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Format: Layer, Start, End, Style, Name, MarginL, MarginR, MarginV, Effect, Text
Dialogue: 0,0:00:00.04,0:00:03.01,Default,,0000,0000,0000,,Over the last two decades, India has become
Dialogue: 0,0:00:03.01,0:00:06.05,Default,,0000,0000,0000,,a global hub for software development
Dialogue: 0,0:00:06.05,0:00:10.08,Default,,0000,0000,0000,,and offshoring of back office services, as we call it,
Dialogue: 0,0:00:10.08,0:00:15.10,Default,,0000,0000,0000,,and what we were interested in finding out was that
Dialogue: 0,0:00:15.10,0:00:19.04,Default,,0000,0000,0000,,because of this huge industry that has started
Dialogue: 0,0:00:19.04,0:00:21.05,Default,,0000,0000,0000,,over the last two decades in India,
Dialogue: 0,0:00:21.05,0:00:24.04,Default,,0000,0000,0000,,offshoring software development and back office services,
Dialogue: 0,0:00:24.04,0:00:26.06,Default,,0000,0000,0000,,there's been a flight of white collar jobs
Dialogue: 0,0:00:26.06,0:00:30.02,Default,,0000,0000,0000,,from the developed world to India.
Dialogue: 0,0:00:30.02,0:00:33.07,Default,,0000,0000,0000,,When this is combined with the loss of manufacturing jobs
Dialogue: 0,0:00:33.07,0:00:37.00,Default,,0000,0000,0000,,to China, it has, you know, led to considerable angst
Dialogue: 0,0:00:37.00,0:00:40.09,Default,,0000,0000,0000,,amongst the Western populations.
Dialogue: 0,0:00:40.09,0:00:43.05,Default,,0000,0000,0000,,In fact, if you look at polls, they show a declining
Dialogue: 0,0:00:43.05,0:00:48.09,Default,,0000,0000,0000,,trend for support for free trade in the West.
Dialogue: 0,0:00:48.09,0:00:51.09,Default,,0000,0000,0000,,Now, the Western elites, however, have said
Dialogue: 0,0:00:51.09,0:00:53.09,Default,,0000,0000,0000,,this fear is misplaced.
Dialogue: 0,0:00:53.09,0:00:56.01,Default,,0000,0000,0000,,For example, if you have read — I suspect many of you
Dialogue: 0,0:00:56.01,0:00:59.04,Default,,0000,0000,0000,,have done so — read the book by Thomas Friedman
Dialogue: 0,0:00:59.04,0:01:02.07,Default,,0000,0000,0000,,called "The World Is Flat," he said, basically, in his book
Dialogue: 0,0:01:02.07,0:01:06.09,Default,,0000,0000,0000,,that, you know, this fear for free trade is wrong
Dialogue: 0,0:01:06.09,0:01:09.07,Default,,0000,0000,0000,,because it assumes, it's based on a mistaken assumption
Dialogue: 0,0:01:09.07,0:01:13.05,Default,,0000,0000,0000,,that everything that can be invented has been invented.
Dialogue: 0,0:01:13.05,0:01:16.04,Default,,0000,0000,0000,,In fact, he says, it's innovation that will keep the West
Dialogue: 0,0:01:16.04,0:01:18.01,Default,,0000,0000,0000,,ahead of the developing world,
Dialogue: 0,0:01:18.01,0:01:21.05,Default,,0000,0000,0000,,with the more sophisticated, innovative tasks being done
Dialogue: 0,0:01:21.05,0:01:24.02,Default,,0000,0000,0000,,in the developed world, and the less sophisticated,
Dialogue: 0,0:01:24.02,0:01:25.08,Default,,0000,0000,0000,,shall we say, drudge work being done
Dialogue: 0,0:01:25.08,0:01:28.10,Default,,0000,0000,0000,,in the developing world.
Dialogue: 0,0:01:28.10,0:01:32.03,Default,,0000,0000,0000,,Now, what we were trying to understand was,
Dialogue: 0,0:01:32.03,0:01:35.01,Default,,0000,0000,0000,,is this true?
Dialogue: 0,0:01:35.01,0:01:38.09,Default,,0000,0000,0000,,Could India become a source, or a global hub,
Dialogue: 0,0:01:38.09,0:01:42.00,Default,,0000,0000,0000,,of innovation, just like it's become a global hub
Dialogue: 0,0:01:42.00,0:01:45.09,Default,,0000,0000,0000,,for back office services and software development?
Dialogue: 0,0:01:45.09,0:01:49.07,Default,,0000,0000,0000,,And for the last four years, my coauthor Phanish Puranam
Dialogue: 0,0:01:49.07,0:01:53.00,Default,,0000,0000,0000,,and I spent investigating this topic.
Dialogue: 0,0:01:53.00,0:01:57.00,Default,,0000,0000,0000,,Initially, or, you know, as people would say, you know,
Dialogue: 0,0:01:57.00,0:01:59.04,Default,,0000,0000,0000,,in fact the more aggressive people who are supporting
Dialogue: 0,0:01:59.04,0:02:01.07,Default,,0000,0000,0000,,the Western innovative model, say,
Dialogue: 0,0:02:01.07,0:02:04.03,Default,,0000,0000,0000,,"Where are the Indian Googles, iPods and Viagras,
Dialogue: 0,0:02:04.03,0:02:08.05,Default,,0000,0000,0000,,if the Indians are so bloody smart?" (Laughter)
Dialogue: 0,0:02:08.05,0:02:10.09,Default,,0000,0000,0000,,So initially, when we started our research, we went
Dialogue: 0,0:02:10.09,0:02:12.10,Default,,0000,0000,0000,,and met several executives, and we asked them,
Dialogue: 0,0:02:12.10,0:02:15.03,Default,,0000,0000,0000,,"What do you think? Will India go from being a favored
Dialogue: 0,0:02:15.03,0:02:18.03,Default,,0000,0000,0000,,destination for software services and back office services
Dialogue: 0,0:02:18.03,0:02:21.04,Default,,0000,0000,0000,,to a destination for innovation?"
Dialogue: 0,0:02:21.04,0:02:23.02,Default,,0000,0000,0000,,They laughed. They dismissed us.
Dialogue: 0,0:02:23.02,0:02:26.03,Default,,0000,0000,0000,,They said, "You know what? Indians don't do innovation."
Dialogue: 0,0:02:26.03,0:02:28.06,Default,,0000,0000,0000,,The more polite ones said, "Well, you know, Indians
Dialogue: 0,0:02:28.06,0:02:31.07,Default,,0000,0000,0000,,make good software programmers and accountants,
Dialogue: 0,0:02:31.07,0:02:34.02,Default,,0000,0000,0000,,but they can't do the creative stuff."
Dialogue: 0,0:02:34.02,0:02:38.08,Default,,0000,0000,0000,,Sometimes, it took a more, took a veneer of sophistication,
Dialogue: 0,0:02:38.08,0:02:41.03,Default,,0000,0000,0000,,and people said, "You know, it's nothing to do with Indians.
Dialogue: 0,0:02:41.03,0:02:44.09,Default,,0000,0000,0000,,It's really the rule-based, regimented education system
Dialogue: 0,0:02:44.09,0:02:49.03,Default,,0000,0000,0000,,in India that is responsible for killing all creativity."
Dialogue: 0,0:02:49.03,0:02:51.09,Default,,0000,0000,0000,,They said, instead, if you want to see real creativity,
Dialogue: 0,0:02:51.09,0:02:53.08,Default,,0000,0000,0000,,go to Silicon Valley, and look at companies
Dialogue: 0,0:02:53.08,0:02:56.05,Default,,0000,0000,0000,,like Google, Microsoft, Intel.
Dialogue: 0,0:02:56.05,0:02:59.00,Default,,0000,0000,0000,,So we started examining the R&D and innovation labs
Dialogue: 0,0:02:59.00,0:03:01.06,Default,,0000,0000,0000,,of Silicon Valley.
Dialogue: 0,0:03:01.06,0:03:03.07,Default,,0000,0000,0000,,Well, interestingly, what you find there is,
Dialogue: 0,0:03:03.07,0:03:06.06,Default,,0000,0000,0000,,usually you are introduced to the head of the innovation lab
Dialogue: 0,0:03:06.06,0:03:08.06,Default,,0000,0000,0000,,or the R&D center as they may call it,
Dialogue: 0,0:03:08.06,0:03:12.02,Default,,0000,0000,0000,,and more often than not, it's an Indian. (Laughter)
Dialogue: 0,0:03:12.02,0:03:15.03,Default,,0000,0000,0000,,So I immediately said, "Well, but you could not have been
Dialogue: 0,0:03:15.03,0:03:16.06,Default,,0000,0000,0000,,educated in India, right?
Dialogue: 0,0:03:16.06,0:03:18.02,Default,,0000,0000,0000,,You must have gotten your education here."
Dialogue: 0,0:03:18.02,0:03:22.00,Default,,0000,0000,0000,,It turned out, in every single case,
Dialogue: 0,0:03:22.00,0:03:26.03,Default,,0000,0000,0000,,they came out of the Indian educational system.
Dialogue: 0,0:03:26.03,0:03:28.08,Default,,0000,0000,0000,,So we realized that maybe we had the wrong question,
Dialogue: 0,0:03:28.08,0:03:31.06,Default,,0000,0000,0000,,and the right question is, really, can Indians
Dialogue: 0,0:03:31.06,0:03:35.04,Default,,0000,0000,0000,,based out of India do innovative work?
Dialogue: 0,0:03:35.04,0:03:37.07,Default,,0000,0000,0000,,So off we went to India. We made, I think,
Dialogue: 0,0:03:37.07,0:03:40.09,Default,,0000,0000,0000,,about a dozen trips to Bangalore, Mumbai, Gurgaon,
Dialogue: 0,0:03:40.09,0:03:43.01,Default,,0000,0000,0000,,Delhi, Hyderabad, you name it, to examine
Dialogue: 0,0:03:43.01,0:03:48.04,Default,,0000,0000,0000,,what is the level of corporate innovation in these cities.
Dialogue: 0,0:03:48.04,0:03:50.09,Default,,0000,0000,0000,,And what we found was, as we progressed in our research,
Dialogue: 0,0:03:50.09,0:03:53.09,Default,,0000,0000,0000,,was, that we were asking really the wrong question.
Dialogue: 0,0:03:53.09,0:03:55.06,Default,,0000,0000,0000,,When you ask, "Where are the Indian Googles,
Dialogue: 0,0:03:55.06,0:03:59.10,Default,,0000,0000,0000,,iPods and Viagras?" you are taking a particular perspective
Dialogue: 0,0:03:59.10,0:04:04.02,Default,,0000,0000,0000,,on innovation, which is innovation for end users,
Dialogue: 0,0:04:04.02,0:04:05.08,Default,,0000,0000,0000,,visible innovation.
Dialogue: 0,0:04:05.08,0:04:09.05,Default,,0000,0000,0000,,Instead, innovation, if you remember, some of you
Dialogue: 0,0:04:09.05,0:04:11.05,Default,,0000,0000,0000,,may have read the famous economist Schumpeter,
Dialogue: 0,0:04:11.05,0:04:13.06,Default,,0000,0000,0000,,he said, "Innovation is novelty
Dialogue: 0,0:04:13.06,0:04:17.03,Default,,0000,0000,0000,,in how value is created and distributed."
Dialogue: 0,0:04:17.03,0:04:19.04,Default,,0000,0000,0000,,It could be new products and services,
Dialogue: 0,0:04:19.04,0:04:21.08,Default,,0000,0000,0000,,but it could also be new ways of producing products.
Dialogue: 0,0:04:21.08,0:04:24.09,Default,,0000,0000,0000,,It could also be novel ways of organizing firms and industries.
Dialogue: 0,0:04:24.09,0:04:28.08,Default,,0000,0000,0000,,Once you take this, there's no reason to restrict innovation,
Dialogue: 0,0:04:28.08,0:04:32.08,Default,,0000,0000,0000,,the beneficiaries of innovation, just to end users.
Dialogue: 0,0:04:32.08,0:04:35.04,Default,,0000,0000,0000,,When you take this broader conceptualization of innovation,
Dialogue: 0,0:04:35.04,0:04:38.07,Default,,0000,0000,0000,,what we found was, India is well represented
Dialogue: 0,0:04:38.07,0:04:42.01,Default,,0000,0000,0000,,in innovation, but the innovation that is being done in India
Dialogue: 0,0:04:42.01,0:04:45.03,Default,,0000,0000,0000,,is of a form we did not anticipate, and what we did was
Dialogue: 0,0:04:45.03,0:04:47.09,Default,,0000,0000,0000,,we called it "invisible innovation."
Dialogue: 0,0:04:47.09,0:04:50.08,Default,,0000,0000,0000,,And specifically, there are four types of invisible innovation
Dialogue: 0,0:04:50.08,0:04:52.10,Default,,0000,0000,0000,,that are coming out of India.
Dialogue: 0,0:04:52.10,0:04:55.07,Default,,0000,0000,0000,,The first type of invisible innovation out of India
Dialogue: 0,0:04:55.07,0:04:58.06,Default,,0000,0000,0000,,is what we call innovation for business customers,
Dialogue: 0,0:04:58.06,0:05:01.04,Default,,0000,0000,0000,,which is led by the multinational corporations,
Dialogue: 0,0:05:01.04,0:05:04.04,Default,,0000,0000,0000,,which have -- in the last two decades, there have been
Dialogue: 0,0:05:04.04,0:05:10.06,Default,,0000,0000,0000,,750 R&D centers set up in India by multinational companies
Dialogue: 0,0:05:10.06,0:05:14.09,Default,,0000,0000,0000,,employing more than 400,000 professionals.
Dialogue: 0,0:05:14.09,0:05:19.01,Default,,0000,0000,0000,,Now, when you consider the fact that, historically,
Dialogue: 0,0:05:19.01,0:05:22.03,Default,,0000,0000,0000,,the R&D center of a multinational company
Dialogue: 0,0:05:22.03,0:05:26.10,Default,,0000,0000,0000,,was always in the headquarters, or in the country of origin
Dialogue: 0,0:05:26.10,0:05:30.09,Default,,0000,0000,0000,,of that multinational company, to have 750 R&D centers
Dialogue: 0,0:05:30.09,0:05:33.02,Default,,0000,0000,0000,,of multinational corporations in India
Dialogue: 0,0:05:33.02,0:05:35.08,Default,,0000,0000,0000,,is truly a remarkable figure.
Dialogue: 0,0:05:35.08,0:05:38.00,Default,,0000,0000,0000,,When we went and talked to the people in those innovation
Dialogue: 0,0:05:38.00,0:05:40.07,Default,,0000,0000,0000,,centers and asked them what are they working on,
Dialogue: 0,0:05:40.07,0:05:42.08,Default,,0000,0000,0000,,they said, "We are working on global products."
Dialogue: 0,0:05:42.08,0:05:45.04,Default,,0000,0000,0000,,They were not working on localizing global products
Dialogue: 0,0:05:45.04,0:05:49.01,Default,,0000,0000,0000,,for India, which is the usual role of a local R&D.
Dialogue: 0,0:05:49.01,0:05:51.06,Default,,0000,0000,0000,,They were working on truly global products,
Dialogue: 0,0:05:51.06,0:05:55.04,Default,,0000,0000,0000,,and companies like Microsoft, Google, AstraZeneca,
Dialogue: 0,0:05:55.04,0:05:58.02,Default,,0000,0000,0000,,General Electric, Philips, have already answered
Dialogue: 0,0:05:58.02,0:06:01.07,Default,,0000,0000,0000,,in the affirmative the question that from their Bangalore
Dialogue: 0,0:06:01.07,0:06:05.07,Default,,0000,0000,0000,,and Hyderabad R&D centers they are able to produce
Dialogue: 0,0:06:05.07,0:06:08.07,Default,,0000,0000,0000,,products and services for the world.
Dialogue: 0,0:06:08.07,0:06:11.04,Default,,0000,0000,0000,,But of course, as an end user, you don't see that,
Dialogue: 0,0:06:11.04,0:06:12.09,Default,,0000,0000,0000,,because you only see the name of the company,
Dialogue: 0,0:06:12.09,0:06:16.06,Default,,0000,0000,0000,,not where it was developed.
Dialogue: 0,0:06:16.06,0:06:19.05,Default,,0000,0000,0000,,The other thing we were told then was, "Yes, but, you know,
Dialogue: 0,0:06:19.05,0:06:21.07,Default,,0000,0000,0000,,the kind of work that is coming out of the Indian R&D center
Dialogue: 0,0:06:21.07,0:06:23.08,Default,,0000,0000,0000,,cannot be compared to the kind of work that is coming out
Dialogue: 0,0:06:23.08,0:06:26.01,Default,,0000,0000,0000,,of the U.S. R&D centers."
Dialogue: 0,0:06:26.01,0:06:27.07,Default,,0000,0000,0000,,So my coauthor Phanish Puranam, who happens to be
Dialogue: 0,0:06:27.07,0:06:30.01,Default,,0000,0000,0000,,one of the smartest people I know, said
Dialogue: 0,0:06:30.01,0:06:31.05,Default,,0000,0000,0000,,he's going to do a study.
Dialogue: 0,0:06:31.05,0:06:34.02,Default,,0000,0000,0000,,What he did was he looked at those companies
Dialogue: 0,0:06:34.02,0:06:37.09,Default,,0000,0000,0000,,that had an R&D center in USA and in India,
Dialogue: 0,0:06:37.09,0:06:40.05,Default,,0000,0000,0000,,and then he looked at a patent that was filed
Dialogue: 0,0:06:40.05,0:06:43.02,Default,,0000,0000,0000,,out of the U.S. and a similar patent filed out of the same
Dialogue: 0,0:06:43.02,0:06:45.07,Default,,0000,0000,0000,,company's subsidiary in India,
Dialogue: 0,0:06:45.07,0:06:48.08,Default,,0000,0000,0000,,so he's now comparing the patents of R&D centers
Dialogue: 0,0:06:48.08,0:06:52.08,Default,,0000,0000,0000,,in the U.S. with R&D centers in India of the same company
Dialogue: 0,0:06:52.08,0:06:55.01,Default,,0000,0000,0000,,to find out what is the quality of the patents filed
Dialogue: 0,0:06:55.01,0:06:56.09,Default,,0000,0000,0000,,out of the Indian centers and how do they compare
Dialogue: 0,0:06:56.09,0:06:59.07,Default,,0000,0000,0000,,with the quality of the patents filed out of the U.S. centers?
Dialogue: 0,0:06:59.07,0:07:01.09,Default,,0000,0000,0000,,Interestingly, what he finds is
Dialogue: 0,0:07:01.09,0:07:04.06,Default,,0000,0000,0000,,— and by the way, the way we look at the quality of a patent
Dialogue: 0,0:07:04.06,0:07:07.06,Default,,0000,0000,0000,,is what we call forward citations: How many times
Dialogue: 0,0:07:07.06,0:07:11.07,Default,,0000,0000,0000,,does a future patent reference the older patent? —
Dialogue: 0,0:07:11.07,0:07:14.02,Default,,0000,0000,0000,,he finds something very interesting.
Dialogue: 0,0:07:14.02,0:07:16.09,Default,,0000,0000,0000,,What we find is that the data says
Dialogue: 0,0:07:16.09,0:07:20.01,Default,,0000,0000,0000,,that the number of forward citations of a patent filed
Dialogue: 0,0:07:20.01,0:07:23.05,Default,,0000,0000,0000,,out of a U.S. R&D subsidiary is identical to the number
Dialogue: 0,0:07:23.05,0:07:27.02,Default,,0000,0000,0000,,of forward citations of a patent filed by an Indian subsidiary
Dialogue: 0,0:07:27.02,0:07:29.04,Default,,0000,0000,0000,,of the same company within that company.
Dialogue: 0,0:07:29.04,0:07:32.04,Default,,0000,0000,0000,,So within the company, there's no difference in the forward
Dialogue: 0,0:07:32.04,0:07:34.09,Default,,0000,0000,0000,,citation rates of their Indian subsidiaries versus
Dialogue: 0,0:07:34.09,0:07:35.10,Default,,0000,0000,0000,,their U.S. subsidiaries.
Dialogue: 0,0:07:35.10,0:07:39.08,Default,,0000,0000,0000,,So that's the first kind of invisible innovation coming out of India.
Dialogue: 0,0:07:39.08,0:07:42.03,Default,,0000,0000,0000,,The second kind of invisible innovation coming out of India
Dialogue: 0,0:07:42.03,0:07:46.00,Default,,0000,0000,0000,,is what we call outsourcing innovation to Indian companies,
Dialogue: 0,0:07:46.00,0:07:49.00,Default,,0000,0000,0000,,where many companies today are contracting
Dialogue: 0,0:07:49.00,0:07:52.10,Default,,0000,0000,0000,,Indian companies to do a major part of their product
Dialogue: 0,0:07:52.10,0:07:57.04,Default,,0000,0000,0000,,development work for their global products
Dialogue: 0,0:07:57.04,0:07:59.07,Default,,0000,0000,0000,,which are going to be sold to the entire world.
Dialogue: 0,0:07:59.07,0:08:01.09,Default,,0000,0000,0000,,For example, in the pharma industry, a lot of the molecules
Dialogue: 0,0:08:01.09,0:08:04.05,Default,,0000,0000,0000,,are being developed, but you see a major part of that work
Dialogue: 0,0:08:04.05,0:08:07.01,Default,,0000,0000,0000,,is being sent to India.
Dialogue: 0,0:08:07.01,0:08:10.01,Default,,0000,0000,0000,,For example, XCL Technologies,
Dialogue: 0,0:08:10.01,0:08:12.10,Default,,0000,0000,0000,,they developed two of the mission critical systems
Dialogue: 0,0:08:12.10,0:08:16.02,Default,,0000,0000,0000,,for the new Boeing 787 Dreamliner,
Dialogue: 0,0:08:16.02,0:08:18.09,Default,,0000,0000,0000,,one to avoid collisions in the sky,
Dialogue: 0,0:08:18.09,0:08:22.02,Default,,0000,0000,0000,,and another to allow landing in zero visibility.
Dialogue: 0,0:08:22.02,0:08:24.08,Default,,0000,0000,0000,,But of course, when you climb onto the Boeing 787,
Dialogue: 0,0:08:24.08,0:08:27.02,Default,,0000,0000,0000,,you are not going to know that this is invisible innovation
Dialogue: 0,0:08:27.02,0:08:28.04,Default,,0000,0000,0000,,out of India.
Dialogue: 0,0:08:28.04,0:08:31.04,Default,,0000,0000,0000,,The third kind of invisible innovation coming out of India
Dialogue: 0,0:08:31.04,0:08:34.04,Default,,0000,0000,0000,,is what we call process innovations, because of an injection
Dialogue: 0,0:08:34.04,0:08:37.02,Default,,0000,0000,0000,,of intelligence by Indian firms.
Dialogue: 0,0:08:37.02,0:08:41.04,Default,,0000,0000,0000,,Process innovation is different from product innovation.
Dialogue: 0,0:08:41.04,0:08:44.06,Default,,0000,0000,0000,,It's about how do you create a new product or develop
Dialogue: 0,0:08:44.06,0:08:46.06,Default,,0000,0000,0000,,a new product or manufacture a new product,
Dialogue: 0,0:08:46.06,0:08:48.07,Default,,0000,0000,0000,,but not a new product itself?
Dialogue: 0,0:08:48.07,0:08:53.08,Default,,0000,0000,0000,,Only in India do millions of young people dream
Dialogue: 0,0:08:53.08,0:08:57.10,Default,,0000,0000,0000,,of working in a call center.
Dialogue: 0,0:08:57.10,0:09:00.10,Default,,0000,0000,0000,,What happens — You know, it's a dead end job in the West,
Dialogue: 0,0:09:00.10,0:09:03.03,Default,,0000,0000,0000,,what high school dropouts do.
Dialogue: 0,0:09:03.03,0:09:06.04,Default,,0000,0000,0000,,What happens when you put hundreds of thousands
Dialogue: 0,0:09:06.04,0:09:09.06,Default,,0000,0000,0000,,of smart, young, ambitious kids
Dialogue: 0,0:09:09.06,0:09:11.09,Default,,0000,0000,0000,,on a call center job?
Dialogue: 0,0:09:11.09,0:09:16.08,Default,,0000,0000,0000,,Very quickly, they get bored, and they start innovating,
Dialogue: 0,0:09:16.08,0:09:20.01,Default,,0000,0000,0000,,and they start telling the boss how to do this job better, and
Dialogue: 0,0:09:20.01,0:09:23.03,Default,,0000,0000,0000,,out of this process innovation comes product innovations,
Dialogue: 0,0:09:23.03,0:09:25.00,Default,,0000,0000,0000,,which are then marketed around the world.
Dialogue: 0,0:09:25.00,0:09:27.04,Default,,0000,0000,0000,,For example, 24/7 Customer,
Dialogue: 0,0:09:27.04,0:09:29.07,Default,,0000,0000,0000,,traditional call center company, used to be a traditional
Dialogue: 0,0:09:29.07,0:09:31.06,Default,,0000,0000,0000,,call center company. Today they're developing
Dialogue: 0,0:09:31.06,0:09:35.00,Default,,0000,0000,0000,,analytical tools to do predictive modeling so that before
Dialogue: 0,0:09:35.00,0:09:38.00,Default,,0000,0000,0000,,you pick up the phone, you can guess
Dialogue: 0,0:09:38.00,0:09:44.08,Default,,0000,0000,0000,,or predict what this phone call is about.
Dialogue: 0,0:09:44.08,0:09:47.03,Default,,0000,0000,0000,,It's because of an injection of intelligence into a process
Dialogue: 0,0:09:47.03,0:09:50.01,Default,,0000,0000,0000,,which was considered dead for a long time in the West.
Dialogue: 0,0:09:50.01,0:09:53.04,Default,,0000,0000,0000,,And the last kind of innovation, invisible innovation
Dialogue: 0,0:09:53.04,0:09:56.00,Default,,0000,0000,0000,,coming out of India is what we call management innovation.
Dialogue: 0,0:09:56.00,0:09:57.08,Default,,0000,0000,0000,,It's not a new product or a new process
Dialogue: 0,0:09:57.08,0:10:00.01,Default,,0000,0000,0000,,but a new way to organize work,
Dialogue: 0,0:10:00.01,0:10:02.06,Default,,0000,0000,0000,,and the most significant management innovation to come
Dialogue: 0,0:10:02.06,0:10:06.02,Default,,0000,0000,0000,,out of India, invented by the Indian offshoring industry
Dialogue: 0,0:10:06.02,0:10:08.08,Default,,0000,0000,0000,,is what we call the global delivery model.
Dialogue: 0,0:10:08.08,0:10:11.01,Default,,0000,0000,0000,,What the global delivery model allows is, it allows you
Dialogue: 0,0:10:11.01,0:10:14.06,Default,,0000,0000,0000,,to take previously geographically core-located tasks,
Dialogue: 0,0:10:14.06,0:10:17.06,Default,,0000,0000,0000,,break them up into parts, send them around the world
Dialogue: 0,0:10:17.06,0:10:19.06,Default,,0000,0000,0000,,where the expertise and the cost structure exists,
Dialogue: 0,0:10:19.06,0:10:22.04,Default,,0000,0000,0000,,and then specify the means for reintegrating them.
Dialogue: 0,0:10:22.04,0:10:24.06,Default,,0000,0000,0000,,Without that, you could not have any of the other
Dialogue: 0,0:10:24.06,0:10:26.08,Default,,0000,0000,0000,,invisible innovations today.
Dialogue: 0,0:10:26.08,0:10:29.05,Default,,0000,0000,0000,,So, what I'm trying to say is, what we are finding
Dialogue: 0,0:10:29.05,0:10:34.01,Default,,0000,0000,0000,,in our research is, that if products for end users
Dialogue: 0,0:10:34.01,0:10:37.04,Default,,0000,0000,0000,,is the visible tip of the innovation iceberg,
Dialogue: 0,0:10:37.04,0:10:41.03,Default,,0000,0000,0000,,India is well represented in the invisible, large,
Dialogue: 0,0:10:41.03,0:10:46.06,Default,,0000,0000,0000,,submerged portion of the innovation iceberg.
Dialogue: 0,0:10:46.06,0:10:51.05,Default,,0000,0000,0000,,Now, this has, of course, some implications,
Dialogue: 0,0:10:51.05,0:10:55.08,Default,,0000,0000,0000,,and so we developed three implications of this research.
Dialogue: 0,0:10:55.08,0:10:59.00,Default,,0000,0000,0000,,The first is what we called sinking skill ladder,
Dialogue: 0,0:10:59.00,0:11:01.07,Default,,0000,0000,0000,,and now I'm going to go back to where I started my
Dialogue: 0,0:11:01.07,0:11:04.10,Default,,0000,0000,0000,,conversation with you, which was about the flight of jobs.
Dialogue: 0,0:11:04.10,0:11:08.01,Default,,0000,0000,0000,,Now, of course, when we first, as a multinational company,
Dialogue: 0,0:11:08.01,0:11:10.09,Default,,0000,0000,0000,,decide to outsource jobs to India in the R&D,
Dialogue: 0,0:11:10.09,0:11:14.03,Default,,0000,0000,0000,,what we are going to do is we are going to outsource the
Dialogue: 0,0:11:14.03,0:11:17.04,Default,,0000,0000,0000,,bottom rung of the ladder to India, the least sophisticated jobs,
Dialogue: 0,0:11:17.04,0:11:20.06,Default,,0000,0000,0000,,just like Tom Friedman would predict.
Dialogue: 0,0:11:20.06,0:11:23.04,Default,,0000,0000,0000,,Now, what happens is, when you outsource the bottom rung
Dialogue: 0,0:11:23.04,0:11:28.02,Default,,0000,0000,0000,,of the ladder to India for innovation and for R&D work,
Dialogue: 0,0:11:28.02,0:11:31.04,Default,,0000,0000,0000,,at some stage in the very near future you are going to have
Dialogue: 0,0:11:31.04,0:11:33.05,Default,,0000,0000,0000,,to confront a problem,
Dialogue: 0,0:11:33.05,0:11:35.04,Default,,0000,0000,0000,,which is where does the next step
Dialogue: 0,0:11:35.04,0:11:38.07,Default,,0000,0000,0000,,of the ladder people come from within your company?
Dialogue: 0,0:11:38.07,0:11:41.06,Default,,0000,0000,0000,,So you have two choices then:
Dialogue: 0,0:11:41.06,0:11:43.08,Default,,0000,0000,0000,,Either you bring the people from India into
Dialogue: 0,0:11:43.08,0:11:46.07,Default,,0000,0000,0000,,the developed world to take positions in the next step
Dialogue: 0,0:11:46.07,0:11:49.04,Default,,0000,0000,0000,,of the ladder — immigration —
Dialogue: 0,0:11:49.04,0:11:51.09,Default,,0000,0000,0000,,or you say, there's so many people in the bottom step
Dialogue: 0,0:11:51.09,0:11:54.05,Default,,0000,0000,0000,,of the ladder waiting to take the next position in India,
Dialogue: 0,0:11:54.05,0:11:58.07,Default,,0000,0000,0000,,why don't we move the next step to India?
Dialogue: 0,0:11:58.07,0:12:00.07,Default,,0000,0000,0000,,What we are trying to say is
Dialogue: 0,0:12:00.07,0:12:05.09,Default,,0000,0000,0000,,that once you outsource the bottom end of the ladder, you --
Dialogue: 0,0:12:05.09,0:12:08.06,Default,,0000,0000,0000,,it's a self-perpetuating act, because of the sinking skill ladder,
Dialogue: 0,0:12:08.06,0:12:11.03,Default,,0000,0000,0000,,and the sinking skill ladder is simply the point that
Dialogue: 0,0:12:11.03,0:12:13.05,Default,,0000,0000,0000,,you can't be an investment banker
Dialogue: 0,0:12:13.05,0:12:15.05,Default,,0000,0000,0000,,without having been an analyst once.
Dialogue: 0,0:12:15.05,0:12:17.08,Default,,0000,0000,0000,,You can't be a professor without having been a student.
Dialogue: 0,0:12:17.08,0:12:20.06,Default,,0000,0000,0000,,You can't be a consultant without having been a research associate.
Dialogue: 0,0:12:20.06,0:12:23.02,Default,,0000,0000,0000,,So, if you outsource the least sophisticated jobs,
Dialogue: 0,0:12:23.02,0:12:27.05,Default,,0000,0000,0000,,at some stage, the next step of the ladder has to follow.
Dialogue: 0,0:12:27.05,0:12:29.03,Default,,0000,0000,0000,,The second thing we bring up is what we call
Dialogue: 0,0:12:29.03,0:12:32.07,Default,,0000,0000,0000,,the browning of the TMT, the top management teams.
Dialogue: 0,0:12:32.07,0:12:35.03,Default,,0000,0000,0000,,If the R&D talent is going to be based out of India
Dialogue: 0,0:12:35.03,0:12:37.06,Default,,0000,0000,0000,,and China, and the largest growth markets
Dialogue: 0,0:12:37.06,0:12:39.08,Default,,0000,0000,0000,,are going to be based out of India and China,
Dialogue: 0,0:12:39.08,0:12:41.05,Default,,0000,0000,0000,,you have to confront the problem that
Dialogue: 0,0:12:41.05,0:12:43.01,Default,,0000,0000,0000,,your top management of the future
Dialogue: 0,0:12:43.02,0:12:46.02,Default,,0000,0000,0000,,is going to have to come out of India and China,
Dialogue: 0,0:12:46.02,0:12:47.10,Default,,0000,0000,0000,,because that's where the product leadership is,
Dialogue: 0,0:12:47.10,0:12:50.02,Default,,0000,0000,0000,,that's where the important market leadership is.
Dialogue: 0,0:12:50.02,0:12:52.09,Default,,0000,0000,0000,,Right? And the last thing we point out in this slide,
Dialogue: 0,0:12:52.09,0:12:56.04,Default,,0000,0000,0000,,which is, you know, that to this story, there's one caveat.
Dialogue: 0,0:12:56.04,0:13:00.04,Default,,0000,0000,0000,,India has the youngest growing population in the world.
Dialogue: 0,0:13:00.04,0:13:04.07,Default,,0000,0000,0000,,This demographic dividend is incredible, but paradoxically,
Dialogue: 0,0:13:04.07,0:13:07.01,Default,,0000,0000,0000,,there's also the mirage of mighty labor pools.
Dialogue: 0,0:13:07.01,0:13:10.00,Default,,0000,0000,0000,,Indian institutes and educational system,
Dialogue: 0,0:13:10.00,0:13:12.10,Default,,0000,0000,0000,,with a few exceptions, are incapable of producing students
Dialogue: 0,0:13:12.10,0:13:15.05,Default,,0000,0000,0000,,in the quantity and quality needed
Dialogue: 0,0:13:15.05,0:13:18.00,Default,,0000,0000,0000,,to keep this innovation engine going,
Dialogue: 0,0:13:18.00,0:13:21.02,Default,,0000,0000,0000,,so companies are finding innovative ways to overcome this,
Dialogue: 0,0:13:21.02,0:13:23.08,Default,,0000,0000,0000,,but in the end it does not absolve the government
Dialogue: 0,0:13:23.08,0:13:28.03,Default,,0000,0000,0000,,of the responsibility for creating this educational structure.
Dialogue: 0,0:13:28.03,0:13:31.06,Default,,0000,0000,0000,,So finally, I want to conclude
Dialogue: 0,0:13:31.06,0:13:34.09,Default,,0000,0000,0000,,by showing you the profile of one company, IBM.
Dialogue: 0,0:13:34.09,0:13:37.03,Default,,0000,0000,0000,,As many of you know, IBM has always been considered
Dialogue: 0,0:13:37.03,0:13:39.03,Default,,0000,0000,0000,,for the last hundred years to be one of the most
Dialogue: 0,0:13:39.03,0:13:40.06,Default,,0000,0000,0000,,innovative companies.
Dialogue: 0,0:13:40.06,0:13:43.03,Default,,0000,0000,0000,,In fact, if you look at the number of patents filed over history,
Dialogue: 0,0:13:43.03,0:13:45.07,Default,,0000,0000,0000,,I think they are in the top or the top two or three companies
Dialogue: 0,0:13:45.07,0:13:49.04,Default,,0000,0000,0000,,in the world of all patents filed in the USA as a private company.
Dialogue: 0,0:13:49.04,0:13:51.09,Default,,0000,0000,0000,,Here is the profile of employees of
Dialogue: 0,0:13:51.09,0:13:55.08,Default,,0000,0000,0000,,IBM over the last decade.
Dialogue: 0,0:13:55.08,0:13:58.06,Default,,0000,0000,0000,,In 2003, they had 300,000 employees,
Dialogue: 0,0:13:58.06,0:14:02.07,Default,,0000,0000,0000,,or 330,000 employees, out of which, 135,000
Dialogue: 0,0:14:02.07,0:14:06.03,Default,,0000,0000,0000,,were in America, 9,000 were in India.
Dialogue: 0,0:14:06.03,0:14:11.03,Default,,0000,0000,0000,,In 2009, they had 400,000 employees, by which time
Dialogue: 0,0:14:11.03,0:14:13.09,Default,,0000,0000,0000,,the U.S. employees had moved to 105,000,
Dialogue: 0,0:14:13.09,0:14:17.01,Default,,0000,0000,0000,,whereas the Indian employees had gone to 100,000.
Dialogue: 0,0:14:17.01,0:14:20.02,Default,,0000,0000,0000,,Well, in 2010, they decided they're not going to reveal
Dialogue: 0,0:14:20.02,0:14:22.05,Default,,0000,0000,0000,,this data anymore, so I had to make some estimates
Dialogue: 0,0:14:22.05,0:14:23.09,Default,,0000,0000,0000,,based on various sources.
Dialogue: 0,0:14:23.09,0:14:26.05,Default,,0000,0000,0000,,Here are my best guesses. Okay? I'm not saying
Dialogue: 0,0:14:26.05,0:14:27.10,Default,,0000,0000,0000,,this is the exact number, it's my best guess.
Dialogue: 0,0:14:27.10,0:14:29.06,Default,,0000,0000,0000,,It gives you a sense of the trend.
Dialogue: 0,0:14:29.06,0:14:34.02,Default,,0000,0000,0000,,There are 433,000 people now at IBM, out of which
Dialogue: 0,0:14:34.02,0:14:36.08,Default,,0000,0000,0000,,98,000 are remaining in the U.S.,
Dialogue: 0,0:14:36.08,0:14:40.04,Default,,0000,0000,0000,,and 150,000 are in India.
Dialogue: 0,0:14:40.04,0:14:43.05,Default,,0000,0000,0000,,So you tell me, is IBM an American company,
Dialogue: 0,0:14:43.05,0:14:47.06,Default,,0000,0000,0000,,or an Indian company? (Laughter)
Dialogue: 0,0:14:47.06,0:14:52.02,Default,,0000,0000,0000,,Ladies and gentlemen, thank you very much. (Applause)