• India and "creative chaos"

   

  Posted by: Steve Hamm on November 10

   

  It’s impossible to think about India without thinking about China—and vise  versa. And the contrast is sharp. China is an orderly, top-down, plan-oriented  state with plenty of capitalist drive but not a lot of creativity. The  infrastructure in its big cities is first rate. But, of course, it’s not  democratic. India’s an unruly democracy—with government as chaotic as its  traffic. Which system will win? China clearly has the early lead, but I wouldn’t  write India off. The concept of creative chaos is one reason. This language was  introduced to me a couple of days ago by Leo Apotheker, head of worldwide sales  and marketing for German software giant SAP. He visits India 4-5 times per year  and has noticed that the top Indian entrepreneurs he meets look at business  problems and opportunities differently than a lot of Western leaders—and they  come up with strategies that knock the established global business players off  balance. They think this way because they have to be creative to overcome the  chaotic business and political environment in India. “I think that long term  India will outperform China,” he told me. “They have a culture of chaos. A  culture of chaos and a strong education system, together, are more important  than infrastructure.”

• Finally, Western companies see the greatest potential for revenue growth  among emerging economies such as India's and China's. In the 1960s, Indians  accepted Jeeps with the steering wheel on the wrong side ("wrong" by local  standards, since Indians drive on the left side of the road). U.S. designs were  considered naturally superior. But today, these economies are unwilling to  accept mature, hand-me-down product designs from the West. For products to enter  these markets successfully, they must be designed to meet local needs. Smart  Western companies have realized that such redesign is better performed in  economies that are closer to the target markets.

   

  These four factors have created the need for smart Western companies to  globalize their product development. The difficulties of including an R&D  team in India are not minor.

   

  Corporate Governance

   

  Foreign companies operating directly in India are generally held to a higher  standard of corporate responsibility than their domestic counterparts. Even  companies with stellar social reputations, such as Tata Motors (TTM),  are at risk of suffering local backlash: Protests about land acquisition for a  new factory in West Bengal caused the company to relocate a proposed plant to  Gujarat, at the other end of the country. Moreover, if companies choose to  outsource rather than operate directly, they need to choose their partners  carefully. While Satyam Computer Services (SAY)  was not very active in outsourced R&D, recent admissions of creative  bookkeeping by its former chairman have led Western companies to reevaluate any  major outsource partner. In our experience, most new-generation Asian vendors  maintain high standards of corporate governance.

• Other subtle but important cross-cultural challenges make the transition to a  global R&D team difficult. But smart and nimble companies that suffer the  pain now in recessionary times will emerge much healthier when the economy turns  around.

   

  In our consulting work, we are frequently asked if Indians can design a  complete product. The starting point is often: "Sure, they're good for  lower-level or service tasks such as digitizing old-fashioned paper blueprints  or for performing esoteric finite-element analysis. But what I need is a  complete product, and I don't think I have seen anything like that from India."  The rules are changing. Sometime this year, Tata Motors will ship the  lowest-cost car in the world, the Nano. To us, it's not the low cost that is  exciting, it's the innovation. In addition to developing a best-in-class design,  Tata has extended the innovation to the design process and the supply chain by  depending on suppliers to squeeze the best price-to-value ratio for an  automobile uniquely designed for punishing Indian roads. A rear-mounted pressure  die-cast engine, wheels that sit at the very extremities of the body, and a  single windshield wiper indicate that this is not your average cracker-box  four-wheeler. Even the distribution model is innovative: The dealer will perform  some final assembly on all Nanos just prior to sale.

   

  Other innovations abound. Indian scientists have developed novel treatments  for migraine and for psoriasis, a serious skin condition. These drugs are in  advanced "Phase II" trials and show the potential of being blockbuster products  should they meet global approval. Additional new chemical entities are in the  pipeline, and it's only a matter of time until we see a pharmaceutical success  from India that is based on intellectual property developed there.

   

  Seek and You Shall Find

   

  The vast majority of growth in product development and sponsored research in  India is under the radar since it is conducted by external vendors on behalf of  European and North American clients; nondisclosure agreements prevent public  dissemination of much of this work. But forward-looking executives ignore this  trend at their own risk. In recent years we've helped R&D executives in  consumer products, chemicals, industrial machinery, energy, medical devices,  aerospace, video games, and other industries find and manage product development  vendors in India and China.

   

  It is natural to ask if the current economic slowdown will alter the rate at  which innovation in India will grow. We believe there may be a temporary hiccup  in R&D globalization, caused primarily by companies freezing in their tracks  as they reassess the new financial realities. But as soon as they rebuild their  product road maps, nimble companies will actually accelerate their globalization  efforts, pushed harder by tight budgets and the realization that the old ways  can be disastrous. We saw exactly this trend in the information technology  business during the recession of 2001-03. IT vendors such as IBM (IBM),  Tata Consultancy Services (TCS.BO),  Infosys Technologies (INFY),  Wipro (WIT),  Accenture (ACN),  and others increased their India staff rapidly. In the current environment, TCS  has expanded by buying Citi's (C)  India offshoring business for $1 billion, and Infosys CEO Kris  Gopalakrishnan recently told BusinessWeek that his company "is  hiring" and in fact "found there will be an increase in allocation for  offshore work" by its clients.

   

  We believe that the same is true for the outsourcing and offshoring of  R&D. In fact we think such innovation will be the next IT and that companies  that are proactive about R&D globalization will gain competitive advantage  over slothful competitors.

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  Gunjan Bagla is managing director of Amritt, a  management consultancy based in Los Angeles. He is author of Doing  Business in 21st Century India (Hachette/Business Plus, 2008). Atul Goel,  a senior adviser with Amritt, earned a PhD from Yale University and has over 20  patents from his prior tenure at Hewlett-Packard and Agilent Technologies. Both  are graduates of the Indian Institute of Technology Kanpur in India.

• Innovation from India: The Next Big Wave

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  <!--DECK-->Innovative companies the world over are discovering the research  and development advantages to be found in India

• A new portable electrocardiogram machine, the MAC 400, can take 100 EKGs on a  single battery charge and weighs less than three pounds. This is appropriate for  rural areas in emerging markets where electricity is not always readily  available and where patients cannot easily travel to urban diagnostic centers.  The product's roots are as remarkable as its capabilities: The MAC 400 was  designed at General Electric's (GE)  John F. Welch Technology Center in Bangalore by a team of Indian engineers. Most  of the early growth at this research and development center, GE's largest  outside the U.S., took place during the 2001-02 recession. Today, the 50-acre  campus employs 3,500 scientists and engineers; they've created patents on  aircraft engines and locomotives in addition to medical devices.

   

  Many other companies are, like GE, turning to Indian talent for new product  development. Technological innovation has powered the rise and the economic  domination of the West for two centuries. With scientific research, technology  development, and product innovations from the steam engine to the World Wide  Web, the West has led the world in wealth creation. A vibrant and structured  educational system coupled with a strong intellectual property regime has  enabled the creators and owners of ideas to profit handsomely.

   

  But the balance of power has begun to shift. Despite the current economic  problems both countries face, we will soon witness a dramatic rise in the  participation of India and China in global R&D. The first reason for this is the  diminished role of corporate laboratories that were the birthplace of many of  the ideas of the 20th century. Bell Labs, Xerox Palo Alto Research Center, and  IBM TJ Watson Center no longer enjoy the same preeminence that produced ideas  such as the transistor and the mouse. Today's nimble companies rely on  ecosystems of external innovation to drive new products to market; venture  capital and private equity investors are eager to fund collaborative innovation  for quick wins but have little appetite for long gestations for science.

   

  "Distributed Development"

   

  In the drive to seek the best return on invested capital, important  components of these ecosystems have moved offshore and away from the West,  creating specialization and disaggregation. Collaboration tools and disciplined  design techniques make it conceivable for people who are not in the same  building to work together as if they are neighbors. The difference between being  one building apart and two continents apart becomes less significant. Once this  "distributed development" becomes a reality, it is natural for portions of such  work to migrate to locations where large numbers of talented scientists and  engineers are more readily available. India, for example, graduates more than  100,000 English-speaking engineers each year, so Western companies find it  particularly attractive as a destination for this work. On the other hand,  first-world countries have declining populations and a lower percentage of  students choosing technical careers. Distributed development is the second  inexorable reason for the forthcoming rise of emerging company R&D.

   

  Third, in many industries, increased competition has pressured companies to  speed products to market as never before. Because profits from new technologies  are highest before the technologies become commoditized, if a new product has a  four-year life and you are one year late to market, you may lose not one quarter  but rather half of the potential profit from the product. Leaders in R&D,  unable to hire enough qualified engineers in the West, turn to Asian resources  to keep up with this faster pace of development. Time-to-market pressure  continues to drive new product initiatives to leverage talent in India.

• Innovation, Education Key to India's Growth
• Delegates at a summit in New Delhi say India has to use "disruptive  technologies" to drive markets such as health care and education
• HashCache: A new method for storing Web content that will  provide speedier Internet access, at more affordable rates around the world.
  

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• India's Singh: West Should Learn from Developing Countries

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  <!--DECK-->When it comes to handling anti-globalization and protectionism,  India may have advice for industrialized nations, says Prime Minister Singh  

• Even as world leaders convened to hammer out some kind of consensus perched  on the edge of the river in London's Docklands, Prime Minister Manmohan Singh  called on leaders of industrialised nations to take tips from developing  countries on how to handle anti-globalisation and protectionist sentiment among  their disgruntled populace.

   

  "Leaders of developing countries have struggled to overcome doubts and fears  of our public to persuade them of the merits of integrating with the global  economy. I believe we have had substantial success... and these hard-won gains  will be destroyed if markets in industrialised countries are not kept open in  these difficult times. I must emphasise that this is an area where leadership  must come from the industrialised countries," he said, addressing his fellow  heads of state just before the actual summit.

   

  "As we deal with the immediate problems, we must also be careful not to  sacrifice the gains of openness of trade, direct investment and immigration," he  said.

   

  Mr Singh also raised and identified concerns of the new 'financial  protectionism' saying the biggest hit developing countries have taken is in the  collapse in trade, and unprecedented decline of almost 9% in trade volume in  2009, as well as a massive decline of private capital flows at close to $700  billion in 2009, with little prospect of a significant revival in 2010.

   

  This, he warned, has been encouraged by "financial protectionism built into  the conditions for assisting banks in industrialised countries," clearly  singling out strings attached to billion dollar bank bailouts in western  countries.

   

  "We must ensure that countries hurt by the massive withdrawal of private  capital that has taken place, which is unlikely to be reversed in 2010, are able  to rely upon an increased flow of resources from the international financial  institutions," he said.

   

  He also told his rich-country counterparts that while it is hard on their  taxpayers, they need to convince their voters and taxpayers that the banking  system needs to be revitalised, even if there is justifiable outrage about  bankers' mistakes and bonuses.

   

  He also came out on the side of the Anglo-American consensus that more  stimulus is better than less, saying that "risks lie in doing too little rather  than too much, and we are not doing enough to ensure recovery in 2010. If we  cannot agree to do more, we should at least send a clear message that we will  watch developments carefully in 2009 and act speedily to do more if necessary."  

• With more than 500,000 new engineering graduates each year, India is in a strong  position to be an engineering powerhouse. But while India is one of the biggest  players in the services and information technology sector, the same cannot be  said of our supply chain and engineering capability. India's manufacturing  exports still amount to less than 10% of gross domestic product, whereas more  than one-third of China's GDP comes from manufacturing

• Arts and Entertainment: Ashvini Yardi

   

  Age: 36
  Programing Head, Viacom Colors
  
  Yardi, who has a fascination  for Louis Vuitton bags, could easily act in one of her serials but prefers to be  behind the scenes. She is the programming chief at Colors, the upstart  television channel from Viacom that rocketed to No. 2 in the Hindi general  entertainment genre within six months of its launch last July. Yardi has changed  the rules of programming by giving viewers contemporary plots instead of the  junk they were fed as entertainment. After spending 14 years at local channel  Zee, Yardi recently succeeded in dislodging the market leader, News Corp's Star  Plus.

• Media: Amit Varma

   

  Age: N/A
  Blogger, Indiauncut.com
  
  Blogger Amit Varma brings a  particular libertarian point of view to his columns and blog items, but also a  risqué sense of humor that keeps readers hooked. He won the 2007 Bastiat Prize  for his columns in Indian business paper Mint, and for a select  group of Indians, he represents a libertarian, anti-tax and anti-government  sensibility that is still quite rare in the country.

• Sports: Sachin Tendulkar

   

  Age: 35
  Cricket Star
  
  India's most revered cricketer, Sachin  Tendulkar broke onto the world stage at 16 and since then has become the highest  scorer ever in both forms of the game. Picked as the second-best batsman in  history by Wisden, the renowned cricketing almanac, Tendulkar often walks out to  the batting pitch to the roaring expectations of hundreds of millions of Indian  cricket fans. But off the field, he has become the largest sports brand in  India, signing promotion deals that are reported to be close to $45 million over  his lifetime.

• Media: Tarun Tejpal

   

  Age: N/A
  Editor, Tehelka magazine
  
  In the 10th year anniversary of  Tehelka, an unlikely magazine that mixes hard-core investigative  journalism with pitch-perfect art and cinema reviews and fiction, Tejpal has  emerged as a celebrity journalist like no other in India. Best known for a sting  operation that revealed rampant bribery in India's defense acquisitions, Tejpal  launched Tehelka (which means "sensational" in Hindi) on the back  of donations and pre-launch subscriptions from readers who supported  investigative journalism. Since then the magazine has exposed government  involvement in the 2002 riots in Gujarat, which killed nearly 2,000 Muslims, and  has become a benchmark for other Indian magazines. It remains commercially  unsuccessful, though, changing formats multiple times in an attempt to gain more  readers and advertising. Tejpal is also the author of a bestselling novel,  The Alchemy of Desire, which received a glowing review from Nobel  Laureate V. S. Naipaul.

• Business: Dilip Shanghvi

   

  Age: 53
  Chairman and Managing Director, Sun Pharmaceuticals
  
  Dilip  Shanghvi's low-key management style has turned Sun Pharma, maker of generic and  branded drugs, into one of the most profitable pharma companies in India. Sun's  priorities include cardiology, neurology, and psychiatry drugs. Shanghvi pursued  M&As at home and overseas at a time when Indian companies rarely went  shopping. Having waged a two-year legal battle, he hopes to score a big win soon  with Sun gaining control over generics drugmaker Taro Pharmaceuticals of  Israel.

• Arts and Entertainment: Ronnie Screwvala

   

  Age: 54
  Chairman UTV Group
  
  It is said that Ronnie Screwvala, the  head of Mumbai-based television and film production and distribution house UTV  Group, smells opportunities even when he has a cold. From running a recording  studio to producing films with Hollywood studios, he was the first to detect the  potential of the Bollywood-Hollywood connection. Walt Disney has a 57% stake in  UTV, and Screwvala has co-produced three films—M Night Shyamalan's sci-fi  thriller The Happening, Mira Nair's Namesake, and  Chris Rock's I Think I Love My Wife—with Fox. He also has a tie-up  with Will Smith's Overbrook Entertainment to make an animation and a live-action  film.

• Technology: Shailesh Rao

   

  Age: 36
  Managing Director, Google India
  
  When Google decided that  India was going to be a strategic destination, it appointed Shailesh Rao to head  operations in 2007. In most Asian countries, local search engines dominate, but  in India, Google is the clear leader in search. Rao wants to consolidate that  lead with a panoply of products for Indian Internet users. The Kellogg graduate  says he spends much of his time meeting everyone from government and state  officials to parents and children to propagate Google's mission in India.

• Nonresident Indians: C.K. Prahalad

   

  Age: 67
  University of Michigan
  
  Of the Indian consultants and  experts with a truly global reputation, C.K. Prahalad is perhaps the best known.  An author and professor at the University of Michigan, he specializes in  figuring out how exactly the top layer of leadership in an organization can push  it toward remarkable success.

• Technology: Deepak B. Phatak

   

  Age: 61
  Head of Kanwal Rekhi School of Information Technology, IIT  Bombay
  
  An open-source evangelist, Phatak, head of Kanwal Rekhi School of  Information Technology, IIT Bombay, has inspired and helped an entire generation  of youngsters morph into thought leaders. One of the most respected teachers,  Phatak is always surrounded by his students and has made computer science a much  sought-after stream not just at IIT but at other Indian universities as well. To  reach out to a larger student universe including rural India, Phatak started  Eklavya, an online distance-learning program for the IITs.

• Entrepreneurship: Chetan Maini

   

  Age: 39
  Deputy Chairman and CTO, Reva Electric Car Company
  
  Chetan  Maini is the man behind Reva, the first electric car made in India. Maini's auto  romance began young. From making a remote-controlled toy car at 11, he then  built toy planes and a go-cart with a scooter engine. The mechanical engineer  from Stanford then built solar and hybrid cars till he made the 3-door hatchback  Reva. Now Maini wants to capitalize on the global demand for hybrid and green  cars. With venture funding from Draper Fischer Jurveston and Global Environment  Fund, he is setting up a second plant in Bangalore, with a capacity of 30,000  vehicles by the end of 2009.

• Finance: Vijay Mahajan

   

  Age: 54
  Chairman, Basix
  
  Mahajan is a microfinance icon in India.  The electrical engineer from IIT-Delhi and a post-grad from Princeton is a  leading social entrepreneur, working for rural economic development since 1981.  From setting up a nonprofit, Pradhan, to creating microfinance company Basix,  Mahajan's mission is to promote rural livelihood to Indians who live on less  than $2 a day. Basix is one of the first microfinance enterprises in the world  to attract Indian and foreign debt and equity investments, providing livelihood  to over 1.5 million customers. Mahajan's in-depth knowledge of the farm sector  has made him a much sought-after adviser with the Planning Commission and many  Indian states.

• Financiers: Vinod Khosla

   

  Age: 54
  Founder, Khosla Ventures
  
  These days, technocrat Vinod  Khosla, co-founder of Sun Microsystems and former partner at leading Silicon  Valley venture company Kleiner Perkins, visits India as often as he can. Khosla,  who claims that "risk is a religion," has been a great source of capital for  such Indian enterprises as biofuel company Praj Industries, SKS Microfinance,  and Aravind Eye Hospital.

• Enterpreneur: Ashok Jhunjhunwala

   

  Age: 56
  Leader, Telecommunications and Computer Networks Group, IIT,  Madras
  
  A firm believer that India needs Indian solutions, this professor  at IIT, Madras goes beyond just teaching. Ashok Jhunjhunwala is an entrepreneur  who has founded seven companies centering around new technology or innovations  in existing technology. His TeNet group has incubated many telecom and banking  products for rural markets, like a low-cost ATM and a remote medical diagnostic  kit.