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FICCI TAG 2014 Theme Presentation Driving Growth through Innovation Prashant Agarwal Joint Managing Director, Wazir Advisors 18 th November 2014

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FICCI TAG 2014

Theme Presentation

Driving Growth through Innovation

Prashant Agarwal

Joint Managing Director, Wazir Advisors

18th November 2014

2

Discussion Points

1. Innovation –The essence of

business

3. Ways to kick-start innovation in our industry

2. Strategic transformation

of Textile & Garment

manufacturing

3

Discussion Points

1. Innovation –The essence of

business

3. Ways to kick-start innovation in our industry

2. Strategic transformation

of Textile & Garment

manufacturing

4

INNOVATION [ˌɪnəˈveɪʃn]

“the introduction of new things, ideas or ways of doing something”

Innovation is “ A new way of doing things that

is commercialized”

Michael PorterEconomist and

Management Guru

Innovation = Invention + Commercialization

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Different types of Innovation

Product

New product to solve consumer’s problems or for their benefit

Process

High productivity, lower costs, service value delivery

Strategy

Challenging existing industry methods of creating customer value for new needs, add value, create new markets, new customer groups

Desi Avatar: Jugaad

The gutsy art of overcoming harsh constraints by improvising an effective solution using limited resources – Harvard Business Review

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Giants of one time which did not evolve with time have vanishedinto thin air

Innovation for manufacturers is NOT an option

1857-2003

Once the 2nd largest steel producer in USA

1972-1984

Pioneer in analogue & digital imaging consumer

products

1867-2004

US video game company credited with evolution of modern video game

industry

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Innovation for manufacturers is NOT an option

The innovative companies are the ones which have changed thecourse of market directions over the years

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Successful Companies have Innovation in their DNA

Some Examples in Textile sector

Turning our unique know how and new ideas into innovative high performance fibre-based materials.

Our Approach: Inclusive Innovation. DuPont is working inclusively with others to find innovative, science-enabled solutions to some of the world’s biggest challenges.

Constant innovation in everything we do is essential for our long term financial success.

Enhancing Life for Global Consumers with the World's Most Innovative Fabric-Based, Market-Driven Solutions.

As reflected in our brand statement, "Human Chemistry, Human Solutions," and with a basis in technological innovations, we are conducting R&D to realize sustainable business growth and creating new businesses globally with the aims of enriching people´s lives and contributing to social development.

…with an ample product portfolio and a commitment to continuous innovation and technological advancement of its weaving machines.

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Discussion Points

1. Innovation –The essence of

business

3. Ways to kick-start innovation in our industry

2. Strategic transformation

of Textile & Garment

manufacturing

10

Shift in Production and Consumption bases

Textile & clothing production as well as consumption were mainly happening in developed countries till 80s

Production and Consumption

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Shift in Production and Consumption bases

Then eastern countries started emerging as major manufacturers and roles got segregated

Production

Consumption

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One of the main reasons behind this shift was high increase in labour cost. Inaddition, high utility costs and overheads lead to unviability of manufacturing“basic products” in these countries

Asia had the presence of strong raw material base to support production inaddition to lower cost. Hence, it emerged as an alternative manufacturingdestination.

Reasons for this shift…

0

5

10

15

20

25

30

1980 1990 2000 2004 2008 2012

Labour costs in textile industry(US$ / hour)

USA

Germany

Italy

China

India

< $ 0.5~ $ 1

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Today the largest textile and apparel exporters are in Asia…

304

40

28 2723

16 14 13 12

Export values (2013, in US$ bn.)

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Country Exports value (2013) Major manufactured categories

Italy US$ 36 billionHigh-end suiting fabrics, premium shirting fabrics, fast fashion, Value added woven garments, textile machinery

Germany US$ 35 billionTechnical textiles, textile machinery, fast fashion, Value added garments

France US$ 16 billionTechnical textiles, textile machinery, high fashion dresses and ensembles, textile machinery

Japan US$ 9 billionPerformance fibers, yarn and fabrics; high end denim, other technical textile products

However, production is not totally dead in western world

Actually, manufacturing has only changed its face…

While Asian countries are manufacturing basic products; developed nationsare focusing exclusively on high-end, high-technology, value added or

INNOVATIVE products

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Several large T&C companies still produce in these countries

Turnover: US$ 8 bnJapan

Aramid

Fibres

Carbon Fibers & Composites

Performance Fabrics

Airbag

Yarns

Tire reinforcement

Technical fabrics

Acoustic

Non woven

Flame retardant non woven

Filtration Fabric

KevlarFiltration & Separation fabric

Medical fabrics

Glass fiber reinforce-ment

Medical nonwovens

Liquid filtration

Turnover: US$ 2 bnNetherlands

Turnover: US$ 2 bnGermany

Turnover: US$ 36 bnUSA

Turnover: US$ 2 bnFinland

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Businesses look for growth and profits

The Strategic Shift…

A simple financial statement

A. Sales

B. Expenses

C. Profit (A-B)

A company in basic product like cotton yarn, power loom fabric,

t-shirts etc.

A company in innovative product line e.g. technical textiles

Focus on expenses to maintain profits

Limited growth because of cost undercutting by competition

Depends on expense management

(approx. 6 - 8%)

More expenditure on R&D and market development

Growth depends on how you help grow the market

Better profitability(approx. 15 - 20%)

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Discussion Points

1. Innovation –The essence of

business

3. Ways to kick-start innovation in our industry

2. Strategic transformation

of Textile & Garment

manufacturing

18

What leads to innovation?

Market forces

• Consumers

• Buyers

• Suppliers

• Competitors

Non-market forces

• Economic

• Political

• Social

• Cultural

But most importantly…

• Inner motivation

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4 pronged approach for industry

Funds

Funds• Funds are usually the initial point of innovation

process

• Company’s deploying funds are the one’s reapingbenefits later on

• Leading innovative players spend 2 to 3% of theirrevenue on R&D

• But, funding is never of the utmost importance.“Kaizen” process itself is a small, gradualimprovement, without significant moneycommitment

Steve Jobs, perhaps the greatest innovator of recenttimes, once said “When Apple came up with the Mac, IBMwas spending at least 100 times more on R&D. It's notabout money. It's about the people you have, how you'reled, and how much you get it.”

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4 pronged approach for industry

Funds

Organization’s vision• Or the inner drive to innovate for excellence… A

key ingredient

• The same is true for individuals (or even acountry) as well. The greatest of innovations arenot only outcome of an organizational effort;individuals sometime outpace the industry andcommercialize their inventions which no bodyever thought of.

Organization’s vision

Chinese president Hu Jintao said “capacity for independentinnovation core of our national development strategy”

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4 pronged approach for industry

Funds

Exploring newavenues

Exploring new avenues• Market growth and profitability in traditional

products is limited

• Focusing on areas hereto unexplored is importantfor entities to realize a “niche” for themselves.

• This niche can be• A product• A process• A technology• A market• A strategy

• Blue Ocean strategy:• Create uncontested market space• Make the competition irrelevant• Create and capture new demand• Break the value-cost trade off

Organization’s vision

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4 pronged approach for industry

Funds

Grooming the innovators

Exploring newavenues

Grooming the innovators• Most important!

• There are specialized institutes globally whichtrain in innovation and innovate themselves, aconcept which is yet to find large acceptance inIndia

Organization’s vision

Thank you for your attention!