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I was lucky to be in the audience and hear Sridhar Vembu of Zoho talk about the priorities of Indian companies and the nations as such.
Sridhar has led Zoho to become one of the leading lights of Indian software companies, not because of cost efficiency, but due to product innovation. His company outperforms Indian software giants on value-added per employee, a testimony of its innovation prowess.
Sridhar contends that our nation is slipping as businesses aren’t focused on the value chain that creates maximum value. He cites the example of the textile industry, where we import expensive machinery, use commodities raw material, unskilled labour and produce textiles of low margin. We are losing out to Bangladesh, Vietnam and Sri Lanka even in this market as they have cheaper labour than us.
An industry that was once a big exporter is struggling today. The big value is being hoarded by the fashion designers and the equipment manufacturers, an area where we are not invested.
A similar story is seen in other industries, including in software services.
Sridhar compares our progress to Korea and Taiwan (we were ahead once upon a time), which have made significant investments in developing future-oriented technologies. Take televisions, for instance, domestic giants like Videocon, rather than invest in electronic technology of future, chose segments like power and oil exploration as part of growth strategy. Not something you could call innovation focus.
Most Indian businesses are like Videocon; they have avoided the risk of investing in developments that are futuristic and are focussed on how they can make money in existing, proven business. This has meant that organization resources are spent on expanding into already established technologies, which were moving towards commoditization.
Simon Wardley presented the concept of Wardley Maps (2016), where he demonstrated that there is a pressure and constant force of competition that keeps pushing value chain elements towards commoditization. That message seems lost on Indian organizations.
Take the solar power sector for example. The power generation is commoditized and so is building power plants. But that is where Indian solar players are playing! They are importing panels, the technology element that makes most value in the chain, take all the risk of producing a commodity. Not something that will ever give you leadership.
As an aspiring superpower and a very populous nation with a large population that is not prosperous, we face a unique challenge;
How do we provide products for our masses that are cheap and affordable?
At the same time, how do we develop technology and products that enable us to garner maximum value from the value chain?
We don’t have a choice of one or the other, but need both; be an ambidextrous nation. For a long time, we have focussed on our ability to be frugal and produce products that feed and meet the needs of our masses.
However, this approach has come at a loss of technology leadership and development. Very few of our corporates have developed technological leadership; we import the latest technologies and end up sacrificing the value to global leaders. A case in point is mobile phones, domestic smart phones are nothing but completely knocked down (CKD) or semi-knocked down (SKD) Chinese products. So are so many other mass products (AC’s, washing machines, computers, etc.).
Most organizations have failed to invest in an innovation portfolio. Our innovation efforts are anchored by university student-led start-ups that struggle for resources and a supporting ecosystem.
If we are to get out of this mire, corporate India needs to examine its approach to innovation, which has been mere “Innovation Theatre”.
A key blocker is that very few on the boards of a large organization are willing to say the truth, we aren’t innovative!
Most CEO’s continue to claim that they are making great efforts at innovation and cite a few examples. As a result, there is no need felt for embarking on an innovation journey.
A second challenge is that most organizations are failing to see the threat of disruption to their existing business.
Despite operating in highly competitive markets with low margins (considering the high cost of capital), organizations are failing to see the threat of disruption and commoditization in the near and short term. They see innovation as a new opportunity, but most will prioritise investments into the present and the known.
Corporate India has always demonstrated a low-risk appetite when it comes to investing in future R&D.
In contrast to the risk people take in investing in IPO’s of companies with a poor track record, corporate India has a poor record of investing in R&D for the future. Except possibly in some of the pharma companies, R&D is limited to product engineering in most organizations. Without a robust R&D function, organizations can’t hope to have breakthrough technologies in 8 to 10 years. Disruptive innovation requires a portfolio of future-oriented developments today, not in the future.
It’s time corporate India woke up to the reality that we aren’t effective innovators and take the lead of people like Sridhar Vembu.
Do you have a plan to innovate?
If you would like to discuss the topic of innovation, do get in touch with me. You can book a free 60 min one on one discussion here: https://bit.ly/3eLCLGz
Krishnan Naganathan
Krishnan is a leading innovation consultant and focuses on helping people and organizations innovate and build capabilities for innovation. He brings over 25 years of experience in the industry and consulting. You can reach him by phone / WhatsApp: +919791033967 or email: krishnan@thinkhorizonconsulting.com
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