that deploys Microsoft Azure and Azure AI to enable extensive digital solutions for loans and credit cards. Mukesh Sharma, Chief Technology Officer, Paisabazaar.com, said, “Most large lenders and Fintechs were unprepared due to the lack of digital processes and infrastructure. We all had to wake up to a new reality and adapt to it. Everybody was impacted and our focus was to ensure that consumers could have access to the loans they needed, through completely paperless and presence-less processes. We recognised the potential of AI and Cognitive Services to make end-to-end digital loan disbursals a reality with our Digital Stack. As the market leader with partnerships with most large banks and new-age lenders – and a culture of innovation since inception – we are well placed to accelerate this critical shift towards the much-needed digitisation of the entire ecosystem.”
Paisabazaar Stack uses Microsoft Azure AI capabilities to make loan disbursals and credit card issuance completely digital. Under the Digitization Stack, the fintech has built completely digital solutions for KYC (Know Your Customer) customer verification, income and employment validation, repayment set-up and consent on loan agreement. With this, a large section of customers will now be able to access credit much quicker from the comfort of their homes through a presence-less and contactless process as each erstwhile physical step in the lending process has now been built digitally. The Digital Stack has made it possible to provide unsecured loans within 3-5 hours from an earlier disbursal time of three to seven days. Their ‘Chance of Approval’ feature enables Paisabazaar to provide customised lending solutions to customers using a predictive algorithm model.
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