Innovation - Key to securing a competitive advantage for Indian manufacturing
"Made in India" may well be espoused in the future by consumers around the globe. While the pace of change in the Indian manufacturing sector has been at a blistering pace over the last decade, there remain significant challenges ahead for the industry to achieve world-class prominence. However, according to a new report released today on "Globalizing Indian Manufacturing. Competing in Global Manufacturing and Service Networks," overcoming these hurdles is well worth the effort and will help manufacturing in India to thrive by fostering further expansion of domestic enterprises and boosting investments by global manufacturers from abroad.
Developed in collaboration with the Center for Global Logistics and Manufacturing Strategies (GLAMS) of the Indian School of Business, Deloitte Research, the Global Business Institute of the Stern School of Business at New York University and the Krannert School of Management at Purdue University, with support from the National Science Foundation, the new report highlights the discussions at the Summit of Indian Manufacturing Competitiveness now it its second successful year. The Summit, held last August in Hyderabad and attended by 200 business executives, industry experts, government officials and academic researchers from around the world, set out to map the challenges and opportunities of manufacturing in India.
"Innovation is probably the most underexploited strategy for the Indian manufacturing industry," says Kumar Kandaswami, India manufacturing industry leader and a director with Deloitte Touche Tohmatsu India Private Limited. "To become a global powerhouse and remain competitive over the next 15 years, local manufacturers need to cultivate innovation capabilities not just in product development, but also in the areas of processes, technologies and business model innovation. We have highly-skilled talent locally, especially in engineering, with good English language capabilities, and we should take more advantage of this."
The research presented at the Summit suggests manufacturers operating in India – domestic and multinationals – need to rethink their operating models to take advantage of the spectacular growth rates. The research also indicates that many leading manufacturers in India today enjoy an average annual revenue growth of nearly 20 percent. If investment rates keep up with those growth rates, this would mean that in just a few years the vast majority of investments in those companies will consists of new investment – not old ones. This massive "greenfield" opportunity is rarely matched in any other manufacturing economy. Indian manufacturers, however, are lagging behind their global peers in investing in research and development (R&D). But this is starting to change. Grabbing the opportunity and rethinking the design of a new business model for manufacturing in India can provide a fertile ground for innovation in global manufacturing in the coming years.
While there is still a long way to go for Indian manufacturing to transform itself through innovation, India as a destination for R&D is well recognized. Recent trends support this with many multinational companies in all manufacturing sectors, including automotive, life sciences, process and industrial products, establishing or increasing investments in R&D centers in India. In fact, India is a top destination in the world for R&D investment. Due to the availability of low-cost, well-educated and highly skilled talent, in some sectors, the cost of R&D in India is as low as a third of what would be spent in a developed country in the west.
Despite a modest 17 percent share of gross domestic product (GDP), the Summit organizers and attendees view a bright future for manufacturing in India. But to succeed, India must follow a balanced approach of developing its manufacturing and operational capabilities and supporting infrastructure and other required services.
"Improving the global competitiveness of the manufacturing industry is critical to India's growth," says N. Viswanadham, executive director of the Centre for Global Logistics and Manufacturing Strategies at the Indian School of Business. "This growth, however, will require the strong collaboration of industry, government and academia alike to effect significant changes. We need to take action to address our local infrastructure, which is the most critical concern, raise productivity and quality levels at the plant levels, and to create more incentives to attract private investment."
The Centre for Global Logistics and Manufacturing Strategies (GLAMS) at ISB was created with the vision of being a knowledge partner of choice to both government and industry in the areas of manufacturing, logistics and supply chain management. Its focus is to engage in innovative research, conduct training programs and work with government and industry to become the driving force for the growth of global logistics and manufacturing in India. Two top industry houses TAFE and Hero Group support some of the Centre’s activities. GLAMS intends to develop partnerships and collaborations with leading industrial institutions and work closely with the industry in disseminating information. The research activities at GLAMS include: Developing frameworks and techniques for analysis and design of global supply chain networks, lean supply chain design for various industry sectors, retail in emerging markets and developing strategies for rural business transformation.
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