India – Innovating for the domestic consumer

In the past few years, innovation in India has largely been about developing products for personal consumption and cheaper versions of already existing devices. Many of these were developed only to be shipped to global markets to be sold for a cheap price.

This is about to change. Now that the country has developed technological capabilities and is being buoyed by the burgeoning middle class, companies across sectors such as pharmaceuticals and medical devices, mobile handsets, white goods and services including healthcare and telecom, are increasingly rolling out innovations targeted at the domestic consumer and those at the bottom of the pyramid. A prime example for this trend is US giant GE. It set up a R&D centre in India to develop products for the global market and years later began to focus on products customised for the domestic market.

Experts say that the quest for innovation has risen out of necessity, survival instincts or economic opportunities. Companies had to come up with affordable and cheaper options, with the model varying from disruptive thinking (allow a new set of consumers access to a products that only used to be accessible for the wealthy) to frugal innovation. Most innovations, particularly in IT, will come from start-ups. This is because they work within tight constraints of time, people and resources to create innovations at a rapid pace.

Experts also point out, that Indians have used their re-engineering skills effectively in the past, particularly in sectors like pharmaceuticals. Medications produced in India have helped Africa enormously, especially in the area of HIV drugs, where prices decreased by 80-90%!

The next challenge for businesses in India is to develop affordable products for those at the bottom of the pyramid. As Vijay Govindarajan at Tuck School of Business puts it “Indian companies must innovate for domestic consumers… Instead of value for money, our mantra has to be value for many or frugal innovation,” he said. “If we can succeed in India, we can transform lives of the rich world consumers or reverse innovation.”

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