Transcript Centre for International Trade and Technology (CITT)

Global Competitiveness and Technology
Deepak Bhatnagar
Head, Centre for International Trade in Technology
[email protected]
[email protected]
India: Competing with the World
A peep into the past……
• Indian Steel in arrows and swords:
- Iron tipped arrows used by Indians in the Persian army (480 BC)
- Alexander the Great prized a gift of 100 talens of steel from Porus in
326 BC
- Indian ‘Wootz’ steel used for making Damuscus blades and became
famous in Europe
(‘Wootz’ derived from the Kannada word ‘UKKU’ meaning steel)
- British Royal Society made a detailed examination of Wootz Steel in
1790: their report says….“the steel of India is decidedly the best I
have yet met with!”
- “Should Tatas make steel rails to British specifications, I would
undertake to eat every pound of it”
Sir Fredrick Upcott, Chief Commissioner of Indian Railways.
“If Upcott had carried out this undertaking he would have had some
slight indigestion” (comment by Dorabjee Tata when the rails were sent to UK)
Competing for the Future
Forget that the ‘World is flat’
The world of business is turning upside down
(The Economist April 17th 2010)
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World’s Centre for economic gravity is shifting towards emerging
markets
Emerging countries are no longer content to be sources of
cheap hands and low-cost brains.
Instead, they too are becoming hot beds of innovation, producing
breakthroughs in everything…
from telecom to car making to health care.
They are redesigning products to reduce costs not just by 10% but by
upto 90%. They are redesigning entire business processes to do
things better and faster than their rivals in the West.
They are the “new masters of management”
Innovation and Technology
Breakthrough ideas are tilting the balance
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Rich-world companies are doing more R&D in emerging markets e.g. Fortune 500
companies now have 98 R&D facilities in China and 63 in India
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Huawei, a Chinese telecoms giant, applied for more international patents than any other
firm did in 2008. It set up R&D operations in India in 1999. Globally, the company
owns 17 R&D centres with a strength of 40,000 Engineers. Order book in India $ 2
Billion (Rs. 9, 000 crore) with BSNL, MTNL, Reliance, Tata Indicom and Bharti Airtel.
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Even more striking is the emerging world’s growing ability to make established products
at dramatically lower costs. e.g. the $2,200 Nano Car or the $ 350 laptop: this sort of
advance – dubbed as “frugal innovation” is not just exploiting cheap labour. It is redesigning products and processes to cut out un-necessary costs. (Similar to the
concept of “lean manufacturing” when Japanese car industry beat the American giants
30 years ago!)
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Emerging economies are not merely challenging that lead in innovation. They are
unleashing a wave of low-cost, disruptive innovations that will, as they spread to the rich
world, shake many industries to their foundations
All sorts of CEOs will scream for protection!
Technology and Competitiveness
-these two are the most popular buzzwords of our time.
• Technology is high up the agenda in both policy and academic
debates.
• The capacity of firms to use new technologies and improved
organizational methods is central in explaining industrial leadership
and the competitiveness of regions and countries.
• Nevertheless, the relation between industrial innovation, scientific
research, organizational change, and competitiveness is not clear.
• The extent and manner in which innovation occurs in an economy
depends on the development of new production and business
capabilities, institutions, and infrastructure-factors which are, in turn,
contingent (among other things) on business strategy and government
decisions on public research funding.
Defining Competitiveness
• Country Competitiveness: Extent to which a national
environment is conducive or detrimental to business.
• Industry/Sector Competitiveness: Extent to which an industry
or a business sector offers potential for growth and attractive
return on investment. The concept can also be defined as the
collective ability of firms in the sector to compete internationally.
A more performance-oriented definition of industry
competitiveness can be given as: Collective ability of an
industry on performance factors such as productivity, cost,
market share and technology.
• Company Competitiveness: Ability to design, produce and/or
market products or services superior to those offered by
competitors , considering the price and non-price qualities.
The Global Competitiveness Report 2010-11
Long term prosperity in the wake of Global Economic Crisis: Since
2005, the World Economic Forum has based its competitiveness
analysis on the Global Competitiveness Index (GCI).
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A highly comprehensive index which captures the micro economic and
macro economic foundation of national competitiveness. The report
defines “competitiveness as the set of institutions, policies and factors
that determine the level of productivity of a country”
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Thus, more-competitive economies tend to be able to produce higher
levels of income for their citizens.
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The productivity level also determines the rates of return obtained by
investments in an economy.
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The concept of competitiveness thus involves static and dynamic
components.
The Global Competitiveness Index 2011–2012 rankings
and 2010–2011 comparisons
Global Innovation Index (2011)
The 12 Pillars of competitiveness
• The GCI provides a weighted average of
many different components, each of which
reflects one aspect of the complex concept
that we call competitiveness. These are
broadly grouped into 12 pillars of
competitiveness.
• Strong inter-relations of the 12 pillars- in
fact, they tend to reinforce each other
9th Pillar - Technological readiness
• This measures the agility with which an economy adopts existing
technologies to enhance the productivity of its industries. In today's
globalised world, technology has increasingly become an important
element for firms to compete and prosper.
• In this context, whether the technology used has or has not been
developed within national borders is irrelevant for its effect on
competitiveness. The central point is that the firms operating in the
country have access to advanced products and blueprints and the
ability to use them. Among the main sources of foreign technology,
FDI plays a key role. India is the 2nd favourite destination for FDI
(after China)
Level of technology available to firms in a country needs to be
distinguished from the country’s ability to innovate and expand the
frontiers of knowledge
12th Pillar - Innovation
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In the long run, standards of living can be expanded only with innovation. Particularly
important for economies as they approach the frontiers of knowledge.
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Firms must design and develop cutting edge products and processes to maintain a
competitive edge.
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This requires an environment that is conducive to economic activity, supported by both
public and private sectors.
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Sufficient investment in R&D, especially by Private Sector.
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Presence of hi-quality research institutions
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Extensive collaboration in research between university and industry.
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Protection of Intellectual Property (IP)
Organizational strategy for competitiveness: Develop and Integrate the Technology
Strategy with Business strategy
Key factors for the top spot in GCI
Switzerland has:
- Excellent capacity for innovation
- High spending on R&D
- Scientific research institutions are among the world’s best
- Strong collaboration between academic and business
sectors ensures that much of this research is translated
into marketable products and process, reinforced by
strong IP protection
- High rate of patenting : 148 per million inhabitants.
(India: 5.46 per million inhabitants)
USA: no 2 slot – has all these plus an excellent university
system
Seminar on Global Competitiveness of Indian
Industries- organized by IIFT and BICP on 19th February 1997
Main findings/recommendations
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The technology issues affecting competitiveness
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Guiding factors towards the objective of achieving international competitiveness should
be profitability, quality and creativity.
Profitability Commercial approach inevitable
Quality
Quality not only of the final product but also of the raw materials
Creativity Proper development and integrated approach
towards human resource development
Indian industry in order to be competitive would require to increase labour productivity,
upgrade technology and resort to aggressive marketing.
Need to focus on issues related to packaging, high transactional cost, on time delivery
and consistent quality
Need to form joint ventures with world leaders in the domain to inject efficiency into
operational parameters
Need to promote energy efficiency and general resource efficiency
Quality of products and services are as important as prices in international market.
The question of technology up-gradation is inextricably linked with improving quality
Imperative to devote adequate attention to research and development to keep pace with
international standards.
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What are the requirements for
enhancing competitiveness ?
• Prevent obsolescence – sustained R&D
• Making the future work for you!
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Are you confident about…
Future trends: how they may affect you?
Where the new opportunities will be?
How S&T can help you seize these opportunities?
What you should be doing NOW?
For every person and organization priorities may differ.
But one thing is certain:
We live in a world of change!.
The need to anticipate and prepare for the future is crucial.
Need to “Manage” Technology
• rapid technological change, uncertainity and
complexity
• technological knowledge to sustain
competitiveness in an uncertain business context
• issues become manifold because of globalization
of technology
• technology financing (VCs, Government schemes
to encourage R&D and incentives)
• create and nurture a ‘culture of innovation’
NEED FOR A TECHNOLOGY VISION…
‘Blessed are those,
who have a dream or a vision,
for, those who have not,
are dead while living!’
The Quest of the Mind
(Article By N R Narayana Murthy in Times of India, 24th October, 2012)
• Boosting R & D is key to driving the future of the
Indian economy.
• India continues to enjoy the No. 1 position in IT,
Business outsourcing and consulting.
• Other emerging power houses of BRIC Nations
are all destinations for future investments.
• We cannot rest on our laurels. Imperative that we
strike to become the finest research hub in the
world.
• We can achieve this by investing in our schools.
Knowledge Network & Nations
- Global Scientific Collaborations in the 21 Century
st
(Royal Society’s Seminal 2011 report)
“ Even in the difficult economic times we now
face, national governments need to
maintain investment in their science base in
order to secure economic prosperity, tap
into new sources of innovation and growth,
and sustain vital connections across the
global research landscape.”
R & D Spending ……
• Currently, India spends less than 1% of
GDP on R & D.
• 12th Plan proposes to step this up to 2%
with half coming from private sector.
• Admirable intentions – but goal falls short.
- Israel spends 6% of GDP.
- Switzerland and Sweden both 4%.
- Even China approaching 2%.
Spend on Education……
• India has increased its expenditure on education as a
percentage of GDP to 4% (2011-12), from 3.3% in 200405.
• Compared to other BRIC Countries, we need to do more.
• According to World Bank:
- Brazil, spends 5.7% of GDP on education.
- Ethiopia spends 4.7%.
- Even Botswana spends 7.8%.
- Imperative to have strong investments in education to
build a sustainable pipeline of scientific research.
“ Scientific gains and a booming economy go
hand in hand. How we move forward at this
moment in our history will determine
whether we lead the world well into the next
century.”
N R Narayana Murthy
Chairman Emeritus, Infosys
Trustee, Infosys Science Foundation.
Stories and new ideas…
Opportunities on how frugal
technology helped companies
become globally competitive
Global Leadership through Technology the charms of frugal innovation
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Mac 400- a hand held ECG device developed by GE’s health care lab at
Bangalore. This miracle sells for $800 (conventional ECG is $ 2000)
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Water Filter- using rice husks to purify water developed by TCS in Chennai.
Gives abundant supply of bacteria free water for an initial investment of about
$ 24 and recurring expense of $ 4 for a new filter every few months.
Tata Chemicals is making these filter. Plan to produce 1m next year and
hopes for an external market of 100 mn.
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Frugal Innovation- not just about re-designing products: it involves re-thinking
entire production processes and business models.
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Companies need to squeeze costs to reach more customers and accept thin
profit margins to gain volume
Low Cost Insulin Pump
- Under development at Amrita School of biotechnology with support from TIFAC, DST.
- Partnership with Bio-Con, a leading
manufacturer of human re-combinant
insulin.
- Price range in the 1000s. Imported pump
costs Rs. 1.75 lakhs.
- Globally competitive product.
- A boon for diabetics, numbers increasing at
alarming rate.
Cost effective removal of Arsenic
Subterranean Arsenic Removal (SAR) technology
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A 2007 study found that over 137 million people in more than 70 countries are
affected by Arsenic poisoning of drinking water. High concentration of Arsenic in
regions like Gangetic belt of India, Nepal, Cambodia and Mekong delta a serious
health hazard: Arsenic levels range from 50-150 PPB against WHO norm of 10 PPB
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Innovative method of removal of Arsenic from ground water without using chemicals
by In-Situ treatment has been developed by a consortium of European and Indian
scientists. Technology demonstrated near Kolkata during 2005-06 and successfully
replicated in 6 Arsenic affected areas in West Bengal. Technology involves simple
and adaptable process to remove Arsenic using controlled oxidation and bio
remediation process taking place inside the aquifer. No chemicals are used and no
sludge is produced since iron and arsenic are trapped under the earth. Estimated
cost of SAR plant of 4000 liters/cycle capacity is $ 3000.
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Competitive with Ex-Situ treatment (Pump and treat) due to much lower cost (10% of
conventional). No cost towards expensive toxic sludge removal. This globally
competitive technology has won the 2010 St. Andrews Prize for the environment.
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Maintenance cost very low and expected life of 10 years.
Medical Tourism
- India is fast becoming a popular medical tourism
destination.
- Growing numbers from the first world are flocking
to India
- Health care in the West is either too expensive or
too slow, with waiting lists of several months
- Also, patients from Africa where there is paucity
of facilities and expertise.
Medical Tourism
GOOD MEDICINE
PROCEDURE
US Rate
Indian Rate
Angioplasty
50,000
11,000
Knee replacement
40,000
9,000
Hip Re-Surfacing
28,000
6,000
Rhinoplasty
10,000
2,000
Heart Surgery
30,000
6,000
Bone marrow transplant
2,50,000
26,000
Source: America’s Medical Solutions (All figures in US Dollars)
Case of Steel Industry
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India –fourth largest producer of steel in the world
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Sustained R&D efforts have lead to India being one of the lowest cost producers of
steel
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Scope for improvement in technological key indices as compared to world leaders e.g.
energy consumption, productivity of capital & labour and environmental emissions
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Unique problem with regard to Indian raw materials hence indigenous technology
development is imperative.
Key technological improvements needed in :
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Quality of Blast furnace coke
Reduction in coke requirement in blast furnace
High temperature stoves for blast furnace
Granulation of slag
Challenge of higher heat size and quicker turn around in BOF as well as EAF for steel making
Thin strip technology in continuous casting for near-net-shape products.
Ladle metallurgy technology for producing cleaner steel
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Strategic alliances and joint ventures by Indian steel companies: Key focus is
acquisition of new technologies (e.g Tata-Corus JV, Posco-SAIL JV)
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Steel demand in US gone down by 41% and UK by 35 % in 2009 but Middle East and
North Africa (Mena) region clocked positive growth e.g. JSPL negotiating with
Zimbabwe Iron and Steel Company, OMAN based Shaheed Iron and Steel based
company for acquisition.
Open- Sourcing of software
Opening - a world of opportunities!
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Open-source movement involves thousands of people around the world coming
together online to collaborate in writing everything from their own software, their own
operating systems, their own dictionary to their own recipe for Biryani
While commercial software is copyrighted and sold (companies guard the code as
they would their crown jewels!) open source software is shared, constantly improved
by its users and made available free to anyone.
A good example is Wikipedia- the user contributed on line encyclopedia (the word
‘Wikis’ is taken from the Hawaiian word for “quick”). Wikis are websites that allow
users to directly edit any web page on their own
Linux operating system- pioneered in 1991 by a student named Linus Torvalds, who
posted his Linux operating system to compete with Microsoft Windows. He invited
other computer geeks on line to try and improve it – for free
Linux offers whole range of operating systems that can be adapted to run on Palm
Pilots, all the way up to super computers. Big companies like Google, E-Trade and
Amazon combined Intel servers with Linux operating systems to dramatically cut
down technology spending.
“Wisdom of Crowds”! (James Surowiecki)
“WE Are Smarter than Me” (Barry Libert)
“Group Genius” (Keith Sawyer)
The amazing reach of open- sourcing
Story of Gold Corp Inc
• Toronto based Gold mining firm struggling to meet high cost of
production from their dying 50 year old gold mine.
• Its CEO, Rob Mc Ewen was inspired by Open Source Linux :
company put all the geology data in a file and shared with the world.
He risked his entire career by sharing proprietary data about their
own mines.
• March 2000- “Goldcorp Challenge" was launched with a total of
$ 575,000 in prize money. Within weeks, submissions poured in from
around the world. Contestants identified 110 targets in the Gold mine
(half of which had not been identified earlier)
• Over 80% of new targets yielded huge amount of Gold
• Today, Goldcorp is reaping the fruits of its open source approach to
exploration. It catapulted this under performing $ 100 million company
into a $ 9 Billion juggernaut.
• Shareholders are very happy: $ 100 invested in 1993 is worth over
$3000 today.
Suggestions for further reading
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Wikinomics by Don Tapscott and Anthony D. Williams Published by Atlantic
Books London 2006
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The World is Flat by Thomas L. Friedman. Published by the Penguin books
2005
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Competitiveness, Technology and Skills by Sanjaya Lall Published by Edward
Elgar Publishing Limited in 2001
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International Competitiveness and Technological Change by Marcela Miozzo.
Published by Oxford University Press in 2006
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Global Competitiveness of Indian Industries Published by Apex Printing
House, New Delhi (Printed for the Indian Institute of Foreign Trade and
Bureau of Industrial Costs & Prices) in 1997
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Technological Learning and Competitive Performance by Paulo N. Figueiredo.
Published by Edward Elgar Publishing Limited in 2001
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Technology and Competitiveness by Jan Peter Wogart , Aasha Kapur Mehta,
Arun Mehta. Published by Sage Publications
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The Economist, April 17th-23rd 2010