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Wednesday, April 05, 2006

Innovation Shall Get Cheaper : C.K.Prahalad

I listened to C.K.Prahalad talk on three/four different occasions in the conference starting from the preconference dinner (I also talked to him for quite sometime separately before the dinner meet) C.K’s theme for the main talk that he delivered was indeed very revealing: Interdependent Ecosystems. C.K started by tracing the origins of the Indian IT industry which has evolved from a resource provider to a player in cost arbitrage and now playing the quality arbitrage game solidified by good software methodologies. Noting that by 2010, the Indian IT industry may see revenues around 25 billion USD, he brought forth the point that there are 3000 india based IT companies having an annual revenue base of less than 20 million USD.These forces, as he sees it shall soon bring about an innovation arbitrage( centered on cost , talent & quality – it would not be displacing the valley’s innovative streak though.) (TCS chief & Nasscom president, Mr.Ramadorai also confirmed this to likely happen in a separate talk). Highlighting the fact that the Indian BPO industry employs 300,000 people, with numbers showing an increasing trend & with the country also has the largest number of approved pharma manufacturing plants (70 out of 95 approved plants are in India) and its focus on quality has won 11 Deming prizes for the country– the highest number outside of Japan. All these clearly point to a formidable ecosystem that is in the making. Many of the Indian startups work on a bootstrapping mode – following good practices to conserve capital. This being the state of progress in India, he believes that increasingly India Inc’s role is moving beyond outsourcing and are creating what he calls two interdependent ecosystems for innovation (The valley may not be in a position to survive without linkages to India in a few years from now). The logic is resource leverage with edge on quality, speed and cost would unleash intense diffusion of innovative capabilities.

CK’s thesis : looking ahead, the implication of this shall be felt in all knowledge centric areas and he thinks that like IT clusters, Pharma clusters and Auto clusters are forming in India. He finds that these clusters are geographically aligned, which means similar to the effect that Indian IT services brought to the world, in other sectors like auto, pharma etc, we may see the emergence of different business models for being successful. So he believes that in most of the industries, the innovation dependence shall increase between India and the US, source of innovation would not be necessarily the US moving forward, the indian ecosystem would attack the cost structure of fostering innovation and bring down the cost of innovation. He foresees that the forces operating at the bottom of the pyramid would unleash competitive pressures that would be felt globally. Now we know why this invisible wave is important to watch and why Ray Laneand Dave Dewalt spoke of the pressing need towards globalizing the software industry. Amazing levels of change are happening and clearly we can expect more to happen.

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