Innovative Public Procurement Policy for Fuelling ASSURED Inclusive Innovation
Rising inequality is one of the greatest challenges of our time. Income inequalities, for instance, create access (education, health, public services) inequalities. This leads to social disharmony. However, reducing income inequalities takes generations. Can we create access equality despite income inequality? The answer is yes, we can.
To illustrate the point, here are some simple specific questions:
• Can we make a high quality Hepatitis-B vaccine priced at $20 per dose available at a price that is 40 times less, not just 40 per cent?
• Can we make a high quality artificial foot priced at $10,000 available at a price that is 300 times less, not just 30 per cent?
• Can we make a high quality cataract eye surgery, costing $3,000, available at a price that is 100 times less, not just 100 per cent?
• Can we make a $10,000 ECG machine available a price that is 20 times lower, and not just 20 per cent?
Incredible as it may sound, all these impossible sounding four feats have been achieved by Indian innovators–Shantha Biotech(1) Jaipur Foot(2) Aravind Eye Care(3) and Indian engineers in GE Healthcare in Bangalore(4) respectively.
All the above are ASSURED inclusive innovations, which stands for:
A (Affordability) is required to create access for everyone across the economic pyramid, especially the bottom. S (Scalability) is required to make real impact by reaching out to every individual in society, and not just a privileged few. S (Sustainability) is required in many contexts; environmental, economic and societal. U (Universal) implies user friendliness, so that the innovation can be used irrespective of the skill levels of an individual citizen. R (Rapid) means speed. Acceleration in inclusive growth cannot be achieved without speed of action matching speed of innovative thoughts. E (Excellence) in technology, product quality, and service quality is required for everyone in society, since rising aspirations of resource-poor people have to be fulfilled. D (Distinctive) is required, since one does not want to promote copycat, ‘me too’ products and services. In fact, we should raise our ambitions and make D (disruptive), which will be truly game changing, as shown in examples below.
Indian innovators have the ability to move from low performance, cheap knock-off versions of technologies in developed nations to harnessing sophisticated technological or non-technological innovations to produce affordable quality goods and services. The inevitability of such a strategic shift has been highlighted in a number of recent scholarly contributions.(5-9)
Recent Game Changing ASSURED Inclusive Innovations
In recent times, India has witnessed two game changing ASSURED inclusive innovations–the government-led JAM combining J (Pradhan Mantri Jan Dhan Yojna), A (Aaadhar identification and authentication) and M (mobile telecommunications) (10) and the other was private sector led, namely Jio(11).
JAM, with all the 7 elements of ASSURED, created the fastest and largest financial inclusion in the world, with 300 million plus bank accounts opening up in record time.
Reliance Jio(11) catapulted India from the 155th rank in mobile data transmission globally to the current number one position. More importantly, Jio moved India from missed call to video call –a shift from Jugaad to systematic innovation.
Challenge in Creating ASSURED Indian Inclusive Innovation
India could have been the birthplace of many game changing ASSURED inclusive innovations, but for the fact that some letters, pertaining to speed, scale and sustainability went missing from ASSURED.
As an illustration, let us take the case of Simputer, a product of Indian innovation launched by the Simputer Trust on 25 April, 2001, which was designed to be a low cost and portable alternative to PCs(12). The idea was to create shared devices that permit truly simple and natural user interfaces based on sight, touch and audio. The Simputer was to read and speak in several Indian languages in its initial release.
The innovation was hailed for its ‘radical simplicity for universal access.’ Before the arrival of the smart phone in 2003, Simputer had anticipated some breakthrough technologies that are now commonplace in mobile devices. One of them was the accelerometer, introduced to the rest of the world for the first time in the iPhone. The other was doodle on mail, the ability to write on a phone, that became a major feature on Samsung Galaxy phones.
Despite having the key letters from ASSURED representing Affordable, Excellence, Universal (user friendly) and Distinctive, what went missing was Rapid (speed), Scale and Sustainability! Why? No innovation-friendly public procurement policy despite many rural specific demonstrations.
Yet another bus in the same space was missed five years later.
New Millennium Indian Technology Leadership Initiative (NMITLI) Led Products
At a national level, in 2000, CSIR conceived and operationalized the New Millennium Indian Technology Leadership Initiative (NMITLI), which was based on the idea of competitive bids based on national grand challenges(14). It was a bold public–private partnership (India’s largest so far) with the private sector getting very low interest loans (to be returned only if successful) and the public sector getting grants. The best brains in India worked together in a ‘Team India’ fashion.
NMITLI gave several grand challenges in the year 2000 aligned with many critical national needs. For instance, when the cost of a laptop was $2000, NMITLI gave a challenge of making it ten times cheaper, around $200. After inviting competitive bids, Vinay Deshpande from Encore in Bangalore won the bid. Mobilis, a mobile PC was launched in March 2005 meeting the price-performance demand set.
NMITLI was to focus only on the proof of concept. However, it went an extra mile to help doing the initial prototyping. Today, an improved version of Mobilis is being sold in rather limited numbers as DSK Mobiliz(15), which is an indigenous, affordable, high performance, solar powered mobile computer. An innovative public procurement policy in 2005 would have helped it scale rapidly, giving India a global leadership.
Public procurement in India in general has a tendency to opt for lowest cost (L1) and low risk solutions, low-margin players and mature technology. Innovation is not routinely welcomed or rewarded. In part, this is due to the competing objectives and bureaucratic barriers that public procurers face, which discourage risk taking.
We must move away from this and create a bold, transparent and innovative public procurement policy for fuelling ASSURED inclusive innovation.
Fundamentals of designing an innovative public procurement policy
Innovations are products of creative interaction of supply and demand. India has incentivized supply through creation of numerous national research and technology organizations that it funds. It has created schemes for part financing ‘technology led businesses’. Examples include NMITLI, Biotechnology Industrial Research Assistance Council(16) ,Technology Development Board(17), etc. Various financial incentives, such as weighted tax deductions have also been given to spur industry led supply of R&D.
We also need aggressive demand side initiatives. With large procurement budgets, the Indian government can not only be the biggest, but also the most influential and demanding customer.
The government approach could be based on three pillars.
First, government could act as the ‘first buyer’ and an ‘early user’ for small, innovative firms and manage the consequent risk thus providing the initial revenue and customer feedback they need to survive and refine their products and services so that they can later compete effectively in the global marketplace. (Interestingly, based on a survey(18) of 1,100 innovative firms in Germany, it was found that public procurement is especially effective for smaller firms in regions under economic stress–a helpful lesson for India.)
Second, government can set up regulations that can successfully drive innovation either indirectly through altering market structure and affecting the funds available for investment, or directly through boosting or limiting demand for particular products and services.
Third, government can set standards that can create market power by generating demand for innovation. Agreed standards will ensure that the risk taken by both early adopters and innovators is lower, thus increasing investment in innovation. The standards should be set at a demanding level of functionality without specifying which solution must be followed. By not prescribing a specific route, innovation is bound to flourish.
I International experience
Many nations have set up innovative public procurement policies for boosting global competitiveness. China has set up truly aggressive policies. OECD members have also taken a big lead. Based on best practices in OECD and in partner countries, OECD recently published a report in June 2017 titled Public Procurement for Innovation: Good Practices & Strategies (19).
Almost 80 per cent of OECD members are reported to have taken measures to support innovation procurement while 50 per cent have developed an action plan for the same.
More than a third of European companies have sold an innovative product or service as part of a public procurement contract they won since 2011(20) More specifically, Germany(21) has created a new Agreement on Public Procurement of Innovation by which six federal ministries (interior, economics, defence, transport, environment and research) will promote innovative procurement.
Roadmap for Creating Innovative Public Procurement Policy
However, context defines the content. Indian policies will have to be based on the dynamically changing Indian context.
The following ten point action agenda is suggested.
1. India has progressed from a science policy resolution (1957) to Technology Policy Statement (1983) to Science & Technology Policy (2003) to Science, Technology & Innovation Policy (2013). It is time that India@70 sets up a fully integrated National Innovation Policy; integrated, since beyond technology innovation, non-technological innovations such as social, business model, work flow, system delivery, process and policy innovations play a critical role. The policy should be such that it should propel India@75 to be among the very top innovative nations.
2. In this integrated innovation policy, inclusive innovation for accelerated inclusive growth would be a major thrust. In this agenda, affordable excellence should be an important subset with well-defined, affordable, price-high performance for public services in health, education, energy, housing and water.
3. An important component of the National Innovation Policy should be innovation oriented public procurement policy, which should be ‘for’ innovation as well as ‘of’ innovation, thus catalyzing both the demand and supply side of the innovation equation. Public procurement of innovative goods and services can induce innovation by specifying levels of performance or functionality that are not achievable with ‘off-the-shelf’ products, because such exacting demand can be only met by innovation.
4. The policy in (3) above should be based on 3 pillars of talent, technology and trust. Transparency is a prerequisite to trust. To achieve this, a legal framework will have to be designed, which should include easily understandable definitions, guidelines and templates based on the ASSURED principles highlighted earlier. This will facilitate smooth and speedy implementation.
5. All the ministries should be mandated to publish long-term demand forecasts, engage in continuous market analysis to identify potential breakthrough solutions, offer professional training on legal options to promote innovation, and foster a strategic dialogue and exchange of experiences between procuring agencies, end-users, industry, and procurement agencies.
6. Procurement agencies from ministries should be given specific targets for innovation procurement. Provision of annual budgets, dedicated funds and stimulating financial incentives, especially for public-private partnerships, will have to be a key part of the execution plan.
7. For speedy implementation, an ‘Innovation Procurement Platform’ as an online hub should be created. It will help procurers, policy makers, government authorities, innovators, and other stakeholders to fully utilize the power of public procurement of innovation. The platform could comprise a website, a procurement forum and a knowledge resource centre. The procurement forum should provide a space for procurers and related stakeholders to share, connect and interact. The resource centre should have central databases and all documents relating to public procurement policy of and for innovation.
8. Major investments will have to be made in capacity building by way of of specific training to build staff capabilities and skills, setting up multidisciplinary teams and competence centres, raising awareness by hosting workshops and seminars.
9. To reduce possible loss and damage, robust risk management and impact measurement systems will have to be put in place. Powerful e-procurement and IT tools should be used to carry out proper risk assessment.
10. Standardization should be used as a catalyst for innovation with full consultation with Indian industry. One should define the test standards, methods and the process for giving quality certificates.
Execution of innovation-friendly public procurement policy
The Prime Minister’s inspiring clarion calls on Start-up India and Stand-up India have stirred the nation. The government has also provided a number of remarkable incentives for start-ups. Of these, the relaxation of public procurement norms for start-ups heralds a great beginning.
But for fuelling ASSURED inclusive innovation, we need to identify start-ups that have game-changing ideas based on the solid foundation of affordable excellence.
Just as an illustration, we present here two start-ups that are the winners of the Anjani Mashelkar Inclusive Innovation Award(22)
Mihir Shah’s UE Life Sciences has developed (23) the non-invasive and painless iBreastExam, a simple, accurate, and affordable palm sized handheld device that is used for early detection of breast tumours, without mammography. . The device is US FDA cleared and CE marked. It can be operated by any community health worker, and only Rs. 65 ($1) per scan!
Can we design a very simple and affordable portable ECG device, which allows the ECG to be seen by an expert miles away?
This has been achieved by another awardee, Rahul Rastogi, who created (24) a portable match box size 12-lead ECG machine. The cost is just Rs 5 (8 cents) per ECG test.
These are all innovations in the formal science/technology system. However, India has a huge reservoir of grassroots innovations, meaning innovations by the people and for the people. The potential of some of the select grassroots innovations, in partnership with formal science/technology institutions, can be brought to meet the ASSURED criteria too.
Within this, there could be two approaches. The first is to leverage the existing national portfolio of innovation and the second is to create new knowledge assets through grand challenges.
Consider the first approach. For instance, look at the outcome of a specific NMITLI based public-private partnership, which has the capacity of giving India a leadership in fuel cells for electricity generation, thus dramatically reducing India’s carbon foot print. This is a critical area, where technology is not available to India.
The NMITLI program has led to successful demonstration of indigenously developed and extensively tested 1-3 kWe low-temperature Proton Exchange Membrane (PEM) fuel cell stacks. It has also led to the development of high-temperature PEM fuel cells, which are currently being scaled up to 5 kWe. Both technologies are based on successful translation of science resulting in 30 plus patent applications and 150 high quality publications.
Most importantly, this program has also led to the development of the entire ecosystem for PEM fuel cells comprising (a) SME vendors, who can manufacture the critical materials, components and sub-assemblies of the stacks such as the catalyst, membranes, gas diffusion layers and membrane electrode assemblies. (b) aggregators, who can assemble fuel cell systems comprising stack, balance of plant components, fuel generators, power electronics and control systems, and (c) industrial users of PEM fuel cell systems.
How can public procurement catalyze successful penetration of PEM fuel cells in Indian markets? While PEM fuel cells can be used in diverse areas such as stationary power generation, long-range electric vehicles, defence and industrial co-generation, perhaps the first important market penetration can be in replacement of around 600,000 diesel generator sets that are presently installed with telecommunication towers to provide back-up power. A PEM fuel cell provides reliable, efficient, quick start-up, low-noise and cleaner energy, as the exhaust from a fuel cell is water and not solid particulates as in diesel generators. The total cost of operation of a PEM fuel cell with an on-board compact methanol reformer to generate hydrogen is similar to that of diesel generator. It is estimated that if just 30 per cent of present towers shift to PEM fuel cells, there would be a need for 180,000 PEM fuel cell systems of 3-5 kWe rating for this one application alone resulting in the creation of 20,000 jobs in the SME sector.
A national policy(25) that incentivizes adoption of alternative power generation systems such as PEM fuel cells supported by large scale public procurement initiative can led to Indian leadership in this technology.
The second approach is to set new grand challenges aligned with critical Indian needs on the ASSURED principles enumerated earlier.
The Expert Committee set up by NITI Aayog has strongly advocated that Atal Innovation Mission (AIM) funds should be used to finance grand challenges.(26) We strongly support the identified grand challenges as also the proposed execution model.
Innovative public procurement policy for and of ASSURED inclusive innovation can greatly help India in achieving multiple objectives, including
o Social harmony. It will help createequality of access despite income inequality.
o Affordability. It will lead to scale, thus bringing equity to large population.
o Excellence. On one hand, excellence will meet the rising aspirations of local populace for high quality goods and services. On the other hand, it will open up opportunities for competitive exports to global markets.
In short, such a policy will help in creating a new India of our dreams, with a smile on the face of 1.25 billion Indians and not just a privileged few.
1. Indian Vaccine Innovation: The Case of Shantha Biotechnics, http://www.researchgate.net
2. The Jaipur Foot, https://www.researchgate.net.
3. A Case study on Aravind Eye Care Systems – Aravind Eye Hospital, www.aravind.org.
4. Reverse Innovation at GE Healthcare https://academilib.com
5. Prahalad, C.K. and Mashelkar, R.A., Innovation’s Holy Grail, Harvard Business Review, July-August, 2010.
6. Mashelkar, R. A., Reinventing India, Sahyadri Publications, 2011.
7. Mashelkar, R.A., `Indovation’ for affordable excellence’, Current Science, Vol. 108, No. 1, pp 7-8, 10 January, 2015.
8. Radjou Navi and Prabhu Jaideep, Frugal Innovation: How to do more with less, Profile Books Ltd, London, 2015.
9. Immelt, J.R., Govinadrajan, V and Trimble, C, How GE Is Disrupting Itself, Harvard Business Review, October, 2009.
10. Jan Dhan 2.0, www.inspirit.in
11. Reliance Jio : Time to take digital innovations at grassroots level, The Economic Times, https://economictimes.indiatimes.com
12. The Simputer: Access Device for Masses, www.simputer.org.
13. Sterling, Bruce, The year in Ideas, New York Times, Magazine, 9 Dec. 2001.
14. Mashelkar, R.A., Current Science, `What will it take for Indian science, technology & innovation to make global impact’ Vol. 109, pp 1021-1042, 25 Sept. 2015.
15. DSK Mobilitz, www.dskdigital.com
16. BIRAC, www.birac.nic.in
17. Technology Development Board, tdb.gov.in
18. Aschhsff, Birgit and Sofka, Wolfgang, Research Policy, Vol. 38, issue 8, pp. 1235-47, October 2009.
22. Edquist C, Zabala-Iturriagagoitia JM (2012) Public procurement for innovation as mission oriented innovation policy. Res Policy 41(10):1757–1769.
23. Anjani Mashelkar Inclusive Innovation Award, award.ilcindia.org
24. More from Less for More: One Company’s Quest to Tackle Early Breast Cancer Detection in Developing Countries, Deanna Crusco, October 5, 2017, Sc Science Center, firstname.lastname@example.org.
25. Agastsa: Sanket Life for All, www.agatsa.com.
27. Report of the Expert Committee on Innovation and Entrepreneurship, niti.gov.in