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Innovation in India National Knowledge Commission 2009. What is Innovation?.
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What is Innovation? • Process by which varying degrees of measurable value enhancement is planned and achieved, in any commercial activity. This process may be breakthrough or incremental and it may occur systematically, in a company or sporadically; it may be achieved by: • Introducing new or improved goods or services and/or • Implementing new or improved operational processes and/or • Implementing new or improved organizational/ managerial processes in order to improve market share, competitiveness and quality, while reducing costs
What is Innovation? • Not only high tech, R&D and manufacturing • Comprehensive process spread across the value chain • Creative idea focused on a consumer touch point resulting in value addition • Identifying new geographies and opportunities
Why is Innovation Important? • Growth in the global knowledge economy is driven by capacity to innovate • Dynamic, mutual relationship with competitiveness-thrives in a competitive environment and in turn, helps achieve such an environment • Critical factor to increase productivity and ultimately alleviate poverty • Globalization opportunities and challenges-innovate or perish-core competence to survive and stay ahead
NKC Survey on Innovation • First detailed, quantitative and qualitative survey on Innovation in India as defined more broadly than R&D • Understand the role played by Innovation as a driver of India’s economic growth • 136 firms surveyed in a wide range of sectors: • 58 large • 78 small and medium enterprises (SMEs) • Methodology: separate questionnaires for large firms and SMEs
Recognition of strategic importance • NKC Report on Innovation: 81% of large firms agree that innovation is critical to growth and competitiveness: top strategic priority (17%). In growth of Indian economy, innovation emerging as key driver • Recent CII-BCG Report on Innovation in Manufacturing in India: 89% of respondents think importance of Innovation has increased significantly over the last 10 years and 39% think it is critical to operations • Recent NKC Report notes that Innovation Intensity (i.e. the percentage of revenue derived from products and services that are less than three years old) has increased for large firms and SMEs-increase in competitiveness, profitability, market share and reduction in costs • SMEs have registered a greater increase in Innovation Intensity than large firms-Innovation Intensity has shown an inverse correlation with size of firm-more than 60% of SMEs have greater than 20% increase in Innovation Intensity, compared to less than 25% of the large firms
SMEs and Innovation • It may be easier to pioneer revolutionary technologies in SMEs-fewer levels of bureaucracy, easier to make decisions and less inertia • SMEs are crucial as revenue generators, employment providers and significant drivers of economic growth in developed and developing countries-innovation will drive their domestic and global competitiveness-therefore processes of innovation in SMEs become critical • Innovation in SMEs is largely a response to specific problems and challenges thrown up by the market or by competitors • Top leadership in SMEs are the most crucial motivators of innovation, unlike large firms where motivation is spread across the firm-crucial indicators of motivation include discussing Innovation in board meetings (NKC Survey: 70% of SMEs discuss)-therefore necessity for internal processes to drive Innovation
External Processes for Innovation • Location of primary market - domestic and foreign • Collaborative arrangements with other players in the same industry-comparative knowledge pooling; with universities, R&D labs, government agencies • IP regime and use of IP consultants
Internal Processes for Innovation • Special Department for Innovation • Allocation of Innovation specific funds • Forecasting probability of success for Innovation projects • Rewarding employees who are successful innovators • Formal processes to analyze the causes of success/failure of Innovation projects • Systematic attempts to track innovation that take place in the industry and in related areas • Physical locations specifically earmarked for Innovation • Constituting cross functioning teams to tackle and deliver mega Innovation projects • IP identification and filing systems
Barriers External Skill shortage due to lack of emphasis on industrial innovation, problem solving, design, experimentation in the education curricula Internal Large firms: lack of organizational focus, KM systems etc SMEs: lack of effective in-house training, sustainability, understanding of market
IP and Innovation • Segment within large firms emerging who have filed more patents and have higher degree of Innovation Intensity • While SME firms are becoming more aware of IP, there is disparity between such perception and actual operationalization • Lower use of IP consultants, IP strategy, IP Management, IP leveraging for wealth creation compared to large firms • IP use is critical in the knowledge economy and hence this issue cannot be ignored • Technology licensing and comparative pooling, along with technology acquisitions – need for better understanding among SMEs of such aspects of wealth creation
General Reforms • Encourage rising innovation activity and awareness as an enabler of economic growth and competitiveness • Reform of higher education and vocational education systems • Greater collaboration between industry, Govt., R&D, education system and consumer • Encourage widespread and comprehensive innovation at all levels, from grassroots to large firms
Reforms: Finance • Global Technology Acquisition Fund, especially for SMEs • Core principle: make IP, buy IP, make to buy IP, buy to make IP, make it together • Strategic positioning of India as a technology superpower will depend not just on development indigenous technological expertise, but also on ability to make crucial technology acquisitions in the global market • Evolve funding mechanisms such as various forms of loans and equity, for such technology intensive acquisition
Reforms: Legislation • To create incentives for R&D, enact legislation for all inventions arising out of government funded research in order to encourage industry-government-academia interaction and enable commercialization of IP assets-also recommended by NKC • The proposed legislation should give universities and research institutions ownership and patent rights over inventions arising out of government funded research • The proposed legislation should create an enabling environment for universities and research institutions to commercialize such inventions through licensing arrangements where inventors would also be allowed to receive a share of the royalty • The proposed enactment should also incorporate important safeguards for exceptional circumstances where the government could be given ‘march in rights’ to protect the public good
Reforms: Education • Create better linkages in higher education and VET with industry to deliver necessary skill sets, facilitate mobility • To fully realise the demographic dividend, make education more flexible, contemporary, relevant, inclusive and creative • Expand higher education, increase public spending and diversify sources of funding, enhance quality • Key issue: Combining equity and excellence
