Product engineering industry in India is growing fast and expanding  beyond the telecom and computing domains to automotive, medical devices, industrial electronics, consumer electronics and of course, mobile devices. Over the years, as India developed as an IT hub, the product design centres have been a crucial component of the industry. Both in terms of outsourced third party design centres and India development centres of MNCs. The Indian development centres of multinational firms and Indian-based service providers have been stepping up their efforts in recent years. We have seen the overall embedded exports growing at close to 40 per cent CAGR for the past six years. Working across multiple domains, India’s name has now become synonymous with offshored product development.

Key elements

There are three key aspects of eco-system in India, which is required for future growth. The success of the product engineering firms is clearly visible when we see the contribution they provide to global product engineering. India already has about one lakh engineers contributing to the global electronic engineering. We are already contributing 10 per cent of the global electronic engineering value from our country. While “engineering value” is 10 per cent, domestic electronic product consumption is about 2.5 per cent (assuming $25 billion in a trillion dollar industry). As we continue to focus on increasing “design value” to about 25 per cent, the question is how can we expand domestic consumption further? 

With India supplying innovative products to firms and geographies across the globe, the Indian subcontinent seems to have largely not been impacted by the product innovation cycle. Having understood product architecture requirements, the Indian engineer is more than capable of delivering what’s required for the local markets here. In recent years, the pace at which semiconductor and systems companies have established their own design centres in India has accelerated. The design services industry will continue to play a role in India’s emerging semiconductor ecosystem.  .

Three key aspects

How do globally successful firms extend in their success to the Indian markets? I would like to describe three key aspects that firms need to address to be able to bridge the gaps between consumer needs and products being sold to them.

‘Increase consumption’

First, one of the main aspects to increase consumption is increased localisation of products. For designing products for India, the level of involvement of firms needs to be more. The designers have a tough ask of meeting the targeted costs while ensuring the seamless integration of applications and having the right user interface, preferably localised. I understand the Indian mobile phone market is poised to touch 45 crore in the next 10 years. This is incredible and primarily due to the fact that the cellphone vendors and service providers have studied the local market well. There are phones at price points and with features that cater to almost all individual requirements. From high-end, PDAs to simple phones for the technophobe. They have even introduced products and services in regional languages.

‘Supported adoption’

Second characteristic is the need for ‘supported adoption’ that is required by the users here. We have seen the PC industry post excellent growth numbers this year. The annual sales are expected to be more than 70 lakh units. It was the small ‘training centre’ in small neighbourhoods across the cities, whether big or small, that introduced the PC to the common man. This small yet significant impetus taken by firms and their franchises helped the SMEs and households see the benefits.

For years, the PC industry has worked hard to educate and enable schools, colleges, government office. Even though this effort is still needed, the results are starting to show.

‘Supported adoption’ goes beyond end consumers. Unlike users of the mature markets, many Indian businesses need support in selecting the right products and solutions for their problems too. Many of the small office workspaces are not wired for IT.

It takes time and money to install UPSs, wiring for UPS power and for network cabling. Wipro Infotech has helped many such customers save effort and costs on network and power infrastructure by using WiFi enabling the networks and using low cost laptops instead of workstations. The question we need to ask is what is the investment we can make to enable the market? It would be naive to expect a new technology to sell by itself.

Evolved biz models

Third opportunity I see is the need for evolved business models. We are also seeing a ‘managed services’ model emerging here, where the design services partner goes beyond just co-engineering the product. The partner is also responsible for overlooking the manufacturing of the product. Thus, his success is dependant on the products success. The value that the partner brings to the table is his knowledge of the local market, his presence in the ecosystem and his experience in global product engineering.

Innovation as the underlying theme:
We need to realise approaches outlined above were not brought about instantly by industries that have been successful. Most of these practices were realised by firms with deep understanding of the end consumer with feet on the ground. Practices that worked in other markets did not always yield the same results here. They listened to their consumers. Moreover they observed their functions and then moved the ideas back to the drawing board. In other words, they went beyond the usual to bring in innovation to their daily business practices.
We know that innovation is not always big, transformational or revolutionary. It’s the incremental changes made to better a product/process/business that finally adds up to success.

Basic guidelines

Innovation is a key pillar for any organisation’s success. Innovation is applied creativity. In today’s context, it’s not unanticipated that Innovation plays an extremely important role. However, we need to understand the following basic essential guidelines.

First, we must ensure that technological and managerial innovation go hand in hand. When technology innovations outstrip management innovations, the benefits fall through the crack. It is like a car with a powerful engine but a wobbly chassis. It cannot get far. It is therefore important for companies to have the managerial depth and sound understanding of customer’s product requirements.

Second, work on creating an entrepreneurial spirit within the organisation (within business units and project teams) that allows natural innovators the space to grow. Organisations need to build a culture that rewards risk, encourages entrepreneurship, celebrates success and upholds the rule of law more than any other. Only this will enable the teams come forward and innovate.

Third, collaborate and co-innovate in the evolving ecosystem. Just like the day of the isolated innovator in a forgotten laboratory is over. The ecosystem is absolutely necessary to take a brilliant idea off the ground. Remember, businesses are good at getting better but poor at getting different. It is very difficult for successful organisations to develop disruptive innovations that would threaten the basis of their success.

The market for electronic products in India is huge in almost all domains that the firms here are specialising in. In this context it’s important to show the world that we have the infrastructure and the capability for sustaining the complete electronic product lifecycle i.e. from design, develop, test and manufacture.

It is time the firms in this room today take up the mantle, collaborate within this ecosystem and apply innovation to design products for the Indian subcontinent.

This article is an excerpt of Azim Premji’s address at the recently held ISA (India Semiconductor Association) Vision Summit 2008.