Economic Independence of India: Need for Multiple Regulators, Three Missions and Three Objectives

As India celebrates the season of sixty seventh anniversary of Indian Independence, there is a new hope and aspiration, which is reflected by the President Shri Pranab Mukherjee who said in his customary pre-Independence Day speech, that the twenty first century belongs to India. The Prime Minister, Shri Narendra Modi, reinforced the message while unfurling the national flag at the Red Fort on the Independence Day with a call to make India strong with economic growth and social equity. A cornerstone of the new aspirations will need to be economic independence for the country. This has a connotation greater than non-independence on economies of other nations. True economic independence means the emergence of a policy structure that rests on the logic of economic growth and social equity than on dogmas like self-reliance or maximizing foreign direct investment (FDI).

True economic independence happens when every adult in every family has a productive and earning job, whether through agriculture, manufacturing or services. The Prime Minister has given a number of inspirational slogans ever since he took office; these could verily serve as credos of development for a New India. Some of these are; ‘Skills, Scale and Speed’, ‘Per Drop, More Crop’, ‘Minimum Government, Maximum Governance’, ‘Come, Make in India’, ‘Zero Defects, Made in India’, ‘Reduce Imports, Maximize Exports’, ‘Zero Defect (of Product), Zero Effect (on Environment), and other exhortations are reflective of Modiji’s passion to develop India as an economic power. To these, if ‘Zero Unemployment, Productive Deployment’ gets added as the exhortation that is translated gainful realization through tangible action it could lead to micro level wealth creation. The issue with economic development is that there tend to be no easy solutions. A holistic approach is needed to make things work for true economic independence.

From licensor to regulator

One of the first tenets of economic liberalization of the 1990s was that licensing stymies industrial and economic development. The two decades of liberalization has demonstrated how unshackling of industries and businesses can lead to unleashing of growth. Two caveats are, however, necessary.  Firstly, growth cannot be fuelled only by continuous removal of licenses or liberalization of investment caps. All said and done, there would continue to exist sectors of strategic importance where licensing or investment controls would be in play. Barring a few such strategic sectors (defence, multi brand retail, railways, insurance and banking, oil and gas, mining, for example), all the rest are probably free of licensing and investment controls but are still anemic in growth for various reasons. Secondly, free market economy does not by itself guarantee non-cartelization nor does it by itself prevent exploitative economics (real estate, for example). There must be an oversight role for the governments, particularly in a huge democracy like India where the disparities in wealth, education and health are three of the most galling pain points.     

At a conceptual level, the governments must move from being licensors to regulators. Regulation commonly is seen as taking care of customer interests through good business practices including pricing. Truly effective regulation goes deeper, with an approach and guidance that ensures quality, innovation and competitiveness. Each of this is an important parameter that must be defining in its essence. National regulatory bodies should have expertise to monitor how various industrial and business sectors are performing in terms of the three parameters and periodically issue guidelines, rules and regulations to course-correct the erring or sub-optimized industries. Regulators, who will be industry specific need to matrix with three pan-industry commissions on each of the three parameters mentioned above; quality, innovation and competitiveness. Three national expert commissions can be conceptualized as discussed below.

Three national missions

Quality, of the product and process, is the key to make India global manufacturing hub. From a situation where the quality standards are derived from the developed world, India must be able to set global quality standards. Looks unbelievable? In the 1950s, setting global quality standards appeared infeasible for Japan and in the 1970s for Korea. Yet, today Japan and Korea lead in quality. Why not, therefore, India? If the Indian industry and talent pool is seen to deliver quality, India would automatically become a global manufacturing hub. For that, the existing base must be developed to reach and set higher standards of quality. A National Quality Mission would be well in order.

Innovation, of the product and process, is the engine of growth. Innovation leads to new products and processes as well as continuous improvement in existing ones. Innovation is commonly seen as a result of research. However, innovation, as with quality, is a matter of mindset. An inventive mindset is required to foster innovation as much as laboratories are required to convert ideation into innovation. For a resource scarce country like India, innovation lies in doing more with less; for example, more crop per drop. The ability to identify sources, uses and forms of innovation is a characteristic of successful nations such as Japan and Korea. India requires a continuous scan of product and process landscape to drive innovation; a National Innovation Mission would help.   

Many times, competition is misconstrued as competitiveness. Competition is simply presence of more players in the industry, which it is hoped will lead to each firm excelling over one another offering improved products or services to customers (it is a hope, not a given!) . Competitiveness, on the other hand, is the ability of a company to excel over the others in the industry in terms of products or services to the customers (it is a demonstrated competency, not a hope!). Mere competition, however high it is, does not guarantee competitiveness; in fact, excessive fragmentation affects viability. Indian airline industry and domestic pharmaceutical industry are examples. Competitiveness builds on quality and innovation with management and leadership processes that assure business growth and sustainability. A National Competitiveness Mission would identify appropriate technical and managerial perspectives.

Three national objectives

There are three beliefs that inhibit the genuine embedding of the three principles of quality, innovation and competitiveness in emerging economies, and these need to be countered by the three expert missions. The first is a sense of false correlation between the product level and quality level. It may be presumed, for example, that a Mercedes Benz E series car is one of higher quality than a lower end popular car. Such thinking leads manufacturers and consumers equate specifications with quality, which is not necessarily right. Each product needs to be designed, manufactured and delivered with a purpose in mind, and quality represents fitness for the purpose as expressed through specifications. The functionality, design principles and quality levels form a total ecosystem, which must be continuously elevated. Whatever be the level of product, the level of quality cannot be compromised. A smart phone and a feature phone are both bound by respective quality parameters as would a blacktopped road and concrete road would need to be. The National Quality Mission would need to embed Quality as a national mindset.    

The second is a belief in generational lag, in products and processes, and in social and industrial infrastructure, almost as if it is a matter of destiny for emerging economies. Domestic governments and consumers as well as foreign investors and corporations believe that the latest technologies must first get embedded in the advanced countries before they can be offered, developed or manufactured in an emerging nation. As a result of this belief, which is driven by technological protectionism of innovating countries and the economic weakness of follower countries, emerging nations tend to be in a perpetual catch-up game in respect of innovation. The National Innovation Mission must continuously explore where, why and how India should leapfrog in innovation rather than be just content with followership.

The third is a belief that competitiveness is a firm level concept, and government has only fiscal policies to improve or reduce competitiveness. As Porter’s study on comparative advantage of nations showed (Michael E Porter, The Competitive Advantage of Nations), certain nations tend to become good, and internationally competitive, in certain industries or businesses relative to others. Governments in India, Centre and States, can integrate infrastructure developmental initiatives with industrial development initiatives as well as social development initiatives to generate competitive advantage at firm level and comparative advantage at national level. The freight corridors that are being developed with Japanese investment could be combined with Indo-Japanese industrial clusters and social communities that provide free flow of technologies and goods and services between India and Japan. The same could be accomplished in multiple manners with multiple nations, in diverse product lines. The National Competitiveness Mission must analyze and integrate the several public, private initiatives to generate national comparative advantage.

Challenges as opportunities

Modiji has exhorted to minimize imports and maximize exports. India imports 80 percent of its crude requirements. India also imports gold, and most of the sophisticated plant and machinery for a wide range of industries. It may therefore look impossible to minimize imports. However, if value added export platform is adopted as the basis, all imports can be exported as value added products; for example, gold as ornaments, and even crude as diesel and petrol, at least to the neighboring nations. Sophisticated plant and machinery may be assembled at site with local content rather than imported as complete built units. This, in turn, requires confidence that the Indian industry is at its pinnacle on quality, innovation and competitiveness.

Skill, Scale and Speed have helped China achieve exactly this, as Shri Narendra Modi aptly observed. China’s acquired expertise in telecom gear, smart phones, fermentation and bullet trains are striking examples. For India to be up to speed on this platform, governments and industries should backward integrate to the fullest extent, in a complete sense. There is certainly utility in indigenously producing new generation products even if in imported equipment, compared to import of the products. However, the full utility accrues when the equipment is also indigenously produced. India, a nation of 1.3 billion people, has now global scale demand levels for a range of products and, therefore, for plant & machinery for such products. It requires holistic planning and execution to recalibrate India on a global scale. The paradigm of industry specific national regulators, and quality, innovation and competitiveness specific national missions have the potential to help translate all of the Prime Minister’s powerful principles into national wealth with social equity.

Posted by Dr CB Rao on August 17, 2014

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

Competitive Innovation : A Supplement to Porter’s Strategy Paradigm

Porter’s contributions in the field of strategy by way of his path-breaking books Competitive Strategy (Porter, 1980) and Competitive Advantage (Porter, 1985) are unmatched. While the former deals with strategy in the context of an industry, the latter discusses how firms can build competitive advantage. Though there have been important contributions to the field of strategy from other scholars, for example, Prahalad (1990, 1994), Hamel (1989) and Hammer (1993) there is, perhaps, no work which is as integrated and solid as Porter’s in approaching the myriad complexities of strategy. Together, Porter’s treatises on competitive strategy and competitive advantage provide a powerful array of concepts and analytical techniques that can help craft meaningful business strategies.

It is paradoxical that despite the availability of such a powerful repository of concepts and tools for achieving competitive advantage, firms tend to develop strategies based on followership rather than differentiation. It could be natural and over tempting for most firms to follow the pioneers to exploit emerging market potential. At the firm level, however, there is ample scope to innovate even while following such paths of pioneers - provided the CEOs and planners focus on developing differentiated strategies. In this context, this paper conceptualizes “competitive innovation" as a differentiator of corporate strategy in industries. This concept is a relevant supplement to Porter’s framework of competitive strategy and competitive advantage, taking into account the accelerating pace of technological innovation. Fundamental to this is an understanding of competitive innovation as distinct from corporate followership.

Corporate followership

Corporate followership can be defined as the phenomenon of several firms in an industry following simultaneously a set of corporate strategies to address a market opportunity same as or similar to that of the pioneer in the industry.

This is best illustrated with the help of two examples. The strategies followed by a host of new passenger car manufacturers in India such as GM, Ford, Honda and Mitsubishi to address the mid-size sedan market with an import-led assembly strategy represent corporate followership. Another example relates to similar strategies being adopted by a host of Indian pharmaceutical companies to enter the US generics markets. The drivers for corporate followership almost invariably are the opening up of a huge market on one hand and the initial success of a pioneer company in the market space on the other.


In practice, corporate followership leads to less than optimal results. Deployment of undifferentiated strategies often forces companies to compete on price rather than on product offering. The follower companies merely trail the pioneer in its path, and end up competing in a limited market space. Fragmentation of market and drive-down of industry returns characterize the aftermath. Over a period of time, mindless pursuit of corporate followership leads to painful consolidation of a sub-optimal industry structure through exits, partial or full divestitures, acquisitions and mergers of companies.

Competitive innovation

Competitive innovation, on the other hand, considers the pioneer’s success as a directional trend rather than as a strategic template or a winning formula. This is again illustrated with examples from the Indian industrial scene. The first ever introduction of small car by Maruti-Suzuki in the 1990s has been a pioneer’s action. Introduction of a “tall boy” small car, Santro, by Hyundai in the 1990s, a good many years thereafter, has been an example of competitive innovation. Without doubt, the development of a highly affordable small car, Nano, by Tata Motors is a masterpiece of competitive innovation, even at a global level. Similarly, Toyota’s unwillingness to follow the others who were preoccupied with the mid-size car segment and its deliberate choice to go in for a multi-utility vehicle, Qualis, has been an example of competitive innovation. Similarly, in the frenzied race for the US pharmaceuticals generics market, if an Indian firm treads a path of biologics boldly, it would be a competitive innovation.

Firms seeking to follow competitive innovation must spend considerable time analyzing the product-market space and the factors influencing evolution of the industry, as opposed to adopting a quick-fix solution of replicating the pioneer’s strategy. While the initial triggers for competitive innovation tend to be the same as the drivers for corporate followership viz., market space and pioneer’s success, the core drivers for competitive innovation are entirely different.

In practice, competitive innovation when followed by a large spectrum of players leads to highly beneficial results for the overall industry. Deployment of differentiated strategies enables companies achieve growth based on intrinsic positive features of their products and their market positioning rather than on price. As innovative followers lay out their own distinctive paths they contribute to opening up of a number of new product-market segments. Competitive innovation results in expansion of market space and healthy industry returns, in the overall.

In general, firms pursuing competitive innovation out-perform firms pursuing only corporate followership. An innovative firm has not only the advantages of strategic differentiation which are unique only to the innovator but also the benefit of a freedom to deploy any and all tactical moves that are used by follower firms.

The differentiation advantage

The paradigms of corporate followership and competitive innovation are compared in terms of five core attributes below:

1. Core concept
Corporate followership: Mimic the pioneer in product-market positioning
Competitive innovation: Emulate the pioneer in opening up product-market space; Develop novel product-market segments

2. Key generic strategy
Corporate followership: Cost leadership
Competitive innovation: Differentiation

3. Key success factor(s)
Corporate followership: Excel by execution superiority
Competitive innovation: Excel by product-market differentiation as well as by execution superiority

4. Key functional drivers
Corporate followership: Sales and production
Competitive innovation: Research and business development

5. Envisaged end-play
Corporate followership: Fragmented market, with low returns
Competitive innovation: Diversified market, with healthy returns

A firm following the strategy of competitive innovation tends to emulate the pioneer more in terms of its pioneering spirit rather than in terms of the nuts and bolts of its strategy. An innovative firm may follow the overall market direction but will develop its own innovative product-market positioning. In contrast to follower firms which rely on cost competitiveness to penetrate and grow, an innovative firm focuses on differentiation to break into the market space. Needless to say, cost leadership provides the added edge to such innovative firms. The key success factors for a follower firm are purely in terms of execution capability, by which the strategies of a pioneer and other players are executed better or faster. On the other hand, an innovative firm’s success lies in its capability to differentiate itself by fulfilling a new customer need. This does not, of course, exclude a shared competence for execution superiority with the follower firms. An innovative firm is likely to be driven by strong research and business development orientation while a follower firm is likely to be highly production and sales driven. The end-play for an industry characterized by innovative firms is one of a diversified market with healthy returns while the end-play of an industry dominated by followers is one of a fragmented market with low returns.

Sources of competitive innovation

Given the premium on corporate innovation, firms must consciously seek sources of competitive innovation. While these sources would seemingly be the same as the sources of sustainable competitive advantage, the qualitative depth of the factors and the timing of access to the sources vary. Firms seeking to achieve competitive differentiation from the very start, however, look at these sources very innovatively compared to firms that build competitive advantage over a period.

The essential sources of competitive innovation are varied and impact each constituent of a firm’s value chain. Broadly, these can be viewed under two categories: specific levers of innovation and generic enablers of innovation.

Following Porter (1985) with some modifications, the core functions of a firm are viewed in terms of logistics, product development, materials procurement, manufacturing and marketing (including sales and service). Each of these five core functions can benefit from two distinctive types of levers of competitive innovation (i) specific levers of innovation and (ii) generic levers of innovation.

Specific levers of innovation

The specific levers of innovation can be viewed in terms of (i) technology convergence (ii) alternative materials (iii) flexible manufacturing systems (iv) customer relationship management and (iv) supply chain management.

A company’s prime foundation of business is its product range. Technology convergence in product development is fast emerging as the prime lever of competitive innovation. Value-added cellular phones with multi-media and imaging capabilities are examples of such convergence-driven new product innovation. Similarly, laptop computers with wireless connectivity and handwriting, speech recognition and imaging capabilities represent the new dimensions of technological convergence. By adding new features to existing products and refashioning existing products into new gizmos, innovative firms often outperform pioneers even while tracing the overall product path opened up by the pioneers. The competence in technology convergence will be dependent on the ability of a firm to fuse a wide variety of technologies to achieve a dramatically superior product range. This attribute will increasingly influence competitive innovation in future.

A company’s ability to achieve technological convergence and competitive innovation is often dictated by its innovative capabilities in materials and manufacturing. Alternative materials are the key to innovation. Miniaturization, weight-effectiveness, cost- competitiveness and life cycle assurance are essentially rooted in the nature and quality of materials used. Firms which focus their resources on researching into basic materials or which network with specialized institutes of materials research are likely to achieve competitive innovation relative to users of traditional materials.

Manufacturing is the key differentiator of firms which are able to successfully translate exciting technological concepts into viable product offerings. Utilizing a broad array of technologies including information technology, industrial electronics and robotics, firms can build innovative foundations of flexible manufacturing systems which can cope with shorter product life cycles, higher product varieties and larger asset costs successfully.

In firms that follow competitive innovation, marketing has also experienced a paradigm shift, from a predominantly communicative function to an entrepreneurial discovery function. Today’s successful marketer is one who phases out his own brand with a novel enhancement. By continuously discovering latent consumer needs and product application potential, today’s entrepreneurial marketer enthuses a firm to be on the virtuous cycle of product innovation on an ongoing basis. The new-age marketer creates value for the company in terms of customer connectivity, customer relationship and broader brand equity of the corporation. In this context, customer relationship management has emerged as an important lever for driving innovation in the sales and marketing functions of an innovative firm.

Logistics, both in-bound and out-bound, constitute the backbone of competitive innovation for the firms. Ability to seamlessly and efficiently integrate a firm with vendors at the back-end and customers at the front-end of the value chain helps the firm to continuously discover new sources of competitive advantage. Judicious deployment of supply chain management as an integrating concept from materials procurement to product delivery has helped firms achieve greater degree of control and efficiency in their logistics operations.

Generic enablers of innovation

If the above core activities are specific levers of corporate innovation, a firm also needs generic enablers which make these specific levers of competitive innovation a feasible proposition. These generic enablers relate to the overall infrastructural capabilities of a firm. These are (i) depth and scope of the firm’s physical infrastructure, (ii) the strength and resilience of its financial infrastructure, (iii) the vintage and solidity of its IT infrastructure and, most importantly, (iv) the spark and creativity of its talent pool. An organization needs to have these four service areas organized such that specific levers of innovation consistent with the goals of the firm can be appropriately deployed.

In today’s business environment, a firm has to be proactive in laying the economic, technical and human foundations of business. With increased liberalization, locational choices for the firm have become varied, even as environmental considerations force firms to adopt locations and technologies which are the least harmful to the environment and most beneficial to the society. A firm should have, ab initio, a total vision of the scale of its operations so that appropriate location and facility choices are made consistent with the need to ramp up operations in harmony with the community and environment. If due attention is not provided to this important factor, the entire value chain of the company will be constrained by the physical infrastructure and the technologies deployed in the site.

Secondly, a firm needs to devote sufficient attention to prudent but proactive financial management. Means of funding and corporate structuring are important facets of overall financial strategy. A company which has a strategy-led business structure and is well supported by a robust financial infrastructure is likely to remain flexible and resilient in the face of growing resource commitment that innovation demands. The recent and unprecedented economic meltdown has demonstrated the importance of robust financial management as a foundation for business sustainability.

Thirdly, the firm needs to deploy an information technology architecture that is modern and flexible. The IT capability of a firm particularly influences the ability of the firm to deploy and utilize specific levers of innovation such as supply chain management, flexible manufacturing systems and customer relationship management.

Finally, considerable management attention must be devoted to building a high-energy and high performance organization with top-class talent. As market opportunities and innovative alternatives explode exponentially and when financial and other markets are precariously perched, firms face a challenging task in retaining the talent pool and supplementing it. HR policies of the firm have to be increasingly driven by business strategy considerations. HR development initiatives with external institutional networking have to be always operational to ensure continuous development of talent in-house.

Summary

Porter’s combined paradigm of competitive strategy and competitive advantage is a historic contribution to the field of strategic management. The application of these strategic concepts in practice by individual firms has, however, been inadequate resulting in corporate followership rather than competitive differentiation as a dominant corporate strategy. By adopting competitive innovation as a proactive driver of corporate strategy, chief executive officers and business planners can chart the growth plans for their organizations in a differentiated manner. The concept of competitive innovation has to be integrated with the concept of a firm’s value chain and specific levers of innovation adopted to drive innovation. Corporate level strategies must simultaneously focus on establishing an appropriate physical, financial, technological and human infrastructure that supports innovation.

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Posted by Dr CB Rao on April 19, 2009