India's invisible innovation – Nirmalya Kumar



over the last two decades India has become a global hub for software development and offshoring of back office services as we call it and what we were interested in finding out was that because of this huge industry that has started over the last two decades in India offshoring software development on back office services there's been a flight of white-collar jobs from the developed world to India then this is combined with the loss of manufacturing jobs to China it has you know led to considerable angst amongst the Western populations in fact if you look at polls they show a declining trend for support for free trade in the West now the Western elites however have said this fear is misplaced for example if you have read I suspect many of you have done so read the book by Thomas Friedman called the world is flat he said basically in his book that you know this fear for free trade is wrong because it assumes is based on a mistaken assumption that everything that can be invented has been invented in fact he says it's innovation that will keep the West ahead of the developing world with the more sophisticated innovative task being done in the developed world and the less sophisticated shall we say drudge work being done in the developing world now what we were trying to understand was is this true could India become a source or a global hub of innovation just like it's become a global hub for back-office services and software development and for the last four years my co-author furnished puranam and I spent investigating this topic initially all you know as people would say you know in fact the more aggressive people who are supporting the Western innovative model say where are the Indian Google's iPods and viagra's if the Indians are so bloody smart so initially when we started our research we went and met several executives and we asked them what do you think will India go from being a favored destination for software services and back office services to a destination for innovation they laughed they dismissed us they said you know what Indians don't do innovation the more polite one said well you know Indians make good software programmers and accountants but they can't do the creative stuff sometimes it took a more book a veneer of sophistication and people said you know it's nothing to do with Indians it's really the road based regimented education system in India that is responsible for killing all creativity they said instead if you want to see real creativity go to Silicon Valley and look at companies like Google Microsoft Intel so we started examining the R&D and innovation labs of Silicon Valley well interestingly what you find there is usually your head introduced to the head of the innovation lab or the R&D center as they may call it and more often than not it's an Indian so I immediately said well but you could not have been educated in India right you must have gotten your education here it turned out in every single case they came out of the Indian educational system so we realize that maybe we have the wrong question and the right question is really can Indians based out of India do innovative work so off we went to India we made I think about a dozen trips to Bangalore Mumbai Google Delhi Hyderabad you name it to examine what is the level of corporate innovation in this country in these cities and what we found was as we progressed in our research was that we were asking really the wrong question when you ask where are the Indian Google's iPods and viagra's you are taking a particular perspective on innovation which is innovation for end-users visible innovation instead innovation if you remember some of you may have read the famous economist sham Peter he said innovation is normal T in how value is created and distributed it could be new products and services but it could also be new ways of producing products it could also be normal ways of organizing firms and industries once you take this there is no reason to restrict innovation the beneficiaries of innovation just to end-users when you take this broader conceptualization of innovation what we found was India is very represented in innovation but the innovation that is being done in India is of a form we did not anticipate and what we did was we called it invisible innovation and specifically there are four types of invisible innovation that are coming out of India the first type of invisible innovation out of India is what we call innovation for business customers which is led by the multinational corporations which have in the last two decades there have been 750 R&D centers set up in India by multinational companies employing more than 400,000 professionals now when you consider the fact that historically the rnd center of a multinational company was always in the headquarters or or in the country of origin of that multinational company to have 750 R&D centers of multinational corporations in India is truly a remarkable figure when we went and talked to the people in that in those innovation centers and asked them what are they working on they said we are working on global products they were not working on localizing global products for India which is the usual low role of a local R&D they were working on truly global products and companies like Microsoft Google Astra Zeneca General Electric Philips have already asked answered in the affirmative the question that from their Bangalore and Hyderabad R&D centers they are able to produce products and services for the world but of course as an end user you don't see that because you only see the name of the company not where it was developed the other thing we were told then was yes but you know the kind of work that is coming out of the Indian R&D center cannot be compared to the kind of work that is coming out of the US R&D sentence so my co-author finished puranam who happens to be one of the smartest people I know said he's going to do a study what he did was he looked at those companies that had an rnd Center in USA and in India and then he looked at a patent that was filed out of the US and a similar patent filed out of the same company subsidiary in India so he is now comparing the patterns of R&D centers in the US with R&D centers in India of the same company to find out what is the quality of the patents filed out of the Indian centers and how do they compare with the quality of the patents filed out of the US Centers increasingly what he finds is and by the way the way we look at the quality of a patent is what we call forward citations how many times does a future patent reference the older patent you find something very interesting what we find is that the data says that the number of forward citations of a patent filed out of the US R&D subsidiary is identical to the number of forward citations of a patent filed by an Indian subsidy of the same company within that company so within the company there is no difference in the forward citation rates of the Indian subsidiaries versus the u.s. subsidiaries so that's the first kind of invisible innovation coming out of India second kind of energy visible innovation coming out of India is what we call outsourcing innovation to Indian companies where many companies today are contracting Indian companies to do a major part of the product development work for their global products which are going to be sold to the entire world for example in the pharma industry a lot of the molecules are being developed well you see a major part of that work is being given sent to India for example HCL technologies they developed two of the Mission Control critical systems for the new Boeing 787 Dreamliner one to avoid collisions in the sky and another to allow landing in zero visibility but of course when you climb onto the Boeing 787 you are not going to know that this is invisible innovation out of India the third kind of invisible innovation coming out of India is what we call process innovations because of an injection of intelligence by Indian firms only process innovation is different from product innovation it's about how do you create a new product or develop a new product or manufacture a new product but not a new wrap itself only in India do millions of young people dream of working in a call center what happens you know it's a dead-end job in the West where high school dropouts do what happens when you put hundreds of thousands of smart young ambitious kids on a call center job very quickly they get bored and they start innovating and they start telling the boss how to do this job better and out of this process innovation comes product innovations which are then marketed around the world for example 24/7 customer traditional call center company used to be a traditional call center company today they're developing analytical tools to do predictive modeling so that before you pick up the phone you can guess or predict what this phone call is about is because of an injection of intelligence into a process which is considered dead for a long time in the West and the last kind of innovation innovation coming our invisible innovation coming out of India is what we call management innovation is not a new product or a new process but a new way to organize work and the most significant management innovation to come out of India invented by the Indian offshoring industry is what we call the global delivery model well the global delivery model allows it it allows you to take previously geographically co-located tasks break them up into parts send them around the world where the expertise and the cost structure exists and then specify the means for reintegrating them without that you could not have any of the other invisible innovations tooling so what I'm trying to say is what we are finding in our research is that if products for end-users is the visible tip of the innovation iceberg India is very represented in the invisible large submerged portion of the innovation iceberg now this has of course some implications and so we developed three implications of this research the first is what we call sinking skill ladder and now I'm going to go back where I started my conversation with you which was about the flight of jobs now of course when we first as a multinational company decide to outsource jobs to India in the rnd what we are going to do is we are going to outsource the bottom rung of the ladder to India the least sophisticated jobs just like Tom Friedman would predict now what happens is when you outsource the bottom rung of the ladder to India for innovation and for R&D work at some stage in the very near future you are going to have to confront a problem which is where does the next step of the ladder people come from within your company so you have two choices then either you bring the people from India into the developed world to take positions in the next step of the ladder immigration or you say there are so many people in the bottom step of the ladder waiting to take the next position in India why don't we move the next step to India what we are trying to say is that once you outsource the bottom end of the ladder you it's a self-perpetuating act because of the sinking skill lager and a sinking skill ladder is simply the point that you can't be an investment banker without having been an analyst once you can't be a professor without having been a student you can't be a consultant without having been a research associate so if you outsource the least sophisticated jobs at some stage the next step of the ladder has to follow the second thing we bring up is what we call the browning of the TMP the top management teams if the rnd talent is going to be based out of India and China and the largest growth markets are going to be based out of India and China you have to confront the problem that your top management of the future is going to have to come out of India and China because that's where the product leadership is that's where the important market leadership is and the last thing we point out in this slide which is you know that to the story there's one caveat India has the youngest growing population in the world this demographic dividend is incredible but paradoxically there's also the Mirage of mighty labor pools Indian Institutes and educational system with a few exceptions are incapable of producing students the quantity and quality needed to keep this innovation engine going so companies are finding innovative ways to overcome this but in the end it does not absolve the government of the responsibility for creating this educational structure so finally I want to conclude by showing you the profile of one company IBM as many of you know iBM has always been considered for the last hundred years to be one of the most innovative companies in fact if you look at the number of patents filed over history I think they are in the top or the top two or three companies in the world of all patents filed in the USA as a private company here is the profile of employees of IBM over the last decade in 2003 they had 300,000 employees or 330 thousand employees out of which 135,000 were in America 9,000 were in India in 2000 and in 2009 they had 400,000 employees by which time the USM flies had moved to 105 thousand whereas the Indian employees had gone to 100,000 well in 2010 they decided they're not going to reveal this data anymore so I had to make some estimates based on various sources here are my best guesses okay I'm not saying this is the exact number it's my best guess it gives you a sense of the trend there are four hundred and thirty three thousand people now at IBM out of which 98 thousand are remaining in the US and 150 thousand are in India so you tell me is Ibn an American company or an Indian company ladies and gentlemen thank you very much you

49 Comments

  1. Jo said:

    Indians will continue to work for foreigners,never for themselves

    June 29, 2019
    Reply
  2. Bb A said:

    0:16

    June 29, 2019
    Reply
  3. Bb A said:

    0:17

    June 29, 2019
    Reply
  4. Bb A said:

    0:15

    June 29, 2019
    Reply
  5. The Viral List said:

    Companies like patanjali is our new hope. But they should bring something new.

    June 29, 2019
    Reply
  6. gourav Gupta said:

    last…
    indians have innovation and only thing is
    all peolpe who work in ibm google etc who are indians come and do something for our country
    yes its true indians in india are very lazy sought of and having a mercedes is success..
    but indians have innovation in dna we want oppurtunity…
    we are talenred ….
    because of brtishers rule all gurukuls were destroyed these convent school marking system was made by them…
    we have not changed anything thats why…we are half india and brtishwrs..

    we need to move to our original side..make gurukuls

    June 29, 2019
    Reply
  7. Pi Squared said:

    Where are the Indian Google's and Microsoft's? Errr…. well they are in Google and Microsoft.

    June 29, 2019
    Reply
  8. knowledge & joy said:

    Good information sar.

    June 29, 2019
    Reply
  9. Divya Badri said:

    Example of Innovation from India made by Indians who studied in India https://www.youtube.com/watch?v=zzWuvBghpGg

    June 29, 2019
    Reply
  10. Mayukh Mukhopadhyay said:

    Indians are the "bell" of the bell shaped curve. Google was founded by American..but angel invested by Indian origin investors….and now run by Indian educated CEO. Indians are average…true…but average is the new exceptional.

    June 29, 2019
    Reply
  11. Crazy Flossin said:

    The number of challenges faced in India by a young aspirant– Lack of funding, Research resources, indian mentality, societal pressure to settle in given time and start a family, the inefficient system, corporate politics, cut throat competition, less opportunities etc etc… US to has its own challenges like racism, expensive living but it gives you the freedom and funding to create. It follows– the best man win mentality…In India its may the offsprings of the best and rich man win!

    June 29, 2019
    Reply
  12. Krishnakanth Griddaluru said:

    Thanks Nirmalya Kumar for reducing myths of India 🇮🇳🌏🌍🌎🌐 JAI HIND 🇮🇳 proud to be an Indian citizen.

    June 29, 2019
    Reply
  13. ur calpal said:

    he is calling developing an 'ecosystem' as innovation – however, thats not new and unique to india nor is it self sustaining. for e.g. he says that we are setup for employees to get bored and start innovating. the fact is that none of that has happened. please wake up and stop prophesying.

    June 29, 2019
    Reply
  14. Prashanth Kumar said:

    Good explanation and analysis of Market and its innovation .
    A lay man like me can also understands.
    All the best for India

    June 29, 2019
    Reply
  15. REPUBLICAN INDIA said:

    India is great

    June 29, 2019
    Reply
  16. TUSHITA-NEPAL YOGA-MEDITATION RETREATS said:

    Nepal is the education hub. Long later Hindus of India learned the Vedic culture from Nepal… www.tushitanepal.com

    June 29, 2019
    Reply
  17. Ritik Panday said:

    Bb

    June 29, 2019
    Reply
  18. Protik Sarkar said:

    Great video

    June 29, 2019
    Reply
  19. Serve The Nation said:

    woww fantastic sir, we done know from where u have come but u not only make to realise not people infront of but also us people in india by giving a grest statistics which most of indians sont know really it may not only knowing factor but also inspiring thing…….thank u sir

    June 29, 2019
    Reply
  20. social feaver said:

    That's amazing….

    June 29, 2019
    Reply
  21. ACSM certified personal trainer S.K.N said:

    Hahaha…nalied it man

    June 29, 2019
    Reply
  22. Gabriel Sebastian said:

    India is the future . Namaste to all !

    June 29, 2019
    Reply
  23. vikas meena Rakaspuriya said:

    I love my india

    June 29, 2019
    Reply
  24. Vaibhav Raut Patil said:

    Good and Best

    June 29, 2019
    Reply
  25. love singh said:

    Why India still not able to make fighter plan yet..

    June 29, 2019
    Reply
  26. Nowhere Lost said:

    Why this kind of vids didn't get views

    June 29, 2019
    Reply
  27. Mohd Aasif said:

    you are saying good .after watching this video i will do something for india …….

    June 29, 2019
    Reply
  28. Mike Agate said:

    What a load of crock!
    In the 1990s a company called Inchcape plc had 60,000 employees worldwide with 40,000 of them in India. Did that make it an Indian company or a British company?
    British, because the Indian employees were all tea pickers in the tea estates in Assam.
    QED

    June 29, 2019
    Reply
  29. News Boosters said:

    @ 10:38 – "….India is represented in the invisible submerged portion" – means, India is the "back office" of Research scene also, just like they are the back office of everything else. When will we be the front office of anything ?

    June 29, 2019
    Reply
  30. Giridhar Maji said:

    Hats off. Though our education system has to evolve a lot.

    June 29, 2019
    Reply
  31. Arkeshwar Medatwal said:

    Dead body audience

    June 29, 2019
    Reply
  32. Sahil said:

    My great country India 😳
    Sorry भारत 😌

    June 29, 2019
    Reply
  33. tony thomas said:

    We should teach children to think freely rather than mugging up things

    June 29, 2019
    Reply
  34. Manohar Reddy said:

    can I see the actual reports(proofs) regarding what he is talking about?

    June 29, 2019
    Reply
  35. technoamb said:

    Why not teach the millions and millions of illiterates both young and old in India! Look India’s Education is only for the few elite and that’s why India will always be stuck in a hole! They give themselves to much credit, admittedly some worth of it, but there’s been no real innovations that compete with the massive amounts of innovations that come from the the West and Far East in all areas! Also Indians achieve better abroad because they get the opportunities to succeed unlike India which is selective on caste, creed, religion, social class, and if have contacts and who you know, also bribing and favouritism.

    June 29, 2019
    Reply
  36. MsKseeker said:

    We were asked to watch this as part of our MBA program. Very impressive and well expressed. Thank you for sharing this!

    June 29, 2019
    Reply
  37. Deepak Chaudhury said:

    https://youtu.be/1w0jKpKlcEE

    June 29, 2019
    Reply
  38. Saurabh Gaur said:

    Rula diya yaar. . . Im so moved . . . My fifth ted talk of the night

    June 29, 2019
    Reply
  39. Samad Sayed said:

    Too good sir

    June 29, 2019
    Reply
  40. Shashikesh Mishra said:

    It is truth and wide open for me…

    June 29, 2019
    Reply
  41. tim cook said:

    umm… software engineering doesn't require creativity? well most of the algorithmic problems require one to think creatively and efficiently.

    June 29, 2019
    Reply
  42. varunthedoc said:

    India is shit….what he talks is nonsense…you send a sewage cleaner to clean the sewage…so that the westerners can enjoy their life

    June 29, 2019
    Reply
  43. Rishav Bhowmik said:

    Indian education system dosent benifits anyone at all.

    thats why all cancer patients , Patients with injury in brain etc always die in India but survive in America.

    June 29, 2019
    Reply
  44. Rishav Bhowmik said:

    no doubt that Indian education system is a piece of shit .
    If it is not then why Indian only manage to do Innovation in America.
    Why greatest companies of India like TATA and Birla can't do innovations?

    June 29, 2019
    Reply
  45. Vaibhav Baluja said:

    Innovate with India and win prizes worth crores
    https://m.facebook.com/story.php?story_fbid=1394761310580529&id=100001400214780

    June 29, 2019
    Reply
  46. Vikrant Patil said:

    Indian have lack of vision to create who we are, instead of that we work for someone's else dream.

    Even we do have vision, no Indian companies want to invest in it. How many R n D lab in India which are built for India talent to innovate and for our own country benefits.

    June 29, 2019
    Reply
  47. siva prasad said:

    really great speech

    June 29, 2019
    Reply
  48. Reality Check said:

    Now u can say all this kind of shit in front of a crowd, to get some claps. no shit, as an Indian I will say if India ever want to get to the top,
    we need to change our fuckin Education system, cause it's just full of shit.

    June 29, 2019
    Reply
  49. BEING ME said:

    i had, a solid idea,, i discussed with a friend and found its not possible in india. So we decided to developed that idea for an American co. Work in progress, probably we will pitch soon. Its all about expouser which not letting Indian innovation.

    June 29, 2019
    Reply

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