Though the Indian market appears large, it doesn’t always provide an environment for technological innovation on a sustainable scale.In a technologically inter-connected world, it is important to collaborate with firms and laboratories in other countries.
For Indian companies that have strong technological capabilities, and see technological innovation as their main source of competitive advantage, targeting international markets is the key to survival and growth. This is because Indian customers, particularly in business-to-business transactions, tend to be conservative at adopting new technology, cost-conscious, and often prefer foreign sources of technology. Further, in many technology areas, the Indian market lacks the size to be able to sustain the profit and growth needs of technology innovators.
Indian technology innovators also stand to gain by addressing international markets — they learn about the latest trends, and their competitiveness is enhanced by the pressure to be consistent and maintain the highest quality standards. Here are case studies of two companies from different industries that underline the importance of international markets for Indian technology companies.
Dirt to dream
Praj Industries is India’s leading bio-industrial company. Founded almost 30 years ago, it established its reputation by creating industrial-scale processes for converting the “dirty” sugarcane molasses generated by India’s sugar mills into potable alcohol. The company discovered that the quality and composition of molasses can vary considerably from region to region, and built experience in adapting its processes to these variations without compromising efficiency or quality. But Praj’s major growth happened only when it started addressing international markets. Its ability to provide turnkey solutions has found it customers in the US, Brazil and Colombia. Today, more than 50 per cent of its revenues come from outside India.
International markets will become even more important for Praj in phase II of its technological innovation journey. Praj now seeks to extend its capabilities beyond core fermentation and distillation processes to provide an energy-efficient, water efficient and environment-friendly process. The “dream” is to create a plant that involves “waterless fermentation, steam-less distillation and zero pollution.”
About five years ago, Praj went beyond process design and application engineering to enter the demanding field of new generation bio-fuels. Towards this end, Praj set up the Praj Matrix Innovation Centre in 2005. Creating these new bio-fuels will involve an understanding of molecular biology and the identification of new organisms for the fermentation process.
The Praj Matrix Innovation Centre has set up a pilot plant for the conversion of lignocellulose to bioethanol. Efforts to scale up this technology further will follow, and Praj hopes to be able to commercialise the technology in the next few years. It is unlikely that this will be possible without closely working with companies, research institutions and Governments in other parts of the world.
Leveraging tech prowess
Hind High Vacuum (HHV) started in 1965 out of the instrumentation department of the Indian Institute of Science. Over time, it became a major supplier to Indian strategic programmes like Space and Atomic Energy. Some of HHV’s achievements include a hypersonic wind tunnel designed and executed with other partners to test space vehicles for re-entry; a rotary vacuum brazing furnace used for the GSLV launch vehicle and an aerospace engine welding technology installation for the Sukhoi aircraft at Koraput. This is a completely robotic facility that uses a unique combination of an external robot and internal robots — the external robot is used to control the internal robots as there are small differences in the sheet metal configuration of one fighter compared to another.
However, in spite of all these significant demonstrations of its technological prowess, HHV was finding it difficult to sustain itself in the domestic market alone. Government procurement guidelines resulted in projects being given to firms with the lowest bids even though they often lacked the technological capabilities to execute the projects. Long term growth prospects looked uncertain, and HHV had to finally turn to the international market to control its own destiny.
Thus, HHV embarked on the journey of becoming an international player. The company realised that it had to build credibility, communicate clearly and take a long-term view to succeed in international markets. It decided to focus on thin film deposition technology and optical coating systems in international business.
Quality and consistency were crucial as reputation could be made or broken by “word of mouth”. It became very critical that every order taken up was executed correctly. HHV acquired a company in the UK to reinforce its position as an international company. By shifting the manufacturing to India, they could reduce costs by 45 per cent. Certification of capabilities from recognised international agencies became another prong of HHV’s internationalisation efforts.
Today HHV has become a contract manufacturer and research firm and a single-point equipment supplier for automotive customers. The latter is achieved by working with international consortium partners to provide a single point solution. It is now identifying new platforms that can provide the basis for future growth.
Not many Indian companies have the technological capabilities to pursue technological innovation. But, for the few that do, like Praj and HHV, it is increasingly clear that though the Indian market appears large in size, it doesn’t always provide a conducive environment for technological innovation on a sustainable scale. This has been the experience of high technology companies in other sectors as well, such as Patel Brass Works, the bearing manufacturer from Rajkot,and Indo-US Mim Tec, the Bangalore-based manufacturer of metal injection moulded components.
Further, in a technologically inter-connected world, it is important to collaborate with companies and laboratories in other countries. Today, there are many companies and research laboratories in the US that are sitting on high potential ideas, but they are unable to exploit these because of the economic downturn there. By having a strong presence in international markets, Indian companies can access these technologies and possibly use them along with technologies of their own to establish a strong technology-based advantage.
(Beyond Jugaad will be a monthly feature. The author is Professor of Corporate Strategy and Policy at IIM-B and author of From Jugaad to Systematic Innovation: The Challenge for India. Send feedback to firstname.lastname@example.org )