Future of Engineering
Too Fast Too Furious
Article Based on Keynote Delivered by Pari Natarajan, CEO, Zinnov Management Consulting at Confluence2014
The MNC R&D Ecosystem in India has witnessed rapid growth in the last decade. With over 900 R&D centres in India, approximately 50 percent of the top 500 R&D spenders have R&D presence in India. In the coming years, the number of centres is expected to grow with many new companies in medical equipment, industrial, automotive and software industry planning to setup their centres in the country. The R&D ecosystem generates over 250,000 R&D jobs and over a million indirect jobs. In 2014, R&D centres have contributed approximately USD 17 billion in efficiency savings and over USD 26 billion in global product revenue.
The tremendous growth has resulted in creation of various growth opportunities. With innovative technologies disrupting existing systems and transforming the status quo, it has become essential for R&D companies to identify the major R&D trends that would impact them. How is the ecosystem changing? What are the emerging threats? How can developing trends be leveraged to gain a competitive edge? The answers to these questions may hold the key to success for global R&D organizations.
Our focus is on the following three key trends:-
- Shift towards the increased usage of data to drive product design and development decisions.
- Growing focus on the new breed of competition
- New wave of hyper collaboration which is transforming the process of ideation and development.
Data Driven Product Engineering
A number of companies have started building products around the data available. The resulting products are disrupting well established industries.
Global telecom industry continues grow at a rapid pace with all indicators witnessing high growth. However in the past 2 years, SMS revenue has witnessed decline. The decline in revenue can be attributed to the rise of a start-up comprising 50 engineers based out of Mountain View California.
There is a growing list of companies that have been successful in building products for global markets without customer proximity. Ford’s Silicon Valley Lab uses data generated from over 4 million cars to improve fuel efficiency. Facebook’s development team makes trips to emerging markets to understand how the local population uses rustic mobile devices to interact with their products. Insights generated from such immersion programs are then used to improve battery and data usage of their applications.
The success of Whatsapp, the internet messaging stalwart, demonstrates that when usage data and products become platforms, co-location of engineering teams to end markets doesn’t remain a necessity. There are many more companies that have been successful in building products for global markets without customer proximity. This includes Ford’s Silicon Valley Lab which uses data generated from over 4 million cars to improve fuel efficiency. Similarly Facebook’s development team undertakes frequent trips to emerging markets for understanding how the local population uses rustic mobile devices to interact with their products. Insights generated from such immersion programs are then used to improve battery and data usage of their applications.
Indian start-ups seem to have beaten MNC R&D centres when it comes to developing for Global markets. Inmobi has all its engineering leadership and a majority of its product leadership based in India whereas their product is used across the globe competing with some of the top companies in the world. Perfint, a medical equipment company has been successful in building products for global markets. Druva, an enterprise endpoint data backup solution, has over 90percent of its R&D based out of India and over 70percent of its revenues from foreign sources. The small domestic market has made these companies think global. Many of these companies are integrating market strategies at the development stage. Focussing on Content marketing and value selling, they are able to sell products worth upto USD 100,000 without having feet on the street. A platform approach to product engineering and observational insights into customer behaviour will contribute to the rise of global ventures.
The small domestic market has made these companies think global. A majority of these companies are integrating market strategies at the development stage. With focus on Content marketing and value selling, they are able to sell products worth up to USD 100,000 without having feet on the street. A platform approach to product engineering and observational insights into customer behaviour will contribute to the rise of global ventures.
Breakthrough innovations and the emergence of new ecosystems are creating a new breed of competitors for MNC R&D centres in India. The competition is global and the range of players is comprehensive. From technology giants based in Silicon Valley to rapidly growing Chinese companies, MNC R&D centres are facing unprecedented competition.
Throughout history there have been occurrences when great minds have lived in close proximity to create revolutionary ideas. In the Renaissance era, Italy emerged as a hub for brilliant artists such as Leonardo Da Vinci, Michael Angelo and Rafael to spark a creative explosion. During the Second Industrial Revolution, Detroit was the backdrop for remarkable innovations in the automotive sector pioneered by Henry Ford, Charles Goodyear and William Durant. In the modern era, Silicon Valley has emerged as the place where innovators such as Steve Jobs, Larry page and Elon Musk have driven the Technology Revolution and given rise to the emergence of large technology corporations. These Tech Mafias have abundant resources at their disposal and are looking to compete across industry segments.
GoogleX, the brainchild of Sergey Brin is focusing on creation of physical products. Google’s self-driving car has already traversed over 100,000 miles and also obtained a driving license. Significant investments are being made in Google Fibre and Google Loon to compete in the Telecom industry. Google Contact Lens uses miniature sensors and a radio antenna thinner than a human hair to track glucose levels. Novartis just announced its partnership with Google Contact lens to commercialize the product. Google’s acquisition of Makani energy was undertaken to drive new innovations in wind energy using air-borne wind turbines. Apple has demonstrated significant intent to diversify into patient-centric healthcare solutions. These bold bets made by the Tech Mafia have the potential to disrupt many well-established industries.
The start-up ecosystem has evolved over the last decade. It has moved beyond software & e-commerce segments and diversified into other avenues. The new generation of start-ups operate at the intersection of hardware and software. Companies such as Nest, GoPro, Oculus, and Beats are already valued highly. Makerbot, a 3-D printer manufacturing company, was acquired for USD 400 million last year. Companies such as Makerbot will have a significant impact on the manufacturing industry in the near future. SpaceX, a start-up founded by Paypal’s co-founder Elon Musk, has carved a space for itself in just a short period. Within a decade, they have managed to develop rockets that NASA employs to send cargo to International Space Stations. Manufacturing, Automotive and Aerospace industries are fostering the emergence of new age competitors for native R&D ecosystem.
China has rapidly emerged as a hub for large companies that are competing for Global dominance. Chinese Technology behemoths are expanding globally and are beginning to threaten global market leaders. Huawei has been the largest Telecom expense management company in the recent years. Lenovo is the largest PC manufacturer in the world today. Their acquisition of the Iconic Motorola brand has heralded an emphatic entry into the Mobile Handset market. Shenzhen based Tencent is one of the largest Internet Companies in the world. Tencent’s WeChat already has significant presence in the Indian market. Lei Jun, the founder of Xiaomi, is considered the Steve Jobs of China. Founded in 2009, Xiaomi already has USD 5 billion in revenue. The company has taken agile development to the next level. It releases an update every week in order to continually integrate customer feedback to improve the product. Xiaomi just launched their phone in India. The Mi3 handset was sold out in a matter of moments on Flipkart. Increased competition calls for higher level of collaboration among industry players.
The way companies ideate and develop new products is undergoing a change . Recently, Tesla Motors made global headlines by making all their patents available to the general public. This development is in stark contrast to recent developments involving Intellectual Property rights. Samsung and Apple have been locked in a legal battle over patent infringement. Google acquired Motorola and clinically dissected its patent portfolio. Erstwhile, in the blog titled, ‘All our patents are belong to you’; Elon Musk the founder of Tesla Motors goes on to say, “Technology leadership is not defined by patents, but rather by the ability of a company to attract and motivate the world’s most talented engineers.” Tesla Motors hopes to enrich the ecosystem around Electric cars and enable more Original Equipment Manufacturers to flourish. This open source and hyper collaborative approach can accelerate the pace of technological growth.
Companies are overcoming organizational constraints by reaching out to the ecosystem. GE wanted to leverage data on over 25 million flights to improve flight management systems to minimize delay. The company collaborated with Kaggle after the in-house team only produced a small efficiency gain in the algorithm. By crowdsourcing ideas from Kaggle platform, GE obtained an algorithm that had a 40 percent efficiency gain over the industry standard. Safecast is an exemplary collaboration platform which created an online map of radiation. It enabled people on the ground to contribute by building downloadable geigers counter and other useful tools. Established in the aftermath of the Japan Fukushima nuclear plant crisis three years ago, Safecast has collected over 16 million data points. This citizen-science project managed to do what governments and NGO’s had yet not accomplished.
These trends need to be leveraged by the Indian R&D Ecosystem. How do organizations imbibe a data driven product engineering culture? Can the Ecosystem take bold bets to ward off emerging competition? Will the R&D centres embrace hyper-collaborative culture to drive innovation?
The answers to the above questions will determine if Indian R&D centres can evolve into engineering hubs. Only a handful of engineering hubs exist in India today. An engineering hub would own one or more deep charters for the organization. It would also take ownership of the innovation initiatives of the organization
A hub will also lead the development of a portfolio of growth products not just mature products. In addition, the hub will have a number of centres of excellence. It could be in technology, functional areas or marketing. The hub will have a strong incubation engine that envisions and bets on future technologies. Moreover, it will be well connected to relevant ecosystems – which it not only leverages but invests in. Finally, a hub will be a melting pot for best-in-class talent.
Once engineering hubs are established, we will be witnessing some of the most exciting innovations in technology being pioneered from Indian centres. We hope that MNC R&D Ecosystem in India will help place India at the forefront of the march for game changing technological innovation.