Transformers: The DNA of an innovative company
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Starting and sustaining an innovative technology-driven manufacturing company is not easy anywhere. It’s even more difficult in India since the ecosystem is not supportive of such enterprises.
In the past, I have often lamented that India missed the semiconductor revolution. We import almost all the modern electronic gadgets we use. By some estimates, the country’s electronics and telecom import bill will soon exceed that of oil imports.
So, it was a pleasure to find myself seated next to Deepak Loomba at a recent Confederation of Indian Industry innovation event. Loomba has set up an innovation- and technology-driven company in the semiconductor space. De Core Science and Technologies claims to have built South Asia’s first nanosemiconductor fabrication unit. The company’s focus is on light emitting diodes.
When Loomba told me that he had captured his experience of setting up De Core in a book, I was excited as we have few authentic accounts of high-tech entrepreneurship in India.
Loomba’s ‘Transformers’ turned out to be quite different from what I expected. Its focus is more on how to design and run a company than on the well-documented vagaries of the Indian regulatory system.
Success or excellence?
Loomba starts with a thought-provoking discussion on what is the right overall performance metric for an organization. He makes an interesting contrast between success (which I interpret as good financial returns irrespective of the path followed or the business model adopted) and excellence (which appears to mean achieving what you originally set out to do, including high quality, an agile organization, and ownership of relevant intellectual property even if the time taken and financial results diverge from what was planned). Obviously, the latter does not allow for shortcuts, though it does demand innovation in terms of achieving the best at low cost.
Loomba realized early on that as a small company with limited resources, De Core had no option but to compete on differentiation and innovation. Yet, this was easier said than done.
Experienced employees that he took on board were scared of embracing new ideas.
Loomba soon realized that he would have to depend more on youngsters for innovative ideas, that he would have to lead the R&D function himself, and that he would have to design systems to ensure scalability and flexibility.
One of the biggest challenges faced by companies in India that pursue innovation is finding and retaining the right people. Loomba devotes a lot of space to this topic. He has come to the conclusion that there is a marked difference between those who can innovate and those who can execute, and you need to distinguish between the two. He is also clear that breakthroughs will only come from one or two people thinking deeply about a problem.
But what I found most interesting is the quality-based approach to hiring that Loomba has evolved. As described in great detail in this book, he and his team have successfully extended the quality management principles they follow in their operations to the human resources domain as well.
Another frequently observed challenge is combining discipline with flexibility. Effective innovation requires discipline in the way work is done because the cost of rework can be very high, and the ability to get intellectual property protection depends on the quality of documentation. De Core has “non-negotiable” practices related to document storage and knowledge management including standard filename protocols and compulsory backups. All of these count in an employee’s performance appraisal.
Organization is key
One dimension that’s difficult to disagree with is Loomba’s obsession with the organization. In one of my favourite articles, titled ‘The Power of Product Integrity’ written 20 years ago, Kim B. Clark and Takahiro Fujimoto argued that a product reflects the company from which it emanates. This observation was based on studying US automobile companies like Ford and General Motors. When a company has strong vertical silos that don’t communicate well with each other, this results in products that take longer to develop and which are hence less likely to be in sync with the needs of the market. The product is also likely to have more design compromises. In other words, integrity of the product as reflected by the customer experience depends on the integrity (or wholeness) of the organization.
Can all operations in a company be computerized and systems-driven? Powerful enterprise resource planning systems have helped in making all the data needed for decision-making easily available. Data analytics and crowdsourcing have made decisions more accurate. But Loomba’s efforts at building a systems-driven organization take computerized operations to a new level. The tool that he uses is DSM—Dependency Structure Matrix—and ‘Transformers’ describes in detail how this tool works to power the entire operations of the company. It is this DSM framework that creates the systems and the flexibility that makes the company prepared for scalability.
Does it work?
It appears to. De Core has a range of innovative products. It applied innovation not only in its products, and its organizational systems, but also in its own factory design. It designed its own amphitheatre and translucent factory walls at a fraction of what the architect said it would cost. It has developed some of its own manufacturing processes, again at a fraction of what a commercial system would have cost.
While necessity (i.e., limited funds) was the driver of some of this innovation, it also came from dissatisfaction with the status quo and an itch to do things better. As Vinay Dabholkar and I wrote in ‘8 Steps to Innovation’, this itch is an important trigger for sustained and systematic innovation.
This unusual book gives several insights into how a creative mind can address the challenge of running an innovative company in a difficult environment. It doesn’t always follow a linear narrative. But it’s well worth staying with the book till the end for it is thought-provoking.
Read an unabridged version on www.foundingfuel.com
Rishikesha T. Krishnan is director and professor of strategic management at the Indian Institute of Management, Indore.