Biocon is setting a good example of how Indian companies should embrace polycentric innovation models
Posted on Harvard Business Review: May 31, 2011 10: 13AM
This post is part of the HBR Insight Center Making Collaboration Work.
On recent visits to India, we have found that "innovation" is the buzzword on everybody's lips. Indian CEOs and policy-makers inject this word into practically every sentence they utter. President Pratibha Patil has even declared 2010-2020 as India's "Decade of Innovation." But to ensure that India realizes its true innovation potential and achieves inclusive and sustainable growth, we suggest it may be more appropriate to make this decade the Indian "Decade of Collaboration."
As we enter the 21st century, the closed and insular innovation models of the 20th century are giving way to open and globally-networked approaches fit for a knowledge economy in which creativity and R&D talent are globally dispersed. Biocon is one Indian company that is adapting well to this new global reality by embracing a polycentric innovation model. For instance, in October 2010, Biocon struck a $350-million marketing alliance with Pfizer, the world's largest drug maker, to commercialize four of Biocon's insulin biosimilar products in non-overlapping markets globally. Biocon also sources drug molecules from other partners, especially from developing countries, such as the Cuba-based Center of Molecular Immunology (CMI).
Biocon's core competency lies in building and orchestrating global innovation networks — the cornerstone of a polycentric innovation model. Global innovation networks represent a next-generation collaborative approach to innovation built on global partnerships in which four specialized players come together to co-create and co-market new solutions — namely:
* Inventors. Inventors are engineers, scientists, or entrepreneurs who come up with an original idea.
* Transformers. Transformers, who are capable of mingling tech-savvy with business acumen, grab inventions from anywhere and transform them into market-valued products and services.
* Financiers. Financiers, who excel in spotting growth opportunities worldwide, fund internal and external invention and transformation activities.
* Connectors. Connectors are the matchmakers with a multicultural background and a global mindset who can bring Inventors, Transformers, and Financiers together and facilitate their interactions. They use their exceptional interpersonal skills to link domestic and international technical talent with global market opportunities.
Biocon has deftly mapped its own and its partner capabilities to the four aforementioned value-adding global innovation network roles. While its in-house scientists continue to invent new drugs, Biocon doesn't attempt to 'hoard' its R&D inventions but willingly shares them with partners like Pfizer capable of transforming them into global products. Similarly, Biocon doesn't suffer from a "not-invented-here" mindset: it gladly sources inventions from partner labs like the Cuba-based CMI and uses its transformation skills to manufacture and market them in India and abroad as its own branded solutions. In this fluid system, Biocon finances CMI's inventive R&D, while using the funds from the Pfizer deal to finance its own R&D and go-to-market activities.
The vision and purpose of Kiran Mazumdar-Shaw, chairman and managing director of Biocon, is to deliver affordable drugs to the masses in both India and other markets. By practicing polycentric innovation she has been able to convert that lofty vision into reality much faster than her competitors. In many ways, Shaw plays the role of the Connector in her firm's Global Innovation Network: she regularly travels abroad to link up with talented inventors like CMI and resource-rich transformers and financiers like Pfizer.
Many Indian companies we interact with confuse invention and innovation. Invention is a novel idea or new technology that can be patented or copyrighted as intellectual property (IP). But IP on its own cannot generate business returns. Innovation is the successful exploitation of that IP which yields commercial (and societal) value. Simply investing more in R&D (as many Indian policy-makers and CEOs are fond of saying they ought to do) won't make India more innovative. It will make the country more ingenious at best. To bridge the invention-innovation gap, corporate India must overcome its insularity and integrate tightly itself into the global knowledge economy. Like Biocon, Indian firms must learn to source promising ideas from abroad that can be transformed into local solutions using low-cost manufacturing talent while partnering with large foreign entities to transform in-house inventions into global solutions.
Sadly, while the media headlines trumpet Indian companies' forays abroad through M&A, our research shows that the Indian firms tend to go global more often to tap into foreign brands, markets, or supply base rather than to seek out R&D capabilities. Actually, the CEOs of two Indian corporations that had acquired well-known brands in Europe candidly told us that it's only after acquiring these firms that they "they discovered by accident the R&D jewels" locked inside these European organizations. Now these two Indian firms are enthusiastically building global innovation networks by connecting their cutting-edge European R&D capabilities with their low-cost Indian transformational capabilities.
We believe that the Indian government should play its part in helping Indian firms integrate into global innovation networks. Here are three concrete policy suggestions to shore up India's collaborative, "Connector" capabilities:
1. The National Innovation Council, chaired by Sam Pitroda, is planning to launch a National Innovation Portal to showcase Indian inventions and connect entrepreneurs across states. We suggest this Portal be made trans-national in scope, by integrating it with organizations such as the U.S. Small Business Administration so that American midsize firms can co-invent and co-transform products and services with their Indian counterparts. The Innovation Council should earmark at least 20% of the recently launched Inclusive Innovation Fund to finance such cross-border innovation projects.
2. Rather than inviting MNCs to set up 'captive' R&D units in India which employ only a handful of engineers or scientists, the government should encourage multinationals to set up lean and nimble "Connector" hubs in India like Procter & Gamble and Xerox have done. Instead of taking the traditional "captive" route of owning all R&D resources, P&G and Xerox have built innovation hubs that focus on partnering with local universities and start-ups to get scale and speed in taking their cutting-edge ideas to market both domestically and globally.
3. The Indian Ministry of External Affairs (MEA) can enable polycentric innovation by leveraging its global network of Embassies and High Commissions. Indeed, the MEA could position "innovation scouts" in embassies and consulates located in innovation hotbeds such as Silicon Valley, Boston, Taiwan, Israel, and Oxbridge who can identify and connect creative local entrepreneurs and university researchers with Indian firms. Similarly, these embassies could organize "innovation missions" to India for foreign companies eager to connect and partner with Indian entrepreneurs. By building these global innovation networks, and playing the role of an objective Connector in them, the MEA can project India's entrepreneurial "soft power" in an interesting new way.
In our increasingly interdependent global economy, (local) knowledge doesn't confer power. Instead, power stems from finding and sharing knowledge across national boundaries. Eschewing vertically-integrated, insular R&D models, Indian CEOs and policy-makers must learn to orchestrate global innovation networks anchored by collaborative partnerships. We look forward to India's "Decade of Collaboration."