Over the past two decades, India has achieved a dominant share of offshore work, giving Western populations angst about the loss of white collar jobs. Yet, as many have argued, perhaps this fear is misplaced as the West retains an advantage in innovation. After all, where are the Indian iPods, Googles and Viagras?
We spent three years researching whether India could transition from being the favored destination for offshored services to a locus of innovation. We discovered that despite substantial innovation taking place in India, much of it has been “invisible.” Take for example, , a company that prides itself on “inspired innovation that’s changing the world." While Intel ensures consumers know they’re using a personal computer powered by Intel innovation, there isn’t any label on the product showing that the innovation originated in India. Here are four types of innovations originating from India that remain invisible:
If one takes a step back and thinks about the invisible innovation in India, it has some disquieting effects for jobs in the West. As more work moves to China and India, companies in the West are likely to confront what we call the “sinking skill ladder” problem. What is a skill ladder? The idea that to do highly sophisticated innovative work, you need to have done less sophisticated work at some stage in your career.
Imagine being the partner at a consulting firm without having been an associate, an investment banker without having been an analyst or the head of a clinical research team without having done any “bench-work.” But a problem lies ahead in that Western companies are blocking their talent pipelines from which to promote tomorrow's senior leaders. Unless they have grappled with this question, it seems facile to say that companies in the West can “move up into higher value-added services” and leave the “low end” work to their counterparts in Asia.
In some sense, the problem for managers of companies from the developed world is less complicated: they can move the next rung of their R&D, and even their headquarters, to where it can be done more effectively and efficiently. However, disconcerting questions for policy makers in developed countries will remain.
Nirmalya Kumar is a professor of marketing and Phanish Puranam is a professor of strategy at and co-authors of India Inside (Harvard Business Review Press, November 2011). They are also co-directors of the Aditya Birla India Centre at the School.