TI Corridors

Channel: Management

Wednesday, November 03, 2010
Why invest in R&D in India?
Sanmit Ahuja discusses with Dr. Sandhya Shekhar, Chief Executive of the Indian Institute of Technology (IIT) Madras Research Park,

Why Invest in R&D in India
Sanmit Ahuja discusses with Dr. Sandhya Shekhar, Chief Executive of the Indian Institute of Technology (IIT) Madras Research Park, the prospects of investing in R&D sectors in India and why this is a trend that is likely to increase.


What is the state of research and innovation?
It has been a consistent observation of most that the market is too much fixated on valuation. However the economic downturn has brought with it one silver lining which is renewed focus on value creation.


Innovation has become a big thing now more than it has ever been in the past. Generally, Research and Innovation have most often been talked about only in the context of a 5 year strategic plan and not as an immediate imperative. The industry now realizes the importance of innovation because it provides the necessary sustainable advantage that it needs.


Traditionally innovation which was bundled with R&D was prone to cost cuts as it would be the first budget head that would get the slash in downturns such as the one we are witnessing today.


However investment in research must now be seen as a profit centre and not as cost centre.


How does one choose the right location for R&D?
There are three pertinent points that come to the fore when choosing the most viable place for conducting research:


1. Location
The location is important from a global sourcing viewpoint. The key question to ask is whether the country has the necessary knowledge pool to conduct the research activities.


2. Co-Location
This is an important consideration from a standpoint of engaging with people who matter in the R&D spectrum. For a long time the R&D arena was a preserve of technocratic elite. Only a few companies really knew about their R&D processes.


Where a company decides to locate its research facilities within a country is a function of existence of various other elements such as nearness to the supply-chain.


More and more companies are choosing to base their research near industry clusters that form part of their value chain. This way, not only are they able to develop more local content and knowledge but also lessen the reliance on suppliers in their home countries.


The other important parameter that organizations doing cutting-edge research keep in mind is the proximity to a University. Start-ups and established companies alike have reaped huge benefits out of the interaction and knowledge transfers with leading academic institutions. Collaborative efforts have often increased the probability of successful innovation.


3. Open network innovation
For a very long time companies conducted research using the ivory tower method where the researchers would have no idea of the application in the real world.


But in today’s open world, sharing of ideas with people of other disciplines is proving to be one of the most important tools of success in the innovation space. This is termed as open innovation. The research park provides an ideal setting for open innovation where there is enough talent from cross and multiple disciplines.


It also offers innovation agility. The companies in today’s world have very limited time to go to market. Thus they cannot afford to have an insular approach. On the contrary they should start to collaborate more with other industries. Accessibility to a young talent pool brings in fresh ideas and shrinks innovation cycle time.


Companies should also learn to rely on knowledge acquired from different sectors. For instance in a very successful example an analytics company from a financial services sector utilized the services of two professors – (1) from chip design (2) from aeronautical engineering. They were able to acquire simulation modeling expertise of these professors


Why invest in research in India?
Simply because one gets more bang for their buck. In a recent UNCTAD report India was highlighted as one of the most preferred R&D destinations outside the US. In the last 2-3 yrs has seen a preponderance of companies looking at India as an R&D destination.


What India offers is sheer numbers as in the ability to conduct many more projects at a lower cost. Since only a handful of these will fructify, the chances of a successful throughput are likely to increase in countries such as India.


Tier 1 educational institutions in India are also known to be the hunting ground for leading multi-nationals to source their human resources. At a time when both the quantum and costs of highly skilled manpower is becoming a challenge in most developed nations, India is quickly becoming a natural choice for companies looking to relocate their R&D activities and their Innovation labs.


India and UK have had a rich tradition of collaborating both at the university and industry levels. Organisations in UK are showing a renewed interest in India, especially during times of an economic recession since it gives them the dual advantage of proximity to a large developing market as well as access to some of the brightest minds.


More details on the IIT Madras Research Park can be found on: http://respark.iitm.ac.in/


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