Innovating for inclusive growth By Anish Gupta

By Anish Gupta

Corporate India needs new ways to make sure that small but important innovations don’t get lost

India is well positioned in many respects for a new era of growth. It possesses a young workforce, an abundance of entrepreneurial drive and vigour, a highly competitive international services sector, significant potential in nascent industries such as green manufacturing and massive untapped consumer demand in its rural populations.

Economic growth in India — fuelled by two decades of economic reforms and a large pool of low-cost, English-speaking, university-educated talent — has enabled India to position itself as a major destination for investment in high-tech innovation. Numerous well-known multinational companies and a handful of large Indian companies have tapped this potential, making India home to some of the most extensive research and development (R&D) centres in the world.

But such opportunities will count for little if they do not ultimately translate into new sources of revenue for Indian companies and more sustainable growth for India at large. With its increasing integration into the world economy, India must build the structures and capabilities that will help it withstand economic shocks and sustain high growth rates far into the future.

“The next 10 years would be dedicated as a decade of innovation” were the words used by the President of India to conclude her address to the Parliament on June 4, 2009.

We must realise that innovation is not only a matter of cool apps and high end gadgetry. It is also about the small jugaads that the common man in India devises to solve his day-to-day problems. We need new and better ways to make sure that small but important innovations don’t get lost — that the process for capturing ideas becomes, in effect, industrialised. And at the other end, we also need to ensure that when ideas bear fruit as new solutions, new ways of improving daily life, they have the furthest possible reach.

The key is innovating for inclusive growth: Indian businesses must understand that innovating to bring India’s geographically remote and low-income groups into the mainstream of economic life now has the potential to become the most valuable business opportunity of the next decade.

As low-income consumers move up the economic ladder in unprecedented numbers, they will account for most of the growth in disposable income. Advances in technology are making these consumers increasingly accessible. And there is plenty of motivation. The aspiring large, poor and geographically remote populations are showing growing interest in adopting technology and are willing to pay for products and services satisfying their wants in a sustained manner. But widespread concerns about investment costs and commercial viability continue to keep a large majority of the companies on the sidelines and are jeopardising their place in the Indian economy’s next spurt of growth.

Our research on innovating for inclusive growth over the past few years has uncovered ways in which these concerns can be overcome. A three-step framework offers guidance for developing the market focus, business model, culture and capabilities that are needed to succeed with inclusive growth — while remaining competitive for the future.

The first key step to viable growth is identifying innovative domains to deliver significant benefits to poor and/or geographically remote consumers. Our 2009 Accenture-AIMA report, which surveyed senior executives as well as consumers, found eight key business areas that are rich in such opportunities. These areas are agriculture, biotechnology, pharmaceuticals, healthcare, education, financial services, green technologies and information and communication technologies. Manufacturers must identify customer gain or pain points and define the exact nature of their inclusive intervention in the context of these eight areas.

Take Hariyali Kisaan Bazaar, a company that has a chain of more than 300 rural stores. Each store offers one-stop shopping for country dwellers needing everything from farming equipment, seeds and fertiliser to apparel, TVs and shampoo. But the company is also a pioneer in business model innovation, offering an array of bundled services to rural consumers and farmers, including financial and agricultural advice. It employs agronomists to educate farmers on how to improve productivity and yield. These experts interact with farmers on a daily basis, helping them extract more value from their produce through better storage and through selling to higher-price markets.

The bundled services have helped increase rural households’ incomes — which in turn has expanded demand for the consumer products sold at Hariyali Kisaan Bazaar centers. By creating and transferring value from its innovative business model to rural households, the company is now selling a larger suite of consumer products per household to a greater number of households.

Once the focus of the innovation effort is determined, the second step is to design a business model capable of democratising innovation needs. Such a business model will not only benefit a large number of prospective customers from low-income and geographically remote populations, but will also involve this section of society in the innovation process by recognising their ideas.

India’s largest retail house Future Group has tied up with India’s National Innovation Foundation (NIF) to commercialise grass-root ideas by creating products to be sold at its outlets. The joint initiative, called ‘Khoj Lab’, will apply Future Group’s consumer insight, marketing, and distribution strength to the ideas of innovators associated with NIF, with the goal of launching affordable products. The company is allowing innovators to test prototypes at Big Bazaar stores in Ahmedabad, such as the Mitti cool refrigerator and Mitti cool non-stick pan. The original creators of the products will retain intellectual property rights and get a royalty percentage on sales.

The final step is to align the operating model with the inclusive business model. In essence, companies must embed a spirit of inclusiveness across elements of the operating model (leadership, organisational architecture, talent and metrics), and cultivate a culture that is aligned with the organisation’s inclusive growth objectives.

Instilling fearlessness and encouraging rebound from failures is a vital stimulant to innovative thinking among people. In 2007, The Tata Group Innovation Forum added an unusual category of recognition to its group-wide Innovista programme. The category was named ‘Dare to Try’, a category under which teams within group companies were asked to send in innovations that failed to get to the marketplace for some reason. By instituting such an award, the group has found a way to reward risk takers and extinguish the fear of failure. Innovators in the company now have a platform to discuss their failures. Moreover, such a process has allowed space within group-companies for ‘creative errors’ largely resulting from changing market circumstances and factors beyond human control.

Leadership plays an extraordinarily important role in winning minds over to an inclusive belief structure. The board and top executives need to spend quality time in identifying leaders capable of framing compelling business questions about inclusive markets for the consideration of cross-functional teams. More importantly, organisational roles need to expand in terms of the type of activities performed, with a goal of becoming closer to the market. This requires senior leaders to be more hands-on in devising inclusion strategies.

Companies need to shorten the communications route between lower, market-facing levels and the top management for faster exchange of ideas and feedback. Moreover, flows of information and instructions have to be increasingly multi-directional to help senior leadership better understand the complex market while designing business plans. ITC Ltd achieved this result by continuously renewing and aligning its organisational architecture to keep pace with its evolving inclusive business e-Choupal.

The type of metrics used to measure organisation and workforce performance also reflects a company’s commitment to its inclusive growth. Purely financial indicators do not fully capture an inclusive business model’s progress toward commercial viability. It is also useful to look into ways to measure the strength of the value proposition vis-á-vis low-income groups or geographically remote communities. For example, it is useful to know the size of the real income differential over the long term from an inclusive intervention as compared with alternative economic arrangements. The impact such a differential creates on aggregate market demand is also useful to know.

Democratising innovation holds tremendous power for the Indian economy. There are thousands of innovators across the country — working on their own or within corporate workforces — on ideas that have the potential to substantively improve the quality of governance and magnitude of corporate profitability.

While these innovators can accomplish impressive things acting independently, they can transform the society if they collaborate via a structured innovation process that can channel their best ideas. To remain competitive as a nation and create an inclusive society, it’s time we start taking measures to democratise innovation from today.

The author is managing director, Products Operating Group, Accenture

(The article first published in Business Standard)