India Inside. The Emerging             Innovation Threat to the West   Nirmalya Kumar   Professor of Marketing and Co-Dire...
The Emerging  MarketsChallenge to   MNCsNirmalya Kumar
Power Shift              Copyright © Nirmalya Kumar
Copyright © Nirmalya Kumar
Bob McDonald                                       CEO, Procter & Gamble      “We are serving 3.5bn people today …. and I ...
Copyright © Nirmalya Kumar
© Nirmalya Kumar
China and India: Issues for MNC  Lead Markets?  Product Range?  Future Competitors?  Location of R&D?  Corporate Head...
India’s Global   Powerhouses          ?Future Competitors               © Nirmalya Kumar
Indian Globalisation Strategy Essel Propack      - following a global customer Mahindra, VIP, Suzlon       - leveraging ...
Hindalco: Climbing the Acquisition                      Competence Ladder                                                 ...
Two Approaches to M&A                                     Traditional Approach                          Emerging Giants Ap...
© Nirmalya Kumar & Phanish Puranam
Friedman’s Prognosis                                                    Free trade based on comparative                   ...
???   Where are the  Indian Googles,iPods, and Viagras             © Nirmalya Kumar & Phanish Puranam
“Indians don’t do   innovation”            © Nirmalya Kumar & Phanish Puranam
Invisible Innovation                       New products/services                           for end usersVISIBLE INNOVATION...
Indian Visible Innovation“The beauty of the Indian market is that it pushesyou in a corner…it demands everything in thewor...
"Designing for simple solutions at the lowestpossible cost is in many ways more challengingthan designing a very advanced,...
Frugal innovation:            “Nano Effect” Robustness Portability De-featuring Leapfrog technology Mega scale produc...
Invisible Innovation                       New products/services                           for end usersVISIBLE INNOVATION...
From services to innovation……                      © Nirmalya Kumar & Phanish Puranam
Research Design                  © Nirmalya Kumar & Phanish Puranam
The Internal Impacts Do Not Differ!                                                         There is aImpact on:   EE     ...
Source: Integrating distributed work, K. Srikanth and P Puranam   © Nirmalya Kumar & Phanish Puranam
Management Innovation: Global Service           Delivery Model“People usually don’t trust their counterparts who are sitti...
IBM’s Dilemma                  IBM Headcount                  2003      2009      Now      World      310,000   400,000   ...
China and India: Issues for MNC Lead Markets? Product Range?                     Browning of                           ...
Evolution of MNC Structure    Export    Local subsidiary    Transnational    T shaped structures                      ...
Mighty Labour Pools Currently, India constitutes one-third of the world’s  low-cost labor supply, and more that half the ...
The Mirage of Mighty Labour Pools• Indian R&D talent pool is between 100,000 and 300,000 people,  compared with 925,000 in...
Harvard Business ReviewHave You Restructured for Global Success? (withPuranam) - October 2011The Upstart’s Assault (with B...
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India Inside. The Emerging Innovation Threat to the West – LBS Professor Nirmalya Kumar

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From Obama to Singh, leaders worldwide cite innovation as crucial to the future prospects of their respective nations. In this presentation, London Business School’s Professor Nirmalya Kumar, debates that the long held monopoly of the West with respect to innovation is over.

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India Inside. The Emerging Innovation Threat to the West – LBS Professor Nirmalya Kumar

  1. 1. India Inside. The Emerging Innovation Threat to the West Nirmalya Kumar Professor of Marketing and Co-Director of Aditya Birla India Centre at London Business SchoolFrom Obama to Singh, leaders worldwide cite innovation as crucial to the future prospects of their respective nations. During this session, Nirmalya Kumar will contend that the long held monopoly of the West with respect to innovation is over.Drawing on extensive research and in-depth interviews with India-based executives(including AstraZeneca, GE, Infosys, Intel and Wipro), Nirmalya will unveil the dramaticrise in so-called “invisible” innovation occurring in India. This innovation takes a richvariety of forms—from novel B2B offerings and R&D services outsourcing to processimprovement discoveries and fresh approaches to management. To the scepticscontention “where are the Indian Googles, iPods and Viagras?”, Nirmalya proposes thatdespite some challenges, most significantly the mirage of mighty labour pools, India hasemerged as a global ‘invisible’ innovation hub.
  2. 2. The Emerging MarketsChallenge to MNCsNirmalya Kumar
  3. 3. Power Shift Copyright © Nirmalya Kumar
  4. 4. Copyright © Nirmalya Kumar
  5. 5. Bob McDonald CEO, Procter & Gamble “We are serving 3.5bn people today …. and I am confident we can reach at least another 1bn or more in the decade ahead.” “If, over time, we increase per capita consumption [of P&G products] in both China and India to the rate we see in Mexico, it would generate an incremental $40bn in annual sales.”Source: P&G growth in emerging markets eyed, Financial Times (11 June 2009) © Nirmalya Kumar
  6. 6. Copyright © Nirmalya Kumar
  7. 7. © Nirmalya Kumar
  8. 8. China and India: Issues for MNC  Lead Markets?  Product Range?  Future Competitors?  Location of R&D?  Corporate Headquarter Location? © Nirmalya Kumar
  9. 9. India’s Global Powerhouses ?Future Competitors © Nirmalya Kumar
  10. 10. Indian Globalisation Strategy Essel Propack - following a global customer Mahindra, VIP, Suzlon - leveraging India’s scale Godrej, Marico, Tata Motors - unique product competence Hindalco, Tata Steel, Tata Tea - transformational merger Infosys, Wipro, TCS - born global © Nirmalya Kumar
  11. 11. Hindalco: Climbing the Acquisition Competence Ladder Novelis North Minacs America St. Anne Worldwide Nackawic Canada ACQUISITIONS Pulp Mill Nifty; Canada Indal; Mount Gordon Australia 2007 Annapurna Foils 2006 India 2005 2003 2004 2000 2001 2002  How to bid for,  How to take over,  How to manage a  How to acquire, negotiate with, and turn around, and global supply chain assimilate, and integrate operate companies as a buyer and delist a company in companies in India in a developed seller North America  How to manage a market  How to manage  How to manage a large customer-  How to list price fluctuations large, HR-intensive focused, value- companies on a and foreign multinational added products stock exchange exchange risks operation business abroad and manage across countries  How to turn around investor relations a small Indian company in receivershipSource: How Emerging Giants are rewriting the rules of M&A, Harvard Business Review (May 2009) © Nirmalya Kumar
  12. 12. Two Approaches to M&A Traditional Approach Emerging Giants ApproachRationale The aim of a takeover is to drive The aim is to obtain drive market consolidations sometimes to obtain combination technologies, enter niches, or break into new countries.Synergy Levels Shared - The acquirer and the acquisition Unique - The acquirer is dominant in usually have the same business model. home market, while the acquisition is a value-added branded-products company in developed market.Integration Speed The buyer makes several changes in the Integration is slow-moving at first. After acquisition soon after the takeover. It slows a while, the buyer starts pulling the the quest for synergies thereafter. acquisition closer.Organizational High executive turnover and head-count Little interference, executive turnover,Fallout reduction at first. Culture clashes occur and or head-count reduction right after the productivity declines, but things settle acquisition. Focus on business process down over time. integration.Goals The buyer has clear short-term aims but The acquirer’s short-term objectives may not have though through long-term may be fuzzy, but its long-term vision is goals. clear.Source: How Emerging Giants are rewriting the rules of M&A, Harvard Business Review (May 2009) © Nirmalya Kumar
  13. 13. © Nirmalya Kumar & Phanish Puranam
  14. 14. Friedman’s Prognosis Free trade based on comparative advantage will benefit the developed world ..with “more sophisticated tasks being done in the developed world and the less sophisticated tasks in the developing world—where each has its comparative advantage.” The World is Flat (p. 271)Source: The World is Flat, Thomas Friedman (2005) © Nirmalya Kumar & Phanish Puranam
  15. 15. ??? Where are the Indian Googles,iPods, and Viagras © Nirmalya Kumar & Phanish Puranam
  16. 16. “Indians don’t do innovation” © Nirmalya Kumar & Phanish Puranam
  17. 17. Invisible Innovation New products/services for end usersVISIBLE INNOVATIONINVISIBLE INNOVATION 1. Innovation for business customers - made in India, branded elsewhere 2. Outsourcing Innovation - value added R & D services on demand 3. Process innovation - an injection of intelligence 4. Management Innovation - global services delivery model © Nirmalya Kumar & Phanish Puranam
  18. 18. Indian Visible Innovation“The beauty of the Indian market is that it pushesyou in a corner…it demands everything in theworld, but cheaper and smaller” Guillermo Wille Former Head of John F. Welch Technology Centre GE Bangalore © Nirmalya Kumar
  19. 19. "Designing for simple solutions at the lowestpossible cost is in many ways more challengingthan designing a very advanced, high-techsolution” Unmesh Kulkarni Senior Design Manager, Philips India © Nirmalya Kumar
  20. 20. Frugal innovation: “Nano Effect” Robustness Portability De-featuring Leapfrog technology Mega scale production Service ecosystems © Nirmalya Kumar
  21. 21. Invisible Innovation New products/services for end usersVISIBLE INNOVATIONINVISIBLE INNOVATION 1. Innovation for business customers - made in India, branded elsewhere 2. Outsourcing Innovation - value added R & D services on demand 3. Process innovation - an injection of intelligence 4. Management Innovation - global services delivery model © Nirmalya Kumar & Phanish Puranam
  22. 22. From services to innovation…… © Nirmalya Kumar & Phanish Puranam
  23. 23. Research Design © Nirmalya Kumar & Phanish Puranam
  24. 24. The Internal Impacts Do Not Differ! There is aImpact on: EE US Difference difference in the Patents patents overall impact mean (fwd mean (fwd of inventions citations) citations)All 2.71 3.39 -0.68**MNCNetwork 0.38 0.47 -0.09External There is noFirms 2.33 2.92 -0.59* difference in the internal impact of inventions*p<.05, ** p<.01, *** p<.001 © Nirmalya Kumar & Phanish Puranam
  25. 25. Source: Integrating distributed work, K. Srikanth and P Puranam © Nirmalya Kumar & Phanish Puranam
  26. 26. Management Innovation: Global Service Delivery Model“People usually don’t trust their counterparts who are sitting11,000 miles away. If you think about it, though, few companieshave the luxury of having their technologists sitting in onebuilding….The behavioural reality is that if people are sitting indifferent buildings, they already pick up the phone or communicatethrough computers. If you understand that, and have created aculture of treating your teams in the next building or those 11,000miles away the same, you have it. The only caveat is the timedifference, which generates issues in work/life balance. That’s theproblem you face.” Guillermo Wille Former Head of John F. Welch Technology Centre GE Bangalore © Nirmalya Kumar & Phanish Puranam
  27. 27. IBM’s Dilemma IBM Headcount 2003 2009 Now World 310,000 400,000 433,000 USA 135,000 105,000 98,000 India 9,000 100,000 150,000January 24, 2009 5:18 PM PST IBM quietly lays off North American staffNews March 12, 2010 Computerworld: IBM stops disclosing U.S. headcount data © Nirmalya Kumar & Phanish Puranam
  28. 28. China and India: Issues for MNC Lead Markets? Product Range?  Browning of the TMT Location of R&D? Future Competitors?  Sinking skill ladder Corporate Headquarter Location? © Nirmalya Kumar
  29. 29. Evolution of MNC Structure  Export  Local subsidiary  Transnational  T shaped structures © Nirmalya Kumar & Phanish Puranam
  30. 30. Mighty Labour Pools Currently, India constitutes one-third of the world’s low-cost labor supply, and more that half the population are under the age of 25. Over the next 5 years, India will account for a quarter of the increase in the working age population across the globe. © Nirmalya Kumar & Phanish Puranam
  31. 31. The Mirage of Mighty Labour Pools• Indian R&D talent pool is between 100,000 and 300,000 people, compared with 925,000 in China, 477,000 in Russia, and 150,000 in Korea• India produced about 6,600 science and technology PhDs in 2007,compared with 8,000 in China and 12,000 in the USA in 2003• Only 10% of the college-age population (18-24) attend college in India, compared with 20% in China and 60% in the USA• Employable undergraduates: “less than 30%” (McKinsey estimate)• IIT’s and IIM’s are notoriously understaffed• Indian Universities are invisible in the record of US patents involving Indian inventors• Management research: Total number of Indian author appearances between 1990-2009 is 132 (compare: HKUST is about 30 per annum)• %GDP spending on R&D: India (0.6%); China (1.3); USA (2.6%) © Nirmalya Kumar & Phanish Puranam
  32. 32. Harvard Business ReviewHave You Restructured for Global Success? (withPuranam) - October 2011The Upstart’s Assault (with Bertini) – July 2010Don’t Be Undersold! (with Steenkamp) - December2009How Emerging Giants are Rewriting the Rules ofM&A - May 2009Strategies to Fight Low-Cost Rivals - December 2006Kill a Brand, Keep a Customer – December 2003Profits in the Pie of the Beholder (with Corsten) -May 2003 32

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