Krishnan on Innovation

Need for open Innovation in the Indian auto industry



Henry Chesbrough wrote one of the defining research articles on open innovation in 2003 (MIT Sloan Management Review, April 2003). Unfortunately, the industry hasn’t internalized and adopted this approach in India so far.


This blog explores Chesbrough’s original work in the context of the Indian auto industry.


Chesbrough defined 3 broad roles and identified 8 different types of innovator profiles.

The three broad roles are innovation funder, generator and commercializing ideas. Under innovation funding, he identified two players, the investor and the benefactor. Under generator, he identified 4 different profiles, explorer, merchant, architect and missionaries. Under commercialization, he identified two profiles, marketers and platforms.


NOTE: Platforms is my interpretation, in his original article, he called them one-stop centres.


INNOVATION INVESTOR

The providers of capital. In the past corporate R&D centres used to be the investors. These days they are VCs, angel investors, accelerators, PEs, Corporate VCs, Sharks etc. In addition to funding, they provide advice and even take active management roles


INNOVATION BENEFACTOR

Benefactors are focused on early-stage research. The governments seem to dominate this space, but the Elon Musk of the world may change that view. Companies and universities (often in partnership) are becoming benefactors in developing pioneering technologies.


INNOVATION EXPLORER

Explorers are undertaking pioneering discovery research. They are spin-offs from corporate and government R&Ds and are most often supported by benefactors. Technologies developed are spun off as start-ups or integrated into established companies


INNOVATION MERCHANT

Merchants tend to be more focused on commercially exploiting their work. They focus on creating IP that can be patented and sold. They will innovate with commercial gains in their mind


INNOVATION ARCHITECT

Architects play the role of defining standards that partition a complex technology world, like the auto industry. They enable numerous players to innovate sub-systems and components and enable overall integration. They usually adopt a larger industry view.


INNOVATION MISSIONARIES

Missionaries adopt a non-profit orientation for achieving a larger purpose. They create and advance technologies to serve a specific cause. They are characterized by government or community efforts


INNOVATION MARKETER

Marketers stand unique by their abilities to combine the efforts of others to meet customer needs. They play an additional role in funding and generating innovations as well. A standout capability is their ability to build effective business models that make individual elements combine effectively


INNOVATION PLATFORMS

The evolution in technology has seen a new player in commercializing innovation, the platform. The platform enables individual players to bring their innovation to life through a shared platform that allows seamless integration of individual components


In an Indian auto industry context, Suzuki played the role of investor, architect and marketer in the early 90s. The investor role was critical in the development and up gradation of the industry capability, something that they enabled by helping local companies form JVs with their global suppliers.


Unfortunately, in the present day, there doesn’t seem to be an innovation ecosystem.


The funders, investors and benefactors are largely absent. VCs, PEs and angel investors are focused on IT technology. Even though the investors call the IT investments as tech investments, I firmly believe that there is more tech involved in auto, aerospace and healthcare, rather than in information technology.


There are very few innovation generators in the ecosystem. Global players like Bosch are focused on the global market. Domestic companies have more focus on engineering, rather than exploratory research.


Of particular concern is the fact that auto manufacturers are scared of competitors and aren’t playing the roles of architects. Years of playing one supplier against another for cost reduction has meant that they have lost the strategic relationships with tier companies to drive innovation partnerships.


The large tier 1 auto component players have never taken to strategic supplier development, they have been focused on cost and quality and lack a deep ecosystem view.


My own experience with the industry shows that they are fast followers and masters at frugal engineering. Show them a design and they can work on reverse engineering the product. The tier 1 companies are probably amongst the best value engineering players. Unfortunately, they cannot do exploratory research.


On the other hand innovation missionaries, represented by university-based accelerators are handicapped by both funding and industry support. Mechanical and chemical engineering startups seem to attract less funding from investors and benefactors as compared to consumer-oriented IT innovations.


This is probably a result of those businesses' ability to scale up faster, even the me-too products.


The other factor limiting innovation explorers in the auto industry is a simple fact; university education except to an extent at the elite institutions lacks quality in mechanical, electrical and chemical engineering fields. The students rarely have an inclination and capability to pursue exploratory research in these domains.


What are the solutions?


Apart from giving sops to the auto industry to come up with EV solutions, the government has to create a special investment vehicle to promote innovation in automotive technology. These must be run as investment companies, rather than tax breaks for corporate R&D, we know it doesn’t work as the industry track record shows.


If you found this interesting reach out to us for more details.


Krishnan Naganathan

Krishnan is a leading innovation consultant and focuses on helping people and organizations innovate and build capabilities for innovation. He brings over 25 years of experience in the industry and consulting. You can reach him by phone / WhatsApp: +919791033967 or email: krishnan@thinkhorizonconsulting.com


#innovationmanagement #disruption #disruptiveinnovation #futureofbusiness #ideation #futuresupplychainsolutions #futuregrowth #sustainabilitymatters #sustainability

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