We never cease debating - about whether the HD-DVD is superior or the Blu-Ray, or whether Obama's win will prove favourable or otherwise to India. The latest debate is whether the global economic recession is good or bad news for the Indian IT industry. There are many who claim that it is a good trend, because foreign companies will now be more than eager to outsource their work to low-cost sweatshops here. Some might consider that good news, but the fact is that as long as 'low cost' remains the differentiator, the trend is unlikely to last for long. Once Brazilian or Chinese firms figure out how to do the same thing at a lower rate, some Indian firms would lose their clients.

If the smiles on Indian CEOs' faces are to remain, they should not rely on cost arbitrage alone as their key selling proposition. Instead, Indian firms need to innovate like never before to create new products and business models that will spell long-term success. Companies need to break out of traditional mindsets and innovate - not at the brink of disaster, but constantly, as a matter of habit.

A starting point could be the manifesto of Erehwon Innovation Consulting on Unleashing Product Innovation in India. Although the manifesto is mainly based on the study of industries like automobiles, consumer durables, consumer electronics, FMCG and infrastructure, its findings are applicable to a wider variety of industries, including Information Technology.

Let us look at some of the overall findings that the study threw up.

1. Structure is never a stumbling block to the real innovator

While most reports identify structural barricades to innovation, and suggest changes in the structure to 'foster' innovation, no real innovator would ever point out structural deficiencies as an excuse for a failure to innovate. Once the rush to innovate is seeded in one's consciousness, a person will innovate, despite all odds.

2. Mindset is the real enemy

When Business Week published its list of top 20 innovators in 2006, it identified certain factors as enemies to innovation. These include lengthy development times, lack of coordination, a risk-averse culture, limited customer insight, poor idea selection, inadequate measurement tools, dearth of ideas, and marketing or communication failure. However, the manifesto claims that these are merely symptoms and not the real enemies to innovation. In fact, the real enemy is just one - the wrong mindset.

So, change the mindset! According to the manifesto, "The heart of innovation is really about freeing people to do their thing. Most people are not stuck because they want to be stuck or because structures limit them or because there's no reward mechanism. Most people are stuck because their mindsets block them. They have come to perceive 'reality' in a certain manner and this, more than anything else, limits them from innovating." Therefore, the first step towards product innovation in a firm is to change people's mindsets. It is worth noting that the shift to innovation happens primarily at the mindset level, and that impacts both the tactical and the strategic levels.

A breakthrough product goes through four stages: conception of the product idea, pursuit decision, development, and go-to-market. And mindset changes are needed at each stage.

3. Dare to think beyond your "identity"

It is imperative to look beyond a company's identity to come up with breakthrough ideas. Identity defines who we are and more importantly, who we are not. When a team at a fertiliser company went to its board with a breakthrough opportunity that took it into a seemingly different direction, the idea was initially shot down. "We're not in that business. We're a chemical and fertiliser company." A multinational computer company has created an identity about itself based on its business units: printing, personal computers (and laptops), and servers. As a result, to the frustration of its R&D team in India, it keeps rejecting ideas that take it anywhere outside this identity. Contrast this with Apple. That is one organisation that systematically breaks through its identity gravity. It is not just a computer company; it is a user interface company.

When a leader describes his company as: "We are in the high-end pipe construction business; most of you would not have heard of it because it is only for B2B customers who use it for long distance laying. In this category we are the Number 1," you can be quite sure that to preserve the'Number 1' identity, this organisation will not attempt to conceive anything that takes it away from this identity.