Orbit Change Conversations

In the last two weeks two automobile CEOs have used interesting adjectives for Indian manufacturing. Carlos Ghosn, CEO of Renault, on his trip to India said…

“We have come here to try and implement principles of what we call frugal product planning and frugal engineering. You are not going to learn these by reading, you are going to learn them by practicing with somebody who is doing as a way of doing.”

Today Rick Wagoner, CEO of GM, expressed the same sentiment. Here is what IHT reported…

Rich Wagoner hailed the country’s thrifty manufacturing culture… India manufacturing costs are already “extremely competitive and among the lowest in the world,” Wagoner said. That is “not just due to lower wage rates. It is also a function of the Indian mentality that abhors waste - because people cannot afford to throw things away.”

This is not surprising at all to regular readers of this blog. I have been writing about the jugaad-innovation ecosystem of India. In a recent much discussed article “IT Innovation Landscape in India”, I stated that…

These repeated bounce-backs and course-corrections can be attributed to a powerful, gritty, improvisational energy that’s been running through Indian society for some time. Up in the north of India, people call it jugaad-innovation. Its core tenet is to not give up. It insists that a practical solution can be found for any problem through intense experimentation. And it encourages getting off the beaten track in search of a solution.
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When the Indian economy was closed, this type of innovation was needed to just survive. As the economy opened up, Indian industry re-purposed this jugaad-innovation to create globally competitive companies in a range of industries. For instance, most analysts, even domestic ones, had written off the Indian manufacturing sector. But it didn’t die. It transformed itself. It took on a new form. It’s now back in the reckoning. Tata Steel is a good example of this. Despite heroic odds, it emerged to become the lowest-cost steel plant in the world.
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Some people prefer to call this unmistakable innovation energy as constraint-based innovation or problem-solving innovation. No matter what you call it, this is at the heart of the strong business model and the process innovation capability that the Indian industry has today.

I go on to describe how this innovative spirit has now morphed into a whole innovation ecosystem. This ecosystem has rapidly evolved. Only twenty years back, it used to be applied to the aid of survival. Then it got re-purposed to help domestic companies deal with change and become globally competitive. Now this has made itself available to any company worldwide through outsourcing or their India subsidiary.

Gautam Mago pointed me to an article in the current MIT Sloan Management Review, “In Praise of Resource Constraints” (subscription required). It’s a breezy article about how resource scarcity drives innovation. It has some interesting examples. The one I liked is about jet propulsion…

In the post-World War II era, several American teams under General Electric Co. and several German teams under BMW AG were competing against each other in a race to resolve the jet engine performance dilemma. The stakes were high, given that Cold War had started and the West was eager to come up with reliable jet technology before Soviet Union did. The German team eventually won by proposing a radical departure from status quo, which in fact is still used today,. It developed a “bypass” technology in which the rotor blades and other engine parts most exposed to high temperatures were hollowed out so that air could flow through them, thereby cooling them off.

Whence this idea? The American team has a virtual blank check to buy whatever costly raw materials it needed to create heat resistant alloys (the Cold War jet propulsion development program cost the U.S. government nearly twice as much as the Manhattan Project). The German team, by contrast was forced to rely on cheaper alloys, as it had significantly less funding at its disposal and simply couldn’t afford the more expensive metals.

No wonder some argue that raising too much money can kill a startup!

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