Innovation in emerging markets: The case of India
On May 1, while most people were heading out on vacation, International MBA participants of the Global Innovation Management Track were preparing for a week-long international trip to India. The goal was to explore innovation in emerging markets, using as a base the Indian Institute of Management Bangalore (IIMB), one of the leading business schools in India.
Bangalore is a vibrant city, home to the majority of the Research and Development centres of the most important multinational corporations in India. While in Bangalore, the participants had the opportunity to attend presentations about innovation presented by top managers from IBM and Boeing. Topics covered included the reasoning behind choosing India as the base for R&D development. The group also had the opportunity to visit the R&D facilities of Oracle and General Electric, where hundreds of engineers work to improve product innovation for the national and global market.
Innovation strategy at TATA Group
Bangalore is also the home of most dynamic Indian technology companies. EADA participants had the chance to visit two of the fastest growing high tech firms. The first visit was to TCS, one of the most important IT companies, with revenues of over 10 billion euros and more than 300,000 employees in 55 countries. At TSC, the VP for R&D described the company’s global expansion strategy including a detailed presentation of product strategy and organisation. TCS belongs to the TATA Group, the largest conglomerate in India and one of the most well-known Indian brands on a global level. The participants were also able to attend a presentation by a TATA manager explaining the Group’s innovation strategy including recent success stories such as a new category of specially designed steel that reduces the noise of railways or a new water filter that provides clean water for remote Indian villages.
A TATA manager explained the Group’s innovation strategy including recent success stories such as a new category of specially designed steel that reduces the noise of railways
There was also a candid discussion about the failure of one of the Group’s most prominent attempts at innovation: the Nano car. The car was pushed forward largely by the chairman, who sought to improve the poor transport conditions of so many Indians who ride bicycles or motorbikes to work. However, as the discussion revealed, this desire to help did not take into account the lack of parking or the negative connotation of buying a car perceived as “cheap” (cheap car = cheap person) in Indian culture.
Biocon: scientific and technological innovation
The second stop for EADA participants was the Indian biotech firm Biocon, whose inspiring female founder, Kiran Mazumdar-Shaw, is among the Financial Times’ Top 50 Women in Business. Biocon has broken from the traditional development model of Indian pharmaceutical companies, which tend to focus on manufacturing low-cost generic alternatives to well-known Western drugs with expired patents. Biocon is investing massively –about 15% of its revenues– in the development of molecule compounds to compete in the global arena. Biocon recruits Ph.D. students and has its own research facilities located in Bangalore. The director of the centre shared the challenges of development strategy based on scientific and technological innovation.
In the healthcare sector, India is not only known for its pharmaceutical industry, but also for its burgeoning hospital industry
In the healthcare sector, India is not only known for its pharmaceutical industry, but also for its burgeoning hospital industry. International MBA participants had the chance to visit Narayana Health, a multispecialty hospital chain in India with 32 centres in 20 different locations. This chain is the first of its kind, offering affordable, excellent quality care –from with surgery to many other treatments–. Its secret is state-of-the-art technology combined with hyper-specialisation, which allows it to make the most of economies of scale and experience: an average of 42 heart surgeries and 24 open-heart surgeries. There are 35 catheterization procedures performed daily, five times more than in the best hospitals in the Western world.
Moreover, the best heart surgeons seek employment in Narayana Health due to the number and variety of patients there. Founded in 2000, the Group is now growing fast not only in India, but also internationally. Over 15,000 surgeries have been performed on patients from 25 different countries. Narayana Health has even been the subject of a Harvard business case.
How to target customers with low purchasing power
India is a country of paradox. It is third in the world in terms of the number of billionaires; even so, 450 million Indians still live in extreme poverty, earning less than 1.25 USD a day. Another 360 million earn less than 2.00 USD a day, making them vulnerable to poverty. This segment of the population, however poor, still has needs to be met.
450 million Indians still live in extrem poverty and earn less than 1.25 USD a day
At IIM, EADA participants learned how Indian companies are managing to do business at the “base of the pyramid” by adapting their business model to suit consumers with low purchasing power and little cash available but who are still yearning for a quality product.
How did they do this?
-Offering smaller quantity (for daily use) at an affordable price for water purification powder, shampoo, or soya snack food.
-Using bus drivers with routes near remote local villages to distribute solar panels.
-Promoting lending within village communities. The community can evaluate the risk of lending small sums to poor members who commit to paying it back.
Many other well-known Indian companies (Selco, Manila Water, Solae) as well as multinational such as TATA Group, Unilever and Procter & Gamble have employed similar strategies based on affordable solutions available to a large portion of the population.
The final focus of the international trip was social innovation. This type of innovation was of particular interest considering that 45% of Indian children (nearly half of the world total) are malnourished, and less than 40% complete school. Social issues continue into adulthood, with 139 million Indians without access to safe drinking water and 69% with inadequate sanitation facilities. In remote parts of India, there are still some tribes living in poor conditions with little or no access to the modern world.
The participants met Dr. H. Sudarshan, who had built schools and hospitals in the poorest areas of the state of Kanarkata, close to Bangalore
International MBA participants had the opportunity to meet well-known social worker, Dr. H. Sudarshan, who was awarded the Mother Teresa Award for Social Justice in 2014. During the meeting, he described the world of Vivekananda Girijana Kalyana Kendra (VGKK), a foundation created in 1981. Its mission is to promote sustainable development among Indian tribes through a rights-based approach to health, education, livelihood security and biodiversity conservation. Dr. Sudarshan detailed how he had built schools and hospitals in the poorest areas of the state of Kanarkata, close to Bangalore. The foundation has been so successful in its efforts that the Indian government has requested its help with the tribes in Northern and Central India.
The Global Innovation Management trip provided the opportunity to see how innovation in India can inspire MBA participants looking to challenge the “business as usual” model. There is little doubt that all who participated were transformed by the trip.
Post written by Eric Viardot, director of the EADA Global Innovation Management Centre