How technology can create impact at scale?

Whether it is education or social causes, technology and an ‘out of the box’ attitude can make a big impact. No one knows this better than serial entrepreneur Gururaj ‘Desh’ Deshpande, Trustee of the Deshpande Foundation. He is a world renowned venture capitalist based out of the USA, best known for co-founding the Chelmsford, MA-based internet equipment manufacturer Sycamore Networks, the Deshpande Center for Technological Innovation at MIT and the Deshpande Foundation. Deshpande is a Life Member of the MIT Corporation, the Board of Trustees of MIT and sits on the board of the MIT School of Engineering Dean’s Advisory Council. Such is his legacy that In July 2010, Deshpande was appointed by then US President Barack Obama to the Co-Chairmanship of the National Advisory Council on Innovation and Entrepreneurship, a group established to support the US President’s innovation strategy. At a fireside chat with session moderator, Anand Deshpande, Chairman and MD, Persistent Systems, Gururaj Deshpande talks about his early life, why he leaves a company every few years, and the need for innovation in the social sector. Corporate Citizen brings you excerpts from the riveting session.

(The conversation, which was in Q&A form, has been converted to sub-heads for the sake of brevity)

"I come from a little town in Karnataka and studied in a Kannada medium school. I came from a middle class family where your comfort zone is very small. The structure that you grow in is very restricted "

— Gururaj Deshpande

Gururaj Deshpande

in The formative years.

Gururaj Deshpande: In terms of my growing up I think most of my life has been serendipity. My dad was a government servant, so it’s not like I knew anything about business or even had the slightest inclination of doing anything in business. Within the family, education was very important and so we all paid a lot of attention to it and therefore we did well.

On being a serial entreprenuer

Throughout my life, every four or five years or so, I found that I come across situations where some things don’t work out. Say, I started one company, which didn’t work out, and so I decided to take a break for about six months before I regrouped and started another company. So if you look at those six months in between, where you wake up and you have almost nothing to do, where you create a white space, it turns out to be a life-changing experience.

In the normal course of things, people lead their lives incrementaly. You are doing something when you start, you do more of it, and I think after a while you’re completely consumed by what happens every day. And, then, if you take a break, you go away from what you do every day, then you come back after a few months, and you find that not too many things have really changed, then you wonder why you’re wasting all your time looking at these little things every day and worrying about them. This was an eye-opening revelation for me. So after that I’ve probably very consciously taken a break about five or six months every five years, and that’s how I went from being a professor to an entrepreneur to being a little bit more of a investor and then investor to the Deshpande Foundation.

Gururaj Deshpande

Moving out of the comfort zone

I come from a little town in Karnataka and studied in a Kannada medium school. I came from a middle class family where your comfort zone is very small. The structure that you grow in is very restricted and when you start swimming into a bigger ocean, suddenly you see people from far-off places and go through mind-opening experiences. It brought me out of my comfort zone. This is part of the reason why so many Indians who now go to the U.S are becoming so successful, because to be an entrepreneur you need out-of-the-box thinking and out-of-the box thinking comes very naturally for anybody who is a fish out of water. For example, people who come to Pune from outside will always do better than Puneites, because people living in Pune are used to a certain way of life and you take things for granted. Whereas, people who come from outside see things differently. For me, I think IIT was one of those first big experiences. Then I went to Canada and the US and these milestones just continued to be experiences that brought new horizons.

"Walking away from a hill, where you’re the king, is very unnerving. But, it’s such an exhilarating experience. You build a castle and then you say I don’t want to live in this castle and you walk away. And, it’s a very liberating experience because it just liberates you from all the obligations you have"

Going back to teaching again

I think educational institutions are the real temples, they’re very important. So its been 22 years ago when I had enough of these startups and companies, and wanted to give back to students. I joined the board of the Massachusetts Institute of Technology (MIT), so I do spend quite a bit of time at MIT and also at IIT Madras. I am not a full-time faculty member, but I do enjoy going and meeting younger people and talking to them and doing guest lectures and so on. It’s lot of fun.

What motivated him to be a serial entreprenuer

What I found is that I enjoy doing new things, but after I do it for five or ten years, it becomes a chore and when something starts becoming a chore-I’ve sort of found this technique of giving it up, walking away from it for two reasons - the first, that it’s not that much fun anymore and secondly, there’s somebody else who would appreciate that opportunity that much more. And they probably would do a better job than what I’m doing right now and so it’s a win-win situation for both. But the only thing is walking away from a hill, where you’re the king, is very unnerving. But, it’s such an exhilarating experience. You build a castle and then you say I don’t want to live in this castle and you walk away. And, it’s a very liberating experience because it just liberates you from all the obligations you have and everything else and then it just opens up a whole new opportunity to do things that you had never done before.

Thinkers vs Doers

I am sure a lot of you in educational institutions relate to this. The world somehow seems to separate the thinkers and the doers because when you have smart people, whether it’s thinktanks or university professors or researchers you need to create a nurturing environment for them. When you create such an environment, it typically becomes a club and then it moves further and further away from the real world. Then what happens is that these thinkers form a club and they focus more on impressing each other and getting each other’s approval as opposed to creating real-world impact even though their intentions are genuine.

"If you want to have an impact with the thinkers and the policy makers, you have to have a very conscious way of connecting them to relevance and so we brought that program back to India. It runs out of IIT-Bombay, IIT-Delhi and so on. It’s a nationwide program"

Connecting with relavance

What I realised is that for any nurturing environment to have an impact, you have to connect it back to relevance. Even in MIT when I started 22 years ago the innovators would think about ideas. They would patent the technology and then the technology license offices would go and try to peddle those technologies and very few of them actually had an impact. And so we brainstormed and opned a party center at MIT, where the simple idea was to connect the innovator to relevance, as they’re innovating as opposed to waiting for the whole innovation to happen. And, it turned out within three years that anything that went through this party center at MIT was thrice more likely to have an impact than otherwise.

All the researchers are super smart people, it’s just that they tend not to get out of the campus. They don’t know how to pick up a phone and make a cold call or make a sales call. So, once they learn the trick of being able to reach out to other people, they do amazing work. And so, once that was successful, then I worked with National Science Foundation to do a program called I-Corps in the US, which is now a nation-wide program. It’s at the very central focus of all the research translational and it’s a powerful tool. If you want to have an impact with the thinkers and the policy makers, you have to have a very conscious way of connecting them to relevance and so we brought that program back to India. It runs out of IIT-Bombay, IIT-Delhi and so on. It’s a nationwide program

A similar programme at IIT Madras?

Yes there is. The way the programme in IIT-Madras works is that any faculty member can apply for the programme, but he has to apply to it together with a lead entrepreneur, which is typically a graduate student or post-doctoral candidate and an external mentor. So the three of them have to apply for this programme together. Typically, there are 10 teams in the cohort, so 30 of them go through a one-week boot camp to brainstorm a plan and then over the next six weeks they actually go and meet 100 prospects. They’re not supposed to peddle their idea but to really do a market discovery. At the end of the whole process they come to one of the three conclusions, either it’s a great idea, maybe they should do something with it, or it’s an okay idea but maybe they should pivot and do something else which can be useful, or that its not a good idea and that they shouldnt even bother going forward with it.

Working with other founders, CEOs and managers

I think it’s a question of how do you rally people to come together to a common goal and I think people really respect it when you truly are committed to that goal. And so, everything that you do all decisions that you make, the roles that you play, there’s only one thing you’re trying to optimise, which is the mission of that organisation. It doesn’t matter whether it’s a social venture or a for-profit one, the more genuine you are with that mission, the more willing you are to take yourself out of it. I think what happens is things start falling apart when you become very self-serving. For example, when you do capability assessment. If it’s you, you’re all capable and everybody else is not capable, that doesn’t work right, so you really have to say, am I the right chairman, or am I the right CEO? And, if you’re not the right CEO you should have the nerve to step out and let somebody else come in and be the CEO. So, the more genuine you are about hat commitment to the mission, the easier it is to rally and bring people together, and people appreciate that.

About some of his myriad social initiatives

So one simple way to sort of think about the world is that there are seven billion people in the world, out of which roughly about two billion have disposable income and more than five billion people don’t have disposable income. The people without diosposable income, as you can see, far outweigh the ones with income to spare. Both these sets of people have their own problems, and solving their problems is what life is all about, whether it is a business or a social enterprise. But, the way you solve the problems of those two billion people who have disposable income is very different than the way you would solve the problems of the five billion people. How is it different? Because, if you have disposable income, it is very likely that you are well-educated and also tech savvy. You can google for solutions to your problems, which the majority of the five billion people who aren’t as well off cannot do. So, if you want to have an impact on their lives you actually have to compete for the opportunity, which means they won’t listen to you unless you bring something new. It becomes very important, innovation has to meet relevance to create an impact and that’s what startups are all about. I mean you come up with a new idea, either a technology idea, a business idea, or a process idea, something that’s new and you direct it to some burning problem that the people have and that creates a company, a for-profit company, but it typically has impact on the people who have disposable income.

"Innovation is essential because if you keep doing the same thing, nothing is going to change. But, the rate at which you inject that innovation has to be together with those people, because no company or enterprise ever runs properly if you don’t understand your customer base"

Relevance plus innovation is equal to impact

Now when you come to the people who don’t have disposable income particularly, if you start going to the bottom of it, they’re just struggling to get through the day. So, for them these earth-shattering patterns and hyper competitive solutions and biggest innovations don’t really make much sense. For them the equation gets turned around. The new equation becomes relevance plus innovation is equal to impact. So, you have to co-create the solution with them. You have to build capacity within those communities to accept that new solution and then you start injecting innovation into it.

Importance of innovation

Innovation is essential because if you keep doing the same thing, nothing is going to change. But, the rate at which you inject that innovation has to be together with those people, because no company or enterprise ever runs properly if you don’t understand your customer base. For all of us sitting in this room, it is difficult trying to understand the customer base where people don’t have disposable income. It’s very difficult, we cannot truly understand them, so the biggest mistake most of us do and most of my colleagues do in Silicon Valley is that they all ask the wrong question-They say ‘What is it that I can give that I’m good at”.

They’re good at innovation, so most of them want to write this software on an Android phone or iPhone which will solve the education problem for the whole world, so that nobody will ever have any problems with education. But, that’s not the issue, the issue is you could do all of this and it will benefit the people in the higher to middle income brackets, because they have disposable income, but people at the bottom who struggle to meet ends meet will not benefit with this.

Social innovation sandbox

What we then decided is simple. And that was the reason why we started this program in Hubli called the social innovation sandbox. We decided to co-create the solution with the people who need that solution. Once we have the solution, we slowly start scaling it by creating capacity within those communities, but the beauty is that as the program starts scaling you will have an opportunity to use all the tools that you developed for the two billion people economy. To be competitive you need advanced technology, you need financial engineering, you need process, you need project management, you need strategic thinking, you need all those tools and it gives you an opportunity to bring all those tools to this sector, so that you can continuously make your solutions cheaper, better, faster, and scale them. So there is a place for innovation in the social sector but it has to follow co-creation with the people who need those solutions.

The difference between the startups or companies and social enterprises

In the for-profit sector one of the powerful tools you have is a feedback from the customer, which gets looped back to the company. The feedback can be anything. It can be that is doesn’t matter how crazy your idea is, within a year, two years or three years if you don’t find a solution for which somebody is willing to pay and what they pay is more than what it cost you, you won’t have a company anymore. Your com- pany will go bankrupt. In the for-profit sector you only have performing assets, whereas in the non-profit sector people have a huge amount of compassion. They start with compassion but this source of money does not relate that much to the people that you benefit. The people that you try to help are not the people who are giving you the money. The money comes from somebody else, donors and the beneficiaries are here so you lack that feedback loop.

"We need to bring compassion to the for-profit sector but similarly we need to bring the execution excellence to the not-for-profit sector. So, we said instead of trying to fund other organisations let us start doing these things ourselves and see if we can prove that this model works"

NGOs are at the donor’s mercy

What happens is some of them are doing excellent work but you know both U.S and India have 3.5 million NGOs out of which 99.9 percent of them are useless because they’re sub-subscale. the funders drive what you do. If the funder is interested in education, then you start a school, then somebody else will come to you saying that I know a school is important but Healthcare is even more important and so if you want his funds, you will have to divert your focus from education and build a hospital. You are at the mercy of the donor’s whims.

Compassion in the for-profit sector

We need to bring a change in the social sector. So we have to help bring the compassion to the for-profit sector because the for-profit sector has to compete so heavily for the top line and the bottom line that in the process they lose their compassion for the people, for the environment, and they mess a lot of things up. We need to bring compassion to the for-profit sector but similarly we need to bring the execution excellence to the not-for-profit sector. So, we said instead of trying to fund other organisations let us start doing these things ourselves and see if we can prove that this model works.

The farm pond solution

So 10 years ago, we started this model for farm production. When Ratan Tata had come to Hubli and I was talking to him and the conversation of rain came up. I said farmers get a lot of rain here. We get 60 to 80 centimeters of rain but there is a problem. Despite recieving so much rain, there is drought in the region all throughout the year because farmers don’t have water when they need it. It rains heavily in the monsoons but then the water just flows away. While talking, we hit upon an idea. We thought why don’t we do a farm pond? We would dig a hole 100 feet by 100 feet by 12 feet and capture the rain water. The rain water will then irrigate the land and in time double the farmer’s income. Ratan Tata liked the idea and he wanted us to try it, so he gave us five Tata Hitachi machines. In the next two years we built 150 more farm ponds, free of cost for the farmer, so that we could prove to them that they actually could make more money and we were proven right. So over the next five years we built about 5 000 farm ponds and the typical farm pond cost about one lakh rupees. So it’s not really that cheap but the 5 000 farmers who initially opted for it paid 75% of the cost and we paid 25% of it. After the initial suiccess, we now we have launched a programme to build a hundred thousand farm ponds, where the farmer up-front pays Rs 20,000 and SBI and HDFC gives a loan of Rs 80,000 and we build a farm pond. The farmer makes so much money, that he is able to repay the entire loan within two years. Today, this is a totally scalable programme.