Entry of MNC’s for capitalizing the market boom generated by our new middle-class moving into affluence, has added to the difficulties faced by an Indian Innovator. He is straightaway up against the Range, Price, Quality, Presentation & Delivery combination of MNC’s. Innovation to succeed has to be Cooler than the combined range of global products from Day-1.

   Another hill to be conquered is added by the deep-pockets of MNC’s coupled with large idling capacities. Not only do they have a full range of products to choose from, but their total Risk is confined to expenses on Marketing & Servicing. Fancy spend on advertisement multiplies market reach. Recent flooding of all media by Volkswagen, General Motors, Nissan & BMW is a vivid example. Can a fledgling local Innovator ever match that clout?

 

   With all the experience and resources of Tata Motors , Chairman Ratan Tata’s vision of a Rs. 1 lac car mooted in 1996 matured into a frozen-design Nano only in 2006 and sold as a commercial product in July 2009. Priced at 50% of competing models, it was globally hailed as the Entry-car for the rising middle-class of developing countries.

   Innovator’s difficulties are further compounded by the sharp reduction of life of new Technology and Innovation to less than 12-months. It makes quick ramp-up of volumes critical for cashing- First-mover advantage. Depth of finetuned ramp-up resources possessed by MNC’s can never be matched by Indian Innovators. High interest rates, inflation, sharp depreciation of the rupee and, frequent changes in policy deter their build-up.

Akash Tablet

Tablets, where present market of 80,000 is expected to grow to 15 million by 2015, are a recent example of this unequal fight. Innovation of the Rs. 2,500 Akash Tablet by Datawind promoted by two NRI’s in Canada was announced earlier his year. Its Indian launch at a subsidized price of Rs. 1,800 for student buyers was announced by HRD Minister with great fanfare. Half a dozen global players are already in the fray; Models sporting every fancy feature with prices range from Rs. 3,000 for the Ubislate to the top-of the-line Apple at 29,000. Key is therefore held by Marketing. Datawind’s total focus must therefore be on sharp rev-up of volumes to get volume-advantage for costreduction to economic levels. It should never forget that our subsidy policies can be fickle and must therefore stand strong on its own legs while subsidy honeymoon lasts. Major rethink on Nilekani’s Aadhar Card half-way should be lesson.

   A few weeks ago Dr. Pitroda had himself made a statement that our import bill for electronics (VLSI) would exceed that for oil-imports in a few years. Looking ahead, he was absolutely right. Some readers would perhaps recall the hot topic of special policy initiatives to facilitate the setting-up a world-class VLSI Fab in Hyderabad at a cost of $ 5 billion; entire issue died within a year. Such risks are way beyond Indian mind afraid of their own shadow.

   In an environment so heavily stacked against, why should an Indian Innovator, howsoever brilliant his creation, choose to Risk-invest in producing and marketing it? Trading in imported products is a far easier option in every fashion? Low gestation! Less effort! No Risks! Yet fancier returns and jazzier lifestyle. Widening trade gap is clear proof.

   It is time our Policy-makers realized that without pro-active initiatives, our Goal of raising Mfg. Sector contribution to 25% by 2025 will remain an elusive pipe-dream. Pre-dominant contribution of Service Sector in our GDP will only increase. Innovation is step way above Mfg.. Planning Commission’s Committee of Spurring Innovation (2006) had identified the reasons neatly:

• Innovators do not know how to develop early-stage ideas into viable business.


• Shortage of Angel & Tier-1 funding Investors.


• Risk capital providers lack the domain expertise to guide Innovators


• Shortage of University-Industry collaboration.

   Unfortunately, the solutions proposed are either homilies or hinge on Govt & Govt. Institutions.

   Entrepreneurship is not an Academic Course to be taught in a class-room; our academics do not a clue. Contact of University Faculty, including that of IIT’s and, for that matter even of Scientists in our National Labs & DRDO, with Industry and the field is insignificant. They live in isolation in their ivory towers. Radical change in policies for their governance, recruitment & promotion would alone pull them out. Relations of the type prevailing in Germany & Switzerland or, in US Universities like MIT & Stanford must be our aim. Experience at PEC University of Technology or at PTU’s Advanced School on TQM & Entrepreneurship proves that such Change is doable.

   Report also stresses on establishment of Incubation Centres in Academic Institutions. It is time we critically examined our experience with hundreds of Incubation Centres established through DST/DSIR support in the last thirty years. Failure is universal. Basic reason is that any new Techno-entrepreneur requires far more help than mere room/facilities. He needs involved Mentoring and guidance from Experts in different fields at every stage. His needs also change from day to day. It could be a CA today, an Architect tomorrow, a Marketing specialist day after and, an Industrial Engineer a day later. And, what he wants is quick access to the best. Guidance for a couple of minutes may be all that he needs, but with from the right one. Isolated as they are, academic Institutions have no clue to what, how and wherefrom.

   It is for this reason that Venture Capital Funds in USA are managed by a group of 4 Managers with strong practical backgrounds in different fields: Sensing of potential & business formulation; Marketing; Costing and financing; Project set-up. Large contacts in respective areas is a must.. Highly successful funds like Kleiner, Perkins & Caulfield, Sequoia etc, all have this structure. Once they decide to support, VC’s contractually take the Driver’s seat: Selection & appointment of key executives; Monthly, if not weekly, reviews; Voice in every key decision. They put you in a tight jacket.

   Managing Partners set up an LLP ( Limited-liability partnership), which in turn sets-up another joint LLP with the Investors on whose behalf Partners invest money for the VCF. Partner LLP earns a pre-fixed percentage of profits earned. Funds have a limited life of 5-8 years. Success of Partners lies in their being able to earn higher returns compared to elsewhere: Stock market; Bonds; Bullion etc. Profit motive drives everyone in the chain. US Tax Laws allow rebate to Investors for investments in VCF’s.