 |
Research
& development
| R&D
expenditure has a link with economic competitiveness.
This might explain why India's high-technology exports
are significantly lower than those of countries such
as South Korea, China and Brazil |
|
Country
|
Value of
high-tech
( in $ million)
|
High-tech
exports as a percentage of total exports
|
|
India
|
1,788
|
5
|
|
China
|
68,182
|
23
|
|
South Korea
|
46,438
|
32
|
|
Brazil
|
6,007
|
19
|
|
USA
|
162,345
|
32
|
Bowonder:
We did a study where we looked at major Indian companies.
Of the 8,330 companies surveyed, 86 per cent did not spend
any money on R&D. Given this fact, how are we going
to survive and compete in today's environment? At the same
time, you find that some 100 global companies have started
R&D centres in India. We are faced with a situation
where our R&D skills are being exploited by these companies.
That's another area of concern.
Mathai: There is practically no venture capital
in India to fund risky businesses. A few weeks ago, I was
at the Massachusetts Institute of Technology where they
have an annual industry-academia interaction programme.
About half the participants were venture capitalists. This
illustrates the difference between there and here.
Bhat: There was an interesting study done by National
Institute of Design which showed a link between economic
progress and the quality of design. Innovation and R&D
have some connection to economic prosperity; we may be creative
by nature, but risk-taking is not possible because of our
economic disadvantages that we face.
Bowonder: In 2002, India's high-tech exports amounted
to $1,780 million, which was 5 per cent of our manufactured
exports. For China the figure was $68,182 million, 23 per
cent of its manufactured exports. For South Korea it was
$46,438 million, 38 per cent of its manufactured exports.
Our figures are low because we do not spend much on R&D,
and competitiveness, R&D and trade expansion are closely
linked. China's R&D expenditure is five times that of
India's. However, there is not even a single Indian company
in the global 300, in terms of R&D expenditure.
Bhat: There is a counter view to that. I heard
a pharmaceutical company executive say that the India operations
of global pharmaceutical giants do not consider R&D
an important area.
Ramkrishna: This is not at all surprising. There
is clearly some confusion involving R&D pertaining to
technology solutions or basic new discoveries, as against
innovation in the larger context of the subject we are discussing.
I think we have to break away from the mould of R&D
as a place with white-coated people, laboratories and fancy
equipment, because that's not where the bulk of investment,
talent and money go. In the whole broad spectrum, in the
wide sweep of R&D, India is definitely set to make huge
gains, thanks to recent improvements in the environment
and changes in political and legislative policies.
Bowonder: A lot of outside companies are coming
to India, but Indian companies are not fully utilising the
skills available in this country. It's a paradoxical situation.
Abhiraman: I'm not sure there is a paradox. There
are R&D centres in Bangalore that do not do the whole
spectrum of R&D. They might do R&D for a specific
part in a complete process that goes from concept to construction
to the consumer. So it's not necessarily true that a large
number of foreign companies have set up R&D centres
in India while we have not woken up to the prospect. What
they have done is acquire specific skill sets to do a component
of what they need in a larger context. They have pieces
of R&D in India.
Mukundan: These global companies have probably understood
which part of the value chain delivers benefits to them
and they are funding that part. But we are not collaborating
with them to get that work done; we are caught up in our
day-to-day issues of efficiency, profit improvement and
competing in the market. We need to get away from this mindset.
People are still focused on whether they can take somebody
else's process, reverse engineer it at minimal cost and
take it to market at a lower price. We are not into this
fundamental thinking that we redesign and come up with a
unique process that will change the way we do business.
That requires a huge commitment. It will probably happen
when we are big and brave.
Bhat: I'd like to add an angle to that. Could we
have been constrained by the marketplace? Innovation was
given short shrift in the watch industry till
Titan came in. HMT was the watch, Bajaj's Chetak was
the outstanding scooter, as was the Godrej cupboard. There
are two schools of thought: one, no innovation is good,
as in, "My neighbour has it, so I must"; two, there is an
India which adapts fast to innovation. Many of the products
we introduced 17 years back continue to be big profit earners
for the company. The market is changing, but the rate at
which this is happening is not as fast. 'Edge' (the thinnest
commercially produced watch in the world) was a passion
for us because we wanted to be a leader in the industry;
it was not a market-driven innovation.
Sumantran: It may be unfair to hide behind the
screen of affordability. It is easy to be brave with the
benefit of resources behind you, at the customer as well
as company end. I don't want to make an excuse of affordability,
but companies in India have been innovating within their
boundaries of affordability. There is room for daring bets,
but the affordability factor does play a role.
Ramkrishna: Most Indian companies, the way they
are structured, do not leave provision for that kind of
a play, regardless of the kitty. Indian companies are focused
on operations. To be led by innovation, they will have to
reinvent their structures.
Ghaisas: When we formed I-Flex in 1993 we said
we would not get into IT services; we will create a product.
That's a constraint we placed on ourselves. Throughout the
1990s we did not earn a single dollar on Y2K or any such
thing. About two-third of our people were in R&D during
this period and we progressed from one product to another.
By 1999 we had the second largest-selling product in the
world, and for the last two years we have had the largest-selling
product in the world. That's the way our success came about
and I think it's more a matter of attitude.
Mathai: Deepak raised an important point. We really
need to separate product companies from manufacturing and
services companies. There are very few product companies
and that's where we have a big gap. In service companies
the need for innovation has never been seen clearly. One
of the reasons why we have not been innovating is that we
have been operating in a narrow space.
Patents
| Large
companies create intellectual property through innovation.
The top five companies in terms of patents granted in
the US in 2003: |
|
Rank
|
Number
|
Company
|
|
1
|
3,415
|
IBM
|
|
2
|
1,992
|
Canon
|
|
3
|
1,893
|
Hitachi
|
|
4
|
1,786
|
Matsushita
|
|
5
|
1,759
|
HP
|
Bowonder:
There are some companies that still don't have a clue about
what they should be working on. This is going to be a major
issue beyond 2005.
Mithyantha: Most companies are looking at what
profits they will make this year or next year. If you look
at Monsanto, its strategic plan talks about the company
in 2015. This is where all innovation and patenting issues
arise. It is not just innovation but marketing as well.
Consider what happened to Digital Corporation: lots of innovation
but weak sustenance in the market.
Ghaisas: Xerox is another example.
Mithyantha: We think that if it's a patent it has
to be something big; we do not look at small inventions.
Mathai: The two biggest patent owners at IBM last
year were two Indian brothers. The more prolific of them
had 45 patents; that's roughly one per week.
Sumantran: There were some people who were prolific
as part of their weekly course of work. Today patents are
as much offensive weapons as they are defensive weapons.
At the end of the day, they are extremely valuable.
| Top
US universities create value and protect them. This
is a list of patents the best among them secured in
2003 |
| Rank
in 2003 |
Number
of patents granted |
University |
| 1 |
439 |
University
of California |
| 2 |
139 |
California
Institute of Technology |
| 3 |
127 |
Massachusetts
Institute of Technology |
| 4 |
96 |
University
of Texas |
| 5 |
85 |
Stanford
University |
Bowonder:
There are some
illuminating statistics that show the number of patents
acquired by American universities. In our universities,
the culture of patenting does not exist; they are still
focused on theses rather than creating. This is an issue
that has not been addressed at any level.
Abhiraman: The foremost responsibility of any
university is to create inventors, innovators and scientists.
You cannot compromise that process. Until and unless our
universities can do that well enough, it would be premature
to focus on creating intellectual property. The creation
of intellectual property has two aspects: one is creation
and the other is protection. If you start thinking about
protection before you learn to create, then our universities
will become second-rate institutions. India produces a
very large number of PhDs, but very few real PhDs. The
reason, I think, is our obsession with numbers.
Bowonder: I was at Hewlett Packard's R&D centre
in the US once and there were 200 attorneys looking at
the patents of other companies. They are also looking
at what others had done and seeing if they could find
a loophole to get into similar products.
Abhiraman: When it comes to the product patents,
there is enormous enthusiasm, at least in the West, to
protect them. But when it comes to process patents, most
people actually do not patent what they are going to use;
they patent what they are going to keep others from using.
The reason is that it is possible to get around process
patents; you can always find a convoluted way to do it.
There are many cases where large corporations have lost
billions of dollars worth of advantage because others
hacked into their processes. In India, too, there are
a lot good processes that we have not patented.
Bhat: What are we talking about? Is it the measurability
of innovation? Second, what does it deliver? Is there
a return on investment in innovation that we can measure,
as in the number of patents, or is it some quality-of-life
kind of parameter that it delivers? A large number of
patents do not necessarily mean economically viable innovation.
So what does innovation secure and how do we measure it?
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Uploaded on August 9,
2004
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