When I worked in New York City, we kept saying to each other, “If we can make it in NYC, we can make it anywhere.” Ravi Venkatesan has the same message about India.
Venkatesan, MBA 1992, the former Chairman of Microsoft India, will be releasing his book shortly, “Conquering the Chaos: Win in India, Win Everywhere,” based on his experience in his home country and interviews with other leaders of multi-national firms. He was tapped by Cummins in 1996 to head its operations in India; he had no plans to go there. In 2004, Microsoft called him. He told them that he had no experience in software. “Doesn’t matter,” they said.
About 4,000 multi-national organizations have operations in India, but only between 30 and 40 do significant business there. The rest equal 1%.
Global companies go to India and replicate what they have done elsewhere which saturates the premium segment and growth stops. They then response in one of three ways:
Decide to go elsewhere “right now”
Do things differently
But the problems in India are typical of all emerging markets:
Companies must innovate in India, but subsequently they can take the products and practices to other emerging markets and even developed markets.
The companies that are the best at globalization are the Korean ones. Korean firms send employees to new countries for ten years. They go native and understand the markets better. Apple vs. Samsung is typical. Apple’s response could be summed up as, “We’ll come back when they look like us.” But Samsung did not wait and now dominates the Indian market.
The Swedes are also good at globalization because their home market is so small. Consumer companies adapt well, but technology firms are arrogant.
GE created global growth organization using India as an example. GE had two years of down revenue between 2000 and 2010.
A manager from English firm JC Bamford Excavators LTD saw construction sites filled with people using shovels to fill bags of dirt which were carried off by a long line of people. He took a backhoe design introduced in England in the 1950’s and updated it, but kept it simple and low-cost. He knew processes could be automated, but expensive equipment was out of the Indian budgets. Bamford is now the largest manufacturer of construction equipment in India and 25% of its output is exported to developed countries. The small shampoo packets that are purchased by the poor in India have become attractive for economically stressed Europeans.
Politically, India’s two weak national parties have left a vacuum which allows regional parties to become stronger. “Think of India as Europe with lots of countries.” There is still a lot of crony capitalism. India has the technical talent to have a Silicon Valley, but lacks venture capitalists. Any organization tied to government should stay out of India. Example would infrastructure construction companies.
Any firm driven by intellectual property needs to figure out how to segment between the poor and the better off-middle class. Organizations can gain positive PR with charity for the poor. Microsoft has trained 35 million kids in India in computer literacy. Microsoft sells licenses to the rich, the cloud to the middle class and offer computer literacy to the poor.
One manufacturing firm decided to establish its factory in a region of India with temperatures over 100 degrees in the summer. The management decided to put in air conditioning even though executives from other organizations in the area said it was not necessary. The productivity in the new factory was amazing, especially when the temperatures rose—few employees wanted to leave the cool comfort so they kept finding things to do to justify staying. Other factories in the region now have AC.
So India forces companies to think outside their comfort zone; to create products and organizational structures that are truly innovative, cost-effective, and attractive to Indian consumers.
All CI professionals should ask what their competitors are doing in India and other developing countries to succeed because they may bring the innovations back to the US and be significantly more competitive.