How Indian Firms Convert Intellectual Property Into Intellectual Profit
Indian firms, across all industries, are filing a flurry of patents for all of the intellectual property (IP) they've generated. For instance, Infosys was just granted two patents by the US Patent and Trademark Office for holography and mobile communications. Earlier, Tata Motors received 40 patents for the design of Nano, its groundbreaking $2,500 car, which should hit Indian roads in October 2008.
Some senior European execs that I met with this week pointed this out and suggested that India’s patent filing prowess provides evidence that the country is becoming a world-class innovator. They're right: Indian companies indeed are emerging as top-notch innovators. But they're also wrong: What proves they're world class innovators is not that they are filing patents to protect the IP they generate, but that they are damn good at monetizing the IP they generate.
These European execs’ notion is indicative of a huge conceptual difference between Western CEOs and Indian CEOs in how they define and drive innovation, and how they measure its success. For Western CEOs, IP might as well stand for “intellectual pride.” Many American and European CEOs proudly report to their shareholders that their firm was very innovative the previous fiscal year because it filed scores of new patents.
But Indian CEOs interpret IP as “intellectual profit." Patents, for them, are just an indicator of how inventive a company is, not how innovative it is. What makes Indian firms proud is not the number of patents but rather their unique ability to rapidly transform their patented inventions into profit-making assets in the marketplace, in the form of new products, services, or processes.
Take Tata Motors: its 40 patents will be useless if Tata's factories can’t transform the Nano’s design specs into 250,000 real-life cars launched on-time and under-budget. That’s why, as CIO Manish Gupta points out, Tata Motors’ innovation metrics not only include number of patents, but also “time-to-volume" and "time-to-value” for new inventions.
Given their eagerness to rapidly extract value from their cutting-edge inventions, some Indian firms don’t even bother patenting them. As Pravir Vohra, Group CTO at ICICI Bank puts it: “Patent filing is an expensive and time-consuming process that would divert our energy from transforming our inventions into business value. Our innovation strategy is all about time-to-value: our industry first-mover advantage doesn’t lie in patenting our IP, but in rapidly transforming it into a strategic market differentiation.”
I have also noticed that in the US and Europe, IP equates with “intellectual paranoia,” as Western firms tend to hoard indiscriminately all their patented inventions, even those that turned out to be commercial flops. This paranoia combined with intellectual pride also prevents Western firms from sourcing IP from external partners, thus lengthening their time-to-market and increasing their innovation cost.
More open-minded Indian firms, on the other hand, are redefining IP as “intellectual partnering.” Rather than reinvent the technology wheel in-house, Indian CIOs and CTOs rely on external providers to address most of their firms’ innovation needs, through IP licensing agreements. Take TCS, India’s largest IT service provider. TCS operates the oldest and largest software R&D lab in Asia. Yet, under the visionary leadership of its CTO Ananth Krishnan, TCS is replacing its closed R&D approach with a networked C&D (Connect & Develop) model. As part of its intellectual partnering strategy, TCS now sources more IP from an external innovation network made up of academic labs, startups, and large software vendors.
Intellectually proud and paranoid US and European companies need not worry about their Indian rivals’ inventiveness, as measured by the number of patents they file. But they must dread Indian firms’ uncanny ability to swiftly monetize IP, whether its invented internally or sourced externally from their innovation network partners.
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Navi Radjou is a vice president at Forrester Research, where he leads the firm’s analysis of how globalized innovation is driving new collaborative market structures and organizational models. He advises senior corporate and government executives worldwide on new organizational designs and public policies that their firm or region must adopt to sustain global competitiveness through technology-enabled business and societal innovation. Navi is an Indian-born French national and is based in San Francisco.
Comments
Dear Navi,
It was an excellent article depicting the Indian innovativeness. It highlighted the sign of the times of Connect & Develop; with more and more needs to collaborate and develop solutions to Energy, power, Food etc. this technique will help people collaborate and contribute.
India will contribute more to Patents in the coming years as we are still a young developing country where the needs are still not complete & that need is the mother of all innovativeness.
Hence expect more from India.
Thanks & Regards,
Punkaj Vohra
- Posted by Punkaj Vohra
June 30, 2008 2:38 PM
Interesting aspects were brought up. IP is always defined based on country's economic decisions. Its simple, India is still in the struggling stage to stand up and stand up strong, hence it would do whatever it takes to achieve. Currently, monetary need is the key to have stable, mature economy which is fueled by money and hence the drive for money is high. Western counterparts have already crossed that stage and hence Pride comes in but if we go back to history - the same can be noticed in the Current developed econmies who were then developing.
Looking forward, you would see even western countries would also start forming (some of them have already started) Connect & Develop approach to survive in highly competitive markets.
regards
Prashant
- Posted by Prashant Malhotra
June 30, 2008 11:38 PM
Hi Navi,
I'm a Chinese working in the IT industry and really impresssed by the invovation taken place by Indian IT services companies such as TCS, Infosys, Wipro, etc.
China is also a big country and doing well in many industries but innovation and persuit of patents are not very popular in our country. You will hear a lot about how we're doing and will do about innovation, but actually you won't see a lot of results. From this point, I think China really need to learn from India.
- Posted by George Liao
July 1, 2008 1:23 AM
Dear Ravi,
brilliant piece, i wonder if there is any statistic that tracks GDP of a nation to the IPs filed per sector..rgds/yogesh
- Posted by yogesh kochhar
July 1, 2008 1:24 AM
Dear Navi,
Your Perspectives were amazing and intersting.Indian Companies does have the big success stories on technology transfer / Licensing. The reason could be the legacy of Patent filings were not there, considering it as a cost. This resulted zero market for technology seller and remained as a Technology buyer. Now the CTO's and CEO's have really felt the need of the hour to protect the value generated by R&D efforts,now we see IP as Investment.
As companies invest on people more than projects.This culture has enabled the techies to create an healthy competition among their colleagues and creates a win-win situation for the indivuals aswell as the organisation.
I appreciate these IT companies who had put India in World Map for quality of Software Services and subsequently spreaded to other Industry. I am sure to note from your article that next leap by these companies to brand India as "Intellectual & Innovative India" than a "Cost Beneficial Destination".
Lokesh V
- Posted by Lokesh V
July 1, 2008 9:18 AM
It is very interesting article indeed, Navi.
The style with which some of the Indian companies approach innovation itself is very innovative.
- Posted by Ramaseshan
July 1, 2008 10:00 AM
No doubt that india has long tradition in trade and commerce , most of indian companies are unaware of IP laws and patent filings for long period of time , by tradition they monetize whatever it they invent and succeed.
only in recent years awareness of patents is spreading among Indian community, it is time consuming process to patent any inventions made in india by that time it would be imitated and patented in other form in some part the world , so as interim solutions indian companies are trying the get short payout for whatever IP they create and it could be the only solution for them.
- Posted by Thirulogachander
July 1, 2008 10:07 AM
Hi Navi,
Intellectual-Property/Pride/Partnering/Profit, which ever way it is , its sure is all about being a step ahead of your competitors in the market. India is known for as low cost destination but its time for developed nation to relook their outlook towards us. Its also about the "value".
In a globalised economy,Indian firms have taken a holistic approach, one which will drive growth, innovation and development. It started with IT, the next came Pharma companies and manufacturing companies (like Tata) are following the suit. Its all about having a sustainable competitive advantage and monetising it for the benefit of shareholders, promoters and employees at a large. the ultimate end is to gain from innovation and deploy a portion of tge gains back into R&D or to Partners for newer opportunities
- Posted by Shilpa
July 1, 2008 1:50 PM
Indian innovations take place more on floor than in any obscure R&D department. New product/service demand translates into IP and not vice versa. Low R&D budgets might be the reason why there are only revenue generating innovations...right?
- Posted by Ganesh Kulkarni
July 15, 2008 5:36 AM