confederation of indian industry - ibm · innovate india: national innovation mission annexures 73...

Confederation of Indian Industry

This is a study prepared for the Confederation of Indian Industry (CII). We acknowledge the

comments and suggestions received from CII's Advisory Committee on National Innovation

Mission, the IBM team and, officials from the Ministry of Science and Technology. This study is

the outcome of numerous discussions held with various people covering industry, academics,

practitioners, policymakers, students, parents, NGOs, etc. The names of specific individuals

are listed at the end of the report. All remaining errors are the authors' responsibility.

Innovate India: National Innovation Mission

India Development Foundation316, Qutab Plaza,

DLF Phase – IGurgaon - 122001

Tel : 0124-4381691Email : [email protected]

Confederation of Indian Industry I D F

Confederation of Indian IndustryThe Mantosh Sondhi Centre,23, Institutional Area, Lodi Road,New Delhi 110 003 (India)Tel : 91 11 24629994-7Fax : 91 11 24626149Email : [email protected]: www.ciionline.org


Messages 1

Dr. A. P. J. Abdul Kalam, President of India 1

Mr. Kapil Sibal, 3

A Citizen's Charter Aimed At Encouraging Innovation In India 5

Executive Summary 9

Innovate India : National Innovation Mission 13

Hon'ble

Minister for Science & Technology and Earth Sciences, Government of India

1. Defining innovation and the innovation process 17

2. The Innovation Situation in India 25

2.1 Taking stock framework of enablers 25

2.2 Human capital 28

2.3 Technology 31

2.4 Service Infrastructure 33

2.4.1 IPR and the innovation process 34

2.4.2 Data protection 35

2.5 Organizations and incentives 36

2.6 Government and Public sector: Innovation and intervention 38

2.7 Society and consumers 41

3. Building an Innovation Eco-system - a dynamic system virtuous(vicious) spiral of value creation (destruction) 43

3.1 Innovation ecosystem a static representation 43

3.2 A dynamic innovation ecosystem value generation and destruction 44

3.3 A dynamic innovation ecosystem what incentives? 46

4. Innovation strategy, roadmap and monitoring the system 49

4.1 The Gap current and future states of the innovation ecosystem 49

4.2 The strategy - how to get to the future state network zero. 51

4.3 Roadmap, milestones, and monitoring the processes 54

5. Specific recommendations 59

Tables 65

1. Innovation Situation in India Quantifying Indicators using Indicators Education 67

2. Innovation Situation in India Quantifying Indicators using Indicators Expertise 69

3. Innovation Situation in India Quantifying Indicators using Indicators InnovationRelated Output 71

INNOVATE INDIA: CONTENTS


Annexures 73

I. Examples of Innovation 75

II. Details on the Data Collection and Compilation Methodology 77

III. Consultations : CII Advisory Committee on National Innovation Mission 81

List of Respondents 83

MESSAGES

Dr. A. P. J. Abdul KalamHon'ble President of India

Innovate India: National Innovation Mission 1

I am happy to know that the Confederation of Indian Industry is brining out a Report on "Innovate India" on the occasion of its Annual General Meeting on May 9, 2007 at New Delhi.

The Report which shall work out a strategy and action plan for making India into an innovative society that will lead to a competitive and economically developed India.

I extend my warm greetings and felicitations to all those associated with the Confederation and wish the Report all success.

(A.P.J. Abdul Kamal)

New DelhiMay 9, 2007

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PRESIDENTREPUBLIC OF INDIA

MESSAGE

Innovation is a major driver of progress in any country, playing pivotal roles in economics, business and technology. Innovation is necessary in products, processes or services, and is indispensable for organizations to remain competitive.

Open economy leads to competition, but if it lacks innovation, the purpose of opening the economy may not be served. Countries have benefited only by managing the innovation and leading the innovation in knowledge driven sectors of economy. Innovation-based economic development is thus the key for progress now even in developing countries. Desired frameworks are being put up by these countries for the purpose.

Often interactive learning paves the way for innovation. However, the institutional framework influence one to one or group to group interaction - in fact in such establishments human interaction is governed by a set of rules, code of communication, language and culture. These vary from country to country and even within the country. The NIS (National Innovation System) of any country thus has an important role to play in enhancing the pace of innovation. The policies are important and important is their evolution, which mostly depends on the succession of demand on the society and resources available on disposal to achieve the desired goals.

India too is innovating and is moving ahead to become knowledge superpower. Socio-economic structure which facilitates innovation is building up. Stakeholders are playing enabling role. However, new policies and programmes that would enable high quality accelerated growth through innovation are needed with such mechanisms, which would enable innovation across firms and organizations unfettered by boundaries.

This report entitled “Innovate India” addresses indeed some of the issues and suggests remedial measures. I take this opportunity to congratulate all those involved in this initiative, which is timely. I am sure the report will be instrumental in building “Innovative India” in a “Team India” spirit.

(Kapil Sibal)

New DelhiMay 15, 2007

Mr. Kapil SibalMinister for Science &

Technology and Earth Sciences,Government of India


A CITIZEN'S CHARTER AIMED ATENCOURAGING INNOVATION IN INDIA

We, the citizens of India, resolve to make India a Knowledge superpower by taking a leadership role in the twenty first century. We wish to capitalize on the favourable demographics in the country and seize the moment to leverage the explosion of talent and entrepreneurship to foster innovation and catapult this dynamic young country to the status of a leading nation. There is an urgent need for India to bring in an environment that supports innovation. We call upon industry, policymakers and parents to take proactive steps to catalyze the immense human potential that is being unleashed within India. The need is to ensure that these steps involve the entire population. It is important to build on the continued success of the service sector, the more recent robust growth in industry and extend this to the agricultural sector which supports the most vulnerable sections of our population. Let us overcome the bottlenecks that prevent India from reaching its tryst with destiny. It is for all of us to make India a hotbed of innovation and fresh thinking.

We must create the minds that will ignite the fires of innovation and develop the expertise that will keep them burning. Research institutes must generate an environment that fosters imagination and provides incentives that reward successes and overlook failures. Schools, colleges, universities and vocational institutes must develop training programmes that encourage problem solving with local resources. Flexible curricula must respond to changing realities with teachers being rewarded for the challenges they throw at students.

The demographic transition in India has given us a young population ready to take on a globalizing world. It is only fair that we give them the tools and the environment in which they can realize their dreams -- an environment that allows them to freely experiment with new ideas and do so without fear of failure and, tools that help them explore new grounds, walk new paths, and take new risks.

Let us reform the education and training system to have the same impact on society that de-licensing in 1991 brought to the economy.

Human Capital and Creativity


Collaboration

IPRs

Flexibility

For innovation to be fostered and taken forward, it is essential to have a platform that engenders collaboration. A necessary condition is the need for common platforms and standards that enable innovation across firms, organizations, individuals and groups unfettered by national and organizational boundaries. Standards ensure competition and facilitate the growth of networks. Standards also enable multi- disciplinary approaches to problem solving. We need to take a proactive approach and show dynamism and openness in the setting of domestic and international standards.

Let us work towards the generation of open networks that allow people to move in and out at will with their ideas protected by law. We will make collaboration a most rewarding activity.

One of the critical institutions for R&D and subsequent applications is the protection of Intellectual Property. Patents and other IPRs encourage innovation, ensure returns to the innovator and, at the same time, put all knowledge in the public domain. India already has a state of the art legislative mechanism for the protection of IPRs, but it is important to be dynamic in this regard, ensure new IPRs are quickly recognized, data privacy ensured, business methods respected and know-how protected to the fullest extent possible. If networks are to be the foundation for collaboration, new forms of shared IPRs are required. At the same time we must work towards an IPR mechanism that reduces delays and compensates owners fully against trespass.

An innovative environment requires flexibility in all factors of production - capital, management and labour. Capital market flexibility in India has already shown impressive results. An efficient managerial market encourages entrepreneurship. A mobile and flexible workforce is not only productive, it is also innovative. Towards this, we quickly need to amend bankruptcy laws and labour laws, encourage entry and venture capital funding, and allow for easy exit for businesses with support to labour during the process of transition.


Our regulatory authorities need to recognize the new challenges and harness India's potential by doing away with several outdated rules and regulations that were relevant for a different culture in a different country.

On this front, we recognize that the government has been making the right moves. The Right to Information Act has already worked wonders on various fronts. This year's budget signals the government's sincerity even more as it declares its commitment to e-governance. We encourage the government to take this forward and ensure promptness in service delivery through reforms in public services and through increased use of technology in service delivery that must reach the length and breadth of the country. Towards this, it would be really important for the country to ensure that its institutions that are responsible for technical education, higher education and research be made accountable and responsible for meeting their objectives. It is also important that the education sector be as free as other sectors in the economy to be able to open universities and institutes and provide training to the vast number of students passing out of our schools. We commit ourselves to further encourage and participate in this move towards openness and transparency.

wish to underline the need for urgency in bringing in these changes. If India does not move towards an innovation eco system quickly, it will very soon lose any advantages it may have gathered in the last couple of decades. A new attitude needs to be brought in that would accept, incubate and strongly encourage innovation in India. We all need to together ensure that the young Indian today thinks afresh, does not fear failure and is rewarded for thinking out of the box. We reiterate our commitment towards building this new India.

Transparency

We


Mr. Shanker Annaswamy Co-Chair, CII Advisory Committee

on National Innovation MissionManaging Director, IBM

Mr. R. Seshasayee President, CII

Lt.Gen (Retd) S. S. Mehta Co-Chair, CII Advisory Committee

on National Innovation MissionDirector General, CII

Mr. Sunil B Mittal Vice President, CII

Dr. T. Ramasami Secretary, DST

Innovation has been defined as the intersection of invention and insight that leads to commercial and social value. In India, there are many instances where innovation, as defined, has occurred and is occurring. However, these are not enough, given the size of the country and the number of problems India is grappling with as it embarks on a path of rapid, sustainable and inclusive growth. Higher growth in India is the outcome of its productive energy, of which, there were many instances prior to 1991. However, industrial delicensing in 1991 unleashed this energy. To suatain the consequent growth, we now have to unleash India's innovative energy, taking it beyond sporadic instances and making it integral to all productive activity.

A careful analysis of the innovations suggests that the translation of new ideas into value generation is not a simple process. Though innovation starts with the idea and ends with value, there are a number of intervening steps that an innovator has to go through. There are no roadmaps that a person with ideas can follow to reach one's destination. Hence, to nurture innovative ideas, it is essential to have an innovation eco-system that opens up a large network of roads on which an innovator may possibly travel.

In other words, instead of directing innovation, the eco-system has to enable it. A number of enablers can be identified and they cover, among others, institutions, laws, infrastructure, mind-sets, incentives and culture. For instance, while outstanding researchers may happen in spite of the system, the level of an average researcher improves with a good research environment. In this context, the number of PhDs in India is far less than it should be and dwindling. The research environments in universities and institutes must attract researchers back into their fold and employment opportunities for such PhDs must be made comparable to what they can otherwise get.

Not only should we produce more PhDs in existing disciplines, we should get some of them in new disciplines also. This will mean the development and implementation of new courses that will develop skills required in the future. One example is the new initiative being talked about regarding a services science syllabus. Some of the best minds in the best universities and organizations are taking exploratory steps in this direction. We need to develop and adopt some of our own.

EXECUTIVE SUMMARY


Focus on our problems and solutions starts at the schooling stage freedom and encouragement to try, nurture experimentation and out of the box thinking, and allow failure. This mind-set of experimentation must extend to skill generation and its continual upgrading. Vocational training and modular courses are therefore important too. Capacity for imparting education and skills must be augmented while allowing for competition amongst the providers.

An innovator must be empowered to experiment and fail. It is not enough to make entry easy for start-ups with venture capital and small business loans, though they are essential. Simultaneously, the social and economic costs of failure must be brought down. Failed entrepreneurs must be able to exit easily. Labour from these units must get support during transition. While flexibility in reallocating resources is desirable for all producers, it is a must for start-ups and young firms where the failure rate is high.

The other characteristic of innovation, and this is becoming more and more important in the global world, is that it works best if groups of people, or organizations, come together. And, equally significant, innovation is no longer restricted to the R&D laboratories of large organizations.

For such collaborations to succeed, two things are essential. First, proper recognition has to be given to all those who participate in an innovative venture --- be it in research, commerce or in social initiatives. India should think innovatively on a patent regime that supports open collaboration. Shared patents such as patent commons are one example.

Second, to maximize the number of individuals and organizations participating in the process, common platforms need to be built so that a collaborator can move in and out of the process seamlessly. The operative word here is “open”; no one knows from before who one's collaborator will be. Defining and developing standards for technology and services will enable people to work on common platforms, reduce duplication of effort and enhance compatibility.

One such common platform stems from e-governance filing online tax returns encouraged small businesses to embrace information technology for taxes and then beyond


to other aspects of their businesses boosting efficiency and transparency. Such innovation leadership, especially from the government, has multiplier effects.

This eco-system of open networks, private or public, has to be supported by a base network or an Indian Innovation Network. We recommend a paradigm shift in the nation's goal-setting (like what happened in 1991 when the economy was opened up) that is not to “drive” innovation but instead generate an attitudinal change in people's mind-sets like greater tolerance to failure, going off the beaten track, looking for solutions encountered in daily life, etc. It will also encourage the public, government and other organizations to create an innovative eco-system in whatever they control. Most importantly, it will foster experimentation.

Simply put, if we do not innovate, we perish.


The objective of this monograph is to work out a strategy and consequent action plan that enables India to become an innovative society. The first aim is to understand what breeds innovative ideas among large groups of individuals and organizations in society --- the institutions, culture, attitudes, incentives, etc. The second is to work out strategies to develop an eco-system that makes innovation an integral part of what everyone, or every organization, does every day.

It is important to grasp the urgency of making India an innovative society. About 65 per cent of the population is in rural India where the major activity is agriculture. Unfortunately, agriculture adds only 19 per cent to GDP. In addition, there is a large amount of under-employment, or disguised unemployment, in rural India which supplies more than 50 per cent of the Indian labour force. In general, development leads to shrinkage of the agricultural labour force and growth in the industrial labour force but, in India, the organized industrial labour force has been declining. The service sector has been growing but the more productive jobs in this sector require training and skills that are not usually available in rural labour. Lack of any employable skills, at a time when the economy is on a growth fast track, can lead to socio-economic disruptions. This can have serious consequences for social and political stability in a democracy.

The world is fast globalizing and so is India. This opens us up to competition in a way that has never been seen before. Our competitors like China have moved far ahead of us and other developing countries are fast catching up. Two decades ago India was insulated from the world economy; today social and economic shocks outside India have immediate implications for our economy. If we are prepared for such unforeseen shocks, it can become an opportunity for growth and development; if we are unprepared it can lead to serious dips in economic activity and consequent destabilization of serious proportions. The need of the hour can be summed up as follows: greater industrial growth to generate employment; rural development through rural industrialization and other non-agricultural activities; harnessing of youth power to enable the realization of the demographic dividend and the prevention of major social disruptions; and the delivery of basic services to the vast majority of the under-served

INNOVATE INDIA: NATIONAL INNOVATION MISSION


population. Our biggest and most valuable resource is our population and they must be enabled to solve their problems. Increasing the scale of what we have been doing so far will not be sufficient. We need to think out of the box and this can be done only if our eco-system rewards innovation.

It is not enough to see how other societies have innovated and implement their experiences for India. This is because India is inherently different from other innovating societies. It would not be enough to take the innovation strategies of other societies (US, China, Taiwan, etc.) and adopt any one, or a combination of these, in India. To highlight some of the differences, consider the fact that the US school system produces a relatively low number of students with science and mathematics capability. Yet, rectifying this is not among the most urgent actions recommended for boosting innovation in the US; what is highlighted instead, and repeatedly, is the R & D capacity and the number of scientific papers produced. This apparent anomaly is explained by the intake of foreign born students at the university level, quite a few of whom stay back in US. In India, on the other hand, the pool of potential students for college degrees (and for future innovators) is the pool of Indian students graduating from the Indian school system. Hence, the US focus on enhanced research in universities and colleges cannot work in India unless we increase the (potential) pool of quality students and researchers graduating from the school system in India. India's focus on building the innovation eco-system must, therefore, start at the lowest levels and go all the way up to enhancing research capability.

The Chinese have made great leaps in their contribution to scientific research. One way they have done so is by allowing a different salary scale for returning Chinese scholars who have already established their reputation abroad, compared to home bred scholars who have not established an international reputation in research. Simultaneously, many of its enterprises, though competing with each other, are set up by local governments and are essentially state owned enterprises. India, on the other hand, will face tremendous political opposition from the academic community to any attempt at dual salary scales and much of its enterprise activities are in private hands. In Taiwan, most of the patents are owned by small scale enterprises while India's enterprises are starved of credit,


1technology and skilled labour. In this report, we keep in mind this difference in the Indian environment and use it as the backdrop within which initiatives have to be undertaken to develop an innovation eco-system.

This monograph is the result of the efforts of many people. To begin with, an Advisory Committee was formed along with the research team entrusted with completing this report. After the structure was loosely decided upon, a number of interactions took place between the research group and people hailing from different walks of life. These interactions happened both individually, and in groups. Different versions of the report were circulated for inputs to a large number of stakeholders.

More precisely, the exercise began with putting down initial thoughts and then brainstorming with experts from various spheres. The initial brainstorming led to more focussed interactions via roundtables and formal discussions. As we collected opinions and re-organized our thoughts, we produced interim reports. These reports were circulated and feedbacks obtained. We reflected, considered and debated more. At each point, our thinking and organization of thoughts got more refined. The following report is an outcome of this process. However, it is not a treatise on innovation or, definitive steps on how to develop an innovative eco-system. Instead, it is the start of a thought process which, to be fruitful, must be refined further with inputs coming in from all who want to see an innovative India.

In particular, the report• identifies innovation and the processes that lead to

innovation; • takes stock of where India is in terms of innovation; • designs an innovation eco-system, bench-marking

US and relevant countries;• identifies the potential gaps that need to be bridged

and draws up a roadmap for getting to the eco-system; use the eco-system mapping to continually monitor and inform us how quickly we are closing the gaps; and

• makes specific recommendations for various stakeholders and milestones.


1 “What Ails the SME Sector?” IDF Report sponsored by DFID-India, March 2004

Innovation is a new idea or a new way of doing something that is value generating. The National Innovation Initiative (NII) of the U.S.A. defines innovation as the intersection of invention and insight, leading to the creation of social and economic value. Insight provides the basis for application of the invention. Then, the solution must be tested and demonstrated to be useful and viable, and finally, it must be commercially or socially produced. Only then is social and economic value created.

If we accept this definition, India has innovated in a number of different ways. Using insight to solve everyday problems abounds in the form of “jugaad” that translates into experimentation with a problem-solving focus, resourcefulness, a quick-fix solution that overcomes current constraints and is effective in the short run. The creativity and insight intrinsic to “jugaad” can be harnessed and extended to solutions that are durable, scalable and commercially, or socially, applicable. Such extension to value-generating solutions will require using science, technology, research, invention and then marrying these to insight. An outstanding recent example of an Indian innovation is the pre-paid SIM card for cell-phones. This was devised as a means to address provision of service amidst limited budgets. Given that much of Indian labour gets paid daily, weekly or fortnightly, it is difficult for them to undertake lumpy payments at longer intervals than their income periods. So, one needed more divisibility in the payment stream, something that is more in keeping with their income periods. The pre-paid card addressed this issue in a unique manner. It allowed low up-front cost and a fixed monthly pre-payment for the service. Starting initially with monthly validity and few rental-talktime choices, this service has expanded in scope and variety to serve different customer needs. From buying the initial SIM card and re-charge coupons from designated stores, the system has moved to one where these cards have become available from a large number of stores and users can re-charge them from their homes. It is an excellent example of a service that has consistently enhanced convenience with affordability. It has improved customer satisfaction, expanded the cell-phone users' market, increased revenues and profits. At the same time, it has improved social value by connecting people all over the country. In short, it has generated considerable value in a country where people are culturally averse to

1. IDENTIFYING INNOVATION AND INNOVATION PROCESSES


running up huge pending bills (as would be the case with post-paid connections) and where a large number of people get paid small amounts but at more frequent intervals of time.

Another example is that of Sona Koyo Systems. It is one of the auto component suppliers to Maruti Suzuki, the Indian joint venture of Suzuki Motors. With the entry of auto majors such as Daewoo Motors, Hyundai Motors, and Visteon with Ford Motors and, along with them other foreign auto ancillaries in the Indian domestic market, domestic auto ancillaries were compelled to upgrade themselves to ward off competition. Sona Koyo through its tie-up with Koyo Seiki of Japan had access to a strong R&D base. Sona Koyo successfully adopted Total Quality Management (TQM) and Total Productive Maintenance (TPM) practices on the shop floor. From this overall environment of manufacturing excellence, built to keep competition at bay, emerged an improved product. Sona Koyo redesigned the steering system used for a Maruti-Suzuki small car (the Alto) --- combining three components into one --- and reduced the weight of the system by 15 percent. The company is now supplying steering systems to auto majors other than Maruti Suzuki such as Toyota, Mitsubishi, and Hyundai in India. It is also building up exports and moving up the value chain. The innovation of the improved steering system established Sona as a place for manufacturing excellence with the skills to re-engineer existing products to save costs.

The first example was a pure Indian initiative, while the second was a partnership between an Indian and a foreign player. An example of a foreign company using Indian resources to innovate within the country is the McDonald's chain. To succeed in a very competitive snack-foods market in India, the McDonald's food chain introduced new variants (for McDonald's but similar to other Indian forms) of vegetarian (“aloo”) patties for their burgers. This form of “jugaad” has been institutionalized in the form of a McDonald's food development centre in Mumbai. The prototypes developed here have been adopted for mass production and retailing, and commercialized profitably across McDonald's outlets in India and other countries.

Government institutions have also been innovative. To combat illiteracy, the government has been running adult education programmes and, for out-of-school children,


alternate education systems. However, despite such programmes, these persons remained out of the purview of formal education. The National Open School provided persons who were hitherto out of the formal schooling system, another chance to enter it, take modular courses, pass the standard “board” examinations and obtain regular certification. This is also an example of an innovation that produces social and economic value.

To combat lack of skills, the CII's skills initiative identifies a menu of skills (plumbing, electrical work, car maintenance and repairs, beauty services, baking services) that a candidate can enrol for; helps each candidate to make a good match; provides training of about six months; a monthly stipend of INR 5000 and, most importantly, provides certification from an internationally established institution and an initial placement through its member industries. The certification is established via a smart card provided to each person which any prospective employer can verify using the internet/web. Thus, the employability of the labour force is enhanced by creating more brown (rust)-collar workers, marketability is enhanced within India and abroad due to certification, and the cost per person is much lower than in public programs such as the NREGA (INR 10,000 per person).

This is an innovation that needs a bit more elaboration. For one, it integrates the Indian labour market. Currently, a skilled plumber in one part of the country cannot be employed outside the immediate neighbourhood simply because there is no way the plumber can credibly signal his expertise. Graded certification by an internationally reputed institution, which is not involved with the training process, allows the plumber to credibly communicate his skill level to an unknown employer. This enables the private sector to find optimal locations without having to worry about the local availability of labour.

To provide healthcare, not only new cures via biotechnology based drugs and therapies but also new ways of ensuring healthcare delivery are required --- both financing (health insurance) and cost-effective means of delivery. The reverse pharmacology approach to new drug discovery would reduce cost and time to produce new drugs relative to the current process in advanced economies. In U.S.A, where health insurance is widely available, almost one-third of the health expenditure is due to paperwork. With the use


of information technology, devices such as the health smart 2

card will enable (i) bypassing or reducing these costs, and (ii) patients to have more control over their health information through secure, private, and portable medical records.

Providing high performance at a low price is possible. Leveraging the population size and following a hub-and-spoke model, the Aravind Eye Care System provides surgery services cataract operations at low costs. While the US costs are USD 2500-3000 per surgery, Aravind Eye Care costs USD 50-300 per surgery. High quality is also achieved comparing UK national survey on adverse events during cataract surgery versus Aravind Eye Care on five indicators, Aravind Eye Care incidence of adverse events is lower.

In a country with a decentralized governance structure and as large as India, there is often a problem with implementing social programmes targeted at weaker sections of the population. Identifying pockets of such populations and monitoring assistance to these is a difficult task. In part, this has led to leakages from the social programmes such as poverty alleviation programmes to undeserving beneficiaries. Small area estimation (SAE) is a relatively new technique that leads to generation of poverty maps or estimates of poverty at local levels, as local as villages. These estimates can be further combined with GIS maps to provide a powerful tool to policy-makers and programme implementers to improve effectiveness of programmes. The

3technique is under pilot testing in India.

Is there a common pattern to these examples of innovation? If we can isolate these characteristics, it will help us in identifying what are the features that enabled them and, hence, give us pointers on what needs to be done to make these examples happen more often and more pervasively.

Some of the characteristics that we have been able to identify are given below. These characteristics are more or less present in all the examples cited above.

• Innovation is cross-disciplinary and arises from the intersection of different fields or spheres of activity. For example, the pre-paid SIM card arose

2

Haryana, 2006.3 Small Area Estimates of Selected Welfare Indicators, IDF, November 2005.

Health Smart Card, IDF Presentation, India Development Foundation, Gurgaon,


from the need for connectivity, customers' constrained budgets, technological factors (SIM card with deducting balance, recurrent SIM card re-charging over the phone), distribution mechanisms (company outlets to third party retail outlets), marketing (new packages of rental and talk-time), and a responsive regulatory authority TRAI (changed regimes from license fees to revenue sharing enabling telecom firms to survive, innovate, and grow).

• It is collaborative, requiring openness, active cooperation, communication, and feedback among scientists, engineers, and designers and between creators and users. Innovation rests on invention and hence hinges on research and development. India has a number of state research institutions (CSIR etc.) and some private ones (TIFR). Research and development efforts are expanding and becoming increasingly collaborative in an attempt to systematically innovate in India and for India both through product development and through collaborative research with Indian academia. For example, the new food items of McDonald's are successful due to such cooperation. The “on-demand” business model practised by IBM is also predicated on active and open collaboration between the service-providers and the clients; in India, a notable success of this collaboration is the outsourcing model followed by Bharti-Airtel.

• It is becoming global in scope, with breakthroughs coming from centres of excellence around the world and the demands of millions of new consumers. A high-powered research team from International Development Enterprise (IDE) observed Maharashtra cotton farmers using drinking straws in a novel way for drip irrigation and developed a material that is more suited for this activity. It is now distributed worldwide as a commercial product with an in-built technology that is more appropriate for small and marginal farmers. Also, the maintenance of the system can be carried out within the village, creating indirect employment within the village. Thus, in addition to being commercially useful, it generates social value by


targeting poor farmers and rural labour. • Innovation is not something that is triggered in

R&D laboratories alone. A major stimulus arises from workers and consumers embracing new ideas, technologies and content, and demanding more creativity from their creators. The CII skills initiative is a novel experiment wherein non-government as well as non-employer training is being accepted as worthwhile by workers. Similarly, farmers have accepted and embraced internet based information in e-choupals. With the increasing spread of internet and screen-based reading, e-books and e-newspapers may become a reality reducing the need for paper and helping to protect our trees and the environment.

• It is diffusing at ever-increasing rates, with adoption times (by a quarter of the population in U.S.A.) dropping from about 50 years for the automobile to 20 years for the television set to less than 10 years for the internet. The adoption gap of new technologies between U.S.A and India is shrinking rapidly with some new products being launched in India before U.S.A. (e.g., smaller cars).

• Innovation follows from an ability to experiment. The Government has an important role here, of fostering an enabling environment for innovation through active policies and through the creation of enabling institutions. To give a simple example of how the government can carry out its functions in an enabling fashion, consider an economy that could commercially operate activities. However, some of these activities, let us say of them, decided under some dec i s ion mak ing ru les (e lec ted representatives or constitutionally or dictatorially), society wants stopped. These could be activities like trading in narcotic drugs for instance. The government has two options --- it could pass a law allowing only the good activities, or a law that bans the activities. In a static world, both options have identical outcomes. However, in a dynamic, innovative world, the two approaches are not equivalent (in outcomes). In a changing world, new activities are discovered. The st activity in a world that “allows” the activities will never be experimented with; a society that bans the activities


will allow experimentation with new activities. For instance, TRAI's role in telecom industry specified what could not be done and, hence, enabled many new initiatives in the telecom sector.

• Innovation can be a direct result of government actions. Governments as providers of public goods have to be innovative themselves --- about public administration and service delivery (for instance, promotion of the development of the health smart card and the National Open School) --- both aimed at generating social value and greater inclusion. In particular, where benefits of innovation are not uniformly distributed, governments enable hitherto non-beneficiaries to develop capacity to absorb innovations and realize gains.

Measuring and monitoring innovation is a challenge since it is only after commercial and/or social success, or value generation, that an idea or an invention can be recognized as an innovation. However, as the list of common characteristics mentioned above suggest, innovation is not a simple one-step cause-and-effect observation, but a series of steps that individually have no value but is of immense significance if all the steps are synchronized with each other. It is an entire process chain starting from demand or problem identification, passing through an existing invention or a new idea that till now may have appeared unrelated to the identified problem, insight into the process that generates the problem, application of the idea to change this process, developing and designing the prototype solution, demonstrating the power of the solution through controlled experiments, fine-tuning the solution to make it cost effective and, finally, replicating and scaling up the solution to large-scale commercial or social deployment. Clearly, any attempt at devising a strategy for promoting innovation must take into account this entire process. It requires a monitoring system that ensures that for each step the relevant resources and institutions are in place.

This is because an important feature of any innovative process is the inherent uncertainty in the types of steps that may be taken as well as in the final outcome, or solution, itself. In other words, the process and the end-product get defined only after the solution is in place. There is no guarantee that an idea at any of the stages may actually


translate into an innovation. Thus, failure is also an inherent feature of the innovation process. In short, innovation cannot be decreed, or a blueprint developed for it. It is, therefore, necessary to devise an eco-system that ensures that all possible steps that could lead to a solution are available to the innovator. An innovative economy is, of necessity, an enabling one rather than a prescriptive one. And, hence, the monitoring process must focus on how enabling is the eco-system.

An important aspect of innovation is the use of new technologies to solve age-old problems. For instance, the mobile phone technology suddenly made it possible to add commercial value to the Kerala fishing communities' activities and social value by giving connectivity to large sections of the poor and remotely placed people in India. Among the major technologies contributing to and underlying innovation today are information technology, nanotechnology, and biotechnology. Measuring progress in development and leveraging of key technologies is an important component of the innovation process. Key areas of innovation go beyond products and services to business process design, business model, organization and management. We are progressively moving from an industrial-services economy to an economy driven by innovation in much the same way as we earlier moved from agrarian economies to industrial and industry-services economies, where new technologies along with new organizations for enterprises unleashed a whole new set of solutions to festering problems.

As manufacturing and international trade have been the engines of growth for the industrial economy, internet and electronic exchange are the engines for service-economy growth. In this context, an innovation economy might be driven by services based innovation and network based exchange of information on ideas and processes. The networks may be closed or internal as in an automobile maker networked with its auto ancillaries across all its locations (Suzuki Motors with ancillaries such as Sona Engineering in India and Koyo Seiki in Japan) or an IT-solutions provider networked with both customers and service-providing partners (IBM networked with its clients as well as partners - vendors, consultants, universities to identify/sense demand and provide on-demand solutions) or it may be open or external (e.g., e-Bay or the internet itself).


In India, growth, productivity, higher standards of living, and emerging leadership in a world with globalization along with removal of poverty have been driven largely by investment, both in industry (notably, automobiles, mobile phones, consumer non-durables such as beverages and snacks) and services (IT, banking and financial services, consulting etc.). Investment, including foreign investment, is powering India and helping to catch up with the advanced economies. Since economic reforms in 1991, the expansion has been accompanied by efficiency gains and enhanced quality in Indian businesses. For further growth and more importantly sustained growth, while continual efficiency and quality improvements will be necessary these may no longer be sufficient for the competitive edge. Being as efficient and as good as the best may not be good enough. Achieving inclusive growth with wide-spread rise in living standards will increasingly be possible only with innovative approaches --- identifying gaps in the range of products and services available, finding new ways to satisfy these gaps, formulating a plan to implement the idea, and executing the plan. Tinkering with existing products and services or following others in the global arena may not help much in either sustaining high growth or in solving the challenges facing India.

So, does India have innovative approaches? Is the Indian society oriented towards innovating? The examples in the earlier section suggest that indeed it is so. However, are these mere pockets of innovation with gains being limited mostly to these pockets or are these innovations occurring across many spheres with gains being wide-spread? To begin answering these questions, we require a systematic framework that allows us to evaluate where we are in terms of innovation, where we would like to be given our goals and objectives, and how do we get there. The first step in this direction is to have a set of indicators that can help quantify the extent and depth of innovative processes in India.

We identify several factors than can either enable or impede innovation; these are listed below. We provide a list of indicators based on these factors that can be either enablers of, or their absence barriers to, innovation. Indicators give us a sense of what exists and to what extent they exist. The

2.1 Developing a framework to measure and monitor innovation

2. THE INNOVATION SITUATION IN INDIA TODAY


4enablers we have identified are:

•Human capital

o Education system

o Expertise and skills

o Creativity and application

o Innovation leadership harnessing and

nurturingo Empowering workers in a changing world

o Value systems, culture, and attitudes fear of

failure and risk-bearing

•Technology

o Promoting frontiers of technology

o Leveraging technology

o Building frontier multi-disciplinary research

capabilities new curricula like services science is an example.

o P r o m o t i n g s t a n d a r d s t o e n a b l e

collaboration

•Service infrastructure

o IPR, patents, and data protection

o Financial markets, venture capital and risk-

takingo Land, infrastructure and innovation

infrastructure

•Organizations and incentives

o Innovation orientation in organizations

§Structure of hierarchy in organizations§Incentive structure in organizations§Promoting innovation leadership

o Research organizations

o Linkages between industry/services-

researchers-academia

•Government and Public sector

o Innovation orientation

o Policy and regulatory structure

4

suggestions of participants (drawn from various walks of life) at our roundtables and what we could cull out from the discussions there. Professor Rishikesha T. Krishnan of IIMB has been especially helpful with his comments and we have also drawn on his published work.

This list is the outcome of our own investigations as well as the direct


o Public administration

•Society and consumers

o Attacking local issues/challenges e.g., small

customer budgetso Being “glocal” thinking global and acting

local

We illustrate the importance of the enablers in the innovation process by using the example of the business process outsourcing (BPO) industry-service in India. Business process outsourcing grew out of data entry processes conducted in locations such as India for clients in advanced economies such as the U.S.A.; data would be processed and shipped in electronic media at a fraction of the cost in U.S.A. Processing of routine and repetitive back-office transactions, however, was a daily requirement and could not be batch processed in remote locations and then shipped back. However, with the advent of the internet and using the time difference between U.S.A. and India, such transactions could be processed and sent back by the next business day. This idea spawned the initial demand for BPO services. The technology --- internet --- was an enabler. Given the demand and the technology, the initial innovators (e.g., GE's BPO, now Genpact) envisaged organizations with a relatively flat hierarchy and a variable pay structure with performance based incentives. They required the knowledge workers to accomplish the task. The problem was night shifts --- getting employees to the BPO unit and back to their homes at odd hours when no commercial transportation was feasible.

The idea of pick-up and drop-off facility emerged. Though seemingly innocuous, this small component of the business process design in providing BPO services was a new way of doing something already being done (getting employees together at the production-service location). Indian laws could have been an impediment. For industrial workers, women were not allowed in night shifts. For commercial workers, hours were restricted to late evening (around 7:00 p.m.). The government could have intervened, enforced any of these laws, and


choked off the emerging growth in BPO; the government stayed away and in this way (specifying only what cannot be done, not what can be or how; also amending what cannot be done as the economy and society changes) also acted as an enabler. Further, society itself responded by allowing young workers, including girls, to venture out of their homes at night. This enabling environment helped to make the initial BPOs a success and generated economic value. The virtuous cycle continued, more BPOs formed, more workers were employed and more value was generated. The innovation of pick-up and drop-off facility continues to help expand the value generation spiral.

Each enabler in itself is important. The absence or the inadequacy of any one can impede innovation --- technology, government, entrepreneurial insight, society in the above BPO example. It is their synergistic interaction that helps produce innovation and generate value.

Based on data, prior studies, and the roundtables, we present the indicators relating to human capital (please see tables 1 3) below.

o Education system

§Number of high school graduates§Proportion of high school graduates in

population aged 18-24§Number of science and technology (S&T)

graduates§Proportion of science and technology (S&T)

graduates in population aged 20-24

o Expertise and skills

§Number of science and technology doctorates

§Personnel in research and development (R&D) establishments

o Creativity and application

§Number of scientific and technical journal articles

2.2 Human capital and education


§Number of citations (of papers)§Number of patent applications filed§Number of patents granted§Number of new designs

On education, the picture that emerges from the indicators (see Table 1) is that in terms of basic education (schooling up to class 12), India's performance is very low. The proportion of high

5school graduates in the relevant population group of age 18-24 is as low as 2.5 per cent and remains below 4 per cent. This is similar to China but is much below the data found for U.S.A. (28 per cent to 34 per cent in various years). However, since the population size is large, in absolute numbers, India has not been severely constrained --- in 2003-04 India had 5.6 million graduating from high school, China 5.5 million, and U.S.A. had 8.9 million.

While India is constrained at the general schooling level (that could potentially impact innovative activity in terms of diffusion of innovations), in terms of an indicator for higher education, namely, the number of science and technology (S&T) graduates, India produces over 2 million S&T graduates every year or over 2 per cent of the relevant population group aged 20-24. This is comparable to both China and U.S.A. that also produce about 2 per cent S&T graduates; however, in terms of numbers, both India and China outnumber U.S.A.

The situation is reversed when it comes to expertise. We have chosen the number of S&T doctorates as one of the indicators for expertise (while S&T graduates are included in higher education). India produces less than 10,000 S&T doctorates while U.S.A. produces around 400,000 S&T doctorates.

This disparity in expertise is reflected in innovation related output or our enabler category 'creativity and application'. In year 2001, India produced 11,000 S&T related journal articles, China produced about 20,000 and U.S.A. produced over 200,000 articles.


5

yet available. Drop-out rates are reported to be about 60 per cent.The data for India relates to high school enrolments. Data on actual graduates is not

Similarly, in terms of the number of patent applications filed, for the year 2002 when data for all three countries are available, India filed about 9000 applications, China about 180,000, and U.S.A. about 380,000. For the number of patents granted, India has approvals around 2000 versus over 100,000 for China.

Design is considered as the glue between inventions (or, new ideas) and commercial application. Design helps to convert ideas and research based products/services into tangible and effective offerings. Through designs, an idea and invention can be customized to achieve a high degree of fit for the target audience and cultural milieu. Hence, output of designs is a relevant indicator for innovation. India's record on the number of new designs is abysmal 39 versus 53,000 for China in the year 2002.

Thus, the human capital pyramid in India narrows at higher education levels in science and technology, that is, for graduates and post-graduates; narrows drastically for doctorates in science and technology. This translates into weaker (intermediate) outcomes, in terms of the number of scientific articles/papers written, the number of applications for patents, and the number of patents granted. At first glance, the lower human capital attainment of the population may have some bearing on the intermediate innovation outcomes relative to both the U.S.A. and China.

The views of stakeholder-participants expressed in the “Innovate India” roundtables corroborate the evidence above. There is a widely held belief that the bottom of the innovation pyramid, the school education system, is weak in India (the bulk of the population has education attainment below the elementary level). Improving education attainment and further improving skill levels is therefore imperative to make persons employable and able to absorb innovations (e.g., adapt and work with new technologies).

Among those who make it to higher education, there is a strong preference for engineering, technology


and medical streams. Most, however, want to keep away from pursuing careers in the basic sciences. This also shows up in the drop in the number of doctorates produced, adversely impacting the level of research and development in India.

India's system of learning by rote may be destroying India's innate creativity captured in “jugaad”. We need to promote a culture of innovation that takes the creativity and systematically exploits it to produce value. From the deliberations with experts, it also emerged that value systems and culture feed into attitudes and attitudes respond to the economic environment and incentives. Just as the non-resident Indians have done well in a more open and enabling economic environment the world over, so have the resident Indians whenever they have had such opportunities. This is manifest in the telecom industry, the IT and IT-enabled services sectors, and now in retail services.

Developmental efforts in frontier fields such as information technology, biotechnology and

6nanotechnology exist in India; however, application to India's non-commercial needs is low. To leverage technology to solve problems that generate social value, promoting experimentation within an enabling environment is very useful. For instance, the pilot studies done for the health card referred to earlier was made possible because of the support given by India's National Aids Control Organization (NACO) and the doctors and management of private and government hospitals.

The biotechnology field is on the rise in India with both investment and number of employees registering double-digit growth over the past few years. Two issues crop up. One, relative to U.S.A., employees in biotechnology lag far behind; in 2004, Indian biotechnology companies employed about 11,000 persons compared to about 187,000 by US companies. Hence, the gap in technology

2.3 Technology


6

products offered to public were more airtight balls, transparent sun block lotion and stain resistant trousers.” Meridian Institute (www.nanoandthepoor.org), quote from Dr. Mashelkar's presentation, 2006.

“Nanotechnology promises new cancer treatment, cheaper and purer water, but the latest

deployment exists and needs to be bridged. Second, while the base of personnel employed is low in India, the supply of trained persons lags behind even more.

Successful leveraging of technology is intricately related to the level of human capital. This is becoming more and more evident in the current service sector dominated global economy. Knowledge and skill in classical disciplines, developed in an “industry-manufacturing-commodity” world, are fast becoming insufficient to improve productivity and growth. The importance of services in delivering value has to be recognized and existing curricula need to be re-worked emphasizing the issues faced in the service sector. For instance, a motor vehicle can be treated as a commodity that allows people to commute to work. On the contrary, a motor vehicle may be treated as a means to deliver a service --- transportation to and from work. Then, along with the details of a vehicle, one will need to know how to optimize on the provision of a public transportation system.

We need people who are knowledgeable about business and information technology and the human factors that go into a successful services operation, in addition to the technicalities and rigours of the basic training they currently get in the old disciplines. This will determine the new waves in computer science, engineering, IT, business management and administration, operations research and, industrial and systems engineering. This will give us an opportunity to be among the

7pioneers in tomorrow's world.

An important enabling element in promoting and leveraging technology for innovation is the development of standards. Already, industries are governed by technical and t ransact ion specifications. When similar specifications are adopted widely, they become standards. It is this adoption of standards that enabled innovative value addition in many spheres --- electrical appliances and electronics, telephone and TV networks, credit and debit cards, global financial markets --- and by


7 Harvard Business Review lists services-science among the "Breakthrough Ideas for 2005.”

extension, all the other business and public services that use them. This will enable people to work on common platforms, reduce duplication of effort and enhance compatibility. Since innovation is a collaborative endeavour among various people and the outcome of putting together insights from various disciplines, it is imperative that what happens somewhere can be used somewhere else by a different person. Such standards have to be accepted by all and cannot be the exclusive preserve of any one company, or entity.

The Bureau of Indian Standards (BIS) is the prime Indian outfit involved in the development of technical standards (popularly known as Indian Standards), product quality and management system certifications and consumer affairs and, is nurturing the standardization movement in the country. While BIS has initiated several steps towards enhancing the efficiency of its operations and upgrading of services, there is ample scope for collaboration with private industry, academic institutions and international standards bodies. BIS should look beyond its boundaries and actively participate in the formulation of international standards. Indeed, given the growth of the Indian economy, and its emerging role in the new technologies, India can take a leadership role in such activities.

One of the key resources for innovation that is in short supply is finance. Many stakeholders feel that there is a dearth of venture capital funding outside the sphere of IT and IT-related sectors. A key gap seems to be early stage funding. However, anecdotal evidence garnered from the roundtables suggests that in the past two-three years, there has been entry of new venture capitalist funds in India.

Lack of finance for new companies is a big barrier to innovation. Recall that innovation can be observed only after it has generated value. Whether, or not, something is of commercial value can be gauged only after the activity is undertaken. On the other hand, as we have pointed out earlier, innovation is no longer the reserve of big company R&D

2.4 Service infrastructure


laboratories. So, how does a new company with an innovative idea but no commercial track record get off the block if no one is going to finance it? Infrastructure constraints affect not just general economic activity but also innovative activity. An innovation infrastructure --- innovation hubs linking industry, services, researchers and academics; innovation extension centres for SMEs, national and regional alliances --- is largely missing in India.

In India, the industrial policy of import substitution had envisaged a great deal of effort and investment in innovativeness. H o w e v e r, b e c a u s e o f p o o r I P R implementation, Indian industry could only obtain out-dated foreign technology instead of state-of-the-art technologies. Coupled with licensing and labour laws, this policy of poor IPR implementation ensured that most of the manufacturing sector remained capital intensive and yet technologically archaic. A notable exception is that of the pharmaceuticals industry that did benefit from this policy, and grew from rudimentary to world-class generics industry.

Recent trends in biotechnology and information technology have brought to the forefront a set of issues in the law and economics of intellectual property. These issues have to do with the problem of rewarding multiple inventors in a setting of

8cumulative innovation. That is, is it possible to provide optimal incentives for innovation simultaneously to the producer of a first generation product and a second-

2.4.1 IPR and the innovation process


8

extending droit de suite to cover scientific inventions during the earlier part of the twentieth century. This idea essentially foundered on a reluctance to impose compulsory licensing on inventors into the far future and the consequences such a move might have for the publication of the results of scientific research. total welfare), but it is very difficult to identify potential partners ex ante in practice.9 Scotchmer (1996) shows the following: Ex post licensing agreements, entered into after the cost of first innovation is sunk can increase the profits available for the two innovators, but cannot achieve the first best, because it is impossible to give the total surplus to each party separately using this (or any other) mechanism, as would be required to invent each of the innovators separately. Ex ante cooperative R&D investment (RJVs), entered into before the R&D cost is sunk generally will achieve a more efficient outcome (in terms of total welfare), but it is very difficult to identify potential partners ex ante in practice.

See Headley (1995) for an interesting discussion of the political/legal history of the idea of

generation product that builds on it? The 9

answer in general is no. The first invention creates an externality for the second inventor and therefore may be worth developing even if the expected cost exceeds its value as a stand-alone product. However, broad patent rights for the first inventor to ensure innovation do not leave enough profit for the second inventor. One solution to this problem is “internalizing the externality” via licensing.

India's intellectual property regime, post the 2005 amendments, is comparable to that of advanced economies. Apar t f rom infrastructural issues that remain, the institutional framework is also in place. However, the absence of laws against data exclusivity may pose a serious threat to innovation in India. This threat arises because intellectual protection of databases is a critical issue for science, research, innovation and creativity, given the proliferation of information services.

Advances in technology have made digital databases an essential resource for innovation. The central issue here is that of the balance between the concerns raised by database creators regarding the provision of incentives and protecting investment in new database products and services and, that of safeguarding customary access to the data by the scientific, education and research communities. Indeed, the ability to access existing databases and to extract and analyze selected portions of them is an integral part of the scientific process. Further, digitization and the potential for instant, low-cost global communication have opened tremendous new opportunities for the dissemination and use of scientific and technical databases in developing countries. This has vastly reduced the time between the production of research output

2.4.2 Data Protection


and its dissemination to the global scientific community. Developing countries can, therefore, in principle, start with, and contribute to, the same knowledge base as the advanced societies. While this is an important opportunity for India, it will not be possible if rights on the data use are not properly specified. In India, there is no protection to data.

While the IT industry has flat organizational structures in place to promote both an easier flow of information and ideas in the workplace and, incentives such as stock options to reward performance, organizations in other sectors may be slow in adopting these flexible structures. Further, even though these may perform effectively in their current activities, they may not be doing enough to promote an innovation culture in their organizations. In part, this may be due to inadequate innovation leadership within organizations.

In academic and research organizations, such mechanisms are crucial. Most academic institutes of higher learning in India are government funded and have a tendency to follow bureaucratic practices in their setup. For instance, one of the top Indian institutions, with global reputation, took six years to initiate a specialized Masters programme. The fact that the programme was a successful one is evident in the fact that the graduates of this course, once started, were much sought after by global and domestic companies, as well as by the very best doctoral programmes in the world. The reason for the delayed adoption of the course was a prime example of the lack of an enabling framework we have referred to earlier. The charter of the organization specified the courses it could offer and this charter was worked out more than 50 years ago! So, until the charter was changed, the new programme could not be started.

Another drawback to innovative research is the incentive structure in these institutions. Most university departments have the “post” concept ---

2.5 Organisations, incentives and linkages


number of professors, number of associate professors and lecturers with . The problem here is that a young over-achieving lecturer has to wait for a professor to retire so that an associate professor can be promoted and open up a vacancy for the lecturer to move up. This obviously destroys the incentive to perform well at lower levels. Promotion to higher levels should depend on the work done and not on who, or how many, have been promoted before.

The other major problem with higher learning and research institutes in India is that many, or most, of these are outside the university system. They have more resources for research compared to what most universities can even dream of. By being outside the university system, this not only duplicates infrastructure, it keeps teaching

10separated from research. A famous physicist narrated the following story during his farewell ceremony from the college where he had always taught. He had applied for a job at a university after finishing his PhD. At the job interview, given his excellent thesis work, the interviewers were rather concerned that he wanted to give up a research career and wanted to teach! The physicist taught in an undergraduate college throughout his career and is internationally reputed for his research work done while he was teaching in this college. His undergraduate students have later turned out to be some of the leading researchers in the world of physics. Unfortunately, he was an exception rather than the norm.

India's R&D expenditure has been stagnant at about 0.9 per cent of GDP for ten years now. In the mean time, China's share has doubled to 1.4 per cent and they have a much larger GDP than India. Our share of total industry R&D is about 35 per cent, much lower than most major economies, including China, where the share is about 65+ per cent. Importantly, most countries spend between 15-35 per cent of national R&D in the university system, with China at around 10 per cent and rising fast. Even by generous estimates, we spend about 4 per cent and the bulk of national R&D is still done in


10 These institutes do have teaching programmes but they are mostly for doctorate students.

autonomous laboratories. Unless we address this fundamental issue, all discussion of connecting public research with industry is going to remain a peripheral activity.Research organizations in India, both public and private, have been akin to ivory towers pursuing excellence in research but without substantial application to India's problems. In addition to the fact that universities lack adequate resources and incentives, they have limited interaction with other stakeholders, namely other academics, industry (producers), consumers, and government so that India's issues have remained largely un-addressed. Linkages among inventors and researchers (generating new ideas or new ways of doing things), entrepreneurs, venture capitalists, and industry-services are quite poor.

While the goal of research and development is a laudable one, there is a broader philosophical issue about what triggers innovation. More specifically, what is the role of the State in any innovation process? Both theoretically, and empirically through cross-country comparisons, the answer is fairly obvious. Economies based on competition, choice and market forces consistently out-perform those where there are extensive State controls and intervention. Often, such State intervention was based on notions of market failure. But there are two reasons why such a diagnosis was often misplaced. First, market failure was assumed, when there was no such evidence. With advances in technology and possibilities of unbundling, many classically cited instances of natural monopolies are no longer natural monopolies. In fact, they are unnatural monopolies thanks to entry restrictions imposed by the State. Second, in interventions based on notions of market failure, the costs of State failure tended to be under-estimated. This is not to deny a role for the State in core governance areas like health, education, some elements of physical infrastructure, preservation of rule of law and protection of property rights and an efficient dispute resolution mechanism.

2.6 Government and public sector: Innovation and intervention


Indeed, there is an additional role for the state --- fostering an enabling environment for innovation through active policies and through the creation of enabling institutions. We have already discussed how a “positive” list (permitting the good activities) can be worse than a “negative” list (banning the bad activities). The permit raj is an example of the first option. In a certain world (with no innovation!), both approaches lead to the same outcome. In an uncertain world, where new activities get developed with time, the first approach will slow us down for we will need to change the law before we can start a new activity. This will kill experimentation, the basis for innovation. The issue is not how one decides on good and bad activities but, once decided, have the bad activities been stopped in an appropriate fashion.

This idea is well explained by the court initiative to bring down pollution in Delhi. The prescription of a clean fuel, compressed natural gas (CNG), helped to curb and reduce vehicular pollution in Delhi and the decision was widely appreciated. However, the specificity to CNG in the law precludes the adoption of better fuels. Such adoption would require a change in the law; the costs of innovation in this case become much higher.

There is a temptation to control and direct resource allocation, both public and private. In the 1950s, in India, this drove State intervention in sectors regarded as core infrastructure sectors, such as coal and iron and steel, and the State ended up producing everything from cycles to cement. Simultaneously, for the private sector, a system of licensing was introduced. The 21st century has variously been described as a knowledge century and India's strengths, in terms of both a demographic dividend and core competencies in education, skills, science and technology, have also been talked about. However, if these are natural comparative advantages, is there a case for State intervention to specifically push specific forms of IT or BT? Or is there a case for removing existing licensing controls in sectors like education and health, so that the demographic and knowledge


dividends are actually tapped?

Government may focus on being an enabler, providing infrastructure and key public goods such as health and education, law and order, and good governance. The private sector is robust and is already innovating. The government could help by innovating in public administration, e.g., e-governance may help to leverage technology and make its use wide-spread.

In this context, it is important to change certain mindsets among our policymakers. When any proposal for change is suggested, the usual question asked by any policymaker is whether it has been tried elsewhere. This, by definition, rules out any innovative solution. Not surprisingly, micro-finance institutions did not develop in India and we are now spending huge resources to support such institutions once the world started talking about such institutions in Bangladesh.

As an example, consider the world-acclaimed DOTS (Directly Observed Treatment: Short course) treatment of tuberculosis. It was developed in India by the Tuberculosis Research Centre, Chennai. The study, known worldwide as The Madras Study, showed the efficacy of treating tuberculosis patients as outpatients (under direct supervision) and called for a shift in public policy away from sanatoria. However, this approach was not approved by the Government of India as there was a lack of precedence for DOTS in other countries of the world! Years later, when this strategy was accepted by most nations of the world, and endorsed by WHO as a sure cure for tuberculosis, the Government of India gave a green signal to DOTS to be

11implemented in India.

A similar “cautious” mind-set has been holding back improvements in India's financial sector. The desire to get regulations in place before institutions can trade in new instruments developed elsewhere may have the same results that we had in product markets during the license raj. That system


11 Review of the Revised National Tuberculosis Control Programme, IDF, February, 2006.

12 Gangopadhyay, Shubhashis and Praveen Mohanty (2003), Appropriate RegulatoryInstitutions for Industry and Finance, ABCDE symposium volume.

hampered and delayed product and process innovations. Similarly, a “regulation, and hence, permission first” approach may result in Indian financial markets following the expertise and knowledge of the regulators, rather than being led

12by the creativity of the financial innovators.

While consumers provide the stimulus for demand in many cases, society's response gives a boost to the value generation spiral of innovation or renders it stagnant and could even lead to value destruction. However, the view from roundtables is that as in the case of value systems and culture, society's responses may be endogenous to the impulses of incentives and economic environment. If we get the economic and innovative impulses right, then society and consumers (demand) will respond in tandem.

Competitive pressures have compelled Indian businesses, both large and small, proactively and successfully to adopt new ways of production and doing business. While being efficiency-conscious and innovative has helped enterprises to withstand competition and generate value, to continue value generation and be business-leaders, innovation itself will have to be sustained and not be sporadic or confined to some pockets. Thus, innovation in India will be required to extend its span.

• from urban to rural business; from services to manufacturing, and beyond to agriculture; from private business to public sector enterprises;

• from enterprise (productive activity) to social sectors (education and training, health) and to attitudes (values, culture and mind-set);

• from regulatory structure (trade, licensing, patenting, infrastructure communications, transport, ports, railways and roads, power and energy, water, irrigation) to public administration (taxation, procurement, subsidies and transfers, poverty removal and other social programs, law,

2.7 Society and consumers


order and general governance); and,• from enterprise (closed group) to networks

(open groups)

Innovative ideas originating from research labs, research institutes and universities, workers and individuals must be systematically harnessed through links with business --- seed money, venture capital, venture counselling --- and commercial application. An eco-system for making India an innovative society has to be developed such that the number of innovations and contribution to growth and well-being might be maximized.


We develop a system that is enabling as opposed to directive, based on the current state of innovation enablers and based on expert views of myriad stakeholders. As explained above, the system must be enabling as it is inherently evolving in nature.

The enablers human capital (HK), technology (Tech), other key resources (Other resources), organizations and incentives (Organizations), government and public sector (Govt.), and society and consumers (Society) all together form the basis of the innovation ecosystem. The enablers discussed earlier and shown here are all required to work in synchronization for an invention or an idea to

13take birth and go through the various stages to reach the form of an innovation. Any factor that is lagging will become the weakest link dragging all the others down. As the various examples highlight, the seed of innovation can arise from a consumer problem (connectivity), from a human capital issue (skilling), from technology (internet), from organizations (hierarchy), or from use of other resources. These are represented by the spokes in the wheel of the ecosystem.

3.1 Innovation ecosystem a static representation

3. DESIGNING AND BUILDING AN INNOVATION ECO-SYSTEM A DYNAMIC SYSTEM


13

idea, insight invention*insight solution-generation (prototype) demonstration of the solution piloting of the solution large-scale commercial or social deployment

The stages of the innovation process are - demand/problem identification, invention/new

43

The innermost circle represents a primary economy wherein value is generated through production and barter or limited trade. The next circle represents the industry-services based economy where value is generated through production and trade, both made possible through markets. The value generated in the industry-services economy is far greater than a primary/agrarian economy, partly because markets associated with this stage allow specialization and engender efficiency. Hence, considerable importance is attached to the development of markets.

The third circle represents the innovative economy. While this produces products and services as before, the key difference is the way it operates. Now, along with markets, networks are crucial. Markets fostered value generation by allowing discovery of price, marginal benefits and costs, and hence marginal or individual rewards for individual effort. Innovation, resting on ideas, depends upon group effort where contributions to the development of an idea will be difficult to apportion if not impossible. The group that nurtures the idea and takes it to fruition is represented by a network, which may be wholly internal to an organization or, as is becoming increasingly evident, have external members too. Thus, in an innovative society, networks will be crucial. Organizations may metamorphose into a network or a network of networks. How will networks interact with each other? Will markets predicated on identification of marginal benefits and costs suffice? This important issue will be dealt with later.

If the enablers work in tandem and support each other, a virtuous spiral of value generation is obtained. It is pictured below. An example is the BPO sector in India (see section 2.1 for a discussion). Recall that a key enabling feature of the BPO sector's success is that society responded by allowing young workers, including girls, to venture out at night to operate the night shifts at BPO units. This freedom to work is accompanied by security

3.2 A dynamic innovation ecosystem value generation or destruction


considerations of night travel. If parents and guardians are not assured of the safety of their wards, they may react and prevent their wards from joining BPO units. Acceleration of any such trend might pose a threat to the growth of the BPO sector and could even lead to a reverse spiral of value destruction. This is represented by the spiral

superimposed upon the static innovation ecosystem structure. Thus, the innovation system is inherently dynamic. If it is not moving ahead and generating value, there might be a risk of value stagnation and reduction.


Among systems to describe innovation are the usual supply-demand models. While the supply-demand representation is apt for an industry-services economy, in characterizing the innovation economy, it does not highlight the importance of networks or how these networks will function. Further, in the innovation ecosystem developed here for India, while we incorporate both supply and demand factors, we also emphasize the role of these factors supporting each other in nurturing an idea, developing it into an innovation and, thereby, generating value. Moreover, to promote an innovation habit in India, change in supply factors human capital, technology, venture capital, infrastructure are likely to be more important.

In an economy defined by marginal contributions and costs, marginal reward to individuals sufficed to elicit effort and output/value. Ideas and inventions are rewarded via patents. For innovations developed by one entity or one group, patents are an appropriate mechanism. However, in the world of ideas developed jointly that cannot be separated into smaller contributions, this structure of incentives will be inadequate. Who should get the patent? One mechanism that has emerged is shared intellectual property rights or shared-IP. Forms of shared-IP include patent pledges and patent commons. A patent pledge is a public commitment by the patent holder not to sue other parties for infringement, typically, in support of a specific purpose/use. Patent commons are communities that have access to patent resources, also, usually for a specific purpose/use. This would be an appropriate mechanism where the innovation arises from within a network developed in collaboration among the members of the network.

There is, however, a gap in the incentive structure where the innovation arises from developments across more than two networks. The openness of the innovation process will enable another network (or organization) to co-opt the rewards from an

3.3 A dynamic innovation ecosystem WHAT incentives?


innovation. Whether this network shares those rewards with the other co-producing networks is a grey area. Intellectual property under this openness is not adequately protected. A mechanism to share rewards within a group/network and across groups/networks where contributions are inexactly defined is required. One option is a two-track patent regime wherein shorter patents are granted, especial ly for technologies with a high obsolescence factor and short duration protection. This provides an opportunity to small innovators to register and protect their ideas for a shorter duration

14and at a lower cost.

For instance, IBM and seven leading U.S. universities have recently announced new open software research projects under a programme designed in conformance with the Open Collaboration Research Principles, a set of guidelines announced previously to help promote an open approach to overcome university-industry intellectual property challenges. Under IBM's new Open Collaborative Research program, results developed between IBM Research and top university faculty and their students for specific projects will be made available as open source software code and all additional intellectual property developed based on those results will be openly published or made available royalty-free. The programme is intended to accelerate the innovation and development of open software across a breadth of areas, thus enabling the development of related industry standards and greater interoperability, while managing intellectual property in a manner that enhances these goals.

Mechanisms that support the operation of networks are

•Standards

•Contracts and contract enforcement

•Reputation capita

Standards will allow for portability and hence more rapid diffusion of any innovation. If members within a network or across networks devise contracts to


14 From comments made on an earlier draft by Mark Dutz, The World Bank

share unknown gains in some ex-ante determined manner, these contracts require speedy enforcement and resolution in case of disputes. Finally, the market for ideas and innovation will operate across networks through reputation capital. Any member or any network found to be reneging on its commitments will be a pariah. This would still not ensure prevention of theft of an idea or an application in the first place. Reputation capital will work best for repeated transactions or exchanges.


To enthuse India to be more innovative, a “grand challenge” that fires the imagination of the youth and the productive, and, galvanizes them for a push toward innovating might be quite helpful. Such a challenge could be “landing an Indian on the moon.” However, it is important for the rallying cause to be connected to the people to matter to the masses, to have the potential for eliciting their contribution to the rallying cause, to have the actual achievement make a difference to the masses. India has had several of such issues that have successfully been deployed in the past. Examples are “Dandi march” by Mahatma Gandhi for no tax on salt by the British government, “garibi hatao” or remove poverty by Prime Minister Indira Gandhi, and to a lesser extent, the “technology missions” by Prime Minister Rajiv Gandhi, or the polio drops campaign using celebrities such as actors Amitabh Bachchan and Shah Rukh Khan. Following the lead set by Prime Minister Manmohan Singh in his “Bharat Nirman” programme, a possibility could be “Pyas bujhao” or quench thirst, that is, ensure safe drinking water to all in India --- find new ways to accomplish this, use technology to not merely increase efficiency but to leapfrog over current solutions, build partnerships to leverage technology and to increase speed to market/delivery.

A rallying focus to achieve the goal of an innovative society is a good starting point. To sustain the momentum thus generated, a sound strategy needs to be in place. Given the status --- the current state, the desired state, and the gap --- we can draw up a set of objectives to be achieved in terms of both process and outcome indicators, and, characterize these in terms of targets to be achieved in a specified time-frame. The strategy will then help to draw a roadmap and also in specifying milestones to be accomplished along the way. Regular monitoring will inform which areas are lagging, learn and anticipate emerging weakness, determine what corrections to apply, e.g., monitoring the price level in the economy, anticipating the impact of fuel price rise, and reducing the propagation of the oil price rise to a rise in costs across the economy.

Defined by the enablers, the state of the innovation ecosystem is also determined by the state of the enablers. In section 2, using available data and the considered views of stake-holders, we described

4.1 The Gap current and future states of the Indian innovation ecosystem

4. INNOVATION STRATEGY, ROADMAP AND MONITORING THE ECO-SYSTEM


the state of some of the enablers. In the pictorial depiction of the innovation ecosystem below, the bold lines depict where India is relative to the boundary of the outermost circle where we want to be. The weakest or the most inward placed enablers are human capital, service infrastructure (IPR, venture capital, infrastructure and land), and government and regulatory structure. Hence, these are the enablers to focus on first while continuing to expand all enablers.


To build an innovative society, India has to focus on

• Strengthening human capitalo Strengthen base of human capital -

secondary educationo Promote expertise for innovation - higher

education, basic scienceso Set specific research matrix e.g., set goals

for number of PHDs, patents and paperso Promote multi-disciplinary research pilot

service science curriculum in select universities

• Engendering creativity and application o Address/ameliorate fear of failureo Mechanisms to recognize achievement in

ideas, invention, innovation

• Providing appropriate incentives o Rewards (patents) for intellectual capital

building and sharingo Penalties in the form of loss - of reputation

capital, future collaborations and value generation opportunities

• Allow both entry and failureo Promote early-stage venture capital

funding, that is, promote entryo Allow failure provide market-based exit

options within a specified period of time (say, initially, up to five years from start of operations)

• Building and fostering linkages and networks for innovation promoting collaboration.

If we continue in the current state with the above potential bottlenecks, we would experience an increasing gap between our status and our own desired state as well as other countries. Alternatively, we could devise a strategy to reduce the gap and achieve the optimum specified.

Given Given the goal of enabling India to become an innovative society and the constraints of resources, the innovation strategy for India must focus on those aspects of the enablers that builds the critical mass for a self-sustaining innovation process, produces the maximum value at the least cost in the shortest time possible, with the early gains being demonstrated and publicized. It must set out a sequence of actions to pursue to achieve this goal while also indicating the actions to follow if this sequence is broken at any point.

For an innovation ecosystem, the underlying characteristic is “evolving.” Hence, the ecosystem must be enabling and not directive. Yet, to enable India to become an innovative society, objectives, targets, and a plan would be required so, how does one specify objectives and targets without becoming directive and therefore restricting innovation itself? The answer begins with a

4.2 The Strategy


network. Instead of having a “directive” organization such as a ministry or a national commission, innovation could be enabled by having a network of thinkers --- an Indian Innovation network

Who should be responsible for the innovation initiative in India? In the normal (equilibrium path) course, direct or indirect government management is to be avoided. In the event of minor deviations (off-equilibrium path), the system structure (incentives) would bring the system back to normalcy. However, in case of a break or a disruption, flexibility would require allowing some State intervention. Given a self-sustaining eco-system, the key is to determine if to intervene, when to intervene, how to intervene, how much and where to intervene? The State should step in to either form an institution or restore the functioning of the institution as the case may be; and, then allow independent functioning.

Several networks aiming at enabling some part of the innovation eco-system are in the process of formation. The National Innovation Foundation under the aegis of the Science and Technology Ministry operates to support grassroots innovators (including the excluded sections of the population). The CII is in the process of establishing a National Innovation Grid to bring inventors together with entrepreneur-mentors, venture capitalists, and innovators. However, they will not succeed if they are to become like existing institutions --- hierarchical, prescriptive and safety-first bureaucratic organizations.

The strategy is to build credible institutions that have two essential elements. First, they must foster each (or a group of) sub-enabler(s) under focus. The institutions must function in consonance with the following principles.

• Allow simple and generic processes that are adaptable to evolving situations since innovation process is inherently uncertain

• Provide incentives (patents) to ideate, collaborate and innovate; disincentives


(reputation loss, punitive damages) for cheating and reneging

• Provide opportunity for all to access the resources of these institutions; enable special access for weaker sections (whosoever they might be at that time) and grass-roots innovators

• Allow redress for grievances and wrong-doing (e.g., idea theft); allow transparency by involving the media.

• Require government intervention only when there are disruptions to the institution

Second, the key enabling institutions must be inter-connected and collaboration must be the guiding principle for inter-connectivity. This is the Indian Innovation network --- empowered by links to directive authorities that can effectively intervene, e.g., the Science and Technology Ministry. It may be an executive group with a rolling membership, say a two year term for each member. Members are to be drawn from a broad section of thinkers/innovators, all of whom are stakeholders in the innovation eco-system. It must be empowered for decision-making. To enable maximum play of ideas within the network, the hierarchy must be a flat one. Powers of decision-making can be entrusted to a smaller collective of members. Once these decisions are taken, they must be executed within a pre-determined time frame by all who have signed up as members, be they government or private bodies.

The activities of the innovation-enabling network will be 1. regular monitoring and reporting2. stock-taking and identifying actions3. taking action or delegating action to an

executing (public/private) body4. and again, monitoring and reporting


4.3 The roadmap and milestones

India has to focus on the following elements of the innovation eco-system that are lagging and acting as barriers rather than as enablers. For each, we specify process milestones and the actions required to achieve them.

Strengthening human capital: Strengthen base of human capital - secondary education; Promote expertise for innovation - higher education, basic sciences

• Determine the quantitative gap for proportion of children out of secondary school, fill a fraction (say, 10 percent) every year; provide resources for filling this gap

• Determine gap for graduates in basic sciences and fill a specified fraction every year (e.g., 20 percent); provide resources for filling this gap

• Promote expertise by encouraging doctoral and research studies; provide resources and incentives (increase salary levels in research institutions)

To achieve these objectives, India would have to allow increase in education capacity --- both schools and colleges --- and foster competition among schools. Hence, private schools must be allowed --- at primary and secondary school stage and beyond to higher education. In higher education, foreign investment would augment domestic resources and raise the level of research more quickly.

Engendering creativity and application: Address/ameliorate fear of failure; adopt mechanisms to recognize achievement in ideas, invention and innovation.

• Institutionalize contests and awards for ideas, inventions, and innovations with associated increasing monetary rewards.o Romanticize innovation achievement (as in

music/dance and quiz contests on TV) and motivate parents by using demonstration effects

o Highlight leadership in innovation e.g., Mr. Sreedharan of Delhi Metro


• Foster trial, failure, and re-trial through formal schooling, organizational, and societal meanso Increase tolerance for experimentation and

allow failure of experiments; promote risk-bearing capacity

o Promote out of the box thinking, nurture exploration, engage with local knowledge and local issues --- science fairs, innovation contests

o Promote a strategic way of identifying problems or anticipating problems

o Promote learning by doing (e.g., allocating 20 per cent time to employees to innovate), foster here in India what non-resident Indians (NRIs) achieve abroad

• Re-design course curricula to foster learning, application and experimentation --- change grading system, include case studies, projects and problem-solving exercises

• Re-train teachers to orient them towards innovation

• Create a culture of research and innovation

Providing appropriate incentives while reducing risk: Rewards (patents) for intellectual capital building and sharing; penalties in the form of loss of reputation capital, future collaborations and value generation opportunities

• Devise new forms of IPR or patents; examples in the text are patent pledges, patent commons, shorter duration patents in a two-track patenting system

• Monitor patent use; provide for compulsory licensing where patent is lying un-used

• Institute an intellectual property policy regime which strikes the appropriate balance between protecting the economic rights of inventors and meeting the needs of society by advancing the progress of science

• Change rewards system for teachers, students,


parents, employees; use motivational tools

• Allow both entry and failureo Promote venture capital funding, specially

early stage funding provision of seed money, venture financing, bankability; that is, promote entry

o Allow failure allow shutting down of an early start-up (exit and stopping loss) with more exit nodes for young ventures, so provide market-based exit options within a specified period of time (say, initially, five years)

o Amend bankruptcy laws so that companies, especially the small ones, can exit at minimal cost

• Provide venture counselling: address lack of exposure (no business model even though domain knowledge exists); highlight role of design as the glue in bringing together an idea to commercial application

Government role: A key role of the government is to remove obstacles in the performance of other enablers, notably, in the education, building skills and training sector. • Improve governance (e.g., Right to Information

Act by the central government), enable public-private partnership --- chaos in government programmes discourages private sector contribution

• Innovate in service delivery --- education, healthcare access (telemedicine), use technology (e-sewa centres employing seemingly non-productive workers to provide public services)

• Reduce remaining regulatory barriers, (e.g., gateway clearance of imports for technology innovation)

Building linkages amongst researchers, designers, venture capitalists, and industry: India has pockets of innovation, some technology sub-sectors are world-class. However, these remain oriented more toward global needs than Indian. While a bigger market is preferable, Indian needs must be addressed.


• Build hubs of innovation universities, institutions, small innovators and corporate firmso National networks e.g., CII Innovation grido International networks e.g., CSIR with other

national research councils

The Indian Innovation network must take on the responsibility of being the nodal network with its members being both other networks, organizations and individuals. The nodal network must achieve its goal of fostering an innovative society by enabling collaborations and nurturing these so as to solve India's problems.

Recall that the purpose here is to provide an enabling innovation eco-system that does not get trapped in a directive mode (that may appear relevant in the current innovation situation) and hence become a barrier to future innovation. A caveat is that this report is not a complete mapping of all enablers that define and determine the innovation eco-system. The mapping, monitoring, and reporting on the state of enablers and providing recommendations to act upon are an on-going process that will become increasingly complete with repeated use.


It is contradictory to ask for innovative ideas and then lay down procedures for gett ing to them! These recommendations are, therefore, ways of encouraging organizations and individuals to innovate and, once they do so, to ensure that they are rewarded for it. In other words, the focus is on enabling innovation --- allowing experimentation with incentives to do them.

Who will be responsible for implementing these recommendations? Obviously, everyone has to be involved. It has to become a national movement --- a natural way of doing things for all Indians. One way to kick off the process is to announce a “grand challenge” --- a rallying call --- to solve a major national problem. The most, or a set of the most, innovative solutions can be rewarded with a special prize. This should attract participation. To create the culture of innovation and encourage participation by all, the grand challenge should not be something like putting an Indian on the moon; instead, it should concentrate on more mundane things like clean water or, public transportation. The prize distribution should be given the greatest possible exposure on television and media.

A network of people will have to be developed who will participate in an exchange of innovative ideas, with proper protection of intellectual property. Each year, this network could adopt a particular enabler for a detailed study, take stock of where it is and draw up a blueprint of how to change it, if necessary. In the process, one must also mention the milestones which will then become the job of everyone to monitor. The purpose of this network is not to drive innovation. Instead, it will help generate an attitudinal change in people's mind-sets like greater tolerance to failure, going off the beaten track, looking for solutions encountered in daily life, etc. It will also encourage the public, government and other organizations to create an innovative eco-system in whatever they control. Most importantly, it will foster experimentation. All this has to be done in a way that facilitates innovation and stops well short of saying what has to be done!

Actions in Specific areas

For the network to be effective, it must nurture debate and discussion among a broad spectrum of people. However, its role will be limited to enabling, encouraging and

5. SPECIFIC RECOMMENDATIONS


experimenting with innovative ideas rather than “doing” them or saying how they are to be achieved. To achieve this, the network will take initiatives that bring about improvements to the enablers. In particular, the network can work towards some goals laid out below. These are not a set of policies that need to be enacted, but issues that the network needs to seriously debate and develop as parts of an innovative ecosystem.

•Schooling up to class 10 should be made

compulsory for all children.

•This will require an improvement in both quantity

(more schools) and quality (better teachers and a better curriculum).

•Private schools should be allowed with education

vouchers if necessary (especially where a public school option is not available in some pre-defined vicinity, e.g., within 5 kilometres).

•Teachers in public schools must be made more

accountable to the local community of parents.

•Institute competition among public schools by

ranking these and making the ranking public.

•Foster competition between public schools and

private schools through regular competitions that have prizes and wide recognition

•School curricula should concentrate more on local

issues, be geared towards solving local problems with the use of local resources, along with more basic training in mathematics and languages.

•Learning should not be by rote; tests and

examinations should be geared towards checking on functional knowledge and understanding.

•School education should include a strong content of

vocational training so that students can decide on moving to vocational institutes after class 10 or, go on to class 12 with a view to moving up to a college education.

•More vocational institutes are required with a strong

partnership between government and the private sector. This will keep the curricula in vocational

School Education:

Vocational Training and Skilling:


institutes geared towards the skills required by businesses.

•To keep up with changing demand for skills, modular

training is required to quickly train new workers and upgrade workers to learn and perform in a competitive and global marketplace.

•The major objective of college education should be

two-fold: specialized training for higher productivity and a managerial, or supervisory, role in the job market or, for moving into a university education to further a career in research and/or academics.

•Generous educational loans should be provided to

the very best students and those who require funding.

•Augment capacity including allowing private

investment in higher education.

•New universities should be integrated ones offering

both undergraduate and post-graduate degrees leading up to PhDs.

•Foster competition among universities, both public

and private, for example, by rankings based on performance indicators and by competitions that have prizes and wide recognition.

•To attract the best researchers into academics,

teacher salaries need to be increased. One way of doing this will be to top up government salaries with private sector provided bonuses based on research outputs.

•The concept of posts in universities should be

discouraged; a performing young researcher should not be held back from promotions because positions above him, or her, are choked by those who have been promoted before.

•Universities should be the prime research

institutions (given that teaching and research create dynamic complementarities). This means that government grants and funds going to specialized institutes with little or no teaching commitments should, instead, be used to strengthen university infrastructure. The existing specialized institutes need to have linkages with students so that they can continuously re-invent themselves.

College Education:


New curricula:

•India is slow to react in developing new disciplines

and courses within its university setup. This is largely because they are hamstrung by a regulatory agency (the University Grants Commission, or the UGC) that believes in prescribing a standard system for all. This slows down the process of developing new courses according to the need of the hour. While UGC should be looking into observable measures like class size and infrastructure, it should desist from laying down what can be taught and when. Universities should be allowed to innovate on syllabi and courses.

•India has taken enormous strides in developing a

vibrant services sector. Unfortunately, there is no course in India that looks at service science as a discipline. The service sector requires a training process that is quite different from the existing course structures that concentrate on the industrial and agricultural economy. For instance, investment in fixed assets is relatively unimportant in a service company. Its major asset is the human capital, made up of footloose and highly skilled individuals. The productivity of such individuals depend on how well they have learnt various aspects of the modern technology, how they network with other people and, how capable they are of borrowing insights from a number of related disciplines. This is independent of, and in addition to, the more classical disciplines they learn in universities. However, there are no training processes in India that can churn out more and more of such people.

•The universities should be treated as “Factory of

Ideas” and should play the true role of acting as an innovation hot bed for creation of wealth. Innovation is about imagining and creating new things. While the role of science and technology is readily understood, management has only recently been receiving some mention. However, the role of design is yet to be understood. Design is about application of creativity throughout the process of innovation to convert ideas into products and services. For creating an innovation eco-system, science, technology, management and design must come together. The best way to achieve this is


through the intermingling of these disciplines and that happens when strong and functioning networks are developed among the universities, institutes and businesses.

•The network should strive to include participants

from the private sector, academia and other citizens to foster joint work with proper recognition of intellectual property through mechanisms suggested in this report. For India to be an innovative society, it is imperative that collaborative activities become institutionalized.

•Competitions among private sector organizations

should be instituted to choose the most innovative organizations.

•Companies should be encouraged to set up

collaborative networks, both within and outside of them.

•Government supports various research proposals

under two broad heads. The first set consists of research grants given to individuals, or institutes, based on proposals submitted by them. The other set consists of specific topical issues given to one institute or organization to help formulate policy. The second type of grant is not conducive to innovative ideas. The same issue should be studied by at least two (or even more) independent groups. This will force the groups to compete with each other to develop the best solution, bring the debate out in the open (rather than being within the realm of government designated experts) and bring about a sense of participation among all.

•Generate a mechanism of identifying ministries that

implement innovative solutions.

•Work with various ministries to identify problem

areas and create a national movement to encourage everyone to find solutions. The network must take the solutions back to the ministries.

Our strength lies in our numbers. Innovation is a product of the mind and people must not be treated as inputs

Private sector:

Government:


into a production process. Instead, they must be seen as problem-solvers and must be encouraged to do so. Unless this is done, our biggest strength can become our worst nightmare, as we try to find productive jobs in straight-jacketed enterprises and activities. Simply put, if we do not innovate, we perish.


TABLES


Notes:

Sources:

For India, number of students passing Senior Secondary Examination is not available. The reported figures are the total number of boys and girls who got enrolled in Class XII.

For India, there are no statistics on the number of S&T graduates. The data reported in the above table have been compiled using enrolments in B.Sc., M.Sc., and AICTE approved intakes in Polytechnics and Degree Engineering programmes.

Age-group wise population for India as on March 1, 2002, March 1, 2003 and March 1, 2004 have been obtained using data reported in Census of India, 2001 and projected population for 2006 on the assumption that population grew at the same rate every year.

For China, population in the age-group 20-24 has been obtained using data for 2000 & 2005 on the assumption that population grew at the same rate every year.

For USA, high school graduates refers to only high school graduates, that is, does not include education attainment levels higher than high school (e.g., bachelor's); this is selected to make it comparable to the high school graduates (enrolments) data for India and China.

Selected Educational Statistics 2000-01, 2001-02, 2002-03 & 2003-04

(An annual publication of the Dept. of Secondary & Higher Education, Ministry of Human Resource Development, Govt. of India)

Rajya Sabha Unstarred Question No. 42, dated 25.7.2005

Rajya Sabha Unstarred Question No. 3846, dated 22.05.2006

India:

Innovation Situation in India – Quantifying Enablers using Indicators

EDUCATION

TABLE I


Census of India, 2001

Projected population by age and sex for 2006 (on the basis of Census of India, 2001) from Report of the Technical Group on Population Projections (constituted by the National Commission on Population), May 2006.

China Statistical Yearbook 2005 Chapter 21: Education, Science & Technology

21-7: Number of Graduates by Level and Type of School

21-36: Basic Statistics on Scientific & Technological Activities

from National Bureau of Statistics of China (http://www.stats.gov.cn/tjsj/ndsj/2005/indexeh.htm)

Population by five-year age group and sex 2000 & 2005, World Population Prospects: The 2004 Revision Population Database (http://esa.un.org/unpp/)

Educational attainment data from Current Population Survey 2001, 2002, 2003 & 2004, U. S. Census Bureau(http://www.census.gov/population/www/socdemo/educ-attn.html)

Educational attainment data from 2004 American Community

Survey, American FactFinder, U. S. Census Bureau (http://factfinder.census.gov)

Survey of Graduate Students and Post Doctorates in Science and Engineering, Division of Science Resources Statistics,

U. S. National Science Foundation (http://www.nsf.gov/statistics/nsf06325/tables.htm#group1b)

Estimated age-group wise population from U. S. Census Bureau (http://www.census.gov/popest/archives/2000s/)

Age & Sex data from 2004 American Community Survey, American FactFinder, U. S. Census Bureau(http://factfinder.census.gov)

China:

U.S.A.:


Notes:

Sources:

*of which 31.7% were performing R&D activities, 30.4% were performing auxiliary activities and rest 37.9% were providing administrative and non-technical support.

By July 2006, R&D Scientists/Engineers in India had risen to 157 per million.

This figure is 3 percent of that for U.S.A

(Dr. R. A. Mashelkar, Director General, Council of Scientific and Industrial Research)

University Grants Commission

R&D Statistics, Department of Science & Technology, Government of India (http://dst.gov.in/majorhighlights.pdf)

China Statistical Yearbook 2005 Chapter 21: Education, Science & Technology

21-36: Basic Statistics on Scientific & Technological Activities, National Bureau of Statistics of China (http://www.stats.gov.cn/tjsj/ndsj/2005/indexeh.htm)

Survey of Graduate Students and Post-doctorates in Science and Engineering, Division of Science Resources Statistics, National Science Foundation(http://www.nsf.gov/statistics/nsf06325/tables.htm)

2004 Survey of Science and Technology Statistics, UNESCO Institute for Statistics(http://www.uis.unesco.org)

Estimated age-group wise population from U. S. Census Bureau (http://www.census.gov/popest/archives/2000s/)


EXPERTISE

TABLE II


Notes:

Sources:

According to World Development Indicators, 2005 total number of patent applications filed in India in 2002 was 91,924 of which residents filed 220 applications and non-residents filed 91,704 applications.

According to National Bureau of Statistics of China, total number of patent applications filed in China in 2002 was 2,52,631.

Figures for India under “Number of Patents granted” are the number of patent applications Notified for opposition in the Gazette of India.

°of which 1078 patents were granted to Indians

The reported figure for new designs in India in 2003 gives the number during January-April, 2003.

*World Development Indicators, 2005

†News article: “India lagging in science and technology” dated August 29, 2006 authored by T. V. Padma (official at SciDev.Net) (http://www.scidev.net/content/news/eng/india-lagging-in-science-and-technology-says-official.cfm)

**Science Citation Index

@Indian Patent Searchable Database EKASWA-A & EKASWA-B provided by Patent Facilitating Centre, Department of Science & Technology, Govt. of India(http://www.indianpatents.org.in/db/db.htm)

R&D Statistics, Department of Science & Technology, Government of India (http://dst.gov.in/majorhighlights.pdf)

#China Statistical Yearbook 2005 Chapter 21: Education, Science & Technology, 21-36: Basic Statistics on Scientific & Technological Activities from National Bureau of Statistics of


INNOVATION RELATED OUTPUT

TABLE III


China(http://www.stats.gov.cn/tjsj/ndsj/2005/indexeh.htm)

^Dept. of Industrial Policy & Promotion, Ministry of Commerce & Industry Notification of Registration of Designs dated August 16, 2003(http://ipindia.nic.in/ipr/design/notification/16.08.2003.pdf)


ANNEXURES


1. Pre-paid SIM cards in India

2. Sona Koyo systems steering systems

3. Mcdonald's food development centre

4. National Open School

5. CII Skills Initiative

6. IDF Health Smart Card

7. Reverse pharmacology process of drug discovery

8. Aravind Eye care system

9. Governance: Small area estimates of poverty and poverty maps

10. BPO: business process innovation - Pick-up and drop facility

11. IBM “On-demand” consulting model

12. E-choupals

13. Computer based functional literacy

14. Governance: RTI

15. E-governance: online filing of Haryana VAT returns

16. Bharti Outsourcing (business process) model

17. Magarpatta City: The farmers' cybercity

18. Cavincare “Chic?” shampoo small sachets

19. IBM e-commerce website architecture

I. EXAMPLES OF INNOVATION


This note outlines the steps in quantifying the indicators identified for each enabler of innovation.

Given that Human Capital is the most vital resource for promoting innovation, we started off with compiling data on our manpower stock and the output that it has generated over the last few years (2000-01 to 2003-04). First, it is very important to take stock of how many High School Graduates and how many S&T Graduates India has been producing because that is the very first step towards building up a (human) resource base in Science & Technology that will engage in R&D activities to produce output that is commercially applicable and socially useful. Then, we have looked into our expertise, to be more specific, the number of Doctorates, personnel in R&D establishments and their output in terms of the number of scientific & technical journal articles published, the number of citations, the number of patent applications filed, the number of patents granted and the number of new designs.

It is important to benchmark the results for India against those for U.S.A. and China, the former a world leader in innovation and the latter our neighbour and our immediate competitor. Accordingly, for all of the above indicators, statistics for U.S.A. and China have also been compiled.

The major problem that we have encountered during this exercise is the absence of readily accessible data for India from a single reliable database. In fact, there is no defined source for our data requirements. However, there is some data at the disaggregated level available from myriad sources. Moreover, since we have also attempted a cross-country comparison of the indicators, it was necessary that the statistics be comparable. Nevertheless, within the limitations of data availability, we have tried to develop a reasonably consistent dataset.

For India, data on the number of students passing Senior Secondary school examination is not available. While annual enrolments in Class XII are available from the Ministry of Human Resource Development, there is no data on drop-outs. Thus, we were not able to estimate the number of High School Graduates. In view of this, we had no option but to report enrolments instead of High School Graduates. The reported figures are therefore not strictly comparable to the figures for U.S.A. and China.

II. DETAILS ON THE DATA COLLECTION ANDCOMPILATION METHODOLOGY


Again, there is no data on the number of persons graduating in Science & Technology. Therefore, we had to compile whatever data is available from various sources so as to arrive at a reasonably good approximation. Ministry of Human Resource Development provides data on annual enrolments in B.Sc., M.Sc. and AICTE approved Polytechnics. Sanctioned annual intakes in AICTE approved Degree Engineering Institutions are available from Lok Sabha and Rajya Sabha Starred & Unstarred questions. The reported figure for each year is the total enrolment in B.Sc., M.Sc., Polytechnics and the total approved intake in Degree Engineering Institutions. Thus, we have accounted for University recognized Degrees in Science and AICTE approved Degree and Diploma programmes in Engineering & Technology. However, once again the reported figure is not strictly comparable to the figures for U.S.A. and China.

We have also reported the numbers as percentages of the relevant population age-group. Thus, it was necessary to have annual data on age-group wise population. However, for India, this data is available only for two years 2001 and 2006. Census of India provides the data for 2001 and the data for 2006 is the projected data based on Census 2001. The age data for the intervening years was obtained assuming a linear annual growth rate of population.

Data on the number of Doctorates in Science & Technology have been obtained from the University Grants Commission. R&D output statistics have been obtained from World Development Indicators (2005), Science Citation Index, Patent Facilitating Centre, Department of Science & Technology, R&D Statistics, Department of Science & Technology and Dept. of Industrial Policy & Promotion, Ministry of Commerce & Industry.

Data for China and U.S.A. were available from respective country and international sources. Data for China has been sourced from the National Bureau of Statistics of China and the data for U.S.A. has been taken from the U.S. National Science Foundation and the U. S. Census Bureau. Age-group wise population for China was not available for all the four years. Population in the age group 20-24 in the two years 2000 and 2005 was obtained from the 2004 Revision Population Database provided by the UN. We have estimated the population in this age group in the intervening years by assuming a linear annual growth rate. However,


data could not be obtained for the 18-24 age-group because the available data is grouped by 5-year age cohorts.

A reasonably consistent dataset is thus being developed that allows us to measure progress in innovation over time and across countries.


CII Advisory Committee onNational Innovation Mission

Mr. Shankar Annaswamy (Co-Chair)Managing DirectorIBM India Ltd.

Lt. Gen. (Retd.) S. S. Mehta (Co-Chair)Director General Confederation of Indian Industry

Dr. Ashok JhunjunwalaProfessor - Department of Electrical EngineeringIndian Institute of Technology, Madras

Prof. Rishikesha T. KrishnanChairperson - Research & PublicationsIndian Institute of Management Bangalore

Dr. Jai MenonChief Information OfficerBharti Airtel Limited

Dr. Ganesh Natarajan Deputy Chairman & Managing DirectorZensar Technologies Ltd.

Mr. Krishnakumar NatarajanPresident & CEO - IT ServicesMindTree Consulting Pvt. Ltd. and Indian Institute of Management Bangalore

Prof. Anand PatwardhanExecutive Director, TIFACDepartment of Science & Technology

Dr. S. RamakrishnanDirector GeneralCentre for Development of Advanced Computing

Mr. Anuj Sinha Adviser & Head (NCSTC) Department of Science & Technology,

Mrs. Aruna SundararajanChief Executive Officer - CSC ProjectDepartment of Information Technology, IL&FS PMU

III. CONSULTATIONS


1. A S RaoDSIR, Government of India

2. Ajay MadhokAMSOFT Systems India Inc.

3. Anil WaliFoundation for Innovation & Technology Transfer

4. Anjan DasConfederation of Indian Industry

5. Anuj SinhaDepartment of Science & Technology

6. Anupam SaronwalaIBM Global Technology Services

7. Badri RaghavanFairIssac India

8. Bharati JacobSeedFund

9. Daniel M. Dias IBM India Research Lab

10. Darlie O KoshyNational Institute of Design

11. Dravida SeetharamIBM India Limited

12. H R BhojwaniMoST (S&T and Earth Science), Government of India

13. Harish KrishnanIBM India Ltd.

14. Harsh SoniFidelity India

15. M. P. RanjanNational Institute of Design, Ahmedabad

16. M. V. Rajiv GowdaIndian Institute of. Management, Bangalore

17. Maj. Gen (Retd) R. SwaminthanOffice of the President of India

LIST OF RESPONDENTS


18. Manish SabharwalTeam Lease Services Pvt. Ltd.

19. Manisha SinghIndia Development Foundation

20. Meena GaneshTESCO Hindustan Service Center

21. N SrinivasanConfederation of Indian Industry

22. N. K. SinghTeleVital (I) Pvt. Ltd.

23. Naushad ForbesForbes Marshall Ltd.

24. Poonam Bir KasturiSrishti School of Art, Design & Technology, Bangalore

25. Pradeep DubeyYale University

26. Puneet GuptaInfosys Technologies Ltd.

27. R. SahaTIFAC, Department of Science & Technology

28. Rajendra PrasadCouncil of Scientific & Industrial Research

29. Rishikesha T. KrishnanIndian Institute of Management Bangalore

30. Romi MalhotraDELL India

31. Sanjay SinghTIFAC, Department of Science & Technology

32. Shubhashis GangopadhyayIndia Development Foundation

33. Soubir BoseOracle India

34. Soumitra DuttaRoland Berger Professor of Business and Technology INSEAD


35. Subir RoyBusiness Standard, Bangalore

36. SUNYStonybrook, USA

37. V. PonrajOffice of the President of India

38. V. S. RamamurthyBoard of Governors, IIT Delhi

39. Vasu RoyNetapp India

40. Venkat PanchapakesanYahoo India

41. Vinay L. DeshpandeEncore Software Ltd.

42. Vineet Kumar GoyalConfederation of Indian Industry


confederation of indian industry - ibm · innovate india: national innovation mission annexures 73...

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