Tuesday, March 17, 2009

Innovation and Entrepreneurship: The Indian Realization

“Innovation is the specific instrument of entrepreneurship - the act that endows resources with a new capacity to create wealth.”

- Peter F Drucker, American Writer

This quote, in a surreal sense, traps the essence of the relationship between innovation and entrepreneurship. While there can be no denying the fact that innovation is the prime driver of entrepreneurship, the latter is equally important for the former. Their relationship can be drawn at a parallel with the relationship between fish and water. Without water, the fish will die. That is a fact and everyone is aware of it. But on deeper investigation, one finds that the water often gets polluted quicker and worse in the absence of certain types of fish. More, the fish also produce the carbon dioxide required to sustain under-water vegetation. All in all, it is a mutually beneficial relationship. Likewise the accord between innovation and entrepreneurship – an innovative product or process is most likely to be the prime driver for the setting up of a new enterprise and the creation of greater wealth or better social capital is what is most likely to trigger innovation.

So, having understood the alliance of innovation and entrepreneurship, how does one use this understanding from an Indian perspective? What can India do to unleash its innovation and entrepreneurship potential? That will be the prime issue of the article hereon. This essay will try to identify the factors that affect innovation and entrepreneurship in India; and, accordingly suggest ways and methods for India to move into the top league in terms of innovation and entrepreneurship.

Start Young

Innovation is not just a novel product or process. It is an attribute that has to be nurtured and honed within the human mind. So, how can innovation be inculcated and imbibed by the millions of Indians – people who are used to the ‘tried and tested’ method?

The answer is ‘start young’. Millions of Indian children less than 14 years of age are being taught Mathematics, Science, Social Sciences and other subjects – no problem with that, one would say. However, the problem is with the instruction and evaluation methods. The children are taught to memorize whatever data there is in our text books and replicate it on their answer sheets. Based on the accuracy of these answers – which often means a ‘word for word copy’ of what is present in the text book – they are awarded excellent grades. In such a system, can innovation be practiced by the young kids? Can a student ever hope to answer a question differently and still aspire for good marks? Even in Mathematics, that subject of a million different methods and probabilities, the student is expected to answer the question only in the method dictated by the syllabus.

A system which kills innovation right at the beginning does not augur well for Indian innovation. The educational structure should aspire for, rather inhibit innovation. A practical example – 20% of marks in Science could be set aside for a live project in class (building of a windmill, representation of a volcano, etc). This will allow for a much better distribution of marks and will also let the students innovate. Further, this will also help the students gather practical acumen in the subject.

There is a fundamental deficiency in our higher education system. The system does not teach the students to do business. What use are subjects like Mathematics, Science, etc. going to be for the students if they do not help them generate goodwill or wealth? The education system should provide for the introduction of Business as a formal subject. Simple concepts such as profit and loss, partnerships, etc. should be taught from a practical business perspective. Small case studies should be included for good measure. Stories of exemplary businessmen such as J R D Tata, Dhirubhai Ambani, etc. should be related to the children. This will inspire and motivate them to think of new and better enterprises. At the end of the day, entrepreneurship should be the result of this effort.

Nurture Institutions of Higher Education

India is home to some of the world’s most innovative institutes - IISc, IITs, IIMs, BITS-Pilani and BARC to name a few. Every year they engage in cutting-edge research. This research is cited by leading academics all over the world and utilized by corporate houses of all nationalities. Yet, ironically, this is where the cookie crumbles.

The player, whose entry will make the most difference to India, is conspicuously missing. Who is this? It is the Government. The Government has an almost lethargic attitude to research and innovation at these institutes. It funds thousands of projects, true, but the diligent follow-up and strategizing to use this innovation for the benefit of the masses are missing. Inventions that could have changed the face of rural India are probably dusty memoirs in some bureaucratic office. Inventions that could have generated thousands of jobs are mired in unnecessary legal tangles.

These hurdles can be overcome only by investing in the institutions themselves. Investment here means help not just of the monetary kind, but help of the abstract and intangible kinds as well.

Institutes of higher education should be provided special corpus funds to fund research projects and innovation. Awards and Grants should be commissioned to take inventions to the next level. The leading public research institutes need to be exempted from the extraordinarily bureaucratic processes that define governmental organizations. Innovations resulting at institutes need to be evaluated on a scientific basis (and not by bureaucrats, as is the case often). Of these, the most promising ones should be taken up by the Government in the form of governmental organizations or other public sector bodies. This will enable realization of the true potential of these innovations. Academic studies have shown that only one of hundred innovations is able to realize the expenses incurred in generating it. The Government should take such details into stride and build self sustaining systems.

The leading institutions have well-ingrained systems that take care of entrepreneurial activities. They provide infrastructure, seed money and adequate human resources to incubate innovations into wealth generating commercial products. However, such systems cannot be provided by the second-tier and third-tier institutes. These are because of varying factors like lack of funds, poor infrastructure and absence of motivation. The Government will have to step in to help. It has to have nerve centers all over the country to help entrepreneurs set shop and utilize innovations resulting at these institutes.

Overall, to ensure realization of the innovation and entrepreneurship potential of institutes of higher education, the Government should initiate policy shifts; provide academic fora for discussion and debate; and provide better academic infrastructure. This will help sustain India’s innovative and entrepreneurial activities.

Processes and Decision-Making

The State itself has to be innovative if it wants its subjects to practice innovation and be entrepreneurs. How can it be so? It will have to resort to foresighted planning and efficient implementation.

The processes that governmental offices employ are antiquated and retrogressive, to say the least. Cases in example - offices of the State do not accept email as a means of communication. Officers demand hard copies of any communication. This leads to an inevitable time delay and hence, loss of productivity. In this context, the fate of an aspiring entrepreneur in securing permission to start an enterprise could well be imagined. Numerous WTO rankings rate India as one of the bottom rung countries to do business in. This includes parameters such as time needed for obtaining permission to start new enterprises. These medieval processes have to be shunted out and new efficient processes instilled in their places. This will help Indian entrepreneurs in speedy implementation of their business plans.

As it is, leadership is a problem in India. This lacuna is greatly amplified, in context of innovation and entrepreneurship. An innovator entrepreneur has to meet any number of people to obtain permission to start an enterprise. This practice can be bypassed effectively if the powers-that-be instruct their subordinates to resolve the issue at the earliest. In turn, this can happen only the leadership is pro-active and exploratory in nature. Therefore, an apolitical and effective leadership can augur Indian entrepreneurship and help it achieve considerable progress.

Eliminate the Two Banes – Red-Tape and Corruption

In the Indian context, two problems always remain the root of all problems. The same applies to innovation and entrepreneurship.

Red-tape is an eternal attribute of the Indian system. An Indian bureaucrat spends an extraordinarily long time in processing files or initiating needed action. This badly affects our innovators and entrepreneurs. For example, if an innovator spends most of his time in a Government office asking for an extension of a financial grant, when will he or she innovate? If an entrepreneur wishes to make use of the next festival season to prop up the sales of his yet-to-start enterprise but is not able to implement it because the concerned office is still sitting on his file, will that not affect him? The key, hence, is to set up separate departments to handle innovation and entrepreneurship activities. Such departments should have a short turn-around time and have officials from a scientific background.

Corruption is yet another characteristic that affects entrepreneurship. Entrepreneurs put in lots of effort to mobilize resources to start new enterprises. However, corruption at every level of the system drains their capital by such an alarming extent that promoters include corruption as a head under expenses while funding entrepreneurs. This has to be eliminated. One effective mechanism would be to legalize corruption. Incentives can be provided to officials who work efficiently and perform within deadline. These can be provided by the Government or by the entrepreneurs themselves. This will eliminate corruption and increase efficiency.

Reach Out To the Professionals and the Poor

The true strength of India lies in two extremes.

One extreme is the crème la crème of Indian society, our professionals. Indian professionals are among the best in the world. They excel in their fields, however disadvantaged they be. However, they migrate to the west in search of better opportunities and challenges. This trend has to be reversed. Even if this has started, it has to be hastened. The Government should encourage our professionals to come back to India. This can be done by giving them incentives, both material - tax waivers, better infrastructure, etc.; and, abstract - honorariums, felicitations, etc.

The other extreme is at the very abyss of our society - the rural and urban poor. Innovation and entrepreneurship are meaningless if the poor do not get any benefits out of them. In that regard, the Government has to take steps to ensure that the fruits of innovation and entrepreneurship reach the poor. Innovation in business processes will ensure that the industry reaches out to the poor. Entrepreneurship should be encouraged among the poor. This can be achieved by the timely provision of credit facilities to the entrepreneurial poor.

This essay started with a quote by a great American writer, but in true Indian spirit, will end with a quote by a great Indian. In more ways than one, the journey of travelling from an American quote to an Indian quote reprises the author’s own realization of the strengths of the great country, which is India.

“Freedom without the strength to support it and, if need be, defend it, would be a cruel delusion. And the strength to defend freedom can itself only come from widespread industrialization and the infusion of modern science and technology into the country's economic life.”

- Jamsetji Tata, The Father of Indian Entrepreneurship

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