Prof Vijay Govindarajan is widely regarded as one of the world's leading experts on strategy and innovation. The Earl C. Daum 1924 Prof of International Business at the Tuck School of Business, Dartmouth, US, worked for several years as the chief innovation consultant at GE. Prof VG works with CEOs and top management teams in Fortune 500 firms to ‘escalate their thinking about strategy'. A chartered accountant from Chennai, Prof VG earned an MBA and a doctorate from Harvard Business School. A regular visitor to his home town, he still finds time to see the occasional Tamil blockbuster movie, evident from his allusion to Kamal Hassan-starrer Dasavatharam, to illustrate a point during the course of an extendsive interview. Excerpts:

What is the debate in American corporations today? What is the focus now?

I think the big focus in American multinationals is ‘how do you grow' in a world that is going to experience overall slow growth. The glory days of the '80s and '90s are over. The wind was behind your back. So you could just do almost nothing and still you were growing pretty impressively. That to me is the central challenge of the CEOs. And people are also beginning to realise that growth is going to come only through innovation because in the current environment you can grow aggressively only by inventing and innovating. And that innovation agenda, people are also realising, has to be in poor countries. Because, if we think of the world's overall population of about seven billion now, there are three billion who are rich enough for the products which have already been invented. But the four billion poor, who are non-consumers of just about everything, have to be brought into the consuming base.

A majority of this four billion are women, in countries such as India, China and continental Africa. So the biggest consuming base for companies, whether you are a Procter & Gamble, Pepsi or General Electric or whatever, is going to be in these countries. And that requires a very different innovation paradigm. Companies are struggling with this because the paradigm in the US is based on ‘let us spend money and innovate for ourselves'. If it is healthcare, let us spend as much money as we can and push the frontiers of medical science and technology, and provide the best healthcare. Cost is not even a second consideration, it is the last.

They are now realising, if you want to compete in continental Africa or India, you can't have that mindset. Because you have to innovate under what I call ‘constraints': constraints-based innovation. Of course, cost is important, but you have to bring the latest technology. And you have to bring the latest design. So it needs to be design-led, technology-rich, constraint-based innovation. This calls for very different thinking.

You've written extensively on reverse innovation. Is that process gathering steam in the developed world?

Absolutely. It is gathering tremendous amount of steam. But, the potential is still to be realised. Because reverse innovation first requires that you innovate in the poor country. That is step one. Step two is to take it to other emerging markets. Step three is to bring it to the US or other rich countries. Most companies haven't even reached step one. That itself is a big one because American companies still think of India as poor and ‘therefore they want cheap products'. They have to change that mindset; they are coming from a different mindset of innovations. They have to first think about changing the innovation paradigm itself and then about how to take it to other countries.

What about in India? Some companies have done well on the innovation front, haven't they? The Nano is one example.

Let me back up and talk about two important traps Indian companies should absolutely avoid. The first trap is to ‘dumb-down' the technology and make something cheap. No. That is not what people want. People want technology-rich products, but also at the right price.

The second trap Indian companies should avoid is that innovation means products. Talking about the Nano, your job is not over because you came up with an engineering wonder, a car that can function at a Rs 1 lakh price point. You have to think of business model innovation, which is more than the product. The product may be a part of it. How do you position it, how do you decide customer value, how do you have a ‘go to market' structure? All of that is also innovation. Because, if you forget that, you are not going to make money. You want commercialisation. So to me, if you really want to make money and really serve Indian consumers, let us get away from product innovation and focus on business model innovation.

I am bullish on the Nano; I think they have got some issues that need to be taken care of. It is a great story of demonstrating the innovation capability of India. India is always looked at as an outsourcing destination with cheap labour and low costs. Tatas have changed the perception of India and shown that we can actually lead the innovation. And we need more of it.

When we go for these kinds of fundamental innovation, it takes time to produce results.

Think of cell phones; as a technology they appeared in the late '70s. But as a business model, cell phones became successful maybe in the late '90s. It takes 20 years for adoption. Paradigm-shifting innovation is what we are talking about.

All that has happened and is happening in the corporate world has shown that even great CEOs have compromised on ethics and have been seen to have feet of clay. In this context, what is the focus of B-school education now?

The way I interpret the unethical behaviour of many people who may have had MBAs from top schools, is that typically they start by doing something small and sort of push the envelope on bad behaviour. It is easy to be hundred per cent honest; it is very difficult to be 99 per cent honest. Because when you are 99 per cent honest, surely, that one per cent starts to expand. Ethics cannot be taught. Because there are certain inherent values you bring.

Leadership is about competence, but leadership is also about character. Character cannot always be taught, but it can be developed. It can be honed.

I would say that there are three dimensions to leadership that we should focus on.

One is competence, which is about giving the best education, in accounting, finance, et al. Two is character. The third is, and maybe it is related to character, is ‘beliefs'. What you believe in is what is going to guide you in decisions.

This is one of the things people question: ‘What are this guy's beliefs? Or does he just change depending upon the circumstances?' That doesn't mean you don't have flexibility.

Flexibility is an important requirement for a leader but you cannot be flexible on your core, because if you are, then there is no core. So that's something we try to address. I can't tell you what your core should be, but I can help you to discover what it is.

So we really focus a lot on self-awareness and character building. Because in the world that we are in now, with low credibility (businesses), one needs to demonstrate to people that one's intentions are good. Core beliefs are tested only under trying circumstances.

>vinaykamath@thehindu.co.in

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