Sunday, August 16, 2009

Basic Instincts and Sublime Solutions: Pathways for Innovation

Firms and industries as well as individuals and societies are driven by two basic instincts: survival and growth. Growth is predicated upon survival but survival cannot assure growth. The solutions to the compulsions of both survival and growth stem from innovation.

Survival-growth matrix

Survival and growth instincts can reside in firms at low and high levels in each case; constituting a 2 x 2 matrix. Firms with low survival and low growth instincts will be washed away by the waves of competition in the industry. Firms with low survival but high growth aspirations overreach themselves on a fragile base and will run the risk of collapse. Firms with high survival instincts but low growth aspirations will remain as profitable niche players. Firms with high survival as well as high growth aspirations will emerge as virtuous yet aggressive firms which are destined to lead their respective industries.

Typically an industry comprises all the four types of firms. Whether they exist in equal measure or in skewed proportion would depend upon the products and services the industry operates in, the ownership patterns of incumbent firms, environmental opportunities and risks affecting the industry, and the nation’s comparative advantage in science and technology relevant to the industry. When innovation becomes a national comparative advantage it also translates itself into a firm level competitive advantage, and fills the industrial landscape with virtuous, competitive firms that rank high in both survival and growth instincts.

Japan is one nation which has a high proportion of virtuous firms in all the industries it has in its national canvas. A uniformly high rate of innovation drives the firms to continuously invent and commercialize new products and services, extend market boundaries, enhance market depth and strengthen the sustainability and growth vectors of their businesses. Mature industries covering steel to automobiles as well as growth industries comprising electronics and electronics have leveraged innovation to keep Japan ahead in the global race of survival and growth.

Tailoring innovation

In order to effectively leverage innovation, each firm needs to understand the diverse typologies of innovation and choose the typology that best meets its needs. Innovation needs intellect; intellect resides in talented people; talented people need modern laboratories and facilities to work and such advanced infrastructure needs investments. Often, firm level decisions are telescoped into national resource capabilities as well.

Emerging countries have options of either limiting innovation to the frugal private or public resources they can marshal or harnessing massive resources through public effort. Smaller countries remain constrained on investment and innovation while China has pumped in massive public funding of infrastructure and research to catch up with the innovation curve. India, in contrast, has followed a unique model of public-private participation which provided a midway path, whereby investment trails requirement, and achievement arguably remains well below potential.

It would however be foolhardy to imagine that resources alone provide the requisite base, let alone an automatic boost, to innovation. Innovation exists in a total eco-system where government, universities, industries, firms, people and consumers encourage innovation in an entrepreneurial spirit. The need to understand innovation typologies is therefore relevant.

Innovation typologies

Innovation can be seen in terms of five basic typologies based on the process that drives innovation and the end points of innovation. These are: fundamental, analogue, integrative, adaptive and substitutive types of innovation.

Fundamental innovation represents the first time discovery of a new apparatus, device or instrument in a field. Automobile, telephone, railway engine, aircraft or ship represent certain fundamental innovations in the transportation field. Telephone, radio and television similarly represent fundamental innovations in the communications field. Penicillin and aspirin represent first-time medicinal discoveries. Fundamental innovations, like the ones above as well as the more recent robotics and artificial intelligence, typically simulate natural bodies and phenomena with the added edge of industrial productivity or commercial reach. Fundamental innovation obviously creates technological leadership for nations and firms, and is rarer to fund, find and sustain.

Analogue innovation, on the other hand, is at the other end of spectrum, being the more popular and affordable type of innovation, which is easier to achieve. Creation of an LCD television represents a fundamental invention. Successive discoveries of LCD televisions with 50, 100, 200 MHz resolution capabilities and higher contrast ratios represent multiple analogue innovations. A first-in-class new drug is a fundamental innovation while follow-on medicines which have a similar structural configuration but superior therapeutic profile represent analogue inventions. Analogue innovation is the breadwinner for the larger gamut of innovation oriented firms.

Integrative innovation aims to combine multiple technologies into a singular device. Bringing together multiple technologies helps the inventor offer multiple functionalities to the consumer. This is not a new approach either. While in the yesteryears a radio cum tape cum CD player represented such convergence, in today’s world a cellular phone which also plays music and captures images represents the new wave of convergence. As long as fundamental and analogue inventions grow, integrative invention also would grow. Tomorrow’s laptop may have the ability to project the presentations, and the cell phone may have physically expandable screen, for example. A futuristic glucose meter may measure glucose and also dispense insulin based on the measurement. Integration invention or convergence invention is the current hope for market expansion.

Adaptive innovation is a type of innovation that relies on a common or similar technology substrate to define and power multiple applications. Application of nanotechnology to as diverse fields such as engineering and pharmaceuticals is a prime example. Leveraging of imaging technologies for diagnostics and entertainment is another example. Robotics has already brought in revolution in engineering and medicine. Tire technology, for example, could determine how automobile chassis are configured, from low floor to high floor applications. Touch screen technologies would lead to new interactive user interfaces on wider variety of devices.

Substitutive innovation is the new hope for a cleaner and greener planet. From recycling technologies to renewable technologies, substitutive innovation would enable the planet to conserve its resources. Potentially, substitutive innovation would represent the final horizon which would combine the nuances of fundamental, integrative and adaptive innovation approaches. If integrative innovation blurs the distinction between products through convergence, substitutive innovation would dismantle the borders between industries. Agriculture could power the automobiles while days could power the nights in future.

Innovation and India

India is aiming to be an economic superpower in the years to come. It has a large consumer base of 1 billion plus population and one of the largest scientific and technical talent bases of the world. All these, however, have not led India on a genuinely innovation led development pathway. The collective responsibility for this rests on the firms, industries and governments.

Innovation can help firms survive and grow. Not all types of innovation will, however, suit all types of firms. Firms with low survival and low or high growth instincts can go no better than relying on analogue innovation to move them to a better growth quadrant. Firms with high survival and low growth instincts will need to deploy their cash in either integrative or adaptive innovation to build on available core competencies. Companies which score high on both survival and growth instincts can consider the full spectrum of innovative approaches, including fundamental, analogue, integrative, adaptive and substitutive.

Firms which desire to master innovation need to focus as much on fundamental sciences as on application technologies. Strategic tie-ups with universities and specialized research laboratories would help application oriented firms in-license fundamental sciences and technologies on a cost competitive basis. Success of American, Japanese and Korean firms in innovation is in no small measure due to the support they provide to, and receive from, universities and research entities.

Indian governments, central and state, scientific laboratories, universities, and firms need to consider bolder and futuristic strategies to create new paradigms of innovation. The central government, and its ministries and departments (such as science and technology and biotechnology) are no doubt taking up several national science and technology missions, many of them as government-industry-academic partnerships. Unfortunately, most of these projects and missions are set up, relative to the needs of the substrates, with meager funds, fuzzy deliverables and indifferent participation, with an almost exclusive focus on analogue research.

India has now world-class and world-scale infrastructure in pharmaceuticals, vaccines, automobiles, telecommunications, textiles, chemicals, information technology and a host of other sectors. These sectors qualify for establishing national centers of collaborative innovation to achieve fundamental innovation as well as substitutive innovation. The task of analogue, integrative and adaptive research may, in contrast, be left to the capabilities of individual firms. Only a concerted effort such as the above, duly backed by an upgraded and expanded university research infrastructure, can place India firmly on the global innovation map.

Posted by Dr CB Rao on August 16, 2009

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