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.

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 School
From 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 dramatic
rise in so-called “invisible” innovation occurring in India. This innovation takes a rich
variety of forms—from novel B2B offerings and R&D services outsourcing to process
improvement discoveries and fresh approaches to management. To the sceptic's
contention “where are the Indian Googles, iPods and Viagras?”, Nirmalya proposes that
despite some challenges, most significantly the mirage of mighty labour pools, India has
emerged as a global ‘invisible’ innovation hub.

2. The Emerging
Markets
Challenge to
MNCs
Nirmalya Kumar

3. Power Shift
Copyright © Nirmalya Kumar

4. Copyright © Nirmalya Kumar

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. Copyright © Nirmalya Kumar

7. © Nirmalya Kumar

8. China and India: Issues for MNC
 Lead Markets?
 Product Range?
 Future Competitors?
 Location of R&D?
 Corporate Headquarter Location?
© Nirmalya Kumar

9. India’s Global
Powerhouses
?
Future Competitors
© Nirmalya Kumar

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. 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
receivership
Source: How Emerging Giants are rewriting the rules of M&A, Harvard Business Review (May 2009)
© Nirmalya Kumar

12. Two Approaches to M&A
Traditional Approach Emerging Giants Approach
Rationale 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. © Nirmalya Kumar & Phanish Puranam

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. ???
Where are the
Indian Googles,
iPods, and Viagras
© Nirmalya Kumar & Phanish Puranam

16. “Indians don’t do
innovation”
© Nirmalya Kumar & Phanish Puranam

17. Invisible Innovation
New products/services
for end users
VISIBLE INNOVATION
INVISIBLE 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. Indian Visible Innovation
“The beauty of the Indian market is that it pushes
you in a corner…it demands everything in the
world, but cheaper and smaller”
Guillermo Wille
Former Head of John F. Welch Technology Centre
GE Bangalore
© Nirmalya Kumar

19. "Designing for simple solutions at the lowest
possible cost is in many ways more challenging
than designing a very advanced, high-tech
solution”
Unmesh Kulkarni
Senior Design Manager, Philips India
© Nirmalya Kumar

20. Frugal innovation:
“Nano Effect”
 Robustness
 Portability
 De-featuring
 Leapfrog technology
 Mega scale production
 Service ecosystems
© Nirmalya Kumar

21. Invisible Innovation
New products/services
for end users
VISIBLE INNOVATION
INVISIBLE 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. From services to innovation……
© Nirmalya Kumar & Phanish Puranam

23. Research Design
© Nirmalya Kumar & Phanish Puranam

24. The Internal Impacts Do Not Differ!
There is a
Impact 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**
MNC
Network 0.38 0.47 -0.09
External
There is no
Firms 2.33 2.92 -0.59* difference in the
internal impact
of inventions
*p<.05, ** p<.01, *** p<.001
© Nirmalya Kumar & Phanish Puranam

25. Source: Integrating distributed work, K. Srikanth and P Puranam © Nirmalya Kumar & Phanish Puranam

26. Management Innovation: Global Service
Delivery Model
“People usually don’t trust their counterparts who are sitting
11,000 miles away. If you think about it, though, few companies
have the luxury of having their technologists sitting in one
building….The behavioural reality is that if people are sitting in
different buildings, they already pick up the phone or communicate
through computers. If you understand that, and have created a
culture of treating your teams in the next building or those 11,000
miles away the same, you have it. The only caveat is the time
difference, which generates issues in work/life balance. That’s the
problem you face.”
Guillermo Wille
Former Head of John F. Welch Technology Centre
GE Bangalore
© Nirmalya Kumar & Phanish Puranam

27. IBM’s Dilemma
IBM Headcount
2003 2009 Now
World 310,000 400,000 433,000
USA 135,000 105,000 98,000
India 9,000 100,000 150,000
January 24, 2009 5:18 PM PST
IBM quietly lays off North American staff
News March 12, 2010 Computerworld:
IBM stops disclosing U.S. headcount data
© Nirmalya Kumar & Phanish Puranam

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. Evolution of MNC Structure
 Export
 Local subsidiary
 Transnational
 T shaped structures
© Nirmalya Kumar & Phanish Puranam

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. 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. Harvard Business Review
Have You Restructured for Global Success? (with
Puranam) - October 2011
The Upstart’s Assault (with Bertini) – July 2010
Don’t Be Undersold! (with Steenkamp) - December
2009
How Emerging Giants are Rewriting the Rules of
M&A - May 2009
Strategies to Fight Low-Cost Rivals - December 2006
Kill a Brand, Keep a Customer – December 2003
Profits in the Pie of the Beholder (with Corsten) -
May 2003
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