Entrepreneurship:

Antidote to Poverty &

Stagnation

C.K. Prahalad
Paul and Ruth McCracken Distinguished University Professor
The Ross School of Business, The University of Michigan

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© C.K. Prahalad
 Point of Departure

History of

Trajectory of the Region?

Ag. and Ind.

How do we Change the

Prowess

History of Record of
Intellectual Industrial
Vitality Devpt. ?

History of
Global Trade
& Commerce

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 Emerging Opportunity Space

New Approach
to Innovation:

Innovation as Levers?
Entrepreneurship and
“Role of Science”

Global Access Growth

To Talent and and
Markets Change

Increasing
Complexity:
“New Ecosystems”

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The New Opportunity

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 The New Age of Innovation:
The Basic Thesis

+ =

Globalization Connectivity, A New Approach

Digitization, To Innovation &
Convergence, Value Creation
Social Networks
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 Price-Performance Envelopes are
Changing Faster than anyone Expected
1970 80 90 2006

1. Transistors/chip 103 106 109

2. Decrease in size of
micro-devices 10-1 10 -6
3. Computing power 1011 1015
4. Cost per MIPs($1000) 1 1M
1. DNA sequencing cost
($/BASE PAIR) 10 0.05
6. Magnetic data storage 104 1011
(bits/dollar)

Source: Ray Kurzwell

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Discontinuities Challenge the “Firm
Centric View” of the World:

Consider:
Convergence of Technologies,
Convergence of Industry Boundaries,
Ubiquitous Connectivity
The Emergence of New Sciences
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 Emerging Entertainment Space
Web TV FAX PC
Digital TV set Cable TV
Interactive TV
HDTV Satellite TV Printers PCTV Laptop

Flat Displays Digital Set-top Box Tablet PC Handheld

Digital Broadcasting Scanners Home Networking
PDA
Video on
demand Wearable Telematics
DVD Digital Video Recorder
Digital Computer
E-mail
Camera Pager
Video Camera Digital Imaging System
Cell Phone
Multimedia Storage
Digital Jukebox
CD Player Electronic Toys
Reality TV
MP3 Player
Stereo System Game Console
Internet Video

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 Consumers and the Wellness Space?

Health
Health Beauty Specialty
spa
supplements aids clinics
Treatment
Cosmetics
centers
Cosmaceuticals Hospitals Assisted
Health
foods Living
Lifestyle
Pharma drugs Yoga Therapeutics
drugs Nutraceuticals
Surgery
Personalized Fitness
Nutritional medicine regimen
Drug
supplements
Self delivery
Remote
care Pharmacogenomics diagnostics
Ayurveda Minimally
invasive
Remote
treatments Genetic
Medical consultation
Herbal screening
Alternative devices
medicine
medicine
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© C.K. Prahalad
 Consumers and the Wellness Space?

Health
Health Beauty Specialty
spa
supplements aids clinics
Treatment
Cosmetics
centers
Cosmaceuticals Hospitals Assisted
Health
foods Living
Lifestyle
Pharma drugs Yoga Therapeutics
drugs Nutraceuticals
Surgery
Personalized Fitness
Nutritional medicine regimen
Drug
supplements
Self delivery
Remote
care Pharmacogenomics diagnostics
Ayurveda Minimally
invasive
Remote
treatments Genetic
Medical consultation
Herbal screening
Alternative devices
medicine
medicine
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 Convergence of Technologies
and Markets
* Computing, Communications, Components, CE,
Software, (e.g. Philips, Sony, Dell, Microsoft, ..)
* Chemical and Electronics (e.g. Kodak)
* Mechanical and Electronics (e.g. Ford, ABB)
* PCP and Pharmaceuticals (e.g. P&G, Revlon, UL)
* Food and Pharmaceuticals (e.g. UL, Nestle)
* Commodity Products and High Tech (e.g. Cargill)
* Retailing, F. Services and Databases (e.g. Wal-Mart,
Citicorp., Tesco, ..)

Fusion of New and Old Knowledge, Creation of Hybrids,

Forgetting, Learning, Harmonizing, and Investing.
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The Emergence of New Sciences:
1. Brain Studies
2. Materials and Nano technology
3. Mathematics
4. Genetics
5. Artificial Intelligence
6. Communications / Computing
7. Global Warming
8. Energy
9. Search Engines
10.Imaging
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 The Value Creation Process Based on
Advances in Science
Science: Major Changes in
Multiple Specialized Opportunities Economic
Fields (Problems) Models of
Traditional
Industries
Ageing, e.g. Insurance, Food
Climate Change,
Chronic Diseases
New Industries
e.g. Carbon Trading

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 The Innovation Paradox
Scientific Discoveries Scientific Discoveries
are Increasingly focused are Increasingly
on Narrow Fields of Geographically Distributed
USA, Europe, Japan, S.Korea
Specialization China, Singapore, India,……..

# Journals R&D Spend

# Papers # of Scientists
Nobel Prize Winners # of Patents
Intellectual Geographical
Diversity Diversity

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 The Innovation Paradox
Scientific Discoveries
are Increasingly focused
on Narrow Fields of
Specialization
Scientific Discoveries
are Increasingly
Geographically Distributed
USA, Europe, Japan, S. Korea
China, Singapore, India,……

# of Journals R&D Spend

# of papers # Patents
Nobel Prize Winners # of Scientists
Intellectual Geographical
Diversity Diversity
Commercial Value is Created at the
Intersection of Multiple Scientific Disciplines
(e.g. Ageing, Climate Change, Chronic Disease Mgt.)
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Mapping an IP Portfolio to slowdown
Ageing
Repairing ageing Cognition/
Structures Memory/Motor skills
(e.g. bones)
The IP Portfolio
Likelihood of (≠ patent portfolio) Predisposition to
Encountering to Slowdown disabilities
Problems Ageing?

How does this Role of Family and

Person compare Community
With Cohorts?
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Mapping an IP Portfolio to slowdown
Ageing

New Materials Brain Studies

Nano Tech

The IP Portfolio
Predictive (≠ patent portfolio) Genetics
Modeling to Slowdown
Ageing?

Databases, Sociology
IT systems

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 The Innovation Paradox
Scientific Discoveries
Scientific Discoveries
are Increasingly
are Increasingly focused
Geographically Distributed
on Narrow Fields of
USA, Europe, Japan,
Specialization
China, Singapore, India
# of Journals R&D Spend
# of Papers # of Patents
Nobel Prize Winners Stitching together
# of Scientists
an IP Portfolio
Intellectual is Critical Geographical
Diversity Diversity
Commercial Value is Created at the
Intersection of Multiple Scientific Disciplines
(e.g. Ageing, Climate Change, Chronic Diseases)
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 The Innovation Paradox
Highly Specialized, Geographically Distributed
Science Base and the Need for Harmonizing
Multiple Specialties to Create Commercially Viable
Solutions will Force us to Consider the Relative Importance of

Collaborative Investment
Capacity Capacity

Integrative
Capacity
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 Making the Business Connection
Housing
Healthcare
Living with Food

Breakdown of Traditional
Diabetes Mobility

Industry Boundaries
Insurance/ Fin. Svcs.
Chronic
Disability
e.g. Diabetes
Travel
Entertainment
Living a Safety
Full Life Community
Connectivity
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 Innovation Paradox
Business Opportunities Based on:

New Business
Models
Investment Collaborative
Capacity Capacity
Emerging Markets
As a Source of
Business Innovations
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 Agenda for Managers:
1. What Impact will the New Sciences have on
Traditional Businesses? What New Businesses
are likely to be Created? Can this be mapped?

2. How do we Reduce the Time, Risk and Cost of

moving “Science from the lab to Market”?

3. How will the Process of Innovation Change? What

are the Implications for How We Manage?

4. How do we Monetize Science based Innovations?

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 Impact of
Convergence
Connectivity
Embedded Software
New Sciences
on Businesses
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 Consider Cardiac Pacemakers

Patient

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 Consider Cardiac Pacemakers
Your Doctor

Experts’
Conference
Doctor on
Location

Patient
Away Hospital

Spouse
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The Value of the Pace Maker?
1. Experience of the Patient?
2. Integration of the Experience for the Patient,
Doctor, Family, others…?
3. Do we need a Network of Providers to
Create an Experience Environment?
4. Is the Pacemaker a Part of but Distinct
from the Experience?
5. What can you Monetize? How?

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 Car as a Stand Alone Product or a
Node in Seamless Connectivity?
High Capacity
CC Node

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Transformation of Traditional Industries:
Truck Tires
Sell a tire Transaction
Price ?

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 Transformation of Traditional Industries:
Truck Tires
Sell a tire Transaction
Price ?

Relationship
Sell Usage,
New Business
Model

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Transformation of Traditional Industries:
Truck Tires
Sell a tire Transaction
Price ?

Relationship
Sell Usage,
Personalized
Co Created
Experience,
New Business
Model

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 N=1, R=G in Shoe
anufacturing
Traditional New Business Model
Business Model
Foot Scanned Design Center
3-D Image Customer
Informati
on stored

Factory
Multiple Custome
customers r
Factory

One size for each customer (N

Customers adjust
= 1)available from $80 in this model
Shoes
to available
shoe sizes
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© C.K. Prahalad
 New business model in Auto
Insurance New Business Model
Traditional Business
Peak/Off-peak Traffic
ModelActuarial Data

Policy Type of Roads Driving Habits

Underwriting
Pay As you
Drive –
Personalized
Insurance
Contracts

Multiple Personalized Policy for Each

Customers Customer

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 The case of Apple iPod

N=1 R=G
Co-creation of
personalized experiences

Playlists Global Content Providers

Display:
News

- Wide Selection of
songs Memory(RAM)
-Personal
Preferences
-Favorites based on
time of day/moods Assembly

Transformation of the Music

Industry © C.K. Prahalad
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The Key Drivers of Value:
1. Personalized Experience
2. Co Creation
3. Individuals
4. Thematic Communities
5. Experience Platform
6. Delivery Network

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 The New Game:

N=1
( Co creation of Personalized Experiences)

R=G
(Multi-Institutional and Multi –Geographic Access to Resources)

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The Transformation from a Product/Firm
Centric View to N=1: R=G

1910
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The Transformation from a Product/Firm
Centric View to N=1: R=G

1910 2010
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India as a Source of Innovations

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 Innovations from India
New Bus. Deep Water
Capability drilling Tata Nano

Cell
Nature of Phones Chandrayan I
Innovation EMRI/HMRI
Psoriasis
Disrupting Param
Existing Water, Eka Tuberculosis,
Business Healthcare
Models
Western Adapted, Indian
New Synthesis
Source of Competence
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© C.K. Prahalad
 Matrix of Innovativeness
New Market New New
Low Capital New Sustainability
Examples Development Inclusion
Intensity . Capability
Management Ecosystem
Processes

IT /ITES ++ +++ +++ +++ ++

Airtel ++++ +++++ ++++ +++ +++ +++

Off Shore ++ + ++ +++++ ++ ++++ +++

Drilling

Tuberclosis ++++ ++++ +++ ++++ +++

Tata Nano ++++ +++ ++++ ++++ ++++ +++

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© C.K. Prahalad
MNCs see this Market as an Opportunity
to Innovate
Innovation Hub:
Outsource: Talent Source: New Approach to
Low Cost Global R&D, Value, Domestic &
Low Tech Innovation ? Global Markets

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© C.K. Prahalad
MNCs see this market as an opportunity
to Innovate
Innovation Hub:
Outsource: Talent Source: New Approach to
Low Cost Global R&D, Value, Domestic &
Low Tech Innovation ? Global Markets

1. Computing
2. Medical Equipment
3. Water
4. Cell Phones
5. Financial Services
6. Pharma
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 MNC R & D Landscape

• 780 MNC R&D centers are currently

being run in India
– About 160,000 professionals work
for MNC R&D centers in India
• 81 MNC R & D centers added during
2007-08
– 77% of the companies are from US

Source: Zinnov Analysis, Feb 2009

© C.K. Prahalad
What is India’s Unique
Advantage?

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Access to New Sources of Advantage….

Access to Talent
Mobilizing Talent

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Access to New Sources of Advantage….
Global Search for
Talent

Access to Talent Cost, Quality,

Mobilizing Talent Speed, Innovation

Collaborative &
Integrative Capacity

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© C.K. Prahalad
 The Evolution of IT Services from India
Innovation
Product R&D Analytics
Systems Integn. Entrepreneurship
VLSI design Domestic Oppty.
MNC R&D
Prod. Engg. Services
Embedded Systems
Y2K, Quality/process
App. Dev. Compliance
Off Shore (ODC)
Application
Mtce.
On site
Augmentation
1980 85 90 95 2000 05 10
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© C.K. Prahalad
 The Evolution of IT Services from India
Innovation
Product R&D Analytics
Systems Integn. Entrepreneurship
VLSI design Domestic Oppty.
MNC R&D
Prod. Engg. Services
Embedded Systems
Y2K, Quality/process
App. Dev. Compliance
Off Shore (ODC)
Application
Mtce.
On site
Augmentation
1980 85 90 95 2000 05 10
Cost Arb. Cost + Cost + Quality Cost+ Quality
Quality + Tech. Tech+ Innov.
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 The Evolution of Pharma from India
Target Validation
Lead Optimization
Clinical Pre clinical and
Trials clinical trials
Chemistry
Biology
services
Generics

Mfg. Bulk
Reverse
Chemicals
Engineering of
Product,
Process devt.
1980 85 90 95 2000 05 10
Cost Arb. Cost Arb. + Cost + Quality Cost+ Quality
Quality ? + Tech. Tech+ Innov.
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 The Evolution of ITES from India
Infrastructure Mgt.
Appln. Mgt.
Analytics,
Legal, Tutoring,
Flexible Models
3rd party call Centers
BPO back office
Transaction Processing
Domestic market
Captive Call
Data centers by MNCs
encryption Quality Process Transfer
Data
entry
1980 85 90 95 2000 05 10
Cost Arb. Cost Arb. + Cost + Quality Cost+ Quality
Quality + Tech. Tech+ Innov.
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© C.K. Prahalad
 Building an Eco System for IT
Own Software
Development

Indian IT Eco System

Facilities in India

Global Outsource to
(and Indian) a US Firms- Deliver based
Customers E.g. IBM, On Indian Facilities
Accenture

Outsource to an
Indian IT Firm

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You Don’t have to be Big to be Global

Size Distribution of Indian IT Firms

Size in $ M 1995 2000 2005 2010
< 25 396 1653 > 3000
26 - 100 41 41 150
100 – 250 18 30 30
250 - 500 6
500 – 1000 6
> 1000 --- ---- 3
Emergence of Micro Multinationals ?
Source: NASSCOM 52
© C.K. Prahalad
 Elements of the IT Ecosystem
Wide Variety of
Firms- Large & Small.
All Global. Potential of
Micro Multinationals
Devt. Of Skills:
Entrepreneurial
Quality,
Drive,
Processes,
Low Capital Needs,
Project Mgt.,
Potential to Innovate Access to capital,
SW Methodology,
and Change Global Access to skills,
Global perspective,
Industry Practices Credibility,
Domain Knowledge,
Confidence,
Legal, HR skills

Wide Variety of Service Providers to the Industry

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 Impact of India on IBM’s Strategy Worldwide

Source: The Economist 54

© C.K. Prahalad
 Challenge to Indian
Entrepreneurs:

Developing New Strategic Capital

(Building New Managerial Processes)

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 Principle Number # 1:

The Essence of Entrepreneurial

Transformation
Situation A Situation B
Resources Low High

Aspirations High Low

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 Principle Number # 1
Aspiration > Resources
Aspiration

Leverage
Resources

Change the Game

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Principle # 2: “Fold the Future In”

Extrapolation
Budgeting Orientation
2010 2020

Fold the Future in

Innovation
Orientation

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Principle # 2: “Fold the Future In”

2010 2020

*Clarity to Direction
*Willingness to Discover
*Clear Milestones
*Speed and Stamina:
400 meters at a time but a Marathon
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© C.K. Prahalad
 Principle # 3:
Focus on Next Practices

Well Known Best Next

Practices Practices Practices
Amplify
Weak Signals

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 Principle # 4: Constrained Innovation:
The Innovation Sandbox
Constraint # 3

Constraint Constraint
#4 #2

Constraint # 1
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© C.K. Prahalad
 Focus on Here and Now:
Tactical,
Blocking and Tackling.

Focus on New Opportunities:

Aspiration > Resources,
Folding the Future in,
Focus on Next Practices
Innovation Sandbox
Thinking Differently about the Here and Now

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© C.K. Prahalad
 What are the Dominant Themes:
2010-2015/2020
1. Primarily Market Based Solutions
2. Social Equity in Development
3. Co Creation and Collaboration
4. Scale
5. New Price- Performance Levels
6. Ecologically Sustainable Development

Embrace the Imperatives of Sustainable Development

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© C.K. Prahalad
The “Sandbox” for Economic Development
Global Scale

y
Ba obal-

a l l
Gl

on bl e
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a
c

m
En stain
es cal

i r

Su
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Ne cial ocus

Le rform ice-
l s a nc e
So uity F
w
Eq

Pe w Pr
Go
ver

Ne

ve
nan

Market Based
ce

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© C.K. Prahalad
The “Sandbox” for Economic Development
Global Scale

y
Ba obal-

a l l
Gl

on bl e
l

nt
a n Lo

e
a
c

m
En stain
es cal

Can we Build a

i r

Su
v
Consensus among
Communities,
Business,
Politicians,
Ne cial ocus

Le rform ice-
l s a nc e
So uity F
w

Civil Society,
Eq

Pe w Pr
Go

Bureaucrats?
ver

Ne

ve
nan

Market Based
ce

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© C.K. Prahalad
Transformation Requires:
Imagination
Passion
Courage
Humanity
Humility
Intellect
Luck !
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© C.K. Prahalad