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Jugaad has done more damage than good
Jugaad has been hailed as an example of Indian ingenuity but Vijay Govindarajan, Earl C. Daum professor of international business and the founding director of Tuck’s Center for Global Leadership, says it’s not improvisation but innovation that should be the focus for companies. In his book, titled ‘Reverse Innovation: Create Far from Home, Win Everywhere’ , he narrows it down even further by saying that reverse innovation will be the driver for the future. By reverse innovation, he means breakthrough innovations that happen first in developing countries and those innovations are then taken to developed countries. In an interview to TOI-Crest , he talks about how disruptive business models will flow from emerging economies to the West in the future.
Here would you say the frontline of innovation is today? And how has it moved?
WI think one of the fundamental shifts is by multi-national companies that have historically innovated in rich countries like the US and sold them in India. Reverse innovation is one of the fundamental changes, which means doing the opposite - innovating in a poor country and bringing it to the US. Most MNCs know innovation is risky and expensive. So then why do it in a poor country where people don't have money? That thinking has changed. Companies are realising now that they have to innovate for emerging markets. If you don't do that then local companies will go ahead and take away a lot more there but also bring them into the US and disrupt you.
How did your formative years (22 years) in India impact your thinking?
I saw many social problems. We didn't have basic human needs - clean water, access to health, education, transportation. I lived in Annamalia Nagar, Cuddalore, Tamil Nadu. It convinced me that the only way India can solve the problem is through radical innovation. We can't use western products, which are costly and inappropriate. Charity won't do it either. Free TVs or rice cookers won't solve India's problems;these are gestures but we don't have enough money for that.
How would a smart company make the best of the current economic climate?
These are challenging times everywhere. If you are a private sector company in India now, you have to really take a hard look at all the projects you are doing to see which you should shut down. Resources are not plenty. So ask yourself hard questions - how many are focused on maintaining status quo and how many on innovations. If you see a portfolio biased towards status quo, you need to readjust it. There are two kinds of innovations. One is breakthrough innovation such as the Tata Nano - it creates a new market but risk is very high and it takes long time to bear fruit. The second one is the adjacency innovation. GE (He worked at GE as chief innovation consultant during 2008-09 ) sold aircraft engines through Boeing. But then they got into the servicing of these engines. Two different businesses but when you already know a lot about these engines then service wouldn't be that risky. They generated business not just through their own engines but competitors' too.
What kind of products developed in emerging markets have the potential of disrupting business models in developed economies?
Everything. There is not one industry, which will be left out - health, transport, energy. It isn't just about lower price but offering more value for a less price. Look at the Narayana Hrudayalya (NH) Hospitals in Bangalore - they can do an open-heart surgery for $2000 and the quality is as good as in the US. The measure of success is the mortality rate 30 days after surgery - NH has 1. 2 per cent and the US has 1. 9 per cent. They are now building one in the Cayman Islands, targeting the US population and the ones who are really excited are the insurance companies in the US. Instead of sending patients to the Mass General, Boston, Massachusetts, for $50, 000 surgeries, they can send them to Cayman Islands, a short flight from the US.
Why are these innovations not happening in the West?
If you think about the US, maybe 10 per cent are poor, 90 per cent are middle class or rich. In India 10 per cent are rich. In the US if I have a 10 per cent segment (uninsured poor health patients) that is only 30 million, it is not large enough for me to risk innovation dollars. Whereas in India it is more like 1 billion - then a $2, 000 car, because of volumes, will make money. It's not as if the need didn't exist but it was too small and they were making a lot of money in the remaining segment.
Why do you stress on western MNCs innovating in emerging economies? Why can't local companies do the same and expand westward?
They can and they should. In my book, I look at eight cases on western MNCs, so it's written from that perspective. I hope that the same ideas will be used by, say, Mahindra and Mahindra, Tata or by local entrepreneurs. Reverse innovation has three steps - innovate inside India, take it to other similar emerging markets and bring it to a rich country. Indian companies have the biggest advantage in step one. In step two and three, I suspect MNCs will have an advantage because they are global brands with capabilities and distribution. It is easier for them because they are already there. But that shouldn't stop Indian companies and why not a collaboration here?
In India, there is a negative connotation to the word "jugaad" ? Do you agree with that?
Jugaad in my mind has done more damage than good. We need to get away from it. It implies that you need to improvise - that somehow you make do.
I was in India last January and my cellphone didn't work. In the US, I take it to the Apple store where they will keep it for a few days. My help at home in India took it and did something and it worked. To me this is jugaad. That is okay as it is convenient but it isn't the paradigm that drives innovation. We need to use the latest technology, not yesterday's technology. Innovation has to understand the constraints and offer a lot of value. Devi Shetty is not doing jugaad. He is doing constraint-based innovation by applying technology.
Do you think we treat failure too harshly-not just as companies, but also as partners, parents or friends?
That is probably true and it begins in childhood. In India, if you failed math or English, it's not acceptable. We keep drilling that. It is something to be ashamed of and should not be tolerated. But that gets set and even in our working life, we don't want risk that has an element of failure. Failure is inherent in innovation and we must create a culture of tolerance. This is a problem with Indian companies - risk averse and too regimented. But expensive failures should also not be tolerated. We have to encourage intelligent and low cost failures. The language needs to be changed - replace failure with "learning". Innovation by itself means discovering the future.
Can you give an example where an innovation has been directly imported from the west and didn't work?
Every innovation that has come from West has not worked for 90 per cent of Indians. Might have worked for the 10 per cent. When GE brings its equipment, or Ford gets its cars, it works but for a small segment. It is not as though western products have zero applicability but that space is highly contested and everyone knows it. The real issue is creating the space.
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