India must rework the risk-reward matrix to push up its innovation quotient

India is being seen as a country with a deep history and culture that is moving forward firmly. As India’s presence grows commensurate with its increasing economic heft, it must dial up its innovation quotient, and build on its strong grounding in technology, IT services and now also digital public infrastructure (DPI).

For India, beyond the current disruption created by rapidly evolving technologies such as artificial intelligence (AI) in mature innovation ecosystems such as the US and Europe, the central long-run question is how well and consistently we can innovate.

A key indicator of India’s low—albeit growing—innovation capabilities is patent filing. Among 55 nations, India is ranked 42nd on the International IP Index 2023 (eleventh edition) developed by the Global Innovation Policy Center, US Chamber of Commerce. In patent filings, directly related to investment in research, India scores much lower than top spenders such as Israel, South Korea, Sweden, Japan and the US, and also below some BRICS peers.

The World Intellectual Property Organization ranks India 40th in the Global Innovation Index 2023. By this assessment, despite performing above expectations relative to GDP and producing more innovation output relative to its level of innovation investment, it ranks low on infrastructure, business sophistication and institutions.

Despite encouraging signs and islands of excellence, India has some way to go before it can compete with the best. Here are three areas it needs to focus on to drive innovation:

First, build truly world-class centres of excellence. India has just a few real world-class centres of excellence for innovation beyond those at the Indian Institute of Science in Bangalore and a few Indian Institutes of Technology (IITs). These have strong linkages between industry, government and academia. While Brand IIT is still a power to reckon with in Silicon Valley, there has been much criticism about the lack of a longer-term innovation strategy at these IITs.

An audit report published in 2021 by the Comptroller and Auditor General of India seems to agree on several counts. Assessing the performance of eight IITs between 2014 and 2019 across a range of research areas, it found that most were unable to nurture innovation consistently and had failed to attract enough non-government-funded research projects. In India, of the broadly 10,000 institutions teaching technology, over 95% have not submitted any intellectual property for protection and the remaining 5% annually file only between 2,000 and 2,500 patents collectively.

Second, create an enabling environment for India’s Generation Z to succeed. This will address a complex sociological factor that has been behind a relatively weak ability to take risks and innovate. While this phenomenon requires deeper study, it’s clear that India differs from the US, where several generations of prosperity over the last 250 years has afforded it the kind of risk-taking and entrepreneurial mindsets necessary to spur innovation.

India, which has had just about three generations since independence, is witnessing the emergence of its current Gen Z as the first generation that is educated, competitive, and, most importantly, fearless in placing big bets on innovation. The very real possibility of failure seems less of a worry to Gen Z and it’s time to make way for it. Today’s youth are also awake to realities of the current world, which is one where responsible tech-centric innovation can have a far-reaching impact on human lives in more ways than meet the eye right now.

Third, it’s time we stop celebrating jugaad and frugal innovation and instead focus on world-class innovation in mission mode. While cheap workarounds as a premise for innovation may be truly Indian, it’s reactive and short-term at best, solving just well enough for resource or time scarce environments.

India Inc must turn its focus towards world-class innovation. The key, of course, is a commitment by both private industry and the government to longer-term investments, aided by tax incentives that could create inter-generational social value at scale in mission mode (and do not merely motivate family or individual wealth).

In the final analysis, can India innovate at all at the same rate as, let’s say, the US? Will the next big thing such as the next Facebook, Google, Microsoft or the next AI wonder emerge from India?

India has all that is required to make it happen: world-class tech talent, rapidly maturing startup entrepreneurial ecosystems, access to smart capital and big finance, strong academic institutions, world-class business leaders, strong and consistent macroeconomic fundamentals and a supportive policy environment.

Powerful innovation takes place when lateral thinking leads to solutions that lie between the usual ‘yes’ and ‘no’ responses. The famous lateral thinking evangelist Edward de Bono called this state of thinking “Po". What is required is a pedagogical and economic re-crafting of the risk-reward matrix that encourages lateral thinking and innovation at scale.