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Sourcing Innovation from Emerging Markets: The Power Of Communities

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Peter Williamson believes there are some very important lessons MNC’s can learn from China. The most important of them is cost-innovation. Cost-innovation can be defined as focussing on delivery a step-change in value for money. There are three aspects to this. For each aspect Professor Williamson offered a real example. The three aspects are:

  1. High tech markets must be rapidly applied to mainstream markets (e.g. the case of digital direct X-ray equipment).
  2. A high variety of products must be offered are low cost. Traditionally this is done at high cost (e.g. Shanghai Port Machinery).
  3. Niche products must be re-engineered to serve a mass (not niche) market (e.g. Haier’s Wine Cooler).
  4. In conclusion, what can we learn from China? To change our notion of what innovation is. What can western MNC’s do to succeed in China? Match the cost innovation of local companies and form joint ventures with local businesses.

Guruduth Banavar argues that IBM define innovation in a number of different ways. They adopt a predominately open, collaborative and global approach to innovation. IBM have a four pronged strategy towards innovation:

  1. Global innovation outlook
  2. Global technology outlook (three-seven year plan)
  3. IBM research agenda
  4. Execution of (1) – (3)

IBM teams are located near to where the problems are occurring on the ground in all countries including India. India is regarded as the global innovation hub, and IBM are engaging in grassroots innovation projects.

One such example is the “spoken web” project. Only 20% of the population use a PC, however a much larger proportion use a mobile phone. Clearly, the PC and mobile phone gap needs to be bridged in order to allow those non-PC users the access and benefits of the world-wide-web. In order to achieve this, IBM are creating a “parallel” internet for mobile phones in India called “spoken web”. This is because Indians prefer speaking to emailing as well as the fact that much of information available on the internet would not be useful to many rural, low income Indians. They would simply want local information about local services and products.

With the spoken web system, villagers can create a “voice-site” (similar to a website) which other people can access via a mobile phone. For example, a plumber could advertise his services on a “voice site”, others could access his site via a mobile phone at any time, and ring him for his services.

Mr Banavar predicts that “the mobile phone will have the same transformation power on society in India, as the Internet did in the West”. The biggest challenge of sustaining high quality R&D in India, is being able to hire high quality leaders. There is a distinct lack of Indian computer science PhD students, for example. Other challenges are concerned with global strategy, IP, and operations. However, IBM’s key success factors in Indian R&D include proximity to the market, open innovation strategy, and retaining the flexibility to respond to new opportunities.

Peter Williamson

Visiting Professor of International Management, Cambridge Judge Business School

Peter Williamson is Visiting Professor of International Management at Judge Business School. Prior to joining Judge Business School, Professor Williamson was ten years with the Asian Business and International Management faculty at INSEAD (1997-2007).

Professor Williamson has been Non-Executive Chairman of the Board of Directors of the macro hedge fund manager Tactical Global Management since 2001, Non-Executive Chairman of computer-based training company Imparta Ltd since 1997 and of energy consultants Energy Edge Ltd since 2004. Professor Williamson was formerly with the Boston Consulting Group in London and Merrill Lynch Inc in London, Singapore and New York.

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Guruduth Banavar

Director, IBM India Research Lab and Chief Technologist, IBM India / South Asia

Dr Guruduth Banavar is the Director of IBM’s India Research Laboratory (IRL) and the Chief Technologist of IBM India / South Asia. IRL is one of the eight labs of the global IBM Research organisation, which is the leading industrial research organisation in the world. IRL has a broad and deep portfolio of research projects, with a major focus on mobile systems and service delivery. IRL’s researchers take a multi-disciplinary approach to solve problems in these domains, bringing to bear our world-class technical leadership in computer science, mathematical science, and the emerging area of service science.

In his additional role as Chief Technologist of IBM India / South Asia, Dr Banavar is setting the technology leadership agenda for this key geography of IBM’s global business. The key elements of this agenda include addressing the unique technology needs and opportunities of this market, as well as enhancing the vitality and advancement of the technical population within this second largest IBM community in the world.

Previously, Dr Banavar was a senior manager at IBM’s Thomas J. Watson Research Center in New York, which he joined in 1995 after his PhD. His broad technical interests and contributions have been in Service Science, Pervasive Computing, Distributed Systems, and Programming Models. Dr Banavar has published more than 40 research papers in top international forums, invented more than 25 US patents, chaired major international technical conferences and workshops in his research areas, served on PhD committees and on the boards of international government, educational, and industrial organisations.

Watch the 'Sourcing Innovation from Emerging Markets: The Power Of Communities' video with Guruduth Banavar

[MUSIC PLAYING] A person and an idea are connected.

What is it that companies can do for these markets to create value, and create wealth for themselves?

This is all about relationships.

And what Reliance did in the partnership with Steven Spielberg is to establish a virtual studio in Hollywood.

Modernising. They are not Westernising.

Guru, thanks a lot for coming to Cambridge to speak at our conference. And thank you also for agreeing to do this interview. What makes India special for IBM? In general, but particularly from an innovation perspective?

India is, indeed, the second largest organisation of IBM overall. Not just the research part of it, but the overall organisation. There is a very vibrant domestic market that IBM wants to get into.

There are a lot of great opportunities for delivering services to our global clients from India, given the amount of talent we have there, and given the amount of capabilities and infrastructure we have there for services. So IBM has decided to strategically invest several billion dollars, in fact, over the next several years to build up that capability and to make it a strategically important cog in the overall IBM wheel.

Understanding the needs of people who have a very different perspective on life, designing technologies and business models around those technologies to address that kind of market is opening some new doors for IBM. The main focus areas that we have for our Indian group, I would say it’s two major areas, emerging mobile solutions, and service delivery technologies. One is how to use the mobile phone as a platform for delivering a whole range of services.

The other major area is, how do we make this idea of global delivery, of services to our vast customer base around the world more effective and more efficient?

During your talk you had told us about Spoken Web. Could you say a little bit about that again?

The Spoken Web is a very special project for us, because it has opened a potentially new opportunity for IBM to enter into these kinds of emerging markets. We have experimented with the Spoken Web now with several small pilots around the country. We think that if we were able to scale this platform to the emerging market scenarios that we’re interested in, we would be able to dramatically transform the kind of IT services that were available to these markets, just like how the regular worldwide web transformed the way the developed world approached IT based services.

Who gets to pay for it? Do consumers pay for it? Do you get other corporates to partner with you in paying for it? Or do governments get involved?

There’s going to be aspects of it that will be provided potentially freely by public service organisations, governments, or NGOs, and so forth. There’ll be aspects of it that will be privately delivered.

People talk about some of the challenges in terms of access to talent. You mentioned not many PhD students coming out potentially from top institutions. Are these challenges for India? And would they have an impact on IBM going forward in terms of innovation?

They are definitely challenges for IBM. And not only for IBM. For the rest of the IT industry. There is a lot of investment in terms of developing the talent. And one example I’ll pick over there is this whole idea of service science that is a key new discipline, we believe, to develop talent for addressing the needs of IBM definitely, but not only IBM for the entire IT industry in India, where we think we need to build the right programmes in academia around the country to generate people who have a deeper understanding of what it means to deliver services and design services so that when they get into the industry, they can be productive from day one.

We’d like to invest more in these kinds of partnerships with institutions to have a long term pipeline that has developed.

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