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India Must Build Its Growth Story Around Innovation

29/08/2016 3:54 PM IST | Updated 30/08/2016 8:35 AM IST
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Innovation worries us. At one level, many perceive it as a threat to their jobs and, in fact, to their way of thinking and behaving. It challenges what they are used to. At another and more profound level, there is genuine fear of failure. After all, not all innovations succeed. Indeed, most fail. A combination of the above is often the reason why governments and institutions are usually averse to innovation and thus, change.

Today, disruptive change has become a buzzword that CEOs and politicians have incorporated into their vocabulary and feel compelled to use, as if not doing so would project them as not being futuristic. Indeed, the pressure has become so oppressive that many have started to complain of change-fatigue, which has come, in fact, as a big relief to the naysayers of innovation.

India stands at the crossroads of either transformational upliftment or abysmal downslide. The route she opts will determine her future for generations.

But can we truly afford to shun innovation?

To answer that question, we first need to decode or understand what innovation really is. Innovation is not restricted to searching for a better idea or thinking outside the box. It is, in fact, that next big step often into the unknown that makes all the difference! Innovation is figuring out how something can be done better. It is the leap from idea to execution. Google, for instance, is a great idea because Google exists and Google works. In other words, innovation needs to make the transition from idea to compelling business proposition. Or to put it differently, innovation succeeds if it helps in doing things more efficiently and thus, in being seen as a growth enabler.

It is worth recalling that according to available data, the average life span of most companies is around 18 years. This is because most companies prefer to stick with what they know – "the tried and tested". They refuse to learn how to see through the fog and what pitfalls lie ahead and thus, to anticipate change and prepare for it. At the heart of the entrepreneurial spirit, lies innovation. In corporate culture, competition is the biggest pitfall that companies have to cope with. Companies fail because they are unable to redefine themselves. They lack the entrepreneurial culture.

This is not restricted to business enterprises alone. Indeed, as the Daron Acemoglu and James Robinson demonstrated in their seminal book, even nations fail. They point to Joseph Schumpeter's "creative disruption", as the key to a nation's growth and success.

Today, India stands at the crossroads of either transformational upliftment or abysmal downslide. The route she opts will determine her future for generations to come. It comes as an encouraging sign, therefore, that the Minister of Commerce and Industry Nirmala Sitharaman is constituting a group of experts to examine how innovation inhibitors may be dismantled to trigger a more welcoming innovation landscape in India. How this would be done remains to be seen.

One of India's great drawbacks has been her lack of investment in R&D as a percentage of GDP, which stands at 0.63...

One of India's great drawbacks has been her lack of investment in R&D as a percentage of GDP, which stands at 0.63 compared, for instance, to Israel, which is 2.61. The telling point is that Israel has a population of 8 million people compared to India's one billion plus and further, Israel has produced 12 Nobel laureates. This is a telling statistic because it is reflective of the low priority India has historically given to research and innovation.

Take China by contrast, which is often referred to as a country in a perpetual state of innovation. Shenzhen, for instance, was a massive factory city churning out cheap goods for the world. Today, it has pushed boundaries and rewired itself to become home to global giants. It is expanding further and hopes to soon emerge as the gateway to 5G and the "internet of things". Chengdu is, similarly, another powerful story where the interface of science and technology drives the passion for innovation. Indeed, as many have documented, China's economic story is built around innovation.

For India to take advantage of its current growth trajectory and address her myriad developmental challenges, it is her response to the innovation opportunity that would emerge as the tipping point. This would require unwavering political will and commitment that cuts across party lines.

Governments need to work inconsonance with research institutions and business so that better and more efficient ways of doing things become part of our DNA.

At the same time, it is critical to recognize that ideas need to be monetized. For this, corporate venture capital is a pathway. Incubators or hatcheries need to be set up with corporate sector funding and government support, which funnel and encourage innovation.

It is often argued that India's successful embrace of the IT revolution was made possible because it was done quietly and quickly without government's knowledge and thus, intrusive intervention. The tendency is to argue that governments are the stumbling block. Yet, whether it is China or Germany, the US or Israel, governments play a crucial role by providing the enabling environment. Governments need to work in consonance with research institutions and business so that better and more efficient ways of doing things become part of our DNA.

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