Talking-and-thinking
points from the report ‘Sustainable and inclusive innovation – strategies for
tomorrow’s world’ by CII-ITC CESD – part 1

A hepatitis B vaccine that is 1/40th the cost of traditional
vaccines but meets UNICEF’s quality requirements; cataract surgeries, performed
on 300,000 patients annually by a single hospital, at a cost that is just
1/100th of that charged in other countries but still meets global quality
standards; a refrigerator that costs less than $70 and runs on battery; farmers
operating water pumps in fields even as they use mobile phones to conduct other
chores; mobile banking, including financial services, that takes such services
into the hitherto cut-off hinterland.

There are four characteristics that set these innovations
apart:

         Such
innovations add value to the life of the people much beyond the immediate use
of the product or service

         They create a
product or service of an uncompromising quality at a price that is affordable

         They address
the challenge of resource-use efficiency to manage drastically low-cost
structures

         They are
scalable and replicable to suit requirements of local circumstances and
complexities

 Innovations meeting these characteristics have been termed
as ‘Sustainable and Inclusive Innovations’, or SI2, by the CII-ITC Centre of
Excellence for Sustainable Development (CESD). These innovations, as the report
‘Sustainable and inclusive innovation – strategies for tomorrow’s world’
presents, are needed if we have to tackle the twin challenges of the 21st
century: poverty and natural-resource strain.

All of the above instances epitomize the innovations taking
place that are not just technological or market breakthroughs. They are
changing people’s lives. The process of converting an idea into an innovation,
which makes tremendous impact, is difficult to realise. Not all attempts
succeed.

Looking for more instances in the league, one finds these:
Nokia’s cheapest mobile handsets equipped with flashlights (because of frequent
power cuts), multiple phone books (because they often have several different
users), rubberized key pads and menus in several different languages; Tata
Swach using rice husks to purify water, giving a large family an abundant
supply of bacteria-free water for an initial investment of about $24 and a
recurring expense of about $4 for a new filter every few months (Tata
Chemicals, which is making the devices, is planning to produce one million over
the next year and hopes for an eventual market of 100 million); Anurag Gupta, a
telecom entrepreneur, reducing a bank branch to a smart-phone and a fingerprint
scanner that allows ATM machines to be taken to rural customers; and a
wood-burning stove invented by First Energy which consumes less energy and
produces less smoke than regular stoves.

What these companies and entrepreneurs are doing is very
different from product or service stripping to make them affordable for the
poor. They are taking the needs of the poor as the starting point and then working
backwards. There is more to this than simply cutting costs to the bone.

SI2 solutions need to be high quality at affordable prices.
SI2 also means being sparing in the use of raw materials and being considerate
about their impact on the environment. SI2 is not just about redesigning
products and services; it involves rethinking entire production processes and
business models.

None of the innovations mentioned above would have succeeded
had they not addressed the issues of sustainability and inclusivity. SI2 is
about innovation that improves the lives of everyone; innovation that does not
leave out the poor. There are approximately four billion people living on
incomes less than $2 a day. To raise their standards of living and quality of
life, goods and services will have to be ultra-low-cost, extremely affordable,
and at the same time be high on performance and world-class in quality.

The value of SI2 is generally perceived to come true in the
low-income markets, but any industry, in any geography, can generate similar
breakthroughs by creating a similar context for itself. Not only can these be
replicated in low-income countries, but they also have the necessary space in
developed countries. Vijay Govindrajan calls such a process ‘reverse innovation’.
This takes place when an innovation developed in a poor country turns out to
have broad utility in the developed world as well. This is validated through
GE’s Mac 400, a handheld electrocardiogram (ECG) unit. Here, the multiple
buttons on conventional ECGs have been reduced to just four. The bulky printer
has been replaced by a tiny gadget normally used in portable ticketing
machines. The complete unit is small enough to fit into a small backpack and
can run on batteries as well as on general power supply. It sells for $800,
instead of the $2,000 that a conventional ECG costs, and it has reduced the
cost of an ECG test to just $1 per patient.

SI2 must be scalable and replicable, for only then will such
innovations reach the poor and the very poor. SI2 that work are those that are
responsive to the limitations imposed by small, irregular customer cash flows
and credibly address distribution questions. When engaging low-income segments,
as suppliers or producers, a successful SI2 will attend to the costs that a
low-income supplier may face in switching livelihoods and to the cost of
aggregating and managing large numbers of small suppliers.

SI2 means adding value to potential customers, who are
currently left out of a market because existing offerings are too expensive or
complicated or they lack access. Such consumers fall all along the
socio-economic spectrum, although opportunities to democratize products in
emerging markets and reach the so-called bottom-of-the pyramid are particularly
ripe. The global economy creates new opportunities for innovative companies to
bring goods and services to those previously unable to access them. As the
global economy fuels upward mobility for even the poorest in developing
nations, many companies are finding growth by breaking down barriers for the
millions of poor they previously thought to be unreachable, unprofitable, or
both.

SI2 ecosystem

Innovation ecosystem is understood as the aggregate of
public and private organizations that contribute to the generation and application
of new technological and market knowledge, and policies and incentive systems
within an economic system to support innovation process. Ecosystems such as
these are receiving increased attention from policymakers as it helps to map
out actors involved in innovation generation, to identify the linkages among
them as well as gaps and missing links reducing various capabilities.

Considering there are basic challenges to sustainability and
inclusivity, such as gaps in physical infrastructure that provides last-mile
connectivity with beneficiaries, SI2 ecosystem includes bridging such gaps,
which may not be found in otherwise evolved innovation systems. The SI2
ecosystem has four key subsystems that interact with each other. These are:
focus on issues, connectivity through physical infrastructure, policy that
nurtures innovation, and collective effort between different actors.

A credible ecosystem should identify priority issues from
time to time. These issues include the environmental and social challenges that
need to be addressed, but they also include identification of bottlenecks and
hurdles in promoting innovation and making them succeed. Prioritization helps
fast-track progress on some of the chronic and immediate challenges. Often, SI2
creates multiplier impact on connected issues.

For instance, provision of renewable-based decentralized
energy tackles the twin challenges of energy poverty and carbon emissions.

Physical infrastructure to connect innovators with
financiers and, ultimately, users is an uncompromising success factor of a good
SI2 ecosystem. Last mile-connectivity using modern technologies bridges many
gaps in taking innovation to the marketplace. In addition, there is also a need
to provide the physical infrastructure for an innovation ecosystem, including
broadband Internet access, seed funding to bridge the ‘valley of death’ between
the development of a technology and its ability to generate a sustainable
revenue stream for a company, and incentives and effective business services to
make investment in aspiring entrepreneurs more attractive.

The importance of SI2-enabling policy can only be
emphasised, and this is best provided by governments. Channelling investments
to facilitating creation of market and providing a healthy intellectual
property rights (IPR) regime are within the purview of governments. Changes in
industry policy could also foster more effective collaborations with higher
education. Industry should ‘pull’ relevant research from universities by
jointly identifying their needs for pre-competitive research and communicating
those needs to relevant experts at universities, rather than waiting for
academia to approach them with products or processes of potential commercial
value.

To develop a thriving innovation ecosystem requires a
fundamental reorientation toward entrepreneurship, commercialization and
collaboration on the parts of government, industry, not-for-profits, academia
and investors. This could potentially reduce unnecessary duplication to some
extent.

Building a robust innovation ecosystem will pay off in many
tangible ways: in more powerful research in fields of direct relevance to our
everyday lives; in new high-technology businesses that leverage the ideas; in
higher-paying jobs, more vibrant academia, and an economy that is more
sustainable; and in increased tax revenues to support programmes and services
that benefit all.

The report
‘Sustainable and inclusive innovation – strategies for tomorrow’s world’ is the
second in a series on sustainable innovation by CII-ITC CESD. The first report,
‘Indian companies with solutions that the world needs’, was developed in 2008,
with the support of WWF-India. CIIITC CESD’s portfolio of services on
sustainable and inclusive innovation includes helping enterprises and other
institutions develop their innovation strategy and capability. It engages with
the Indian government on its innovation roadmap and helps create an enabling
innovation ecosystem that is both sustainable and inclusive.

 

The report has been
written by Sachin Joshi, deputy director, CII-ITC CESD. He can be reached at:
sachin.csr@gmail.com, www.twitter.com/sachin_joshi, and
http://sachinjoshi.posterous.com.