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Category: Technology

  • The Potential Of India’s Offline Market

    India is a unique economy in many respects. Though Indians conduct cutting-edge and mission-critical research for Fortune 500 corporations, few Indians actually think of building products that compete with them. While the print medium is dying in other parts of the world, leading print publications such as Forbes, Entrepreneur, Harper’s Bazaar, Technology Review and even celebrity gossip rags People and Hello! magazines have launched print editions specially for the Indian market.

    While the rest of the world has seen a boom in online media and social networking, India, which has less than 80 million Internet users in a population of over one billion, has seen meteoric growth in traditional electronic and print media over the decade. As Europe and the US debate the virtues of distributed power and how the electricity grid can be upgraded, India is starting with a clean slate. Large swathes of the country are still far away from grid connectivity or are shrouded in perennial power cuts.

    In a nutshell, the rules and principles which would work in markets in the West do not apply directly to India. Over the last few weeks, I came across a few companies that represent the potential of India’s “offline” market.

    Large parts of India are still not connected to the electricity grid. Sometimes the connectivity is there, but electricity supply is unreliable and inadequate. Bangalore-based Duron Energy has developed a solar-powered domestic lighting solution for exactly such areas. One of the most popular reasons consumers and families are willing to invest in purchasing Duron’s product is to enable their children to read and study after sunset. Duron is competing with the kerosene oil lamp, and is offering a solution to customers at the bottom of the pyramid who would probably never see electricity in their homes for at least a few years, even though a massive government push for infrastructure investment is already underway.

    At IIT Bombay’s Entrepreneurship Summit, there was a company called Five Shells which is developing board games. Yes, board games. Conventional wisdom dictates that board games are dead. After all, we live in the era of Nintendo Wii, PlayStation Portable and Xbox 360. Games these days should be developed exclusively for console systems like the Wii and Xbox, and hand-held devices like the PlayStation Portable, iPod Touch and even the iPhone.

    Except that in India, the conventional wisdom doesn’t quite apply that neatly. Most of the consoles and hand-held devices are priced way beyond the reach of the average Indian. It costs a great deal of money to purchase electronic hardware, which can cost tens of thousands of rupees, and supplement that with game title purchases, which start at a few thousand rupees. In short, the spending required is simply beyond the budget of the average family.

    Hence, there is clearly a huge market for inexpensive and fun board games priced at a few hundred rupees, assuming a small percentage of Indians enjoys playing board games. Moreover, few companies are designing board games keeping in mind India’s history, culture and consumer tastes.

    Why should Indian consumers only have a choice between Risk and Monopoly? Having said that, designing and marketing board games is no mean task. It requires an incisive understanding of consumers tastes and psychology to produce a game that is fun and easy to play. A company like Five Shells would also do well to protect indigenous intellectual property, and should avoid producing cheap knock-offs of game ideas from abroad, focusing on innovation and new ideas instead.

    Another company that is innovating in an allegedly dying industry is ReleaseMyAd. Founded by former Microsoft employee and Wharton School graduate Sharad Lunia, ReleaseMyAd allows customers to take out print classified advertisements in newspapers from across the country using the Internet, eliminating the cumbersome process of finding and coordinating with a local agency. Print classifieds have been transformed from a billion dollar business into a million dollar business by the likes of Craigslist, but in India, print still rules.

    The death of print has been greatly exaggerated. In India, no website comes close to the reach and readership of a newspaper, and the old-media print classifieds market stands at some $300 million. ReleaseMyAd charges nothing extra to consumers for its service, and is in fact growing the market for print classifieds by providing those who wouldn’t otherwise use print classifieds an easy, seamless and transparent way to do so.

    Focusing on technology for the sake of technology can result in missed opportunities. Both entrepreneurs and investors would do well to remember that India is different. Those that build companies addressing this market’s unique and specific needs will be the ones that emerge as big winners.

    Originally Published: http://navam.in/1o9kz9s

  • The Global Innovation Challenge

    Rising unemployment and income disparity has shaken democracies across the Western world in the last year. Unemployment among young people in particular has been persistent and pervasive — the United States saw the highest ever youth unemployment in 2011, and it has reached as high as 45 percent in Spain. Job creation has suffered not just because of excessive debt. Advanced economies have seen a massive erosion in manufacturing, and new enterprises have been too focused on driving consumption.

    Internet companies have mushroomed in Silicon Valley thanks to the low cost and ease of building products for the Web. They’re able to scale globally while maintaining a relatively low employee headcount. The year 2011 was a landmark one for Internet companies, with several start-ups going public and raising over $3.5 billion in the best year for initial public offerings since 2000. Among the biggest ones to do so in the United States were LinkedIn, Zynga, Groupon and Renren, a Chinese social networking site. And Facebook’s recent filing for a $5 billion public offering could make 2012 the best year for Internet I.P.O.’s since the dot-com days of 1999.

    But all these companies thrive on aiding consumption, whether it’s through gaming, social networking or group discount buying.

    In contrast, production-oriented technology sectors in health care, advanced materials and energy have had limited success in America. Most ventures in clean technology have absorbed large amounts of capital and have yet to show returns for investors. Many that have managed to grow, like A123 Systems, which manufactures advanced lithium-ion batteries, and Tesla Motors, aren’t very profitable. The success of consumption-driven Internet start-ups has left production-oriented ventures behind.

    It’s technology that ensures equitable growth. Think of how mobile phones are ubiquitous across the developing world: there are over five billion cellphone users worldwide. Would it have been possible for all of them to have landline telephones instead? Would there be enough copper in the world to draw wiring to even the poorest day-wage laborers in India and China who today use cellphones? Even if the world had enough copper, could it all be mined quickly enough with limited environmental impact, and could it be devoted to laying telephone lines for a customer of meager means? Almost every modern day convenience that the West takes for granted will have to be re-engineered to make it cheaper and better for large-scale use in the developing world.

    There’s a dichotomy here. The advanced Western economies aren’t able to create jobs partly because of their inability to compete with Asia when it comes to large-scale manufacturing, and this has in turn limited their ability to scale production-oriented technology companies. In the East, the emergence of manufacturing — and in India’s case, I.T.-outsourcing — has created higher incomes, a stronger consumer culture and the need for energy and resource efficiency. Rapid urbanization and industrialization in the developing world are irreversible trends. There are suddenly billions of consumers in Asia who can now aspire to the standard of living in advanced economies, and meeting this demand will require a giant leap of innovation across sectors like energy, chemicals, health care, transportation, water and materials.

    But emerging markets lag in innovation because their entrepreneurship ecosystem, higher education institutions and research infrastructure are far less robust. Above all, entrepreneurship is celebrated in American culture and business failures aren’t looked down upon. Silicon Valley is the product of this culture — like French cuisine and Indian classical music, it cannot be cloned. As the world’s innovation engine, Silicon Valley should lead the way in commercializing game-changing technologies that can ease constraints on the world’s resources and enhance production. Instead, it has found more success in ventures for the consumer market.

    But start-ups must be close to their customers, and there’s a case to be made that industrial and clean-tech start-ups in Silicon Valley have been hard-pressed for success because their real customers are in emerging markets. From an economic standpoint, climate change and resource efficiency are more the problems of developing nations. Moreover, as the bankruptcy of American clean-energy start-ups like Solyndra has shown, innovation that needs to be propped up by governments is difficult to sustain.

    Similarly, consumer Internet ventures in emerging markets are only able to clumsily copy ideas from abroad. Though there is a rapidly growing middle class with Internet access in India and China, the United States still has the world’s largest and most affluent consumer base, making it a natural pioneer for consumer Internet innovation.

    The Internet is challenging the hegemony of nations. An Internet start-up in any country can reach consumers worldwide because of the platform’s openness. But the same isn’t true for production-focused start-ups. Greater economic integration and free trade will help them globalize more easily. To foster innovation in production-oriented sectors, nations need to champion the freer flow of technology, labor and capital and create institutions and laws that promote the same openness. There needs to be a symbiosis between entrepreneurial talent, investment capital and sectors that are in need of transformational innovation. Only then will global economic growth be truly inclusive and harmonious.

    Originally Published: http://navam.in/ZD1ODE

  • India Needs Infrastructure For World-Class Research

    When Dr. Venkatraman Ramakrishnan was announced as one of the winners for the Nobel Prize in Chemistry last year, the nation erupted in celebration. The president and prime minister formally acknowledged and congratulated Dr. Ramakrishnan’s achievement. The media went into a tizzy documenting the life and work of the typically shy and introverted professor who suddenly found himself at the center of attention in the land of his birth. Encomiums poured in from all quarters, and Dr. Ramakrishnan was so overwhelmed with the reception that he actually asked people from India to stop contacting him with congratulatory messages and good wishes, to which some in India took offence. Dr. Ramakrishnan emphasized how it wasn’t important that a person from India had helped understand ribosomes, which are the protein-producing factories in cells, and it was significant because it was a fundamentally important scientific discovery. It was easy to feel the excitement he felt in doing his work from the choice of his words, and his almost blasé attitude towards winning the highest prize in his field made the honour seem incidental.

    Venkatraman Ramakrishnan was born in India in 1952, shortly after Independence. He graduated from the Maharaj Sayajirao University of Baroda in 1971 with a BSc in physics. He then obtained a PhD in physics from Ohio State University in 1971, and went on to study and conduct research in biology at the University of California, San Diego and Yale University. Dr. Ramakrishnan switched from physics to biology late in his academic career, and his work on understanding the structure of ribosomes after completing a PhD in physics won him the Nobel for chemistry. Today, he leads the group working on understanding biological structures at Cambridge University’s Laboratory for Molecular Biology, the same laboratory where Francis Crick and James Watson discovered the structure of DNA in 1953.

    It is instructive to ask the question why Dr. Ramakrishnan chose to the leave the country in 1971. If Dr. Ramakrishnan stayed in India after completing his studies at Baroda, he would not be able to conduct the cutting-edge research that he did in laboratories across the US and UK because India lacked the research infrastructure, even though a full generation had grown up since Independence was achieved in 1947. Moreover, it would have also been almost impossible for him to build a research career in biology after completing a PhD in physics. It is likely that Dr. Ramakrishnan would not have been able to do the work which ultimately won him the Nobel if he had remained in India. Science would have been poorer.

    Nanotechnology is an enabling technology, and is based on the design and engineering of materials at length scales of below 100 nanometers to obtain unique and novel materials properties that would otherwise not be achievable. It’s common experience that a cube of sugar takes much longer to dissolve than the powdered form. Certain material properties are size-dependent, and it is this principle that is at the core of all nanotech innovations, which are rooted in breakthroughs in basic sciences and engineering.

    Recently, clean technology has become an area which is seeing the widespread application of such novel materials, including nanomaterials. Venture capital investment in nanotechnology and materials-based technologies has increased at a rate of over 40% annually worldwide since 1997, according to New York-based research firm Lux Research. India received just 2% of global venture capital investment in 2008, compared to 10% for China and 4% for Israel, a nation whose economy and population is many times smaller. As Asian countries such as China and India industrialize, productivity gains and process efficiencies derived from advances in nanotechnology and advanced materials will be critical to ensure that the consumption of naturally-occurring minerals and commodities is optimized and waste is minimal.

    According to numbers published by the Government of India’s Department of Science and Technology, investment in research and development has languished between 0.85% and 0.90% of GDP since 2000. Moreover, since 1998, private sector investment in R&D has grown substantially to contribute over 25%, while government investment has declined. This means that while tax receipts have increased in the period alongside the boom in the economy, the government’s research funding has declined in relative terms and the gap has been bridged by the private sector. The bulk of R&D investment has traditionally come from the government, and this imbalance is being corrected, but nevertheless there is a case for increasing government investment.

    The substantial growth of the economy has not seen a commensurate increase in the establishment of more science and engineering universities and government R&D investment. Instead, we have seen a rationing of existing supply, with increased reservation of seats at the IITs and other centrally-funded universities, policies which can compromise merit and quality. We should be focusing on increasing capacity to such an extent that everyone has opportunity and nobody is left behind.

    Nanotechnology also presents some unique risk management challenges for health, safety and the environment. These real and perceived risks must be duly evaluated within a well-defined regulatory framework, else nanotech might go the way of genetically-modified foods. International cooperation has been strong in this area, and India should work with the international community to formulate appropriate standards.

    It is not just the dearth of financial capital which makes building nanotech and advanced materials businesses very difficult for entrepreneurs. Another severe constraint has been that of human capital – high-quality scientists and engineers, like Dr. Venkatraman Ramakrishnan, have frequently chosen to live and work abroad, given the lack of access to leading-edge equipment and low budgetary allocation for research in science and engineering. The Indian Institute of Science (IISc) and the Tata Institute of Fundamental Research (TIFR), two of the nation’s leading research institutions, were established by private trusts controlled by the Tata Group. Much before the IITs, the Birla Institute of Technology and Science (BITS), Pilani opened its doors in 1929 in the middle of the Rajasthan desert, offering courses in engineering from 1946. Indian science owes a lot to the vision of industrialists J.N. Tata, G.D. Birla and J.R.D Tata, who played key roles in the establishment of IISc, BITS and TIFR.

    If India’s best brains choose to work abroad, that’s where they also create new knowledge and technology. A self-perpetuating cycle begins, with talent gravitating towards places offering cutting-edge equipment and infrastructure, sufficient research funding and a high-quality pool of human resources. For most of the 20th century, the United States was that nation, and the US continues to be the world-leader in technology development and commercialization.

    The United States had a similar experience precipitated by the Second World War. Before and during the War, many leading European scientists fled the continent and made America their new home. Among them were titans like Albert Einstein and Enrico Fermi. Moreover, scientists from India and China also went west, with socialism in India and Maoism and the Cultural Revolution in China stifling the freedom and creativity of scientists like Dr. Ramakrishnan. The US became the destination of choice for the world’s top scientific talent.

    Today, Indian scientists, who are doing some of the most important scientific research work in corporate and academic laboratories abroad, are thinking of returning to their home country. India must capitalize on the converging trends of recent economic turmoil in the developed nations, the rise of a consumer class in Asia and the movement of the center of gravity for economic growth towards the Asian countries. Unforeseeable events and good fortune have presented us with a golden opportunity, and it must not be frittered away.

    China began changing its approach towards higher education in 1977, when Deng Xiaoping reinstated the Gao Kao university entrance examination system suspended by Chairman Mao. In the last three decades, China has become a hotbed of science and engineering research. According to data from the World Intellectual Property Organization, China was granted nearly 68,000 patents in 2007, while India did not even cross 8000 patents. China implemented over three decades ago the kind of reform India is attempting now under Education Minister Kapil Sibal, and the results are there for all to see.

    India is not just a technology deployment market. We have a rich history and culture of scientific inquiry and achievement and there is no reason for it to be any different in the future, but India needs to proceed on a war footing if it is to realize its potential to lead the world in technology development and commercialization. Unlike any other country, we have the scientific and entrepreneurial talent, and what is required is consistency and commitment in government policy. World-class research conducted by universities, higher-education institutions and national laboratories is a key ingredient to catalyze businesses built around nanotechnology. Policy for nanotechnology cannot be constructed in a vacuum and should be designed keeping in mind the accompanying environment where the research, which is the bedrock of this emerging technology, is conducted.

    This means ensuring that there are plenty of universities, and cultivating a culture of academic freedom and flexibility, the kind that Dr. Venkatraman Ramakrishnan enjoyed when moving from physics to biology. Errors made earlier which drove talent like Dr. Ramakrishnan’s away from the country must not be repeated. The existing environment has to be changed and it should be done not by piecemeal reform but wholesale liberalization. The government should be setting minimum standards for higher education institutions and playing the role of an incorruptible referee only. Once that happens, we will see a more thriving ecosystem of nanotechnology and advanced materials research, commercialization and entrepreneurship which will increase productivity, generate wealth and create employment.

    MarketWatch

    Nanotechnology is the design and engineering of materials at a length scale of below 100 nanometers to acquire materials properties which would otherwise not be achievable. Nanotechnology is an enabling technology and can be best understood as value chain of nanomaterials, which are used to make nano-intermediates such as fabrics, coatings, memory chips and mechanical components.  These nano-intermediates in turn go into creating unique nano-enabled products as diverse as stain-resistant apparel, machine tools with extraordinary strength, aerospace components that are lighter and more durable and electrodes which multiply the power and efficiency of batteries used in electric vehicles.

    Going by that working definition and standard, India does not have any noteworthy nanotech ventures. There are a few companies who claim to be manufacturing nanomaterials and nanotech-enabled products, but because of the hype associated with the sector, companies say they are in nanotech without really understanding the technology. Having said that, India does have a number of promising start-ups in the broader advanced materials space. I have personally seen some very talented teams and high-potential ventures at IIT Delhi, IIT Bombay and IIT Kharagpur in particular. Worldwide, the market size of nano-intermediates which allow for the development of unique nano-enabled products should grow from $29 billion in 2009 to $498 billion in 2015, a compounded growth rate of 61%, according to consulting firm Lux Research. In the nanotechnology value chain, nanomaterials manufacturing has been highly commoditized and has seen the entry of global chemical manufacturers. Building a nanomaterials business has proven to be difficult and start-ups in the US have learned the hard way. Increasingly, nano-intermediates seems to the space where new companies can create a niche by applying commodity nanomaterials manufactured by bigger players in innovative ways.

    The big success story to come from the nano-intermediates space is US-based A123 Systems, a manufacturer of lithium-ion batteries used in electric vehicles. Founded in 2001, A123 took an innovation in battery electrodes developed in the labs of MIT’s Dr. Yet-Ming Chiang and applied it for lithium-ion battery packs powering electric vehicles, offering better safety and performance characteristics at a competitive price. A123 Systems received venture investment of about $300 million from firms like Sequoia Capital, North Bridge Venture Partners, Procter & Gamble, CMEA Capital and General Electric. The company went public last year, and jumped 40% on listing on the NASDAQ. Even now, A123 boasts a market capitalization of over $2 billion.

    As Indian industry matures and becomes more competitive, Indian corporates too will look at adopting and assimilating leading-edge technologies in their products. It is also crucial to encourage market competition as a part of economic policy, because only then will larger corporates be driven to take risks and embrace innovation. It is no coincidence that sectors such as software, Internet and telecommunications, which see the the big chunk of venture investment and are among the more dynamic, innovative and high-growth sectors in India’s economy, are also the ones relatively less constrained by bureaucracy and red-tape.

    India’s ecosystem for nanotech and advanced materials companies is still evolving, and is relatively under-developed compared to other sectors such as Internet and mobile value-added services, but given the latent talent in the area and the investor appetite for themes and sectors separate from Internet and telecommunications, nanotech and advanced materials should see more entrepreneurial activity and venture capital investment in the coming years, assuming prudent policy-making in higher-education and the liberalization of the economy go hand in hand.

    Originally Published: http://navam.in/S7KRMI

  • Harnessing India’s Technological Potential

    Over the last decade, clean technology and nanotechnology have emerged as prominent investment themes in venture capital.

    According to New York-based research firm Lux Research, venture capital investment in cleantech and nanotech has grown at about 40% annually since 1997. Rapid advances in the physical sciences and materials engineering have ushered in everything from hybrid-electric cars and lighter airplanes with substantially enhanced fuel efficiency to eco-friendly specialty chemicals and stain-resistant apparel.

    As China and India industrialize, there is a glaring need for such innovation to ensure that limited natural resources are consumed with high efficiency. Venture capitalists have a key role to play in fostering that innovation.

    VCs typically consider India to be just a technology deployment market. That view is too narrow: India has not just the entrepreneurial competence but also the scientific talent to invent and lead in science-driven innovation.

    The American model for technology commercialization has proven to be highly successful. Corporate giants such as Hewlett-Packard, Genentech and Google took root at universities.

    More recently, President Barack Obama unveiled the government’s biggest infrastructure investment plan since the creation of the U.S. highway system with energy efficiency as its cornerstone.

    Prof. C. N. R. Rao, chairman of the Prime Minister’s Scientific Advisory Council and one of India’s most distinguished scientists, has worked tirelessly for the cause of science education and research, recently obtaining a grant of over $200 million from the central government for fundamental research in materials science and nanotechnology. When I met him in July last year, he lamented the lack of enthusiasm for science and technology in India, and commended China’s nationalist zeal for building prowess in high-technology.

    There is no dearth of scientific ability in India, but Indians prefer to work in laboratories abroad thanks to the lack of cutting-edge infrastructure in their home country. What’s missing here are incentives for innovation and entrepreneurship.

    The Indian government has promoted investment in renewable energy sources such as solar and wind, and these sectors are beginning to see some traction. However, India is still way behind both the U.S. and China.

    Economist Joseph Schumpeter feted the entrepreneur as the growth-driver of an economy, the “wild spirit” who would cause creative destruction by innovation and disruption. A market-based mechanism must be adopted, but the government has a vital role to play in setting effective policies. The government should invest in basic scientific research and introduce reforms in higher education, allowing for the creation of more world-class universities.

    Culturally, Indian scientists are hesitant to partner with entrepreneurs and external investors. For some Indians, the traditional concept of education clashes with the notion of commerce. Profit is still a dirty word in India’s academic circles. This malaise is partly caused by the red tape stifling Indian educational institutions.

    Basic mechanisms for technology transfer are absent or deficient at leading Indian universities. When the appropriate systems are in place and research institutions are forthcoming, venture capitalists and entrepreneurs can license and commercialize technology, moving it from the lab to the market. Taxpayers get a return on their investment in the form of better products and increased productivity if investors and entrepreneurs are able to beat the odds and succeed.

    Otherwise, research remains research. IIT Delhi and IIT Bombay have taken the lead by establishing sophisticated infrastructure for technology transfer and venture incubation. I’ve seen technology transfer offices at some of the world’s leading universities, and the offices at these two Indian institutions are comparable to the best. Others would do well to follow their example.

    The next step should be the establishment of a national group to represent the voice of science-driven innovation, on the lines of the Indian information technology industry’s Nasscom. With prudent government policy and a thriving ecosystem, private capital can kick-start the transformation of laboratory inventions into marketable products.

    India missed the information technology and electronics manufacturing wave. If India is to transform itself from an economy driven by agriculture and services to one with high-technology industry and manufacturing as its bedrock, it should put in place effective policies to ride the new Schumpeterian wave of creative destruction driven by physical sciences-based technology.

    Originally Published – http://navam.in/1iL8eTr