The Vijay Govindrajan Interview

The Vijay Govindrajan Interview Dr Amit Kapoor, Honorary Chairman at Institute for Competitiveness, India interviews Dr Vijay Govindarajan, Earl C. Daum 1924 Professor of International Business at the Tuck School of Business at Dartmouth College, widely regarded as one of the world's leading experts on strategy and innovation. "The concept of a $300 home or a $2000 cardiac surgery is not charity. Corporations should clamor for this model, for its reach maximization and not for profit maximization." "India has millions and millions of people who need education. We cannot follow the American model of education as that model is based on exclusion and not on inclusion." Could you give a brief insight of your academic journey and your notion of reverse innovation? Having grown up in India, I know that innovation is the solution for many of the country's problems. India has too many problems and we have too few resources and the only way to solve these problems is innovation. I committed myself to really studying innovation and I have always been interested in its impact on the real world but by doing really regular research. When I came to America my study was really targeted at American companies and how they innovate. In the last 10 years or so I got interested in the notion of reverse innovation which is about innovating in a poor country like India and so that brought me full circle with regards to my ambition. When you said you have come full circle moving from India; working with American companies; and now looking at India, what is the biggest learning that you drew from this country? I think there are three learnings that I got from India. Firstly, the notion of frugal thinking that comes very naturally to us. Because the resources are limited and we want to be very efficient in how we spend our resources and not waste them. Secondly, we Indians emphasize a lot on memorizing data which is not so in the US. It is dying even faster because of the advent of computers, calculators and iPhones. US focuses on critical thinking whereas in India we do not focus on critical thinking. As I was brought up in India and was exposed to memorizing data, then when I came to US and got the critical thinking part, it was a deadly combination as I had the data plus critical thinking orientation. Critical thinking without data is useless and data without critical thinking is also useless. So, the second important notion from India is data. The third thing is diversity. India is such a diverse country and if anyone has operated inside India, then he is well prepared to face the outside world. There is a misnomer amongst people who relate frugal innovation to Jugaad. How would you react to this? To me jugaad is absolutely the wrong way to go. Jugaad is different from frugal thinking. Frugality can co-exist with the latest technology. Jugaad is “The way people use it, improvise it, make it work and get the things done”. I think jugaad implies even inferior quality. That’s not what we need. What we need is latest technology in innovation, which is at the cutting edge. For example, Narayana Hrudayalaya hospital is an excellent hospital as they have the latest equipment in cardiac surgery as you would find in the US. Yet we are able to do cardiac surgeries for $2000 whereas in US it costs $150,000. Frugality is bringing that cost down to $2000 by using absolutely the greatest, latest and the most appropriate technology. What we really need is to marry technological powers in the US with frugality. You wrote a very interesting piece in HBR wherein you talked about a $300 home. How can reverse innovation help us do that? When I wrote the article about $300 home it was not about lowering cost but was about offering more value at a lower cost. I was challenging people to think about how more health, education, jobs can be offered in a $300 house. Take for instance health –health is not just delivered in hospitals, health is also delivered in a way you construct a house. In today's world there are three infectious diseases, which are killing millions of poor people all over the world - TB, Cholera and malaria. TB is air borne disease and if we imagine a hut, which has no sunlight, no ventilation, and ten people sleeping then if one of them has TB the other nine would also be infected with it. So, why can’t we derive a $300 house with proper sunlight, ventilation and thereby decrease the incidents of TB. In a similar way cholera is water borne disease and we should look at designing a $300 house, which has portable drinking water. The last one is malaria, which is caused by mosquitos, so the house should be designed in such a way so that we can put up mosquito nets and decrease the incidents of malaria. The point is to think about the housing problem by using breakthrough thinking. We did a project in Dartmouth wherein the participants were called from all across the globe and were given the task of building a $300 house, which is earthquake/hurricane resistant. By using local materials, the local people could actually construct the house thereby creating jobs for themselves. This is really about how do we include the poor people in the innovation that we create. What we are saying is at what level we are able to give in hands to quality of life. Yes that’s really the point. Ultra low cost housing is not a new topic as people talked about it for decades but they talk about it as though it is a problem of charity. We somehow divided the world of 7 billion people into two compartments. 1 billion who are consumers who have the purchasing power and the rest 6 billion, the non-consumers, the so-called poor, who we have left to be taken care of by charity. The problem of converting the 6 billion non-consumers to consumers is not a question of charity but it is a challenge for innovation because the reason they are non-consumers is they can't consume the products the 1 billion consumers are consuming. In Narayana Hrudayalaya (NH) the same platform is used for doing surgeries for the people who are paying and also for the poor patients who either pay nothing or pay subsidized rates. The concept of a $300 home or a $2000 cardiac surgery is not charity. Corporations should clamor for this model for its reach maximization and not for profit maximization. NH is also about reach maximization. The problems of education/ health/ transportation can be solved by making it available to the consumers and the non - consumers. So, having a $300 home is a problem for the corporations to solve and corporations would come in this space if they find significant opportunity in this field and are able to make money. Looking at 6 billion populations of non - consumers with an average of 6 people per household we would have an opportunity of $300 billion. Similar is the case with Apple where it is not able to sell its iPhone to 6 billion non- consumers, as they cannot afford it. If apple makes a $10 nano iPhone they would be looking at a $60 billion opportunity. So, on a digital platform in the $300 household one can deliver more education to the poor through eLearning, more health through tele medicine, more banking through mobile banking etc. All the above requires thinking and creativity and leads to doing more with less. How is your thinking emerging in the area of education as this is the foremost problem the world is facing? Let us think as to why education is so expensive in US. At Dartmouth the annual charges are $60,000 for tuition, boarding and lodging amounts to $200,000 – $250,000 for a 4-year course. Basically only the very rich can afford that kind of education or very poor because they get scholarship. The middle class people get squeezed because they make enough money so they are not entitled to scholarship, but they can't afford $250,000 so they have to take a loan and hence pay for the rest of their lives. There are three reasons why education is expensive in the US. Firstly, good institutions follow the vertical integration strategy which means knowledge creation is done by the faculty who do research and the same faculty disseminates that knowledge to teach and the same faculty does the assessment to grade the students for which the institute issues the certification. So once you pass these courses you get the certificate. The cost rises with vertical integration. Secondly, at Dartmouth everything is done on campus. Therefore, the infrastructure costs rises as lab, dormitory, classes, faculty offices, cafeteria have to be built. Thirdly, colleges have an admission policy called principle of inclusion and principle of exclusion. In Dartmouth we take a lot pride in saying how many people we reject. About 95% of the people who apply are rejected. So, we have built an education industry in this country on these people who are snubed. India has millions and millions of people who need education and we cannot follow the American model of education as that model is based on exclusion and not on inclusion. Higher education is very expensive in India so we have to disaggregate the value chain. We should not focus on the basic research in India instead let the American universities do the research. In this way we would be able to eliminate the expense on research. Secondly, we need to create a global university in India, which will have online courses in every subject. Delivering courses online is not only low cost but also high quality. In higher education there are two types of courses – transactional and transformational courses. Transactional courses are better delivered through online platform and transformational courses are face-to-face interaction because it’s about application/ problem solving. So, we could have the best teachers in India create the best course in every area in the transactional courses. The universities would only conduct the transformational experiences and then we would create a third global university, which would do the assessment. So the second university would take the assessment and third university would do the certification. In certification we need certified courses, which provide right kind of knowledge and capabilities to do the right kind of job. Do you think we can surmount the problem of critical thinking that India is lacking? The transformational courses are the ones from where the critical thinking comes from. And that’s why we have to have the broken model university system as well and hence the transactional courses and transformational courses. The corporations also need to step in and invest in human resources. My thinking is we have to fundamentally rethink the way we are attacking the education problem in India. This is a great innovation opportunity to create a new model of education. When it comes down to it, what is pushing India back and what really needs to be changed in this country to take it forward? When I look at India I look beyond the filth and poverty and at a huge human potential. The human potential in India is enormous and awesome. Then I look at our accomplishments which are very disappointing. Of late I have become even more frustrated with the lack of progress in India. So I look at what we have achieved and what we could achieve. The human potential is incredible, but we have fallen short. The problem is really the leadership gap. There is a real leadership deficit in India. If India has to realize its full potential we need to create systems and process and structures which will harness the talent. We really need someone to lead this talent. Youngsters need to step up and take the leadership forward. Everybody understands the way political leadership has failed the country. Are saying that even corporate leaders have failed? My hope is corporate leadership. Since independence we have had problems in political leadership. There have been scandals, corruption charges and lack of economic progress even on the corporate side. We have had some success stories especially in the 90’s when the IT companies came on board. We thought we were building a new India, but it looks like we are back to the same muck. Corruption and inefficiencies are cropping up, growth is slowing. We should have more experiments in the education industry like we have NH in health industry. Health alone could be a huge industry in India. Presently, they are touching only about 1% of India; 99% of India does not have proper health care. The health industry is one where we can employ a lot of people because it is a services industry. We can solve our employment problem and this is what I mean by, where is the corporate leadership? Similarly in infrastructure and transportation the gap is so big. Corporate leaders need to step up and make their employees a part of the wealth creation process. We certainly don’t seem to have that momentum to move forward.

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