The issue with Indian Innovation
- In Mathematics, Science & Technology
- 12:07 AM, Aug 08, 2015
- Bhanu Gouda
On July 15th 2015, Infosys founder Mr. Narayana Murthy attended the convocation at The Indian Institute of Science in Bengaluru. In his address, he remarked that there was no earth shaking innovation from Indian Institute of Sciences or IITs while MIT had many path breaking inventions. The media went in only one direction, attack him.
Let’s get some clarity on the two words innovation and invention.
Innovation improves the functionality of an existing product or a service. Invention is a new “thing” which did not exist before. An iPhone is an innovation, Apple did not invent the smartphone, that credit goes to Palm but Apple innovated better than most other companies. The innovations are so many that the iPhone can may be called as an invention. In contrast, the iPad is an invention. There was no such internet consumption device that existed before it. There were some Personal Digital Assistants (PDAs) but they were good for the Pre-Google era browsing.
Innovations and Inventions do occur at both private companies and Government organizations. Research is the Science and Development is the Technology. For Innovation and Inventions to happen Research and Development should be part of any organization as a continuous process. There is no stopping R&D activity in any organization.
Research in a private company focuses on creating a product, which is different to the Government’s work of fundamental research. However, there are many private companies which have enough money to do fundamental research. The relationship between the Government and the private companies in fostering innovation is a complex one. The Government spends capital on fundamental research. The results of government research help private companies either directly or indirectly. The fundamental research NASA carried to produce electricity resulted in an energy company called Bloom Energy which provides electricity to the datacenters at Google, EBay and Apple. The Internet is a creation of the US government. Cisco is the indirect benefactor of that research. Sometimes, a few of the inventions are used by companies all over the world. They are ubiquitous, we cannot live without them. GPS technology is an excellent example of such invention. Even in India, the Defense Research Development Organization worked on creating a particular stainless steel to stop the corrosion on military ships. The material subsequently morphed into the famous Kalam-Raju stent!! We can find this relation between Governments and private corporations throughout history.
Large private corporations do not sit idle selling their existing products or services. General Electric and IBM are perfect examples of tireless innovation and inventions. GE started as a plastics company but now has evolved into an avionic and nuclear energy behemoth. Making of plastics has now been taken over by the Chinese while GE researchers work on next generation Jet engines.
IBM the iconic 100 year company started with punch cards for counting. It grew its business by getting a contract from The United States census for counting people who immigrated to the United States. Fast forward 2015, IBM still counts, not people, but electrons in its sophisticated labs which are part of their Thomas Watson Research Center located in New York and Massachusetts. Turns out an Indian who is a product of the IIT’s is heading this prestigious research center. IBM should thank IIT’s for giving Sri Arvind Krishna to run these labs. Continuous innovation is responsible for what these companies are today and will decide where they will be in the future. Both IBM and GE make still make money from their low margin businesses by the way. For IBM its software development and services and for GE its light bulbs and appliances. However, they still spend millions of dollars in basic research.
Most companies in the West and Japan did start out very small. Sony was started literally in a building that was in a rubble after World War II. Google started inside a home. From those humble beginnings, HP and Apple worked their way up in the marketplace to where they are today. These companies continue to innovate. Sony has now morphed into a movie producer and a gaming company from their earlier business of selling Walkman’s and consumer electronics. Google while still making money on search, expanded into YouTube and Mobile computing. The newcomer Facebook expanded into virtual reality by acquiring companies with the cash it raised from the market.
Innovation is what keeps these companies alive. India’s Wipro started selling soaps and oil. They still sell them, but they have moved onto other businesses including IT. They innovated on the early electronics such as the printers but their entry into the IT world came much later. Entering a new area comes with a risk. Wipro took it. Infosys started as a software company, and it still is a software company albeit expanded into providing service to diverse industries. I am not sure it will remain a software company in the future. They might turn into a products based company if they apply themselves in the R&D space objectively.
Leaving aside the future of Infosys for a second, let us look into how innovation happens across the world. It happens in places (both government and private corporations) filled with teams consisting of the best and the brightest ready to change the world with a mission.
Where do the greatest universities or colleges fit in this technology innovation? In the west, bright students (the types Narayan Murthy wanted the IIT/IISC students to be) come from these very universities. They join such teams to do research. Sometimes a college degree is not always needed in the West, the knowledge and willingness to create something is more important than an MIT degree. Regardless of whether they came from a famous university or community college, these bright people forming those teams will tackle the next big problem. Once the teams are in place, they work to invent things. They help the organizations expand. One invention is all they need to create a steady revenue stream. Private corporations and the governments sponsor the research for these groups. The financial support these team get is one of the most important aspect of how any organization innovates.
So how does this work in India? We have the best and brightest students. At a theory level, our students are on par with the west or even better. The practical aspect is where they fail.
I remember my own experience of being given a paper to write a software program but was prohibited to use the computer. Why? Because there are not many computers two decades ago at my college. We used to share a few of them. The situation has changed now. However, the labs and facilities at the IITs are not comparable to the best in the west. The collaboration between the Universities (IITs, IISC or NITs) and Private sector is not at the level as it happens in the West.
For these R&D teams to function at their peak, private companies should either donate money on research inside university labs or invest in their own R&D. They can hire the best from the IITs to work on that new cool R&D project. Which brings us to question how many times we heard an IIT graduate or undergraduate saying “hey I am creating a new java compiler” or “I am creating a new framework for internet based email” or “I am making a drone”. I suspect not many. The IIT student hired by IT companies are usually assigned a mundane software project, supporting a client located outside of India. That’s the life of the brightest in the best IT companies of India. Some are lucky to work on exciting new technologies. But that again is tailored to some client requirement, it is not really “exciting”. The university where they came from has nothing to do with how these students progress once they leave the campus. That Invention seed has to be sown in the private companies. If the professors are given freedom to work with private companies, not just the Indian companies but globally, things will improve. The gurus in these universities can have their own research projects. All it needs is a combination of financial support and the next great idea. The ideas are plenty in IITs, but funding of the IIT to spend on scientific projects is not on par with the top universities in the west. We cannot expect gigantic inventions out of the R&D with the current state of resources.
One could argue that the government needs to pump more money into Universities for research. But that extra money will be wasted on some mundane research or to dole more PhDs. It will not be used to innovate existing things or to invent new things. Remember we are comparing our universities with the west. Private Companies involvement with India’s premier institutions is where the rubber meets the road to solve this issue. In the West, many universities have private endowments. Few companies such as the Bose Corporation (Bose speakers) went that extra mile to donate the majority of ownership to MIT! Such act will foster strong relationship between the private company and university. Bose made use of MIT and is giving back. Government support is old story, that’s like we are still living in Nehruvian era. Time is ripe for removing obstacles to help India’s private companies collaborate with Universities.There is one problem, the mindset of the private companies not to spend money on R&D needs to change.
Large corporations in the west spend considerable amount of their earnings on R&D. The great universities benefit from this. The culture of not spending enough money on R&D is the main issue with Indian Private Companies. It is not just Infosys but every company from Tata, Reliance, Wipro, Mahindra, the list is big, do not spend like their counter parts in the west. Betting on big ideas is not yet started in India. The startups are picking up, but no big company is spending huge money on cool making cool product in their R&D. The tendency of these companies to avoid risk is something etched in the Indian genes. Perhaps it’s the older generation of leaders in these companies not willing to risk their profits by spending on R&D. The annual report of Infosys submitted to Securities Exchange commission (SEC) mentioned a list of risks which can slow down their business. They have listed “change in government policies”, “geopolitical changes” even “terrorist attacks such as the one on 911 can have negative impact on their business” however their inability to innovate or expand business into new areas of software or hardware was not mentioned as a risk.
The blame is not for Infosys, it is with shareholders and the board. The board and the shareholders love to get dividends on fat profits. They do not want to waste money on R&D.They have been programmed to think R&D spending as expense with no returns. That is how the entire system work in India. It is wrong to just blame Mr. Narayana Murthy for saying about lack of Innovation coming out from IITs. All private sector companies needs to collaborate more with universities by opening their purses. If they have issues of any sort with policy, call the PMO. Ache Din are here. Obstacles will be removed.
Whether we like it or not, Infosys was the first innovative company which started publishing its financial results using Generally Accepted Accounting Principles (GAAP) similar to American corporations. It was voluntary and unheard of during that time. So they are innovative company of that time. Fast forward few decades, they spend less than 2% of their revenues in comparison IBM spends about 6%.As the country’s economy improves and as the foreign investment increasing, the R&D spending will increase in private sector. New companies will mushroom. New products will be created. Sitting idle and doing nothing will cost the business. It’s a big risk for all the companies to not do anything. It will be matter of time before Infosys starts spending more money on R&D. That’s the ONLY way forward for them and the rest of the other companies. As the private collaboration picks up, the IITs will become the great engines of Innovation in the coming years. It will be a natural process.
By Bhanu Gouda
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