This goes to show that innovation, although mostly focused on the area of research and development, and marketing, should not be compartmentalised from the rest of the company, but rather integrated at every level, in order to be fully effective and to be in line with corporate strategy and goals. Indeed, innovation is not solely restricted to products, but rather encompasses business processes and business models as well
Schumpeter, one of the first economists who studied and defined innovation, coined the term “creative destruction” to refer to the “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one”. He identified novelty, in technology or in organisational structure, as being the key source of competition, and not price. Even though in the Indian market, consumers in various sectors still take price as a symbol of product value, things are changing even on the product side.
Opening of sectors by the Indian Government has seen a flood of foreign competitors who are trying new products in the Indian market leaving Indian consumer psyche matured. Indian companies need to improve their products and bring new products to the market on the one hand and on the other foreign companies need to innovate for the Indian market- incorporating Indian tastes and other preferences.
Product innovation, be it disruptive or incremental, can increase profitability, by either increasing revenues, or by reducing costs.
In India, where two-wheelers represent the most common transportation means, Tata Motors saw the need to come up with a safer kind of transportation. In addition to this safety issue, personal transport is also problematic because of the rare availability of public transportation . Therefore, Tata Motors introduced the People’s Car, called the Nano. This disruptive product innovation will surely have significant effects on the small-car segment.
The Jaipur Foot, a hand-made artificial foot, is another example of a successful product innovation. There are more than 5.5 million amputees in India, and most of them live below the poverty line, thus not affording health care. The most important issue for these people is then to be able to go back to work, which is essential for their survival. However, most amputees were fitted with prostheses which were not very flexible, and not offering a wide range of motion.
Therefore, the Jaipur Foot is a prosthesis that matches the active lifestyle of the poor and allows squatting, sitting cross-legged, climb, working in wet fields, and walking barefoot. Just a week ago, there were reports of an NGO setting up a camp for amputees to be helped with Jaipur foot in Iraq.
I was surprised a couple of days back watching an advertisement of McDonalds’ Veggie Burger being sold in Germany. It’s a classic McDonald innovation for India that is being taken reverse to the western markets. Some years ago, as far as my travelling goes, India was probably the only country where McDonald offered this veggie Burger!
In India, Tata Group’s Computational Research Laboratories (CRL) developed a parallel processing library technology. Thanks to this process innovation, CRL has been able to develop the fourth fastest computer in the world, sustaining a speed of performing 117.9 trillion floating operations per second in 2007. Similarly Tata Steel before its takeover of Chorus for instance was considered to be one of most cost effective steel producers in the world. This was not because of low cost labour but because of best in class process innovations in operations and branding that Tata Steel employed.
Business Model Innovation
Amul (Anand Milk-producers Union Limited), the $1-million brand managed by Gujurat Co-operative Milk Marketing Federation Ltd, is an integrated cooperative structure that processes and markets milk and milk products. Amul is thus jointly owned by more than 2 million of milk producers. This business model innovation has really become unique and efficient model for sustainable rural development, and has made Amul a very successful company.
Another successful Indian business model innovation is definitely the Mumbai’s Dabbawalas. The Dabbawalas, meaning the ones who carry the box, are people carrying and delivering homemade food in lunch boxes to office workers or businessmen. Actually, more than 175,000 lunches are delivered every day by around 5,000 Dabbawalas, and their performance and accuracy reach Six Sigma standards, although there is no system of documentation, but only a simple colour coding.
Thanks to this business model innovation, the Dabbawalas allow Mumbai’s workers to eat homemade food without having to carry it in the overcrowded local train. Moreover, some Dabbawalas even gave guest lectures in famous Indian business schools.
Finally, the government of Andhra Pradesh, a southern state in India has managed to come up with an innovative business model to provide access to its services and agencies. eSeva, meaning e-service, are centres operated through a public-private partnership, which can be accessed via the Internet or through kiosks set up by the government.
Thus, citizens can pay electricity bills, and property taxes, or get their driver’s license through this system, via the Internet, or in only one trip to a kiosk, without any corruption. eSeva allow all citizens to receive the same service, no matter their economic class, and allow for a greater transaction visibility as well.
These examples are just exemplary- innovation is happening in all different sectors and stratas of the society. Indeed a perfect balance between exploiting the highest earnings from existing activities or products, and looking for new ones, is a must – not just in products but in processes and business models. And Indian companies are slowly embracing it! Actually that’s the only way going forward as the times of labour arbitrage are gradually going to fade away!
Gunjan Bhardwaj, advisor, senior editor and member of the editorial board. Gunjan is the leader of the Global Business Performance Think-tank of Ernst&Young. He is also the solution champion for Pricing strategy and effectiveness as well as Innovation management in the advisory services of Ernst & Young with a focus on Pharmaceutical and FMCG sector.
Gunjan is also a guest professor for Growth and Innovation management at European Business School (EBS) in Germany and a member of the scientific advisory board of Plexus Institute in the US which researches on complexity in health sciences.
Gunjan has published a number of papers and articles in various Journals and magazines and has been a frequent speaker in conferences on marketing and innovation related topics. He is also the chief editor of the quarterly journal of Ernst & Young’s advisory practice called Performance.