Dr. C.K. Prahalad

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Dr. C.K. Prahalad

  1. 1. Entrepreneurship: Antidote to Poverty & Stagnation C.K. Prahalad Paul and Ruth McCracken Distinguished University Professor The Ross School of Business, The University of Michigan
  2. 2. Point of Departure History of Ag. and Ind. Prowess History of Intellectual Vitality History of Global Trade & Commerce Record of Industrial Devpt. ? How do we Change the Trajectory of the Region?
  3. 3. Emerging Opportunity Space New Approach to Innovation: “ Role of Science” Global Access To Talent and Markets Increasing Complexity: “ New Ecosystems” Growth and Change Entrepreneurship and Innovation as Levers?
  4. 4. The New Opportunity
  5. 5. The New Age of Innovation: The Basic Thesis Globalization Connectivity, Digitization, Convergence, Social Networks A New Approach To Innovation & Value Creation + =
  6. 6. Price-Performance Envelopes are Changing Faster than anyone Expected <ul><li>Transistors/chip 10 3 10 6 10 9 </li></ul><ul><li>Decrease in size of </li></ul><ul><li>micro-devices 10 -1 10 -6 </li></ul><ul><li>3. Computing power 10 11 10 15 </li></ul><ul><li>4. Cost per MIPs($1000) 1 1M </li></ul><ul><li>DNA sequencing cost </li></ul><ul><li>($/BASE PAIR) 10 0.05 </li></ul><ul><li>6. Magnetic data storage 10 4 10 11 </li></ul><ul><li>(bits/dollar) </li></ul>1970 80 90 2006 Source: Ray Kurzwell
  7. 7. Discontinuities Challenge the “Firm Centric View” of the World: Consider: Convergence of Technologies, Convergence of Industry Boundaries, Ubiquitous Connectivity The Emergence of New Sciences
  8. 8. Emerging Entertainment Space Digital TV set Digital Video Recorder Digital Set-top Box Flat Displays Tablet PC PC DVD Stereo System Game Console Cable TV Satellite TV Internet Video Video Camera Cell Phone Web TV Digital Camera HDTV CD Player Multimedia Storage Digital Broadcasting Electronic Toys Reality TV PDA PCTV Interactive TV Pager MP3 Player Printers Scanners Digital Imaging System Telematics Laptop Handheld Video on demand FAX Home Networking E-mail Digital Jukebox Wearable Computer
  9. 9. Consumers and the Wellness Space? Nutritional supplements Health supplements Herbal medicine Alternative medicine Nutraceuticals Cosmaceuticals Cosmetics Beauty aids Health foods Lifestyle drugs Therapeutics Ayurveda Specialty clinics Hospitals Treatment centers Health spa Self care Remote diagnostics Minimally invasive treatments Pharma drugs Medical devices Fitness regimen Remote consultation Drug delivery Genetic screening Personalized medicine Pharmacogenomics Assisted Living Yoga Surgery
  10. 10. Consumers and the Wellness Space? Nutritional supplements Health supplements Herbal medicine Alternative medicine Nutraceuticals Cosmaceuticals Cosmetics Beauty aids Health foods Lifestyle drugs Therapeutics Ayurveda Specialty clinics Hospitals Treatment centers Health spa Self care Remote diagnostics Minimally invasive treatments Pharma drugs Medical devices Fitness regimen Remote consultation Drug delivery Genetic screening Personalized medicine Pharmacogenomics Assisted Living Yoga Surgery
  11. 11. * Computing, Communications, Components, CE, Software, (e.g. Philips, Sony, Dell, Microsoft, ..) * Chemical and Electronics (e.g. Kodak) * Mechanical and Electronics (e.g. Ford, ABB) * PCP and Pharmaceuticals (e.g. P&G, Revlon, UL) * Food and Pharmaceuticals (e.g. UL, Nestle) * Commodity Products and High Tech (e.g. Cargill) * Retailing, F. Services and Databases (e.g. Wal-Mart, Citicorp., Tesco, ..) Fusion of New and Old Knowledge, Creation of Hybrids, Forgetting, Learning, Harmonizing, and Investing. Convergence of Technologies and Markets
  12. 12. The Emergence of New Sciences: <ul><li>Brain Studies </li></ul><ul><li>Materials and Nano technology </li></ul><ul><li>Mathematics </li></ul><ul><li>Genetics </li></ul><ul><li>5. Artificial Intelligence </li></ul><ul><li>6. Communications / Computing </li></ul><ul><li>7. Global Warming </li></ul><ul><li>Energy </li></ul><ul><li>Search Engines </li></ul><ul><li>Imaging </li></ul>
  13. 13. The Value Creation Process Based on Advances in Science Science: Multiple Specialized Fields Major Opportunities (Problems) Ageing, Climate Change, Chronic Diseases Changes in Economic Models of Traditional Industries e.g. Insurance, Food New Industries e.g. Carbon Trading
  14. 14. The Innovation Paradox Scientific Discoveries are Increasingly Geographically Distributed USA, Europe, Japan, S.Korea China, Singapore, India,…….. Scientific Discoveries are Increasingly focused on Narrow Fields of Specialization # Journals # Papers Nobel Prize Winners R&D Spend # of Scientists # of Patents Intellectual Geographical Diversity Diversity
  15. 15. The Innovation Paradox Scientific Discoveries are Increasingly Geographically Distributed USA, Europe, Japan, S. Korea China, Singapore, India,…… Scientific Discoveries are Increasingly focused on Narrow Fields of Specialization # of Journals # of papers Nobel Prize Winners R&D Spend # Patents # of Scientists Intellectual Geographical Diversity Diversity Commercial Value is Created at the Intersection of Multiple Scientific Disciplines (e.g. Ageing, Climate Change, Chronic Disease Mgt.)
  16. 16. Mapping an IP Portfolio to slowdown Ageing The IP Portfolio ( ≠ patent portfolio) to Slowdown Ageing? Role of Family and Community Predisposition to disabilities How does this Person compare With Cohorts? Likelihood of Encountering Problems Cognition/ Memory/Motor skills Repairing ageing Structures (e.g. bones)
  17. 17. Mapping an IP Portfolio to slowdown Ageing The IP Portfolio ( ≠ patent portfolio) to Slowdown Ageing? Sociology Genetics Databases, IT systems Predictive Modeling Brain Studies New Materials Nano Tech
  18. 18. The Innovation Paradox Scientific Discoveries are Increasingly Geographically Distributed USA, Europe, Japan, China, Singapore, India Scientific Discoveries are Increasingly focused on Narrow Fields of Specialization # of Journals # of Papers Nobel Prize Winners R&D Spend # of Patents # of Scientists Intellectual Geographical Diversity Diversity Stitching together an IP Portfolio is Critical Commercial Value is Created at the Intersection of Multiple Scientific Disciplines (e.g. Ageing, Climate Change, Chronic Diseases)
  19. 19. The Innovation Paradox Highly Specialized, Geographically Distributed Science Base and the Need for Harmonizing Multiple Specialties to Create Commercially Viable Solutions will Force us to Consider the Relative Importance of Collaborative Capacity Investment Capacity Integrative Capacity
  20. 20. Making the Business Connection Chronic Disability e.g. Diabetes Living with Diabetes Housing Healthcare Food Mobility Insurance/ Fin. Svcs. Living a Full Life Travel Safety Community Connectivity Entertainment Breakdown of Traditional Industry Boundaries
  21. 21. Innovation Paradox Business Opportunities Based on: Investment Capacity Collaborative Capacity New Business Models Emerging Markets As a Source of Business Innovations
  22. 22. Agenda for Managers: <ul><li>What Impact will the New Sciences have on </li></ul><ul><li>Traditional Businesses? What New Businesses </li></ul><ul><li>are likely to be Created? Can this be mapped ? </li></ul><ul><li>2. How do we Reduce the Time, Risk and Cost of </li></ul><ul><li>moving “Science from the lab to Market”? </li></ul><ul><li>3. How will the Process of Innovation Change? What </li></ul><ul><li>are the Implications for How We Manage ? </li></ul><ul><li>4. How do we Monetize Science based Innovations ? </li></ul>
  23. 23. Impact of Convergence Connectivity Embedded Software New Sciences on Businesses
  24. 24. Consider Cardiac Pacemakers Patient
  25. 25. Consider Cardiac Pacemakers Patient Away Hospital Your Doctor Doctor on Location Experts’ Conference Spouse
  26. 26. The Value of the Pace Maker? <ul><li>Experience of the Patient? </li></ul><ul><li>Integration of the Experience for the Patient, </li></ul><ul><li>Doctor, Family, others…? </li></ul><ul><li>Do we need a Network of Providers to </li></ul><ul><li>Create an Experience Environment? </li></ul><ul><li>4. Is the Pacemaker a Part of but Distinct </li></ul><ul><li>from the Experience? </li></ul><ul><li>5. What can you Monetize? How? </li></ul>
  27. 27. Car as a Stand Alone Product or a Node in Seamless Connectivity? High Capacity CC Node
  28. 28. Transformation of Traditional Industries: Truck Tires Sell a tire Price ? Transaction
  29. 29. Transformation of Traditional Industries: Truck Tires Sell a tire Price ? Transaction Sell Usage, New Business Model Relationship
  30. 30. Transformation of Traditional Industries: Truck Tires Sell a tire Price ? Transaction Sell Usage, Personalized Co Created Experience, New Business Model Relationship
  31. 31. N=1, R=G in Shoe Manufacturing One size for each customer (N = 1) Shoes available from $80 in this model Traditional Business Model Design Center Customer Information stored Factory Factory Customers adjust to available shoe sizes Multiple customers 3-D Image Customer New Business Model Foot Scanned
  32. 32. New business model in Auto Insurance Traditional Business Model Type of Roads Driving Habits Peak/Off-peak Traffic Personalized Policy for Each Customer Pay As you Drive – Personalized Insurance Contracts New Business Model Actuarial Data Policy Underwriting Multiple Customers
  33. 33. The case of Apple iPod R = G Co-creation of personalized experiences N = 1 Transformation of the Music Industry Display: Memory(RAM) Assembly Playlists News <ul><li>- Wide Selection of songs </li></ul><ul><li>Personal Preferences </li></ul><ul><li>Favorites based on time of day/moods </li></ul>Global Content Providers
  34. 34. The Key Drivers of Value: <ul><li>Personalized Experience </li></ul><ul><li>Co Creation </li></ul><ul><li>Individuals </li></ul><ul><li>Thematic Communities </li></ul><ul><li>Experience Platform </li></ul><ul><li>Delivery Network </li></ul>
  35. 35. The New Game: N = 1 R = G ( Co creation of Personalized Experiences) (Multi-Institutional and Multi –Geographic Access to Resources)
  36. 36. The Transformation from a Product/Firm Centric View to N=1: R=G 1910
  37. 37. The Transformation from a Product/Firm Centric View to N=1: R=G 1910 2010
  38. 38. India as a Source of Innovations
  39. 39. Innovations from India Nature of Innovation New Bus. Capability Disrupting Existing Business Models Source of Competence Western Adapted, Indian New Synthesis Cell Phones EMRI/HMRI Deep Water drilling Water, Healthcare Tuberculosis, Tata Nano Param Eka Psoriasis Chandrayan I
  40. 40. Matrix of Innovativeness New Market Development Low Capital Intensity . Sustainability New Management Processes New Ecosystem Examples IT /ITES ++ +++ +++ +++ ++ Airtel ++++ +++++ ++++ +++ +++ +++ Off Shore ++ + ++ +++++ ++ ++++ +++ Drilling Tuberclosis ++++ ++++ +++ ++++ +++ Tata Nano ++++ +++ ++++ ++++ ++++ +++ Inclusion New Capability
  41. 41. MNCs see this Market as an Opportunity to Innovate Outsource: Low Cost Low Tech Talent Source: Global R&D, Innovation ? Innovation Hub: New Approach to Value, Domestic & Global Markets
  42. 42. MNCs see this market as an opportunity to Innovate <ul><li>Computing </li></ul><ul><li>Medical Equipment </li></ul><ul><li>Water </li></ul><ul><li>Cell Phones </li></ul><ul><li>Financial Services </li></ul><ul><li>Pharma </li></ul>Outsource: Low Cost Low Tech Talent Source: Global R&D, Innovation ? Innovation Hub: New Approach to Value, Domestic & Global Markets
  43. 43. MNC R & D Landscape <ul><li>780 MNC R&D centers are currently being run in India </li></ul><ul><ul><li>About 160,000 professionals work for MNC R&D centers in India </li></ul></ul><ul><li>81 MNC R & D centers added during 2007-08 </li></ul><ul><ul><li>77% of the companies are from US </li></ul></ul>Source: Zinnov Analysis, Feb 2009
  44. 44. What is India’s Unique Advantage?
  45. 45. Access to New Sources of Advantage…. Access to Talent Mobilizing Talent
  46. 46. Access to New Sources of Advantage…. Access to Talent Mobilizing Talent Global Search for Talent Cost, Quality, Speed, Innovation Collaborative & Integrative Capacity
  47. 47. The Evolution of IT Services from India 1980 85 90 95 2000 05 10 On site Augmentation Application Mtce. App. Dev. Off Shore (ODC) Prod. Engg. Services Embedded Systems Y2K, Quality/process Compliance Product R&D Systems Integn. VLSI design MNC R&D Innovation Analytics Entrepreneurship Domestic Oppty.
  48. 48. The Evolution of IT Services from India 1980 85 90 95 2000 05 10 On site Augmentation Application Mtce. App. Dev. Off Shore (ODC) Prod. Engg. Services Embedded Systems Y2K, Quality/process Compliance Product R&D Systems Integn. VLSI design MNC R&D Innovation Analytics Entrepreneurship Domestic Oppty. Cost Arb. Cost + Cost + Quality Cost+ Quality Quality + Tech. Tech+ Innov.
  49. 49. The Evolution of Pharma from India 1980 85 90 95 2000 05 10 Reverse Engineering of Product, Process devt. Clinical Trials Chemistry Biology services Target Validation Lead Optimization Pre clinical and clinical trials Cost Arb. Cost Arb. + Cost + Quality Cost+ Quality Quality ? + Tech. Tech+ Innov. Mfg. Bulk Chemicals Generics
  50. 50. The Evolution of ITES from India 1980 85 90 95 2000 05 10 Data entry Data encryption Captive Call centers by MNCs Quality Process Transfer 3 rd party call Centers BPO back office Transaction Processing Domestic market Infrastructure Mgt. Appln. Mgt. Analytics, Legal, Tutoring, Flexible Models Cost Arb. Cost Arb. + Cost + Quality Cost+ Quality Quality + Tech. Tech+ Innov.
  51. 51. Building an Eco System for IT Global (and Indian) Customers Own Software Development Facilities in India Outsource to a US Firms- E.g. IBM, Accenture Deliver based On Indian Facilities Outsource to an Indian IT Firm Indian IT Eco System
  52. 52. Size Distribution of Indian IT Firms 1995 2000 2005 2010 Size in $ M < 25 396 1653 > 3000 26 - 100 41 41 150 100 – 250 18 30 30 250 - 500 6 500 – 1000 6 > 1000 --- ---- 3 Source: NASSCOM You Don’t have to be Big to be Global Emergence of Micro Multinationals ?
  53. 53. Elements of the IT Ecosystem Wide Variety of Firms- Large & Small. All Global. Potential of Micro Multinationals Devt. Of Skills: Quality, Processes, Project Mgt., SW Methodology, Global perspective, Domain Knowledge, Legal, HR skills Entrepreneurial Drive, Low Capital Needs, Access to capital, Access to skills, Credibility, Confidence, Wide Variety of Service Providers to the Industry Potential to Innovate and Change Global Industry Practices
  54. 54. Impact of India on IBM’s Strategy Worldwide Source: The Economist
  55. 55. Challenge to Indian Entrepreneurs: Developing New Strategic Capital (Building New Managerial Processes)
  56. 56. Principle Number # 1: The Essence of Entrepreneurial Transformation Situation A Situation B Resources Low High Aspirations High Low
  57. 57. Principle Number # 1 Aspiration > Resources Aspiration Leverage Resources Change the Game
  58. 58. Principle # 2: “Fold the Future In” 2010 2020 Extrapolation Budgeting Orientation Fold the Future in Innovation Orientation
  59. 59. Principle # 2: “Fold the Future In” 2010 2020 *Clarity to Direction *Willingness to Discover *Clear Milestones *Speed and Stamina: 400 meters at a time but a Marathon
  60. 60. Principle # 3: Focus on Next Practices Well Known Practices Best Practices Next Practices Amplify Weak Signals
  61. 61. Principle # 4: Constrained Innovation: The Innovation Sandbox Constraint # 1 Constraint # 3 Constraint # 4 Constraint # 2
  62. 62. Focus on Here and Now: Tactical, Blocking and Tackling. Focus on New Opportunities: Aspiration > Resources, Folding the Future in, Focus on Next Practices Innovation Sandbox Thinking Differently about the Here and Now
  63. 63. What are the Dominant Themes: 2010-2015/2020 <ul><li>Primarily Market Based Solutions </li></ul><ul><li>Social Equity in Development </li></ul><ul><li>Co Creation and Collaboration </li></ul><ul><li>Scale </li></ul><ul><li>New Price- Performance Levels </li></ul><ul><li>Ecologically Sustainable Development </li></ul>Embrace the Imperatives of Sustainable Development
  64. 64. The “Sandbox” for Economic Development Market Based New Price- Performance Levels Environmentally Sustainable Global Scale Global-Local Balances New Governance Social Equity Focus
  65. 65. The “Sandbox” for Economic Development Market Based New Price- Performance Levels Environmentally Sustainable Global Scale Global-Local Balances New Governance Social Equity Focus Can we Build a Consensus among Communities, Business, Politicians, Civil Society, Bureaucrats?
  66. 66. Transformation Requires: Imagination Passion Courage Humanity Humility Intellect Luck !

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