Innovation must improve the quality of human existence. Ravi Venkatesan in Conversation…

In a freewheeling conversation on Innovation and India, Ravi Venkatesan talks about the inadequate Government action, evolving business responsibility and social enterprise.  Speaking to Parvathi Menon, Ravi shares his perspective on the opportunities and barriers that make up the Innovation fabric in our country. As Chairman of Cummins India Limited and thereafter as Chairman of Microsoft India, Ravi has had a unique vantage point view of Business in India over the last two decades of rapid evolution.

In Conversation….

I had the opportunity to catch up with Ravi at his wonderful home in the heart of Bangalore, as he took a break from writing his book titled ‘Winning in India’ to be published in 2012 by Harvard Business School Publishing.

“You have caught me on a bad day…” says Ravi as we get started. He is writing a chapter on why projects like UID must not be stalled … and goes on to share both his excitement and frustration on the subject of Innovation in India. Included below are excerpts of the conversation around some specific questions.

PM: What would you consider as innovation? Are PhDs and Patents the relevant indicators to measure?

Ravi: “For me innovation is things that improve the quality of human existence. When I was at Microsoft, we spent a lot of time trying to do things to stimulate the rate at which the country was producing PhDs in computer science, so in fact we set up Microsoft Research in Bangalore. But I think that’s a very narrow view of innovation and you would probably agree. Innovation is so much broader than just Patents and so forth.

 A lot of what has fueled innovation in the west or the developed world has been innovating for the world’s affluent, and I think what we’re talking about now is that there’s an opportunity to innovate for people who have less needs and provide them access to what are considered basics that is education, water, healthcare, all those things. And make money while doing that.

 So, am I concerned about the number of PhDs, patents that India is producing?  Yes.  But, I think that’s a different issue than real innovation that changes life and changes society. Both are important, but I think at the stage at which we are, still a developing country I think innovation that impacts lives, changes society, provides access to things that people didn’t have access to, that’s more important than raw scientific prowess measured as PhDs, patents, peer reviewed articles etcetera.  I think that will also happen but it can come over time.  This is the more important and urgent. And I think India has an opportunity to be sort of uniquely good at this type of innovation.”

PM: Are we succeeding in this type of Innovation? 

Ravi: “I just finished the research for my chapter on Innovation, and I came away from my conversations reasonably encouraged by the amount of innovation that is bubbling out there. The problem though is that not enough of it scales.  Much of it stops at the point where it barely has demonstrated some sort of proof of concept and companies give up too quickly or, you know, people get satisfied with a certain scale of success.

 There’s no shortage of ideas or people with ideas.  But for various reasons it’s not really impacting things at scale in the way we would like to see.”

PM: With the volume of challenges to be solved, isn’t that an ecosystem challenge? What is the role of the Government in Innovation and scale, for instance?

Ravi: “Everybody says government should do more to promote innovation.  I don’t think so. I think the government should just do its job. What is its job?  Its job is to create conditions that are conducive to growth. It’s like gardening.  If you create fertile soil, then other people can throw whatever seeds they want and it will catch root and flourish.  If you create the kind of disastrous environment that you have today where there’s no confidence, interest rates are wacko, inflation is high, etcetera, even established businesses struggle let alone start-ups and innovations. 

 There is a certain enabling infrastructure that is needed for innovations to scale, what is that?  For instance distribution reach. You can have 22 smokeless chulhaa ideas, 15 different solar lanterns etcetera.  Every one of which is viable, but there is no distribution reach, so, many of these ideas and models won’t scale because they lack access to distribution.

So, I think job number one of a Government is to create conditions that are conducive for the growth of businesses, operation of business.  It’s just so tough that it sucks all the life force out of these poor innovators.

 Number two the Government needs to promote competition. One of the biggest drivers of innovation is competition. And there are large parts of our economy that are still today quite protected from competition and therefore we are not seeing enough innovation.  For instance this whole subject of retailing, agricultural supply chains etcetera.  Critical issue, lots of means and scope for innovation, but if you don’t throw the doors open in a responsible way, with regulation, you are never going to get there, right?

 Number three, the role is in creating critical enabling infrastructure, whether its roads or electricity that is necessary for people and businesses to work. So, the Government should just do its job. Should it provide early stage funding? It’s nice if it does, but that’s not critical.  If the economy is growing, there’s going to be plenty of early, medium and late stage capital. So, I think let’s just keep them focused on what Government should do and I think other parts of society whether it’s business, non-governmental organizations, civil society they can all do their respective tasks.”

PM: What should corporate businesses do?  Do they have a role in building more conducive environments and opportunities?

Ravi: “Businesses, I guess, should do two things; Take a longer-term view, longer-term horizon of their own business because I think the investments in R&D in most cases are extremely little.

And the second thing businesses, should do is think about corporate social purpose as opposed to corporate social responsibility and think about extensions to their business that create social value as well as economic value.

We have got plenty of examples of this. One of the biggest cases in my book is of Hindustan Unilever and their PureIt water filter. It’s actually a stunning example of doing it right.  Still long way to go, but they stayed with it and are now in the 11th year and for $22 or 1,000 rupees you get your entry-level water filter.

And it’s fantastic, but here’s a company that’s creating social value and eventually will create economic value.  And I think businesses should be encouraged to think that way i.e. enlightened self-interest, right?  The company called JCB that makes diggers; they are training two types of people at scale. One group of people is welders because they need welders (at JCB), but they train lots and lots of them, most don’t join them, some do.  But they’re creating a pool of skilled welders and they train operators of construction equipment with a for-profit business model that covers their costs.  And they’re creating thousands of skilled people. I worked with Raymond, the apparel company.  And I’m advising them on how to create a scalable way of skilling tailors because their long-term success depends on finding enough tailors and today the younger generation simply doesn’t want to become and so that’s a big issue.

So, every business should be encouraged to think about ways of creating societal value in a way that they leveraging their own strength, leveraging core learning around their own strength and do it in a way that is profitable and sustainable for them not just contribute 2 percent of profits into CSR to be compliant with a new company rule or something. Genuinely do that.  That’s what Businesses should do.”

PM: Is there a constraint in terms of capital that can be deployed to build such ideas?

Ravi: “So, I look at Unilever and PureIt.  It has been at it for 10 years.  They’ve spent hundred’s of crores probably more than a thousand crores and it’s still a long way and they know it. Now, how many people can sustain with this type of scale, right?  And that’s because Unilever has done all the heavy lifting in this.

For Social Entrepreneurs like Harish Hande the scale is still small because a lot of the pieces like the infrastructure are not there. For any entrepreneur to really scale without any infrastructure is very tough – you first have to put infrastructure in.

So, the more the government does its bit, for instance, if you remove this gap of FDI and retail and retail blossoms and distribution systems fall in place, then you can go into a small town or a big village and be able to buy your (solar) lantern, and he (the entrepreneur) doesn’t have to go figure out how to get products into every nook and cranny.

 There’s plenty of money – there’s foreign money, angel investors who are quite well off, but everybody is investing only in growth stage, even if you take Narayana Murthy and Catamaran. They’re looking for growth stage.  They’re not doing early stage.

And I think that’s because people don’t believe a lot of the early stage stuff will succeed. Either the entrepreneurs have no track record of any sort or else these other barriers to becoming successful are so large that they’re skeptical.

So, what we have to do is reduce the barriers to innovation and commercialization.  The money will come. Money is always very rational.  It will flow where the returns’ are.  If we reduce the barriers to returns, the money will come….”

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The conversation continued to cover a wide range of examples and ideas from UID, Apple, Akshay Patra and Ravi’s own exploration of a Start-up and his learning from that. But all that’s for another time.

In summary a few points that stood out. The fact that India has an opportunity to build its own unique ‘purposeful innovation’ approach given the opportunities at hand. But there is a critical need for Governments to start doing their job in building the necessary infrastructure to facilitate innovation and business. And an opportunity for Businesses to think of integrating Corporate Social purpose into their core business, not just look at it as social responsibility.

Innovation continues to be a rapidly evolving thought process for India… but something that Ravi said stayed with me… “We have a tendency to celebrate prematurely.  That’s really an issue…” indeed and while there are fantastic examples of how innovation is enabling change in our country, we may need to stay the course and find the rigor, structure and scale to make it really meaningful.

Is rigor and scale relevant to enough innovators and entrepreneurs for us to change the mindset and system that keeps us locked in?

Ravi Venkatesan is on the 2012 Innovation for India Awards Jury. The Awards Ceremony is scheduled for March 30 in Mumbai; author and Business Guru, Dr Ram Charan and UIDAI Chairman, Nandan Nilekani will both be speaking at the event. If you would like to attend, please register for your exclusive invite.

Parvathi Menon is the Founder CEO of Innovation Alchemy Consulting
And can be reached on Twitter @parvathimenon