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Bhagwan Mahaveer Viklang Sahayata Samiti, a charitable organization that took upon itself the task of training technicians and sharing its know-how. The Jaipur Foot uses local
materials, is easy to fit and replace, and costs only around USD35 See, for example, Prahalad, 2009.
The Aravind Eye Hospital was set up by Dr. G. Venkataswamy “Dr. V., an ophthalmologist who had just retired from the government health service, in 1978. Dr. V.
believed that many people had lost their vision due to untreated cataracts over their eyes, and that removal of this cataract at low cost could lead to the elimination of “needless
blindness.” Over the next two decades, he and his team at the Aravind Eye Hospital in Madurai, worked on improving the efficiency of the cataract removal process by focusing on
using expensive doctor time only for the most critical parts of the cataract surgery, and training para medical staff to take care of the other steps in the cataract removal process.
Thanks to these changes, they were able to streamline cataract surgery into an “assembly- line” process which drastically-reduced the cost of surgery. This cost benefit was used to do
thousands of free cataract surgeries for poor patients, with the cost of the surgeries essentially borne by paying patients who “subsidized” the free surgeries Kasturi Rangan
Thulasiraj, 2007.
1.5. Innovation Policy Framework
Prior to 1991, innovation policy support in India was largely focused on funding RD in the government-owned and operated RD system, and on supporting academic research in
government-funded institutions. There was some financial support available for technology development and commercialization in public sector enterprises, but no such support offered
to private enterprises. The only significant public fiscal support for private sector innovation was through accelerated deductions of RD expenditure from income for the purpose of
computation of taxable income for income tax purposes. However, the government did support one kind of low-cost innovation explicitly
– by excluding product patents on drugs from the intellectual property rights regime, the government encouraged the creation of an
indigenous drug industry with advanced capabilities in developing low-cost drug development processes Krishnan, 2010.
2. INNOVATION IN INDIA: THE LAST TWO DECADES 2.1.
Role of Economic Reforms
The environment for innovation in India changed with the economic reforms process that started in the early 1990s. The complex licensing system and controls were dismantled, so
the creative energy of entrepreneurs was now freed up. Restrictions on the import of technology were also eased. Foreign investment was welcomed, and the local business
environment became more competitive. Initially, the release in pent-up demand thanks to the removal of controls meant that most players in the economy could grow without too much
effort. But, in recent years, as some categories of products and services became more saturated, the need to meet either the replacement demand of customers who already own
products, or meet the needs of un-served or under-served markets the so- called “bottom of
the pyramid” has propelled firms to take innovation more seriously.
2.2. Innovation in Industry: Large Industrial Groups
In a study of Indian market leaders across five industries Krishnan Jha, 2011, we found that innovation has played an important role in their attaining a leadership position.
While these firms tap external sources for knowledge and ideas, this learning is integrated with internal innovation. Market exploration, particularly the development of products,
services and business models that allow the companies to meet the affordability criteria of the mass market, has played an important role in the innovation strategy of these companies.
Strong core capabilities built by these companies over time provide a powerful platform for innovation.
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Innovation in large Indian firms has been driven by the aspiration of their leaders. The Chairman of the Tata Group, Ratan Tata, has encouraged the members of his conglomerate
to demonstrate their innovation capabilities. He was personally involved in the development of the Tata Nano, and it was his decision and insistence that led to the Rs. 100,000 price
target for the Nano. The Nano has acted as a role model and inspiration for serious innovation efforts in other Tata group companies. Similarly, Anand Mahindra, earlier Vice
Chairman and now Chairman of Mahindra Mahindra, a leading producer of tractors and utility vehicles has encouraged his company to develop new products including the Scorpio
a Sports Utility Vehicle and Xylo a Multi Utility Vehicle which have won awards as well as been successful in the market. Overall, we have seen a higher level of technology-oriented
innovation in groups led by technically-qualified entrepreneurs, or in groups where the group leaders have been willing to get themselves immersed in the innovation process Krishnan,
2010.
2.3. Multinational Corporations and their RD Centres
Another push for innovation has come from multinational corporations MNCs. About 850 MNCs have set up research and development centres in India Basant Mani, 2012. These
centres were initially set up to tap into the relatively low-cost technical talent available in India, and functioned as extensions to the parent company’s global RD network with a
focus on working on products and services for the global market Dhanaraj, Jha, and Krishnan, 2012. As a result, much of the innovation done by the Indian RD centres was
“invisible,” with the final product not traceable to Indian RD Kumar and Puranam, 2011. MNCs are now shifting a part of their attention to developing products for the local market
in India, and other emerging economies. This phenomenon is driven by the need to meet the aspirations of their Indian employees Krishnan, 2006 and the new opportunities opening up
in emerging markets that are seen as the future growth engines of the global economy. Since, these markets are more price-sensitive than their traditional markets the triad of North
America, Europe and Japan, the emphasis is on low-cost products. With the slow growth and financial woes of the western world, there is also a belief that some of these new “low-
cost” products may find a market back in their home markets as well, constituting a phenomenon that is being called “reverse innovation” Govindarajan and Trimble, 2012.
Under cost pressures globally, and facing recessionary conditions in their home countries, MNCs are also concerned about lowering the cost of the innovation process itself. They seek
to reduce their RD costs, and make their RD more effective, i.e., enhance the conversion efficiency of ideas and funding into new products and services Radjou, Prabhu and Ahuja,
2012. MNCs with a strong presence in the Indian market are also being forced to consider low-
cost or frugal innovation because of competitive pressure and demand from their customers. Bosch, an automobile component manufacturer has been in India for decades. When Tata
Motors initiated their Nano project, they approached all the major vendors of components to develop low-cost components that could help them meet their ambitious cost targets. One of
the vendors they approached was Bosch. They asked Bosch to design a Common Rail Direct Injection system for the Nano at a very challenging price point. When the RD team at Bosch
headquarters in Germany expressed skepticism about achieving the required performance and quality at the price point specified by Tata Motors, the then head of Bosch in India put
together a team of relatively inexperienced engineers in India to develop the system. They were successful, and this is one of the important ingredients in lowering the cost of the Tata
Nano. It appears that the lack of experience of the Indian team of Bosch helped rather than hindered their ability to meet Tata Motors’ challenging target; they were able to design the
system ground up without the pre-conceived notions embedded in the standard Bosch development process Hieronimus, 2007.
While Bosch’s efforts at frugal innovation for the Nano have been successful, the commercial outcomes of MNC efforts in low-cost innovation in the end-product market in
India are not as clear. For example, in the healthcare sector where leading MNCs have
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developed low-cost devices specifically for the Indian market, sales volumes have been below expectations, apparently due to their failure to create appropriate low-cost distribution
and service networks, and inherent distrust of low-cost devices among the medical fraternity Duray and Avinash, 2012.
2.4. Grassroots Innovations
