Issue1. Vol.1 (April, 2013) - IIT Mandi

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ESSENT Society for Collaborative Research and Innovation, IIT Mandicosting Rs. 50 and upwards (equivalent topaying Rs. 500 or more today). The vastmajority of Indians, especially those in ruralareas, did not use shampoo. There were manyreasons: Rs. 50 was a large investment formost Indians; the shampoo in the bottle couldeasily be adulterated; during use, if it spilt,several months of hair-washing could go downthe drain. People preferred to buy soap orpowders costing a rupee or two. The shampoomarket was dominated by Hindustan Leverwhich was making a comfortable profit withits urban-based distributor network selling tothe upper classes.Along came CavinKare with a unique businessplan [Munshi 09]. They packaged shampoo insmall sealed plastic sachets, set up a largedistributor network throughout the country tosell shampoo at Re 1 per sachet. Even a poorperson in a remote village could now useshampoo occasionally when s/he had Re 1 tospare. As the packet was sealed, there was noquestion of adulteration. Their Chik shampoosachets rapidly gained popularity among therural people. Today, CavinKare has 25% ofthe shampoo market and sachets account for70% of the shampoo market.Again, this innovation used existing businesspractices and technologies. It put themtogether in a novel way to create and capture avast new market. While bottled shampoo wasprofitable due to high margins on smallvolumes, sachet shampoo was profitabledespite very small profit margins because ofvery high volumes.As engineers, we dream of being responsiblefor the next disruptive innovation. What isinnovation, why is it important to India, howcan we be more innovative, can innovation betaught? These are questions that we address inthe rest of this paper.2 What is Innovation?Creativity and innovation are related butdistinct. Creativity is coming up withsomething novel and non-obvious. This mayinclude a new theory to explain observed facts,writing a book or poem, composing music, andinventing technical mechanisms.Innovation is putting ideas to use in a novelway for the benefit of society. Two keydifferences: innovation may make use ofexisting ideas while creativity involves newideas. Innovation must be useful, whilecreativity need not result in any immediatebenefit to anyone.3 Why is Innovation Important?India faces vast and seemingly insurmountableproblems. These include lack of affordablehousing, clean water, sanitation, basic healthfacilities, good schools and colleges, and manymore for the majority of Indians. The 70%who live in rural India are especially badly off.While our cities score better on many of theseparameters, they are bursting at the seams andaffordability is a problem for the many slumdwellers.With the advent of TV and ubiquitoustelecommunications, the poor are no longerwilling to accept their lot as “fate”. Thwartedaspirations often lead to social unrest andviolence. Besides, a country cannot claim to bea mature democracy unless there is a measureof equality in the quality of life of its citizens.India is a country of contrasts. Consider percapita income [WorldBank 12]. The familyincome of the top 250 million people is aboutRs. 19 lakhs/year 1 . This is quite generous byany standards. The middle 500 million peoplehave a family income of about Rs. 61 Considering an exchange rate of Rs. 50 per$1 and a family size of 5. The figures quotedare averages. Within each group there isobviously a range of income.6 ESSENT|Issue1|Vol1
ESSENT Society for Collaborative Research and Innovation, IIT Mandilakhs/year. This enables a comfortable middleclasslifestyle. However, at the bottom of thepyramid we have 125 million people whosubsist on Rs. 75 per day which is at bestadequate for the bare necessities of existence.To address these inequalities, large-scaleredistribution of income is not politicallyfeasible. Bringing the poor up to middle-classstandards requires growth in national income.Much of this increase in national income willbe absorbed by the well-off. Hence, to achievedecent living standards for all in a few yearsrequires continuing growth at a high rate of10% per annum or more. Of course, growthmust be tempered by measures to ensure areasonable degree of equality.India's remarkable growth over the past 2-3decades has been driven primarily bymanufacturing and services. These can resultin only a linear rate of growth. If theinvestment in a factory is doubled, it typicallyresults in double the output. Likewise, if an ITcompany increases its workforce by 50%, itsrevenues increase by about 50% also. In fact,this has been largely how our successful ITcompanies – Infosys, Wipro, IBM and others –have achieved their spectacular growth. Theyhave each increased their headcount from afew thousand to 1-2 lakhs.Product design and innovation promises muchhigher growth rates. For example, the Googlesearch engine patent was based mainly on thework on 2 graduate students done over a fewyears. It has earned over $330m (Rs. 1,600crores) in royalties for Stanford University[Chao 06]. Another example: for everycellphone sold in India, an amount of between2-15% of the price is paid as royalty to thedevelopers of various parts of the cellphone[Jhun 11]. These designers did their work afew years ago, and now collect huge amountsof royalties every year with practically noeffort. Most of this royalty flows outside India,though this is changing gradually.7 ESSENT|Issue1|Vol1Innovation is needed for another reason. Amodern lifestyle consumes a lot ofirreplaceable natural resources and generatesconsiderable pollution. The ratio of per-capitaconsumption of resources of the averageIndian to that of the average person in the USis about 1:20. Comparing rural India to urbanIndia, again the ratio is about 1:20. If India's1.25 billion people consume resources at therate of the 100 million affluent urban Indians,or the 250 million affluent in the US, there willbe an environmental disaster. As a democracy,we cannot prevent rural India fromdeveloping. Innovative solutions that areenvironmentally sustainable are crucial forIndia's development.4 The Roads to InnovationIs innovativeness innate, or can it becultivated? Research and experience indicatethat there are factors that encourageinnovation. We first give a very simplifiedview of how the human brain works. Next, wedescribe some of the factors favouringinnovation.4.1 The Human Cognitive ProcessThe human brain has a memory consistingbillions of neurons. Each neuron can hold afact or other piece of knowledge. An ideaoccurs when a number of these facts areconnected together. Connections occur whenneurons emit signals that flow to other neuronsthrough synapses. There is some randomnessin the paths taken by the signals. Thus, with agiven set of facts, different networks ofneurons, i.e. different ideas, may emerge.Ideas may emerge from a combination ofapparently unrelated facts (serendipity). Thefiring of neurons occurs both when we areawake and when we are asleep.4.2 Factors Favouring InnovationThis view of the human brain appears tosuggest a simple recipe to foster innovation:fill your brain with facts, train your neurons tofire, and be prepared to recognize whichpatterns are useful ones.
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Issue1. Vol.1 (April, 2013) - IIT Mandi

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