ISBInsight: An emerging trend in innovation is cluster development. This is where universities and start-ups are coming together and working with businesses to invest in ideation as well as execution. What are some benefits and challenges of this approach?
Anand Nandkumar: There are many benefits from this kind of arrangement. Companies are typically searching for the next big idea. But given that technology lifecycles are crunched up, they might not have the luxury of time for breakthrough innovation. Universities by definition are set up to do that. By tying up with universities, firms can have the benefit of addressing their shortened technology lifecycles and at the same time looking for breakthrough ideas.
However, this scenario is not devoid of challenges. If we skimmed through some of the historical alliances between universities and firms, differences in their objectives and governance have created some management challenges in the past. For example, an alliance between a large pharmaceutical firm and a leading US research university did not work out, because the university had a longer timeframe of about 20 years in mind. However, it would be very expensive for a firm to invest in R&D lasting 20 years. Universities are looking for continuity in projects; firms may not have an appetite for long-duration projects.
Having said that, these challenges can be overcome with proper governance structures and prior understanding between entities. Overall, cluster development is a welcome change. In India, given where some of the universities are and the general lack of funding, this might also end up upgrading universities’ access.
The Government of India has launched a number of initiatives such as Make in India or Start-up India. How does India fare in terms of global benchmarks for start-up success or women entrepreneurship, to take a couple metrics?
Anand Nandkumar: There are far fewer women entrepreneurs in India relative to the rest of the world. But even in Silicon Valley, the odds are stacked up against women entrepreneurs, as Robin Chase from Zipcar has stated. It is an open question whether the entrepreneurship networks are different among men and women, impacting their success rate. At a roundtable where I participated a couple of days ago, it was heartening to see that most entrepreneurs making to the final round were women.
Addressing the second aspect, look at the sheer number of start-ups in India. There are seven unicorns from India in the worldwide list, which is an encouraging sign. We have the third largest numbers of start-up entries in the world and we are ostensibly also third largest in terms of start-up exits.
So, the next few years are going to be critical. For start-ups, the game is not just starting up, it is scaling up. At the Centre for Innovation and Entrepreneurship (CIE), we research issues surrounding the thresholds or hurdles that start-ups have to cross. We have designed specific programmes supporting the entrepreneurial ecosystem, enabling start-ups to scale up. We want to create more Flipkarts out of India.
India now has a firm seat at the innovation table internationally: consider the Global Innovation Centres (GICs) which multinational firms started in India during the 1990s. We now have a shift, with reverse innovation happening in India which is then taken worldwide. How can we capitalise on this momentum?
Anand Nandkumar: It is a bit of a puzzle which we as a research centre are trying to put together. Going by measurable statistics such as patents, you don’t see too much happening in India. In fact, most patents filed in India are by multinationals. And the inventors on these patents don’t tend to be from India. So, there is a lot of activity in GICs but we don’t see it in observable statistics.
The real question is why. There are two perspectives. On the one hand, sceptics point out that GICs are working on low value-added tasks. On the other hand, the optimistic side is the “invisible inventions” from India, as pointed out by Nirmalya Kumar and Phanish Puranam’s research. Due to a variety of reasons such as outsourcing of R&D, Indian inventors don’t show up on final patents.
I am biased toward the optimistic argument, simply because it is inconceivable for an economy like ours to grow at 8% for the last decade or so without any innovation activity. Ideas grow the economy and without ideas, our economy could not have grown at this staggering pace.
The second aspect that might not be captured in statistics is grassroot innovation or frugal innovation. These innovations create significant value at all levels, including business model innovation—an example being Cash on Delivery (COD). Such innovations create huge economic value which has been appropriated by India. So, there is innovation in India that the numbers don’t pick up.
Part of CIE’s endeavour is to understand the idiosyncrasies of grassroot innovation which is about ‘connect and grow,’ not ‘protect and prosper.’ By definition, this would not show up in the statistics. At the same time, there is a lot of innovation spearheaded by multinationals. In fact, most initial start-ups according to our research came from multinational firms’ employees. Our research would like to capture the different dimensions of innovations from India.
As a Centre for Innovation and Entrepreneurship within a business school, how do you connect your research findings with industry and with government policy?
Anand Nandkumar: What a business school can focus on is not creativity or innovation per se but the management of innovation. History suggests that it is not just about the generation of ideas. What also matters is how these ideas are brought to market. The second aspect is that firms need to be organised to do innovation systematically. That’s an issue of management.
Secondly, firms are situated in an institutional environment. The interplay between this institutional environment and firm strategy determines how innovation can be managed appropriately in different types of economies. So, our goal is to try and understand the intersection between policy and firm strategy. By extrapolation, we would be able to recommend policies to the government that would enable firms to generate big breakthrough innovations not once or twice, but systematically.
About the Interviewer:
Yogini Joglekar is a Consultant at ISB’s Centre for Learning and Management Practice.