India becomes global innovation hub

18 June 2010

NEW DELHI: A number of multinational companies are placing India at the heart of their global innovation programmes.

Armin Bruck, managing director of the local arm of Siemens, recently showed its leading global executives the Tata Nano, the "world's cheapest road car", as an example of how India is changing.

This approach, he suggested, would help Peter Löscher, Siemens' ceo, get to grips with the "smell and feel" of the modern India.

It also contributed to the German organisation's decision to invest €3bn ($3.7bn; £2.5bn) in crafting over 80 "base level" offerings aimed at emerging economies like Brazil, Russia, India and China.

More specifically, €1bn will be allocated specifically to India, where the creation of simple products, rather than the hi-tech goods often needed elsewhere, can reduce R&D costs by up to 70%.

Siemens' recent output in India has included generators that are fuelled by wind power, and its R&D unit in Mumbai is now working on 42 potential new projects for India and abroad.

"These products require a different kind of innovation," said Löscher. "What counts here is simplicity, not sophistication."

In all, Siemens expects demand in India to rise ten times over in the coming decade to around €1bn a year, an impressive return on its initial outlay.

John Flannery, the president of General Electric in India, said the US conglomerate is seeking to respond to "unstoppable industry trends" in the healthcare and energy sectors.

As part of this effort, it is "migrating processes" from America to India and undertaking "reverse innovation" by developing goods in the Asian nation and rolling them out in advanced markets.

One result of this activity to date has been a portable electrocardiogram that is available for just $1,000, which was originally intended for rural areas of India but has since been introduced in the US.

PepsiCo and Hindustan Unilever are among the other corporations that have sought to adopt unique strategies in India, where modest salaries and regional diversity pose specific corporate challenges.

For Navi Radjou, executive director of the Centre for India & Global Business at Cambridge University, India is a "living laboratory" for brand owners. 

"Multinationals will have to rely on their next generation products and business models coming from emerging markets which deal a lot with scarcity," he said.

"They have to have the ability to source their ideas from India and scale them up globally."

Rajendra Pachauri, chairman of the United Nations Intergovernmental Panel on Climate Change, similarly argued that this type of "Indovation" is only like to gain ground in the future.

"Innovation and 'Indovation' are really the key to taking us forward," he said."Electronics is going to be a really important driver of change. We will be able to produce more from less."

Data sourced from Financial Times; additional content by Warc staff