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Friday, 8 November 2013 00:02 - - {{hitsCtrl.values.hits}}
Innovation in action
Lanka Harness CEO Rohan Pallewatta kicked off the technical sessions with a lively surprise for the audience, a solo vocal and guitar performance. As he ended his song, he explained to the audience that it was an apt entry to the topic ‘Innovation in Action’ as stage fright – the fear of being laughed at, ridiculed or rejected – are the same feelings that you come across when you try to put into action an innovative idea. 
Pallewatta’s company provides airbags and seatbelts for companies with high quality requirements – Toyota, Hyundai and Chrysler, amongst others. He opened his address saying: “When I embarked on this journey, I was told by many parties that with the country’s existing work ethic, this sort of quality was impossible. Looking at the old monuments, etc., from 2,000 years ago and the precision involved, I was sure that that level of quality was in our DNA. Most of the barriers we face in embarking on new ventures are psychological. There are just those who have the guts to become 
pioneers.”
Soon after his O/Levels, Pallewatta was offered a scholarship to either the US, UK, Australia or Japan. He chose Japan, and soon found that the scholarship involved visits to all the big manufacturing conglomerates, which sowed the seeds of his business idea. At the Toyota factory, he noticed a marked lack of people – due to a large dependence on automated processes. However, the airbag could not be automated and was a labour intensive product. A standard vehicle uses about 17,000 parts coming together. While some parts are outsourced, other parts are critical. At the end of the tour, he requested a few samples of their sensors and returned to Sri Lanka.
He made 10 samples based on the visual nature of the samples given to him by Toyota. Toyota rejected these, and despite being discouraged, Pallewatta kept sending his samples across. Advised that the Toyota business model did not involve manufacturing but depended mostly on assembly production, Pallewatta then approached the manufacturing companies that provided components to Toyota. One company replied to his sample, with defect analysis reports. After three months, the company slowly started outsourcing larger portions of components to Pallewatta, who built them by hand himself. As the amounts grew, he went to existing facilities and requested them to produce the sensors for him.
Within three years, the amount went up to 300,000 sensors a month. Now in a comfort zone, with two degrees and a comfortable income, there was a particular danger in the business model. In order to stop business with him, the Japanese had to take just one step back. Doing business with the Japanese, physical presence is very important. Each sensor he sent was being reinspected by the facilities in Japan. Pallewatta suggested the inspection be carried out in Sri Lanka itself, but they rejected the idea saying they were comfortable with their existing business model.
Discussing the terrorist attacks on the Katunayake airport, insurance underwriters such as Lloyd’s, etc., made international business in Sri 
Lanka impossible. After this, the Japanese called a meeting to discuss the security of their Sri Lankan operations. At this point, 9/11 occurred which rendered their argument obsolete as virtually every country in the world was at risk. At that point, they agreed to invest in the country, and their entire investment was recovered within 2.5 years. 
Pallewatta’s key points
Pallewatta concluded with a few key points. He explained that finding and realising the potential of a business is psychologically difficult. It will always be opposed from within because it means breaking away with the old, established habits. It often means giving up what senior most people of an organisation are proudest of which will be resented by its most accomplished people as a direct attack on their position, pride and power.
You cannot innovate and relax, expecting your innovation to pay you dividends eternally. New knowledge, technology, new perceptions might make it obsolete. Hence the individual has to awaken the innovative sprit within and have a strong resolve to implement it. When an egg is pressurised from the outside and it breaks life ends. But when an egg is pressurised from the inside and it breaks life begins. Hence all great things happen from within the individual.
As Mahathma Gandhi said when you try to do something different people will disagree with you, they will laugh at you, they will ridicule you, then if possible they will try to fight with you, and then you win. That is the path.
While we are engrossed in innovation in action, we are governed by people at provincial and national levels. There needs to be a certain catharsis to galvanise social innovation.
Panel discussion: Evolution of the manufacturing sector
Featuring CIC Holdings Chairman B.R.L. Fernando and Coordinating Secretariat for Science Technology and Innovation (COSTI) Sri Lanka Project Director Prof. Ajith De Alwis along with Pallewatta, the panel discussion focused on the evolution of the manufacturing sector, stemming from innovation.
Fernando opened his presentation by discussing the wager between the author of ‘The Population Bomb’ Paul Ehrlich, who belonged to the Neo-Malthusian school of thought, versus conservative economist Julian Simon. Their battle of visions betted on the Earth’s future – whether the world’s resources would be enough to sustain the burgeoning population or not.
Time showed that scarcity gave way to human innovation. Geology did not determine the future but human ingenuity did. In the agricultural sector, challenges are quite different. In the next 60 years, the world will have to produce 70% more food to feed the growing population. Food production needs to go up while land available is diminishing. People also demand higher quality and assurance, which are sorely testing the agricultural sector. The green revolution, first half of the 20th Century, was a time of change for global food production. It increased fivefold during that period, proving Malthus wrong. In the 1940’s US, the corn crop went from 40 bushels per acre to 100.
The green revolution was built on certain premises – the free availability of water, which is now in short supply. So of all available water, 97% is in the sea. Most of the remaining 3% is in the polar ice caps. We have only 0.3% for human plant use. We have pollution of our drinking water due to the use of urea, also linked to pesticides, another pillar of the green revolution. All these are under pressure as pesticides are getting into residual amounts in food. Another pillar, land, is under threat. Other uses are drawing a lot of agricultural land out of production. There is improved planting material, which is under stress. One of the methods to improve this is genetic modifications, the repercussions of which are as yet unknown. From the company’s point of view, we must 
approach these changes.
Fernando explained that water has a large role to play in this. “With 70 acres of pineapple, we were counting our chickens before they hatched. The size of the fruit diminished due to drought and we lost about 20 million rupees. The profit per litre of water was lower than the profit per litre of water from banana. We continued to do some research, and worked out protocol to lessen the water consumption and grow pineapple in the dry zone. It is wishful thinking to think we can survive without fertilisers and pesticides at this time, despite the growth of the organic movement, etc. Land utilisation, according to a Rockefeller university study, shows that just 140 acres will be free over the next century.”
Professor de Alwis then presented his thoughts on the topic, asserting “We need to have ideas and we need to put them into action. Exports are going down, imports are going up. The commonsense interpretation of this is, we like what others are doing but others don’t like what we are doing. At this point, creativity needs to be put in place, and workforces must be allowed to innovate. We have plenty of creative people and ideas, but they need to be harnessed.”
He questioned whether innovation was just a corporate lexicon these days. He explained further: “We should allow individual ideas to grow. With over 1.5 million people in the state sector and the same goals, innovation or individual thought cannot exist. We’ve seen the external examples but we don’t seem to be allowing ourselves to break out of the mould. Don’t talk about the factors of production – labour and capital, but talk about innovation.”
According to the legendary management consultant Peter Drucker, “Every organisation needs one core competence – innovation”. Professor de Alwis said that this concept needs to be embedded in the boardroom and in practice. With 21.2 million people in Sri Lanka, we still don’t believe our market is big enough. The expectations of human beings are the same, but the price point is the issue. Ignoring them is not the problem, but capturing the lower markets is important too via service and product innovation.
He also discussed the concept of reverse innovations, which entails learning innovation from developing countries, for example washing machines being used as yoghurt makers in India.
Q&A session
The Q & A session of the panel was then opened to the audience via a text messaging service.
Q: In terms of being a single service product, how do you face the sustainability issue?
Pallewatta: Although I started with the airbag sensors and seatbelts, I have diversified to other products such as sun visors etc. I am in a blue ocean as the quality level need is high. It is a matter of nurturing a quality level. I also now export to other countries such as Germany, Poland, and the US. So the risk of becoming obsolete is low due to product diversification.
Q: What is the role of culture in terms of innovation? Particularly, where do you see the room for innovation in governmental structures?
Professor de Alwis: With so many people in the public sector, the systems and processes are very rigid. We need to critically look at a few things; ability to perceive new ideas, approve new ideas, and allow young people/students to pursue ideas. We have a huge need for facilitating change in the country. We have to change our culture.
Pallewatta: We have a culture that is conducive to leadership; it is just a matter of rekindling the DNA.
Fernando: Our people have a vast innovative capacity which has not been harnessed, so we need to create the ambience to get innovation going. Many people would envy some of the things happening in the country. What we have added in terms of value and innovation is stupendous, and our capacity and individuals are there. We are just lacking in incentive.
Q: What is the link between innovation and capital? To what extent is capital required to take things to the next level, and to what extent is innovation possible in the face of lacking capital?
Professor de Alwis: We have about 1.5% of GDP in R&D. The state has given opportunities of state tax concessions for new inventions and patents. It is essential to reach at least 1% in the private sector as well.
Fernando: Capital is vital for the R&D side. Unless we put in money, we cannot retain people and encourage them. The main problem is our people’s risk averseness. We have given assurances that when they get into universities that they would get jobs after their degrees. There is a need for greater infusion of other ideas into education. Certainly capital is important, in order to create the ambience for innovation.
Pallewatta: There is a difference between the stimuli and action stage. There is no point being inspired and not having any behavioural change.
Leading innovation
3M corporate research laboratory, Singapore Senior Manager Dr. Young-Tzung Shih opened the leadership session with discussing various aspects of 3M’s strategy in relation to innovation.
He said: “What’s the connection between leading innovation and accountants? The entire 3M innovation culture was based on one principle – the McKnight principle. This was developed by William Mc Knight, a student hired as an accounting professional who went on to be the 3M Chairman. It states simply that mistakes will be made. But if a person is essentially right, the mistakes he or she makes are not as serious in the long run as the mistakes management will make if it undertakes to tell those in authority exactly how they must do their jobs. Management that is destructively critical when mistakes are made kills initiative. And it is essential that we have many people with initiative if we are to continue to grow.”
Dr. Shih also quoted W. Arthur Porter, saying that “the innovation point is the pivotal moment when talented and motivated people seek the opportunity to act on their ideas and dreams.” One of the key principles they operated on was the fact that uncommon connections lead to innovative solutions. 3M has five market leading business groups; industrial, safety and graphics, electronics & energy, consumer, and healthcare.
With R&D at 5.4% of their annual $30 billion sales, over 55,000 products and 40,500 issued and pending patents, they take their innovation seriously. 3M’s first customer-inspired innovation was 3M scotch masking tape, used to create clean lines in automobile paint jobs. 3M also has 46 core technology platforms, and successful new product growth builds on uncommon connections. According to the inventor of the Post-It Note, Art Fry, “At 3M we’re a bunch of ideas. We never throw an idea away because you never know when someone else may need it.”
The company has over 50,000 products, many discovered by accident to create entirely new product lines and categories. Dr. Shih insisted that innovation is not just about R&D and new products, it is about sales, services, distribution strategy, business models and marketing too. 3M leads innovation via system of principles, practices and infrastructure that harness the chain reaction of new ideas.
Dr. Shih outlined the 15% Culture that drives 3M innovation, and has been the cause for many of the company’s new products. It is a culture and philosophy not a time sheet measurement, and enables employees to explore new technologies and/or new markets usually related to existing work. It also enables employees to leverage technical specialists without management approval, thereby teaching employees leadership and new skills. There is also diversity in how employees utilise their 15% time, leading to a great variety of developments. 
Dr. Shih wrapped up his presentation with an insight from former 3M CEO L.W. Lehr: “The ordinary manager has a craving for order. The leader understands that innovation is almost always an untidy process. The ordinary manager wants proof for an idea before taking action. The leader understands the value and power of faith.” He added that the bottom line was that research is the transformation of money into knowledge and innovation is the transformation of knowledge into money.”
Panel discussion: Leadership in innovation
IFS South Asia Vice President and IFS Sri Lanka Managing Director Jayantha De Silva together with Commissioner of Sri Lanka Inventors Commission Deepal Sooriyaarachchi and Dr. Shih made up the panel, giving industry insights into leadership in innovation.
De Silva kicked off the session by stating that change is inevitable. He added: “Yet, in Sri Lanka, when it comes to driving innovation or supporting it, there is a serious lack. There is a difference between innovation and change: people support innovation but resist change. Innovation distinguishes between a leader and a follower. Thus the only way to bring innovation and change to the same level is to be a leader and drive this movement.”
He explained that there are layers of innovative lead-ins: international, national, corporate, individual. People must question themselves as to whether they are doers, supporters or beneficiaries of the innovation cycle. Returning to the topic of partnering innovation, Perera added that it is a role or duty to help in whatever possible way. Quoting Michelangelo, “The greatest danger for most of us is not that our aim is too high and we miss it, but that it is too low and we reach.”
Sooriyaarachchi then weighed in, adding that to patent something as an invention, it has to be unique, original and not done previously. He added that there are some steps that facilitate innovation; observation, questioning, experimentation, networking, and associational thinking. Speaking of observation, Sooriyaarachchi discussed the conception of Velcro, based on George de Mestral sticking to his trousers. The ability and skill to innovate is something that can be developed and harnessed. He agreed with Dr. Shih’s previous point that innovations range from not only product, but include process and technology as well.
Q&A session
Q: What is a practical perspective of change coming from the top?
Dr. Shih: Good managers nurture change and not comfort and complacency. At 3M, we believe in challenging your boss, as a company committed to change.
Sooriyaarachchi: Replacing bosses is futile because you’ll just have another boss. The key way to energise change is to simply ask people what they want.
De Silva: Especially the IT BPO sector, almost 90% of the employees are under 30 years old. There should be liberty to make mistakes, as if you’re penalised in your environment you’ll go into hiding. We have managed to overcome this communication barrier. Ideas must go through a technical specification which results in a solution. The moment you tag R&D onto ROI, you will have a problem. By doing this, we’ve found some very good people and ideas.
Q: Managements are often seeking efficiency, not innovation.
Sooriyaarachchi: That happens if you see innovation only as innovative products, rather than innovating processes that are too costly or cumbersome. At the end of the day, if the organisation realises if they do not invest in innovation they will not have a future, they will behave differently. Constant observation and questioning is necessary. In that way, efficiency is not a factor in comparison to survival.
Q: If there is a point of comfort where efficiency is achieved, does this cause a barrier?
Dr. Shih: A product is a number but innovation is not a number. You need to be able to balance this. My original intended goal is to get people to do what is good for the company.
Conquering new markets
Presented by Natures Beauty Creations Chairman/MD Samantha Kumarasinghe, the third session looked at the increasing importance of open innovation in companies’ involved in international marketing, and the role of policymakers in creating a conducive environment that promotes innovation.
Kumarasinghe commenced with an overview of inventions in history, explaining that unique inventions in the 9th and 11th centuries gave the real meaning of conquering via gunpowder. It played a large part in Genghis Khan’s 13th century rule over China and European colonisation. In the same way, conquering markets entails taking over a market either ethically or unethically.
He elaborated, using a local example: “In Sri Lanka, many British brands established themselves, creating product monopolies in a militarily conquered market. Furthermore, there was free advertising or propaganda brainwashing locals to think ‘we cannot’. Other aspects included taking over land to grow export crops and ban toddy tapping and introduce foreign alcohol. The 20th century however was the era of trade agreements including GATT and WTO, which created political security for market access. Bilateral and regional agreements such as FTAs also came into being. These caused a few problems for Sri Lanka – including the 1947 commitment on milk/milk powder imports, and maximum tariff banding on agriculture. David Ricardo’s Theory of Free International Trade is not prevalent in practice.”
On the other hand, innovative and ethical conquering of markets involves the creation of substantial new value by creatively changing one or more dimensions of the business. Heavy investment in R&D is not necessary for innovation. This can be done through various aspects of the processes or operations of the business. Kumarasinghe also highlighted a few “conquering” companies, such as Samsung, Hyundai and others that used open innovation such as Rolls Royce and P&G. The benefits of open innovation include creating new revenue streams for the company while disadvantages include intellectual property issues and lack of trust.
Ceylon Biscuits Ltd. Group MD Sheamalee Wickramasingha then took over, mentioning that in today’s context, innovation is survival. “As a small developing country, Sri Lanka needs to struggle that much harder. Unlike today, where entrepreneurship was accepted, in the 1960s it was not so. Today, innovation is a much broader term. Many of our successes are dependent on our ability to change and evolve. CBL today not only manufactures biscuits but also cereals, soya meat and various farm-sourced programs.”
She continued: “As a Sri Lankan company, we are proud that we have managed to create an international product, being able to export large amounts of biscuits every year. From an entrepreneurial company, we are now a multi-management company. We are also doing two projects overseas, setting up factories. There is risk but you must learn how to forge ahead.”
hSenid Software International Ltd. Chief Executive Officer Dinesh Saparamadu also weighed in, adding that innovation was a great topic, one that was lived and breathed every day at hSenid. He explained further: “We are a software product company focusing on HR and also a mobile development company. We own all our own intellectual property. Product innovation is key when you release a product need in a market, as needs are different in each country.”
Creative social networking
The final session of the day was presented by Ernst & Young Ltd., Singapore Associate Director (Advisory Services Advanced Analytics) Dr. David R. Hardoon. His section focused on the pivotal role technology and online collaboration tools play in modern day innovations, while also considering the challenges and risks involved in dealing with these tools. The presentation was bolstered by Sri Lanka Country Consultant for Google Asia Pacific Rohan Jayaweera and Momentus Ltd. Digital Consultant Earl Bumotad on the panel.
Dr. Hardoon explained that how to understand, analyse and make use of your data is more important than the data itself, and that leveraging social media is a key element in innovation. He said: “We are now in a community that goes beyond borders. Fundamentally, social media is about putting up a message and finding a resonating voice that agrees or validates what we feel. Many companies feel as though they can control the internet – but that is impossible.”
He went on to elaborate, explaining how social media has started directly influencing spending habits and existing financial constructs. Dr. Hardoon gave a few examples, such as that concepts of crowd-surfing via social media have started to replace more traditional forms of funding such as banks, and negative consumer reviews can ruin businesses in countries with high internet and social media penetration. From a promotional perspective, 24 hours online can create or destroy a business.
Across the board, analytics is the world of understanding data and making insightful decisions based on this. This helps unravel hidden connections and make correlations. These business insights can help pinpoint target markets and adjust areas of the unknown. Dr. Hardoon explained that it can help businesses understand what drives customer behaviour and how to influence it. On the analytics maturity roadmap, the competitive advantages increase from data management and data consumption to advanced analytics. It’s all about foresight.
He added: “There must be a purpose to the collection of data. How you design and consider the characteristics of information collected is key because the amount of data that can be accessed is now almost infinite. It’s important to keep in mind that this information must also be taken with a pinch of salt. As an existing organisation, you can find out who speaks about you, and what they say – be in tune with both potential customers as well as the content of their sentiments. It is also important to find out why – what works and what doesn’t both for your products and for your competitors.”
Pix by Upul Abayasekara
