Transcript IT Innovation in a post Lehman world

IT Innovation in a post
Lehman world
Krishna R Sundaresan
Crisil Irevna Argentina
VIII Congreso Internacional en Innovación
Tecnológica Informática,
3 septiembre, 2010
Disclaimer and Introduction
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Disclaimer
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About Me: Experience
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Over 8 years of experience across IT, Supply Chain Management, Media,
Consumer Sales, Financial Services
In 2006 - Part of a startup which tried (unsuccessfully) to create software
solutions for media companies
Worked with top names like Oracle, CRISIL & Unilever India
About Me: Education
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"I think there is a world market for maybe five computers." -- Thomas Watson,
chairman of IBM, 1943.
Any predictions / analysis of technology could go as wrong as the above
quote
Intend to raise more questions than provide answers
MBA ‐ IIM Bangalore, Class of 2006
B.E. Chemical Engineering‐ BITS Pilani, Class of 2002
Contact
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Email: [email protected], [email protected] ,
[email protected]
Voice: +5411 4837 7610
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But first some definitions: Innovation, IT
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Wikipedia - "Innovation is a change in the thought process for
doing something, or the useful application of new inventions or
discoveries. It may refer to an incremental emergent or radical
and revolutionary changes in thinking, products, processes, or
organizations."
According to economic theory "The goal of innovation is
positive change, to make someone or something better.
Innovation leading to increased productivity is the fundamental
source of increasing wealth in an economy. "
In fact we now have a theory of economics called innovation
economics, which puts innovation at the centre rather than being
independent and largely affected by public policy
IT- Includes all hardware, software, communication technology,
products services
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Innovation has become more difficult....(1)
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VC funds raised in 2009 dipped ~40% from 2008, although 2010
is showing signs of improvement. (NVCA)
R&D budgets of major tech companies have also fallen
VC Funding Raised in US has been falling since 2007
40
35
30
USD (bln)
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25
20
15
10
5
0
2004
2005
2006
2007
2008
2009
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Innovation has become more difficult....(2)
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Shorter pay-back / technology diffusion
Life cycles
Long tail - Selling smaller end markets for products
Wage inflation - Costs per innovation increase
Globalization / low-cost countries implying falling margins
Complexity of IT products have been increasing - E.g. Cost of
designing a chip have been increasing now it takes ~60-100 mln
US$ to design a chip
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...But is more important than ever
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"The (next) 100 years are about ideas.” - Seth Godin
Manufacturing efficiency and scale will no longer be enough.
Wage inflation means that
 China is no longer the lowest cost manufacturer
 India is no longer the lowest cost for services
Stakes are higher, to compete companies regions or nations
must drive innovation in the global marketplace in order to
remain competitive
Innovation is the only way companies, nations and countries can
sustain economic growth. Those countries that produce the most
important new products and services can capture a premium in
world markets that will enable them to pay high wages to their
employees/citizens
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Innovation is needed!
..But
We need to do more with less!
More bang for the VC dollar!
More bang for the R&D buck!
Some ideas from other successes
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Hype Cycles - I
Concept
created by Gartner
Useful tool to sense check where
a particular emerging tech/trend
is going
Is only a theoretical model, not
all techs go follow it
5 Stage model
1. Technology Trigger:
2. Peak of Inflated Expectations
3. Trough of Disillusionment
4. Slope of Enlightenment
5.Plateau of Productivity
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Hype Cycles - II
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Where would you place the
following trends?
Cloud
Microblogging
Data centre networking
LBS
RFID
Molecular computing
Social networking
Technology Trigger - New
tech, very few investments
2. Peak - Tech will
revolutionized the world....
3. Trough of Disillusionment Many investors, customers,
companies have burnt their
fingers
4. Slope of Enlightenment Technology matures, standards
evolve, more wide adoption,
conservative players still wait it
out
5.Plateau of Productivity
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Stay close to the market: Redbus.in
Redbus
Is one of India's up and coming ".com" companies
It Started as India's first online bus ticket booking portal
Today, it is India’s largest such service with the highest number
of routes (over 3200) and over 250+ bus operator partners. The
market for bus ticketing in India is estimated at ~3.2 bln US$
However some not so well known facts:
They deliver their tickets using cheap bicycle couriers
80% of their orders are over the phone, not online!
 Conclusion: Technology is an enabler, not an aim itself. Focus
on cost and customer service
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Value at the bottom of the pyramid?
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How do you sell IT/Communication products to an Indian
farmer making US$100 a month?
Conventional Approach: Cheaper products?
 Low cost cell phones/ Free software => 2$ service?
Or... Flip the question on its head.
 Why does the farmer make only $100 a month?
 Solution from Bharti Airtel - Enable farmer to earn $500 per
month and take $50 per month for that service? - Provide
farmer with weather updates, price updates, farming advice The cell phone now becomes a tool of productivity and not a
communication service
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Not just innovation for low cost, but low cost
innovation
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Designing a chip now costs upwards of $50 million. A typical
semiconductor startup can raise about $60 million over 3 rounds
of funding. Do the math!
Scope for low cost engineers to help in chip design. But why
should only Intel, IBM and large companies
LogicFab, which was formed mid-2006, is meant to express the
scope of the product rather than the detail. LogicFab is about
design rather than manufacturing and takes on all chip design
work
Startups can now cut their cost of chip design to ~ $20 million,
giving them more leeway and a better chance to succeed
LogicFab is profitable and is planning and IPO in there years
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About KPOs and About Irevna
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Irevna is a division of CRISIL, India's leading ratings, research,
risk and policy advisory company
Services
 Financial Services
 Corporate Services
 Analytical Solutions.
Supports world's leading commercial and investment banks,
insurance companies, corporations, consulting firms, private
equity players and asset management firms
World's top-ranked research and analytical services offshoring
firm
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"Ideas are no one's monopoly"
Dieter Rams
Braun
T3 Pocket Radio
c. 1960
John Ives
Apple
iPod
2001
Rip-off or Inspiration? How different must you be considered
innovative? Market (and legal authorities) will decide
Exports evolving from goods to services to now ideas
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Closing Thoughts
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Focus the resources - Try to identify opportunity early, don't get
caught up in the "Hype"
Show me the money - Keep close to the customer/market,
technology is not an end in itself. VCs are no longer investing in
ideas that don't have concrete business models
Explore new markets - Value at the bottom of the pyramid
Look for ways to lower the cost of innovation
Ideas are no one's monopoly - Look everywhere for inspiration
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Sources
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The Economist
EE Times
National Venture Capital Association
Gizmodo
Rediff.com
Redbus.in
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Any Questions? (Answers)