Can India build an ecosystem for product innovation?

Absolutely. There has been a lot of debate on this subject, especially around the belief that India cannot excel in building/nurturing product companies. I believe it can, and the time to carve that road ahead is now! Read on for my views!

Siva Ramamoorthy, Vice President, Genband Inc


Siva RamamoorthyWhile India has succeeded in building world leading services companies in almost all verticals – Information Communication Technology (ICT), Telecom Service Providers, Hotels, Healthcare – our performance in building Innovation driven product companies has been spotty. While we have a few successful role models such as Comviva, Tejas Networks; we are still a long way to go. By comparison puny Israel with a population of around two third’s of Bangalore boasts a bevy of Product companies in spaces as diverse as Aerospace, defense, Security, Software, Silicon. Next to Canada, Israel has the highest number of listings in the US Stock market. The tech heavy NASDAQ is home to Gilat, Audiocodes, Check Point, Radware and several more Israeli companies.

Why is it so? Does India really need to succeed in building Innovation driven product companies to evolve as a Global power? Are we better of focusing on our core competencies as Gary Hamel of HBS would say and live with being a services country?

Large countries need diversities in their industries. As Jessie Paul writes in her book “No Money Marketing”  two factors have flattened the world – the Internet and Container ships. Perhaps migration of talent, Global media can be added to the list as World Flatteners. While smaller countries such as Taiwan and Israel can focus and specialize; large countries with large populations need diversity of Industries. Large countries the way I see it are conglomerates of clusters – such as Tirupur’s Textile cluster, Surat’s Diamond cluster. Such clusters align with the geographical/ cultural diversity of large countries. Overall to sustain Global ups and downs and to provide employment to large populations,countries such as India need Intellectual diversity in their industries.

With that context I believe that India needs to evolve and focus on building a few world class Innovation Driven product companies. Clearly out of the hundreds of US based Google’s and Cisco’s and Intel’s we have room for a few such companies in this country of 1.2 Billion people.

Having led Marketing at Tejas Networks, one of India’s few successful product companies I am very optimistic on the future of product companies in India. I see a few reasons for this trend.

Emergence of India as a Market

With 1.2 Billion people and an economy growing at 8-9 % India has now arrived as a consumption market. Monitoring the annual reports of US listed public companies over the last 10 years, it is amazing at the much increased frequency of India appearing in these reports. Our Capex consumption in areas such as Defense, Telecom and Petroleum are among the top 5, 6 worldwide. This is creating a Pull-in effect for Indian product companies to develop products for this space.

Let us take mobile phones as an example. Years ago mobile phones had lifecycles of two or three years. The lifecycle of handsets is now around 12 months and possibly even lower in the low/middle segment of mobile phones- which is the bulk of the Indian handset consumption. Is it possible to design a handset with a lifecycle of 12 months or less sitting in the super cold Northern Europe for consumption in India? Perhaps not. Design decisions move closer to the point of consumption, eventually resulting in more and more of the innovation cycle happening in India.

Indian Venture Capital Ecosystem:

Venture Capitalists have played a bigrole in building an ecosystem for product companies in the US. Sand hillroad in Paolo Alto and the stories around VC’s identifying/ funding/ nurturing garage entrepreneurs are legendary in the IT industry.  Billions of dollars have been raised by several Indian/ US VC’s.  VC investments have grown significantly from around $500 Million in 2003 to over US $18 billion in 2010.

While most of the VC’s operating in India/investing in India do so at the Seed B/C stage or in plain English Middle/Late stage; several World class VC’s operate at the early stage as well.  Examples include Helion Ventures, NEA ventures, Venture East and several others. Besides providing the needed funds for startups to form, such world-class VC’s can serve and bring together very powerful mentor networks.

Role Models to follow:

Nothing breeds success like Success! The success of IT giants such as Infosys and Wipro has created an Indian ICT Services space of $60 Billion annual revenue, employing over 2.5 Million people. In the last 5,6 years we have seen a few successful telecom software and products companies such as Sasken (http://www.sasken.com/), Comviva (http://www.comviva.com/), Tejas Networks (http://www.tejasnetworks.com/), and Subex (http://www.subexworld.com/)among others. Many of them have pursued a “Start in India / Other Emerging markets and go into the Developed Markets” strategy which seems to be working.

Perhaps a 1000 flowers will bloom behind!

The successful $1.3 Billion IPO of Apple in 1980 has motivated waves of Innovation behind it, resulting in more successful IPO’s which in turn motivate more successful IPO’s.

MNC’s Move into India and move more High End work here:

Companies such as Intel, Cisco have over the last 10 years brought in more and more high end design/ Innovation activities into their India centers. I remember Intel announcing a few years ago that many of their Mobile CPU’s are now being designed in India. Likewise Cisco’s Globalization Center (http://www.cisco.com/web/about/ciscoitatwork/highlights/111620071.html) brings together almost all of Cisco’s functions including product innovation into India. Such high end activities have a rub off effect on the Local innovation ecosystem with talent flowing in from efforts into startups.

The ‘Return to India’ Phenomena:

With the booming economy, available of virtually all goods and services and the capacity to live closer to friends and family, many Indian are returning back after spending career spans in the US and other advanced Innovation countries. Many such engineers having spent a career working for a Product company such as Cisco seek out similar opportunities.

I believe now would be a great time for the Indian Industry especially in the ICT space to work together and nurture/build more such companies. Organizations such as CII, NASSCOM are starting to play a role in bringing together a self-reinforcing ecosystem for such Innovation based product companies to thrive. Clearly there is a need to bring together these product companies, Venture Capitalists, Related Services – product companies like Infosys, Symphony so that we can look at the gating factors and get into the mode of ‘carving the road ahead’. We can leverage the India brand built by Services behemoths such as Infosys, Wipro and work towards moving into the next steps of Innovation and Product expertise.

It would be critical for India to leverage all elements of the ecosystem that are slowly coming together – and mobilize them towards carving a clear road ahead as a Product Innovation Hub.