India is Innovation , By: Ravi Venkatesan

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Keynote address by Mr. Ravi Venkatesan at a Microsoft seminar on 'India is Innovation'

The last few years have been exhilarating for India. It seems that the unbounded opportunities were limited only by our imagination. With each passing day, we see even more clearly, that India will soon become a developed country and the world’s third largest economy.

 But as we speak, we are confronted with enormous challenges and in the words of a prominent journalist, termites are gnawing away at our success. What are these challenges, who are these termites and how can we profit from addressing these challenges?

 Some of the key issues which need immediate attention are –

<!--[if !supportLists]-->·        <!--[endif]-->Focus on education

<!--[if !supportLists]-->·        <!--[endif]-->Creating economic opportunities for the middle and the bottom of the pyramid

<!--[if !supportLists]-->·        <!--[endif]-->Enabling the small business to compete and succeed in the global economy

<!--[if !supportLists]-->·        <!--[endif]-->Improving our infrastructure and

<!--[if !supportLists]-->·        <!--[endif]-->Most importantly helping the government in its e- governance initiatives 

A recent study by CII & WEF (World Economic Forum) visualized the India of 2025.  

The study came out with 3 different paths that India growth can possibly take:

  •  Pahale India ( Inclusive Development for entire India )
  • Bolly World ( Exclusive Development for few pockets of India)
  • Atakta Bharat (Isolation from and with the world)

In light of the future balanced growth of India, it is imperative for us to embrace a model aimed at inclusive development. IT would play a central role in this, is a well accepted fact.  

Considering that, it is quite alarming for us to know that the IT investment is only 3.5% of total capital investment. India still ranks 30 amongst the developing countries, lagging behind even Thailand, Vietnam and Philippines.  

The flip side is, that it this under investment represents a large economic opportunities for Indian entrepreneurs. For centuries, it is a proven fact that the largest fortunes have been created by expanding the market, by serving the middle if not the bottom of the economic pyramid.  

Around 150 years ago, Isaac Singer of Singer Sewing machine fame made his name immortal and created a great fortune by allowing people to pay $5 per month rather than pay for their sewing machine upfront. Millions of housewives could suddenly afford to buy a singer. About 100 years ago, Henry Ford did the same by paying his workers $5/hour enabling the middle class Americans to own a luxury car. Bill Gates laid the foundations of his vision 30 years ago to install a computer on every desktop and in every home. Sam Walton made every thing affordable for middle class in America creating the world’s largest company.  

In India, Captain Gopinath created Deccan Airways with a dream of making flying a reality for middle class Indians. Fares ranged from 10%-50% .In no time, he has created an enterprise with a market cap of almost $1 billion. Dhirubhai Ambani had a vision of people being able to talk to each other on a cell phone for less than the cost of a postcard. Today 6 years later Reliance Communications Ventures is worth $8 billion.  

What is the lesson here? To create great fortunes, great enterprises need to be built by serving the needs of the middle and bottom of the pyramid which would benefit our society and the country as a whole. This is an extraordinary window of opportunity and those of us who are fortunate to live in these times will look back with some regret if we don’t seize the moment to innovate and be entrepreneurs.  

This is not a theoretical belief. At Microsoft we passionately believe in realizing India’s potential and we are investing in the right direction to make this a reality.  

Let us take the example of Rural India. There is a huge number of Indians who will not be able to participate in India’s growth curve unless they have access to information.. There is empirical evidence to prove this is true.  

A year ago we committed ourselves to the goal of giving every Indian access to a connected computer by 2010. We launched an initiative called Project Saksham that aims to setup connected PC kiosks in at least 200,000 villages. Now the easiest thing in the world is to drop a kiosk in a village. But unless one really thinks this through it will well be that in three months time when you come back, the PC would have stopped working and gathered a thick layer of dust.  

So one really has to think through issues of sustainability and plan very carefully. One has to think about how to create a hand-held user interface because of high levels of illiteracy and fear of computers. We have found women from self help groups who make the best kiosk entrepreneurs. We had to think about how to give these women the business training and computer skills to become successful entrepreneurs. One has to think about issues of power and connectivity. The inability to access technology in local language can be a big hurdle. To address this, through our Project Bhasha, we made Windows and Office interfaces available in 14 languages. It is also important to identify and work with ISVs to deliver services and content at the kiosk that can be monetized allowing the emergence of an economically viable ecosystem.  

We piloted 300 kiosks across 6 states involving about 4000 users to understand the key requirements and sustainability of the rural kiosk model. Our key learning’s were -  

  • e-Government alone is insufficient to sustain the rural kiosks
  • People in rural areas consider education important. They are willing to pay money to become Computer literate (Internet, MS Excel, Word and Power Point) and to learn English - English and Primary (Being developed in consultation with British Council)
  • The e-Government application allows instant access to land records and certificates and things like Grievance Submission, tracking and resolution system are appreciated along with Monitoring of MP & MLA developmental activities.
  • Local Agricultural services and clinical information are invaluable resource of information. As a step in this direction we are partnering with ICRISAT.
  • Micro credit is extremely critical to get the rural economy going. So we worked with TCS and IIIT Bangalore to develop a Rural Credit Delivery Services (RCDS) application which is being piloted in Karnataka, along with SBI. We are engaging with ICICI to provide banking, insurance and other services through kiosks. ICICI shares our dream of lifting rural India out of poverty through innovative and sustainable business models. Their vision is to sell life insurance at $2 per year which will payout $2200 in case of death and $1000 in case of injury. They are selling insurance against a bad monsoon. They are selling mutual funds where the cost of entry is $2 and the per month payment is perhaps 50 cents. They have a vision where grocery stores & rural kiosks take the place of the branch and collect and disburse cash. The key to enable such ultra small transaction is a technology platform & that is what we are creating together.

  Some of the lessons that we have learned from our initiatives are as follows -  

  • You have to start with the customer. Who are you trying to serve?
  • We learned that you have to be crystal clear about the problem you are trying to solve? What does value mean to the customer?
  • We learned that affordability is a crucial issue in India and in emerging markets, pay per use or EMIs is the best way to make anything affordable for the masses.
  • We learned that you have to bring in partners to build the full solutions and that you have to work seamlessly way with each other. Taking the rural project as an example; who all are part of the ecosystem? Government, Telecom companies, Hardware manufacturing companies, Intel, banks like ICICI, ILFS and SBI; Companies like TCS.; many small ISVs.; NGOs like Drishtee, nLogue, SEWA, Tarahaat; Academic institutions, Commercial players such as HLL and ITC eChoupal and training organizations like NIIT.
  • We learned that it is critical at every stage to understand how the initiative is going to scale the business. India is known as a graveyard for innovative pilots and we don’t need yet another pilot in 10 villages.
  • And most of all we learned that the caliber of talent, of IQ applied to these problems is a crucial determinant of success…

Now why is Microsoft investing so much in this? We think as more people move up the economic ladder, as more people learn to use computers, in the long run, its good for the socio-economic development of India and its good for us. We believe that learning to serve poor rural communities profitably will give us insights into the next 5 billion of the world’s consumers and help us in innovating new business models.  

We see some other big opportunities as well, which would help us to realize India’s potential. For instance, how do you leverage IT to overcome deficiencies in the educational system? We spend 4 % of GDP on education. That’s just the government spend. Middle class families spend hundreds and millions of dollars on education and tuitions. There is a large opportunity for entrepreneurs who crack the code on how to get a small share of this spend. Likewise there are 8 million SMEs in our country ….only 25% of whom have a computer. Many of these will not survive globalization of our economy. Some will become global companies. We think technology is going to be one of the determinants for who prospers and who doesn’t. We believe that IT will be critical both for productivity and to integrate with the global supply chains of Toyota and Walmart.  

The way we are all going about selling to SMEs’ today is unlikely to help their cause. What SMEs need is affordability, ease of deployment and easy to manage out of the box solutions. The solutions must be vertical. The affordability factor must encompass the ability to pay for hardware, software and connectivity on a usage or on a monthly basis. In addition, the IT skills training will be a big driver of success. This will require a combined effort of hardware players, ISVs, services companies. This is exactly what we are attempting to do under Project Vikas which Bill Gates announced last December. And we hope to have successful pilots in 5 clusters by the end of this year.  

There is no doubt that the Indian IT industry has successfully placed India on the world map. It has created wealth & jobs on a scale we couldn’t imagine a decade ago. It has given us the self confidence to dream of India as a developed nation and to see ourselves as a knowledge society and to see our population as an asset not a liability.  

But Indian IT 1.0 is reaching its limits. Its time to start thinking about Indian IT 2.0? This is where we have to make some significant transitions. The transition from renting IQ to creating our own IP. The transition from serving wealthy clients overseas to also thinking about how to solve large scale societal problems by leveraging technology. The transition from labour arbitrage to applying problem solving skills to market insights. The transition from simply innovating from India to innovating for India. We are convinced that there are huge economic opportunities here over the next decade and with the added benefit of knowing that we are contributing to the building of our country in the process. However the ecosystem of our complementors or partners to make each of these opportunities viable and scalable is broken. Moreover the way we are going about our businesses today–with every company working tactically and in relative isolation if not at actual odds with each other- is not promising.  

As I conclude, I would like to point out that, what it is going to take is a few people and a few organizations with vision and courage to step up and try to pull together the ecosystem. What its going to take in the minds of these leaders is the recognition that a single organization, NGO or the government, cannot do it alone…it’s going to take a committed partnership of all stakeholders. What larger players have to do is to create a platform for smaller players and entrepreneurs to come in with ideas and energy and simply plug in.  

Microsoft is committed to create a similar platform. Today’s Innovation Day is an attempt to once again bring together a set of key stakeholders and have a constructive dialogue that will influence the IT innovation agenda for our country. It’s a great beginning but perhaps in future we should have separate tracks for education, Rural India, SMEs, e-Governance etc to develop more actionable plans.  

Well, Thank you for joining us today and I hope we have some high spirited discussions and a really worthwhile day.

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