Friday, July 31, 2009

Why SMEs have not yet woken up to Innovation?

There has been a continuous rant by the government, chambers of commerce, design and innovation thinkers and the SME consultants alike- INNOVATE. The voice has only grown louder in the troubled times. Yet, we don’t see much activity on the SME front as far as innovation goes. Medium scale enterprises are still okay, but the down below- the small and the micro enterprises have not even blinked at the call of innovation to emerge as winner in these times. They are still trying the old ways of ‘optimisation’, ‘collaborations’ and trying the get a safe bet in the game.

Recently we were talking to a small manufacturer of home-plastic products. He has a factory where he has a few injection moulding machines capable of making the small plastic tumblers as well as big buckets of 100 lt size. He is doing decent amount of business (i.e. 30 Cr). He had never employed a designer till now.

The man who owns the company is the CEO and also the chief designer, who sits with his engineers and some reference products (could be some foreign products or some competition products picked up from the market) and gets the design which he thinks is the winner. This one man team accomplishes much for his size as of now. When we bring a portfolio of a design company of our size to him, he is at first scared of the big brands we have worked with. It straight away implies to him that our services are costly and he won’t be able to afford us. He verbalizes as much. However, on convincing him that no, we are talking to him with a different model of engagement in mind, we get a hearing. He wants to do great products and has collected a lot of insights. We understand his next product plan and give him a quote that barely takes care of one man’s salary for a month+ a small royalty amount. He does not bite the bullet. Later we came to know that he actually went with a CAD company (posing as a design studio). ‘Design’ is a confused definition for him, like many others.

This is small instance which is replicated in many ways during our conversations with the small manufacturing companies. There was a time when one could establish a direct relation between the ad-spend and the ROI i.e. sale of the product went up by a few times the very next week the ad is launched on TV/Newspaper combo. Of late, this correlation ceases to exist. But incase of product design and new product development, the correlation never occoured at the first place. Never was a time where people knew that if they spend x percentage of their turnover in product innovation then the top line is to grow by y percent. The rougest of the calculation is also not a common knowledge. It is a privy of the few for-runners and ‘test by fire’ companies who have gone big by doing it first. For the rest, any R& D effort is an affront cost which needs to be optimized (or a t times, just done away with the best alternative solution available). This is a startling but true realization that occurred to me after spending more than a decade in Design and Innovation consulting industry in India. I have seen by now two cycles of economy boom and sink. I have seen the buzzing alleys of MIDC (the industrial area in Pune), with flurry of material handling trucks. I have also seen, the same places silent and desolate. Every time, I thought that the industry is learning a tough lesson and investing in innovation is the only way they will go ahead. But I was wrong. Indian mind would shy away from taking any cathartic steps. It will always rely on time tested and the frugal advice. Innovation does no figure there.

There is a news that government of India has set up an auto-cluster facility in Pune. The common facility center for this cluster would now also house a design consulting office. Nearly Rs. 500 Million would be spent on design education and facilitation for SMEs connected to this auto cluster. This is one of the very first impetus to Design inclusion in the SME space though government intervention. This kind of efforts will go a long way in making the ROI (Returns on Innovation) to the industries.

to be continued...