Research and development (R&D) in India has undergone a major transformation. Earlier, it was dominated by Government-funded and Government-run institutions that are part of networks like Council of Scientific and Industrial Research (CSIR) and Defence Research and Development Organisation (DRDO). Today, the focus of R&D has shifted to the more than 850 multinational corporations (MNCs) that have R&D centres in India, employing around 500,000 highly-qualified scientists and engineers. Many of these professionals have returned to India with advanced degrees and after working in the best global institutions and corporations.

Most MNCs set up their India R&D centres as extensions of their global R&D networks, with an eye to the low-cost high-quality talent available here. While the size of the Indian market did not justify creating separate local products, a vast majority of these centres are in high-technology areas related to information technology where, in any case, most products are global in nature.

So, initially, the contributions of these centres remained invisible as they got integrated into advanced technologies and products for world markets. Nirmalya Kumar and Phanish Puranam captured this phenomenon in their aptly titled book India Inside .

Looking at India

But, in the last decade, there has been growing interest in these R&D centres in what are often called “In India, for India” innovation programmes. This trend has been driven by the growing size of the Indian market, and the fact that there are hundreds of millions of un-served end-users for whom existing products seem neither relevant nor affordable. It has been reinforced by a need to meet the aspirations of the Indian employees working in these centres to innovate for the local market.

Some projects have been natural choices. For example, IBM provides the IT backbone and a whole range of related services to Airtel. A major focus of IBM’s R&D in India has, therefore, been to develop low-cost analytics solutions for the huge volumes of data that are generated by companies like Airtel.

In an effort to reach out to a wider set of users and create national impact, some companies have gone well beyond their traditional boundaries. Intuit, a company famous for its personal financial software products in the US, has created platforms like fasal that brings farmers and buyers closer together and txtweb , an application platform that allows users with a simple mobile phone to access a whole range of Internet and non-Internet services. IBM itself has pioneered a new technology called Spoken Web that mimics the Internet but with voice-based content. However, so far, most MNCs have found it difficult to monetise these efforts, and instead they remain primarily good technology demonstrators.

Reverse innovation

So, what’s the future of “In India, for India,” particularly for those companies that are in the product domain? Last year, Vijay Govindarajan and Chris Trimble built on their earlier work with Jeff Immelt, Chief Executive Officer of General Electric (GE), to advance the idea of reverse innovation. Their arguments were that emerging markets represented the best opportunities for growth for MNCs, and MNCs could not afford to ignore these opportunities — not only because they would forsake growth but also because they would allow a whole set of new competitors to occupy that space if they didn’t address it. Their diagnosis was that existing financial hurdle rates and organisational structures within MNCs prevented them from capitalising on these opportunities, and, hence, MNCs need to adopt top-down initiatives to target resources and talent to address these opportunities.

Naturally, the first company to embrace this approach was GE itself (Govindarajan was a consultant and scholar-in-residence at GE). As a result, we have seen a stream of relatively low-cost medical devices focused on India and India-like markets. But, while these products have shown the potential of this new approach, most market reports indicate that delivering growth and profitability is far from easy. Instead, since some developed countries that are under financial stress have shown interest in these products, the hope now is that these products will slowly diffuse into the developed world.

A new approach

However, a new approach to reverse innovation is showing promise, and may hold the key to making “In India, for India” programmes work. Cisco’s India Centre has developed a set of access routers as a part of the ASR 901 family. Like many other such programmes, the intention was to create a router that would meet the needs of Indian customers. Tight cost constraints were adopted right from the beginning. But, in terms of technical specifications, a decision was taken to make a router that not only met the peculiar needs of Indian customers, but also incorporated the latest technical features sought by service providers in the west. Combining low cost and advanced technical features allowed Cisco to touch a sweet spot across markets, and, in fact, the first purchases came from developed markets!

Alcatel Lucent’s Bell Labs in India noticed that rather than download songs legally available through mobile service providers, mobile owners preferred to buy songs from a corner store because the latter was cheaper. Legally downloaded songs cost more because the service providers had congested networks, and, therefore, did not want to promote downloads that would congest their networks further. Bell Labs India’s solution to this problem was a Mango Box, which could push content to users at off-peak times. But, while they managed to commercialise this product in India, revenues were never big enough to excite headquarters. Ultimately, Mango got traction when it was deployed in the US for use on AT&T’s iPhone network. The lessons? Address local problems, but look out for global problems where the same solution can be applied.

So, one important way to make “In India, for India” programmes work is to make products that not only meet Indian needs, but serve other markets too. And, if this can be built into product definition and design upfront, the chances of success could improve considerably.

(Beyong Jugaad will be a monthly feature. The author is Professor of Corporate Strategy & Policy at IIM-B and author of From Jugaad to Systematic Innovation: The Challenge for India. Send feedback to thenewmanager@thehindu.co.in and rishi@iimb.ernet.in )

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