The accident of being born in 1947 makes B Bowonder one of midnight's children. But he is much more a technocrat, a management expert and an innovation evangelist. Director of the Tata Management Training Centre in Pune, this Phd holder from the Indian Institute of Science (Bangalore) is at his best when preaching the gospel of new ideas. Excerpts from an interview with Christabelle Noronha
How do you define innovation from a business perspective?
It can be the development of a new product, a new process or a new idea. Innovation means invention plus value addition. If you are doing something new and getting value out of it, that can be called innovation.
What are the stages in an innovation chain?
The starting point of an innovation is usually an idea an ability to identify a new window of opportunity. Ideas are floating around everywhere; what's needed is the knack to arrive at something new. A typical example is the ballpen. The ball was already in existence and so was the pen. Somebody thought of using a ball instead of a nib for writing. The person who invented the ballpen was not in the business of making pens; he was a printer.
When does the process of measurement and assessment begin?
You first have the 'idea space', which is an open space. The only thing you need here is imagination and visualisation abilities. The idea has to be transformed into something tangible called the 'concept space'. Here it is about how easily you can produce the product: is it easy to manufacture, is it real, will people find it useful? Then comes the 'product space', followed by the 'market space' and 'user space'. Customer experience is critical since it is this that makes an innovation a dream product or a flop. Each space is different and distinct. Innovation is the competence to navigate an idea through these spaces and make a fantastic experience in the mind of the customer. This holds true for any product and service.
Earlier, people believed that innovation was a matter of chance, something serendipitous, but that is not true. Good companies have efficient systems for managing innovation. 3M is a company that is always innovating and replenishing ideas; this is an instance of institutionalised innovation. The focus of innovation here is radical innovation that could create new markets. Similarly, General Motors now has an assembly line for new ideas.
The Japanese have high-quality idea-management systems. They think money can be secured easily (you can borrow from anywhere), but that ideas are more difficult to get. So you need a system for managing ideas and reusing them, converting them into breakthroughs.
Is there any benchmark return-on-investments model?
There are no benchmark models, but many companies have robust evaluation systems. Venture capitalists have systems that assess the value of ideas. They use three kinds of risks to do that. One is the organisational risk whether the organisation is capable of converting its idea into a marketable product. Second is the market risk the potential of the market to accept the new product is gauged, as also whether it will beat the competition. The third is the technology risk. Here you have to consider if the technology is new and whether it will become obsolete quickly. If your idea goes through these filters, your product will go through successfully.
Earlier, it was thought that there are no techniques for innovation. But now Altshuller, a Russian, has developed a method called Triz. After studying some 200,000 innovations, he concluded that all of them are covered by 40 inventive principles. If you learn these 40 principles you can use them easily, just as you would a multiplication table.
In the 'Stage and Gate' method, a product must go through a series of gates to be successful (Tata Motors is using this for new product development). It helps you decide whether it is worthwhile to commercialise a product. There are four stages in this method: the idea-generating stage, where you try to look for ideas, gaps, demand and needs; the preliminary-investigation stage, where you consider if it is worth proceeding further; the detailed-investigation stage; and, finally, the stage where you commit to developing the new idea.
Companies are allocating only 1-2 per cent of revenues to R&D. Are we being shortsighted?
We recently did a study on R&D and innovation in India. One of the issues addressed was why we are not innovative enough. In 2002, the largest investor in R&D was Ranbaxy, followed by Dr Reddy's Laboratories, Tata Motors and Bharat Heavy Electricals [BHEL]. Money was not necessarily the issue for low R&D spend. What is essential is a company's ability to have a portfolio that will balance risk against the ability to manage competition.
Our companies are not so large that they can afford to spend huge amounts of money on R&D. Even if they do, they don't have enough people to do the kind of R&D that may be required. It is a chicken-and-egg kind of situation. Unless you have large units you cannot have too much R&D; unless you have big R&D divisions you cannot grow.
The situation is changing. Indian companies are spending more money on R&D and also applying for more patents. Moreover, many multinationals, among them General Electric, Motorola, Texas Instruments, Intel, Cisco and Microsoft, are setting up R&D centres because we have a rich talent pool. It is not a lack of capability in India that is hindering R&D growth; it is probably a lack of will.
Biocon is one the firms that has innovation at its base and they are producing drugs for the global market. Within the Tata group, Titan has received the National R&D award twice; Tata Steel was the first Indian company to start R&D. Tata Chemicals has improved its process efficiency through process innovation and also reduced the resource use. TCS has developed a low cost water filter for rural areas.
Where does India's expertise lie in the overall innovation cycle?
We are good in R&D. The National Chemical Laboratory, for example, has done a lot of pioneering work, as also the National Aerospace Laboratory, Central Drug Research Institute and the Central Food Technology Research Institute (CFTRI). Earlier these institutions were not commercially oriented; now they are (Dr Mashelkar, director general of the Council of Scientific and Industrial Research, has institutionalised systems where people are now inventing things that can be commercialised and patented). Similarly, the Defence Research and Development Organisation has brought out a number of complex products that we cannot get from abroad. LRDE (Electronics and Radar Development Establishment) at Bangalore has developed portable battlefield radar that weighs merely 28kg. These are being manufactured at Bharat Electronics.
There are many products specifically of Indian origin. CFTRI has commercialised honey powder. Amul milk powder, which is made from buffalo milk, is another example. Buffalo milk needs a lot of processing to be converted into milk powder. Amul, through CFTRI, developed a process which is amenable for manufacturing in India.
R&D centres are clustered in certain centres.
Socially speaking, this is not a desirable development, but economically that is the way things are going to be. There is a question of resource infrastructure as also of people-capability factor. Bangalore, for instance, is a big R&D hub because of these institutions in and around the city. This is good, in a way, because clustering increases the flow of talent around the area.
In an organisation, is it better for one person to head the cash-to-innovation process or should it be left to individual business units?
Long-term R&D is generally business related and is handled at a centralised level. BHEL is a typical example. Research that takes long to mature and be commercialised is handled by BHEL's central R&D; the other stuff is done by its business units. This model is being adopted in most places. Unilever has a variety of R&D systems. The support R&D backs its existing system and is handled by a business unit. The derivative R&D is where you have derivatives or variants that are new. The third, called breakthrough R&D is not necessarily done in one particular place. In the cluster R&D, the company sponsors work in other institutions.
The system used in earlier days was known as a closed-innovation model: a company converts its ideas into concepts, and concepts into products, then takes them to the market. Today people have moved to an open-innovation process wherein you can get ideas from anywhere. You can even acquire an idea, something that Intel does effectively. Companies such as Microsoft, IBM, Lucent and Boeing also use the open-innovation model. This is collaborative, virtual or distributed R&D.
What is the ideal time from idea to market?
It varies from product to product. In the case of a car, in 1995 it used to be 84 months. Honda brought it down to 48 months. Today Nissan is doing it in around 18 months (and they want to reduce this to 12 months). IT allows you to do this kind of cycle-time reduction, essentially through what is known as concurrent engineering, which means overlapping phases of product development by working jointly with the supplier. Titan has enormously reduced its cycle time for developing new products by using this process.
A company must test market a product before it is introduced into the market. Titan makes a small number of sets and shows them to dealers before introducing new models. Additionally, people are trying to make multiple prototypes. They conduct test marketing and validation before actual introduction. They check customer reaction and market acceptance, since they cannot afford to fail. This is concurrent engineering.
Earlier, you had the idea and the design and you went from manufacturing to marketing. In this system every activity was in a separate silo. It wasn't a good system, so people decided to change things and work in an interactive manner through what is known as cross-functional teams. Here all professionals work together seamlessly. Problems are identified early because there's just the one team, from design to marketing.
This model will find increasing acceptance because it minimises rework and the failure rate. Since you are working seamlessly from the beginning as a single team, problems are continuously envisaged and solved as and when they come up. This requires foresight and courage and trust among the team members and willingness to take risk.
Are there any good benchmarks?
There are many. Biocon, headed by Kiron Mazumdar, is one that stands out. It has developed a process called solid-state fermentation, which reduces the cycle time needed to produce certain drugs that are sold in the US. Then there is a firm called Ittiam (an acronym for 'I think, therefore I am'), which is mainly into chip design. Metahelix is another Bangalore-based company which is into biotech, as also Impulsoft.
Tata Motors' Engineering Research Centre has also set benchmarks in innovation. Tata Steel is doing some good work. TCS has an R&D centre, but it is into product development now. The good thing about TCS is that it is able to become a supplier to major technology companies.
Would you say the Palm Pilot was a failure of innovation?
They were very complacent; they thought things would not change, but other companies innovated continuously. What happened with the Palm Pilot is that the company did not anticipate some additional uses that could have been incorporated. It meant that it lost out to the cell phone. Today, Nokia has done what the Palm Pilot could have.
How should Indian companies move up in the innovation value chain?
There are two distinct types of innovations: incremental and radical. Incremental innovation is marginal improvements aimed at improving an existing product. It has a short-term focus for instance, a new version of an existing brand of toothpaste. Investments needed are low and you are trying to defend an existing product. If you focus too much on this you tend to be short term focused and you neglect the future.
Radical innovation is bringing out a new category or technology that did not exist before. Through this, you are creating your future. The DVD, for example, created new demand and is a new generation of products that makes the old generation obsolete.
Creative destruction is the crux of radical innovation. Realising radical innovation requires systematic innovation strategy. It may take a while to realise it. Radical innovation focuses on future market creation and not market protection in the short run. Indian companies have to plan for radical innovation. It also means some amount of risk taking and foresight. Firms have to institutionalise processes and systems for radical innovation if they have to dominate the markets. Many were of the view that innovation cannot be planned and this is not so today.
The growth of firms such as Intel, 3M, Canon, Matsushita, GE, Texas Instruments, Monsanto, Nortel, CISCO, Phillips, Genentech, Chiron, Sanyo and Nokia are essentially through the exploitation of radical innovation. These companies did not grow by luck or chance. Indian firms have to go a long way for stimulating radical innovations. Firms like Tata Motors, Ranbaxy, Dr Reddy's Laboratories , Tata Steel etc., have the mental prowess but have to move faster. The top management has to recognise the need for radical innovations and support them. This needs a mindset that seeks future and then engineers it. Nanotechnology is a perfect example of radical innovation.
What do these investigations entail?
First, is it a technologically feasible idea? Second, is the market good enough? Third, will it generate enough returns to sustain it through its lifecycle (an idea that will deliver returns for only two years may not be worth investing in)?
Most Indian companies did not worry about innovation because we operated in a highly protected market. We did not feel the need to innovate; we could survive because there was little or no competition (the Ambassador car is an apt example). The situation has changed now. In the 1960s and 70s everyone talked about world-class marketing. Then came world-class manufacturing. Today the buzz phrase is world-class product development. You have to be able to make world-class products in a very short time, and successful at that. In other words, competition has made innovation a necessity.
You have to be competitive in your own market or you cannot be competitive elsewhere. Tata Motors for example, can now go into the other markets because it is domestically competitive. Innovation is done only when companies are strong, or if there is an urge for them to expand and grow. A big global company benefits enormously from innovation because it can introduce the new product in every market. That is the key - the larger the market, the bigger the returns.