Why digital innovation flourishes in India...

Last month, I had the pleasure and honor of traveling as a member of German Vice Chancellor Dr. Robert Habeck’s delegation to India. While a significant portion of the minister’s agenda was around achieving consensus to fight climate change and to assess India’s opportunities for additional foreign direct investment from Germany, he also put a special focus on digitalization and innovation.

Robert Habeck opened the Indo-German Business Forum in New Delhi to discuss opportunities between both countries for areas of?#digitization,?#greentech,?#supplychain?resilience,?#skillgap, and?#codevelopment. I moderated a panel on #IndoGerman?opportunities around digitalization with? Sindhu Gangadharan , Debjani Ghosh ,?and? Elisabeth Staudinger . The three outstanding panelists gave different testimonies regarding India’s opportunities when it comes to innovation, digitalization, ventures, and so on. The next day, a panel of 15 start-ups from India was moderated by Minister Habeck in a charming and insightful way, giving the audience at BASF India R&D Center even deeper insight into the opportunities that the eco-system of young start-ups and unicorns would give German companies. There were amazing stories laid out by CarbonCraft , ReUpyog , upGrad , and Purplle.com , to name just a few.

For me, it made me wonder why such innovative ecosystems flourish in some countries and not in others. What is the “secret sauce” that makes innovation possible in places such as Bengaluru, Mumbai, Berlin, Beijing, or San Francisco, and why don’t we see it in other cities around the globe of similar size? Bengaluru, Chennai, Delhi, and Mumbai are all listed in the top 100 of the “Global Innovation Cluster” ranking.

As I mentioned in a previous post, if one would look at the usual “suspects” on the lists of innovative countries, such as the 2023 Ranking by the World Intellectual Property Organization (WIPO) the so-called Global Innovation Index 2022 (Global Innovation Index 2022 (wipo.int)), one would find India only on the global ranking #40, which is surprising. But if one looks into the details of that ranking, it includes many macroeconomic topics, such as market sophistication (where India is listed #18) and infrastructure (Rank #78). Obviously, it does not make sense to compare super-highly developed countries like Switzerland, Sweden, or the US with countries that have much lower income levels, and therefore the investment in research institutions, infrastructure, or mechanisms easing the go-to-market are somewhat less developed. However, if on looks at WIPO’s Global Innovation Index adjusted to the income levels of an economy, India ranks first in countries with a “lower-middle income.” Bengaluru, according to the start-up links, ranks first in India and eighth worldwide for its start-up ecosystem.?

On the other hand, India’s patent ratio is far below that of other countries, such as Korea, Japan, or Germany, and far away from the US or China. India’s total patent applications are close to Italy’s or the Netherlands in number (around 40K p.a. on average for the last three years), in total China’s companies and institutions have filed 30 times more patents than their Indian counterparts. According to AmCham in India, the country’s spending for R&D is among the lowest in the world as a share of GDP. In India, R&D investment has been relatively low. In the past few years, R&D investment in the country has declined from 0.8% of the GDP in 2008–09 to 0.7% in 2017-18 (https://www.niti.gov.in/sites/default/files/2022-07/India-Innovation-Index-2021-Web-Version_21_7_22.pdf).

So, despite these obstacles, why does India have flourishing, innovative start-up systems? The first thing that comes to mind is simply that one should never look to the “status quo” to serve the trend. In 2015, India’s ranking in the WIPO Global Innovation Index was 82; now, it’s 40, the strongest jump of all nations in that ranking. And, as this trend fuels further innovation, there is no reason to believe that it will stop in the next years. Probably, India will soon break into the top 20 nations when it comes to innovation.

Second, India has the benefit of its massive knowledge base, which is an unmatched pool of highly motivated talent. According to the World Economic Forum (WEF), the number of annua STEM graduates in China is about 2 million, the same as in India. Both countries maintain a high percentage of STEM graduates of total graduates from Universities (India: 34%, China 40% - 2016 data), much higher than the Americas or Western Europe, with Germany being the exception.

From my personal experience of having lived for 12 years in India, there is an enormous pursuit of innovation. Patented or not, innovation happens everywhere in India, from frugal innovation by the smallest firms and individuals to large-scale research success by corporations. Many experts argue that entrepreneurial ingenuity in the face of economic difficulties during the COVID-19 pandemic became even stronger. From my own experience at SAP, we have no other SAP labs in the world where so many colleagues have left us to create their own ventures, start-ups, or businesses. Many of them are very successful CEOs today!

Finally, successful?start-ups bring innovative business ideas to the market and grow them into sizable businesses. This requires not only innovative ideas, but also determination, capital, and support systems. Therefore, the fact that India was able to grow the number of start-ups by 20 times in just five years according to the Economic Times, is a completely different message from patent numbers or R&D spending. Successful companies can defend their position not only by IP protection, but also by of innovation, prototyping, agility speed, quicker go-to-market, and extraordinary customer service.

This was beautifully exemplified when Minister Habeck not only spoke to young start-ups in Mumbai, but he also included Indian unicorns in his conversations, such as Purplle.com , who call themselves India’s #1 beauty destination. The platform company was founded in 2012 and crossed a 1 billion USD market cap ten years later. As their co-founder and CEO, Menish Taneja, said in Mumbai, they differentiated themselves through a better understanding of their consumers and a superior, highly personalized shopping experience.?

In conclusion, what seems to be a bit of an unexplainable miracle—the Indian surge as a top player in the global innovation and start-up landscape, despite its relatively modest rank in global IP-based or R&D spent rankings—is neither axiom nor a complete miracle. According to my experience, it is based on a unique culture, a “can-do” attitude, and extremely high flexibility. By the way, values that are shared widely across Asia and that are another angle for very successful innovation.

(Disclaimer: The ideas, views, and opinions expressed in my LinkedIn posts and profiles represent my own views and not those of any of my current or previous employers or organizations with which I am associated. Also, any and all comments on my posts from respondents/commenters to my postings belong to, and only to, the responder posting the comment(s).)