THE Express IT Awards has always created the platform for leading technologists and business leaders to debate, discuss and pave the way forward for the Indian technology industry. At the fourth edition of the awards this year, the panel discussion was on the theme—Disruption and Innovation—a subject that is central to many of the emerging businesses. The panel comprised Xiaomi India head Manu Jain, Ola co-founder Ankit Bhati, Happiest Minds founder Ashok Soota, iSPIRT founder and startup mentor Sharad Sharma, Nasscom Software Product Council chairman Ravi Gururaj and Freshdesk founder and CEO Girish Mathrubhootham. The panel was moderated by Darlington Jose Hector, executive editor – south, The Financial Express. Excerpts:
Darlington Jose Hector: Hello, Mr Soota. Let’s begin today’s discussion with you. Words like disruption and disruptive innovation have become buzzwords in industry circles. While it was Harvard professor Clayton Christensen who first coined the term disruptive innovation, it was not like there was no such concept in the ’80s. How do you perceive the disruptive innovation that has taken place in Indian industry?
Ashok Soota: A certain process of disruption must have got initiated ever since industrialisation began. The pace at which change is taking place is obviously accelerating day by day. The biggest disruption on the Indian scene has to be the $150 billion IT industry. We completely disrupted the existing IT model. It may have been driven by cost in the beginning, but we were able to demonstrate that you could do distributed development across the globe and one actually converted
distance and time into a competitive advantage. However, like all disruption and innovation, it had a time span, and no differentiation can last for ever. In this case, IT industry has become mainstream. The disruptors which are emerging today are largely driven by technology. It is not technology per se which is the disruptor, but the business model itself that is creating this disruption.
Hector: Let’s now turn to Sharad. Are Indian start-ups really creating a disruptive ecosystem?
Sharad Sharma: I want to bridge the two topics of this discussion. Innovation has always been happening but what has not been happening is this non-linear change. All innovation is combinatorial where people combine different things in innovative ways to create something new. We are living in an era where all this combinatorial innovation has simply exploded. For example, Ola is a result of this with the presence of GPS, Google Maps and smartphones, none of which were envisaged for something like Ola. They came and took those building blocks which resulted in a dramatic change in the transportation sector. The reason why disruption is happening is the way in which these building blocks are being put to use. India saw it faster than the West. We ended up creating a set of building blocks here in India which will unleash over the next ten years, and soon disruption will be at a scale that we have not seen before in history. We are at the start of a golden period.
Hector: How do you view the debate on foreign capital vs Indian start-ups? This is in obvious reference to a few Indian start-ups seeking help from the Indian government.
Sharad Sharma: India, for the first time, has the potential to be a major player on the global stage. What Israel is to cyber security, India will be to SaaS (Software as a Service). India is rising in its own way, but we must learn to play the game well. We must make sure that our start-ups have a level playing field. At the same time, protectionism comes in when you tilt the scale to protect your own companies. Our companies do not need that tilted scale since they are very good. But what they do need is a level playing field. The market will decide who the winners will be. The government professes a level playing field but actually it does not exist. For example, Uber enjoyed 18 months of forgiveness on the payment system which was not the case with Ola. We have a department in the ministry of commerce whose exclusive responsibility is to sort things for the incoming MNCs but we do not have any such department for start-ups. We need to make the corrections and create the level playing field.
Hector: Hello, Ankit. Ola has been locked in a battle with Uber. There is also talk about protectionism. What is your take on this and is there no level playing field right now?
Ankit Bhati: The law of the land is easily applicable and enforceable on local companies because they are operating within the confines of Indian laws. But the same cannot be said for the companies that are incorporated outside and offering their services here. For example, two factor authentication. Right now, Uber is continuously violating the laws, and you can get a private car on the Uber platform which is not allowed by the law of the land. You can get motorcyles which are also not allowed. I think the framework and the enforcement structure have to be shaped to ensure that the local company is not at a disadvantage just because it is a local company. And I think that’s the minimum we should strive for. And I do think that on technology itself, Ola has been much more local and innovative in solutions from the start. Be it cash booking, or be it the leasing model we started and which Uber followed later. So we are doing local innovation thus staying ahead of the curve. We are continuously disrupting ourselves to make sure that we are offering solutions, which are local but competitive on a global scale. What we need to ensure is that the regulatory framework and the enforcement of laws are not lopsided and that is the most fundamental point for us.
Hector: Can we talk about protectionism, especially when companies in India receive foreign capital? How local can such a company be?
Ankit Bhati: When I say local company it is not the corporate structure that defines the local company. What it means is the solution and focus and the complete scope in which the company is trying to enforce it and how innovation is completely geared up towards local market dynamics. I think GE had started the term glocalisation earlier. In China they miniaturised the size of MRIs because the hospitals were small. It is not about locally founded companies or internationally founded companies. It is about the market they are addressing, the technology innovations they are undertaking and how that focus yields results for the market in which they play. I will go beyond that as well. It is not just enough to do local innovation. Local innovation is value addition to stay ahead of competition and make sure that the company maintains the edge in the market. It is a formula to win the game. But the technology has to be globally competent. You cannot have an inferior technology solution and then couch behind localisation. The engineering, the product, data science, product innovation, technology platform, etc., should handle scale at a crazy pace. We have kept pace with technology and have grown exponentially.
Hector: Hello, Manu. Yours is a Chinese company operating in a highly competitive handset market in India. How do you ensure that you remain consistently innovative?
Manu Jain: There is this discussion about local or global. At the end of the day, the company which will win is the one which innovates, understand the needs of the users and provide solutions. We are a Chinese company and there were a lot of concerns but in a short of period of two years, we have become the number one online brand and number three overall. All this was done without any TV spend or marketing. This could not have been possible if people were thinking of us as a Chinese company. We have basically focused on what consumers are looking for and how we build products suited to that need. For example, in India everybody uses dual SIM, and in our phones a consumer can have two Whatsapp numbers, one for business and the other for personal use. There are hundreds of innovations which we have done that are specific to India, ensuring our leadership position today.
Hector: Ravi, from a Nasscom point of view, how disruptive have Indian start-ups been? Are we really that disruptive as we claim to be?
Ravi Gururaj: It is a fantastic time to innovate for various reasons: form factor, distribution, and ability to innovate with much fewer resources being a few among them. One could be innovating from a small town and be able to serve the world, and all that was not possible five years ago. About protecting Indian companies, clearly, we need a level playing field, and nobody wants unfair competition. I would also bet Indian companies will get ahead. This debate is not about capitulation. The question is how do you create a nurturing environment. The game is long from over. It is really a fantastic time to be an entrepreneur. There is some funding slowdown which is a good thing as there will be a little bit of filtering. I hope in the coming years there will be deep tech, and a lot more focus on India centric problems to address the local market. We need to upscale our academia and that would jumpstart a lot of innovation. I am very optimistic, bullish and am betting on Indian entrepreneurs. We are just at the tip of the iceberg in terms of potential and scale.
Hector: Girish, I have seen Freshdesk grow into a major force in such a short period. How did Freshdesk become a leader in the SaaS space, taking on the might of companies like Salesforce? Software product success stories are so rare in India….
Girish Mathrubhootham: We have been a beneficiary of a level playing field globally. Disruption is not about just about technology innovation but also involves business models. What we realised is that between 2006 and now, there has been a convergence of two factors. One, SaaS is gaining adoption making software available at lower price points, say $100 or $200 per month, and suddenly SMBs can afford software. In 2000, you needed $1 million to set up a data centre, now you can get it at $1000. All these building blocks started to fall in place, and SaaS made software affordable for SMBs. On the other side, there were also new inbound marketing technologies where you can acquire customers and sell over the phone or Webex. These two models converged rapidly and Indian companies adopted this much sooner than the Valley companies because they were still used to higher cost sales models. That is the big opportunity for India and SaaS.
Hector: I’m coming back to you, Mr Soota. Is disruption always a necessity?
Ashok Soota: All disruptions will involve innovation but not the other way around. In reality they may be having disruptive technology but what is important is a disruptive business model. What is really different in the two eras, now and a few decades back, is that back then the only companies that could get funded were IT services ones. But today it is different. There are a host of new companies which are IT driven, whether they are in healthcare, education, communication, etc. Now those same innovations which were driving the IT services are being made available to the entire gamut of industries.
Hector: Sharad, would these new disruptive technologies take jobs away?
Sharad Sharma: The structure of jobs is changing. We are looking at a big shift. The same technologies which are enabling that shift in the West can dramatically improve many sectors in India like healthcare, education. If we play this correctly in India, it will lead to a different set of outcomes. Please do not take the Western narrative with exponential technologies and apply that blindly in India. Today, there is a likelihood we will go cashless in four years’ time or even less. Everybody is talking about selling to India, where there are 50 million families whose annual household income is around $7400. The next set of 100 million households, whose incomes are between $3400 and $7400, are active participants of the economy but they are not part of the formal system. When these 100 million families go from financial exclusion into financial inclusion, you will see a virtual cycle take hold that will result in completely new consumption patterns. India is going to embrace this. Luckily, all the key enabling technology infrastructure that we need are in place. We have the unified payment interface (UPI) in place, a billion people on Aadhaar, smartphone and feature phone penetration. All these key enabling technologies can come together and bring middle India into the formal system. When that happens, India will be the leader in bringing this new set of people into the economy. Other countries will turn to India. This will be the new-found soft power for India tomorrow which is not driven by Bollywood or yoga. We are looking at a world where technology will enable India to rise.
Hector: Sharad, you have been one of the key architects of Aadhaar. How disruptively innovative has Aadhaar been?
Sharad Sharma: Seven years back if one had said that identity will be a foundational service nobody would have agreed. Anywhere else in the world, biometric authentication is provided by two MNCs. Only in India, you have the third choice. By December of next year, we will be the largest user of e-signature in the world, while in everywhere else you need a dongle. In India, we can do it through Aadhaar at a scale the world has never seen before. But it is not going to be limited to Aadhaar alone. Over that, there are three more layers and it is the combination of these four things, which is called India Stack, which is going to be the transformational engine of India. For example, in payments space, the golden rule of banking is that they have to show me the entire transaction which is done with my permission and this can be done through UPI. The fourth layer of India Stack is digital consent, which is coming and RBI has already issued account aggregation guidelines and the ministry of IT has invited public comments. Essentially it says that data can be moved only with the individual’s permission. European countries are coming here to understand this as they do not have technology tools. India will be at the forefront to offer country scale solution in privacy. India will have the soft power, not just because of the capability but because of its policy and narrative. India has the technology to innovate for the next billion as the first billion will be done by Silicon Valley. Together we will innovate for the whole world.
Hector: Ankit, how do you assess Ola’s disruptive offerings?
Ankit Bhati: We have not disrupted any traditional sources of employment or created social displacement but have been a power for social aggregation. For it is not about a capital fight with Uber and we have kept away from the stance of outspending. India is not a ‘one shoe fits all’ market, it is a very segmented market. We have created various segmented shares of solutions. It is not about fixed technologies or trying to buy market share. We are penetrating and creating new markets. The number of people who have taken cab services in India has exponentially risen. This is not a zero sum game. We are actually trying to create solutions addressing different customers who can get onto Ola through digital solutions.
Hector: Manu, how has Xiaomi managed to achieve scale with a small team? That is quite remarkable.
Manu Jain: We have about 160 people with us and have generated 3,000 jobs. In our first sale, we had ordered 10,000 phones as these were the number of ‘Likes’ on our Facebook page. We were not planning to do any TV or print ads and there were a lot of sceptics. However, the result was totally different with 3.5 lakh people coming to the Flipkart site. We realised that to do things differently we have to adopt a different mindset. We have always tried to create the pull through the use of technology apps. We are able to grow with a five-member sales team. The one parameter which I personally used when selecting a team member was whether that individual was good enough to be my boss. If that is the case, I would go ahead and hire. We have such great rockstars in the company.
Hector: Ravi, isn’t it time India moved away from the Silicon Valley model?
Ravi Gururaj: We have around 1.4 billion people. We have to actually think what technology is going to do to create the next billion jobs. It is a very daunting task. If one looks at it from a pyramid model, there are a few creators at the top, consumers in the middle and a large number of cravers at the bottom. In India, the groups of cravers are growing and technologists will have to think about the base of the pyramid. One cannot really create 400-500 million jobs that easily and we need to think through this in a really deliberate way.