India's Next Global Export: Innovation

On a November afternoon, a dozen executives from companies including investment banks Rothschild and Goldman Sachs (GS) and tech research firm Gartner (IT) ringed a conference table in a brownstone on New York's Upper East Side. They were there to learn how U.S. businesses could develop products more cheaply and quickly by borrowing strategies from India. Speaker Navi Radjou, who heads the recently formed Centre for India & Global Business at England's Cambridge University, summed up his advice in one word: jugaad. A Hindi slang word, jugaad (pronounced "joo-gaardh") translates to an improvisational style of innovation that's driven by scarce resources and attention to a customer's immediate needs, not their lifestyle wants. It captures how Tata Group, Infosys Technologies (INFY), and other Indian corporations have gained international stature. The term seems likely to enter the lexicon of management consultants, mingling with Six Sigma, total quality, lean, and kaizen, the Japanese term for continuous improvement. Like previous management concepts, Indian-style innovation could be a fad. Moreover, because jugaad essentially means inexpensive invention on the fly, it can imply cutting corners, disregarding safety, or providing shoddy service. "Jugaad means 'Somehow, get it done,' even if it involves corruption," cautions M.S. Krishnan, a Ross business school professor. "Companies have to be careful. They have to pursue jugaad with regulations and ethics in mind." More than a Fad?The rise of jugaad raises another question: Do companies really need to pay someone to tell them something that's as elementary as keep it simple? "Having a consulting industry built around jugaad is almost anathema to the word itself," says Robert C. Wolcott, executive director of Northwestern University's Kellogg Innovation Network. "I'm not sure how this is different from old-fashioned Yankee ingenuity." Nonetheless, jugaad seems aligned with the times. Recession-slammed corporations no longer have money to burn on research and development. Likewise, U.S. consumers are trading down to good-enough products and services. Meantime, the Indian economy continues to plow ahead despite the global recession—it grew at a 7.9% clip in the third quarter—suggesting its executives have a winning strategy. Already, companies as varied as Best Buy (BBY), Cisco Systems (CSCO) , and Oracle (ORCL) are employing jugaad as they create products and services that are more economical both for supplier and consumer. "In today's challenging times, American companies are forced to learn to operate with Plan Bs," notes Radjou. "But Indian engineers have long known how to invent with a whole alphabet soup of options that work, are cheap, and can be rolled out instantly. That is jugaad." Spreading the WordAt the same time, a cottage industry has popped up to offer jugaad instruction. Prasad Kaipa, a former manager at Apple's (AAPL) in-house training university, uses jugaad in the courses he's teaching at Hyderabad's Indian School of Business. The University of Michigan's Ross School of Business, where high-profile Indian-born professor C.K. Prahalad teaches, has opened a research office near Infosys' headquarters in India so faculty members can observe how Indian software companies come up with ideas. McKinsey consultants have begun talking up jugaad principles with clients, too. Jugaad has been a colloquialism for decades throughout India. Sandeep Vij, vice-president and general manager of Cisco Systems in Bangalore who heads a new unit that makes energy-monitoring systems, says a good example is an Indian villager who constructs a vehicle to transport goats and cattle by turning an irrigation hand pump into a makeshift diesel engine for a wooden cart. Its application also can be seen in Tata Motors' (TTM) much-hyped Nano, a bare-bones subcompact car that the Indian company sells for the equivalent of $2,500 to so-called bottom-of-the-pyramid consumers who had been priced out of the auto market. "At Tata Group, we're used to thinking like this," says Ananth Krishnan, chief technology officer of Tata Consultancy Services. "The jugaad mindset is crucial. It's not just jargon." Putting Jugaad into PracticeU.S. companies are starting to put jugaad into practice. At Best Buy's headquarters, in Richfield, Minn., Kalendu Patel, the retailer's executive vice-president for emerging business, is holding jugaad workshops to help store personnel and managers come up with new products or services that could be added easily and inexpensively to generate more sales per store. Among the ideas: home health-care equipment. Top executives at Cisco, which opened what the San Jose (Calif.) company calls a second global headquarters in Bangalore in 2007, are importing the Indian mindset as they meld teams of U.S. engineers with Indian supervisors. "The innovation agenda in India is affordability and scale," says Wim Elfrink, Cisco's chief globalization officer, who moved from San Jose to Bangalore in 2007. "People are masters of managing costs down, but not creativity. If Indian engineers find out an executive has an MBA, they will say, 'Unlearn, and observe.' " The effort is beginning to show up in the marketplace. Last January, Cisco acquired Richards-Zeta Building Intelligence, a 21-year-old company whose software measures a building's energy usage through wall sensors and displays it via the Web. Although Richards-Zeta still is headquartered in Goleta, Calif., it has been managed from Bangalore, where Cisco's emerging technologies group researches real estate and energy-related software. The Bangalore staff approaches its work with a different set of assumptions than Americans typically do: that power supplies are unreliable and that demand is surging as urban populations expand. Sensing a broader market for the Richards-Zeta technology, the Indian-led teams have, in just a few months, come up with products such as software that allows companies to monitor energy consumption across all buildings on a campus or even internationally. Clients include Google (GOOG), which is using the program at its Mountain View (Calif.) headquarters, and data-storage company NetApp (NTAP), which uses it at all its properties, from Sunnyvale, Calif., to Amsterdam. Other jugaad proponents such as Kaipa of the Indian School of Business say companies are adopting India-style innovation without even knowing it. The ex-Apple researcher points out that the iPhone maker is a champ at repurposing existing ideas and technologies in simple ways which enables it to reduce R&D outlays and produce high-margin products. "Jugaad is an Indian philosophy, but it's not unique to India," Kaipa says. "Companies in all parts of the world can learn from it and make it work for them, too."

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