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Tuesday, November 6, 2007

Perspective # 11 - God is in ‘structures’

God is in ‘structures’: In India though there are few one off business model innovations (Aravind Eye Hospital etc.) we have far to go w.r.t Innovation. Though we all love to believe the perception that China is the factory of the world and India is going to be the laboratory of the world, data does not support this theory.

As per CII’s National Innovation Mission Report, released in May 2007 in India, 2000 patents were approved versus over 100,000 for China. Also, India’s record for new designs was 39 versus 53,000 for China. According to World Bank, China scores 4.74 in Innovative Index, while India scores only 3.72. The UN report says that China is spending 1.5% of its gross domestic product on R&D invesment, twice that of India.The jury is still out but all the stats as of now - Patents, citation analysis, university rankings etc. shows that we are a Innovation laggard.

Prof Vijay Govindarajan, the widely acclaimed Innovation Guru attributes little of India Inc’s current success to Innovation. he says “For the last 15 years, Indian industry has grown merely by sucking out inefficency.To me, that game is now over…looking to the future, our innovation gap is bigger than our efficiency gap” .

They say the world is flat but why Indian IT companies fail to create a YouTube or MySpace? Why don’t Indian Professors come out with business concepts like Blue Ocean Strategy? Why there are no Indian Pharma discoveries like Viagra? Why our doctors are not creating breakthroughs like Emotional Intelligence theory? Why our business journalists are not coming up with concepts like ‘the long tail’?

Why are we great followers? – Kamagra was launched by Ajanta Pharma as soon as Viagra was launched. Similarly ‘rediff i-share’ and ‘big adda’ came up after Orkut’s success. ‘It happens only in Silicon Valley’ is the usual excuse, but what about Skype which is from Luxembourg or Pokemon? or Manga the Japanese comic trip which is a hit globally?

Another excuse is about the ‘huge money spend on research’, but what about Facebook which was created by a 23 yr old college kid and is now worth jaw dropping USD 15 Billion?

The answer is not ‘culture’ but may point out to ‘structures’. It is our ‘structures’ - Incentives, SOPs, Org Charts, Reporting, Performance metrics etc. and not ‘culture’ that stifles Innovation. ‘structures’ and ‘culture’ need to complement. Look at the IDEO office or Bangalore Philips Innovation campus which is designed to stoke innovation. Look at Google’s employee screening process to tap innovation talent and the 20% idea time off for employees.

R&D spending to annual sales of Pfizer, Merck etc. exceed 20% - these are strong hard to ignore ‘structural messages’ which will push the organization's propensity for innovation. ‘Structures’ are great behavior shapers - How on earth can you not hit blockbuster drugs if you spend 20% of your turnover on R&D? Many organizations put too much focus and energy on creating the ‘innovation culture’ without tampering with our good old sacred ‘structures’.

When Krishna Bharat of Google using his 20% time-off created 'Google News' the Print Journalism industry was scared, imagine the disruption if the hundreds of Krishna’s and Bharat’s within our Billion $ software outfits who are tied up by structural chains wake up?

Monday, November 5, 2007

Perspective # 10 - MGR style Positive Lateral thinking

MGR style Positive Lateral thinking: Many inventions today happens due to lateral thinking of employees.

Let us look at the example of Pfizer’s anti cholesterol blockbuster Lipitor that has annual sales exceeding US $10 Billion. Many competitors including many in India are working on formulations to reduce LDL (bad cholesterol). A small firm called Kos Pharmaceuticals worked on a different model – they worked on formulations to elevate HDL (good cholesterol) instead of working on reducing LDL (bad cholesterol) and struck gold. Their product Niaspan is now FDA approved and the company valuation is sky rocketing – thanks to thinking differently.

Lateral ideas are evident in today’s Web 2.0 stars like YouTube the free video sharing site or Social networking sites like Facebook or MySpace whose valuations are zooming. Nearly $6 million worth of virtual currency changed hands in Second Life, the virtual world in June 2006.

Prof. Govindarajan who authored the bestseller "10 Rules for Strategic Innovators" (published by Harvard Business School Press) has a nice analogy from Tamil cinema of his youth “Think of the scene where the villain ties down MGR, kidnaps the heroine and escapes in a Mercedes. He is chased by a police van, which follows the same rules as the car, but is much slower…By the time MGR gets up, he is 30 minutes late. He knows he can’t play by the same rules, so he jumps on a horse, bypasses the roads and goes after the villain. That’s thinking differently,”.

The case of washing machines used to make Lassi in Punjab is well known. Think about the possibilities if we think lateral, particularly ‘Positive lateral thinking’. Lateral thinking innovation sometimes is misguided and results in IP violations, reverse engineering etc. Varanasi is the largest consumer of condoms in the country – to polish the silk and lubricate the hand and power looms! India and elsewhere Cough syrups are replacing good old Alcohol.! The annual study by the National Institute on Drug Abuse , conducted by the University of Michigan found that as many as one in every 14 high school seniors said they used cold medicine “fairly recently” to get high. Another study found that 36 million Americans have abused prescription drugs at least once in their lifetime! Too much lateral thinking :)

The challenge is to make all imbibe the message of the need to think lateral in a positive way.

Perspective # 9 - The whole is greater than the sum of the parts

The whole is greater than the sum of the parts: Gone are the days where a single idea in the R&D lab turned into a blockbuster. Those were the magical days, many solutions waiting to address human needs! For example when Willis Carrier invented the 30 tonne ‘Apparatus for treating air' it was a big hit and the ‘air-conditioning’ industry was born.

Today one needs to have multiple inventions, networks, partners, human factor experts, designers and even ethnographers to ensure that an idea blooms and scales in the market place.

Look at the i-Pod – the amazing UI and miniature hard disk is only part of the story. Steve Jobs and team created the online business model (otherwise anti piracy media moguls would have killed the i-Pod just like they eliminated Napster), invested in ‘this is cool’ branding, integrated with iTunes software platform and build an ecosystem to ensure success.

Yes, there are iconic one man/woman show inventers like Richard Sapper (200+ inventions ranging from ThinkPad,Tizio Lamp to Mercedes rear view mirror) but they are a dying breed! In today’s’ networked economy it does not pay to be a stand alone hero. The Edison days are over.