NASSCOM – Engineering Summit 2014Panel Discusion

Is India an Engineering hub?

Sanjeev AroraExecutive Vice President Innovations, Growth and Product DevelopmentJCB India Limited8 Oct 2014

Overview

• 700+ R&D centers in India delivering solutions to the world.

• By 2020, India will exceed US in producing R&D professionals.

• 46 of Global Top 50 Organizations have R&D presence in India.

• India R&D has moved from “Cost” to “Strategic Value”.

• Cost arbitrage advantage sustainable to over two decades.

• India ranks 76 (of 143) in Global Innovation Index. 2012-2013 no. patents 43,955 (vs. China 6,52,777)

• “R&D spend: US still remains world’s biggest engine for Innovation – 2011 R&D spend: US$ 366 bn (China: US$ 160 bn, EU: US$ 275bn)

• However, organizations integrating India in their global innovation networks for affordable solutions for Global Markets.

• “Relevant” Skills and Talent growth rate to match aspirations.

3

R&D Intensity

Source: IMF, World Bank, OECD, CIA Fact Book, Battelle

4

R&D Globalization Drivers

• Market

• Talent & Skills

• R&D Productivity

• Ecosystem

• IPR Security

5

Comparative Analysis

MarketR&D

ProductivityDomestic Demand

Design & engg. skills

Manufacturing skills

Manpower Cost

Supplier Base

Commercial Environment

Raw Material

Infrastructure

Korea 9 1 1 7 3 1 2 1

Ecosystem

East

Asia

Talent & Skills

China 2 4 4 1 3 12 1 4

East

Asia

Thialand 8 8 11 7 6 1 11 2Indonesia 9 8 7 3 7 5 11 11Vietnam 14 13 13 7 12 5 15 11Czech 9 1 1 7 1 5 6 3Romania 6 13 13 7 14 10 13 15Poland 8 8 9 15 8 3 13 6Slovakia 14 11 4 7 10 5 6 5Russia 1 5 11 3 14 10 3 8Hungary 2 3 9 7 13 12 10 8Turkey 9 13 7 6 8 3 5 8

Brazil 2 6 4 7 3 15 9 6

Mexico 6 12 13 3 10 5 4 13India 2 6 3 1 1 12 6 13

LATA

MEa

ster

n Eu

rope

East

Asia

*Source: Ernst & Young

6

GIC Landscape

India China Brazil

10%25%

50%Local R&D hub

India China Brazil

5% 10%20%

Center of compe-tence

India China Brazil

55% 55%30%

Engineering nucleus

India China Brazil

30%20%

0%

Off shore Unit

High

Low

GlobalLocal

Au

ton

om

y fr

om

glo

ba

l R&

D c

en

ter

Project responsibility

Share of OEMs and suppliers operating in each type of R&D setup

Source: Secondary Research

Key Insights

R&D setup in India is majorly of two

types

► Engineering nucleus-Adapting

worldwide product to local

requirement

► Offshore unit –

Development of specific

contents for product utilizing low

factor cost

Localized R&D centers in EMs are of four types

India to be destination for R&D investment to develop products for global markets

Source: BCG report on “Winning the BRIC Auto market 2012

7

2006 2007 2008 2009 2010 2020P 2020B 2020O0

5

10

15

20

25

30

$1.7b $2.4b$3.6b

$2.6b $3.3b

$19.3b

$22.7b$24.8b

India CE Market

Source: ICEMA Accenture Report 2011

Bas

e

Pes

sim

istic O

ptim

istic

19.3%CAGR

22.4%CAGR

US

$ b

illi

on

21.3%CAGR

Country

Ranking

USA 1

China 2

Japan 3

Germany

4

Spain 5

France 6

Italy 7

S.Korea 8

India 9

UK 10

Country Ranking

China 1

USA 2

India 3

Japan 4

S.Korea 5

Germany 6

Spain 7

Russia 8

UK 9

Canada 10

2009 2020Global Construction Market Ranking

JCB: India Product Dev./R&D

• Business – High expectations of Growth.

• Opportunities to broaden R&D/Product development efforts :• Access to local talent• Frugal Engineering / Emerging Market mindset

• Lead by Innovation• Staying Relevant to Market.• Leveraging Frugal Innovation

• Focus – better access to customer insight

• Structure – Product focus teams; Central core functions; Connect seamless to HQ/BUs; Dedicated captive design center; Freedom to Innovate

Product Development Scale

• Ground-up development for consumers in local market Level- 3

• Global platforms derivatives – Adjust features for emerging markets

Level- 1

• New Product Development – Leveraging known platforms/technologies

Level- 2

Level 2 & 3 – Opportunities for other Emerging Markets

“Reverse Innovation”

Excon 2007 Excon 2009 Excon 2011 Excon 2013 2014 YTD0

5

10

15

20

25

30

35

9 10

15

24

31

JCB Portfolio Growth

Product Line: 4

Product Line: 8

Product Line: 5

Product Line: 5

Product Line: 7

Innovation Wave Front

Innovation Maturity Roadmap

Nurturing Innovation Culture

Robust Innovation Process

Live Innovation Programs

Innovation Ecosystem

Invest in People

Reward and Recognition

Celebrating the Innovation

1

2

3

4

5

6

7

8

JCB Innovation Wavefront

IP

InnovationPipeline

IP

Implementation Strategy

Kaizen

Futuristic(parked)

Innovation Projects

Eva

luat

ion

by

Inn

ova

tion

Co

unci

l

Idea Assessment

Intel

Intel

Intel

Intel

Innovation Process @ JCB

Intel – Innovation in Technology for Leadership

Intel

Intel

Hopper of Opportunities

Innovation Hopper of Ideas

Impact Assessment

New Products

Technology Pool

Intel

40+Patents

250+Design Registrations

Convergence –Thru’ Innovation

14

Opportunities & Challenges

• Innovation as a growth engine for India (1/3rd of US GDP is derived from Quantum technologies)

• Substantially change India’s perception to the world – “Offshore Back Office” to “Center of Competence”

• 2011 study by CII and INSEAD, France had 52% responses yes for ‘India as Innovation Hub’ while 45% were negative.

• Key changes required to accelerate India’s attractiveness as key innovation hub

• Quality of infrastructure and research centers.• Integration of industry and academic / research

institutions• Relevant Talent and Skills• Specific Government policies and incentives.

15

Summary

• Globalization of R&D driven by globally interdependent economies – Global offshoring business worth US$ 120 bn in 2012.

• R&D Industry in India has grown and also projected to grow @ CAGR of 14-16% to reach US$ 40bn by 2020.

• Right ecosystem is a key to sustain R&D growth in India.

• Leverage India strength – Market, Talent and R&D Productivity.

• Innovation across the sectors is crucial for the next level of growth.

Opportunity to ride the 3rd great wave of innovation and economic disruption.

… Being set off by technological advances…Machine intelligence,

Advanced Robotics, Life Sciences, Ubiquitous web….The DIGITAL revolution

The challenge […] is to develop an “Inclusive model of Innovation”.

Thank You