Voices for Innovation Strategic Meet, 15 December, 2006, New Delhi, India

The Prosperity through Innovation—Strengthening Entrepreneurship, Enterprise Ecosystem meet was organized jointly by Voices for Innovation (a platform by Microsoft), VIKAS, CSDMS, NMCC and Clusterkraft. The meet took place on 15th December, 2006 in Ambassador Hotel, New Delhi (near Khan market), India. The motive behind the meet was to share and disseminate knowledge from experts in the areas of small and medium enterprises (SMEs) and information and communication technologies (ICTs) to promote cluster development, entrepreneurship and innovation. Ms. Jayalakshami Chittoor from the Centre for Science, Development and Media Studies (CSDMS ) opened the session by briefly introducing everybody about CSDMS. She informed that Voices for Innovation offers an online knowledge-sharing platform for the knowledge workers, which is relevant for entrepreneurship and innovation.

Honourable Union Minister of State (Independent in-Charge) for Science and Technology and Ocean development, Government of India Shri Kapil Sibal talked about the importance of innovation in the era of globalization, where market forces play a key role in diffusion of technology even in the rural areas. He said there is a need to see how global changes in technology affect lives, even in the rural hinterlands. He said that small-and-medium manufacturing enterprises play a key role in generating employment. In order to boost productivity, SMEs (small and medium enterprises) do depend on IT since usage of IT reduces transaction costs and improves productivity. The usage of IT also helps in communicating. The SMEs exists in various sectors of the economy such as information technology, textiles et al. There is need to have a legal framework to ensure investment in small and medium enterprises. There is also the need to look how the knowledge economy works. Mr. Kapil Sibal emphasized the need for cluster development at the village level, where IT can play a key role.

Shri Govindarajan (Member Secretary, National Manufacturing Competitiveness Council, Government of India) said that the economy of a modern nation under the modern development paradigm shifts from agriculture, to manufacturing and finally to services sector, over time, which means that at the initial stage of development, a majority of the workforce depend on agriculture, and the primary sector contributes the major portion of the gross domestic product (GDP). In the second stage, the majority of the work force depends on manufacturing (the secondary sector), and the majority of the GDP comes from manufacturing sector. In the final stage, services sector hold a majority of the workforce, and it contributes a major portion of the GDP. The economy reaches the final stage when the majority of the work force is skilled and the economy is termed as the knowledge economy. What has happened in the case of India is that the economy has entirely jumped from the initial stage to the final stage, leading to social tensions, since a large part of the population are lacking basic amenities like literacy, housing et al. The employment elasticity in the case of manufacturing sector has fallen between the successive NSSO (National Sample Survey Organisation) surveys. This can explain the case of India’s jobless growth scenario. Moreover, India’s manufacturing sector has not grown because of lack of competitiveness, access to capital and redundancy in technology at the firm level. There is a need to see how innovatively ICTs can be used in small and medium manufacturing units, and how ICTs affect productivities of SMEs. Investment in SMEs can be done through public-private partnership mode.

Mr. Doug Hauger (COO, Microsoft India), spoke about the use of ICTs in an innovative way to boost economic growth. He informed that mostly innovation happens in an informal way in small companies/ firms. He said that innovation ecosystem faces challenges. There is need to look at issues like patents, intellectual property rights, and taxation. Patents, copyrights and intellectual property rights help innovators to innovate, since they act as incentives to create new product. The tax structure should be such that it helps the innovators. He said that Voices for Innovation is a platform for the community to participate and exchange ideas and provide solutions to problems.

Ms. Sheetal Mehta (CEO, Innovative Social Ventures) gave an extensive presentation on innovation, entrepreneurship, policy making and IT. She said that there is a need to define innovation, whether it is a new one or a ‘fix it’ type. There is also the question of accessibility to resources (both economic and non-economic) and for innovation to take place. Experience plays a key role in innovation, since intrinsic knowledge is related to experience. For innovation to take place there is need for funding (both fixed and working capital), incentives to patent, adequate infrastructure and skilled labour. The return on innovation should be measurable for monitoring, deriving conclusion and planning. There is a need to look at the sustainability (economic) aspect of innovation. The main inhibitors of innovation are wrong government policies, and entrepreneurship culture. Ms. Mehta said that in order to generate innovation, there is need to look at the ‘ecosystem’ which comprise of the government, academics, corporations, financial influences (venture capital), entrepreneurs, ISVs, SMEs and analysts. There is need of co-opetition (or cooperation) instead of competition. There is a thin line of difference between social entrepreneurship and innovation. No longer greed (or profit motive) among the firms is termed good. Instead, day-by-day, firms are going for creating social goods, such as following environmental standards. Karma is a principal of action but innovation is about creating changes. Innovation is not about reacting to change. Corporate social responsibility is done for innovative social welfare as is being promoted by the UK government. Under the global entrepreneurship programme, dealmakers are going global. There is need to access smart money (venture capital), and promote technology and life sciences. There is also the need for attracting and matching talent. In UK, there had been efforts to enhance the entrepreneurial gene pool in United Kingdom. In India, efforts have been taken to promote economic growth through foreign direct investment. But now there have been efforts to look into areas like human capital, R&D, and spin offs. Innovations have taken place in sectors like Information Technology, biotech, wireless, semiconductor and pharmaceuticals. SMEs constitute 90% of all industrial units, 40% of industrial output and 45% of formal industrial employment. There is need to look at MINE Relief, Capstan Learning, Voices for Innovation. Ms. Mehta also mentioned about the launch of IMEA VFI, where there had been partnership at the local and at the global level. What is needed by the private sector is to initiate the process of dialogue with the government. For enhancing growth, there is need to implement innovative technology, and focus on competition. There should be focus on working together and closer. There is also the need to engage in prosperity thru innovation, and strengthening entrepreneurship.

Prof. Richard Duncombe (IDPM, University of Manchester) spoke about the ICT in strengthening innovation and entrepreneurship. He said that innovation should be seen as a change process. There are standard models for innovation. If somebody is working in the area of SMEs, there is need to look at the mature manufacturing sector, who have a strong domestic and export orientation, and face increasing global competition. The key driving force for innovation is determined by low ICT knowledge and skill. There is also the need to look at regenerated manufacturing base with greater competitiveness, productivity, export market and R&D, as they determine SME upgradation and development. The key internal drivers for ICTs are leadership and strategic focus. The key external drivers for innovation are market and customers. The constraints for innovation are generic constraints (that affect all firms) and specific constraints (largely internal and firm specific). The resistance to change can also become constraint for innovation.

Mr. Richard Duncombe said that the problems with standard model are:

Tend to be supply driven and technology led.
Over-simplifies complex innovation processes (push-pull)
Fails to distinguish between sectors and size.
People create change not technology
Ignores social dimension

For developing SMEs, one needs to keep in mind the above five factors (i.e. Organizational Readiness, Managerial Capability, ICT Capability, Motivation and Value Chain Positioning.) along with forward and backward linkages.

The key soft factors for developing SMEs is to emphasize upon:

Motivation—Respond to incentives via more effective commodity chain positioning
Awareness—Management Practices (e.g. intellectual property rights)
Leadership—Foster vision and commitment
Human resources—Key ingredients—can consider outsourced solutions (ISPs/ ASPs)—control and internal capability should be retained in the business
Financial Resources
Managerial Capability—the ability to link innovation

Policy suggestions by Mr. Duncombe were:

Support the enabling environment –manufacturing and social enterprise sectors (macro level interventions)
Awareness raising among SME support agency staff about the role of ICTs for productivity and competitiveness
Develop demand driven information services incorporating e-partnership
Develop an authoritative knowledge base of good practice on ICT innovation in SMEs.
Support the development of the localized ICT sector and ICT technical capability and the localization of IT support sector with a sustainability component

The meet ended with a discussion by participants (including the audience) to be followed by dinner hosted by the Centre for Science, Development and Media Studies (CSDMS).