R & D SPECIAL.................. What India Inc can learn from Big Blue

What India Inc can learn from Big Blue





IBM's global research head Arvind Krishna on its patents factory, innovation engine and working with Nobel laureates

About two decades ago, when Java was synonymous with an Indonesian coffee bean rather than a computer program, Arvind Krishna hopped from client to client, posing a fundamental question: “I know you can work with lots of companies, but would you like to work with the one where Tony Nadalin (who wrote the standard for Java security) can help you crack your project?“ Back then, Krishna was more of a greenhorn at IBM, the American technology and consulting giant headquartered in Armonk, New York with revenues of $92.7 billion. Today, as Senior VP & Director of IBM Research, the IIT-Kanpur alum with 15 patents under his belt, Krishna heads Research & Development (R&D) for IBM. He's only the eleventh person to hold such a position in the seven decades of IBM Research Labs.

So, what does Krishna's job entail?

For starters, IBM, also dubbed the Big Blue for its size and the color of its logo and packaging, spent a staggering $5.4 billion on R&D last fiscal, or about 6% of its revenue. Over the last three years, it has spent $17 billion. “The 6% rule of the thumb has been consistently true for years,“ Krishna told Corporate Dossier. In 2014, IBM was issued 7,534 patents, the twenty-second year of overall US leadership on that topic consecutively. “We have more patents than the six companies we compete with put together,“ emphasises Krishna, who oversees 12 IBM labs worldwide. In other words, IBM retains its supremacy in research alongside Microsoft, Google, Accenture, Oracle, Amazon and HP combined. India Inc lagging behind.

To put those numbers in context, take a look at how much India Inc spends on research.Data from publicly listed BSE 100 companies reveals that they spent an average of 1.32% of their net turnover on R&D activities over the last three years. Of the 19 companies that published R&D data for the year ending March 2014, ten companies spent less than 0.5% on R&D.

So, why is India Inc not spending enough on R&D?
India's economic history is one probable reason, argues RA Mashelkar, eminent scientist and former director general of Council of Scientific and Industrial Research. “Until 1991, we were a closed economy and there was no competition. Innovation takes root only when there is competition,“ he says. “In pharma, until 2005, there were no product patents, as the law didn't allow it. Only process patents existed. So, we used to copy molecules developed by Merck or Pfizer because of our strength in process chemistry and process engineering. After 2005, the incentive to copy has vanished and a number of companies have got into new molecule development.“ That impetus seems to be bearing fruit as 15 of the top 20 BSE 500 spenders on R&D in FY14 are pharma companies. However, Mashelkar cautions that R&D spends vary from sector to sector: “In retail, R&D is low but it is extremely vital in auto and pharma. So R&D spends in FMCG would be typically 0.5% of turnover; 2-3% in auto; and, could even be 10% in pharma.“ Indian IT companies are spending more on R&D as they move up the value chain. For instance, Infosys doubled it to 2.4% from 1.2% from FY09 to FY13; and TCS upped it to 1.2% from 0.2% in the same timeframe.

“Indian CEOs need to take note of research very closely since competition is now global,“ says Krishna, surveying IBM's new-age client center at Delhi's tony Vasant Kunj area. “What drove India's economy all this while was low cost offshoring or lower cost programming in the IT industry but that model is probably running its course because others (like Philippines and Malaysia) can copy it.“ 

The moonshot & research So, how does IBM do it? To begin with, the 104-year old company has a long history of innovation. In the 1960s, NASA commissioned IBM to help them put a man on the moon. Between the Apollo 9 to 13 programs, the number of parts comprising a complete spacecraft totted up to six million. In the movie Apollo 13, astronauts said they had a problem in space. “If you were sitting there with engineers with books, how long do you think it would take them to find something wrong in the spacecraft?“ asks Krishna. In effect, what got invented was the first ever database.

Today, Krishna has about 3,000 researchers across a dozen locations around the globe, of which twothirds are PhDs. There are about 300 researchers, from the field of mathematics alone, who do everything from cryptography to optimisation of supply chains to new analytical algorithms. “It helps our sustainability as a corporation because the things these people do, will form the basis for business next year and the year after that, and 10 years from now,“ says Krishna. If legacy is any indicator, IBM is up there too with six Nobel laureates and as many Turing awardees in its 104-year history. That's primarily because the company pushes its people to be known in the science and engineering community, not just inside IBM. That has translated into heavy contribution in science literature with regular write-ups in Nature. Also, currently, it has 19 members from the American Academy of Sciences, 23 members from the National Academy of Engineering, Fellows from IEEE, besides a host of top-notch scientific community platforms.

Killing floors & Nobels

IBM has a killing floor too. Of the 12,000-odd homegrown ideas that the company came that the company came up with, only 7,500 made it as patents. Others just fell by the wayside. At times, Krishna points out, a single research project of a certain magnitude might generate 30-100 patents. At the first stage, patents come out primarily from the company's strategic lens--whether the idea aligns to the high value innovation credo.The next level is all about gauging what difference it will make. An incremental move is often abandoned for more pathbreaking research. In the entire process, apart from keeping his ear to the ground, the 52-year-old Krishna is aided by 12 lab leaders as well as four strategy leaders, who play a role in guiding and selecting projects. Indian companies can draw several lessons from Krishna's army of 3,000 researchers and how they are managed in an environment that values freedom.For instance, the 2014 Nobel Prize winner in Chemistry William E Moerner did his formative research in biophysics and imaging of single molecules at IBM as a researcher where he worked for 15 years before becoming a professor at Stanford.

Krishna says. Moerner started his work because the fundamental question he was being asked at IBM was to store information as far down as a single molecule. And he got the freedom to do a bunch of work along those lines at the company's Almaden Research Center at San Jose, California. And when he decided to move to academia, he was given the freedom to do so.In the process, a two-way learning evolved where both Moerner and IBM benefited.

The missing link

That industry-academia linkage is a crucial missing piece in the India R&D puzze. “In R&D clusters around the world, we not only find linkages with industry but also with reputed institutes of higher education. So, we have to see the culture of excellence and competitiveness in higher education itself,“ says Anu Madgavkar, Senior Fellow, McKinsey Global Institute. The good news, however, is that Indian companies beyond IT & pharma are looking at investing at increasing their R&D spends. “We currently spend 1-1.5% of our sales on research and I want to personally take that up to 3% in the next four years. That's because the auto industry is becoming extremely intelligent,“ says Neeraj Kanwar, Vice Chairman & MD, Apollo Tyres. & MD, Apollo Tyres.

The company has two R&D centres--in Chennai and the Netherlands, employing about 150 and 130 people, respectively.

For now, Krishna says the research that has got him the most excited is some thing called Project Synapse, which marries bio-sciences with digital technology to replicate cognition in computers. “Today, you're lucky if a robot can speak to you...now imagine a robot that can see you, recognise obstacles and move out of the way....(with Synapse) we can begin to enable those things and help companies that want to use robots for human interaction-elderly care, hospitality, industrial etc,“ sums up Krishna. India Inc.can draw inspiration from that project while Darwinism knocks on its door. 

By Moinak Mitra

 CDET 10APR15