Innovation and Entrepreneurship

Innovation and Entrepreneurship

India Perspective

India, a nation of one billion people,Home to Indus valley civilization and a region of historic trade routes and vast empires, the Indian subcontinent was identified with its commercial and cultural wealth for much of its long history. Gradually annexed by the British East India Company from the early eighteenth century and colonized by the United Kingdom from the mid-nineteenth century, India became an independent nation in 1947 after a struggle for independence that was marked by widespread nonviolent resistance. It has the world's twelfth largest economy at market exchange rates and the fourth largest in purchasing power. Economic reforms since 1991 have transformed it into one of the fastest growing economies however, it still suffers from high levels of poverty, illiteracy, and malnutrition. For an entire generation from the 1950s until the 1980s, India followed socialist-inspired policies. The economy was shackled by extensive regulation, protectionism, and public ownership, leading to pervasive corruption and slow growth. Since 1991, the nation has moved towards a market-based system. Agriculture is the predominant occupation in India, accounting for 60% of employment. Service sector makes up 28% and industrial sector 12%. One estimate is that only one in five job-seekers has had any sort of vocational training. The labor force totals half billion people. With a brief history and background about Indian economy we try to get familiar with some big words like innovation and entrepreneurship.

When a large gap existed between the isolated Indian economy and world standards, benchmarking to best practices made sense. But in the current environment, where Indian companies aspire to be world leaders, benchmarking to best practices could result in mediocrity. Strategy is about folding in the future, not extrapolating the past. A review of the theories surrounding entrepreneurship and innovation reveals an immense amount of material. We need to connect the poor through entrepreneurship and innovation which enables wealth creation through transparent and legitimate means. This way businesses could create wealth for themselves too through poverty alleviation. Lots of opportunities exist for innovation and entrepreneurship to thrive in India, especially in areas such as technology, health care, education, rural marketing and social services. Among the keys to innovation are the ability to imagine tomorrow's world, to think in quantum leaps rather than in small increments, and being prepared to fail. While Indians have strong innovative and entrepreneurial instincts, they have much to learn from the U.S. about germinating ideas in university and corporate incubators and providing incentives to budding entrepreneurs.

Innovation:

Innovation has been traditionally defined as the successful implementation of creative ideas. Contemporary economic theorists have tried to address the concept and related issues with varying success. This is despite widespread recognition of the fact that innovation is crucial to the success of an economy at both the micro and macro levels . Over the last decade a great deal of attention has been directed at the study of the actors, the institutions, and the relevant linkages that together are deemed to constitute different models of innovation. An understanding of models of innovation, including their diffusion and dissemination throughout the economy and society, is very important. In addition an understanding of what shapes these developments is critical. Innovation has become the industrial religion of the late 20th century. Business sees it as the key to increase profits and market shares. Governments automatically reach for it when trying to fix the economy. Around the world, the rhetoric of innovation has replaced the post-war language of welfare economics...yet there is still much confusion over what it is and how to make it happen."

Entrepreneurship:

Entrepreneurship is the result of three dimensions working together: conducive framework conditions, well-designed government programmes and supportive cultural attitudes . This view is entirely consistent with the implications of this discussion so far. Across these three perspectives of entrepreneurship, two major conclusions are apparent. Firstly, the economic, psychological and sociological academic fields accept that entrepreneurship is a process. Secondly, despite the separate fields of analysis, entrepreneurship is clearly more than just an economic function.

Think Today and Plan for Tomorrow-Indian Perspective:

The lifestyles of the poor are different than their income levels might suggest, as can be seen from the way poor people allocate their income to consumption. Indeed, in urban slums, it is commonplace to find homes that are cramped and surrounded by squalor but have TV sets, refrigerators and pressure cookers. Often, at least one family member will possess the latest cell phone. The poor, even if they live in shanty towns, want to consume like wealthier people. This factor potentially can create surges in consumption. resources and aspirations must be related to each other for entrepreneurship to flourish. By creating a mismatch between aspirations (more) and resources (less) you create entrepreneurship. Entrepreneurs leverage resources and change the business model to get more, for fewer resources. So the task for us is, how to create aspirations that rest outside the current resource base. Innovative solutions by imaginative entrepreneurs would help solve poverty. “To discover a new approach to development [India needs to] move from best practice to next practice”.

Aspiring entrepreneurs should have the courage to discover something new by asking who else is doing what they plan to do. "If no one is doing it, and you are smart, you can do it better," to name a few car companies around the world want to come to India to find out how to build a $2,500 car -- such as the Tata Nano. The $20 computer -- designed in partnership with Intel for rural India -- has more innovations than conventional laptops .

Entrepreneurs should use Price - Profit = Design as their guiding principle rather than the shortage economy paradigm of Cost + Profit = Price. Challenge and change the price performance equations. If we can satisfy 500 million (poor) customers in India by producing world-class quality, then that can become the biggest export opportunity in the world. Innovating to create solutions the market needs at a price it can afford is important if Indian enterprise has to be globally competitive. Electricity in India is twice as expensive as China and the railways cost three times as much as China, the need to innovate to deal with the infirmities of the Indian ecosystem.

Opportunities for Innovation and entrepreneurship in Indian Business and Government:

The budding entrepreneurs should have a clear vision of their goal but to take small steps toward it since both speed and stamina are required to succeed. The goal should be "broken up into smaller milestones that need to be pursued with the vigor of a Cheetah. The Indian academics should have the courage to create their own concepts and steer India to next level. "Our problems have no precedent since they are huge in scale, so let's invent our own concepts."

India's per capita income – when seen over a 300-year period in real terms -- has not grown. "But if you take the last two years, India's consumer spending, which totaled Rs 17 trillion in 2005 has ballooned to Rs 34 trillion in 2007. When companies project 40% to 50% annual growth, eyebrows are no longer raised (at institutions whose funding is being sought) . Even more importantly from an entrepreneur's perspective, venture capitalists (VCs) are now willing to value that kind of growth when acquiring a stake in a startup firm. India's chief election commissioner, spoke about entrepreneurship in government. "The biggest enterprise in India is maintaining democracy. Our elections, involving 700 million voters, are the single largest event management exercise in the world," , adding that the Election Commission of India saved more than 8,000 metric tons of paper by using electronic voting machines to tabulate votes for all candidates. These one million machines have a failure rate of just 0.5%, and now the new ones will be able to track minute-by-minute voting records and store them for at least five years.

Interface Between Innovation and Entrepreneurship: A key ingredient for India's Success Story

With a background about Innovation and entrepreneurship we have to become familiar with each of the concepts of innovation and entrepreneurship independently. To use the framework for thinking about possible government policy mechanisms for facilitating and stimulating entrepreneurship and innovation in India. In order to exploit various opportunities, the entrepreneur must purchase the necessary inputs or the services of the input owners. No production takes place if the entrepreneur cannot secure the necessary inputs for the exploitation of his/her opportunity. Most entrepreneurial opportunities are only fully realized in the long term. Consequently, the entrepreneur will often be required to secure the use of his/her inputs, presumably via a series of long-term contracts.

Unleashing the Indian Potential for Innovation and Entrepreneurship:

Promotion of entrepreneurship culture is one of the key policy objectives and it represents an integral part of wider activities that contribute to economic development. Therefore, the following broad areas need to be considered in policy development:

· Developing a culture in which links between business, schools, and education more generally, are seen as a natural partnership;

· Providing opportunities for individuals and communities to build specific and practical knowledge and skills for enterprise;

· Developing confident individuals that have the skills to deal with constant change and that look at their environment with “eyes of opportunity” where the glass is half-full rather than half-empty;

· Promoting the success of enterprising and entrepreneurial Indians in both business and social development activities; and

· Fostering a culture that encourages risk-taking and accepts failure as permissible social and individual norms.

-Anil Deshpande

10-03-2009

India.