“There are so many deep-tech innovations in Silicon Valley. Why haven’t we seen such innovations yet from China, India and other countries?”
This is a common question among many members of startup community worldwide. I propose my “Layers of Innovation” theory to answer this.
When you look at the innovation coming out of startups (especially internet startups), you can see innovation happening in 3 layers:
- Platform innovation
- Infrastructure innovation
- Deep Tech Innovation
Successful platforms emerge mainly out of business model innovation while deep tech advancements are examples of technological innovation. The innovation in infrastructure layer (bridge) is a result of the combination of business model and technological innovation.
The ‘Three Layer Innovation’ model can be better understood with the example of Amazon.
- When Amazon started in 1994 as an online bookstore, and then moved onto a marketplace for selling and buying goods. This is the platform or aggregator layer of innovation.
- As time passed on, Amazon build a better infrastructure for its services i.e. fixed-cost logistic infrastructure (Amazon fulfilment and delivery) and software infrastructure to handle its operations (Amazon web services). This is the Infrastructure layer.
- With advancements in technology, Amazon now uses powerful AI recommendation system to match buyers and products, and also uses deep learning and voice recognition to build intelligent personal assistants like Amazon Echo. This is the deep tech innovation layer.
It isn’t as if Silicon Valley startups started deep technical innovations from day 1. Many of them gradually moved on from platform layer, through the infrastructure layer to reach the deep tech innovation layer.
The same thing is happening in countries like India today. Let’s explore this with the example of FinTech innovation in India. There was a lot of innovation in the platform side of things a few years back. Currently, the infrastructure layer is being innovated at a rapid pace. However, deep tech innovations in FinTech are far and few.
What is the connection among the 3 layers?
The key difference between Silicon Valley and other startup ecosystems is: In Silicon Valley, there is less time-gap for the connection between the platform and deep tech layer. Business model Innovations in the platform layer can be rapidly integrated with deep tech innovations. This is because of the strong infrastructure layer which acts as a foundation. The scientific research in technologies such as radar, semiconductor, computer networking, etc. created a firm technology infrastructure in Silicon Valley. Similarly, successful large corporations like Walmart, Ford, and others created a strong business infrastructure (E.g. Supply chain, brand loyalty, etc.). The Silicon Valley startups can build on top of this foundation, and use the existing infrastructure to include deep tech into platform innovations, or to build a business model around a deep-tech innovation.
So, what is the real reason for the lack of deep tech innovations in other ecosystems?
The infrastructure layer, and sometimes even the platform layer, is weak in most developing countries. Agritech (Agriculture tech) is a case in point. What is the point of a high-tech drone surveying the field if there is no efficient way of selling the agricultural produce (e-commerce and marketplace) and if half of the agricultural produce gets wasted during transportation? The reason there are many platform and infrastructure related innovations in countries like India and Indonesia is because they are the need of the hour.
That doesn’t mean that there are no core tech innovations in these countries. There are niche and grassroots level innovations emerging in the field of IoT, Robotics, Cleantech and Healthtech. But many of these innovations fail to make it big because of the lack of market access (platforms) or weak business/technical infrastructure.
Investors and corporates in OECD countries either tend to look at emerging countries as only a market opportunity, or go in search some revolutionary deep tech innovation that is going to change the world. They often neglect the unique, need-based platform/infrastructure innovation.
The so called deep tech advancements in Silicon Valley may have innovated for the top 1 billion in the world. But the platform and infrastructure innovation in emerging countries will be equally important, if not more, to innovate for the other 6 billion.