India: The World's Secret Silicon Valley

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You might not know it, but a key cog in the global innovation machine is hiding in plain sight in the world's largest democracy

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Reuters

For many firms, developing new products for consumers around the world is the most visible manifestation of innovation - the "real deal." But many people still see India as a place where other people's ideas are made or executed and not where innovation begins. (After all, you don't hear about an Indian equivalent to Google, iPod or Viagra.) Bu they're wrong. In more than 600 captive research and development (R&D) centers across India today, corporations are designing and building amazing new things.

For example, GE's John F. Welch Technology Center has developed a string of technological marvels. A transparent roof spanning 300 meters without any central supports. A device to display integrated anatomical information from a CT scan with live functional information from a PET scan. A car bumper that self-destructs on impact (rather than destroying, say, the leg of an unlucky pedestrian). The markets for these wonder products are truly global, encompassing the United States, Europe, Asia and, of course, India itself.

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Similarly, Intel's R&D center in Bengaluru is its largest unit outside the United States, having recently overtaken the much older Israeli unit. Some of its work is truly "blue-sky" research. For example, the center delivered the world's first tera-scale experimental chip capable of one trillion operations per second.

In addition to GE and Intel, other global companies are also taking advantage of India's innovation skills. Indian R&D units are present in AstraZeneca, EMC, Microsoft, Philips, Pfizer and Alcatel-Lucent - providing striking evidence that Indians can "do" innovation. But global consumers rarely recognize India as the country of origin because most of this innovation is invisible. How so? The innovation occurring in these Indian captive units is visible only to other business units and is not revealed to end consumers.

To understand the nature of this invisibility, consider how new complex multicomponent products such as engines, IT hardware, or even major software are currently developed in multinational companies. Using horizontal segmentation, the various components involved are often developed in parallel, in different countries, only to be assembled at a later date. And India plays a large role in this multi-country orchestration of development of new products.

Because no country unit is solely responsible for the final result, it's difficult to associate any particular place with the innovation. Thus, the head of the GE unit in Bengaluru took great pains to state clearly that the unit in Bengaluru helped develop everything, but would not take sole credit for the aircraft engines and wind turbines. Equally important, no other R&D unit in the GE network can claim sole credit, either, which begs the question: "Where was it really innovated?"

One thing is clear: the availability of high-quality talent is a key innovation driver, and in fact, confidence in the capabilities of India's talent pool has increased. When we look to Microsoft, Bill Gates has noted: Microsoft's India center has exceeded expectations in terms of how quickly it became a contributor to the company's R&D network. This example among others indicates India has become an "unavoidable destination" for R&D and innovation centers.

Given India's historic absence from the innovation arena, many might ask how the country has contributed to outsourced innovation. The global services delivery model was invented in the late 1990s by many Indian IT companies, and this model allows for a key transformation: tightly integrated tasks formerly performed by workers in one location working for a single company now take on a distributed format, such that different parts of the work are executed in different geographies. The advantages are obvious, including the ability to (1) execute work where the best expertise exists at the lowest possible costs, (2) take advantage of time zone differences for round-the-clock efforts, and (3) achieve some level of risk diversification by building redundancy across locations.

These factors and the global delivery model have become fundamental to India's transition to an innovation destination. This process should work well for fairly routine, standardized tasks (e.g., booking flights and making restaurant reservations) as well as high-value-added knowledge work or creative work such as R&D because the global delivery model focuses not on the task itself, but whether the subtask links can be managed across distances.

With this efficient model and high-quality talent in place, India is positioned to be recognized not just for successful offshore services, but as the next global innovation hub.

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Presented by

Nirmalya Kumar & Phanish Puranam

Nirmalya Kumar and Phanish Puranam are professors at London Business School and co-directors of its Aditya Birla India Centre. They co-authored India Inside: The Emerging Innovation Challenge to the West.

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