Archive for October, 2010
Building Blocks of Innovation
This post is contributed by Villgro Fellow, Jeanne Chen.
A few weeks ago, the Wall Street Journal (WSJ) featured an article: “The Origins of Good Ideas” discussing how many successful innovations aren’t revolutionary, but rather built on existing products. The premise: Existing Products + New Idea + Modified Application = Innovation. The corollary is that new ideas result from cross-industrial applications – the article gives the example of using a motorcycle battery to power an infant warmer. This example and conclusion should be familiar to those in India’s social enterprise sector, where adapting motorvehicle batteries has created a reliable source of power in rural districts. What’s critical to note from the article’s examples is how innovation often arises from sharing ideas across industries, which highlights the importance of bringing ideas together to facilitate innovative adaptations.
In my opinion, this facilitation of idea sharing is one of the more valuable and intangible differentiators of social incubators like Villgro. Bringing together innovations from multiple disciplines, incubators can furnish a fertile environment for new ideas to develop. While incubators can actively facilitate cross-pollination of ideas as part of a recommended course of action, many times the facilitation is passive simply by creating a network of innovators. For example, Villgro’s annual Unconvention social entrepreneurship conference hosts InnoHub, specifically for nurturing partnerships between innovators and entrepreneurs. The exhibition brings together Villgro’s network and creates opportunities for meetings and discussions, which can lead to an alternative application of an innovation resulting in meaningful social impact. In the larger social sector, this is a significant way for Villgro to contribute to the further development of new innovations.
Villgro also hosts monthly Learning Saturday Workshops for its incubatees and staff. Each month’s sessions focus on different themes of best practices, sectoral knowledge, and general social development information with featured experts and guest speakers. These learning sessions have a tremendous potential to help teach incubatees to improve or adapt their technology as well as to encourage staff to look at existing ideas with a fresh eye. From innovative marketing to design, having specific events for the entrepreneurial community to exchange ideas and knowledge helps the sector to apply new ideas to existing systems.
The conclusion of the WSJ’s article, while not a surprise, is a good reminder to all of us that we can all encourage more innovation through the facilitation of platforms for idea exchanges. Social incubators, like Villgro, have a unique advantage in bringing together their entrepreneurial networks and actively creating opportunities for those networks to interact is an important part of their core functions.
The Role of Civil Society in Affordable Housing
Contributed by Robert Moore
India recently saw a spate of announcements for affordable housing projects being launched in various parts of the country. So, what has led to developers getting involved with affordable housing projects in India? A closer look at some of these projects where developers are launching projects in the price range of INR 4-10 lakhs ($ 8000 – 20,000) shows that in most of these projects there is a collaboration with a Citizen Sector Organisation (CSO).
Read more about these potential partnership here.
Open Innovation: Innovation Through Networking
In this article, Vijay Rangarajan, a Villgro Fellow, takes a look at the ‘open innovation’ route to innovation, and looks at its relevance for social enterprises.
In 2004 Proctor and Gamble was able to accelerate the launch of their new line of crisps, Pringle Prints using a new approach to innovation – open innovation. P&G was looking for a way to introduce edible printing on to each crisp. The idea was to have trivia, pictures and words printed on each crisp. Rather than develop the technology in-house, P&G floated the requirement globally, and acquired the technology from a small baker in the Italian city of Bologna. Taking this route allowed them to take the product to market at a fraction of the cost of the traditional innovation model. The term ‘open innovation’ was first used by H.W Chesbrough, of the University of California, Berkeley in his book Open Innovation: The new imperative for creating and profiting from technology. Open innovation is defined as “the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively.”[i]
Traditionally, companies follow the invention model to innovation. If it is a well established firm, they create infrastructure and recruit the best talent from their internal fund to produce innovative products. A fortunate startup or a mid-sized firm would do the same using the funds from venture capitalists. The idea behind this is to keep the innovation within their four walls and gain an edge over their competitors. The focus in this model is on talent and not on the business model. World class talent developed valuable innovation that finds its way to the market. Through this process, the innovations which are not useful to company’s core business are shelved. Often the people involved in developing the idea leave the firm and commercialize the innovation on their own. As a result the firm which financed the innovation is not able to enjoy the benefits. Chesbrough, uses the example of Xerox Palo Alto Research Centre (PARC) to explain how Xerox failed to capitalize on disruptive innovations developed by their own staff. These products were later launched by companies set up by former Xerox employees. The market capitalization of these companies collectively exceeded Xerox itself.[ii]
Secondly, the invention model is not able to sustain the high levels of top-line growth. Stagnation in R&D productivity leading to flattened sales and squeezing by nimble competitors mandated change in the innovation model. Important innovations were originating mostly from small and midsized entrepreneurial companies. Individuals, university and government were looking for ways to make money out of their intellectual property. The above factors led to the new paradigm of open innovation.
Rather than developing all the innovations inside the firm, the idea behind open innovation is to look outside the boundaries of the firm for innovations that can solve business problems. Also, the intellectual property created inside the firm can be licensed to other firms for application in other markets. It is important to understand that open innovation is different from outsourcing innovation. Outsourcing is transferring work to low-cost players. But open innovation is about finding good ideas that are almost ready-made solutions that suit your requirements. Open innovation is a form of crowdsourcing that helps companies to have a rapid design process with the help of ideas of people available globally.
Changes in the way innovations are done in firms have led to emergence of players who play a significant role in connecting technology seekers and providers. They act as knowledge brokers between the R&D labs of multinationals and scientists in government and private labs, consultants and universities. The benefits that the firms that seek them get are several times greater than the seeking charges that these brokers charge. Ninesigma, Innocentive, Yet2.com are some of the intermediaries who provide services to accelerate the process of open innovation. Other ways of looking out for innovations outside the firm would be to have your own people to look out for ideas or look out for innovations among the partners and suppliers you engage with.
The Institute for One World Health (IOWH) is a perfect example of a social enterprise capitalizing on open innovation. The organization is a pharmaceutical social enterprise founded in 2000 that is dedicated to developing drugs that can cure diseases affecting millions irrespective of their ability to pay for the drugs. They conduct an international search for most promising solutions that can cure the most infectious diseases in the world. After evaluating each identified lead, they closely work with the inventors, form partnerships to seek funding, and secure rights to develop these innovations for the noncommercial markets in the developing world where they are needed most. Through their efforts, they are able to provide an appealing outlet for idle intellectual property of pharmaceutical and biotechnology companies. Pharmaceutical scientists, drawn to a mission of saving lives and improving health worldwide, are eager to participate in groundbreaking and compassionate research and development. IOWH also plays a significant role in bringing promising drug research from the lab into the clinic and onto regulatory approval and manufacturing.
These examples show how open innovation can lead to more players entering the market, as well as direct benefits to us, the consumers who use these innovative products. The IOWH example shows how social enterprises can use the idea of open innovation to possibly create greater social impact. Open Innovation has helped realize the full potential of every innovation. But we must remember that it is not a substitute for in-house innovation, which is still required for the development of ideas that do not find a solution outside the company.
[i] Open Innovation Blog, http://blog.openinnovation.net/2010/08/definitive-open-innovation-primer.html
[ii] http://www.quickmba.com/entre/open-innovation/
Clean Energy and the BoP: More Power to the People
In this article Robert Moore shares his thoughts on a blog post by Think Change India, which reflects on the issue of clean energy at the BoP. Read the original article here.
IFMR Centre for Development Finance and the World Resources Institute are coming out with a report focusing on clean energy options for the base of pyramid in India, this report is titled “Power to the people” which was released in Mumbai on the 28th of September 2010 in front of a host of social sector investors and companies.
This article introduces the realities of rural electrification and the basis for their upcoming report. It showcases a few significant concepts such as electricity access statistics, reliability, and the current market for alternative energy sources.
In India only 40% of rural households have access to electricity and 85% depend on kerosene for lighting and firewood for cooking. However the problem is actually worse than that because as an apple farmer quoted in the article astutely said “Most houses have electrical connections, but what is the use? We have power for a few hours a day. Even when there is electricity, it is barely enough to operate one or two light bulbs. We cannot rely on it.” This farmer makes an important point but this leads to an even deeper issue – imagine the trouble that commercial companies would have trying to rely on such energy distribution. How can India move manufacturing, processing, and industry jobs closer to the villages if the electricity isn’t even reliable enough for consumer use?
As the article goes on to illustrate, there are companies such as SBA Hydro which are selling clean energy products and services directly to the Base of the Pyramid population. The SBA Hydro company sells hydroelectric power but there is also SELCO which sells solar power and Husk Power Systems which sells biomass power to name a few others. Many of these company’s customers actually have access to electricity but as the quote above illustrates, the current available electricity just isn’t enough.
With SBA Hydro’s $1.26m investment from Acumen Fund allowing them to reach 6000 households, SELCO reaching over 120,000 households in the last 10 years, and Husk being able to reach over 10,000 households you can see that these companies are doing a great job providing solutions to the BoP. But even if 100% of their sales were to be from rural customers with no previous access to electricity this still only solves 16% of the 81 million rural households without electricity in India.
While each of these alternative energy companies are still pretty small and face their own challenges the “Power to the People: Investing in Clean Energy for the Base of the Pyramid in India” report should provide valuable information to both the investors and entrepreneurs trying to meet the needs of India’s rural electrification market. Hopefully with more reports like these the energy companies can make smarter decisions and investors will feel more confident about the financial and social returns they will achieve from deploying capital in this industry.
Ed. Note: Read more about the report’s launch on the IFMR website, and access the report here.