Innovation May Not Add Value In All Cases - What Do You Say? - CiteHR
Dinesh Divekar
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I am just back at Mumbai after a Need Analysis Survey of the Electrical ( instruments) Industry cluster at Ambala. Trudging factory to factory, small and big, I was constantly hit by a depressing insight i.e. innovation does not add value in all cases.

Electrical instruments cluster at Ambala caters mainly for the labs in schools and colleges in India. Every manufacturer, without fail, told me that improvement in product has simply no takers. Heads of educational institutions demand 20 % commission and thereafter the vendor could supply stones for all anyone cares. Some manufacturers went to the extent of saying that such an innovation exercise might get them an innovation award, but their family will surely starve, since cost would go up, even if marginally.

In such a scenario, there seemed very little, or nil or even negative, pressure on the manufacturer to innovate.

I then discussed that innovation does not necessarily mean product development. You could innovate in other areas of business e.g. marketing, finances, processes etc. This line was accepted, though grudgingly.

If Quality has no takers, no one is ready/keen to innovate. In institutional sales in India, that is quite the case.

In such a scenario, my case is that innovation occurs only if the person would benefit from it. We assume that this is always the case but that may not be true.

What do you say?

Alok

Innovvators & Leaders

09821677859

Dear Alok,

Thanks for sharing your experience. However, I beg to differ with the inference that you have drawn. Secondly, you have not mentioned number of manufacturing units you had visited in Ambala,

Innovation means adding value to the existing product or services. This value addition may happen at additional cost also. This is what happened while adding value in electrical instruments that manufacturers of Ambala manufactured.

Though I need additional information, let me give few of my comments.

Now my take is that this increase in price can be offset by increasing production volume. Volume brings economies of scale. Why they cannot market their product to US and European countries? Have they tried with e-commerce? Schools and colleges are there world over? So why concentrate only in India?

Secondly, where have these manufacturers tested their market? Was that only in Punjab? India is far and wide. Have they tried at other states? If yes, what is their experience?

Thirdly, can this value addition be patented? Patents will bring them steady cash flow.

Fourthly, why these manufacturers do not approach some big shot in the industry like Bajaj, Mahindra etc. They can take up the subcontracting work leaving marketing of the product to these big shots. Obviously these big daddies have far stronger marketing muscle. They can sustain long time period for the break even of their investment.

Lastly, while innovating product, we need to test market first and find the market acceptance. What market research they did before getting into innovation of the product?

If the manufacturers are that confident that the innovated product will bring them some award then they should acquire that award. I say so because this will establish technical competence in the market. Award enhance brand image of the company. Let me give classic example why I say so. Couple of years ago Carlos Ghosn had outsourced their R and D to Bajaj motors. This they did even though Bajaj did not produce passenger cars. But then Carlos Ghosn was confident of Bajaj's R and D competence. Later they had break up that is different story.

Frankly speaking concept of "innovation" is used to reduce the price. They can use methods of "Value Analysis" to find that can the product's price be reduced.

It is quite regrettable to note that product could not be sold in the Indian market. But then manufacturers have to adopt the new selling strategy. I feel that this is more sales problem than innovation problem. If the product is really good then it will get sold anyway, if not in India then somewhere else.

Thanks,

Dinesh V Divekar


Without knowing details of what products are in question, it is difficult to generalise. However, kindly read the article at Cost Innovation vs. Product Innovation « MattMaroon.com <link updated to site home> May be if the companies spent some time on Cost Innovation as Opposed to Product Innovation, it is possible to sell more products. It's possible that schools are reluctant to buy new products due to switching costs.
The points made by Dinesh and Simhan are correct and appreciated. I think likewise.
I initiated this mail to focus on the point that innovation has an attendant cost e.g. finding new ways to manufacture, finding new markets etc. These costs can be borne by some but not by all. The small and micro entrepreneur, working in an environment where the end user is purchasing the product for institutional use rather than for personal use, finds it difficult to appreciate the virtues of innovation.
The answer lies in a change in the eco-system, which is outside the circle of influence of the small/micro entrepreneur. Hence, for him, innovation does not add value.
Best
Alok

Hello Alok,

A very good thread initiated by you.

The example about Ambala manufacturing sector that you mentioned reflects the typical old Indian mentality/notion of innovation--that it costs.

More often than not, that was the predominant thinking process in the pre-1991 years [pre-liberalisation]. Strangely, the very same reasons given to you in your trip were the de-facto standard reasons for much of the Indian industry in those days--and more so as the justification for the poor levels of quality of Indian goods then.

However, only after the liberalisation set-in, did many Indian manufacturers realize that if innovation in one area [say production process] raises costs in the effort to increase efficiency or features of the product, it invariably has to be offset by ANOTHER innovation in another area [say marketing or material-selection] of the manufacturing cycle that reduces the costs associated with that specific part of the cycle--a very prominent result of the exposure Indian industry got to the world markets, after seeing 'how' developed countries increase products range/features even while decreasing costs/prices of the products in almost every field.

Let's take the specific situation that the people you met mentioned "improvement in product has simply no takers. Heads of educational institutions demand 20 % commission". What's stopping them from finding reducing the costs in other areas of the product cycle to handle the commission expectations & yet make more profit?

The fact of the matter, however much they may loath to admit it, is--they do not have any 'perceived' incentive to innovate since their predominant market focus is the local educational institutional sales. And as long as they have the easy-way out, they do not see the need to innovate. Those exposed to the general industry scenario about 2 decades back would be able to co-relate this very small--yet SALIENT--aspect of the Indian industrial scenario.

Reg your statement "In institutional sales in India, that is quite the case", I am not quite sure I agree with you. For eg, the technical Labs in most institutions specify devices/instruments like HP, Fluke, Anritsu, etc for purchases--which negates your contention, since these brands are world famous for continuous innovation & consistent quality, even though they are priced higher than comparable models of other manufacturers.

I too agree with your statement "innovation occurs only if the person would benefit from it"--BUT with a difference. It all depends on how one would view/define the 'benefit' part. Our mental blocks always associate/equate the 'benefit' with 'cost/price'--which is not always correct. Hope you get the point.

Rgds,

TS

Dear friend
We all need to fight corruption for holistic prog of the nation. However, if one can add value thru inn to the product in a graduated cost escalation is highly appreciated and inn becomes popular.

Alok,

What you encountered is the sloth of Indian Industry

These are old fossils who no longer have a reason to be in business.

They are just drones who are blindly copying old designs and are not interested in moving from their comfort zones (where no thinking is required and business runs in auto pilot)

These same manufacturers will 5 years down go out of business and blame the chinese, simply because a better or cheaper product will be introduced where they can't compete

Some counter points :

1. Innovation does not mean higher cost (fans today cost less as heavy iron blades are replaced with cheaper and lighter metal, also requiring lower power)

2. Innovation can result in a new product that others do not have and give you the advantage

3. If the purchase manager is asking for a 20% commission, even better. You can sell him a more expensive innovation as his 20% is then a hIgher amount. He will not mind it obviously (provided he can justify the purchase based on features)

If someone wants to sell, and is willing to make the efforts, then it will work. Else, you can make excuses till the cows come home.

I do not know the purpose of your trip. But if you are looking to mentor someone on innovation, look back at your data. Find a company run by the younger generation, educated and open to ideas. One or 2 of them will be the seeds of the success.

They say, invention is the seed and innovation is the end product of it. Innovation involves lot of activities including economics etc. Not all inventions turn out to be innovations for the simple reason they are technically viable but commercially unviable. Hence alok you are right in your own way. But one thing is sure, just for the sake of profit margins or so, innovations doesn't going to stop. In the process if one gets the bigger mileage out of it, then sure he is lucky. There is no need to feel despair. Because you know Edison failed 99 times and finally succeeded to produce a tungstan filament lamp.
Warm Regards,

Thanks, Murdhar and others. I am getting valuable inputs from you. Appreciate it greatly.

Of course, it is easy to find a company open to innovation ideas and fill their niche. Also, it was easy for Edison to fail 99 times since I suppose he was experimenting with someone else's money. HP, Fluke and Anritsu must be great and innovative companies.

But what do you do with people I met who simply do not find it worth their while to innovate. Their unwillingness is a reality. While they may not know all techniques or the full scope of innovation, it is not that they are totally ignorant of same. In cutting costs, they will teach any innovation consultant a thing or two.

It is simply that most of them simply can not afford to take any risks at all. To leap forward, one has to pull back slightly. That is something they can not afford to. Also, the system does not motivate or spur them to innovate, at least not in terms of quality or functions of product.

It seems to me that the health of the eco-system is the most important thing to promote innovation. These small manufacturers find themselves incapable of influencing it even remotely. Basically, they are so demotivated by the system that they are not doing even what they easily can.

Of course, I am going back to them to tell them that there still is a lot they can do. However, in this transaction, I have learnt a lot myself.

Edison did his experiments with his own money, not with someone else’s How much does a new design cost ? Surely creating one prototype is not enough to make a business bankrupt ?

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