TIME IS NOW TO END INNOVATION MYOPIA

Are you innovating enough to survive the new normal- is your thinking and action non-linear? What is your R&D orientation? The answers to these and related questions unravels an organisation’s innovation quotient

Andy Grove wrote that couple of decades back, but it beautifully, in a nutshell, defines the state of IT industry at this point in time. The traditional IT outsourcing models are aging and losing sheen by the day and its time to re-invent IT with focused innovation strategies to stay in the race. The computing industry is on the cusp of things. Many companies are struggling to make up for the lost growth and revenues as the industry by and large was caught in a disruptive nexus of forces that has manifested in an alphabet soup of abbreviations – ranging from IoT to SDN et al. Let’s go to the core question: What ails growth? Beyond the sluggish economy, it’s the lack of innovation that’s slowing down things. EVERYONE RIDES THE INNOVATION BANDWAGON Most technology leaders you meet today lip syncs ‘In-

“Not only has the basis of computing changed, the basis of competition has changed too” – Andrew S. Grove in Only the Paranoid Survive

novation’. But very little is said about what are they innovating? or How is it manifesting at ground zero? Particularly, when you look at an industry like IT outsourcing, in which every vendor has a global sourcing model- but at the end of the day, it’s a model each one struggles to differentiate.

So if you ask the IT service providers- what is your Innovation Quotient (IQ), the chances are you might not get a lucid answer- because most of the jobs they do are still linear. But sadly, the IT outsourcers here in this part of the world are measured only based on their stock and quarterly performance and many fail to look at parameters like in what ways they have innovated IT organizations with their services or how much they invested in R&D or creating CoEs and stuff like that.

But now the time has come wherein IT organizations are demanding more innovation from services providers, hence it is imperative they raise their bar by providing ‘Innovation Benchmarks’ in order to transition to the next orbit. That leads to the critical question: Are Indian IT Outsourcers prepared for this change?

The answer is by and large a very fudgy one you get. For instance, I asked a leading IT industry CEO this question, and he gave a typical reply: “The answer to your question is a ‘Yes’ and ‘No’. I left it with that, as probing further will only yield such ‘politically correct’ ambiguous answers.

All said and done this process of innovation the industry has been talking for years. And if you look at the IT industry, the only way innovation can come about is non-linear innovation- wherein the emphasis is more on IP, products, platforms, service excellence et al as against the ‘time and material’ model. But we need to accept the fact that IT services in India is still mired in linearity and it will take a while for non-linearity to kick in and every company’s dream is to grow its non-linear revenues.

INNOVATION INSIGHTS: THE R& D EDGE

Given this back drop, if we seek some answers on innovation, a Strategy& study provides some pointers. Strategy& - part of PwC Network in its 2017 Global Innovation 1000 study said, “Annual worldwide R&D spending breaks through $700bn for the top 1000 corporate R&D spenders for the first time. Almost 25% of executives surveyed reported having already experienced some pressure to change how or where they conduct innovation. Amazon is the world’s largest corporate spender on R&D at over $16bn. Alphabet surpasses Apple, according to a global survey of R&D executives, as the most innovative company and for the first time a Chinese company, Alibaba joins the Top 10 most innovative companies list. Annual worldwide corporate R&D spending broke through $700bn in annual investment, according to an annual analysis of R&D spending across 1000 global public companies by PwC’s Strategy& study.”

THE MESSAGE IS CLEAR ON THE WALL

Innovate or perish. The IT services companies need to be prepared for this change. For instance, the above study further said that large multi-national companies report that they expect the focus of their innovation efforts and investments to change significantly over the next decade – moving toward a far greater emphasis on riskier initiatives and breakthrough innovations.

“It’s been a year of highs and lows for R&D. Record levels of investment, next to unprecedented drops in

alignment between innovation and business strategies. There’s no doubt that uncertainty is causing concern for medium and long-term plans, irrespective of whether policy realities actually follow political rhetoric.” comments Barry Jaruzelski, Principal, PwC US, Strategy&.

“Although the goals and levels of investment in corporate innovation will likely not change if economic nationalism continues to develop, the global innovation model would need to evolve. At many companies, what is now a nimble, interdependent network may become a group of more autonomous hubs, hiring specialist technical talent in local regional markets and opening future R&D centers in regional markets. It could mean companies losing efficiency and taking on higher costs if it is not managed effectively,” adds Jaruzelski.

However, there are some caveats. For instance, the study also mentioned that 562 executive participants, R&D leaders expressed concerns about the growing heat of rhetoric about economic nationalism – and its potential impact on where companies invest in R&D how they conduct innovation.

Overall, 52% of respondents say that a general move toward economic nationalism will have a moderate or significant impact on their companies’ R&D efforts. Major companies have been conducting some R&D outside their headquarters countries for decades. In 2015 it was determined that 94% of major corporations conduct their R&D in multiple countries. But increasing attention on regulations and policies for visas, the labor movement, and the regulations governing the sharing of knowledge and technology are causing some companies to question how sustainable their integrated global innovation networks are.

Bottom-line: In an Indian context, for those companies struggling to put in an innovation roadmap, the time is now for decoding the innovation cliché and end myopia by infusing more granularity, action, and clarity in terms of innovation in tangible terms.