Murthy, Infosys and Innovation | Value Research Narayana Murthy has touched a raw nerve by pointing out that there is hardly any innovation in India
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Murthy, Infosys and Innovation

Narayana Murthy has touched a raw nerve by pointing out that there is hardly any innovation in India

A couple of weeks ago, Infosys co-founder N R Narayana Murthy was reported as having said that there was no innovation in India. He said that in the last 60 years, not a single 'earth- shaking' innovation had come out of India.

As you might expect, there were many who agreed with what Murthy had said, but there were many who were angry too. Those who didn't like his statement obviously questioned the record of Infosys in innovation. Despite having billions of dollars in reserve and despite being able to easily attract top talent, Infosys has essentially been in the business of exploiting the salary differential between India and western countries.

In fact, Murthy more or less invited opprobrium upon himself by claiming that the only innovations that had been made in India were from Infosys. Here's his quote: "...let us pause and ask what the contributions of Indian institutions of higher learning, particularly IISc and IITs, have been over the last sixty-plus years to make our society and the world a better place?... Folks, the reality is that there is no such contribution from India in the last sixty years. The only two ideas that have transformed the productivity of global corporations - the Global Delivery Model and the 24-hour workday came from a company called Infosys."

I have great respect for the achievements of Murthy and Nilekani during the years they were running Infosys. In fact, although I believe that the so-called Global Delivery System can hardly be called a unique innovation, there are other genuine innovations that they have made. The biggest of these is that they ran a clean company with transparent and believable financials, and genuinely shared wealth with shareholders and employees. In a country where the business environment used to be almost 100 per cent crooked, and still is to a considerable extent, they struggled against our system, made a huge success in it and were an inspiration to millions of other entrepreneurs. In fact, I remember, in 1995, meeting with the right-hand man of an industrialist from a large business house which has been a household name for decades. He told me with complete confidence that Infosys was a 100 per cent hawala operation. He didn't actually have any real information; he just 'knew' that if a company had rapidly growing dollar earnings in a business where no physical inspection of exported goods was possible, then what else could it be except for some kind of an illegal operation? That was what he had seen of business with the famous name that he served. And in a way, his assumption was justifiable, as cases like Satyam, DSQ Software and others showed later.

Murthy's point was about lack of innovation in IITs and IISc and surely he is right. It's also true that corporate India, Infosys included, has done precious little on technical, scientific and engineering innovation. Within our lifetimes, we have seen Asian countries like South Korea, Taiwan and now China start from behind and pull far ahead of India in all technical fields. The fault for this lies almost entirely on the command-and-control socialist economic management that has been our state ideology since Nehru's days. Murthy was speaking about institutions of higher education and surely he is right. The lack of incentives and the support system to do any real innovation are now all pervasive.

I'd like to think that this is actually an opportunity for those businesses which are willing to innovate. The ability to execute something new is surely a characteristic that investors should watch out for. Of course, it goes without saying that the definition of innovation should be something more than 'our discounts are the biggest', as is the case in our supposedly innovative new businesses.

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