Feb 9, 2006

Organizational Innovation in India

In response to this post of mine on desicritics, a comment that Sumanth left said "Innovation and stiff structures do not go hand in hand. So, lets just forget about India corporates getting innovative."

I agree with him on some level, but would take this opportunity to think this through a little more.

Innovation is about knowing when to diverge to come out with opportunities, ideas, options, and then reversing the process to converge and decide on one decision to prototype and test and then if successful launch.

So yes, Sumanth is quite right when he says that "stiff structures" cannot help in innovation.

In fact in the first half of the innovation process is all about the things that large organizations are allergic to. It's about messy, chaotic, instinctive and insightful idea generation. It calls for suspending judgement. It even calls for suspending action orientation. That is not a role for management people. This is the part of the innovation process that is best done in startups, without too much analysis, or in pods away from the mother ship (skunkworks for example).

The management part of organizations comes into play in the convergence of ideas. This is when 'traditional' management and decision making skills come into play. Trade-offs need to be made, analysis needs to be done on feasibility, ideas need to be tangibilised into execution.

It will not be an exaggeration to say that philosophically, these two parts of the innovation process are directly in a state of tension with each other. The people who do one part well, resent the activities done by the other part. There is a feeling that ideas are superior and execution is inferior. However, as Bossidy and Ram Charan state in their book Execution, it's the implementation that makes the difference.

A little bit like yin-yang I suppose.

So that brings us to Sumanth's comment. Will Indian companies never be innovative?

I think the answer is not as easy as a yes or no. There are three types of Indian organizations:

1. The old school, that has thrived in the age of the license raj and has realised that the brave new world of Indian business is not for it. They've decided to sell brands to better competitors, sell their land and live off the earnings that their previous 3 generations earned. Sometimes they also get into property-will issues and spend more time on the court and party circuit.

2. The competitive old school. They've done business in India over the last century and have decided to innovate and take on the world. They're like the Tata group (buying out Daewoo, Tetly and launching a frontal attack on the best consultants - S Ramadorai was named one of the world's top 25 most influential consultants in 2002 !), Aditya Birla Group, Reliance, TVS, Sundaram Fasteners, Kalyani Forge and Godrej. They set themselves global benchmarks (from sales, to quality) and have launched cultural change initiatives (for example, the Godrej group was amongst the earliest to adopt the EVA methodology) that are making them stand and look global competitors in the eye.

3. The homegrown MNCs. These are the MNCs that have always existed in India, but are so indigenised that they feel more Indian than the new ones. They are struggling to contain the group described next. They've traditionally marketed to the mass market, and have tried new innovations, that have travelled thorough the world to other developing nations. Their talent has made a mark in traditional European and American boardrooms. These are firms like HLL, Colgate Palmolive, P&G.

4. The 20 year and less startups. The flood that Nirma (in FMCG) and Infosys (in IT) unleased. They have the advantage of the young age, less legacy, better insight and a desire to beat the big boys in their backyards. These will be the seeds of the innovation that will churn our country in the next 4-5 years. They have little or no diffidence to pedigree, power and history.

As Edgar Schein said "A culture of innovation does not scale", so maybe the fourth type of firm will be acquired and get more "organized", but they would have done their job, to move innovation and its results to the population of India.