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Those who have travelled through rural north India may be familiar with the most ubiquitous of all jugaad, the tractor-cum-truck-cum-minibus powered by a water-pump motor, the four wheels under a simple part-wooden-part metal frame that passes for chassis, body and cabin.
First devised in the sixties, the origin of this jugaad is lost in obscurity but it still works as well on the wheat field as on the village mud strip or on the asphalt road to the nearest mandi. It could also double as a passenger vehicle. Born out of necessity, jugaad was the best example of rustic innovation and cost very little to build. The farmer already had a water pump, wood was plentiful, and all he needed was a good mechanic to put the contraption together.
Marketing professor Baba Shiv of Stanford Graduate School of Business sees in jugaad the very Indian inventive approach to managing scarcity. It has fathered many innovations. More often than not, jugaad arose out of one family or one village’s needs. So, commercialisation of a jugaad idea was never considered. Some of those ideas could well have been implemented on a larger scale, for the betterment of a larger group of people. That would have needed the backing of money, often in absence of which promising ideas die.
According to Vineet Rai, co-founder of Aavishkaar, one of the earliest and largest micro- venture investors, all mainstream capital that has gone into this space in the past decade would not exceed Rs 500-600 crore across all enterprises.
Either innovators have not come forth with enough workable ideas or, simply, they missed the crucial connect with funding agencies. The National Inclusive Innovation Fund, led by Sam Pitroda, 69, will try to establish this missing link.
A washing machine that churns lassi will probably not make the cut with Pitroda. But what may is Balubhai Vasoya’s stove that can use both electricity and kerosene and save 70 per cent of the cost of LPG to make the same dish, or Sorin Grama and Sam White’s milk chillers that make expensive cold chains redundant. Shilpi Kapoor’s BarrierBreak Technologies that provides products to aid people with visual, mobile or learning disabilities belongs to a higher level of jugaad that can help a wide cross-section.
Funding is no charity
The Simputer, a hand-held computer launched in 2002 in India, was envisioned as a low-cost alternative to personal computers. The hope was that 50,000 of these machines could be sold. But less than half the number has been taken so far. Swami Manohar, who led the scientists working on the Simputer, says money backing is of essence. No one wants to fund an experiment, but some may put money on the table after a successful pilot.
The Amida Simputer was brought to the market by PicoPeta Simputers in 2004, three years after the prototype was developed. The time gap was long, the main reason being lack of capital. No VC was willing to bet on a hardware venture at that time.
“The original Simputer vision was to provide services to citizens. It has taken 10 years to reach this stage, with no government or VC support,” says Manohar, who co-invented Simputer while at IISc.
No fund was willing to take a technology risk. Everyone likes an instant success and has no time or money for an innovation ‘in the works’. It is often forgotten that a good innovation proves its differentiation only on a large scale. It takes time to reach that scale.
Funding an innovation or invention is not charity. Shekhar Kirani of the US- based Accel Partners makes it clear: social investors need to get good returns. “If the government wants participation of private venture or equity funds, we would need a good rate of return.”
Typically, the return expected is at least 12 per cent. But in an inflationary economy, investors are demanding an inflation- adjusted rate of return of 17 to 20 per cent. Not difficult to attain, according to Paul Basil of business incubator Villgro.
But money alone is not enough. Of equal importance is how it is spent. The “money is not a problem” syndrome can be dangerous if they produce half-baked ideas, says Jayant V Narlikar, founder director of the Inter-University Centre for Astronomy and Astrophysics.
Not many ideas, even if funded, evolve or find success. The original jugaad tractor-cum-truck-cum-bus has not evolved at all in all these years.
Take the case of Wonder Grass: it wanted to build low-cost houses for the rural poor using bamboo as the main raw material. After going along with the project for 12 months, its business incubation partner exited because the ‘ecosystem’ for special housing did not exist. What the partner probably meant by ecosystem was that there was not enough support to take the project to a scale where he could get expected returns.
Grassroots innovator Vivekanandan invented a pin pulveriser, essentially a small machine that grinds chilli and coriander (essential ingredients in South Indian recipes). It is power-efficient and inexpensive and should have popular appeal, especially in villages. But the machine could not garner sales beyond a point because the innovator could not get talent for devising a business development strategy. Scaling up is a big challenge and success needs to be measured with a proper yardstick, says Basil of Villgro that has ‘activated’ close to 2,000 social innovators. Currently it is incubating 12 projects, of which “seven or eight” have raised venture capital funds. “It can be great idea but it’s quite another thing to have talent to run the business, manage working capital needs and have last-mile connectivity,” says Basil.
Innovations galore
India has been ranked the sixth most innovative country in GE’s annual global innovation barometer. Three things have nurtured this innovative bent, according to the survey of 2,800 senior business executives in 22 countries, including 200 in India. These are: talent, financial support from public authorities and long-term support from investors.
Respondents were asked to identify countries they considered innovation champions; 65 per cent picked the US, 48 per cent Germany, 45 per cent Japan, 38 per cent China, 13 per cent Korea, and 12 per cent chose India. We do not get to hear much of these innovations that are regularly churned out in India. But contemporary press coverage does occasionally throw light on some. Here is a sampling of Indian ideas and innovations that have attracted media coverage:
1) Fibre matchsticks that burn longer, do not snap easily and are cheaper than even conventional matchsticks.
2) Zero-head water turbine that generates electricity from river currents and at the same time pumps water out for irrigation and other uses.
3) Jeep seed-broadcaster, a mechanical blower that can be mounted on a Jeep to spray seeds up to a radius of 15 metres.
4) Mechanic Tukaram Verma’s auto-engine stopper that shuts the engine within 30 seconds of shifting the gear to neutral.
5) This one comes straight from the field – an injector which can inject pesticide into the banana tree stem, obviating the need to indiscriminately spray the field.
These are only a few of thousands of ideas that regularly come up. “There is no dearth of good ideas,” says Pitroda.
The problem lies in identifying, nurturing and turning them into commercial projects with an overriding objective that they all do the people good.
From the business perspective, the challenge is to find innovations that are scalable, affordable and help the masses. In the 1980s Everett Rogers did extensive research on what makes an innovation a success. He came up with a formula with which he could predict success with up to 85 per cent accuracy, which in business is quite extraordinary. Research by the Doblin group has also thrown up the following three interesting observations about successful innovations:
1) The bulk of spending goes into the product under development.
2) The bulk of profit from new innovations results from something other than the product itself, and
3) Both the above help explain the adoption and success of ‘system’ products (such as the Apple iPad), implying that building things ‘with’ customers, suppliers and commercial partners provides a good ecosystem for large-scale adoption of the product.
Clearly, any jugaad idea or product designed to help the poor needs all the above three factors working for it. This is where the government, along with some key institutions, comes in. In various combinations, they have to offer risk capital through venture funds. Usually venture funds invest in the initial commercial expansion of a proven business model, technology, or service. They do not generally finance the development of a prototype or an idea. Ultimately, the objective is to turn an idea into business. Government policy can help. Many governments in the world have funded innovative start-ups in the hope that this will stimulate overall economic growth in the wake of the global financial crisis. But new research suggests policy inducements offer only a small part of the resources new entrepreneurs need.
The average would-be business owner with an MBA degree wants a support package of over $750,000 to branch out on his own, according to the findings of a study by IMD, Lausanne, Switzerland in which researchers in the US and India’s Bangalore joined. The study finds budding entrepreneurs have little interest in commonplace incentives such as networking opportunities, office space and, sometimes, even capital. Instead, the single most important resource they want while starting a business is an experienced mentor. They also heavily lean towards ‘hybrid’ or part-time entrepreneurship, which simply means attempting to start a business from within the secure of a job one already holds.
According to Stuart Read, co-author, the study sheds new light on what it takes to persuade an individual to launch his own company. But all roads to success are fraught with pitfalls.
In Read’s words: “One of the difficulties facing public policy efforts to encourage entrepreneurship is that policymakers lack the data or intellectual foundation from which to act.
As a result we have a veritable mini-industry of advisers, bureaucrats and other players pursuing magic bullets designed to promote entrepreneurial activity. The search for solutions has involved a lot of trial and error, experimentation and failures, and knowledge on the topic is best described as tentative and inconclusive.”
No grants please
Most government-backed research in India has been financed with grants. Grants do not always work because there is no obligation on the recipient to show results. Pitroda has done well to shun the easy route and opt for the venture capital model in proposing the $1 billion initiative. Government-funded start-ups aimed at helping the poor have faced problems for a variety of reasons, the worst manifestation of which are the bureaucracy, red tape and poor legal documentation, according to lawyer Ramanuj Mukherjee, founder of iPleaders and Intelligent Legal Risk Management Solutions.
Mukherjee, who seeks to protect the interests of start-ups, tells the story of a start-up in Kolkata backed by two venture capital firms: “When it took a seed loan of Rs 20 lakh from a government incubator, the investment agreement made the incubator joint owner of its intellectual property. No investor would have agreed to invest in a software company whose intellectual property is partly owned by a government body. This caused an eight- month delay and could have been fatal for the company.”
Lesson learnt? Public-private partnership (PPP) in a start-up is not necessarily a blessing. Yet, government help can make or mar start-ups, depending on how the bureaucracy perceives a project. Bindeshwar Pathak founded Sulabh that has given over 1.4 million toilets to homes and over 8,000 public toilets.
“Way back in the 70s the first contract I got was to build two toilets in Ara in Bihar. The government grant required was Rs 500. The IAS officer questioned my intention. It was only after a low-ranking official gave a guarantee that the IAS officer saw reason,” says Pathak, whose NGO now has an annual budget of Rs 300 crore but takes no external aid. “If I patented the technology and joined hands with businesses, I could have made billions. It’s a careful line mixing social objectives with business,” says the 68-year old.
Even so, grants are eagerly sought. Shilpi Kapoor’s BarrierBreak Technologies has raised money but still wants government grant to subsidise the technology cost of products that give a certain degree of independence to disabled people. Over 25 million people are disabled in India, a number indicative enough of the scale required to help them. Hence Kapoor’s plea for government help to lower the final product cost.
Innovation can address poverty as well as inequality issues, underlines RA Mashelkar, chairman of the National Innovation Foundation. Towards that end the finance minister on November 14, 2011 announced the government intention of a Rs 100 crore start-up fund. “Others will contribute to (the fund) nurture innovations in various technologies that can bring about great changes in the lives of the poor and empower them,” says Mashelkar.
A shot in time
Without timely funding, an innovation can die a premature death. Capital is like oxygen for start-ups, points out Ganesh Rengaswamy, partner in Lok Capital which manages $85 million in two bottom of the pyramid funds. “It is important to seek out innovation and then back it continuously. Capital will be required at regular intervals, not just once or twice,” he notes.
Social ventures are even more vulnerable to sporadic or half-hearted funding. Balubhai Vasoya’s stove may have faded away as we could not locate one nearby. Nor could FC locate the innovator who was feted by media when the stove was announced. But Grama & White’s milk chilling machine seems to be doing fine. They have the support from Villgro.
Nursing innovations is the centre’s job alone. For all-round development ideas and innovations from every corner of the country must be nurtured and developed. The states’ role in this cannot be overemphasised. Some states have woken up and created special funds for the purpose. Alas, with little success. The initiative came mainly through state finance corporations and state industrial development corporations, which gave seed money in the shape of equity or mezzanine capital. None, except Sicom of Maharashtra which incubated a few large companies in Navi Mumbai, could recover their investments, let alone earn a profit.
Rai of Aavishkaar has three reasons why bottom- of-pyramid companies struggle even with the best technologies/ innovations – shortage of money, lack of talent, and nil or slow growth. Mainstream businesses also face the problems. But at the bottom of pyramid the challenge is multiplied because of poor rural infrastructure support in low-income states and even some developed states. “The ecosystem needed to provide support to such enterprises is non- existent. It calls for massive investments,” says Rai.
It is possible that innovations and idea will come forth more frequently if some of the basic needs of the rural folk are met. M S Unnikrishnan, Thermax managing director and chief executive officer, lists these needs in three groups: a) reliable and cheap energy for agricultural pumps, b) abundant water for cultivation, drinking, domestic needs and live stock and c) community cold storage and mini warehouses.
The first could be met with solar power combined with biomass energy generated locally. In turn this can help meet the second and third need groups also. Indeed, some global companies have done some work in this regard. Possibly India’s first solar-powered fridge, eKOCool, is one such innovation.
The genesis of the cooler is interesting. Atul Singh, CEO and president of Coca-Cola India, was visiting a village market in Uttar Pradesh. He found that several shops selling Coca-Cola beverages did not have refrigerators and used ice- boxes instead. Refrigerators were not an option because power supply was limited and erratic. Ice-boxes meant travelling some distance once or twice a day for fetching ice. This added to the shopkeeper’s cost.
Upon returning to Delhi, Singh asked his technical team to come up with a solution. Asim Parekh, technical vice-president of Coca-Cola India, narrates the rest of the story. The technical team set out to develop a solar cooler in 2009 and thus the eKOCool was born. The prototype was a success. Now several Coca-Cola units around the globe procure these coolers.
Jugaad with a global impact.
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