India stands to gain big from innovation game
The innovation-rush at the Tata group companies—adding over 2,000 in 2015 alone, the group grossed over 7,000 patents, twice that of what it had in 2013—should make it clear how much there is to gain from it and what needs to be done to ensure a nurturing ecosystem. The group spent $2.9 billion in FY15 on research & development (R&D) and has realised over $1 billion in trailing annual benefits from additional revenue as well as cost savings from implementing process innovations. From precision-targeting UAVs for spraying pesticides in farms to virtual automotive prototype-testing that reduces both costs and lead-times typical of physical prototype testing. And from a wearable device that tracks an employee’s health at work to Ignio, the neural automation system developed by Tata Consultancy Services, the group is investing in a brave new world where patents mean big business.
It isn’t that Tata Sons’ is the only game in town—apart from the many start-ups, there are MNCs like GE, whose Global Research and Technology Development site in Bangalore is its largest outside the US, and even the government, with Aadhaar. But the group’s innovation—and concordantly, R&D—focus lays the path for big, established corporate houses in the country to follow in a scenario where established business-processes, and indeed, businesses, are getting routinely disrupted. What makes its case even more remarkable is that the $1-billion gains that accrued to the group come from spending just 2.7% of its turnover on R&D—globally, Tata Sons’ group chief technology officer, Gopichand Kattragadda, says, companies spend over 4%. So, imagine the possible benefits in store if the group—or any other company/industrial house in the country—were to reach that level of spending. How essential innovation is for businesses now is evident from the fact that in the US, an economy-wide decline in investment in physical plant infrastructure is being offset by rising expenditure on R&D and creation of intellectual property. A 2015 OECD report found that top corporate R&D investors owned 66% of all IP5 (top five patent-filing authorities) patent families—set of either patent applications or publications taken in multiple countries to protect a single invention by a common inventor(s) and then patented in more than one country. That is how big the innovation game has gotten for businesses. And in that, there is an opportunity for India. The PwC Global Innovation 1000 report for 2015 shows that R&D off-shoring to India, the third most-preferred destination that year, increased by 116% in dollar terms between 2007 and 2015. With the top 1,000 innovating companies worldwide, as per the PwC report, citing access to talent, tax advantages and labour and operation costs as some of the primary factors driving the choice of R&D off-shoring destination, India needs to work on these if it is to foster not just off-shored R&D but homegrown innovation-champions like the Tata group as well are quite clear.