Thinkers - The Idea of India by Institute for Competitiveness

www.thinkers.in

Trailblazers share thought-provoking views on Indian... Entrepreneurship & Jugaad Culture & will to Change Higher Education & Demographic Dividend Governance & Government Management & Mis-management

Vol 1. Issue 1. January-March 2015

ISSN 2321-9297

The Idea of India

Anil K. Gupta Anurag Batra Arvind Rangaswamy Des Dearlove Devdutt Pattanaik Jagdish Sheth Jan-Benedict E.M. Steenkamp Kevin Stolarick Mark Esposito Navi Radjou Nila Madhab Panda Nirmalya Kumar Pankaj Ghemawat Paranjoy Guha Thakurta Pramath Raj Sinha Prasad Kaipa Raj Sisodia Ravi Venkatesan Rishikesha T. Krishnan Roger Martin Sachin Garg Stuart Crainer Susan Zielinski Terence Tse Vijay Govindarajan Vineet Nayar Yogesh Kochhar

Vol 1. Issue 1. January-March 2015

Thinkers Magazine is now available in the following versions: Print: Get access to the print copy which will be delivered to your place. (Available only in India) Digital: Download the application and enjoy reading it on your device. Single copy Price: $14.99 | `500 Annual subscription Price: $45 | `1500 Subscription includes: In India, a copy of print magazine and digital application For international readers, access to only digital application.

Editor-in-Chief Amit Kapoor Designed By IdeaWorks Design & Strategy Pvt Ltd Publisher Institute for Competitiveness Editorial Board Joan Bigham Managing Director Global Solution Networks Executive Vice President Tapscott Group NEERA VOHRA Program Coordinator Institute for Competitiveness

Thinkers, is a presentation of Thinkers50 India, which is about discussing new ideas, new thoughts, addressing challenging issues, forging new paths, in the process creating an ever widening circle of thought leadership and create synergy in the thought leadership space by integrating the online and offline experiences. Thinkers50 India is a joint initiative of Institute for Competitiveness, India and Thinkers50. Institute for Competitiveness, India is an international initiative centred in India, dedicated to enlarging and purposeful disseminating of the body of research and knowledge on competition and strategy. Institute for Competitiveness, India conducts and supports indigenous research, offers academic and executive courses, and provides advisory services to the Corporate and the Governments. The institute studies competition and its implications for company strategy; the competitiveness of nations, regions & cities and thus generates guidelines for businesses and those in governance; and suggests and provides solutions for socio-economic problems. Created in 2001 by Stuart Crainer and Des Dearlove, the Thinkers50 was the first-ever global ranking of management thinkers. In the intervening decade, the scope of Thinkers50 has broadened to include a range of activities that support its mission of identifying, ranking and sharing the best management thinking in the world. Today, Thinkers50 is widely recognized as the worldâ&#x20AC;&#x2122;s definitive ranking of the top 50 business thinkers, and the T50 Distinguished Achievement Awards are widely regarded as the â&#x20AC;&#x153;Oscars of management thinking.â&#x20AC;?

The Power of Ideas

By Stuart Crainer & Des Dearlove From Silicon Valley to Tokyo, companies are united in a strong desire to innovate, though their approaches to innovation may vary.

India at 67: A mixed and mixed-up story

The (Current) Extent of India’s Urbanization By Kevin Stolarick, PhD

Visual imageries depicting India’s growing urbanization over the years creates a far greater impact than documented statistics giving the same information.

By Paranjoy Guha Thakurta

Opening up the idea of India

Independent India’s first Prime Minister envisioned a “mixed economy” for India with the best elements of capitalism and socialism. Looking at key socioeconomic indicators today, the verdict is almost unanimous: we took the worst of both worlds.

Several socio-economic indicators suggest that India is far from a sweet spot in terms of global connectedness, which is an imperative for fast growth.

Why bother with a very Indian approach to management? By Devdutt Pattanaik

Modern management uses a Western framework to explain cultural phenomenas around the world, and overlooks the fact that different cultures have different frameworks they operate from.

Interview Vijay Govindarajan

In an interaction between Amit Kapoor and Vijay Govindarajan, Earl C. Daum 1924 Professor of International Business at the Tuck School of Business at Dartmouth College, the latter talks about higher education in India and the US and also the benefits of reverse innovation.

By Pankaj Ghemawat

Four hurdles emerging market firms have to overcome to create global brands By Nirmalya Kumar and Jan-Benedict E.M. Steenkamp

Emerging market brands will become increasingly global in the coming decade, but in order to do so they – China in particular – will have to change certain existing practices.

Three ideas for Higher Education in India By Pramath Raj Sinha

Problems of quality, access, and skewed demandsupply within higher education in India, are all too familiar. If a genuine effort were made to put a few ideas into action, the existing scenario would radically change.

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Employees First, customers second By Vineet Nayar

The journey from a customer-centric to employeecentric organization requires asking tough questions and following it up with a cultural transformation.

Going Beyond Jugaad: Can India build a Systematic Innovation Capability? By Rishikesha T. Krishnan

Indian companies have apparent blocks which inhibit their innovative capability, but as some companies have shown specific steps can be taken to successfully overcome these problems.

Kal aaj aur kal! By Nila Madhab Panda

The concept of ‘Unity in Diversity’ outlined by our great leaders in the Constitution has lost meaning and relevance in today’s India.

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Raj Sisodia

In an interaction between Amit Kapoor and Raj Sisodia, one of the thought leaders of the Conscious Capitalism movement globally, the latter shares his view on this concept. His book Firms of Endearment: How World Class Companies Profit from Passion and Purpose is considered a foundational work in explaining the precepts and performance implications of pursuing a conscious approach to business.

Moving the economy By Susan Zielinski

There are many opportunities for India in the emerging global new mobility industry.

Fast Expanding Markets: A new needed economic lens in the 21st century By Terence Tse, Mark Esposito

This seminal paper on FEM was presented for the European Business Review in March 2013. FEM does not define business opportunities by geographical boundaries but by places where there is a vast variety of opportunites.

Wisdom at Work: Moving from Smart to Wise Leadership Book Excerpt From Smart to Wise: Acting and Leading with Wisdom By Prasad Kaipa and Navi Radjou

In this section, the authors talk about the need for leaders to exhibit wisdom, and differentiate between smartness and wisdom.

India needs a Thinking Culture! By Anurag Batra

In the land that gave birth to the great Buddha and Aryabhata, it is baffling to see the paucity and lack of acceptance of thinkers, who in fact have the capability to endow and enrich the fabric of our society.

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In an interaction between Amit Kapoor and Jagdish Sheth, Charles H. Kellstadt Chair of Marketing in the Goizueta Business School at Emory University, the latter talks about his idea of India, weaving in his expertise in behavioural economics and management.

By Yogesh Kochhar

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Jagdish Sheth

Jugaad Innovation: Converting Adversity into Opportunity By Navi Radjou

Jugaad is the gutsy art of spotting opportunities in the most adverse circumstances and resourcefully improvising solutions using simple means.

A Call to Action By Ravi Venkatesan

It is one thing to survive in the chaos called India, but by not correcting its condition of dishevelment, India will never succeed in realizing its potential.

Rethinking the Role of Quality in India’s Higher Education System By Arvind Rangaswamy

Higher education institutes in India need to improve quality in multiple areas, and particularly fast-track initiatives around attracting high quality faculty.

CSR: A case for CoRpOrate or Collective SR The passage of the Companies Bill that directs companies to spend a percentage of profit on CSR is a big step in the right direction. However, a lot more needs to be done to ensure efforts are brought to their fruition.

My brand of challenges By Sachin Garg

The ability to see challenges as opportunities and not problems is an essential quality needed for entrepreneurs in India.

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Interview roger martin

In an interaction between Amit Kapoor and Roger Martin, Dean of the Rotman School of Management, the latter shares his view on the India story and why he believes it is far from over. Mr Martin also serves on the Boards of Thomson Reuters Corporation and Research in Motion and is chair of Tennis Canada.

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Why India Must be Audacious By Anil K. Gupta

India today stands at a critical crossroad, similar to the one it did in 1991. If the government wants to seize the opportunity and transform this into a “golden moment” again, it will need to take concrete actions from the inside out.

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CONTRIBUTORS

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Note From Editor-in-Chief

At Thinkers50 India we are driven by simple but fundamental beliefs: that ideas are powerful because they can change the world; that the first step towards building a better future, be it in business, finance, economics; arts and entertainment; history and culture; or governance is by infusing each with fresh and new ideas. It is exactly this idea that has lead to the creation of Thinkers50 India that seeks to expand and celebrate the best and brightest thinkers across the Indian diaspora through online and offline platforms such as this magazine. In that regard, I welcome you to the inaugural issue of the magazine that seeks to raise the level of debate on matters of business, technology, innovation, sustainability, culture and governance, and thank you for joining and enhancing the conversation. In my view, it is symbolic that the theme we are exploring in our launch issue, “The Idea of India”– that examines among many areas, what India was, what she is and what she could be – coincides with the month we celebrate the 66th year of our independence. We have for this inaugural issue, which we hope will adorn your coffee tables and book shelves for time to come, invited eminent Indian intellectuals from around the world to share their idea of India, linking it to their domain of expertise. From people like Nirmalya Kumar, talking about the potential of emerging economies; to Pankaj Ghemawat sharing tips on how Indian firms need to focus on global connectedness to speed up growth; to Nila Madhab Panda sharing from his purview as a film maker the reasons for the floundering unity of our

country; to academics such as Vijay Govindarajan and Arvind Rangaswamy sharing from their global experience tips to raise the higher education bar in India; to management practitioners such as Vineet Nayar, Devdutt Pattanaik, sharing ground realities of doing business in India; and many many more that encompass the about twenty five essays and interviews in this edition–we have brought the best minds together to make a stellar issue on a topic that has never been more pertinent for our citizens. The strength in our conviction for this type of dialogue, the theme of which – arts, humanities or science – will change with each issue of Thinker50 India magazine, is exactly what has given us the determination to forge on; when wellmeaning and practical friends and advisors have encouraged us to re-think launching yet another publication when the media industry in India, thus far untouched by the global recession, is going through a blood bath across all platforms-television, print and online. Maturity, they say, comes from staying steadfast to the course irrespective of the numerous hits and highs, that constitute the cycle of life. This could not hold more true for India, than today. The true test of our maturity and freedom will emerge from how we come out of the mostly true conundrum of social, economic and political woes we face today. Thanks for reading this issue and we look forward to your feedback.

Regards, Amit Kapoor

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National Competitiveness Forum With a unique insight on Indian competitiveness, India Councilâ&#x20AC;&#x2DC;s National Competitiveness Forum is an assembly of top leaders across business, civil society and academia to assess the state of competitiveness in India, and explore pressing and emerging priorities.

Explore Mega Trends Understand Emerging Opportunities Create Impact Forum Friday, 25 September, 2015 New Delhi

The India Council on Competitiveness is a non-partisan network of leaders from corporate CEO, University Chancellors and Civil Society leaders working to make India a competitive nation with a mission of setting forth an action agenda to ensure prosperity for all Indians. For further details visit: www.compete.org.in For registration contact: neera.vohra@competitiveness.in

The Power of Ideas By Stuart Crainer & Des Dearlove

From Silicon Valley to Tokyo, companies are united in a strong desire to innovate, though their approaches to innovation may vary.

3 “Blame it on fickle consumers if you will, or blame it on progress, but there is a continuous ramping up of our expectations, and this has led to a heightening of our expectations of innovation.” vulnerable, some are soon consigned to history. A key part of the problem is that dealing with discontinuity requires a very different set of capabilities. Organizing and managing discontinuous innovation requires searching in unlikely places, building links to new partners, allocating resources to high risk ventures, and exploring new ways of looking at the business. These are very different to the conventional and traditional approach to innovation. Historically, a company simply hired some very smart people, put them in an R&D lab, and let them get on with it. That approach is no longer sufficient. After the Japanese company Fujitsu was acknowledged as having developed the world’s fastest supercomputer, we spent time talking to those involved with its development to learn more about the reality of innovation. The computer was nicknamed K, a play on the Japanese word ‘kei’ for the number 10 to the power of 16. It is a big number and a big build with a $1 billion development budget and over 1,000 people involved. Development began in 2007 and ended in 2012 with the K being celebrated as the “fastest of the fastest”. We met with the managers and leaders involved in this huge project. We were struck by two things. First, the down-to-earth nature of those involved. The Fujitsu team were not classic Silicon Valley material. They were neither hip nor cool. There were no jeans, not even chinos. No casual wear; in fact nothing casual at all about them. Indeed, when we met the overall project manager he looked like a typical middle-aged Japanese corporate man wearing a suit with a waistcoat to stave off the Tokyo winter chill. Ordinary people involved in an extraordinary project. The second thing that struck us was that despite their quiet and contained outward demeanor, these were men and women with a mission. We talked

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The Thinkers50 has been scanning, ranking, and sharing management ideas since 2001. Thinkers50 India too shares our passion for and is the driving force of the power and importance of ideas. Ideas are the vital fuel of innovation, and few in business or elsewhere would argue against the fact that innovation matters now more than ever. CEOs, academics and politicians can be heard waxing lyrical about the need for innovation in this or that company, industry or even national economy. But why does innovation matter so much in today’s business world? The answer is surprisingly simple. Innovation is where the worlds of business and creativity meet to create new value. It really is as simple as that. Indeed, one definition of innovation is “the creation of new value.” The word innovate first appears in the midsixteenth century. It comes from the Latin “innovat” meaning “renewed, altered,” from the verb “innovare” – from in (into) and novare (make new). In other words, innovation is all about finding new ways to change things. What makes this all the more relevant today is that we live in a world where we are constantly demanding new value from the products and services we consume. Think about it. When did you last buy a new phone that boasted “the same old tried and tested technology,” or a car that proclaimed itself “just as good as before.” The fact is that our ancestors might have been persuaded with claims of constancy and old-fashioned consistency, but we demand more. Blame it on fickle consumers if you will, or blame it on progress, but there is a continuous ramping up of our expectations, and this has led to a heightening of our expectations of innovation. Companies are in the front line. And it isn’t just that the competition might add a new feature or button to an existing product. Commercial life can be positively Hobbesian: Nasty. Brutish. And, increasingly, short. Entire product categories can disappear overnight. Remember the VHS player? Remember the cassette recorder? Remember buying film for your camera? One of the biggest innovation challenges is dealing with discontinuous innovation. When technologies shift, or new markets emerge, or the regulatory rules of the game change, or someone introduces a new business model, many formerly successful organizations suddenly become

4 “Organizing and managing discontinuous innovation requires searching in unlikely places, building links to new partners, allocating resources to high risk ventures, and exploring new ways of looking at the business.” with Aiichirou Inoue, President of Fujitsu’s Next Generation Technical Computing Unit. When we spoke it was nearing the end of the project. The pressure was on. Inoue had been the driving force behind the company’s mainframe computer business for 27 years. Given his long service, Inoue could perhaps have been forgiven an air of ennui. In reality, he was a ball of creative energy, excited and under pressure in equal measure. “In my previous roles, I couldn’t do the things I wanted to do. I wanted to build something by myself, not just to use it, but to build it,” he explained. It was clear talking to Inoue and his colleagues that the innovative and groundbreaking K computer wasn’t an end in itself. There were many more important and motivational forces at work. “I want the young engineers working on this project to be excited and to enjoy their work,” said Inoue. “But, let’s be clear: the K Computer will make the future for Fujitsu, Japan, and for human beings. It will give us the ability to look at the weather of the future; and there are a huge number of healthcare uses. That’s what I mean about its power to change humanity. A computer is just a big box; what’s interesting is to see it as a tool to help mankind and societies around the world.” We walked away from the Fujitsu team and started thinking again about innovation. What we had encountered challenged our easily held stereotypes and assumptions. We learned that innovation is not practiced in isolation. Nor is it the work of supermen and women, though much of what they accomplish is superbly world changing. Innovation is ordinary, but the results extraordinary. Innovation changes reality, but is built from aspirations, dreams, ambitions, and visions. Innovation is vital.

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India at By Paranjoy Guha Thakurta Independent India’s first Prime Minister envisioned a “mixed economy” for India with the best elements of capitalism and socialism. Looking at key socioeconomic indicators today, the verdict is almost unanimous: we took the worst of both worlds.

A mixed and mixed-up story

7 “One out of three computer software engineers in the world is a person of Indian origin. And so is one out of three persons on the planet who is poor, undernourished and illiterate.” the planet’s second-most populous country. Yes, India and the idea of India have prevailed. At the time of writing this article in the middle of August 2013, the country’s economy was in pretty bad shape. The danger of the government defaulting on its international financial obligations was not as palpable as it was in June 1991when the present Prime Minister became the country’s Finance Minister in the P. V. Narasimha Rao government. India’s foreign currency reserves have not slumped to the equivalent of a fortnight’s import requirements as it had 22 years ago, but there is a new set of economic crises that seem equally intractable and extremely painful to resolve. The high current account deficit on the external balance of payments has contributed to a fast-falling rupee vis-a-vis the US dollar. On the domestic front, persistently-high food inflation and tardy creation of jobs has led to a widening of the gap between the rich and the poor. The government’s statistics indicate that 138 million individuals have been “lifted” above the poverty line over a seven-year period between 2004-05 and 2011-12 coinciding with the term of the United Progressive Alliance coalition in office. Academics and officials admit that the yardsticks used to measure poverty are inadequate and contentious. Those who support the government’s claim that the proportion of Indians living below the poverty line has come down dramatically from 37.2 per cent in 2004-05 to 29.8 per cent in 2009-10 and further to 21.9 per cent in 2011-12 – based on a daily per head consumption of Rs 33.40 in urban areas and Rs 27.20 in rural areas – argue that these figures are not fudged. They claim that the “internationally accepted” definition of a poverty line is US$1.25 per person per day on the basis of “purchasing power parity” that better reflects standards of living than exchange rates. Thus, if one uses the current exchange rate

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The most commonly used cliché about India is that this is a country of crazy contrasts. The world’s second most populous nation-state is very rich and very poor; it is extremely educated and extremely ignorant. India’s biggest achievement since it became politically independent 67 years ago at midnight on 15 August 1947, is that it has remained united despite innumerable prognostications to the contrary. The fact that India has remained undivided is significant since this is arguably the world’s most heterogeneous, and at the same time deeply-divided, country – a nation that categorizes its peoples not only along traditional lines of class, race, region, religion and language but also (uniquely superimposed on the other divisions) on the basis of an ancient and oppressive caste system. One out of three computer software engineers in the world is a person of Indian origin. And so is one out of three persons on the planet who is poor, undernourished and illiterate. Coexisting in the country is a range of political and economic systems including different forms of feudalism, capitalism and socialism. The first Prime Minister of independent India Jawaharlal Nehru wanted India to have a “mixed economy”, one that would include the best elements of both capitalism and socialism. More than six and half decades later, the verdict is almost unanimous: we took the worst of both worlds. Private enterprise (the hallmark of capitalism) was stifled by excessive bureaucratic controls. At the same time, the government could hardly provide quality health-care and elementary education (that socialist societies sought to provide) to the majority of its people. Even if certain small sections of India’s population have made considerable progress in recent years, the impact of economic development has, by and large, been uneven. The overall nationwide picture of growth indicators conceals sharp and increasing inequalities in income and social development. To claim that the world’s largest democracy has made little progress since the country became politically independent twothirds of a century ago, would be a travesty. But to argue that the country’s economy has “emerged” from the shadows of under-development would be to gloss over reality. Many who live in politically independent India are far from economically independent. Hunger, malnutrition and unemployment gnaw at the economic freedom of at least a quarter of the 1.2 billion people who inhabit

8 of Rs 60 to one dollar, the internationally accepted poverty line would be Rs 75 per person per day. If one deflates the figure using purchasing power parity norms, the poverty line would be in the region of Rs 30 (or 50 cents) per person per day. The same set of data put out by the National Sample Survey Organization (NSSO) can, however, be interpreted differently in a way that hardly shows up the government’s performance in good light. The survey on consumption expenditure shows that overall spending by the richest 10 per cent of Indians living in urban areas went up by nearly twothirds (63 per cent) between 2000 and 2012 while expenditure by the bottom five per cent rose by just a third (33 per cent), the corresponding figures for rural areas being roughly 60 per cent and 30 per cent respectively. The same set of data disclose that the gap in spending by the richest and poorest in urban India went up from twelve times to fifteen times in this period, while the gap in rural areas increased from around seven times to nine times between 2000 and 2012. It is not as if the rich are getting richer while the poor are getting poorer. The undisputed fact about contemporary India is that the gap between the rich and the poor has widened significantly and continues to do so. The NSSO figures state that while the per person spending on milk and milk products went up by 58 per cent for the poorest 30 per cent in rural areas and 111 per cent in urban areas, the corresponding figures for the richest five per cent jumped by more than three times (331 per cent) in rural areas and over four times (422 per cent ) in urban areas over this 12-year period. The same story gets repeated across other commodity groups (such as fresh fruits and vegetables, eggs, fish, poultry and meat) as well as expenditure on education and medicines. At one level, the debate on the direction of economic policies – epitomized by the acrimonious war of words between economists Amartya Sen and Jagdish Bhagwati – has acquired a new urgency with everybody pitching in with her or his comments on the relative importance or unimportance of growth versus welfare (or redistribution) schemes. While this debate is undoubtedly important, it is also true that India at present is having neither growth nor equity in adequate measure. The growth rate of gross domestic product has slumped. Employment opportunities are being created very slowly despite the government’s claims of having sharply brought down the incidence of poverty over the last nine

years. Welfare schemes – including the Mahatma Gandhi National Rural Employment Guarantee scheme – are being implemented with varying degrees of efficiency and effectiveness in different parts of the country. More welfare schemes are to be initiated soon, including the legislation on food security. But all these efforts are being negated, if not neutralized, because of the government’s inability to control food inflation.

“It is true that India at present is having neither growth nor equity in adequate measure.” Since the country imports 80 per cent of its total requirements of crude oil and because the government has chosen to gradually equate domestic energy prices (especially diesel, the most widely-used petroleum product) with world prices, what is essentially taking place is that we as a country are importing inflation. The government is unable to narrow the trade deficit which is the principal reason why the current account deficit on the external balance of payments has careened out of control. Many of our exports are highly import intensive (for example, polished diamonds, gems and jewellery) while the markets for other labourintensive exports (including textiles, garments, leather, handicrafts and processed foods) have shrunk on account of recessionary conditions in the West. With imports inelastic and exports sluggish, it is hardly surprising that the government has no alternative but to depend on volatile flows of foreign capital to bridge the gap between inflows and outflows of foreign currencies. This is hardly a good situation to be in. The government belatedly decided to curb imports of gold and luxury products. But the problems will not disappear overnight. The reason why people have been investing in (legal and illegal) gold is simply because the yellow metal is perceived as the best hedge against inflation. In other words, the demand for gold from Indians will not be curtailed until the root cause – that is, inflation – is first addressed. The government has gone on an overdrive hiking the limits and caps on foreign direct investment in various sectors. But this is not going to result in a flood of FDI flowing into the country given the

9 THINKERS

economic conditions currently prevailing. As the experience of attracting FDI in multi-brand retail should make amply clear, there is indeed many a slip between the cup and the lip. The key issue the government has not been able to tackle is to convince Indiaâ&#x20AC;&#x2122;s own entrepreneurs that they should invest in their own country before seeking greener pastures overseas. Prime Minister Dr Manmohan Singh says economic reforms cannot take place unless there is political consensus. The question, therefore, arises as to what are the reasons why the UPA government failed to build the necessary political consensus. Finance Minister P. Chidambaram is openly angry with some of the judges of the Supreme Court, the Comptroller and Auditor General of India and even, the Governor of the Reserve Bank of India, because they have refused to toe the governmentâ&#x20AC;&#x2122;s line. On the contrary, they have been often critical of the policies, programmes and actions of the ruling dispensation. By being critical of institutions that are responsible for strengthening democracy, the government has not been able to create consensus in a highly-fractious polity such as ours. In the last fifteen general elections in India, there have been peaceful regime changes on no less than seven occasions. We seem to be on the cusp of another round of changes, brought about largely by the arrogance and stupidity of those in positions of power and authority.

10 Modern management uses a Western framework to explain cultural phenomenas around the world, and overlooks the fact that different cultures have different frameworks they operate from.

By Devdutt Pattanaik

Why bother with a very Indian approach to management?

11 These are shaped by Western cultures. Historically, today’s management is influenced by principles of the Roman Army, Jesuit Missionaries, and Industrial Engineering of the 19th century – all Western. It is not objective at all. It does not take worldviews of China and India into consideration to say the least. It assumes itself as rational, independent of cultural thinking. And that is its greatest shortcoming. Mathematics and statistics may be universal languages, but the way we read the results varies with the cultural gaze embedded in the leadership. This understanding is critical in the new ‘postinternet’ world order where everything is mingling and merging and we are realizing that all things Western are not necessarily modern, or complete, or suitable for all contexts. It is important to reevaluate our gaze. It is important to expand our mind, join more dots.

“Emotions cannot be measured, imagination cannot be measured, but these play a critical role in policy making and business decisions. We cannot be indifferent to them simply because they defy both measurement and rationality.” Sun Tzu and the Art of War became popular in the 1980s because of the success of Japanese corporations and it gave management thinkers all over the world exposure to Chinese thought (Sun Tzu was not from Japan). Since India became a hub of outsourcing and a potential market for many in Europe and America, people have been wondering about Indian thought. Hence the proliferation of books on Chanakya and Bhagavad Gita. Chanakya appeals to the rationalist and Bhagavad Gita appeals to the philosopher. But neither takes into consideration the vast body of knowledge embedded in the stories, symbols and rituals of India. Neither takes into consideration Lakshmi, the restless but delightful goddess of wealth, the most popular Goddess in India (not just amongst Hindus). Perhaps this has something to do with 19th century disdain for all things ‘myth’ and an obsession for rationality and scientific thinking.

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Modern management as we know it today thrives on an assumption: that it is objective and rational. Of course, cutting edge thinkers know that it is not so. But that management is objective and rational remains a dominant perception. Subjectivity plays a key role in management. And subjectivity is influenced strongly by culture. The way we see the world is conditioned by the culture we have been most exposed to since childhood. A child brought up in Denmark, for example, all his life, has a very different understanding of life, compared to a child brought up in India, Internet notwithstanding. There will be many things in common but there will also be many differences. How much focus do we pay to subjectivity relative to objectivity, irrationality relative to rationality, in management thought? People are divided on this. We have been conditioned to look upon subjectivity and irrationality as wrong, even evil, the source of problems and the source of chaos. Yet, it remains a factor impacting business and can be a lever that can change the way we conduct business and solve problems we face today. In Denmark, one is exposed to an economy of 5 million people, 80% of the same ethnicity. In India, one is exposed to an economy of 1200 million people, where less than 40% speak the same language, and the remaining 60% speak 15 languages, and there is great diversity along economic, political, linguistic, educational, religious and caste lines. Management principles that will emerge from, and will be applicable to, Denmark may not work as well in India. This seems pretty obvious, but many people challenge this. Such reaction reaffirms the idea that different people see the world differently: the world is not a rational, logical, objective space, where there is one truth. There are many truths. But some truths are more favoured and more dominant than others, and even positioned as THE truth. Belief is an assumption based on how many data points we are exposed to, and how we join these data points: the more the dots, the more complex the pattern. The more the experience, the more ways we know to join the dots. And so belief keeps expanding. Like a business plan which changes when assumption changes, our understanding of business and management changes dramatically when our belief changes, or rather expands. Notions of business and management as we know it today comes primarily from USA and Europe.

12 Business Sutra begins here

Belief GAZE

Business GOAL

Behaviour

Management Science begins here Mythology

WEST

INDIA

Journey of this book

Goal-based

Gaze-based

Management

Of course, today social scientists know that ‘myth’ is essentially a cultural point of view that expresses itself through stories, symbols and rituals: every society has its own myth. There is no culture that has no myth. Western thought is also a myth that shapes the modern world; it is neither rational nor real. The mythology of modern management is rooted in the belief that ‘all that is measurable can be managed’. It lends itself (wrongly) to the secondary assumption that ‘all that is not measurable does not exist’. A good scientist is acutely aware of this. But how many good scientists are out there? Most scientists of the world do come from cultures that value monotheism (one god, one truth) over polytheism (many gods, many truths). Even atheism is presented along monotheistic lines where rationality is argued as a god.

Emotions cannot be measured, imagination cannot be measured, but these play a critical role in policy making and business decisions. We cannot be indifferent to them simply because they defy both measurement and rationality. This measurement-celebrating Western myth has resulted in placing more values on processes (measurable) than people (not so measurable). We rely more on institutions than on individuals. This has its roots in Biblical myth (one half of Western myth) where the tribe or church is more important than the individual member. We are constantly seeking to institutionalize Steve Jobs of Apple and Mark Zuckerberg of Facebook. Ironically, these two gentlemen are embedded in the Greek myth (the other half of Western myth) where glory comes from doing something extraordinary that challenges the status quo. They broke the prevalent assumptions of communication. They were what the Greeks called hero, men who changed the rules of the game, like Alexander, who were then invited by the gods to the special heaven called Elysium. Western management myth subscribes to the Biblical and Greek mythologies that are similar to each other in that they value only one truth. They are also at odds with each other: the one focuses on the collective and the other focuses on the individual. Please note: Biblical mythology does not mean the Christian Bible, it refers to a vast body of thought that emerged from Ancient Egypt, Mesopotamia, Persia and Levantine, where great value is placed on central authority.

13 NUANCES OF DOING BUSINESS IN INDIA, CHINA, AND The WEST

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Social scientists have used this individual/collective framework to explain cultural phenomenon all over the world not realizing this framework is Western, not global. Different cultures have different frameworks they operate from. This is especially true in China and India. China values relationships and India values contexts. Neither China nor India thinks in terms of tribe/ church/institutions although words like clan and caste do give the impression that they do. Hence guanxi (special relationships) are so critical in Chinese business. In Confucian China that dominated the court culture, the focus is the relationship between one and the other, not one and the many. This is a critical difference. The Chinese does not think China, he thinks ‘boss’ or ‘subordinate’. The boss embodies China, until he is overthrown by someone more noble and worthy. People often equate Chinese with ants. Incidentally, the institutional model is also about ants. In the Chinese worldview, the pecking order of ants matter. In the institutional worldview, the anthill matters more than the ants. India values neither ants nor anthill. Great value is given to impermanence (think Buddha). Nothing is fixed, except maybe gender and caste that are determined at birth. Everything else, even family structures are continuously changing. So the individual is continuously trying to figure out his relationship with the other in every context. Caste relationships, and village relationships, are more reliable than relationship with the government or someone far away.

Human

Hermit

Householder

Collective Rule Keeper

Individual Rule Keeper

Path chosen in fear

Path chosen to outgrow fear

CHINA

WEST

INDIA

Over Lifetimes

INDIA

CHINA

WEST

Peace

Order

Truth

Why?

How?

What?

They are obsessed with things

They are speculative

They are exotic

I am focussed on thoughts

I am pragmatic

I am objective

14 “A simple tool to understand different cultures is to study the dominant mythology of the land: the stories, symbols and rituals that are favoured by a society.” In the realm of impermanent structures, there is no fixed institution (as in the West) or boss (as in China); everything is changing and so one has to figure out at each interaction that status of the other, hence oneself. This creates a lot of ambiguity that exasperates people who do business in India. A simple tool to understand different cultures is to study the dominant mythology of the land: the stories, symbols and rituals that are favoured by a society. Unlike psychoanalytical ‘archetype’ models that seek the common and the universal, the approach needs to be more structural – seeking differences. This reveals why the manager from Denmark is so different from the manager from India even though both are educated in the same B-schools and have gone through the same induction and training programmes. The difference is not just because of personality (individual) or the culture (collective) or institution (collective) but also because of relationships and context: the Danish manager will be very different in a roomful of Danes as compared to a roomful of Indians and vice versa. Biblical mythology celebrates rule-following prophets (Moses) and kings (Solomon) while Greek mythology celebrates rule-defying heroes (Odysseus, Theseus, Jason, Hercules). Indian mythology has both rule-following Ram and rulebreaking Krishna, both of whom, are not two different characters but the same character, Vishnu, in two different contexts: he follows rules as Ram in Treta yuga and breaks rules of Krishna in Dvapara yuga. Then there is Shiva who is indifferent to all rules and who beheads Daksha who seeks to impose rules on others, for Shiva is more interested in the intention beyond the rules, beyond the processes, beyond the institution. In chasing the institutional model of modern management, we do not question its intention. It is structurally designed to celebrate greed: growth in profit quarter after quarter to satisfy the

shareholder. Yes, we keep speaking of stakeholders, but the only action favouring stakeholders seems to be more rules: regulations protecting environment, or workers and rules compelling the rich to be more charitable. The reliance is once again on processes than people. The assumption is that the world can only be made a better place through commandments. The assumption is that democratically-generated policies are bound to be fair, just and good. The assumption is the Board of Directors are good or can be forced to be good through intervention of regulators and independent directors and other watchdogs. Modern management conversations rarely speak of people, or rather it leans disproportionately towards processes. When there are conversations about people, they tend to focus on what they have (think Mukesh Ambani) or what they do (think Warren Buffet), but never no who they are. More often than not, the assumption is if you are successful entrepreneur and have created an institution of enviable market capitalization, you must be a smart leader who inspires people (think Narayan Murthy). Who a person is cannot be reliably measured. Personality tests, designed using Western methodologies, map people in a vacuum and do not take contexts and relationships into consideration. They map people as ‘archetypes’ in a fixed ‘template’, or as ‘pegs’ in a fixed set of ‘holes’. They do not consider relationships as in relational databases (who is in the cell above and below). They do not consider personality that keeps changing according to desha (geography), kala (history) and patra (roles), which define a yuga (context). Thus we grapple with incomplete patterns. It is time to increase the dots and find more ways of joining the dots. It is time to look beyond known constellations to the billions of galaxies out there. It is time to also consider the very Indian approach to management.

THE Vijay Govindarajan INTERVIEW By Amit Kapoor

When you said you have come full circle moving from India; working with American companies; and now looking at India, what is the biggest learning that you drew from this country? I think there are three learnings that I got from India. Firstly, the notion of frugal thinking that comes very naturally to us. Because the resources are limited and we want to be very efficient in how we spend our resources and not waste them. Secondly, we Indians emphasize a lot on memorizing data which is not so in the US. It is dying even faster because of the advent of computers, calculators and iPhones. US focuses on critical thinking whereas in India we do not focus on critical thinking. As I was brought up in India and was exposed to memorizing data, then when I came to US and got the critical thinking part, it was a deadly combination as I had the data plus critical thinking orientation. Critical thinking without data is useless and data without critical thinking is also useless. So, the second important notion from India is data. The third thing is diversity. India is such a diverse country and if anyone has operated inside India, then he is well prepared to face the outside world. There is a misnomer amongst people who relate frugal innovation to Jugaad. How would you react to this? To me jugaad is absolutely the wrong way to go. Jugaad is different from frugal thinking. Frugality can co-exist with the latest technology. Jugaad is “The way people use it, improvise it, make it work and get the things done”. I think jugaad implies even inferior quality. That’s not what we need.

What we need is latest technology in innovation, which is at the cutting edge. For example, Narayana Hrudayalaya hospital is an excellent hospital as they have the latest equipment in cardiac surgery as you would find in the US. Yet we are able to do cardiac surgeries for $2000 whereas in US it costs $150,000. Frugality is bringing that cost down to $2000 by using absolutely the greatest, latest and the most appropriate technology. What we really need is to marry technological powers in the US with frugality.

“The concept of a $300 home or a $2000 cardiac surgery is not charity. Corporations should clamor for this model, for its reach maximization and not for profit maximization.” You wrote a very interesting piece in HBR wherein you talked about a $300 home. How can reverse innovation help us do that? When I wrote the article about $300 home it was not about lowering cost but was about offering more value at a lower cost. I was challenging people to think about how more health, education, jobs can be offered in a $300 house. Take for instance health – health is not just delivered in hospitals, health is also delivered in a way you construct a house. In today’s world there are three infectious diseases, which are killing millions of poor people all over the world - TB, Cholera and malaria. TB is air borne disease and if we imagine a hut, which has no sunlight, no ventilation, and ten people sleeping then if one of them has TB the other nine would also be infected with it. So, why can’t we derive a $300 house with proper sunlight, ventilation and thereby decrease the incidents of TB. In a similar way cholera is water borne disease and we should look at designing a $300 house, which has portable drinking water. The last one is malaria, which is caused by mosquitos, so the house should be designed in such a way so that we can put up mosquito nets and decrease the incidents of malaria. The point is to think about the housing problem by using breakthrough thinking. We did a project in Dartmouth wherein the participants were

THINKERS

Could you give a brief insight of your academic journey and your notion of reverse innovation? Having grown up in India, I know that innovation is the solution for many of the country’s problems. India has too many problems and we have too few resources and the only way to solve these problems is innovation. I committed myself to really studying innovation and I have always been interested in its impact on the real world, but by doing really regular research. When I came to America my study was really targeted at American companies and how they innovate. In the last 10 years or so I got interested in the notion of reverse innovation which is about innovating in a poor country like India and so that brought me full circle with regards to my ambition.

18 called from all across the globe and were given the task of building a $300 house, which is earthquake/ hurricane resistant. By using local materials, the local people could actually construct the house thereby creating jobs for themselves. This is really about how do we include the poor people in the innovation that we create. What we are saying is at what level we are able to give in hands to quality of life. Yes that’s really the point. Ultra low cost housing is not a new topic as people talked about it for decades but they talk about it as though it is a problem of charity. We somehow divided the world of 7 billion people into two compartments. 1 billion who are consumers who have the purchasing power and the rest 6 billion, the non-consumers, the so-called poor, who we have left to be taken care of by charity. The problem of converting the 6 billion non-consumers to consumers is not a question of charity but it is a challenge for innovation because the reason they are nonconsumers is they can’t consume the products the 1 billion consumers are consuming. In Narayana Hrudayalaya (NH) the same platform is used for doing surgeries for the people who are paying and also for the poor patients who either pay nothing or pay subsidized rates. The concept of a $300 home or a $2000 cardiac surgery is not charity. Corporations should clamor for this model for its reach maximization and not for profit maximization. NH is also about reach maximization. The problems of education/ health/ transportation can be solved by making it available to the consumers and the non - consumers. So, having a $300 home is a problem for the corporations to solve and corporations would come in this space if they find significant opportunity in this field and are able to make money. Looking at 6 billion populations of non - consumers with an average of 6 people per household we would have an opportunity of $300 billion. Similar is the case with Apple where it is not able to sell its iPhone to 6 billion non- consumers, as they cannot afford it. If apple makes a $10 nano iPhone they would be looking at a $60 billion opportunity. So, on a digital platform in the $300 household one can deliver more education to the poor through eLearning, more health through tele medicine, more banking through mobile banking etc. All the above requires thinking and creativity and leads to doing more with less.

How is your thinking emerging in the area of education as this is the foremost problem the world is facing? Let us think as to why education is so expensive in US. At Dartmouth the annual charges are $60,000 for tuition, boarding and lodging amounts to $200,000 – $250,000 for a 4-year course. Basically only the very rich can afford that kind of education or very poor because they get scholarship. The middle class people get squeezed because they make enough money so they are not entitled to scholarship, but they can’t afford $250,000 so they have to take a loan and hence pay for the rest of their lives.

“India has millions and millions of people who need education. We cannot follow the American model of education as that model is based on exclusion and not on inclusion.” There are three reasons why education is expensive in the US. Firstly, good institutions follow the vertical integration strategy which means knowledge creation is done by the faculty who do research and the same faculty disseminates that knowledge to teach and the same faculty does the assessment to grade the students for which the institute issues the certification. So once you pass these courses you get the certificate. The cost rises with vertical integration. Secondly, at Dartmouth everything is done on campus. Therefore, the infrastructure costs rises as lab, dormitory, classes, faculty offices, cafeteria have to be built. Thirdly, colleges have an admission policy called principle of inclusion and principle of exclusion. In Dartmouth we take a lot pride in saying how many people we reject. About 95% of the people who apply are rejected. So, we have built an education industry in this country on these people who are snubed. India has millions and millions of people who need education and we cannot follow the American model of education as that model is based on exclusion and not on inclusion. Higher education is very expensive in India so we have to disaggregate the value chain. We should not focus on the

Do you think we can surmount the problem of critical thinking that India is lacking? The transformational courses are the ones from where the critical thinking comes from. And that’s why we have to have the broken model university system as well and hence the transactional courses and transformational courses. The corporations also need to step in and invest in human resources. My thinking is we have to fundamentally rethink the way we are attacking the education problem in India. This is a great innovation opportunity to create a new model of education. When it comes down to it, what is pushing India back and what really needs to be changed in this country to take it forward? When I look at India I look beyond the filth and poverty and at a huge human potential. The human potential in India is enormous and awesome. Then I look at our accomplishments which are very disappointing. Of late I have become even more frustrated with the lack of progress in India. So I look at what we have achieved and what we could achieve. The human potential is incredible, but we have fallen short. The problem is really the leadership gap. There is a real leadership deficit in India. If India has to realize its full potential we

need to create systems and process and structures which will harness the talent. We really need someone to lead this talent. Youngsters need to step up and take the leadership forward. Everybody understands the way political leadership has failed the country. Are saying that even corporate leaders have failed? My hope is corporate leadership. Since independence we have had problems in political leadership. There have been scandals, corruption charges and lack of economic progress even on the corporate side. We have had some success stories especially in the 90’s when the IT companies came on board. We thought we were building a new India, but it looks like we are back to the same muck. Corruption and inefficiencies are cropping up, growth is slowing. We should have more experiments in the education industry like we have NH in health industry. Health alone could be a huge industry in India. Presently, they are touching only about 1% of India; 99% of India does not have proper health care. The health industry is one where we can employ a lot of people because it is a services industry. We can solve our employment problem and this is what I mean by, where is the corporate leadership? Similarly in infrastructure and transportation the gap is so big. Corporate leaders need to step up and make their employees a part of the wealth creation process. We certainly don’t seem to have that momentum to move forward.

THINKERS

basic research in India instead let the American universities do the research. In this way we would be able to eliminate the expense on research. Secondly, we need to create a global university in India, which will have online courses in every subject. Delivering courses online is not only low cost but also high quality. In higher education there are two types of courses – transactional and transformational courses. Transactional courses are better delivered through online platform and transformational courses are face-to-face interaction because it’s about application/ problem solving. So, we could have the best teachers in India create the best course in every area in the transactional courses. The universities would only conduct the transformational experiences and then we would create a third global university, which would do the assessment. So the second university would take the assessment and third university would do the certification. In certification we need certified courses, which provide right kind of knowledge and capabilities to do the right kind of job.

The (Current) Extent of Indiaâ&#x20AC;&#x2122;s Urbanization By Kevin Stolarick Visual imageries depicting Indiaâ&#x20AC;&#x2122;s growing urbanization over the years creates a far greater impact than documented statistics giving the same information.

to be appreciated. Ladies and Gentlemen, India’s urbanization … Figure 1 shows the nighttime lights for India and surrounding countries from 1992. Figure 2 shows exactly the same geography but 18 years later. While the bright spots of Delhi and Kolkata and the Mumbai-Pune combination and the Hyderabad, Bangalore, Chennai triangle are all clearly visible in 1992, they have all increased in intensity and size by 2010. And, a whole series of new constellations have been added to the subcontinent. It’s not just those few bright spots getting bigger and brighter – it’s also a whole new collection of cities and towns increasing their visibility at night which not only means increased electrification but also larger and more economically prosperous populations. Figures 3 and 4 show the nighttime lights for the Delhi region from 1992 to 2010. Figures 3a and 4a show exactly the same but with a colour spectrum used to show the intensity of the light instead of just black and white. A more detailed discussion of the growth of urbanization of Delhi will be presented below, but the transition from black and white to

Figure 1 – India at Night (1992)

Figure 2 – India at Night (2010)

THINKERS

“With 11 million residents, Delhi has been experiencing the fastest urbanization rate in the world according to the 2011 Census with a 4.1% increase in population from 2001.”

Current estimates put India’s urban population at about 31% of the total population. Estimates from the UN’s 2007 State of the World report estimates India’s urban population to be almost 41% by 2030. The UN Department of Economic and Social Affairs estimates that over the next forty years, India will add another 497 million to its urban population. McKinsey and Company in India’s urbanization: A closer look says, “Urban expansion in India will happen at a speed quite unlike anything the country or the world has seen before. It took nearly 40 years ( from 1971 to 2008) for India’s urban population to rise by nearly 230 million; it will take only half that time to add the next 250 million. This expansion will affect almost every state. For the first time in India’s history, five of its largest states will have more of their population living in cities than in villages.” While both the exuberance and alacrity surrounding India’s urbanization have been questioned, the reality of its occurrence is unquestionable. The goal of this paper is to provide another view of the current extents of India’s urbanization – an aerial view (actually an orbital one). Since 1992, the Operational Linescan System (OLS) of the US Defense Meteorological Satellite Program (DMSP) has been collecting images of the world at night. These images capture the nighttime lights generated on the ground. These images have been captured, processed, and analyzed for India and select metropolitan regions for the past 20 years and are presented below. The extent of India’s urbanization over the past 20 years may be well-understood and documented, but the true scope must truly be seen

Figure 3 – Delhi (1992)

Figure 4 – Delhi (2010)

Figure 3a – Delhi (1992)

Figure 4a – Delhi (2010)

coloured mapping should be explained first. The instrument used to collect the nighttime light data is actually designed to collect the reflection of moon and starlight off of clouds (it is a meteorological satellite). As a result, the instrument is tuned to detect very low levels of light and is quickly saturated by the light output of most major cities on cloudless nights. The red areas in 3a and 4a which correspond to the brightest white areas of 3 and 4 are areas where saturation has occurred. However, since the instrument can detect lower levels of light, the fringes of urbanized areas are detected. These areas are difficult to see on a greyscale map since there is little difference between very dark grey and black. However, when a colour spectrum is used, those areas can be made more easily seen. The blue areas of Figures 3a and 4a are places where no nighttime light was collected, but everywhere else shows where there are fairly significant sources of light at night. As the spectrum runs from blue to cyan to green to yellow to orange to red, the amount of visible light detected by the satellite increases from total darkness to total saturation.

Increased Urbanization of Selected Cities With over 12.5 million people in the metropolitan area, Mumbai has seen significant rural-urban migration and a 3.1% increase in population from 2001 to 2011. With 11 million residents, Delhi has been experiencing the fastest urbanization rate in the world according to the 2011 Census with a 4.1% increase in population from 2001. Kolkata’s 16 million residents are the result of a 2% population increase. Hyderabad and Bangalore each house around 10 million people. Figure 5 shows the nighttime lights for the Delhi region every two years from 1992 to 2000 (top row) and 2002 to 2010 (bottom row). It should be noted that some of the year-to-year variation is not actually from an increase and then decrease in the visible lights detected but is a result of the processing that is done to produce each annual file. The light readings are not guaranteed to be consistent across the years, but the overall trend is consistent. Not only has the urbanized area surrounding Delhi increased significantly over this period, but the lower intensity lights in the

23 THINKERS

Figure 5 - Delhi (Top row - 1992, 94, 96, 98, 2000; Bottom row - 02, 04, 06, 08, 10)

area surrounding the most intense nighttime lights has also increased significantly. Lights are visible along the major road routes. The Yamuna Expressway from Noida to Agra (south from Delhi) was completed in 2012 and so does not show up on the 2010 map. Delhi, like almost all metropolitan areas, expands along road access routes until it reaches other cities that effectively become part of the larger metro. In 1992, Faridabad in the southeast was still slightly separated from the core of Delhi. By 2010, the growth of Noida is seen and Faridabad is strongly connected to the rest of the metro. In 1992, Meerut northeast of the core is separate as is the small blip of Modinagar on the Meerut road from Ghaziabad. By 2010, Ghaziabad is indistinguishable from the rest of Delhi; Meerut has grown considerably; Modinagar has stretched out more along the road; and the core urbanized portion of Delhi continues to grow. All around the Delhi region, the maps show the growth of not only the core of Delhi but also the surrounding cities and towns. Some like Bahadurgarh west of the core or Sonipat/Sector 15 to the north become part of the core while others like Aligarh (in the lower right corner) show significantly increased urbanization without becoming part of the Delhi metro.

Figure 6 shows Mumbai and Pune (lower right) with 1992-2000 on the top row and 2002-2010 on the bottom row. As both water and land can be dark at night, the coast is not shown. And, light reflected off the water, or “overglow”, is shown so Front Bay and Thane Creek do show nighttime light. The significant amount of growth and urbanization that

“The satellite imagery for India is very clear – urbanization is a process of growth and intensification of existing settled locations and not the formation of new settlements, except around the edges of existing ones.” has happened in the Mumbai metropolitan region is already well-documented but strikingly shown here. While the maps show slight increases for Mumbai across the entire period, a large amount of grown has been in the past few years. What hasn’t been as

Figure 6 - Mumbai-Pune (Top row - 1992, 94, 96, 98, 2000; Bottom row - 02, 04, 06, 08, 10)

Figure 7 - Kolkata (Top row - 1992, 94, 96, 98, 2000; Bottom row - 02, 04, 06, 08, 10)

well-documented or discussed is the tremendous growth of the Pune region. The tripling of area of saturated nighttime light for Pune is significant, and the region around Pune has also seen significantly increased urbanization. Urbanization has also increased along the Rasayani-Lonavala-Vadgaon corridor between Mumbai and Pune. Limited by its coastline, Mumbai has grown north along the coast, to the east, and towards a growing Pune. Vasai Creek to the north of the core has not been a restrictive boundary as Nala Sopara and Vasai have grown considerably as have Uran and Nehru Port across Front Bay to the south. Increased urbanization pressures are leading to the expansion of places that had previously been considered inaccessible. Figure 7 shows Kolkata with 1992-2000 on the top row and 2002-2010 on the bottom row. As with the other cities, the expansion of the urbanized area of Kolkata is apparent. In addition to following major roads, the spur to the north of the core follows a different transportation route, the Hooghly River. Kolkata, like Delhi, shows a great deal of growth in the lower light intensity fringes of the city in more recent years. These areas are likely home to much of the recent more â&#x20AC;&#x153;informalâ&#x20AC;? growth and

urbanization that is occurring across the region. When an area is more formally developed, the infrastructure, electrification, and nighttime lights are added that create the more saturated, brighter (red) regions of the map. The growth of Haldia, closer to the Bay of Bengal, is shown at the bottom of the map. Figure 8 shows Hyderabad with 1992-2000 on the top row and 2002-2010 on the bottom row. Either Hyderabad or Bangalore could have been shown. The pattern and growth for both regions is remarkably similar. Neither had any geological restrictions to their growth, like Mumbai, and both essentially just keep steadily getting bigger and bigger â&#x20AC;&#x201C; essentially a spiky circle following major roads, absorbing nearby cities and towns, and growing outward. For Hyderabad (shown here), the growth is mostly restricted to the city and immediately surrounding area. While Warangal, shown in the upper right corner, shows some significant growth over the period, and a few of the smaller towns intensify their nighttime lights slightly, almost all of the growth is in and immediately around the core of Hyderabad. In 2008 (bottom row, 4th) the intensification of light in the

Figure 8 - Hyderabad (Top row - 1992, 94, 96, 98, 2000; Bottom row - 02, 04, 06, 08, 10)

25 THINKERS

Figure 9 - Kolhapur-Ichalkaranji-Sangli/Maraji-Karad (Top row - 1992, 94, 96, 98, 2000; Bottom row - 02, 04, 06, 08, 10)

area in Shamshabad to the south of the core around the Rajiv Gandhi International Airport, which was completed that year, is visible. By 2010, the entire area shows saturated light. As indicated in the introduction and show in Figures 1 and 2, the urbanization of India is not just restricted to the largest cities. Figure 9 shows the region around the cites of Kolhapur (bottom left), Ichalkaranji (bottom center), Sangl/Miraji (bottom right), and Karad (top of the triangle). These cities are in Maharashtra on the border with Karnataka (the border between the two is shown) with 19922000 on the top row and 2002-2010 on the bottom row. Kolhapur according to the 2011 Census had a population of just over half a million people. The key thing to notice from this series of maps is how the intensification of nighttime lights is increasing across the region. Not only is it increasing within the triangle of cities in Maharashtra but also along the Krishna River in Karnataka. The number of people living in the smaller cities and even towns and villages is also increasing. And with that increased population, the nighttime lights produced along with the prosperity of more remote regions is increasing as urbanization increases. Interestingly, this is an intensification process. Virtually no city appears de novo in the satellite imagery. Small settlements become villages which become towns then cities and eventually could become major metropolitan areas. Although the map shows much more nighttime light at the end of the period than at the beginning, it is from an increase in light from places that were already there in an early period but with less light produced. The satellite imagery for India is very clear â&#x20AC;&#x201C; urbanization is a process of growth and intensification of existing settled locations and not the formation of new settlements,

except around the edges of existing ones. Places are not grown from scratch â&#x20AC;&#x201C; they develop from much smaller ones. The (Current) Extents The maps have shown how urbanization has increased across India during the past 20 years. Delhi has seen a nearly fourfold increase in the total area of the city with the highest concentration of nighttime lights over the period, and most (if not all) of the other major cities of India have had similar or even larger increases. But, that growth is not restricted to just the largest cities. Smaller cities, some in areas immediately adjacent to metros, some neighbouring but not (yet) part of larger metros, some in more remote locations, have also seen significant increases in their urbanization over the same period. The implications of that increasing and intensive urbanization in economic, social, environmental, and cultural terms have yet to be fully understood, but the urbanization is happening. It is happening across the entire country, not just in the biggest cities, and Indiaâ&#x20AC;&#x2122;s urbanization is growth and intensification of existing locations.

26 References Chen, X., Nordhaus, W. D. (2011) Using luminosity data as a proxy for economic Statistics, Proceedings of the National Academy of Sciences, 108(21), pp. 8589-8594. Doll, C. N. H., Muller, J. P., Elvidge, C. D. (2000) NightTime Imagery as a Tool for Global Mappingo of SocioEconomic Parameters and Greenhouse Gas Emissions, Ambio, 29, pp. 157-162.

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Elvidge, C. D., Baugh, K. E., Dietz, J. B., Bland, T., Sutton, P. C., Kroehl, H. W. (1999) Radiance Calibration of DMSPOLS Low-light Imaging Data of Human Settlements, Remote Sensing of Environment, 68(1), pp. 77-88.

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Several socio-economic indicators suggest that India is far from a sweet spot in terms of global connectedness, which is an imperative for fast growth.

Opening up the idea of By Pankaj Ghemawat

1 Des Dearlove (Spring 2009). “On the verge of something extraordinary”. Business Strategy Review (London Business School): 17–20 2 http://telematica.politicas.unam.mx/biblioteca/archivos/040107017.pdf 3 The Pew Global Attitudes Project, World Publics Welcome Trade—But Not Immigration (Washington, DC: Pew Research Center, October 4, 2007). 4 http://www.dhl.com/content/dam/flash/g0/gci_2012/download/dhl_ gci_2012_complete_study.pdf

“The ratio of India’s exports to its GDP has tripled over the past two decades, but across a broader range of indicators, the depth of India’s global connectedness still ranks only 119th out of 140 countries.” decades, but across a broader range of indicators, the depth of India’s global connectedness still ranks only 119th out of 140 countries. On trade, India still falls in the bottom 25%. (The accompanying map helps visualize this—the vast majority of India’s economic output stays in India.) On capital flows, India ranks near the middle of the pack, but that is driven almost entirely by outward FDI from India and inward portfolio equity investment. On inward FDI stock as a percentage of GDP, India is still in the bottom 10%. On information flows, India ranks in the bottom 20%, and on people flows, India ranks second from last. Why does the depth of global connectedness matter? There is a strong positive correlation across countries between the depth of a country’s global connectedness and measures of its prosperity, such as GDP per capita and the UN’s Human Development Index. Of course, correlation is not the same as causation, but statistical analysis does indicate that after controlling for initial income levels, countries with deeper global connectedness have tended to grow faster than less connected countries. The reasons for India’s dismal depth scores are also far from mysterious—one doesn’t need the extra creativity that diversity is supposed to produce to figure it out—just a little of “the ability to think clearly” which F.C. Kohli, one of the founders of India’s IT Services miracle as former vice-chairman of Tata Consultancy Services, affirmed that Indians “have in abundance.”5 Regarding trade, we don’t From Kohli’s 1975 speech to the Computer Society of India. He said, “Many years ago, there was an industrial revolution; we missed it for reasons beyond our control. Today there is a new revolution – a revolution in information technology, which requires neither mechanical bias nor mechanical temperament. Primarily it requires the ability to think clearly. This we have in abundance. We have the opportunity to participate in this revolution on an equal basis; we have an opportunity, even, to assume leadership in this revolution. If we miss this opportunity, those who follow us will not forgive us for our tardiness and negligence.”

THINKERS

I can think of no better place to begin a Thinkers50 India reflection on the Idea of India than with the late C. K. Prahalad’s comments about India to Thinkers50 co-founder Des Dearlove in 2009. He said that, “Growing up in India is an extraordinary preparation for management,” and listed first among his reasons for that view, “India is a very diverse culture, in terms of languages, religions and income levels—so you start adjusting and coping with diversity at a very personal level as a child.”1 Other research backs up at least C.K.’s view about India’s diversity: among 160 countries, India ranks 5th on cultural and 17th on ethnic “fractionalization.”2 The contrast between diversity, which most of us learned growing up to view as a strength, and fractionalization, which sounds rather nasty and comes up in research on civil conflicts among other topics, leads me to reflect on another curious and related contrast about India. In a 2007 Pew survey, 93% of Indians agreed with the statement, “Our people are not perfect, but our culture is superior to others” and 92% agreed that “Our way of life needs to be protected against foreign influence.” India had the dubious distinction of ranking first in the world on both questions.3 If India’s culture, incorporating all of its diversity, is really as great as we proclaim, why don’t we feel confident enough in its merit to let it stand on its own without demanding protection against foreign influences? Prahalad’s India, with diversity as a great strength, is presumably an India whose ability to assimilate new ideas should make it an open country, an India that should welcome competition, confident in its ability to hold its own and ultimately to earn its rightful place among the world’s best. Yet, the battle over FDI in retail reflects the more fearful India that shows up on the Pew survey—an India marked more by fractionalization than what I like to think of as diversity. My own research on India’s openness for the DHL Global Connectedness Index, which I prepare with my IESE business school colleague Steven A. Altman, indicates that India is still a relatively closed country in many aspects.4 The ratio of India’s exports to its GDP has tripled over the past two

30 “If we integrate India internally, building trust among cultural groups and cutting state-level barriers to trade, then one India, united in its diversity, can surely thrive in global competition.” have to look farther than India’s third-from-last ranking for Market Access on the World Economic Forum’s 2012 Enabling Trade Index. And for FDI, India ranks in the bottom 10% of countries the 50 analyzed by the OECD in terms of openness to FDI. One could go on to cite infrastructure gaps, ease of doing business and many other indicators, but I will add just one more ranking because, having started with comments about India’s culture, it always provokes argument about whether it is really a cultural or an institutional variable: corruption. India ranks 94th on Transparency International’s Corruption Perception Index. Since India’s rank isn’t too far away from Mexico’s, it’s worth noting that according to one study, an increase in corruption from the level of Singapore to that of Mexico has the same negative effect on inward FDI as raising the tax rate by over fifty percentage points!6 Breaking the back of corruption in India will require tackling it from both policy and cultural perspectives. Government should take (and enforce) bold steps, but as long as young Indian business people are told by their mentors, as many are today, that “I don’t like it but the reality of business is that you have to be willing to break at least a few rules along the way if you want to succeed,” little will change. Anyone with influence in India — entertainers, executives, politicians, religious leaders, and — if I may — even academics, should ask themselves whether the examples they are setting are contributing to an India characterized by more trust or less. To circle back to where I started, the difference between diversity and fractionalization and between open confidence and closed fear has a great deal to do with trust. India ranks 44th out Shang-Jin Wei,” How Taxing is Corruption on International Investors?,” The Review of Economics and Statistics, February 2000, Vol. 82, No. 1, Pages 1-11

of 50 countries on what I call the “distance sensitivity of trust,” which I measure according to the ratio of trust in people in your own neighborhood versus trust in people of another nationality using data from the World Values Survey. Human progress, as I elaborate in my 2007 book, World 3.0: Global Prosperity and How to Achieve it, has been spurred over the millennia by people expanding their circles of trust to make them less sensitive to distance, national borders, religious differences, and so on — an idea that dates back at least to the Greek philosopher Hierocles.

World Map with Countries Scaled According to India’s Exports to them and Colored based on India’s Share of their Imports (India Scaled According to its GDP minus Exports)

31 THINKERS

I believe India does have tremendous cultural riches and probably more untapped business potential than in any other single country in the world. But until we open up with confidence to each other and to the world, we will continue to fall too far short of our potential. If we integrate India internally, building trust among cultural groups and cutting statelevel barriers to trade, then one India, united in its diversity, can surely thrive in global competition. If we remain fractionalized and fearful of each other, we have no one to blame but ourselves for our continued stagnation.

INDIA

India Share of Imports 30% 12% 8% 4% 3% 2%

unknown Source: UN Comtrade Database, World Bank World Development Indicators

hurdles emerging market firms have to overcome to create global brands By Nirmalya Kumar and Jan-Benedict E.M. Steenkamp

Emerging market brands will become increasingly global in the coming decade, but in order to do so, theyChina in particular- will have to change certain existing practices.

Hurdle 1 Improve transparency Many Chinese firms lack transparency, particularly with respect to ownership structures and governance standards. Despite our best efforts,

it was impossible to penetrate the opaque ownership structures that went through a mother company (parent) and several daughter companies (subsidiaries), some of which might be listed. At one listed company, we learnt that the listed portion referred to only one factory for one product category. Most of these related companies transact significant business with each other. Sometimes, the entire raw materials or key inputs for a listed firm may come from another non-listed firm in the network. In such a case, unless the transfer price mechanism is known and market-compliant, the profits in the listed firm are subject to a degree of arbitrariness. Indian firms used to have such complex shareholding patterns before the reforms of 1991, but in the last decade they have made considerable strides in unraveling them.

“There is no historical precedence for a major country that has come to economic prominence that has not also developed strong brands.” The composition and profiles of the members of the board of directors is sketchy. As a result, we were unable to gain a full grasp of the ownership and governance structures of Chinese firms. In fact, we were often advised not to raise the ownership issue in our interviews as it would jeopardize the entire interview. Even when brought up with senior Western managers of Chinese firms, it was clear they were uneasy discussing this issue. Greater probing led us to believe that it was not that these executives did not wish to reveal the ownership, but that they were ignorant of it. The state and the Communist Party not only control many of the state-owned firms and their top leadership (which are typically appointments approved by the Party), but, one suspects, also exert significant influence on the behavior of private companies. Illustrative of this is a 2012 front-page article in the leading newspaper China Daily with the headline “Party continues to expand,” celebrating that, to date, close to one million companies (including 47,000 foreign firms) have set established Party organizations in their companies. This, according to Wang Jingqing, vice-minister of the Organization Department of the Communist Party of China Central Committee, has

THINKERS

It is a widely held belief that emerging market companies will not be a threat to existing global largely Western - powerhouses. In our new book, Brand Blowback: How Emerging Market Brands Will Go Global, we question this conventional wisdom. The top leadership of corporations in the West grew up in a world in which their competitors were all very well-known and because of that many CEOs, marketing practitioners, and even business school students believe that a poor perception of products from these countries, combined with a lack of marketing experience, will doom such brands from becoming global players. We are however advocates of “brand breakout”; and believe that, in the coming decade, emerging market brands will become increasingly global and present in the Western world. Our conviction is based on three fundamental observations. First, the push to global sourcing means leading emerging market firms, especially in China, have now built world-class manufacturing capabilities. Second, the traditional emerging markets model based on low-cost labor is breaking down, again especially in China. The time when emerging market companies could rely on low cost products for export growth has ended. Turning products into globally recognized consumer brands, supported by innovation and marketing has become the ultimate goal for many emerging market firms. Topping it off, emerging markets now account for over half of global GDP and 80% of global growth. Economic might will translate into market might. In fact, there is no historical precedence for a major country that has come to economic prominence that has not also developed strong brands. However, while we are optimistic about the potential of emerging market companies to build global consumer brands, we are not wearing rosecolored glasses. Our research has shown that there are at four significant hurdles emerging market companies have to overcome for their true branding potential to be unleashed. While these four obstacles can be observed in many emerging markets, Chinese firms in particular need to confront them.

34 “helped companies learn about the latest national policies and [has] improved relations between employers and employees.” Perhaps. But a less benign explanation is that the hand of the Party is never far away. Russia is the other significant emerging market where one also gets this feeling of the hand of the State. Just ask Shell or British Petroleum (BP). Yet Russia is more privatized than China. It should be noted that Western governments are not without fault either, as exemplified by the recent NSA eavesdropping scandal and extortionate demands for compensation on BP after the Deepwater Horizon oil spill. Nevertheless, the hand of the State weighs more heavily in emerging markets where the Rule of Law often is less firmly established. The lack of transparency is endemic to China as its political system attempts to control the flows of information in society. In Beijing, we were unable to access Facebook and Twitter as well as many other websites. How do you build a global brand in today’s world without social media? The desire to release limited information spills over into the corporate sector. Most of the corporate websites are of poor quality, providing minimal information, and some have not updated their English-language websites in years despite being having annual revenues running into billions of dollars. Many companies are supposedly owned by the employees. For example, the two listed companies that comprise Haier claim to be a collective that is employee owned, yet the employees do not know exactly what they own, nor do they appear to receive dividends. We believe that it is more difficult for state-run and state-employee-managed firms to build global consumer brands. The investment in the marketing efforts required to build brands, where the returns cannot be demonstrated as easily as say in building a factory, is always suspect. Who owns the cash flows being generated by the firm and who can make the decisions on whether to pay them as dividends or invest in the softer aspects of building a global brand is unclear. An important item on the Chinese corporate manifesto for the future must be to open the ownership structure up to scrutiny. We are hopeful that this will happen. One way to do this is to get listed on Western stock exchanges. Our field research revealed that Chinese companies are increasingly becoming aware that improving transparency will be beneficial to them. External

forces are also encouraging Chinese firms to change in this respect in order to succeed in their quest to become more global. For example, in 2013, the Financial Times reported that “Huawei has pledged to start disclosing more detailed financial information and shareholding information as the Chinese telecom equipment maker tries to dispel fears about suspected ties to China’s military that are hampering its global expansion.” All that was known until then was that the founder owned 1.4 percent, with the rest in the hands of a “body representing 65,000 Huawei staff.” Hurdle 2 Enhance profitability and integrity of financial statements Many large Chinese firms seem to operate on low profit margins. For example, despite having about similar levels of market share in the PC business, Lenovo’s operating margins in 2012 were a quarter of Hewlett-Packard’s. This led The Economist to observe that the Asian model of capitalism “prizes market share over profits.” But profits are necessary too if one is to invest into building global brands. The low profit margins lead one to question the returns to capital at many Chinese firms, especially in light of the preferential land and capital they receive by being “favored firms” in China. The same article in The Economist went on state: “the state draws up long term plans, funnels cash to industries it deems strategic and works hand-in-glove with national champions, like Huawei and Haier.” If these subsidies were to disappear, and this were combined with increasing Chinese labor costs, one has to wonder whether the Chinese business model would be sustainable. At a minimum, we believe that this model will have to evolve and we are skeptical of a unique “Asian business model.” Beyond the low profit margins, there is the question of integrity of financial statements. Results for firms are often released far after the end of the financial year. For some major, publicly listed firms, the results for 2011 are still not available! Numbers, often round numbers, projected by leaders of these firms during the year have an uncanny way of being met. While many of the firms are audited by international firms, the problems at India’s Satyam demonstrate that this does not always guard against errors and fraud. We want to emphasize here that the integrity of financial statements is not merely a problem in China, or even an emerging

35 THINKERS

“Maybe there’s a good reason why no on else has broken into this market.”

market problem. Scandals such as those of Enron, WorldCom, and Lehman Brothers as well as fraud with Greek official statistical data have highlighted that the integrity of financial statements is a worldwide concern. Yet, relatively, emerging market firms need to make greater strides on this front. Brands are about trust; and everything that a firm does, enhances or detracts from the brand. Hurdle 3 Move from imitation to innovation For years, brands from emerging markets focused on the domestic market. In a relatively closed economy, they usually mimicked the products of Western or Japanese firms. The term “reverse-engineering” was common in India to describe the process of figuring out how to manufacture innovative products from the West. Like the Japanese and Koreans before them, Chinese firms are masters at this. In the early stages of a company, it can grow by merely imitating Western products and brands. But as emerging market companies grow and rise to prominence, they must make the transition from imitation to

innovation. They have to offer a differentiated product and proposition to the Western consumers. This requires building and acquiring both research and development (R&D) and marketing capabilities, as well as an organizational culture that encourages bottom-up ideas. The highly hierarchical and family-controlled culture that dominates many emerging market firms is not always conducive to innovation and branding. Some state planners in China and family business heads in India love to think that this is the route to world beating innovation and brands. But apart from a few high-profile exceptions, this thinking is mostly delusional. Innovation and branding as sustained capabilities are best nurtured in professionally managed firms rather than left to the vagaries of state bureaucrats or the offspring of exceptional entrepreneurs. Investments in innovation and brands are rational only if intellectual property (IP) is protected and the protections are enforced. In our work, we have noticed numerous examples of the blatant copying of Western products, brand names, and brand logos.

36 “Innovation and branding as sustained capabilities are best nurtured in professionally managed firms rather than left to the vagaries of state bureaucrats or the offspring of exceptional entrepreneurs.” If emerging market firms would take these global, they would open their companies up to expensive international lawsuits. Hopefully, this situation will improve as emerging market companies mature and realize that it is in their own interest to support IP protection and enforcement. On this front, one sees great leaps forward in China. Companies such as Huawei, Galanz, Haier, and ZTE have global R&D operations with centers in Americas, Europe, and Japan. The push to register patents abroad is starting to increase among Chinese firms, and has made some of these firms into large filers in the US patent regime. While foreign patent applications by Chinese firms still lag applications by Western firms, the writing is on the wall. The Economist cautions “Geeks in the West should not relax.” The R&D facilities of companies such as Lenovo that we visited were impressive. Lenovo’s Shanghai R&D facility is one of four in China and works closely with the firm’s R&D centers in Yokohama (Japan) and Raleigh (NC, USA). They actively rotate people across these centers and encourage diversity. Hurdle 4 Accept management diversity and a global mindset Building a global brand in today’s world with distributed economic power requires managing across many countries. The consumer insights needed from the different parts of the world require a global mindset in the top management teams of the firm. This is of course not a problem unique to emerging market firms as French, Japanese, and even British firms struggle to incorporate emerging market talent into their top management teams. Emerging market firms desiring to build global brands in Western countries face the opposite problem of how to get Westerners integrated

into their top management. There is little history in many of these countries of multicultural management teams. Given the structure of their societies, companies from Brazil, India, and South Africa have some advantage on this front. Firms from these countries are already used to dealing with a top management team that looks different from each other despite sharing a common nationality. Indian and South African companies are also used to doing business in English, even if their mother tongue may be Hindi, Bengali, Afrikaans, or Xhosa. We do recognize that the top management of firms from these countries is still overwhelmingly from the home country. But at least they can potentially work with a more multinational top management team. China, on the other hand, is culturally and linguistically more homogeneous. The language barrier also makes it harder to incorporate foreigners. Chinese firms aspiring to build global brands will have to follow German multinationals such as Allianz, Daimler, and Siemens, where all documents are written in English, which is the company’s working language. Even French firms like Alcatel-Lucent have now adopted English as their working language. Like it or not, the global business language does not seem destined to change even if this turns out to be the Chinese century. It is Chinese firms that will have to change. There are encouraging signs, however, as Lenovo has adopted English as its official internal language. Looking ahead In sum, significant hurdles remain on the path to global success. But Western managers should not be lulled into complacency. They have done that before, and it did not turn out well. Previously, Western managers have been blindsided for first underestimating the Japanese brands (e.g., Toyota, Sony, and Canon), and subsequently the Korean brands (e.g., Hyundai, LG, and Samsung), who swept aside supposedly invulnerable incumbents like Philips, Thomson, General Motors, Ford, and RCA. They surely do not want to be blindsided a third time. The threat is most aptly described by the mantra of Chinese domestic-appliance manufacturer Midea “Never give up, no matter what.” In the inimitable words of The Economist: “The great Western brands should listen to those words and tremble.”

ideas for Higher Education in India By Pramath Raj Sinha Problems of quality, access, and skewed demand-supply within higher education in India, are all too familiar. If a genuine effort were made to put a few ideas into action, the existing scenario would radically change.

Creating SEdZs Creating Special Education Zones (SEdZs) akin to the industrial Special Economic Zones (SEZs) can transform access to and the quality of higher education in this country. Every year hundreds of thousands of our bright young students have no choice but to go abroad for higher studies. They spend billions of dollars and thousands of crores to get this education. What is worse, a simple demand-supply analysis of higher education suggests that these numbers will continue to grow, and grow exponentially. We are, in effect, outsourcing higher education to the US, UK, Australia and New Zealand. Recently, one of my employees sent her son to study dentistry in Russia even though she could ill-afford it. The new craze

“We are, in effect, outsourcing higher education to the US, UK, Australia and New Zealand.” is “twinning programmes” where you study in an Indian university for 2 years and then complete your graduation and get a degree in the foreign university. Singapore and Dubai are ostensibly building education hubs for Asia, but the reality is that it is Indian students hungry for a good education who are swarming new institutions in these locations. The tragedy is that home-grown public and private institutions are now setting up campuses in neighbouring and far-away foreign locations to escape overpowering local regulatory constraints. In effect, even though we can ill-afford to, as a country, we are outsourcing, and increasingly so, our higher education to the West. Given that both the supply of students and the demand for college graduates are right here in India, why not replicate the “overseas and higher-quality” experience in India by creating SEdZs along the lines of the manufacturing SEZs. Interestingly, the concept of SEZs for education first seemed to have surfaced in 2004. In a then oped, the erstwhile Commerce Secretary P.P. Prabhu had made a case vigorously for SEdZs saying, “The Special Education Zone (SEdZ) institution...should be treated as though it is deemed to have been established in a foreign enclave, and, therefore, freed from all domestic controls and restrictions. An SEdZ institution...should not be required to seek any approvals for its courses; it would need to be allowed to charge any fees, follow its own admission criteria and award its own degrees, and so on. However, if an SEdZ institution wants recognition of its degrees and diplomas in our country, it would be required to meet the standards and conditions of affiliation and recognition.” Leveraging surplus land in existing institutions I have recently been part of an effort to build a new private university in India. With our poor infrastructure it is impossible to build a high-quality institution away from a large urban centre in India. Faculty are unwilling to teach and live in a place that does not offer employment opportunities for their spouses and an excellent school for their children.

THINKERS

We are all familiar with the challenges for higher education in India. Not enough capacity – the danger that we will not be able to cope with sheer numbers and provide direly needed education to the majority of our young in the years to come, turning our so called demographic dividend into a disaster. Very poor quality – our existing institutions are in decline and the quality of new institutions are generally sub-par. Obsession with specialisation – in a society hankering for employment the emphasis on studying engineering, management, law, medicine, commerce, etc. is creating legions of trained manpower rather than problem-solvers and leaders. The government is making tremendous efforts to expand capacity by creating greenfield institutions, but there is only so much the government can do. It needs to be given a leg up by the private sector, but deplorably the regulatory environment remains constraining even for legitimate private players to set up institutions – most private institutions tend to be perceived as money-making rackets, with little or no concern for their students. In this context, much has been written and said about how to solve India’s higher education mess. Let me suggest three ideas that could radically change our country’s trajectory. While these ideas may seem far-fetched, I believe we, other than any country, have the opportunity to innovate in higher education and, in fact, have no choice but to do so. • Create education SEZs • Offer surplus land within existing public institutions to new public or private institutions • Rapidly expand Massive Open Online Courses) (MOOCs )

40 A case in point are the new IITs and IIMs several of which, established in far-flung areas of the country on vast tracts of land in isolated settings, are struggling to attract faculty for the lack of adequate social infrastructure around their campuses. Clearly, for new institutions, urban or suburban locations make most sense.

“With our poor infrastructure it is impossible to build a high-quality institution away from a large urban centre in India. Faculty are unwilling to teach and live in a place that does not offer employment opportunities for their spouses and an excellent school for their children.” Urban and suburban locations make sense also because of the emerging trend of inner-city university campuses that are tightly integrated with their host cities. As Kerstin Hoeger, Full Professor of architecture and urban design at Norwegian University of Science and Technology points out, “Worldwide, universities and their host cities are evolving into ‘knowledge cities’.” She and others in the field argue that the erstwhile ideal of a monofunctional and isolated greenfield campus removed from the city, providing academics and students the distance to reflect on humanity, is fast becoming obsolete in the context of modern knowledge societies, and is giving way instead to open campuses that share a close relationship with their host city. In fact, when seen today many of the top 50 universities of the world – for instance, MIT, LSE, Harvard and TU Berlin to name a few – are embedded in such ‘knowledge ecosystems’ enabling them to perform better. However, the model demands tracts of centrallylocated urban or semi-urban land that are increasingly hard to come by and come at exorbitant prices. For a new university to incur the high cost of land acquisition in its early stages is crippling – most new institutions end up investing large amounts in real estate even before they get started, unless they

get subsidized and free land from the Government. Even so, most urban centres do not have unutilised land that the Government can allot for higher education. By contrast several central universities and institutes have vast tracts of land within urban areas that are underutilised. As an example, the Jawaharlal Nehru University (JNU) in Delhi has a 1000-acre campus that is largely unused. Osmania University in Hyderabad has a 2000-acre campus. Why not allow new institutions to co-build and co-habit campuses for a fee and ensure more efficient utilisation of scarce and precious space. The “rentals” for the land will help supplement and improve the funding of existing institutions and not needing to spend their initial capital on land acquisition will help the new institution, in addition to giving them an attractive location to launch from. At the very least, the government should expand capacity and diversify areas of study in its central and public universities and institutes of national importance situated in central urban locations and built on vast tracts of land. Rapidly scaling up Massive Open Online Courses (MOOCs) India has no option but to embrace online education in a big way. This is because MOOCs are capable of solving two of India’s most pressing constraints at once – access and quality. It is near impossible for the country to provide a high-quality university education to the millions of deserving students with the existing numbers and quality of faculty. Current faculty-student ratios will just not get us there. The only way to fundamentally shift that ratio is to have “massive” classes made possible by the new MOOCs. In online education, unlike in traditional education, a few high-quality professors can reach manifold students. Of course, people will get into a debate whether this has the potential to replace teachers but we have also seen developments like Kindle and music players which have redefined usage patterns. There is also the classic intellectual debate about whether online education will work in isolation, in the absence of a classroom full of students, peers and teachers, but new theories show that self-learning is a new model whose time has come. But more importantly, we need to ask ourselves if we can afford to engage in such debates. India seemingly has no choice! Unlike in the West where

41 THINKERS

online education only adds to what already exists (more like education for the educated), in India it has the potential to be the first port of call for millions of students who are currently left out of the higher education system, or are having to settle for lower quality alternatives. Even if this model is the second or third choice for developed countries, it is a luxury for India to spurn it out of hand. In fact, many young Indians are already taking to MOOCs in a big way. At roughly 10%, Indian students form the second-largest group on Coursera, the biggest US-based MOOC which has 4.3 million enrolments from over 190 countries. On Udacity and EdX, the other top-3 MOOCs, Indians represent equally large proportions. Clearly, innumerable Indian students see great value in MOOCs since the demand for education, particularly high-quality education, is way higher than supply and availability. At the very least, online education provides another chance to students who cannot understand or clear a course in the first attempt, and acts as a great democratiser. Agreed that distance or online learning is not the newest idea on the block â&#x20AC;&#x201C; it has been around for a while. There are 176 institutes in India that offer distance learning programmes and 26% students are enrolled in them. However, there is a need to deregulate and scale up the distance/online learning model to be much larger than what it currently is. If we are ever to achieve quality with access, there is also a need to mainstream this sort of learning. The ideal solution has to be a blend where online education plays an important role in mainstream education.

Employees First, Customers Second By Vineet Nayar The journey from a customer-centric to employee-centric organization requires asking tough questions and following it up with a cultural transformation.

43 “Mirror Mirror” is a simple exercise that forced us to have frequent, open and honest conversations to identify where we were and where we were headed.” At HCL we decided to take the leap of faith. We realized that, something had to change - but what and how? To find out the answer it was important to ask some tough questions. This exercise of introspection led to the following discoveries: • In the business of IT services, it was evident that value no longer lay in the technology itself and certainly not in any particular hardware or software. • We observed that maximum value was created at the employee-customer interface, called the “value zone”, where frontline employees created customized solutions for customers. • In order to maximize value creation for customers, the role of managers needed to be redefined - which would be to encourage, enthuse and empower employees. This was the light bulb moment. By putting employees first, and customers second, we began our journey of transformation. And in the process of doing so we became one of the fastest growing and most successful IT service providers in the world. But this didn’t happen overnight, it was a cultural-transformation journey which required moving through several stages. The first stage was “Mirror, Mirror” or “Creating the need for change”. “Mirror Mirror” is a simple exercise that forced us to have frequent, open, and honest conversations to identify where we were and where we were headed. It helped us define point A, the truth and reality of our situation today, before moving towards the destination or Point B. By taking a closer look at ourselves and defining point A, we believed we would be able to connect the dots to Point B. The second stage involved building trust through transparency or “creating the culture for change”. Identifying the need for change was just the beginning. For change to happen, it became necessary for every employee to participate in the process. This would be possible only by

THINKERS

At one of the most popular tribal crafts carnival in India I once had an experience of watching an unusual puppet show. Normally the puppets are the only things you see on stage and the people who are handling them are hidden behind a canopy. But this one had the puppeteers completely exposed and they emoted and acted in synch with their puppets. The show ended with a rapturous applause from the audience and in no time a swarm of kids had collected around the puppet crew. Even as the kids chatted excitedly with the puppeteers, I could not help but strike a conversation with a person who seemed like the head of the group. “Any particular reason why you bring the crew up front?” I asked. “Because they are the ones who run the show”, he said dissolving back into the sea of little admirers, even as those simple lines spoken in a most nonchalant way sunk deep into my ears, settling into that portion of memory which bookmarks some important learnings of life. Many years later when I started my own start-up called Comnet, which is now a $1.4 billion company, I was to have the same déjà vu moment when at a meeting, a customer spent most of the time praising the project team who had accompanied me and completely ignored me, the CEO! That was to be the start point of many such meetings, experiences and incidents which kept pointing to the same message – magic happens when employees at the frontline rise up to deliver the show! This realization was to eventually become the fuel of a new philosophy of organizational transformation that came to be known as Employees First, Customers Second or EFCS. More about that later; let me first begin at the beginning. The year was 2005, when I was asked to lead HCL Technologies. I found the company in a peculiar position then. While all seemed fine on the surface, we were rapidly expanding our global footprint, both in our customer base and operations and growing at a cumulative average of 30%. Yet under this veneer of success, all was not well. In fact, we were growing slower than our rivals and steadily losing market share, mindshare and “talent share.” What would be the right response in such a situation? Do we play safe? Or take the plunge into the unknown? It’s like finding yourself on the ledge of a building on fire. In that moment you have only two choices, either wait to be rescued, or decide to take matters into your own hands and leap to safety.

44 building trust not just in leadership or strategy, but throughout HCL. We realized that to build trust we had to push the envelope of transparency. One of the first steps we took towards creating transparency was to open the window of financial information to our employees. By sharing both the good and bad, we strengthened the culture of trust, just like in a strong family. By building initiatives that would promote transparency, we ensured that employees clearly understood the organization vision, and how they as individuals contributed to its goals. Another way we built transparency was by trying to build an open office environment. This led to the creation of the U&I portal, an online forum where any employee could post any questions, which I along with my leadership team would answer. The idea was to replace rumors and misinformation with a culture of open conversation. The third stage was all about “Inverting the Organizational Pyramid”. Once employees had accepted the call for change, and there was a culture of trust that motivated them to embrace change, there was a need to establish the structure for change. We realized that making small, incremental changes here and there would not work. It was necessary to challenge the traditional pyramid organizational structure itself, to ensure that change would touch every aspect of our business. This is when we thought about inverting the pyramid – and reverse accountability became a key building block for the new structure. This meant that certain elements of the hierarchy had to become more accountable to the value zone. We started with enabling functions – such as finance, human resources, administration etc, and decided to make them more accountable to the employees they were supporting through initiatives like Smart Service Desk to find permanent fixes to common problem tickets. Next, we decided to take a closer look at the performance of managers across these enabling functions. What started as feedback from the manager’s immediate span of control, went onto become a 360 degree performance review. In one single instance every employee could view the strengths and gaps of their managers, including the CEO, evidently making management truly accountable to the employees The last stage was “Recasting the Role of the

CEO”. In this final stage of the journey, we were set to transfer the responsibility for change from the management to employees. We did this by recasting the role of the CEO and transferring the responsibility of change to the employees. That was the only way to sustain change. One of the initiatives, the Employee Passion Indicative Count (EPIC) identified the main drivers of employees’ passion and organized them into three core themes, around which a survey was created. This helped us identify and understand the core values that drive their potential to act passionately both personally and professionally.

“An empowered and transformed employee thinks in a very different way, than one who is driven purely by monetary compensations. He is eager to contribute value, he thinks long-term and he exceeds his own expectations.” Transferring the responsibility of change didn’t stop here. The “Value Portal” was created where ideas could be shared by employees with customers and based on a feedback and review process, would go onto to be implemented. Then we took an even bigger leap. We launched “My BluePrint” program, through which 300 managers recorded their business plans which were then hosted on a portal. These plans were reviewed by 8,000 managers. By transforming the business plan review process from a top-down judgment to a peer-peer review, we had taken a big step in creating a company which is in many ways self- run and self-governing. But the journey isn’t over. Employees First is a living concept that continues to evolve. While Employees First 1.0 was “management driven, employee embraced” - a contemporary version is emerging today. – Employees First 2.0 which is “employee driven, management embraced.” Manifestations of this are evident in initiatives like MAD JAM which is an internal crowd source initiative for frontline employees that enable micro innovations to gather greater momentum and become employee led business lines. Similarly

45 THINKERS

Meme is our in-house social and professional networking platform created by Gen Y employees which cuts across age, location and function barriers. Today it has more than 70,000 members and is a vital hub for ideas and collaboration. By doing all these radical initiatives HCL was able to unleash the energy of thousands of employees. And the results were for all to see. Ever since the launch of the EFCS philosophy at HCL, the company has seen its revenues and market cap grow by six times, the active customer base has doubled and the employee base has quadrupled. But the biggest return has been the change of mindset we had been able to trigger in the company at all levels. An empowered and transformed employee thinks in a very different way, than one who is driven purely by monetary compensations. He is eager to contribute value, he thinks long-term, and he exceeds his own expectations. I think that is what makes for the foundation of sustainable and successful enterprisesâ&#x20AC;&#x201C;one that puts humans at the very heart of business and makes the world a better place to live for millions and billions of employees who come to work every day. I think we all deserve a better place to live.

Going Beyond Jugaad: Can India build a Systematic Innovation Capability?

Indian companies have apparent blocks which inhibit their innovative capability but as some companies have shown specific steps can be taken to successfully overcome these problems.

By Rishikesha T. Krishnan

The Big Picture International comparative studies of innovation consistently place India far below the top of the innovation charts. In the latest INSEAD-WIPO Global Innovation Index (2013), India ranks #66. Rather than going up the ladder, India is actually sliding down – we slipped two positions in the last year and, this is in spite of the Government of India declaring this the decade of innovation! A simple way of understanding innovation output is to think in terms of supply side factors, processes and capabilities, and demand side factors. At the national level, since liberalization began over two decade ago, the demand for innovation has grown. Disposable incomes are up, the government is looking for low cost solutions to knotty public problems, and the legal systems for protection of inventors’ rights, are now better aligned with those in rest of the world. But India still faces challenges on the supply side, and in the capabilities of organizations to use the inputs available for innovative outcomes. Supply side issues include the failure of the education system to rise up to the challenge of building a well-trained work force that can undertake creative problem-solving, lack of adequate seed capital to take ideas to prototypes, and the absence of a supportive infrastructure for innovation. But, perhaps the biggest supply side problem is India’s poor research base – a recent study commissioned by India’s Department of Science & Technology shows that India’s research output is not cited at a level above the global average in a single academic discipline. The main agent of innovation in a capitalist economy is the firm. This is the entity that links ideas with the market. Unfortunately, firms in India have been slow to develop systematic innovation capabilities, preferring to rely on traditional methods of creative improvisation such

as jugaad. While jugaad may be attractive to large multinational firms whose processes have become too rigid and inflexible, Indian firms (with a few notable exceptions) face the opposite challenge – their innovation processes are too fluid and under-developed to facilitate the transformation of the creative energies of their employees into a steady stream of innovative products and services. Unfortunately, while multinational R&D and engineering subsidiaries in India have the potential to do more innovative work, their innovation tends to be circumscribed by the roles mandated by their parents. Why don’t Indian organizations spend more effort in developing better innovation capabilities? Family ownership appears to be a barrier, unless the family members involved in the business have a penchant for innovation (e.g. Dr. Anji Reddy and Dr. Parvinder Singh at DRL and Ranbaxy respectively). More traditional family owners lack a deep understanding of either technology or customer needs, two of the key starting points for innovation.

“India’s research output is not cited at a level above the global average in a single academic discipline.” But there are also social and cultural forces at work that impede the creation of systematic innovation capabilities within firms. Research on management in India has shown that Indian companies’ efforts at innovation are impeded by poor teamwork; the enduring importance of upward hierarchical progression in a traditional society that leads to individuals moving out of individual contributor roles too early; a “brahminical attitude” that gives brainwork a superior position over physical work and results in ideation being lionised but experimentation looked down upon. Additionally, a weak systems and strategic orientation that results in the absence of appropriate change paradigms; a low tolerance of failure; a lack of confidence in innovation capabilities; a failure to positively reinforce innovation efforts; and a strong need for control that comes in the way of joint working with other organisations, all are impediments to innovation in India.

THINKERS

As individuals, Indians are resourceful, creative and smart. In a supportive context, such as Silicon Valley they have shown that they can play critical roles in the most innovative companies. But, here in India, our innovation output is significantly below our potential. My work on innovation has focused on identifying the barriers to innovation in India, and seeking pathways at the level of both the nation and the firm to channelize our creative potential into a more systematic and sustainable innovation output.

48 Accelerating the Pace of Change Some of these factors are changing over time, but the change is slow. What can India do to accelerate the pace of change? I believe there are four priorities starting with a focus on the creation of a critical mass of new generation firms, started by young entrepreneurs. These youngsters would be relatively free of the baggage of our past and therefore more inclined to take on the challenge of genuine innovation. These firms need to be in sectors and application areas that go well beyond our traditional strengths like IT and services. The second priority is to provide the right incentives for institutions of higher education to change to become more research-oriented and more practice-oriented. The third priority is to change the nature of government’s support for research and development. The traditional model of governmentowned, financed, and run research institutions needs to be replaced by competitive government grants to support R&D in private institutions and small firms. The feasibility of this has already been proven by the schemes and programmes of the Department of Biotechnology, such as SBIRI and BIRAC. Such an approach needs to be extended to other sectors as well. The last but certainly not the least priority is to move India towards being a more knowledge-driven and science-intensive society. The solution to this problem lies as much with individuals as with the government. The next time your child has a project from school, get her to do it rather than doing it for her. Don’t accept superstitions and baseless rituals. Embrace the scientific method. Building Innovation Capabilities: The 8 Steps Approach The other part of the puzzle is building strong organizational innovation capabilities. Some Indian companies have already shown how this can be done. Vinay Dabholkar and I have captured the essence of these practices in our 8 Steps to Innovation framework. In our interaction with Indian companies, we learnt that they faced three major problems in making innovation a sustained activity. The first is what we call the pipeline problem – the absence of a steady stream of ideas that can drive their innovation engine. Some companies told us that

they have managed to create a stream of ideas, but that many of the ideas seem to get lost in the system – this is the source of a second problem that we call the velocity problem. A set of companies more mature in the innovation process told us that their challenge is different – this is the third problem that we call the batting average problem, i.e., the absence of adequate business impact of innovation.

“Ideas don’t move forward because they remain untried and untested. The solution to this is to encourage and support quick, low-cost experimentation to test assumptions related to need, technology, production, and commercialization.” Our 8 step framework seeks to address these three big problems. Building a pipeline involves getting more people across the organization to see innovation as a part of their job and to make it easy for them to share their ideas with the company. To facilitate this, we advocate 3 steps. The first is to lay the foundation for innovation. This is achieved by designing an idea management system that is aligned with the company’s culture, conducting periodic campaigns that create excitement and involvement around innovation, and training people in creative problem solving methods to help them unleash their creative potential. The second step is to create a “challenge book” – identify the problems on which the company should focus its innovation efforts. The third step is to encourage participation in innovation. Some of the ways of achieving this are identification and recognition of innovation role models; forming communities of practice; identifying and training innovation catalysts who can help people with ideas take these ideas forward; and judicious use of rewards and recognition to get people involved. Ideas don’t move forward because they remain untried and untested. The solution to this is to encourage and support quick, low-cost experimentation to test assumptions related to need,

49 THINKERS

technology, production, and commercialization. Once a proof-of-concept has been established, the barrier often shifts to the resources needed to take the innovation forward. Champions provide credibility and support and help overcome this barrier. Moving towards commercialization is helped by applying the principles of experimentation to the business model as well. Getting a bigger bang out of innovation – or enhancing the batting average as we call it – depends on two sets of actions. The first set is related to making the innovation successful, and consists of the use of innovation sandbox approaches to do intense experimentation within the tight expectations of the market; the use of platform approaches to help capture value from one innovation across multiple application areas; and sourcing ideas from outside the company (open innovation) to complement the company’s ideas and complete the innovation process. The second set relates to managing risk. Understanding the history of similar innovations, awareness of the baseline success rate of such innovations, and doing a premortem are some useful ways of managing the risk involved. Other approaches include a portfolio orientation and having a vigorous pipeline to avoid over-dependence on a single innovation. We found successful Indian companies practising several of the approaches we have described above. Bajaj Auto has been very effective at defining the right challenge book leading to market-dominating products such as the Pulsar. Titan Industries has been a leader in training employees to participate in the innovation process and launching annual campaigns. Cognizant Technology Solutions has also been strong on participation, and has trained an impressive “army” of catalysts. Tata Motors has used innovation sandboxes effectively, Infosys has a portfolio of effective innovation platforms, and Eureka Forbes has used open innovation to its advantage. Clearly where there is a will, Indian companies have found a way to build their innovative capabilities.

The concept of ‘Unity in Diversity’ outlined by our great leaders in the Constitution has lost meaning and relevance in today’s India.

By Nila Madhab Panda

51 “It is during tough times, when we have to make tough choices that we come face to face with who we truly are.” today, an independent filmmaker, social activist, entrepreneur, I have seen a lot of change in my immediate surroundings, and I can see for myself how my son cannot possibly relate to my childhood in this day and age. It becomes very conflicting for me to see everything we valued at the time, become redundant and obsolete like archiving old photographs in an album, rather than actually living those values. I guess even I have come so far, that a part of me cannot recognize my roots anymore. These changes are what make me wonder today, about what our country could become tomorrow. Of course, development is a natural process, but is that what you would call this? An unprecedented influx of new money and no value system to call our own, is this the idea behind ‘India Shining’ or ‘Bharat Nirmaan’? Who are Indians – who are we? More than two-third of the population that lives in abject poverty, compared with the 100-150 corporations that run this country? The ‘philanthropic’ bureaucrats and politicians, compared with the ‘altruistic’ urban elite artists and celebrities? It is this schizophrenic identity of India that continues to cause disintegration of our borders as well as our people. Are newer states and further fragmentation of our people the only answer we are left with? I doubt this is what our Constitution means when it says ‘Unity in Diversity’. Till date, there exists a fierce struggle for every basic human need, whether food, water or shelter. Yet another need that has cropped up in recent times, and is sure to increase over the next years, is the lack of farmland. There is neither enough green cover, nor enough fertile land to do anything about it, in this race to industrialize and privatize all resources. This is going to soon lead to a nationwide food crisis, in addition to the existing water crisis, both man-made. We are simply paying for our exploitation all these years. Imagine a country that was once known for its beauty and treasures, even called the ‘Golden Bird’ for its heritage and wealth, has been brought to utter ruin, first at the hands of colonialism, and ever

THINKERS

You often hear people confer over India divided into two factions – ‘Do Bharat’ – but I always maintain that India has three parts; yesterday, today and tomorrow. As a child, back in my village in Odisha, I saw my father and his generation struggle every day. We barely managed two meals a day for the entire family. There would be major calculations and second thoughts at every level, every decision, whether it was the marriage of my two sisters, or our education. I remember my father making a lot of tough choices, selling off land, my mother’s jewellery and what not, to make ends meet. But it is during tough times, when we have to make tough choices that we come face to face with who we truly are. And I like who we were back then. There was a rawness about us, an unabashed goodness and vulnerability that I miss today. We were people of small means, but I believe we had the judgment to know the important things in life. I’m not sure I can say the same about our present. We knew how to value things and people, resources – water, food, land – the earth, our environment, relationships. Today, we seem to be going off in a different direction. Not just wandering, but ostensibly lost. Joint families back then were a blessing. They might not have seemed like one, of course there were fights and altercations, but what it gave us was a sense of family, of belonging, a set of values instilled in us from day one. In fact, not just families, there was a sense of community among neighbours. Whether in our village or in small towns or even in small societies in the cities, there was a support system that helped us grow as individuals not in isolation, but together, as one. Now that is a country I can call my own – Unity in Diversity, isn’t that how our great leaders envisioned India postindependence? When one talks of Indian values and heritage, I believe this is what they mean. But alas, today, we are so far away from it that it seems like a mythical and strange, quite like stories from Mahabharata or Ramayana would seem to our future generations. When I tell my nine-year-old son stories from my village as a kid, he doesn’t believe them and you can’t blame him, because we have rid ourselves of even the faintest footprints of the past. That glorious India has disappeared within a span of the last 10-15 years, not even two decades. Whatever I have managed to make of myself

52 “Imagine a country that was once known for its beauty and treasures, even called the ‘Golden Bird’ for its heritage and wealth, has been brought to utter ruin, first at the hands of colonialism, and ever since, at the hands of our very own people.” since, at the hands of our very own people. What we continue to do, without fail, is depend on Westerners for all advice and counsel, instead of looking back at our own legacy. Look at our fashion, for example. We live in a country where every 100 kilometres, colour changes, landscape changes, people change, clothes change, but does any of that reflect in our fashion trends? It is a miserable state of affairs that we choose to look outward, towards the West once again, instead of inward for inspiration. It is true that India has developed by leaps and bounds as far as communication is concerned. We have come a long way in a short span of time, but once again, the implementation of that technology is disastrous. Today, there are more mobile phones than people in India. Isn’t that an interesting fact about a country with close to 300 million people going without food? India, the hunger capital of the world, home to about one-third of the world’s hungry poor. The world is laughing at us. Growing at a rate of 1.4 percent per year, India will soon beat China to become the country with the largest population in the world. But it is like somebody said – population is an asset. Look at how China has used it as a tool to create some of the largest manufacturing industries and production plants in existence, making the rest of the world completely dependent on their products. Look at some of the European countries – they are tired of giving retirement salary to its citizens. What India needs to realize is the power of its youth; a young population automatically means a more productive country, both intellectually and otherwise. What we need to concentrate on is giving them the right healthcare, the right education, and the right opportunities, and then nothing can stop this country from flourishing.

And of course, as mentioned before, the right value system. Like former President of India, Dr. APJ Abdul Kalam always maintains, we have become nuclearized living in this nuclear family structure; each person has become nuclearized from their own selves. A very dark issue that is born out of this indifference is child labour, which I have researched and worked on extensively. Findings prove that India will never be able to get out of this stranglehold, not because of desperate circumstances or poverty, but solely due to habit, clubbed with indifference. One, there is a hangover of oppression in our veins, we as a nation are too used to being on either side of it, it has become something we cannot do without anymore. Two, there is a major lack of respect for any human life in India, especially the two ends of the spectrum – children and old people. When we talk of our future, the dream of a new India, it is only our children who can make that dream come true. It is not about money or power or politics, but about going back to that value system that we once had and cherished from ancient times. As an Indian, what are we doing for our country? Going further down India’s schizophrenic lanes, we are a country of extremes. The richest man constructs one of the tallest buildings in the country to reside in the same city that houses one of the largest slums in the world. Both Delhi and Mumbai have become two of the richest cities with increasingly fast property rates that are at par with property rates in New York and Manhattan. All these statistics and facts have resulted in an India that is a living paradox for the world to watch, and maybe take down notes on ‘how not to do things’. It is the feudalistic system that we need to get rid of. Overcoming this great imbalance between the rich and the poor should be our first and foremost priority, and not the biggest brands like Starbucks, or the biggest chain like Walmart, or the biggest FDI like POSCO coming to the country. We need to realize the value of a person, a human life, and respect ourselves, be proud of our heritage, and not ape outsiders. Follow our own ancestors’ footsteps instead of others. Else, we will soon be heading towards a recession similar to the one experienced by the West, where we can see entire nations collapsing economically, through disasters, natural and man-made, in addition to constant wars outside and inside.

THINKERS

THE raj sisodia INTERVIEW By Amit Kapoor

55 “The phrase ‘conscious capitalism’ is a natural coming together of two great traditions of capitalism – American -the epitome of global capitalism and Indian, the fountain of consciousness.” is given to us and I realize that every truly great enterprise starts with a purpose and transcends with it and makes it an enduring company. This journey led us to non-profit conscious capitalism link that is finding global resonance, as the ideas are quite universal. The phrase “conscious capitalism” is a natural coming together of two great traditions of capitalism; American–the epitome of global capitalism and Indian, the fountain of consciousness. The combination is very powerful as there is real natural synergy in terms of India and the perspectives from the US. Countries like South Africa and Korea have responded very positively to this. How exactly are you looking at this synergy? There is a growing realization that there is a great wisdom that is embodied in the ancient traditions in general and which the world of modern business has tended to ignore or relegate to the sidelines. This was brought home most compellingly when I published “Firms of Endearment”. I have been studying the Bhagvad Gita for twenty years and most of the wisdom that we think there is today is actually been written about very deeply by some of the ancient sages. I believe in the theory of Karma and almost called this karma capitalism rather than conscious capitalism. There should be focus on community and actions without thinking of the outcome. Like wise the qualities of a conscious leader – and the idea of dharma or duty - are very powerful notions and resonate very well with audiences. During my talks in India, two common themes emerged – one was an advanced form of capitalism means we are still going through the growing pains of capitalism and this would take some time maybe 10-20 years when we are ready for this. We need to learn from mistakes of others rather than learning from our own mistakes. The second was that it was

THINKERS

Could you share a brief overview of your academic journey thus far, from The Rule of Three to 4 A’s of Marketing and now Conscious Capitalism? I did my engineering and MBA in India, my PhD in marketing from Columbia University and started teaching in 1985. My focus initially was on marketing of services, marketing of information technology and then evolved over time into areas such as marketing productivity and also strategy, which is where the Rule of Three book came in. I always had a broad perspective and was not focused on sub-disciplines within marketing. Looking at business gently; marketing is a function of efficiency and effectiveness. I did a lot of research projects on the image of marketing and the negative feeling that people have about marketing and came to the conclusion that not only we have problems of efficiency and productiveness but also in terms of public trust. This led to a project that was tentatively called “In Search of Marketing Excellence” which looked for companies that spent less money than their peers in marketing and still had higher levels of customer loyalty, trust and satisfaction. Most of the companies are opposite of that. Companies spend a lot of money but don’t have high level of customer loyalty and trust. So that project led us to a number of companies which we had to examine in more detail and we found that what was true of customers was true of employees. In other words the employees also had high level of loyalty and trust towards the suppliers and they had a strong deeply embedded presence within their communities. The other unique thing was that there was a sense of higher purpose that they were in business to do something beyond the ordinary industry. Also these companies had leaders who were more driven by their purpose and less so by power and personal enrichment. This led to the book “Firms of Endearment”. The other book was Rule of Three and the book on globalization, which was called “Tectonic Shift” that was published in 2006. I also developed a new framework for marketing called the 4 A’s of Marketing which came out in 2011 which addresses many problems that one faces in terms of efficiency and effectiveness. It is a way of making sure that our marketing efforts are creating value for customers and for companies and ultimately for society. I have been talking business for 20 years without even using the word “purpose” because the purpose

56 entirely consistent with institutional wisdom. In the future we expect lot of value and wisdom coming out of India, from scholars in India who will enrich our understanding of consciousness idea. Many western CEOs are into meditation and yoga which makes them highly effective leaders. There is a group of about thirty people from different walks of life who have come in as collaborators and set up “conscious collaborators” or “prasanga”. They view each other as travellers rather than competitors and this has a very important role to play. So many Indian academics who are in the US are using some of that wisdom in the work that they are doing with MNCs. Shared value suggests that corporates should share wealth while building enterprise and creating wealth for people around. How would you compare the two concepts of Shared Value and Conscious Capitalism? The shared value is consistent with conscious capitalism but I don’t think it goes as far. It really refers to a pragmatic approach that says if you want a license to operate in the future you cannot be creating prosperity for shareholders while you are creating consciousness for society. The western analogy is very practical as it says that we should figure out a way to do what is good for the society as that would be good for you. The deeper spiritual dimension is a part of conscious capitalism and in other words it provides a meaning and purpose in our lives. There is a whole new deeper dimension if you look at the difference between profit driven organizations and self-driven organizations. Conscious capitalism is having that real tangible sense of high purpose, which includes society as one of the staples. I think the spiritual dimension is meaning and purpose at an individual level, which is conscious capitalism and conscious businesses operate on the idea of love and care. There is an atmosphere of love and care and absence of fear. People can truly flower and bring out their creativity. When we operate out of fear we are in a survival mode. Take as example, General Electric which has the rule that bottom 10% people get fired every year. The fact is there is tremendous amount of fear within the organization as 30%-40% think they might get fired. Then they start to behave in defensive ways by not helping other people. I think

the emotional and the spiritual dimension are two important ways in which conscious capitalism is beyond the idea of shared value. How would you react to the exploitative behaviour of organizations? As a generalization, businesses operate with a narrow perspective and a lot of it has to do with the wholesale importing of the old American style of capitalism. We have got this paradoxical situation in a country where we are running into the same kinds of problems that other companies have faced. So we have to raise the consciousness about this to get people to see that this is not about sacrificing performance for the sake of these other things but its about aligning all the forces together so that you actually create a lot more value for everybody including westerners. We really have a significant challenge to change those mental models that people have about business. I think a separation of work from rest of life is really probably much more pronounced in India. Where people behave one way in mission of work and money and then in an entire other way in their personal lives. We can blend self-interest with the need to care. I think it’s a big part of the journey in India. We have all the wisdom that we need. How can the government learn from the principles of conscious capitalism and become a conscious government? I am working with a couple of co-authors on “Building of a Conscious Society” that’s about taking the ideas of conscious capitalism from the domain of business and broadening them to other sectors that touch society. So, we need to have a higher consciousness in all the sections of society whether government, private, civil society, non-profits or a public sector. Every sector needs to operate with a high level of consciousness for its specific role and purpose. I think the unfortunate legacy in India is the government, which we have inherited from the British. Earlier, the government was there not to serve but to control, especially the administrative, the Indian Civil Service which finally got changed to IAS but the emphasis remained on controlling and not serving. People who work in the government service really need to have that higher sense of purpose. I think one of the challenges that India faces is the socialist way of thinking. There is a certain

set of activities that the government must do like providing infrastructure, ensuring lawfulness, security etc. and also fulfilling the needs of the society as a whole. That’s where you find efficiency and effectiveness. I think in our system, the government does a lot of things and there is tremendous scope in efficiency and effectiveness. Along with this also comes tremendous corruption. All businesses can get corrupted in a country where government has too much of a role. It becomes a gatekeeper. You said that civil society is the third pillar for the whole system. How do you expect civil society to react? My advice to members of civil society who want to start non-profits is to start something which could generate some profits. If you can create a for-profit entity that can accomplish the same needs that you are trying to meet, then-in-then the business is sustainable and scalable in the long term. However there would still remain things that cannot churn out profit, therefore, they have to be done by real people who have a passion to serve. That’s where non-profits would continue to have a role. I think the key thing for non-profits is they have a sense of purpose but many of them don’t really operate in an efficient way. I think non-profits need to learn from the world of business. I also think there is a lot of potential for cross sector collaboration, through markets that require the coming together of for-profit businesses and non-profits. There is a lot of potential for creative collaboration across sectors. What are some of the critical changes you would recommend for the education sector? I do think that we also need to change our education sector. From an early age, one has to incorporate wisdom; the ideas that make for a meaningful life; technical skills. I do think we also need to teach the skills that constitute “systems thinking”.

It is shocking to see that such few people have an understanding of systems. Many institutes do not offer courses on systems and yet every problem that we deal with in the world is systems problem. When we don’t have the systems perspectives and start to think of it as a cause and effect problem then we ultimately end up with the opposite results. When we understand the whole system that applies to business, health care etc., we know every sector has tremendous need for systems thinking. That’s something that we need to do. Of course our business schools have an important role to play. I think India has a high number of consciousness b-schools like the “School of Inspired Leadership” in Gurgaon. We need to change the education system to incorporate training in these skills and there is still a long way to go.

THINKERS

“I think the emotional and the spiritual dimension are two important ways in which conscious capitalism is beyond the idea of shared value.”

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Moving The

ECONO By Susan Zielinski

There are many opportunities for India in the emerging global new mobility industry

ECONOMY

On first glance it may appear that India, with its growing and increasingly congested cities, sits on the demand side – not the solution or supply side – of the new mobility continuum. But on closer examination the situation may be quite the opposite. India may well be endowed with key elements of a robust new mobility industry cluster - both in the big business and the entrepreneurial space, and poised to accelerate the array of opportunities. Building on early global new mobility cluster work by Moving the Economy in 2002, and in the context of a Rockefeller Foundation-supported project by SMART at the University of Michigan, Dr. Amit Kapoor and Dr. Sankalp Sharma have recently explored emerging opportunities for India

“At its most basic level, a new mobility grid is simply a network of places across a community where transportation modes and services physically connect.” to play a key role in the new mobility industry cluster leadership. This brief offers a status update on the rapidly evolving global new mobility industry, related new business models (big and small), public-private innovation and new integration models, and new narratives and policy architectures around the future of transportation and the economy that supplies it. It then shifts the focus to innovation and leadership opportunities for Indian industry and enterprise. What does New Mobility Look Like? New Integration Models and Public-Private Innovation Imagine a day when from steps of your door, or even from inside your home or office, you could enter a vital network or grid of new mobility points, places that connect any of a range of transport amenities including buses, trains, streetcars, clean fuel taxis, auto rickshaws and car share or bike share vehicles, and in some cases, day care, satellite offices, cafes, shops and entertainment. At its most basic level, a new mobility grid is simply a network of places across a community where transportation modes and services physically connect. At the next level up, this is all brought together and enhanced by a telecommunications framework that offers real-time information on arrival and departure times and availability (either through kiosks at hubs or through mobile phones), as well as access to other information. The telecommunications framework also allows you to quickly and easily pay for these affordable modes and services with a single click or a wave past the reader through a mobile phone or a card or a kiosk. This way you can transfer seamlessly from one mode of transportation to the other, informed of schedules and options as you go, using the best mode for the purpose, gaining access to car share at one hub, and dropping it off at another to pick up a waiting bus or train.

THINKERS

A multitude of new services, products, technologies, and infrastructures have been bubbling up over the past decade or so to supply the next generation of transportation, for an increasingly complex and urbanizing world. This evolution is highly diversified; information technology (IT)-driven; and service-oriented, creating unique business opportunities (both for local application and export) in sectors as wide ranging as telecommunications, manufacturing, energy, utilities, service and retail, tourism, real estate, logistics, urban design, infrastructure and more. This emerging “new mobility market” is already generating new meta-opportunities to provide seamless door-to-door transportation systems for moving people, moving goods, and moving less; customized to just about any region or community.

62 In practice, it’s much like a customized communications portfolio, in which laptop or tablet connects to desktop, camera, TV, printer, search engine, and more, all talking to each other seamlessly regardless of brand. It doesn’t mean abandoning your desktop computer—it just means merging it with a more diverse and connected portfolio, allowing you to choose the best option for each task. For the user, it’s easy, convenient, affordable and accessible. For government leaders, this begins to address social, environmental, and economic goals, fostering livability, social equity, green industry and green jobs. See “Connecting and Transforming the Future of Transportation” : http://deepblue.lib. umich.edu/handle/2027.42/85216 What New Business Models Will Support the Transformation? Some of the greatest benefits of the burgeoning New Mobility will be economic. For example, established players have already begun to mine the opportunities offered by the fast-growing nextgeneration transportation market: witness the urban mobility initiative of Ford Motor Company, as well as smart city businesses of Ashok Leyland, Infosys, Cisco Systems, IBM, Siemens, and more. Meanwhile innovative small enterprises are already beginning to grow up around the new mobility ecosystem. For example, companies that offer fractional- use services such as car share, bike share, and customized shuttles, as well as mobile-phone journey-planning applications and multimodal fare-payment technologies, are finding innovative ways to profit from the new-mobility grid. Examples of such innovative enterprise in India include Red Bus, Eco-Cabs Dial A Rickshaw, G-Auto, SMV Wheels Pvt. Ltd., Transparent Chennai, Ideophone, Yo Bykes, Jan Bas, and more. Taken together, as industry clusters that cater to the emerging global transportation market are nurtured, they can enhance regional competitiveness and spur job creation. For this to be most effective, a culture of “Public Private Innovation” is emerging in some of the more successful regions, engaging and convening public sector, private sector, and non profit entities early and often to refine the new mobility use cases as they benefit people, cities and economies. As urban complexity and traffic volume increases, the “surface area” between the major movers in the new

mobility space needs to increase in support of multifaceted solutions that meet a range of needs. New Narratives, New Policy Landscapes, and New Supporting Platforms Recent studies have begun to show a slight decline in interest in car ownership by the younger generation known as “millenials” – aged 18 – 35. While the jury is still out, this trend is attributed to a number of social and economic factors including a preference for IT over automobile ownership. As such a new narrative (with related business opportunity) seems to be arising featuring a next generation that seeks access to mobility without the necessity of ownership. At the same time, technology and innovation have begun to outpace the capacity to make policies that apply to them. As such new policy landscapes are emerging to be more nimble and dynamic, with less emphasis on heavy and capital intensive approaches to infrastructure, decision making, and financing. In some cases frameworks and incentives aim to reduce or replace detailed regulation with collaborative, multi-stakeholder, integrated, and regionally customized solutions. New public sector roles are in some cases opening up to include convening, incenting, open system framework-setting, and the building of big data platforms and professional networks that serve not only transportation users, but also transportation leaders and new mobility businesses and enterprises alike. Through the Rockefeller Foundationsupported work on catalyzing the new mobility in cities, the Mobi Prize and platform was developed to crowdsource, profile, link and support new mobility entrepreneurs worldwide (see www.mobiprize. com). New skills and capacities are also needed specific to implementing integrated systems and innovating sustainable and exportable solutions. Outlook for India: The Way Ahead in India and Beyond According to Dr. Amit Kapoor and Dr. Sankalp Sharma of the Competitiveness Institute: “One could say that the quality of life plus efficiency of travel would define the future of travel in India” They recently developed a white paper focused specifally on India entitled “State of the New Mobility Industry in India” to support understanding of the growth and trajectory of the

urban mobility clusters in India and the shape of things to come in the future. In a nutshell they found that: “.. the opportunities exist on many fronts be it mobility solutions for urban poor (whose volumes are massive) or IT solutions for the mobility platforms (GIS/ GPS for tracking MRTS system) to having an IT blueprint of a city. The urban mobility clusters would also create a huge number of jobs, which would promote a more robust and inclusive economic growth.” The white paper also offers important context for proactive industry cluster development in India, highlighting the following points: • I ndia has significant metropolitanization in addition to rapid urbanization • t here are many newer smaller cities that are growing faster • t here is a growing number and size of cities • t echnology is driving change • s olutions need to be customized • t here is an increase in smaller cars, longer weekend drives, demand for transit, more transport options • h igh productivity losses are due to transportation • t he city cannot afford to cater to private cars and two wheelers • m uch needs to be done if public transport (and other options) are to play a significant role • s pending on transport is driven by political prestige • t here is a lack of adequate policies for urban transportation • t he Indian auto industry is “glocal”, powerful, and evolving and needs to be integrated into new mobility industry cluster development • s ervice orientation and the power of IT in transportation is increasing

• t he new urban mobility could serve a range of classes of consumers • a combination of awareness, marketing, technology and policy could help scale emerging innovative enterprises • enabling infrastructure is needed • there is a need for skilling the labour force for integrated project operations & implementation • testing facilities are needed • IT and new transit solutions are having an effect • the future of the new mobility cluster in India is exciting In summary, the white paper says: “India has been at the forefront of technology development (at least since 1993 for this specific industry) and has been able to keep down the costs and deliver superior performance to customers. At present urban mobility is severely hampered in India due to improper planning and development. Investments in transportation technology will hold the key for a new urban transportation cluster. Sustainable technology for transportation could show the way for other countries. If India focuses only on fossil fuel technologies the movement away from these would have significant barriers, which will be difficult to break … The agglomeration factors for a cluster arises primarily from knowledge spillovers and lead to enhanced productivity and faster innovation cycles, which help the region grow and prosper. The primary focus is to enhance design and innovation capacity to achieve international competitiveness”

THINKERS

“The opportunities exist on many fronts be it mobility solutions for urban poor (whose volumes are massive) or IT solutions for the mobility platforms (GIS/ GPS for tracking MRTS system) to having an IT blueprint of a city.”

Fast Expanding Markets Anewneeded economiclens inthe21stcentury

By Terence Tse, Mark Esposito This seminal paper on FEM was presented for the European Business Review in March 2013. FEM does not define business opportunities by geographical boundaries but by places where there is a vast variety of opportunites.

Revenue growth and not just cost cutting But before looking into the future, let us go back in time. From the end of the dot-com crash in 2001 to the beginning of the financial crisis in the first decade of this century, markets blossomed and new business opportunities emerged around the world. We could be and certainly felt enveloped by prosperity, which could have led to over-spending and over-consumption – which in turn fueled more new business opportunities than ever before. The fires of commerce raged on. We – the general public and businesses – found it easy to part with our money, and just as easy

to borrow the money that we didn’t have. Overstretching was the name of the game for many households as well as businesses. It was a tremendously prosperous period for everyone. But it was also a grand house of cards, potentially exposed to a drastic fall. And now, just a few short years later, the “golden decade” has already been consigned to history. Given the financial meltdown and the subsequent economic crisis, we now live in a world in which people have no choice but to start (belatedly) exercising financial discipline. Additionally, many companies and businesses have shifted their focus away from profitability to simply ensuring their economic survival, primarily by cutting costs. Additionally, like every fashionable trend, the concept of “insourcing” back to the countries that pioneered outsourcing in the previous decades is becoming an increasingly adopted practice. But are these the best tactics for businesses to take in order for the general economy and the business themselves to turnaround?

“Thinking along the lines of FEM frees our minds to wave off the restrictions and boundaries of geographies or industries, in order to find new ways of achieving economic growth.” We believe that the answer is no. We think it is far more important for firms to concentrate on top-line growth rather than on lowering costs. While cost cutting can lead to an immediate increase in profit, an expansion of the sources of revenue will lead to far more sustainable advantages in the future. A company cannot cost-cut its way to prosperity. New markets and new market opportunities must be found in paths less traveled. While the current economic outlook remains bleak, we do not believe that the situation is all “doom and gloom.” We understand why some companies have adopted a policy of retrenchment in response to a real economic recession. In difficult times, firms usually tend to favor business processes

THINKERS

Where will we find growth opportunities, the kind that will take our businesses to the next level? The usual and popular choice of terms we use when looking at current markets and potential ones often include “developed markets” and “emerging economies”, which have inspired new golden age of race to the new treasure, hidden in the capacities of these markets. But we find these terms limiting, perhaps even deficient and definitely distractive in most part. Is a term really that important, you may ask? We think it’s vital. Here’s why. The terms themselves focus only on markets at the country level. But what if you’ve got a rapidly growing market opportunity that exists on a supranational, national, regional, industry, cluster or even firm level? We found that the ability of a term to address a new economic complexity is missing and for too many years we have simplified the premises of the emerging economy within a confined use of a term. To take these different levels of analysis into account, we propose a new term called “FastExpanding Markets” (FEM). These markets are not restricted to traditionally defined boundaries, such as geographical, industrial or firm boundaries. It is possible to argue that the term is too broad to pinpoint real economic drivers and determinants of growth, but we believe that it is also this unique characteristic that allows managers and policy makers to find new sources of wealth and prosperity. Thinking along the lines of FEM frees our minds to wave off the restrictions and boundaries of geographies or industries, in order to find new ways of achieving economic growth. As a positive side effect, FEM liberate us from a rigid classification of countries performances and rankings, which speak little about the real state of things at the market level.

66 focused on “re-engineering,” “streamlining,” “re-structuring,” re-organizing,” “optimizing” “downsizing,” and “outsourcing” in order to maintain profitability. Indeed, they are (much) easier to pursue because of their linearity than revenue growth, which requires growing existing markets or discovering new ones. But cutting and simultaneously growing are not easy feats. And one more thing: we were steadfast in our view that cost reduction is a short-term solution that temporarily boosts earnings. It produces few benefits in the long run because it relies on a strict accountancy perspective: costs can only be slashed to a certain point without causing unintended consequences. For example, in order to cut costs, many companies have moved production to countries with less-expensive labor. This, however, does not necessarily lower costs. Lower and lost labor efficiency alone might cancel out anticipated savings. Similarly, reducing costs for parts can have counter-productive effects: cheap parts usually result in an increase in costs associated with quality, service, operations and overhead. These are all causes for concerns because in economically difficult times customer retention becomes even more important. Our bottom line: it is far more paramount for businesses to concentrate on top-line growth than on lowering costs. Fast-Expanding Markets We know that new ways of lifting sales in tough times have been widely discussed in the past, but we think the answer lies looking at markets in a different way. To identify potential opportunities for top line revenue we propose looking at “Fast-Expanding Markets” (FEM), that we want to position as a new economic lens of intelligence for the understanding of markets in the 21st century. Put simply, “Fast-Expanding Markets” refers to any rapidly growing opportunity in which the market is the focal point. Such a market may exist at the supranational, national, regional, industrial, cluster, sector, corporate or product level. FEM are everywhere. At times, they grow intuitively, while at other times they grow counter-intuitively, so that the application of traditional market and economic theories is often inappropriate, which place in forecast and predictability a quintessential part of how value is generated. FEM are distinct from some of the previous concepts related to new

markets and new market spaces due to the fact that FEM represent potentially extremely lucrative markets that many people are unaware of or have overlooked. To better understand FEM, we conducted extensive pilot research in an attempt to identify markets that could expand by more than 15% per year over a period of three to five years. This time span enabled us to exclude distortions arising from speculative behavior, which can be recursive in several prime and equity markets. To our surprise, the markets that we identified as “fast” and “expanding” were much more “fast and furious” than we initially assumed. For example, the bio-stoves market in Kenya has been growing by at least 300% annually for the last three years, with growth peaking at 500% in 2012. This discovery led us to acknowledge that not only does the environment benefit from the growth of this market but also entire territories, which are spread out across the country. Similarly, in Uganda, money transfers made through SMS-based technologies totaled USD 17.5 billion in the last five years, with annual growth peaks ranging from 200% to 290%. This highlights an opportunity to turn the cancerous nature of an informal economy into something formal. We also investigated whether a form of FEM could be found in agriculture. We found that, for example, Bolivia’s economy has been supported by the rapid increase in demand for quinoa, which resulted in an annual growth rate of 26% for the last three to five years. This FEM was not only inspired by technological innovation but also by a truly territorial emergence across a number of organised economic complexities. Even better than this, FEM do not follow any traditional reflection of the GDP rankings, as a market could grow exponentially rapidly over our cycle of three to five years, literally anywhere in the world. Put in perspective, FEM do not behave through the traditional phases of economic development, from resource-based economies, all the way to innovation driven. They tend to generate acceleration beyond the current standing of the economy in which they operate, so they are unpredictable in most of its behavioral emergences. Why FEM is a better term to describe new growth opportunities Why have we not looked at potential markets this way before? We believe that a combination of

Everest Capital (2009) “The End of Emerging Markets,” November, http://evcapan.com/documents/TheEndofEmergingMarkets.pdf, accessed on 7 November 2011. 1

“Fast-Expanding Markets” refers to any rapidly growing opportunity in which the market is the focal point. Such a market may exist at the supranational, national, regional, industrial, cluster, sector, corporate or product level. FEM are everywhere.” experiencing marginal growth, at best. “Emerging” countries have experienced above-average, if not substantial, GDP growth in recent years, although part of this has been the result of starting from a lower base. Clearly, a new term is needed to describe growth markets, hence FEM. The fact that The Economist uses the term “emerging markets” while it simultaneously calls for a halt in the use of the term highlights the genuine need for new term to describe up-and-coming markets. It is a good thing that we came along! But perhaps the greatest problem with the term “emerging markets” is that as long as markets are maintained as the critical unit of analysis, at the country level, it is easy to miss growth markets in countries with lackluster overall economic performance. If we only conduct analyses at the macroeconomic level, many growing business opportunities that have yet to contribute substantially to a country’s GDP will go unnoticed. It is exactly the identification of markets that are “off the radar” that create businesses advantages for companies. For example, many researchers have viewed Japan as a languishing economy for the past two decades. Its traditional businesses are facing evermounting cut-throat competition from China and Korea, and it ranks low in competitiveness.2 From this perspective, it may be tempting to view Japan as a nation in continuous decline with few growth prospects and to discount it as a potential source of new opportunities. However, this view reflects a focus on the country’s macroeconomic situations. 2 According to the IMD World Competitiveness Yearbook (2011), Japan ranks twenty-sixth, putting it behind Qatar (8), Malaysia (16), China (19) and Korea (22), and just marginally above Thailand (27), the UAE (28), Chile (29) and India (32).

THINKERS

limitations, inherent in the existing terminologies and the prevalent conservative views on growth, play important roles. Thus far, people have associated such expressions as “emerging markets,” “emerging economies,” “frontier markets,” and “developing markets/economies” with growth opportunities. In our view, such concepts suffer from various shortcomings when describing new growth opportunities. The term “emerging markets” traditionally refers to countries or regions with inadequate economic welfare and structures – but it has become misleading. The label is also applied to those economies that have already “emerged.” Confused? Here’s an example. Until recently, The Economist viewed Singapore and Hong Kong as emerging economies, and the FTSE labels them as “advanced emerging markets.” But according to the World Bank, the purchasing-power-adjusted per capita GDPs of Singapore and Hong Kong in 2010 were USD 43,867 and USD 31,758, respectively. On this basis, Singapore exceeded Japan, Germany, France and the UK, and both economies ranked above Spain, Israel and Portugal. In contrast, numerous “advanced”, “emerged” and “developed” economies, such as Greece, Spain and Italy, are on the verge of economic contraction. They might even be described as “submerging” markets! Moreover, the stigma once attached to the concept of “emerging markets” is really no longer valid. Emerging countries tend to be seen as possessing small equity markets with levels of liquidity and price fluctuations typical of inefficient capital markets. In reality, however, equity markets in some “emerging” countries are sufficiently sizeable, with liquidity and volatility levels that match those of their more “advanced” counterparts. At the same time, the level of corporate governance in various “emerging markets” is moving close to, if not surpassing, levels seen in developed markets.1 As the distinction between “emerging” and “developed” markets blurs, the applicability of these descriptions becomes increasingly limited. It is no wonder then that The Economist called for the term “emerging markets” to be rendered obsolete. “Emerging” markets are the engines of the world economy, while “developed” economies are

68 If we look deep enough, pockets of exceptional growth can be observed. Whereas Japan’s consumer-electronic industry may appear to have passed its prime, its pop-culture industry has been expanding in the global market. For instance, the popularity of Japanese comics, or manga, has been booming in the US for the past decade, even though this genre is culturally distinct from mainstream US comics.3 The same is true of “cosplay”, a sub-culture originating from Japan in which people dress in costumes and take on the roles of various characters from animated series or computer games. In Japan alone, the cosplay costume industry grew by 5% in 2009 to around USD $500M.4 Cosplay is becoming an important part of Japan’s pop-culture exports. Indeed, a “World Cosplay Summit”, which was sponsored in part by Japan’s Trade Ministry and publicized by Japan’s Ministry of Foreign Affairs, has been held annually for nine years. This example illustrates that new opportunities exist at more granular levels, even in countries with stagnant or faltering economies. We can discover a new configuration for how markets emerge by focusing on the pockets of growth that develop in a much more spontaneous manner than what we have been trained to anticipate. Pockets are spontaneous in nature, rebellious in behavior, and expanding at a rate that would impress in terms of traditional indicators and analysis. Pockets of growth are cells of FEMs in that they are embryonic transporters of new business opportunities that are often untapped and undetected. Some may suggest that the term FEM is too broad to be useful. But we believe that it is exactly this characteristic that allows the term to encompass a vast variety of business opportunities and new sources of wealth, which could truly shape new seeds of prosperity. It is only by broadening our horizons that we can break away from the limitations imposed by such popular terms as “emerging”, “developing/developed” or “frontier” markets. Moreover, some may argue that FEMs are 3 Matsui, Takashi (2009) “The Diffusion of Foreign Cultural Products: The Case Analysis of Japanese Comics (Manga) Market in the US“, Working Paper #37, Center for Arts and Cultural Policy Studies, Princeton University, Spring. 4 The Economist (2011) “Cosplay with me,” 10 August, http://www. economist.com/blogs/schumpeter/2011/08/japanese-pop-culture, accessed on 9 November 2011.

nothing more than conjectures, as forecasting naturally entails disappointments. This may be true – admittedly, not every FEM will deliver promising results. However, analyses of the FEM phenomena should help us prepare for the future. In a sense, these markets are similar to a compass. While they may not provide enough information to pinpoint exactly what lies in the future, they can generate opportunities that honor real economy as the agency of development. It is a brave new world where our global economy is concerned and it begs for a new term to help us evolve with it.

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Wisdom at Work Moving from Smart to Wise Leadership

Book Excerpt From Smart to Wise: Acting and Leading with Wisdom By Prasad Kaipa and Navi Radjou In this section, the authors talk about the need for leaders to exhibit wisdom, and differentiate between smartness and wisdom.

Soft skills and smart leaders According to a 2004 survey done by Nigel Andrews and Laura Tyson1, CEOs want to hire managers who not only boast strong functional skills but also soft skills—i.e., integrity, perseverance, intuition, passion, self-awareness, creativity, and desire to learn—which are often not given sufficient attention in management schools. In the complex global environment that we live in, these soft leadership skills are becoming paramount for success. Unfortunately, in terms of knowledge, skills and attitude, there is growing gap between what will be demanded of future leaders to effectively navigate complexity and what business schools are teaching today. Take majority of current MBA programs: they continue to produce smart leaders. These smart leaders have highly developed analytical capabilities but have gaps in soft skills profile. They are like athletes who over-exercise specific muscles in their body, rather than developing their entire musculature. As a result of this skewed leadership education—which gets reinforced through early experiences in organizations—these smart leaders tend to: a) over-rely on analytical skills and logic—or smartness—to make rational decisions at the expense of intuition and empathy, which are becoming valuable leadership qualities Andrews, N. and Tyson, L. D. “The Upwardly Global MBA.” strategy + business, Issue 36, Autumn 2004. 1

“The more flexible and dynamic your state of mind, the greater access you would enjoy to wisdom—and the more successful you will be in a complex business setting.” in today’s unpredictable and interconnected global economy; b) focus, more often than not, primarily on optimizing shareholder value—and driving business growth—without sufficient consideration of other stakeholders and sustainability issues (business, environment and culture); c) excel at managing people and resources in organizations—but not at “leading from behind” and building grassroots coalitions (and ad-hoc networks) that embody the fluidity of social media networks. But, this smart leadership model can’t fully equip leaders with the broad range of capabilities they need to cope with the challenges lying ahead in the global business environment. The need of the hour is for a well-rounded, holistic leadership model that can effectively help organizations navigate complexity. What the world desperately needs now is wise leadership. Wise Leadership: Leading with Practical Wisdom What is wise leadership? It consists in “playing in the middle of the court,” to quote Warren Buffett, and not too close to the boundary lines.2 It is about cultivating a resting place within you, where you can introspect before arriving at your next decision. It is about anticipating and responding to external events pro-actively instead of reacting to them in a knee-jerk fashion. It is about setting high standards both for yourself and others and operating out of “values that create value” for your shareholders as well as the society at large. In an increasingly complex world, we need more wise leaders who can help navigate organizations through turbulent times. Leaders who can flex their state of mind gain access to something far more valuable—and 2 How Warren Buffet’s protégé David Sokol lost his way Business Week, April 28, 2011 http://www.businessweek.com/magazine/content/11_19/ b4227050988120.htm

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Why do we need wisdom at work? Complexity—magnified by globalization and information technology—is fundamentally changing the business context in which organizations operate. Such changes in business context intimidate most leaders who tend to respond to—or rather counter—these changes by reusing past success formulas. They get overwhelmed by complexity and hunker down and are unable to expose their vulnerability and ask for help: they prefer to fight or flee complexity rather than surrender to it—and learn from it. Current leadership approaches are no longer sufficient in today’s interconnected social networking era. We need an integral—or wise— leadership approach that embraces complexity— rather than shying away from it—and that gives leaders the flexibility and fluidity to think and find solutions. Let us explore specifically what new competencies leaders need to effectively cope with—and thrive in—complex settings.

72 rewarding—in today’s complex environment than smartness: wisdom. What is wisdom? Wisdom is a critical capacity that gives you the discernment to choose appropriate actions and make sound decisions in response to a swiftly changing external context. The more flexible and dynamic your state of mind, the greater access you would enjoy to wisdom—and the more successful you will be in a complex business setting. There are many preconceived notions about wisdom—which we will address in this article. Here are ten popular “myths” about wisdom: • Wisdom can only be discussed by wise people: Should a world class food critic or a ‘foodie’ be a world class cook? You can experience others wisdom and recognize wise leaders without being one. In fact, we encourage you to listen, discuss and read about wisdom and wise leaders and engage in learning best practices from them. • Wisdom only comes with age/experience: Wisdom is perceived as good wine that matures well with age. While many wise people matured in age and experience before they were called wise, there are others who rapidly develop their wisdom at a young age and in a short time. Young entrepreneurs and executives—such as Mark Zuckerberg, founder of Facebook—have demonstrated wisdom by making some remarkable contributions to their organizations and societies. • People are born with wisdom and wisdom cannot be developed: We have seen more examples of people who developed wisdom than being born with it. • Wisdom is a luxury (because it takes time to develop) that we can’t afford in our busy work lives: We argue that the time taken for developing wisdom is mostly for getting rid of old habits and unlearning what is not wise! • Wisdom is not practical: If there is one thing we learned about wisdom, it is pragmatic and grounded in action more than thought. While wisdom gives you long-term perspective it can also help you with your everyday decisions. • Wise people are detached from society: Wisdom might be connected more closely with noble purpose and common good. That does not mean that wise people are detached. In fact, many wise leaders—such as Mahatma Gandhi and Martin Luther King—were actively engaged in the society

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that they helped transform for the better but they were detached from the fruits of their actions (i.e., they didn’t seek personal glory). As such, they practiced what one might call detached engagement. Wisdom cannot exist without spirituality: We have come across many wise people who are atheists, agnostics and have not had any spiritual grounding who rely on their “practical wisdom”— which Coleridge calls the “uncommon common sense”—to make farsighted decisions and take enlightened actions. We also noted that this “practical wisdom” gets enriched when informed and grounded in spirituality. Only a few “chosen” people have access to wisdom: While it appears that way because there are very few names that come to our mind when one is asked to identify wise leaders. Still, we found that all of us can have access to wisdom within—although many of us are unwilling to invest energy and time to discover and connect with our inner-wisdom. Smart people cannot be wise and wise people cannot be smart: Smartness and wisdom are not mutually exclusive. In fact, smart people can have a quicker access to wisdom if they put in the same intensity and energy that they invest in staying smart. Wisdom helps elevate smartness to the next level by enriching/fortifying it with valuable skills and attributes—such as context sensitivity, humility, openness, discernment, and commitment to action. Can everybody become wise? It is unlikely though hypothetically, it is possible. It is just like losing weight – everybody can by watching what they eat and doing appropriate exercise regularly—but most people don’t succeed or even if they do, they don’t sustain the weight loss. Let us explore what wisdom is in more detail.

Source of Wisdom Wisdom has been a subject of study for philosophers for thousands of years. (Philosophy is, interestingly, defined as the “love of wisdom”.) In the West, Plato and Socrates are well known philosophers who explored the topic of wisdom while Confucius, Adi Sankara (founder of the Advaita (Non-dual) Vedanta school of philosophy), Vyasa (the author of Mahabharata — a Hindu epic that is the second longest in the world) are eminent minds who

addressed the topic of wisdom in the East. For instance, the Greek Aristotelian tradition deems wisdom as the mother of all virtues—and Confucius had famously said: “By three methods, we may learn wisdom: First, by reflection, which is noblest; Second, by imitation, which is easiest; and third by experience, which is the bitterest.” Likewise, wisdom has also been intimately connected with all major religions: Judaism, Hinduism, Buddhism, Christianity, Islam, and Taoism all refer to wisdom in more ways than one. When the religious perspectives (world view or dogma depending on whom you ask) translate into spiritual values and ethics (such as the Ten Commandments or Manu Dharma Shastra of Hindu religion) and personal daily practices (rituals, recommended behaviors), you have a structure for practicing religion. This religious wisdom is bounded by the religion’s worldview. For example, according to Hindu worldview, we have multiple lives and according to many other religions, we only have one life. Similarly, in one religion, heaven is the highest goal whereas for another religion, selfknowledge could be the highest goal. For a third religion, it could be removing suffering for all living beings. With such different worldviews, principles and practices sometimes we bump against the worldviews that prevent us from adopting wisdom principles and practices from different religions. For example, meditation or yoga could be a taboo for some religious followers even though they might offer practical help for their body or mind. Spiritual wisdom has broader reach because practitioners might mix and match principles and practices from different traditions and work with wise teachers to help their journeys. In this article, however, which is steeped in the business context, we will be covering what we call practical wisdom.

Aristole. Nicomachean Ethics. Book 6.

Practical Wisdom Aristotle called practical wisdom Phronesis—and differentiated it from the philosophical wisdom, which he called Sophia.3 Aristotle, in his book Nicomachean Ethics, describes phronesis as “figuring out the right way to do the right thing in a particular circumstance, with a particular person at a particular time.” While Aristotle identified many virtues like loyalty, self-control, courage, fairness, generosity, perseverance, integrity, kindness, truthfulness, the master virtue (arête) was practical wisdom.4 Practical wisdom, according to Nonaka and Takeuchi, Japanese concept of toku—a virtue that leads a person to pursue the common good and moral excellence as a way of life.5 In Hindu tradition, this practical wisdom could be equated to, in Sanskrit, yukta-ayukta vichakshana—which means having the intelligence to discern what is right and appropriate and what is wrong and inappropriate in taking action for the larger good. While knowledge is connected with static intellect (leading to smartness), wisdom is connected to dynamic intelligence (leading to context sensitivity). In other words, practical wisdom is about taking actions, making judgments (using discernment), and fulfilling a noble purpose (perspective). In Bhagavad Gita, a Hindu religious text is considered to be a book of practical wisdom for Hindus and wise leadership is meant to be balancing the extremes and acting from an equanimity state of mind.6 Through our research and consulting work, we have identified some key attributes of practical wisdom: • It is grounded in action and lived experience • It gives you context sensitivity—so you can make decisions with discernment and take “appropriate” action • It gives you the intuitive intelligence to modulate your responses dynamically to changing circumstances rather than reacting to circumstances in a knee-jerk fashion or “as per the book” • It is unique to you: you don’t learn about practical wisdom by reading about it in books or observing other leaders who embody and practice it. 4 Ibit, page 6. And Aristotle, Nicomachean Ethics translated by martin Oswald (1962) 5 I. Nonaka and H. Takeuchi, “Big Idea: The Wise Leader” HBR May 2011 6 Bhagavad Gita – chapter II:55-72. Meaning is loosely translated from Sanskrit text by the authors

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“Smartness is grounded in application of intelligence for self interest while practical wisdom is grounded in taking ethical action for the larger good.”

74 In fact, developing practical wisdom requires you to unlearn the conditioned responses and practice it using your own counter intuitive logic that you develop iteratively. • I t can’t be gained overnight: you need to practice it diligently and with self-discipline. • I t is about having a noble purpose and taking action for the larger good. Enlightened selfinterest and self-less interest are sometimes guiding forces that help a leader develop practical wisdom.

universally applicable. The wisdom gained by practicing those universal values without being limited by the absolute perspective of any individual religion could be called spiritual wisdom. Practical wisdom aligns, when matured, with spiritual wisdom. Practical wisdom begins subjectively with personal benefit as the driving force whereas spiritual wisdom begins objectively with common good as the driving force. Values serve as the bridge between the spiritual wisdom and practical wisdom (Figure 2).

At this stage, it’s worth briefly exploring the differences—and complementarity—between religious wisdom and practical wisdom. The causality of religious wisdom is top down: the religious perspective is objective and absolute and gives way to values and practices (rituals) that are consistent with the absolute perspective. The religious perspective is objective and immutable. On the other hand, the causality of practical wisdom is bottom up – when personal experiences and individual actions are observed consciously one recognizes patterns and derive guiding principles empirically. When these principles and experiences are interpreted and discernment is applied, one could evolve a new worldview (Figure 1). This worldview is context-sensitive and subjective and after testing it over time and experiencing success with it, it evolves into a wisdom logic.

Figure 2. Values bridge spiritual wisdom and practical wisdom

Figure 1. Practical Wisdom vs. Religious Wisdom

Practical Wisdom

Perspectives

(subjective and context-sensitive)

Values

Worldview

Practices

Religious Wisdom

Principles

Experiences

(objective and absolute)

It’s important to clarify that religious wisdom and practical wisdom are not contradictory in essence. Indeed, there are values and principles that are common and shared across all religions and are

Common Goods

Spiritual Wisdom

Personal Benefit

Values

Practical Wisdom

As a smart leader, once you let practical wisdom guide your actions, you will begin to appreciate the different states of mind that help you deal with complexity. You will learn to flex your “wisdom muscle”—rather than being stuck in the smart leadership mode all the time. Wise Leadership: The Antidote to Complexity Smartness is grounded in application of intelligence for self interest while practical wisdom is grounded in taking ethical action for the larger good. When you become sensitive to the changing context, you begin to see that smartness has multiple shades and two extreme positions of smartness represent two significantly different contexts – functional knowledge and expertise (functional smartness) and business knowledge and expertise (business smartness). Practical wisdom is being able to take advantage of the entire spectrum of smartness from functional end to business end. Instead of being stuck in one kind of smart leadership, you gain access to all of smartness and depending on the context, you bring forth appropriate intelligence with discernment to act and grow in practical wisdom. By consciously cultivating and continually gaining

In that sense, wise leadership is leveraging smartness for the greater good through reflection, introspection and ethical clarity (in contrast with smart leadership, which is the application of smartness and action in service of personal gain.) The wisdom anchor helps us to shift focus from using our smartness for our own benefit with a zero sum mindset to using it for creating new value for a higher purpose. We can reach this middle ground between the smartness extremes through reflection and introspection, which are gateways to find ethical clarity. In the context of complex world, the journey from smart to wise is the movement from a rational and logical way of focusing on what is tangible and personally beneficial, to finding an authentic way of paying attention to intangibles such as shared values and ethics for the greater good. Those intangibles allow us to avoid attachment to either edge, and build a capacity to leverage the entire spectrum of smartness. To ignore the intangibles is to miss the invisible middle, which leaves us stuck with one kind of smartness or the other, but without discovering the middle ground of wise leadership. The journey to wise leadership is not just about discovering the middle ground and staying there, but using that middle ground as an anchor or fulcrum to dynamically move between the two edges of the spectrum.

Conclusion In this article, we made a case that existing models of leadership are insufficient for dealing with issues of complexity, globalization and technology in the world place. Religious wisdom approaches from faith-based traditions do not appeal to business leaders as much as practical wisdom approaches. We believe that wise leadership of 21st century will bridge the needs of today with values and practices of ancient wisdom, and wisdom at work is the need of the hour.

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access to practical wisdom, leaders will be able to better address complexity: they will be able to better exercise the leadership capability that is available to all of us. In our book, we highlight six key leadership capabilities that are critical to cope with complexity—and we describe and exemplify how leaders use these capabilities differently depending on the state of mind they are operating from – with wisdom or with smartness: In particular, we will show how practical wisdom gives leaders the: • a bility to gain unified perspective so they make the most out of diversity • h umility and integrity to leverage interconnectivity more effectively • s tability to deal with velocity • c larity to deal with ambiguity • r esourceful creativity to deal with resource scarcity.

India needs a Thinking Culture! By Anurag Batra

77 “Thinkers are original. Thinkers contribute a fresh angle or a fresh perspective or a never thought of before approach to, fundamental aspects of our lives and humanity.” to think tanks? The answers to both will be bleak at best. We have to stop looking at think tanks and thinkers as irritants or people challenging the status quo. We have to make thinkers the starting point of our plans, our ideation, and our futuristic goals. When will that happen in India? In the land of Buddha and the land of Aryabhata. Whichever way you look at it, we need more thinkers in India. When I think of thinkers, I think of the following words: “...the thoughtful excitement of lonely rambles, of gardening, and of other like occupations, where the mind has leisure to must during the healthful activity of the body, with the fresh and wakeful breezes blowing round it...” said Augustus William Hare and Julius Charles Hare, Guesses at Truth, by Two Brothers, 1827 Are institutions and authorities afraid of thinkers in India? In my view involving thinkers in governance would lead to better governance. “Men fear thought as they fear nothing else on earth, more than ruin, more even than death. Thought is subversive and revolutionary, destructive and terrible, thought is merciless to privilege, established institutions, and comfortable habit. Thought looks into the pit of hell and is not afraid. Thought is great and swift and free, the light of the world, and the chief glory of man.” said Bertrand Russell Some of the thinkers quoted were great doers also, they visualised and they achieved. It is said, “Thinkers think and doers do. But until the thinkers do and the doers think, progress will be just another word in the already overburdened vocabulary of the talkers who talk”. The Thinkers50 is a celebration of ideas, of action led movements, and individuals whose thoughts will shape the future of India.

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“You and I are not what we eat; we are what we think. “ said Walter Anderson in The Confidence Course, 1997 When I was in business school almost 20 years ago, there was this saying or shall I say quip, “Those who can do, do and become managers and entrepreneurs, those who cannot do become teachers, and those who cannot do and cannot teach become consultants .” Can we say the same about thinkers ? What are the similarities between thinkers and consultants ? When I was part of the management consulting team of my business school the joke about consultants was, consultants are people whom when you ask the time, they look at your watch, tell you the time and take the watch away. Thinkers are not the same. Thinkers are original. Thinkers contribute a fresh angle or a fresh perspective or a never thought of before approach to, fundamental aspects of our lives and humanity. Thinkers dare I say, change the world. We in India do not encourage thinkers and the thinking culture because to sustain thinkers we need to give them an environment where they can blossom by challenging existing paradigms; where they are left alone and allowed to experiment. Thinkers are like R&D heads at pharma companies; sometimes it takes them a lot of time to find their eureka moments. When you think of a thinker, you think of an erudite person, with a beard, sipping tea and reclining in his chair or leaning forward on his table and in a “thought mudra”. India is facing so many dilemmas; only sustained, systematic thinking followed by action can make sure India and Indians realise their dreams. The words of Voltaire have never rung more true, than they do today: No problem can withstand the assault of sustained thinking. The Indian government and our great institutions have to encourage the thinking culture. What is a thinking culture ? In my view the thinking culture is where very exceptionally talented professionals from various walks of life are left to do their own thing without expecting much. It’s like drug discovery. The thinking culture nurtures contrarian and sometimes impractical ideas. The thinking culture encourages individuals to think of ideas that may not be practical at first glance. Let’s do a reality check. How many think tanks exist in India? Do we institutionally provide funding

THE JAGDISH SHETH INTERVIEW By Amit Kapoor

What propelled you to move from consumer behavior to economics? In 1968, I was a visiting professor at IIM Calcutta and taught international marketing in addition to consumer psychology. While teaching international marketing I was exposed to managerial issues as compared to consumer issues. So, the principles of economics in marketing began to shift towards managerial marketing. Immediately after that followed managerial economics. In my thesis work, beside behavioral, I also expanded into multimedia statistics and created a whole wave. In a mutual economy, we began to understand that in large organizations customer reaches were more important than customer acquisition. So I started looking at the whole notion of relationship marketing. My theory was again parallel to the theory of hierarchy but more on behavioral perspective. As transition economies were becoming a dominant domain, relationship became more critical. What was the idea when you moved into working on Chindia? My giving into Chindia Rising was almost at the nation level and also more policy oriented as compared to behavioral. The book “Commanding

“The tectonic shift about how a discipline would shift its paradigm is not a linear model, not even an exponential model, but a curvilinear model wherein new ideas are born and there are bunch of people who challenge the thoughts.” Heights” which talks about future of emerging markets inspired me and then I went into the Chindia Rising state. Even today I believe that resource advantage is a very cheap theory, instead we have to look at resource advantage that the nation can create. What was the biggest challenge that you faced? My main challenge was to motivate the academic community to shift their thinking as academics tend to be lot more orthodox – they are the orthodoxy of thoughts. The tectonic shift about how a discipline would shift its paradigm is not a linear model, not even an exponential model, but a curvilinear model wherein new ideas are born and there are bunch of people who challenge the thoughts. If we challenge the new classical economics towards behavioral economics, the editors of the journals don’t accept the thinking as the reviewers are all trained with the previous thinking. So this is one of the major challenges that I found as to how to push the traditional journal to accept this framework. Right now emerging markets is one, which I am propagating heavily and very well accepted by known universities. Overall, I would say, the challenges have not been as many as the opportunities that I have got. I became an administrator in 1971 -72. Because of lack of leadership I learnt quite a lot of administrative aspects. In the academic study I became like a director - more like a department head. There are two things that are hugely affecting academics. One as you say is orthodoxy of thought and the other is how to manage the faculty or resources. How do you react to this in the Indian context? I would make comments at three levels. At the

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Congratulations for being on the T50 list! Could you share the broad ideas behind your academic work over the years? My academic journey was accidental. I went to America to do my MBA in production management. There I was exposed to the theory of hierarchy of needs. My academic career primarily began in studying psychology of consumers and also physiological aspects, which is called behavioral economics. I began with this concept 50 years ago and it has evolved with time. The most definitive theory called the “Harvard shift theory of consumer behavior” became the foundation in the marketing discipline. It actually became a paradigm shift because rather than taking a market perspective; the customer’s perspective was taken. In economics, the consumer must make choices and maximize the utility for the price they pay. This theory also says that consumers become loyal to a brand and this becomes a habit rather than a result of cognitive thinking. So this model is very much based on several factors of psychology that are integrated into a common framework.

80 macro level I was an advisor to the ministry of education, to bring about higher education reforms from a policy perspective. We all agree that there is a need for a perfect system but there was the AICTE. Apparently there was a policy document that went to Sam Pitroda, Chairman of the National Knowledge Commission and the PMO. So, from this you can see that you cannot change the orthodoxy. The private universities, the deemed universities and all educational institutes register with AICTE. The second loophole was that the AICTE, in the legislative process, anchored everything to the management process. So for instance, a one-year program was there instead of a two year program and there was nobody in charge of regulation. The third issue is Section 25 company wherein the dividends are not distributed and this is a huge loophole in AICTE legislation. At the university level I find there are four approaches. The first approach is to start something fresh new and try to break the traditional legacy of an IIM or IIT. It’s hard to change the faculty and which is also mentioned in my book “The Self Destructive Habits of Good Companies”. This book came out on a one to one meeting with the CEO when he asked the question – “Why good companies fail?” It took me 10 years of research to come out with this book. The most common is denial of new realities, arrogance, and compliance. In many ways traditional, well-respected universities will probably become self-destructive. The dramatic transformation is already taking place. The faculty is becoming competitive, as they don’t need an institution anymore. They do independent work and come out with enormous research whether in science, technology, medical and now in management. How would you look at India on the aspect of denial, arrogance and complacency? And how would you really define the India growth story? If we have to map India into those seven bad habits, it is endowed with four of them. The first and biggest one is internal thought wars. In other words one ministry against the other ministry. We are not aligned amongst ourselves towards a common goal or a common approach. Internal thought wars always happen within larger institutions. Second one is denial of new realities. I think India as a nation is in a denial stage. I also believe that

India after the quick success of 1991 transformation became very arrogant. They thought they were bigger than life and the media unfortunately amplified this idea. India went through an accidental success and was not able to rationalize its success. Most success happens accidentally. People are at the right place at the right time, but you can’t say to the world I am just a lucky guy – nobody would bet their money on you then. He has to rationalize – why he succeeded – he has to have an explanation why he succeeded. I think India went through that. The last one is complacency. There is no sense of urgency in India at all. I think all that I can map is competitive myopia. We are always comparing ourselves to China all the time without being aware of other competitors which may even be coming from advanced countries. The last one is competence dependence. I found that whatever one is very good at, when that becomes irrelevant we are already trapped into that, and our competency itself becomes our liability. So that’s the one bad habit I am watching about India. Whatever we are competent in now is keeping us behind to go where we need to go. Where do you see India becoming complacent? The complacency is happening because of the sudden success of the educated class. There is a new generational shift and the young educated class do not work as hard as their fathers did and do not work on weekends as they have to maintain worklife balance. The instinct for survival for livelihood is moving away, except in the poor class. Today a young person is not bothered even if he leaves his job in four days. Though his father might have worked in a company with a very clear sense of obligation since he would be the only breadwinner of the family. So that’s a part of complacency coming in. Complacency also comes in terms of energy. If I feel good - like with success I would splurge and be focused about what I want to do. So there are components of complacency. As an academic, people do not want to hear criticism in this country. How would you overcome that? It is very painful to see that we as a nation are very judgmental as people. We can make a comment on somebody with a political correctness. But if somebody else makes a comment on us we get very angry and agitated.

So you do agree that societal value would have to be created by companies across the board? Absolutely. The reason is the government is the enterprise and does not allow the private sector to nationalize. So government enterprise provide economic livelihood through employment in rail roads, the telephone companies and telegraph which are all government enterprises. Second thing was social investment, which means wherever I get my income from I need to subsidize the poor. Third measure was economic development in other words how do I lift people from poverty through government policy/resources/budget and the fourth measure is defence – i.e how do I protect my nation. Most governments are finding that they cannot do all four anymore because of the bandwidth / resources etc. Defense is non negotiable so we begin to exit other endeavors. So, NGO’s were created to do the social service. The charitable activities done by the government like subsidizing education etc were given to the foundations. The industry people know how to leverage it and they are passing on their wealth to society and doing a social contribution. Government does not know how to leverage it. Lot of foundations has given billion of dollars to education and health. The third thing is to privatize everything. There are two roles that the government would have in near future - defense and domestic security. Government needs to be a policy maker rather than a political model. The current policy is one of compliance, one of watchdog. This changes the

notion of policy in the govt thinking, as most of them are trained in the traditional economic thinking. To nurture capitalism in the positive way the governance mechanism should be inclined towards the citizens; otherwise revolts would be there. Though people want to participate in government, the politicians have not allowed them to participate, instead they have allowed them to represent them. After representation, the citizen feels that he is not participating. So Government should encourage citizen participation and this would make the government look very different 50 years from now.

“Most success happens accidentally. People are at the right place at the right time, but you can’t say to the world I am just a lucky guy – nobody would bet their money on you then.” How will principles of capitalism change? The principles of capitalism will change and it will happen either through external compliance; reservation; or internal self-enlightenment as capitalism becomes self enlightened eventually. Selfenlightenment is a better theory of capitalism rather than self-interest. The self-enlightenment is that the huge disparity of wages/salaries in organizations is in our hands to control. From the lowest paid category - from the managerial class to the help line supervisor to the highest paid person CEO or chairman the whole range should no more than 20 times. Similarly, in the factory, the person who works in the factory from the plant manager level the range should not be more than 10 times. We will learn to establish our own jurisdiction to say that if we increase the range of salaries / compensations it would be creating immediate revolt within the organizations. The people will sense lack of equity. The rich are getting richer within the company and the poor are getting poorer. So that’s one-way capitalism won’t respond when one company does it quite often. I believe that this kind of imitative behavior created by outside consultants on how you should compensate is one way in which capitalism would become self enlightened.

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How would you look at India going through the whole idea of social inclusion and the idea of societal value? I think that this is a worldwide movement wherein the senior most management is convinced that if we don’t have a healthy society we cannot have a healthy corporation. I think the shared value article that Michael Porter wrote has become the way of thinking now. I am very grateful because you do need leaders like Michael Porter who have the credibility and access to government leaders. I think you need people like Ram Charan to validate, legitimate and propagate ideas. My book in 2007 called the “Sense of Endearment” with Raj Sisodia has now transformed into second book called “Conscious Capitalism”. This whole movement of conscious capitalism very much matches Porter’s idea of the shared value .

82 Also the shareholder would hold the corporation responsible to do good for the community/ suppliers who are involved in value creation. It’s a shared value kind of concept. We encourage corporations not to give out as charity but whenever we create any value, x% only goes to the shareholder of 100% and y% will be redistributed value. It is basically the same as value redistribution; what governments do with taxes and the monetary policy system. But here it is done by corporations through its own distribution mechanisms. What is your idea of India and how do you think we can achieve it? I can tell you one punch line, “The rest of the world needs India in many ways more than India even thinks.” Rest of the world thinks that India is a very strategic nation. Not from the traditional view or the colonial view of resource rich continent in agriculture, animals, human, natural resources. I don’t think they are looking at India from a resource exploitation/ access point of view. India is a market and as a market it is so important in the global architecture of competitors that they have to focus on it whether they like it or not.

Converting Adversity Into Opportunity

By Navi Radjou

Jugaad is the gutsy art of spotting opportunities in the most adverse circumstances and resourcefully improvising solutions using simple means.

85 most adverse circumstances and resourcefully improvising solutions using simple means. Jugaad is about seeing the glass always half-full. Jugaad Innovators: The Modern Day Alchemists Jugaad is practised by almost all Indians in their daily lives to make the most of what they have. Jugaad applications include finding new shrewd uses for everyday objects—Indian kitchens are replete with empty soft drink or pickle bottles reused as containers for water, spices, or lentils— or inventing new utilitarian applications and ingenious solutions with everyday objects, like using cellphones to make “missed calls”.

“The jugaad innovators we studied all hail from different cultures and social and professional backgrounds. Yet they all share one unique quality: their uncanny ability to “make lemonade with any lemon” they are given.” The entrepreneurial spirit of jugaad is not limited to India. It is widely practised across all emerging economies such as China, Africa, and Brazil, where resilient entrepreneurs are also pursuing growth in difficult circumstances. The Brazilians have their own word for this resourceful approach: jeitinho. The Chinese call it zizhu chuangxin, or indigenous innovation (in contrast with shanzhai, meaning copycat versions of foreign-made products). The Kenyans refer to it as jua kali. In our book Jugaad Innovation, my co-authors and I delved into the frugal and flexible mindset of thousands of ingenious entrepreneurs and enterprises around the world practicing jugaad to creatively address critical socio-economic issues in their communities. In Kenya, for instance, entrepreneurs have invented a device that enables bicycle riders to charge their cellphones while pedalling. In the Philippines, Illac Diaz invented A Litre of Light—a recycled plastic bottle containing bleach-processed water that refracts sunlight, producing the equivalent of a 55-watt light bulb. This product—which costs only $1—is a boon for

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We are entering an Age of Complexity manifested by intensified economic unpredictability, tectonic demographic and technological shifts, and accelerating scarcity of resources. Adversity has become the new normal. The good news is that we humans are typically good at coping with adversity. From a biological perspective, humans are pre-programmed to react predictably to adverse—and even hostile—situations thanks to our well-perfected “fight-or-flight” instinct. Sadly, however, this preconditioned “fight-or-flight” reaction fails to produce optimal responses in today’s complex world. When we face an intractable problem many of us tend to throw in the towel quickly or keep on fighting the issue wishing it will vanish. Now visualize this: what if you could transcend this binary “fight-or-flight” reaction and uncover a “third way”—a new outlook that empowers you to see adversity as an opportunity for personal and collective growth? Adversity will suddenly morph into your ally—an ally that can ignite your ingenuity and drive you to the unearthing of revolutionary solutions that yield amazing value for yourselves and for humanity. You will become a modernday alchemist—one who can literally transmute adversity into opportunity. Such alchemists do exist—and many of them live in emerging markets like India. Take Kanak Das, a young man who lives in Morigaon, a remote village in the northeast Indian state of Assam. Das got sick of riding his bicycle on poor village roads filled with potholes and bumps. Assume you were an R&D engineer who works for Ford, BMW, or Toyota trying to design a car that can ride smoothly on such potholes-filled roads: your “fight” instinct would have told you to design better shock absorbers to overcome the bumps. But Das didn’t “fight” the bumps: instead, he used this constraint to his advantage by equipping his bicycle with a makeshift device that converts the shocks it gets into acceleration energy—enabling his bicycle to run faster on bumpy roads! Das literally transformed adversity into an opportunity to innovate and extract value from the very problem he confronted. Das epitomizes the spirit of jugaad. Jugaad is a Hindi word meaning an innovative fix or an improvised solution born from ingenuity and cleverness. Jugaad is, quite simply, a unique way of thinking and acting in response to challenges; it is the gutsy art of spotting opportunities in the

86 scores of Filipino families living in makeshift houses in off-the-grid shantytowns. And in Lima, Peru (a country with 98% humidity that receives only 1 inch of rain a year), the local University of Engineering and Technology (UTEC) has designed advertising billboards that can generate up to 100 litres of potable water out of humid air each day. The jugaad innovators we studied all hail from different cultures and social and professional backgrounds. Yet they all share one unique quality: their uncanny ability to “make lemonade with any lemon” they are given. They are resilient entrepreneurs who overcame tremendous difficulties to invent ingenious solutions to vexing issues afflicting our societies. Like magicians, they conjured up these innovative solutions out of thin air—using meager resources. Just as an alchemist can convert low-value metal into high-value gold, these frugal innovators can “do more with less”: they can create lot more value using far fewer resources. What Makes Jugaad Innovators— And Their Solutions—Unique? Despite their diversity, all the jugaad innovators—be they entrepreneurs or corporate leaders—we studied in India and other emerging markets all have the following unique personality traits in common: They are empathetic They recognize that their fellow citizens are suffering from adverse circumstances (e.g., poor access to healthcare or education services) and strive to lessen their pain. It is this compassion for other beings that sparks their own passion to discovering pertinent solutions to issues afflicting others. For instance, Jane Chen, a Stanford MBA, was deeply moved by the fact that 20 million babies are born prematurely or with a low birth weight each year worldwide, and four million of them die, most in developing nations, because their parents can’t afford to maintain them in baby incubators, which are too expensive. To address this issue, Jane co-founded Embrace, which makes inexpensive portable infant warmers that lowincome mothers in rural India, China, and Africa can use to keep their premature babies warm, and thus save their lives. They are driven by a higher purpose Jugaad innovators are not driven by fame or money. Rather, they are motivated by the aspiration to build

“a better world”. This higher purpose provides them great ethical clarity and serves as an innercompass that guides all their decisions and actions. For instance, brothers Abhishek Sinha and Abhinav Sinha cofounded Eko to make financial services affordable and accessible to the 600 million Indians who can’t avail of banking services. Eko enables lowincome people to open a savings account in a kirana (neighborhood retail store) and then merely use a mobile phone to deposit/withdraw cash as well as send/receive money.

“Renault-Nissan’s CEO Carlos Ghosn famously coined the term “frugal engineering” in 2006 to describe the Indian engineers’ unique ability to conceive high-quality solutions faster, better, and cheaper.” They are nonconformists Jugaad innovators boldly challenge the statusquo by relentlessly posing the question: “Why not?”. They exhibit what Samuel Taylor Coleridge calls “uncommon common sense”: they develop counterintuitive solutions that flout conventional wisdom or even turn it on its head. For example, when Ratan Tata announced his decision to produce the Nano industry experts and media analysts scoffed at the idea of making a $2,000 car, for which they believed there would be no market. But the maverick Tata stuck to his counterintuitive decision and he ended up creating not only a breakthrough car but he also shaped an entire new market for subcompact cars that Western automakers are jumping into lately. They are ingeniously resourceful Just like MacGyver (the famed TV action hero who can escape from any predicament by improvising solutions using just his Swiss Army knife) jugaad innovators display great ingenuity in the face of challenges. They leverage their (inner) resourcefulness when they have no external resources to tap into. They embody the frugal “bricoleurs” whom the legendary anthropologist Claude Lévi-Strauss lauded in his seminal book La

They are adaptable Jugaad innovators possess an agile mindset that enables them to rapidly shift course and reach their objectives by trying out various approaches. They are not wedded to any specific approach or tool to solving problems. Their sense of purpose is steadfast (“Make the world a better place”) but their method to serving that purpose is dynamic and constantly evolving. Hence, they are resilient and can “reinvent” themselves continually. For example, Harish Hande founded SELCO in 1995 to debunk the myths that poor people can’t afford solar energy and cannot maintain sustainable technologies. Conservative banks refused to fund his startup and he initially struggled to convince rural consumers to switch from cheap-but-polluting kerosene to solar systems. But Hande applied his flexible thinking to improvise an ingenious solution that involves a grassroots network of micro-entrepreneurs who charge, install, maintain, and collect payment for solar lighting systems that they rent to people in remote villages. These personality traits of jugaad innovators also pervade the clever solutions they conceive. All their astute solutions (products or services) share the following attributes: • They deliver more value at less cost: Their ingenious solutions are low-cost (or much less expensive than alternative solutions in the market) and yet they offer much greater value for users. As a result, these solutions deliver “more value for less”. For instance, the Embrace portable infant warmer costs less than $200—or 1% of the cost of Western baby incubators priced at $20,000. More importantly, mothers can now hold against them their premature babies— dramatically boosting their chances of survival. That’s real value! • They are simple to use and maintain: The solutions are designed to be incredibly simple to use and maintain, thus lowering their “adoption

barriers” for a larger number of users. For example, Eko’s mobile banking and payment services can be accessed using even the most basic mobile handset. This ease of use is a key success factor of Eko’s service which today counts 2 million clients. • They are inclusive: The solutions make critical products and services available and accessible to “marginal segments” of the society—e.g., lowincome people, the elderly, ethnic minorities— who traditionally couldn’t afford or access these products/services due their high cost or high complexity. For example, SELCO’s solar lighting systems are now used by over 125,000 rural households across India (SELCO aims to serve 200,00 households by 2013). • They are sustainable: The solutions are both environmentally and socially sustainable. First, these solutions are eco-friendly and minimize use of natural resources. Second, these solutions contribute to the social sustainability of local communities by spawning new “ecosystems” that create new jobs, etc.—thus catalyzing a virtuous cycle of enduring socio-economic growth. For instance, Mansukh Prajapati involves many women in his village in Gujarat to produce his MittiCools, thus creating gainful employment for local community members. The Rise of Jugaad Innovation In The West The developed world, like emerging economies, is increasingly facing its own problems in areas such as healthcare, education, finance, and community development. Cash-strapped Western governments, however, are unable to deal with these challenges on their own. In this context, a new wave of flexibleminded jugaad innovators in the US and Europe are emerging. These nonconformists are turning the conventional practices of many industries upside down, and in the process creating affordable and sustainable products and services for more citizens. For instance, Sal Khan founded Khan Academy to democratize access to education and make learning more fun for kids. He has created over 4,000 video tutorials for math, sciences, and engineering that are freely available on YouTube and are today viewed by over 6 million users a month. Similarly, Erik Douglas co-founded CellScope, a startup that converts your smartphone into a medical diagnosis tool so you can do ear, throat, and skin exams at home without having to visit an expensive lab. CellScope

THINKERS

Pensée Sauvage. According to Lévi-Strauss, a bricoleur taps into existing resources to quickly solve a problem—unlike an engineer who goes searching for the best resources available to design a perfect solution. Mansukh Prajapati is one such bricoleur: a potter by training, he created MittiCool, the world’s “greenest” fridge made entirely of clay that consumes no electricity and is 100% biodegradable.

88 is a boon for the 50 million Americans who lack medical insurance. And to meet the needs of the 68 million Americans today who are unbanked or underbanked, Danny Shader founded PayNearMe, which enables US citizens without credit/debit cards to pay for online transactions by cash in local convenient stores. Universities too are joining this jugaad innovation movement in the West. Several higher education institutions in the US and Europe are training a new breed of engineers and managers to design next-generation products and services that can deal with scarcity in a frugal and sustainable manner. For instance, Stanford runs a very popular multidisciplinary program called Entrepreneurial Design for Extreme Affordability. And MIT, with funding from Ratan Tata, recently launched the Tata Center for Technology and Design to train future generation of engineers and business leaders to create affordable technologies and inclusive systems that meet the needs of resource-constrained communities in the developing world. Finally, several vanguard Western corporations— helmed by visionary CEOs—are pioneering the adoption of jugaad innovation. The most notable of them is the global carmaker Renault-Nissan, whose CEO Carlos Ghosn famously coined the term “frugal engineering” in 2006 to describe the Indian engineers’ unique ability to conceive high-quality solutions faster, better, and cheaper. Ghosn is a big admirer of the jugaad mindset. As he puts it: “In the West, when we face huge problems and we lack resources, we tend to give up (too) easily. Jugaad is about never giving up!” In 2012, he sent Gérard Detourbet, a senior French executive in charge of Renault’s entry-level car business, to India. From his new R&D center in Chennai, Detourbet will be designing and producing several vehicles—all built on the ultra-low-cost “A-Entry” platform—that will first be launched in India and then marketed in Brazil and South Africa. There is no doubt that when Detourbet returns to Renault’s headquarters in Paris, he will carry with him the flexible jugaad mindset he acquired in India. They are nonconformists: Jugaad innovators boldly challenge the status-quo by relentlessly posing the question: “Why not?”. They exhibit what Samuel Taylor Coleridge calls “uncommon common sense”: they develop counterintuitive solutions that flout conventional wisdom or even turn it on its head. For example, when Ratan Tata announced

his decision to produce the Nano industry experts and media analysts scoffed at the idea of making a $2,000 car, for which they believed there would be no market. But the maverick Tata stuck to his counterintuitive decision and he ended up creating not only a breakthrough car but he also shaped an entire new market for sub-compact cars that Western automakers are jumping into lately. They are ingeniously resourceful: Just like MacGyver (the famed TV action hero who can escape from any predicament by improvising solutions using just his Swiss Army knife) jugaad innovators display great ingenuity in the face of challenges. They leverage their (inner) resourcefulness when they have no external resources to tap into. They embody the frugal “bricoleurs” whom the legendary anthropologist Claude Lévi-Strauss lauded in his seminal book La Pensée Sauvage. According to Lévi-Strauss, a bricoleur taps into existing resources to quickly solve a problem—unlike an engineer who goes searching for the best resources available to design a perfect solution. Mansukh Prajapati is one such bricoleur: a potter by training, he created MittiCool, the world’s “greenest” fridge made entirely of clay that consumes no electricity and is 100% biodegradable. Ultimately, the ingenious solutions devised by these audacious jugaad innovators—our modernday alchemists—in emerging markets as well as in developed economies stand out not because they are “clever” but because they bring hope to millions around the world. In today’s morose economic climate and challenging social context, these alchemists help transmute pessimism into optimism—and that, by itself, is priceless. These ingenious alchemists—and their frugal and agile jugaad mindset—not only represent the hope for humanity but they also help restore our faith in humanity. This article is partially adapted from the book Jugaad Innovation: A Frugal And Flexible Approach To Innovation For The 21st Century (Random House India, 2012).

Negative

S ocietal

I mpact

Positive

In the Indian context, the word jugaad carries a slightly negative connotation for some. That’s because the jugaad mindset can also be applied to find an ingenious way to either game an existing system or even violate it. But by and large, the entrepreneurial spirit of jugaad is practiced by millions in India and in other emerging markets simply to improvise completely legitimate solutions to everyday problems. The figure below captures the three ways jugaad can be used based on the nobility of the intent (Sankalpa in Sanskrit) of the person using jugaad and the societal impact (Karma in Sanskrit) created by his/her actions:

Improve existing system or create new system • Nano • Mobile Banking • Distributed solar energy Game or circumvent existing system • Missed calls • Electricity theft

Abuse or violate existing system • Bribery • Nepotism (e.g. Commonwealth Games) Selfish

N O B I L I T Y

O F

I N T E N T

Altruistic

Figure 1. The Various Uses Of Jugaad In Figure 1 (depicted above), the red zone depicts the “negative” use of jugaad by unwise leaders—especially in political and business circles—for selfish purpose: they abuse or violate existing systems (think of the Commonwealth Games debacle), hence generating negative societal impact. The blue zone represents the “neutral” use of jugaad by someone who tries to “game” or circumvent an existing system—like in the case of “missed calls”—but that person is not ill-intentioned. In this context, a person may even create a jugaad solution that seemingly is illegitimate but do so with the motivation to help others (e.g., a rural youth siphoning off electricity from power lines to bring energy to his off-the-grid village) Finally, the green zone represents the “positive” use of jugaad by ingenious entrepreneurs inventing totally

legitimate solutions that improve deficient existing systems (in healthcare, energy, education, retail, finance)—or aim to create entirely new systems that are highly efficient and bring greater benefits to a large number of people (think of the Nano car, mobile banking applications like Eko, or distributed solar energy systems like SELCO). The Buddhists have a saying: “A knife in the hands of a thief is life-threatening; but the same knife in the hands of a surgeon is life-giving.” Jugaad is like that knife. It’s merely a tool. What matters is why use the tool—and how wisely you use it. My book Jugaad Innovation deals with wise entrepreneurs and firms worldwide who are using the jugaad mindset with a noble intent to make positive societal impact on a large scale.

THINKERS

SIDEBAR: THE WISE AND UNWISE USE OF JUGAAD

A Call to Action By Ravi Venkatesan

It is one thing to survive in the chaos called India, but by not correcting its condition of dishevelment, India will never succeed in realizing its potential.

91 and attract FDI, it certainly needs to make India a less hostile place. But my point is that even in a tough market and a slowing economy, it is possible at the firm level to carve out a very successful business. And this is what companies like Samsung have shown. However I wasn’t prepared for one question which really flummoxed me; it came from a wise former US Ambassador to India. “So what you are saying in effect is that India will continue to be a lower middle income country, like much of Africa and South America instead of someday catching up with Europe or even China; isn’t that a rather tragic scenario for a country with such amazing potential?”, he asked.

“Companies that have done spectacularly well in India such as Suzuki, Unilever, JCB, Cummins, Nokia, Standard Chartered, Hyundai or Schneider Electric have learned to thrive in the midst of chaos and having succeeded in India, they find that they have developed the capabilities, mindset, talent and innovative products and business models that help them succeed elsewhere.” The question stopped me in my tracks and has rankled ever since. It’s fine to dish out advice to companies on how to prosper despite the chaos but what about India itself? As an Indian, I had sort of come to believe the rhetoric of Incredible India. I had come to believe that despite all our many challenges we would stumble our way forward-if not to great power status, at least to the status of a developed nation. Rather naively, I had thought this might happen even in my lifetime, but as I reflected on the question and on the events playing out in our country, it struck me that the good Ambassador had in fact asked the most relevant question. It’s not about our potential but rather how much of it we are likely to realize. As a CEO who has run large companies, I have

THINKERS

Three months on the road, promoting my new book in America, Singapore and Europe have been an extraordinarily eye-opening experience. In this book, called “Conquering the Chaos; Win in India, Win Everywhere”, I look at why most MNCs have failed to make India an important market and what might be the consequences of this. Most MNCs in India are part of a “1 percent club” where India contributes an irrelevant 1% or less of their global profits. They tend to blame this on the challenges of doing business in India. A key point in the book is that chaotic India is in fact highly representative of most emerging markets. Corruption, bureaucracy, policy uncertainty and volatility, harassment by the taxman, inadequate protection for IP, poor infrastructure etc. are not unique to India alone; they are characteristics of all emerging markets and MNCs can’t escape this chaos in Brazil, Indonesia or Nigeria as well. Companies that have done spectacularly well in India such as Suzuki, Unilever, JCB, Cummins, Nokia, Standard Chartered, Hyundai or Schneider Electric have learned to thrive in the midst of chaos and having succeeded in India, they find that they have developed the capabilities, mindset, talent and innovative products and business models that help them succeed elsewhere. This is why the subtitle of the book is “Win in India, win everywhere”. These companies are not waiting for India to get better or look like a more developed market; they are instead adapting themselves and their business model to the realities of India and being richly rewarded for this. I contrast their approach with that of companies like Apple or Caterpillar who hesitate to commit to India until things get better allowing competitors like Samsung or JCB to eat their lunch. While India is a very challenging market, the bigger challenge for many MNCs is their own headquarters mindset. Such companies will find the going to be tough not just in India but all emerging markets. Since our economy is in such dire straits and our reputation as a rising nation so tarnished, I was fully prepared for a lot of pushback and criticism of my rather contrarian views. In fact, I was surprised by the fairly ready acceptance of my thesis. The only pushback I got was, “Are you letting the government of India off the hook too easily?” It is certainly true that India is one of the toughest places in the world for a business (ranked 132 out of 200 countries according to the World Bank). If the government wants to jump start the economy

92 learned that sustained performance has less to do with ambition, opportunities, or resources; long term performance is in fact the outcome of strategic choices, organizational capabilities, company culture, and above all, leadership. Over time, I have realized that this is true not just for a company, but for any organization and perhaps even for a country. And this framework highlights India’s problems. For a start, we cannot agree on ideas let alone strategies for anything. What should our policy be towards Pakistan? Towards China? Towards America? What is our strategy for economic development? How are we going to balance growth and the need for more equitable distribution? Is globalization positive for India or not? Are we going to welcome foreign companies and the investments, technology, and jobs that they bring or are we going to remain distrustful of them? Indeed are we going to be welcoming of businessmen and entrepreneurs or go back to Nehruvian distrust that crushed our economic potential? How are basic healthcare and education going to be delivered? How much should be left to the private sector? How are we going to improve our infrastructure? On any number of fundamental questions, there isn’t coherent thinking; we simply muddle along. The issue of institutional capabilities is even more troubling. We could have all the ambition and even strategic clarity but without strong institutional capabilities, nothing can happen. “It’s like trying to go to the moon on a bullock cart; no matter how much you flog the bulls, you won’t get there.” says spiritual leader Jaggi Vasudev. We have to upgrade our capability from bullock cart to spacecraft. Many of our institutions are still in the 19t century; perhaps some like the ICS were stronger then than today. Harvard economist Lant Pritchett points to rampant absenteeism, indifference, incompetence and corruption in many of our institutions and suggests India is a ‘flailing state”. How can we reasonably expect anything to be implemented when our implementation capabilities are so compromised? Historian Ram Guha points to the deliberate and systematic erosion of many of our critical institutions–law enforcement, judiciary–and posits that instability may be India’s destiny. How about culture? It is easy to blame the current situation on politicians and babus, but what about us? While there are indeed incredible aspects to our culture, there are some things that are truly shameful. Even Dr B.R. Ambedkar, the

“I have learned that sustained performance has less to do with ambition, opportunities, or resources; long term performance is in fact the outcome of strategic choices, organizational capabilities, company culture, and above all, leadership.” father of our Constitution, recognized that we are a fundamentally undemocratic and amoral culture. Take corruption. It’s very easy to blame the person asking for the bribe, but what about the person paying it? Why pay a fine for running a traffic light when you can get away by offering Rs 100? Why suffer a delay of some months getting a property transaction registered when you can pay a bribe and get it done today? Most of us have become so used to corruption that we fail to see much wrong with it. The whole pond has now got poisoned and it is hard to find a single sphere of activity that isn’t highly corrupt-business, civil society, education, even religion. No act is now so brazen as to be truly shocking. Lack of concern for the commons, evident from the condition of our public spaces, for instance, is another striking feature. I couldn’t help but notice that in New York City, every little public space has a small little garden or flower patch tended by volunteers. In India, every one of those would likely be a garbage dump. What about dodging taxes? In a country of nearly 100 official billionaires and zooming luxury car sales, is it not egregious that only 40,000 people, almost all of whom are professionals with tax deducted at source, have a declared income of over INR 1 crore? After visiting Europe many times, I cannot but be impressed by the extent to which European society focuses on the rights and needs of its weakest and most marginalized members of society. Yet we dismiss them as weak society in terminal decline even as we shrug indifferently at the death of children in Bihar who were fed a poisoned midday meal or at the countless daily acts of violence against women. Which is the better society? Where would you rather live?

93 honest civil servant for instance. Activism matters more than we might think; Jessica Lal’s murderer would still be free if it weren’t for activism. India would not have an antirape Act if it weren’t for activism. We could donate generously and support the small number of individuals and non-profit organizations who are fighting courageously for better governance. And finally, handful of us could muster up the courage to jump into politics and tip the balance in favour of good. Progress has always hinged on the forces of good being stronger than the dark forces. Once we make a decision to be a force for good, we are limited only by our imagination. It is the educated middle class that ultimately determines the future of a society. It is time for us to step up.

THINKERS

This brings me to the matter of leadership. Human nature is not fundamentally different around the world. If people in Singapore or Switzerland follow the rules diligently, pay taxes, and don’t litter, it isn’t because they are different or better. It’s because these countries have rules, regulations, and laws and swift and equal consequences for violating them. This happens because they have built strong institutions and a strong culture which in turn are a product of good governance and good leadership. The ultimate failure in our country is one of leadership and governance. It is impossible for India to make any progress on any front when self-interest trumps national interest every time. We have gradually allowed our country and our society to be hijacked by people who are criminals at worst and self-serving at best. For the most part, those at the helm of affairs today have little interest in India’s development. 30% of Lok Sabha members are criminals; 369 MPs and MLAs have been convicted of crimes against women. 100% of our parliamentarians under the age of 30 are children of politicians; so are 2/3rds of those under the age of 40. These aren’t the people focused on the country’s development. This extraordinary corruption and selfishness is true not just in politics and not just in the civil services or judiciary. It is equally true in business where much of the prosperity has been created more by crony capitalism than real entrepreneurship. And to an extent it applies to all of us, the urban middle class, who have chosen to stay disengaged and simply feather our own nests. I cannot claim to have a good solution but it does strike me that we have a few choices. Some of us can emigrate-as many did in the seventies and eighties. Others can erect stronger moats around our gated communities and try to keep the chaos at bay. We could turn to religion and pray for things to get better. We can pray for a savior like Mahatma Gandhi to arise and lead us to a better future. Or at least a benevolent strongman like Lee Kwan Yew though India seems much too complex to be led by a strongman. Or more of us could step up and demonstrate greater public spirit and leadership and try to reclaim India’s future. We could start by being good citizens-law abiding, paying taxes, voting in elections, refusing to pay bribes. We could join hands and protest strongly, publicly, peacefully against injustice-the suspension or transfer of an

Rethinking the Role of Quality in Indiaâ&#x20AC;&#x2122;s Higher Education System By Arvind Rangaswamy

Higher education institutes in India need to improve quality in multiple areas, and particularly fast-track initiatives around attracting high quality faculty.

95 “India produces less than half the number of PhD’s as do China and the U.S. This number is grossly inadequate, even ignoring quality differences.” Quality faculty In a speech in 2007, Prime Minister Manmohan Singh noted that about 67% of Indian universities and 90% of Indian colleges are of poor quality. At the core, the quality of an educational institution (and consequently, its reputation) depends on the quality of the students, the quality of the faculty, and the quality of the educational experience, i.e., the magic that happens when quality students interact with quality faculty. I have no doubt that Indian students have the intrinsic ability to hold their own against students from other countries if they have access to a good-quality education. However, when it comes to the quality of faculty and the quality of the educational experience, there is much that is lacking, especially when one ventures outside of the IIT’s, IIM’s and the central universities. As someone put it well, in India we have “A” students taught by “B” faculty working for an “F” administration. In the rest of this article, I will focus only on issues pertaining to enhancing the quality of faculty, and will not discuss issues related to enhancing the quality of education in general (which is a major subject worthy of a separate article). I will also not address issues related to the policy goals of educational access and equity. One could view every good university as a unique aggregator of faculty talent. And, the top universities of the world are defined by having high-quality faculty that cannot be duplicated by others. In this sense, there can be only one Harvard University, because its unique faculty talent cannot be replicated. In a FICCI meeting a few years ago, a speaker suggested that a country of India’s size and capabilities should be able to create 10 Harvard’s in ten years. That, of course, is a pipedream, because there cannot be two Harvard universities, or for that matter, two IITM’s. And, further, not all universities can, or should, aim for the highest levels of faculty talent. By necessity, there is a segmentation of faculty talent, with different types of educational institutions attracting different segments of faculty.

THINKERS

I am a product of the Indian higher education system. I am also a product of the American educational system. And, I have been teaching in universities in the U.S. for about 30 years. Thus, nearly my entire adult life has been involved in some way with the education sector. Over the past few years, I have had several occasions to get a closer look at the many facets of India’s higher education system. In 2009, Penn State University (www.psu. edu), where I am employed, asked me to co-chair a committee to explore strategic opportunities for Penn State to engage with Indian universities to enhance our own research, teaching, and global footprint. To implement this committee’s recommendations, I have since engaged with officials in India’s Ministry of Human Resources Development, and with several higher education institutions in India, such as IITD, IITM, TISS, MDI, and IIMB. In this article, I want to share my observations about the role of faculty quality in enhancing the overall quality of Indian universities. Much has been written by many experts and government-appointed commissions about the state of Indian higher education, its shortcomings, and potential ways to fix the problems. While there are many overall goals that have been proposed for India’s higher education system, three goals seem to be central: (1) Make higher education more accessible to more students so that Gross Enrollment Ratio (GER) reaches levels that are comparable to those of developed economies, (2) Ensure equity so that poor and socially disadvantaged groups gain access to higher education, and (3) Enhance the quality and excellence of the education available to students. Although it is often assumed by policy makers that all three goals could be simultaneously pursued with equal vigor, that is not so. For example, high quality often means careful selection and exclusion of many students, i.e., less access. In 2012, only 9,647 out of 512,000 test takers were admitted to one of the IITs (less than 2%). In fact, increasing access (i.e., providing college degrees) without substantial increases in quality will lead to adverse social consequences by raising expectations but not employment outcomes. Recently, Infosys sorted through 1.3 million applicants only to find around 2% that were qualified for jobs, not unlike the 2% admit rate to IIT’s.

96 Quality is non-additive, which means we cannot simply add up the work of two average faculty members and get the results delivered by one high-quality faculty member. This also means that increases in quality of education will involve disproportionate increases in costs for realizing the higher quality, a cost structure that is less palatable than the linear increase in costs associated with increasing the access to education. But, we need to get the quality initiatives started. Where should we start? My contention is that the source of the quality bottleneck is at the very top, and that is where we need to focus our attention first. Don’t get me wrong. There are some outstanding scholars at Indian universities who can compete with the very best in the world. But, there are not enough of them. We need many more high-quality faculty and administrators to provide the intellectual and administrative leadership for many existing and new educational institutions that are emerging. Today, it is a global market for faculty talent. This means that a world-class university has to recruit in the global market for relatively scarce talent, which is the obverse of the situation in which widely distributed talent can be obtained from outsourced locations at lower costs. It often takes several years beyond a Master’s degree for someone to obtain a PhD and become eligible to be part of the global faculty talent pool. The PhD education process is not scalable because it requires a lot of expensive one-on-one mentoring. India produces less than half the number of PhD’s as do China and the U.S. This number is grossly inadequate, even ignoring quality differences. Thus, building a university with top faculty could take years, or even generations, unless the university adopts fast-track processes for recruiting talent, and has the resources to pay roughly equivalent global prices for that talent. China has tried to speed up the process via such initiatives as the “Thousand Talent Program” which provides substantial funds for recruiting up to 1,000 star faculty from foreign countries in a span of five years. Many regions have set up their own Talent Programs to attract star faculty to their locations. Likewise, the Indian government, perhaps in partnership with Indian industries, should establish and fund programs for attracting a significant number of faculty stars from abroad who would serve to raise aspirations and set quality standards for entire disciplines and professions. When well-known foreign scholars have participated

in conferences in China, some have been offered faculty positions on the spot under the Talent Programs, based on recommendations from their Chinese colleagues. Recruiting top talent in such a proactive manner is a must. Most such scholars are not going to respond to recruitment ads, certainly not to the type of bureaucratic ads for faculty positions that I see in Indian newspapers. Perhaps the “National Professor” program currently in place could be greatly expanded for this purpose.

“Education, it is said, is not the filling of a pail, but the lighting of a fire. Without high-quality faculty, we will merely be filling the pail, and not lighting the fire within the students who want to reach for something more in life for themselves and for others.” Leadership in higher education Even more important for removing the quality bottleneck, India needs a large number of leaders for its educational establishments (particularly Deans and Vice-Chancellors), who have had experience at the world’s leading universities. This recruiting of academic leaders would be well worth the investment and effort because such leaders could help leverage scarce resources and direct them to uses better aligned with the future, than if the funds were to continue to be disbursed through the current entrenched system of grants and excessive government regulations. The recent appointment of Raghuram Rajan as Governor of the Reserve Bank of India is perhaps an indication that the Indian government might be willing to take similar bold steps with appointments to academic institutions. Another hopeful sign is that the number of visas granted to Americans to work in India has increased substantially in recent years (New York Times, Feb 12, 2012). Top academic leaders from Western educational institutions bring with them strong academic values and experiences that promote disinterested scholarship without regard to the religious, political

97 education is not just about learning content, but is more importantly a way to also learn how to convert content into beneficial actions and outcomes, and for gaining useful life experiences, such as finding strong mentors from within a collective learning community, building lifelong friendships, becoming a better person, learning to thrive in competitive intellectual environments, gaining hands-on skills, and the like. There is a real danger that the allure and reliance on online education will lead to a two-tier society with the well-to-do students getting a more complete and meaningful higherquality educational experience in the offline world, and the poor being reduced to getting an online education. Attracting top faculty and academic leadership talent, even if this approach is successful, is less than half the story. It is difficult to put academic values into action, even if those values are shared by an entire community, but it is an even bigger challenge in the presence of a perceived elite group, which could engender envy, resentment, and systemlevel dysfunctions. Therefore, an environment has to be created so top talent can thrive, and in turn, recruit additional talent to reinforce the learning communities that keep feeding the quality multiplier. While there are many things that need to be carefully thought through to create such a conducive environment (e.g., academic freedom, strong PhD program), I would like to focus here on the need for a clear and detailed quality assessment system. Greater rewards should be subject to stricter accountability. Typically, top universities in the U.S. use a combination of the following four criteria for evaluating faculty scholarship (teaching quality is measured via other metrics): • Quality of the journals in which the faculty member publishes his/her work (the top universities expect a significant number of publications in “A” journals, especially for junior faculty). • Impact measures associated with published articles (typically, this is based on citation counts, and the types of papers that cite the work of the author)1. 1 A recent bibliometric analysis of India’s scientific publications revealed that the indexed average citations per paper published by a researcher from India increased from 0.35 in 1981-85 to 0.68 in 2006-2010 (compared to the world benchmark figure of 1.0). The indexed average U.S. citation rate for the corresponding periods were 1.41 and 1.37 (www.dst.gov.in/whats_new/ whats_new12/report.pdf).

THINKERS

or other affiliations of the source of an argument or piece of knowledge. They will encourage wide sharing of knowledge both within the university and in the local economy in terms of curriculum, research, and teaching. As a result, strong academic values have the potential to become institutional norms, and to not remain as just the private values of a few motivated faculty members. Traditional academic values are under threat even in Western countries because it is becoming harder to justify funding for educational institutions without associating those funds with specific performance outcomes. But, instilling strong academic values is a foundational requirement at a time when India is in the process of transforming its entire higher education enterprise. When top academic leaders participate in the apex bodies that set or implement higher education policies and funding guidelines, or establish the norms associated with accreditation, the entire system will benefit. All of this will cost a substantial amount of money. Even if India was able to recruit only 100 such faculty/academic leaders per year over the next five years, my rough estimate is that the cost of this effort would be $600 - 750 million (3,600 to 4,500 crores) over the first five years of recruitment, with continuing expenses of $200 million per year thereafter. However, the “quality multiplier” effect of this group should be very high, helping to diffuse quality throughout the educational system. In any case, the talent recruiting effort could be started as an experiment on a limited scale the first couple of years, and then expanded when the return on investment is established on a firmer basis. It is fashionable these days to talk about online education as a way to resolve the “quality” problem without incurring substantial costs. A single superstar faculty member can indeed reach millions of students and inspire them, but does that necessarily give them a high quality education (ignore, for a moment, the credential value of a well-established traditional university)? I do not doubt the value of widely distributing knowledge in an understandable manner, and the online medium may even work well for providing quality educational experiences to the masses in a few topic areas. But there are many subject areas where the online medium fails if it is the primary medium of education (e.g., medicine, architecture, chemistry). Gaining knowledge is necessary, but not sufficient, for getting a good education in those areas. Also,

98 • V isibility of faculty member in his/her field (e.g., honors, author of widely-adopted textbook, editorial appointments in prestigious journals, board memberships in companies and professional associations in areas of expertise). • Productivity (regular contributions to the scholarship of a field, in terms of the number of publications and other measures of output). Even when all of this information is available about a faculty member, it requires special expertise to judge the quality of scholarship. While it is possible for faculty members to game some of these metrics, typically these metrics are not directly under their control (e.g., citations and honors are decisions made by others). Thus, we can bring a measure of objectivity to the difficult task of assessing faculty contributions. Academic leaders could also be evaluated on the same four metrics, but as they apply to the entire faculty for which they provide leadership (in addition to other metrics of leadership performance). Management and information systems are needed for the collection and use of such metrics for every faculty member at an educational institution. In fact, a customizable system could be designed by an apex body of academicians for use in all educational institutions in India. For example, companies such as DigitalMeasures.com have developed flexible IT systems for this purpose, which are used in several U.S. universities. Finally, I would like to point out that the true test of the quality of a university is the employability of its students by industries, governments, and educational institutions, and for that matter, employability in the global labor markets. In this sense, faculty quality is a means to an end – to produce students who embody good values, have a passion for learning, and are well-prepared for the jobs of tomorrow. Education, it is said, is not the filling of a pail, but the lighting of a fire. Without high-quality faculty, we will merely be filling the pail, and not lighting the fire within the students who want to reach for something more in life for themselves and for others. It is time to re-kindle the spirit that built the great Nalanda University 2,600 years ago, which in its time was among the very best “universities” of the world and served as a source of inspiration and as a magnet for top students pursuing many different fields of study.

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CSR: A case for CoRpOrate or Collective SR By Yogesh Kochhar

The passage of the Companies Bill that directs companies to spend a percentage of profit on CSR is a big step in the right direction. However, a lot more needs to be done to ensure efforts are brought to their fruition.

101 “A recent report by National Sample Survey Organization (NSSO), based on a comparison of data on household spending patterns for 1999-2000 and 2011-12, indicates that in rural areas the disparity between the haves and the have-nots increased nine times in these 12 years.” Thus, not only will there be an account of what is spent; it will also cover the geo-spread of that spend. If a corporate entity sells its goods and services in an area, howsoever remote, it is equally its responsibility to contribute to the sustainability in the area. For, that alone can be surmised as responsible selling or it is undue profiteering. The new law also reflects and affirms India’s intent to be counted as more than a mere statistic in the Millenium Development Goals (MDG) rankings of the United Nations Global Compact (UNGC); and improve its stock to reduce disparities, improve governance, and attract investment and growth. In effect, it is evident that both the UNGC and the MDGs in the Indian context, translated in the form of the new law (Clause 135 read with Schedule VII of the Bill), deals with the concept of CSR and even identifies activities and expenses that shall qualify as valid spend on CSR. These should be read and run, hand in glove with the UNGC and the MDGs. This heralds a new era for corporate India--for corporate governance, shareholders, stake holders, employees, customers, and markets. The bill has landed and revealed truth or Satyam. Companies Bill: Its executable challenges In order for the law to be executed well, it must set standards that define, measure, analyze, improve, and control adequately because as philanthropist Rohini Nilekeni has said, “Since the money on the table could equate a large nationwide program involving billions of dollars.” It is imperative now more than ever earlier. While the companies start following this, it shall at best remain a disparate story, with each company

THINKERS

Backdrop and the current law Indian markets offer an exciting opportunity with its billion+ and growing population. We have one third of America’s area and four times its population, and offer twelve times more customers to any prospective entrant with its bags of goods and services. While the opportunity to work with the economies of scale on the logistics and distribution side of the trade offers an attractive arbitrage; however, such an entrant also examines the encompassing hygiene that shall ensure the sustainability and growth of its business. Thus, the legal structure, the political, economic and social stability or uncertainties; are equally of paramount importance. The reality also is that the surface area of commercial opportunity today in India is under threat, with 25% of it compromised. What with over 170 districts out of 640 notified as terror ridden. Clearly that indicates a view of the parched land, unaddressed aspirations with lack of opportunity that rants, cries out, and raises its head in the form of terror outfits. The income disparities are only widening and leading up to serious repercussions of unease, unrest, and restive populations. A recent report by National Sample Survey Organization (NSSO), based on a comparison of data on household spending patterns for 1999-2000 and 2011-12, indicates that in rural areas the disparity between the haves and the have-nots increased nine times in these 12 years. These are the disparities that manifest as open wounds and as a result we have naxals and Maoists etc festering on our country. To call them outlaws would be to live in denial. These need to be treated and can’t be surgically removed. Let’s look at a different perspective now. If the Companies Bill 1956 produced landlords, the Companies Bill 2012 looks to empower the LAN to lord over its stock. The Local Area Network gets a shot in the arm. If the goals and objectives of a company are self-centered, as it may be, it’s her radius that shall matter now! The Law mandates companies to spend an average @2% of profit after tax of the preceding three years on CSR, the lowest common denominator being a company that makes a profit of rupees five crores annually. What the Bill does to India, with her official GDP of USD 1.8 trillion and GDP based on PPP of USD 4.7 trillion, is that it directs the flow of this 2% of profit. The Bill in its fine print, mandates that the said 2% be spent in the area of company’s operations.

102 identifying and pulling their stock behind such issues as they deem fit, without considering work undertaken by the others or impact created or studied. This requires a shepherd’s crook, to ensure that initiatives several as they are, don’t run all over the place. CSR Initiatives and interventions must serve the objective of rearing and grooming India in a manner that’s equitable and equanimous. This calls for collective wisdom and endeavor. Before we address as to how it can be managed, lets use an illustration. On a recent visit to Puduchery, I saw hundreds of boats littered on the beach at Mammalapuram on the east coast road from Chennai to Puduchery; a post Tsunami result of supposedly well-meaning CSR. It isn’t difficult for those of us that have gone there in recent times to imagine that fishing villages that may have had a 100 fishermen and 10 boats Pre-Tsunami perhaps returned Post-Tsunami only with a 100 boats and 10 fishermen. That happens due to no metrics or measures available. However most donors while they are happy having done their bit, do rarely go beyond accounting their contributions in their books; while what is needed is to study impact of such spend and check if this is leading to colossal overstuffing waste or duplication of efforts. Absence of cohesion; dispersed; diverse; and all kinds of initiatives being undertaken by the corporates in silos largely add up to nothing even as these are individually reported in their annual reports. It is also here that UNGC and MDGs or now our CSR law shall become casualties. Thus a corporate entity’s challenges and limitations in line with the breadth of their operations are: • To scope their areas of contribution, in as much as any single corporate can, given that it can only provide its own finished goods and services. (e.g: a Telco can provide bandwidth alone, which cannot build a school from ground upwards) • To scale their CSR outreach. This can only be limited to a certain radius where it may have access based on its presence by virtue of its offices and employees, all in an effort to capture a few human interest stories and be seen as good corporate citizens. • To align itself with all the MDGs, due to its marginal ability to identify partners and collaborations, to optimize investment returns on CSR, and increase the surface of its contribution and impact. The scenario is similar to the eight

blind people around the elephant each of whom feel sure in their respective description. Way forward Corporate houses are ever willing to ‘seek’ opportunities, while on the other hand the several NGOs and Trusts are ever willing to help communities ‘soak’ that giving. What is needed is a collaborative platform that helps them conjoin their strengths and re-discover the extent and economies of scale and scope in their grass root engagements.

“If a corporate entity sells its goods and services in an area, howsoever remote, it is equally its responsibility to contribute to the sustainability in the area. For, that alone can be surmised as responsible selling or it is undue profiteering.” It is precisely here that there is need to set up an electronic CSRealm or CS Registry under the Ministry of Corporate Affairs, in the form of a one page view that identifies spaces for interventions, creates a database, catalyses CSR partners, and gives such initiatives both a deeper and a wider scale and scope. Thus, identify and plot the spread and cascade of ‘seekers’ and ‘soakers’ with exactitude on an electronic platform across the states, districts, and blocks. It would deliver a package that’s better than the sum of its parts. Thus on such an e-registry, it would be possible to identify ‘seekers’ and ‘soakers’ that can: • ‘LEAD’ an initiative if it has its own offices or establishment down from its head offices across the states to the various districts all the way to the block level. Block, since it is the last administrative outpost of the government, or • ‘SUPPORT’ an initiative if it has its products and services selling through dealers, distributors, and franchisees. If such initiatives can in turn be identified with the help of the ‘soakers’ and the BDO (block development officer) in the backdrop of MDGs or

103 THINKERS

the schedule VII, the CS Registry will help identify resources available in such a block. There is a good chance that a primary school with five classrooms can be created in a remote block of the nation, through SUPPORT coming from companies registered on the CS registry that sell cement, steel, computers, electrical and hardware, Soaps, TVs, gensets, inverters and batteries, tiles and knobs and the like. To lead, it is possible that a business house with its offices there can second an engineer who builds that school. It follows logically, thus, that there could be several seekers and soakers working in each block in disparate streams oblivious of other seekers and soakers presence, all keen to collaborate, all blissfully unaware of each other. Through an electronic CS Registry, we can identify need gaps in any geography with the help of the BDO and a Lead Corporate and go on to execute, measure, monitor, control and grow sustainably, even as we exploit economies of scale and economies of scope. Thus, it can be ensured that a boat to that fishing hamlet is taken only if it needs it and its provisioning there does not lead to the econometrics getting confounded, compromised, or complicated. For that may mean, creation of a sum of its parts that’s better than the whole, through a mechanism that has metrics built into it. If a company can sell in an area that is terror ridden, it must equally contribute to CSR there. How good is seeking without soaking. Equally pertinent is the need to develop metrics that assess the spend and the spread. Only a method that helps measure the spend and the spread will pay in the long run. Example, if one sold its goods across 2100 blocks and one’s CSR interventions were spread only across 30 blocks, its effective contribution is 1.43%. That’s opportunity for improvement (OFI) of upto 98.57% where one still sold and never supported. Lack of information pertaining to other likely partners in such deficient geographies and a mechanism to deliver, restrains intervention across such 98.57%. What counts must also be counted. That Columbus discovered America is not to disregard that America existed before he set foot on it. This act of discovery does not lie in looking for new lands alone, it lies equally in looking with new eyes. Lack of evidence does not mean lack of existence. CSR is a marketplace. There is a space in the market and there is a market in the space.

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My brand of challenges By Sachin Garg

The ability to see challenges as opportunities and not problems is an essential quality needed for entrepreneurs in India.

105 person faces and to some extent, I expected to have my own tryst with them. But this article is not about them. This article is about the challenges which I could never have predicted. Let me take you through a few of them –I probably wouldn’t shy away from saying– they are very Indian. Allow me to cruise you through the story of my venture – Grapevine India Publishers Pvt Ltd. The first thing I realized was that I had grossly underestimated the challenge of being a first generation entrepreneur in a market which is almost completely occupied by international players. I gave myself three months to learn the ropes and started traveling to every street, trying to tap the thriving unorganized market, where publishers/ distributors lived, only to realize that there are way too many streets like that in India.

“I gave myself three months to learn the ropes and started traveling to every street, trying to tap the thriving unorganized market, where publishers/ distributors lived, only to realize that there are way too many streets like that in India.” We had to scale up and build a team. We are a talent driven company; if we don’t have good editors, our handicap is almost like a technology company not having enough technological capability. I had visited a few colleges to hire editors and marketing professionals. Two trends took me by surprise: firstly, their flawed understanding of the concept of a job and lack of proper skill set. And secondly, their unrealistically high expectations of salary and perks. In June 2011, I started to look for an office. A real estate broker told me there was this space in a village in North Delhi called Pandav Nagar which had everything I was asking for, which was: lots of space at a low rent. I reached this place and the board in front of the two storey building on a rather shabby road read: “Yaha par gaadi churana mana hai” (Translation: It’s not allowed to steal cars in this place).

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Before I became an entrepreneur, I thought my work-station at a Fortune 500 company was the best I could have carved out for myself after four years of engineering and an MBA. Even though it was not a sophisticated glass-clad workplace, one would find in the imposing niches of DLF Cyber City in Gurgaon or Bandra-Kurla complex in Mumbai, it was my own cubicle nonetheless. It was a cubicle in a steel plant at the most significant mining district of India – Bellary. Vis-à-vis my batch-mates from MDI, for the first few weeks, I felt chuffed and blessed to be at that sought-after position. Wherever I looked, there were systems and methods, discipline and structure. I was finally living the hectic corporate life I had grown up hearing about from seniors and mentors. But, something started snapping. Eventually, the evenness and the unsatisfactory tenor of the profession started taking a toll. Then onwards, almost every morning I would reach office, look at my work and tell myself the same thing – I can do better. So one day, in the year 2011, at twenty four years of age, I decided to not subdue that ambitious part of me anymore. Rock steady and unshakably cool, I woke up and succumbed to the entrepreneurial bug in me: I resigned from my job. Along with seeing me back in Delhi, my parents also saw crashing the two principal dreams they had for their son—of being a flat owner and a husband. I didn’t have any entrepreneur friends at the time when I resigned, but I had read a lot of stories. Everybody unanimously claimed that it was difficult. Contrary to how glamorous the word sounds, entrepreneurship I knew would be difficult. I decided to roll my sleeves and throw back the question– “how unusual can it get?” at people who tried to intimidate me. It’s been two years since I started treading on this unusual path and nothing can get you an answer better than actually being an entrepreneur in India. It’s no joke being an entrepreneur in this country. Suddenly, the structure and the processes I had gotten used to were out of the window. Even though I wasn’t a big fan of my boss, it was disconcerting to have nobody to go to with my questions now. Having to start a brand from scratch, facing competition from the ever dominating and powerful international competitors, arranging initial capital, keeping track of accounts and taxes et all, these are the challenges that every first generation business

106 “When an entrepreneur looks at his industry, he does not let the amount of work which has already happened before him overwhelm him. He sees the huge gaps which are still to be filled and the innovations that will always be welcomed.” We did take the place and started setting up the operations. In 2011, we applied for a list of International Standard Book Numbers (ISBN), which were supposed to reach our office in Pandav Nagar by government post in a week. Finally, after waiting for almost two months, we went to the post office to inquire about the letter. And clearly, the postman wanted ‘chai-pani’ to recognize our office as a valid address, and gave us a list of documents like Board Resolution and Rent Agreement which he needed before he could start delivering posts. I had no idea what had hit me. I wanted to be operational by now, but I was struck with a fifty-year-old postman who wanted me to compromise on a very basic value I had set for myself. In despondence, I tweeted my experience and asked for guidance. The advice was unanimous and I was introduced to the concept of actually using an RTI. Three days later, we had the letter in our hands. In August 2013, after having spent two years there, we moved out of Pandav Nagar and took a bigger and prettier office. We got the interiors designed and had an exclusive pantry of our own. We also needed a new watchman and we hired Ram Narain. Ram is from Siwan District in Northern Jharkhand. Ram’s father never had much expectations from him. In Siwan, most people don’t study beyond the third grade and if a kid reaches adulthood without going to jail once, the kid is a good one. Ram’s father’s dream was that his son goes onto become a security guard. The prerequisite to become one was to possess a licensed gun, which would cost rupees two lakh. He had to mortgage his field to buy the gun, which Ram brought to office every day. Owning a gun gave him assurance of a lifelong job as a security guard, and from his salary,

he continues to pay a steady EMI to get his father’s fields back. Ram’s story is often a microcosm for rural India for me: It’s not he who brings the gun to office. It’s the gun who brings him to office. So yeah, the roads will always be broken, the government processes will always be slow, people and promises would dither, the talent in colleges will always be substandard, criticism would be unsettling, policies of bureaucracy will always be unfavourable, and the list would be definitely endless. This is the downside and yes, they are exasperating. I cringe whenever I come face to face with any of these vexing limitations. But then, let’s talk about the flip side. What happens when you get around these road blocks, really put your foot down and decide to become an entrepreneur? Trusted sources will tell you that the first thing an entrepreneur needs is an idea or an opportunity and that is what India has in abundance. When an entrepreneur looks at his industry, he does not let the amount of work which has already happened before him overwhelm him. He sees the huge gaps which are still to be filled and the innovations that will always be welcomed. What looks like the darkest shade of red to an outsider looks like the bluest ocean to an entrepreneur with a vision.

Survival tips for entrepreneurs in India • Don’t get carried away by the glorification of ‘jugaad’ in entrepreneurship. An entrepreneur is made by the systems and processes he builds. Jugaad comes in when systems don’t work. • Success is seldom permanent and neither is failure. It is important to not lose your head when either lasts too long. • It is important to respect your peers /competitors. Ups and downs will come and go but it is important to win respect from your peers as a person. • Help people. Invest your time in helping others without any ulterior motive or expectations in exchange. Good things happen to people who help others. • Meet people. People unlike you who would have perspectives different from yours. People senior to you, junior to you, related to work, completely unrelated to work. It will help you become a well rounded person.

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Definitely, I hate it when I get stuck in a traffic jam induced by India’s poor infrastructure. I loathe the law of bribe being a rule rather than an exception in my country. But, I also get extremely happy when my ideas catch on because of the scope of things in the country. So trust me, I don’t mind being stuck in a traffic jam in comparison to the up sides. “He became a millionaire overnight” and “he just cooked anything and it is selling like hot cakes” are oft heard lines from armchair critics. There are infinite hours of hard work behind every success story. We started as publishers of fiction – mostly commercial romances, which we extensively diversified at a later stage. Absolutely every book we released became ‘a national bestseller’ and many of our authors have become youth icons in their own right. Within a span of two years, we became India’s most frequented publisher in the Nielsen list of top selling 250 books in India. Today, I can accurately pin down the avid dissatisfaction with my college placement as an MBA graduate – I was merely being a job seeker and not a job creator. I look at my team of ten in the office and know that their lives, sleep, and pay cheques are hinged on my performance in any given month. I try to attend as many launch events as I can to share their happiness and my experiences. I feel the repercussions of my decisions across many families. I am supposed to take on the likes of Hachette and Harper Collins. I am doing work which is increasing the scope of the Indian market in a significant sector. Now when I look back, I know that I couldn’t have ever achieved this contentment, bond, and sense of control anywhere otherwise.

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THE Roger Martin INTERVIEW By Amit Kapoor

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Are we over-emphasizing the idea of India? India is just 2.5% of the global GDP. Where do you see India? I think in the modern world, it really matters the degree to which we can create something that not only citizens want, but also to evaluate how we are able to project that into the world. There was almost no projection of India out into the world 20 years back. Now, India has projected itself into the world whether it is through TCS, ICICI, Infosys, or Wipro. I don’t think that the sole criterion for judgment should be a country GDP vis-a-vis world GDP. One needs to look at the progress that India has made in the past. Canada is just 3 % of the world GDP and does contribute to the global economy in various fields with companies like Bombardier, Four Seasons and McCain. You have given a very interesting example of McCain Foods, which is a very product centric company, but in India we haven’t really seen the emergence of products. What’s your view on the reasons for this? As the world is increasingly becoming a service oriented economy, India is being very modern as it is trading more in services than in products. Jobs in manufacturing are going down. China’s share of manufacturing as a percentage of manufacturing is going down even though they are the manufacturing hub of the world. I do not think that it is a negative for India that it is figuring out how to have international trade in services. As India is primarily a factor driven economy and there is labour arbitrage. How could India and other emerging economies move up in the future? The key factors of production, which are selling internationally, are human resources like skilled engineers that are getting expensive. Their costs are inflating and it hampers India’s ability to play the

“There was almost no projection of India out into the world 20 years back. Now, India has projected itself into the world whether it is through TCS, ICICI, Infosys, or Wipro.” labour arbitrage game. On the flip side, it provides the incentive to do something else, like what Japan did when faced with a similar situation. Japan today cannot play the labour arbitrage game that they played 50 years ago. Because their wages are as high as American wages so they have to compete on a more sophisticated basis. Upgradation and economic change is as much a stick-based as a carrot-based game. And I assume that is going to happen with India, as its human resources get more expensive. What do you think are the few steps that the governments need to take to come out of global economic slowdown? Japan grew at astonishing rates in the past. So it is not new that India and China are not going to return to a 10 % GDP per capita growth and it is partially because when a country grows fast its labour arbitrage opportunity gets smaller and that makes it harder to grow that fast consistently. If I would be the Indian government, I would be planning to grow more like 5% than 10% and going forward trying to spur it to get to it to 8%. 10% is just unbelievably fast economic growth, something that rarely happens in the course of human endeavors and I don’t think one would wishfully want to bet on that. 5% growth is fantastic. 5 % growth seems very scary in case of India as we would not be creating enough jobs. Wouldn’t you say that 5 % is acceptable for larger economies with smaller bases? Certainly, this way India would pull more people out of poverty faster. Trying to artificially grow economies faster than they can grow does not get more people out of poverty. It creates cycles of boom and bust and people who suffer most in downturns are poor people. The best way for India and India’s poor is to be on a stable growth path that does not

THINKERS

What do you think about India’s competitiveness? I find it very exciting that India has woken up to the fact that it can be a consequential country in the world. Initially, the focus was people and the idea of economic upheaval was on the sidelines. At present, it has a bunch of companies that play successfully in the global economy. It is this mindset change, which is exciting to see.

110 have a lot of ups and downs and overheating in the economy. I do think, that there is always a macro tradeoff that all the countries governance bodies have to make, which is how much of the resources are we going to spend on consuming current prosperity versus investing in future prosperity. And in North America governments have tilted considerably in favour of consuming more of current prosperity rather than investing in future prosperity and that is what India should really be careful about. How do you think India needs to invest in future prosperity? I think physical infrastructure is the one thing to focus on. Education is the other enabler for future prosperity. Going deeper into the idea of India and Indiaâ&#x20AC;&#x2122;s competitiveness, do you look at India as a whole or should one look at the sub-national level, say provincial level as we move on in the future? I think you have to look at both because India has a central government and has one currency, that is one perspective to look at; but it is regions, which are dominating the world economy. So that is another perspective. India is a classic case of both perspectives. How do you get the right balance of perspectives? You can only try to be always aware of the need of balance and recognize when you are getting out of balance. There is no mechanism that I have seen which allows you to stay in balance. There has been a lot of talk about India versus China. Where do you think the difference lies and what is the future of the country? The really big difference is infrastructure. China is investing in the physical infrastructure and building fantastic infrastructure. Their highways, trains and airports are better than American highways, trains and airports. In India, infrastructure seems largely in disarray though the airports are in order now. There is also a gigantic difference between the two in language skills. It makes it easier for companies from the west to do business in India, which is a substantial English speaking country. India is more chaotic than China and Chinese have got this kind of state capitalism. Sadly, both India and China have one thing in common which is world-class

corruption capability. That is the frustration to companies trying to do plain ordinary business. Could you give an insight as to how corruption reduces a countryâ&#x20AC;&#x2122;s competitiveness? Why is it important to really rein it in? It is a case of classic rent-seeking behavior. There are people who are positioned at various points in the economic chain who engage in rent-seeking. Dollars are being spent by companies to pay people off for activities that have no value whatsoever for consumers. Companies are paying for the right-tooffer. It is just a drain on the creation of consumer value and that is a sad thing. When we talk about corruption it is often thought that governments are always wrong, do you think and see corporates doing this as well? When I say corruption, it is not only government and its rent-seeking behavior by various people. Freer markets provided a sort of an antiseptic to corruption. I do think it helps corruption if markets are trained in some manner. It is a fact that corruption is high in various places around the world where there are constrained markets. When you say constrained markets what you mean is overregulated markets. So what we need to work on is freer markets and capability to make products and services? Yes. although given North American experience, free markets have some connotations, which people do not necessarily like. The financial crisis came because of freer markets and looser regulation. But I think we can solve this by having a clever and precise regulation. I think regulation is good but regulators need to regulate using the lightest touch. Figuring out the lightest touch possible to accomplishing the goal is the key. India is having a huge debate on what sectors to open to FDI like FDI in retail, etc. Are you professing that India should look at more open markets? Yes. Though with regards to FDI, I am a great critique of the current theories of how you monitor and regulate FDI. In merchandise and service trade the underlying philosophy is reciprocity. Thatâ&#x20AC;&#x2122;s the nature of trade agreements. And in FDI the conceptual underpinning of the regulation is that there is no need for reciprocity, it is just net

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benefits. If we have net benefits as our criteria every economic system would fail. In various GATT rounds we lower our tariffs, all of us, some of those tariff reductions would produce net detriments but if you look across all sectors it would provide a net benefit. This whole thing where you are looking one-by-one and asking whether there is net benefit or not is I think absolutely flawed. If this happened the country that would be maddest is China because they think they can buy anybody else’s company but they will not allow a single one of their companies to be bought. They are not showing any reciprocity in foreign direct investment and they are basically buying stuff up. I think it is dangerous to allow a country to buy your companies when you can’t buy theirs. How do you think the government in a place like India should actually look at this opportunity of creating systems, which is going to be beneficial to corporates? I think in my country as in any other, government does not get close enough to companies to really understand how it can be really helpful to companies. Part of the problem is they are fearful they will work in their own self-interest and not in the interest of the country. In not having robust dialogue with individual companies it is hard for the government to really understand what these companies need.

THINKERS

“I think it is dangerous to allow a country to buy your companies when you can’t buy theirs.”

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Why India Must be Audacious By Anil K. Gupta India today stands at a critical crossroad, similar to the one it did in 1991. If the government wants to seize the opportunity and transform this into a â&#x20AC;&#x153;golden momentâ&#x20AC;? again, it will need to take concrete actions from the inside out.

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India’s Fundamental Strengths India enjoys five major strengths – a blessing that none of the other BRIC nations (not even China) share. These are the foundations on which we need to build the castles of tomorrow. First, India has a stable democracy that has withstood the test of extreme diversity, several wars, and economic turmoil. Sometime in the next decade or two (perhaps sooner), China will be forced to confront a transition to democracy. Given China’s

“Along with China and the United States, India is the only country in the world that has the size and the structural foundations to become a superpower and to stay that way for the next two thousand years and beyond.” level of economic development, urbanization, literacy and digital connectedness, this is inevitable. What remains unclear is whether the transition will be peaceful or traumatic. In that sense, politically, India is already future-ready. It is also encouraging that, although coalition politics is here to stay for the foreseeable future, two major parties – on opposite sides of the center – have emerged as the torchbearers for the citizens’ differing ideologies. Importantly too, state governments are now beginning to compete with each other for better governance and economic development. Second, along with the US and China, India has built one of the strongest higher education systems in the world. Graduates of India’s top colleges and graduate schools contribute mightily to the country’s pool of leadership talent. In addition, by rising to the CEO position in several of the world’s largest corporations, many of them also help make the case for India in corporate boardrooms and the financial community globally. Third, like the US and Europe but unlike China, India has a very strong private sector and a large pool of extremely well-managed multi-billion dollar companies. These companies are as good as or better than their Western peers in the quality of leadership and management. India is also home to a growing pool of technology entrepreneurs. One should add, however, that the size of annual venture capital investment in India remains a fraction of that in the US or China. Fourth, reflecting its Asian heritage, India enjoys one of the highest rates of savings in the world. This is particularly noteworthy given that India is still one of the poorest nations in Asia; thus, a large chunk of the country’s population is forced to spend almost the entire bulk of their meager earnings on bare necessities such as food and shelter. Fifth, India enjoys strong backing from some

THINKERS

At its India Summit in 2010, the World Economic Forum invited me to join a televised debate on “What kind of a superpower will India be.” The other esteemed panelists included BBC’s Nick Gowing and several prominent Indians – from the industry, the government, and the NGO sector. Featuring a bunch of argumentative Indians, the debate was, not surprisingly, quite lively. To me, however, a shocking surprise was that several of my Indian colleagues questioned rather openly as to why India should aim to be a superpower at all. Since then, I have had this question posed to me on at least five other occasions by prominent Indians belonging to either the government or the NGO sector. Talk of low ambitions! Other than sheer random luck (you dig for water and out comes black gold), no individual, organization, or country has ever gotten anywhere without dreaming of touching the sky. Ambition fuels daring. It also fuels action. If all you aim for is to become a little bit better off than yesterday, almost anything might work – including going to sleep on your job as our current political leaders appear to have done in recent years. India had the good fortune to be “born” as one of the greatest countries on earth. It maintained that status for more than two thousand years. The last two centuries, however, have transformed the giant into a pigmy. Instead for accounting for about 25 percent of the world’s GDP (which India did until the early 19th century), our contribution now is a little over 2 percent. Given the country’s inherent strengths, it does not have to stay that way. Along with China and the United States, India is the only country in the world that has the size and the structural foundations to become a superpower and to stay that way for the next two thousand years and beyond. However, as the current crisis amply illustrates, we will have to strive and work hard for it. Greatness is unlikely to be thrust upon us.

114 very powerful allies – notably the US, Japan, and Europe. All of these powers accept the reality of China’s ascendance. They also realize that China is more likely to adopt an assertive non-compromising “China First” role in international affairs. Thus, unless a friendly India rises up to become an economic (and thereby geopolitical) power to rival China, the global baton will eventually pass from the US as the world’s sole superpower to China in this role. The rich countries appear to have concluded that it is in their own strategic interests to help India’s economic rise. Why else would George W. Bush go out of his way to ensure passage of the USIndia Civil Nuclear Agreement? Why else would Japan be so eager to help India build the DelhiMumbai Industrial Corridor? What Ails India? At the core, India’s problems appear to be rooted in a seeming lack of realization by the country’s leaders that “what got you here won’t get you there.” In real terms, India’s GDP in 2010 was twice as large as in 2000 and almost four times as large as in 1990. When the economy was smaller and had suffered from low growth for several decades, it was relatively easy to kick-start higher growth by picking the low hanging fruit. In the case of India in 1990, this meant the removal of many mindless handcuffs that had kept companies and entrepreneurs shackled. Given today’s much larger economy, the government’s role needs to become that of a proactive enabler. The infrastructure of 2000 is totally inadequate for the current size of India’s economy. No large country has ever relied largely on the private sector to finance or build the country’s infrastructure. Look at the US in the 1950s and 1960s and China over the last two decades. Yet, instead of focusing on infrastructure as Job 1, India’s leaders have chosen to focus on giving handouts as the government’s primary mission. Boosting demand without removing supply-side constraints begets higher inflation. That leads the central bank to jack up interest rates which in turn deters companies from making investments - a classic vicious cycle. A second important respect in which today’s India is dramatically different from that in 1990 (or even 2000) is the level of the country’s global integration. The honorable prime minister and finance minister keep saying that investors and

“Rather than pretending that global integration is a side-show, the country’s leaders need to focus on how to help India leverage global integration for advantage instead of heightened vulnerability.” citizens should focus on India’s internal strengths rather than on actions by the Federal Reserve in the US, a far-away land 10,000 miles away. This is nonsensical. In 2012, India’s total trade in goods and services as a ratio of GDP came to 55.3% vs. 26.5% in 2000 and a paltry 15.2% in 1990. It would have been utterly impossible for India to achieve the 7.6% average annual growth in GDP that it did during 2000-2010 without access to global capital, global resources, global technology and global markets. Rather than pretending that global integration is a side-show, the country’s leaders need to focus on how to help India leverage global integration for advantage instead of heightened vulnerability. Another major impediment to India’s growth is the persistence of a colonial hangover and continuing distrust of foreign multinationals. Yes, British colonization of India was reprehensible in every imaginable way. Worse, the imperial rule grew out of initial encroachments by The East India Company, a foreign multinational. We must never forget this nasty period in the country’s history. At the same time, we gain nothing by mortgaging the country’s future to its past. The days of MNCs being able to behave like The East India Company are long gone. Today’s MNCs bring not just capital but “smart” capital i.e., capital backed up with technology, managerial know-how and global networks. Bulk of the value that they create is absorbed by the host country. This is the pragmatic reason why, aggregated across the economy (rather than sector by sector), even the Communist Party of China has been friendlier to foreign MNCs than India’s leaders. As Deng Xiao Ping famously said, “It doesn’t matter whether the cat is black or white. As long as it catches mice, it’s a good cat.” Could This Be India’s Golden Moment? The next ten years have the potential to be India’s golden moment. China is slowing down rapidly.

115 THINKERS

While official numbers may indicate a 7.5% growth rate in GDP for 2013, many economists believe that the actual figure may be closer to 6-6.5%. According to World Bank estimates, China’s likely growth rate for the next ten years will be around 6% - at best. Should India get its house in order, it could easily be the world’s fastest growing economy for the next 20 years. My own discussions with senior executives in several of the world’s largest corporations suggest that MNCs are sitting on billions of dollars of investable cash and are wary of putting all of their eggs in just one or two baskets even if those are big baskets such as the US and China. India is the only other large economy with the ability to soak in several hundred billion dollars of the world’s capital. As the CEO of a Fortune 50 multinational said to me, “We are ready to invest. Is India ready to welcome us?” The immediate task for the government is to stabilize the rupee. As proposed by IHS Asia, the incoming RBI governor could do this quickly through a combination of two measures – a $30 billion swap line with the US Federal Reserve and the issuance of NRI bonds. Beyond the immediate stabilization measures, the government needs to focus on removing bottlenecks to investment by India’s own companies. The finance minister has been making the rounds of the world’s economic centers to drum up FDI. This is sheer waste of time. Foreign investors pay far greater attention to the decisions and actions of India’s own companies than they do to ministers’ assurances. Why would foreign companies ramp up investment in India when India’s own companies are ramping down? The starting point has to be the removal of domestic bottlenecks faced by Indian companies, especially those focused on infrastructure. As these bottlenecks begin to dissipate, the domestic stock market will start perking up. Combined with a stabilization of the rupee, that in turn will trigger inflows of both FII and FDI capital. With the right set of policies, the current vicious cycle can be transformed into a virtuous one. Will India’s leaders be up to the task? I remain optimistic. India has a history of not waking up until forced to do so by a serious crisis. Like 1991, now could again be one of those golden moments.

CONTRIBUTORS

Anil K. Gupta

The author is the Michel D. Dingman Chair in Strategy, Globalization, and Entrepreneurship at the Smith School of Business, The University of Maryland and a Visiting Professor of Strategy at INSEAD. A graduate of IIT Kanpur and IIM Ahmedabad, Gupta earned his PhD from Harvard University. His most recent book is Global Strategies for Emerging Asia (Wiley, 2012).

Anurag Batra

The author is an entrepreneur, media observer and a journalist rolled into one. He is the Managing Director and Editor-in-Chief of exchange4media group which includes exchange4media.com, PITCH, IMPACT, Realty Plus and Franchise Plus. He is a B. Tech in Computer Science.

Arvind Rangaswamy

The author is Anchel Professor of Marketing Penn State University. His research is focused on developing concepts, methods and models to improve the efficiency and effectiveness of marketing using information technologies, an area in which he is internationally recognized.

Des Dearlove

The author is one of the founders of the Thinkers50. He is co founder of the media content, concepts and consulting firm Suntop Media. He writes on business issues for magazines and newspapers throughout the world, including The Times, American Management Review and is a contributing editor to the US magazine Strategy+Business.

Devdutt Pattanaik

The author is Chief Belief Officer of Future Group (Big Bazaar), TED speaker, and columnist with Corporate Dossier, which is the supplement of Economic Times. His book â&#x20AC;&#x2DC;Business Sutra: a very Indian approach to Managementâ&#x20AC;&#x2122; was published in 2013.

117 Nirmalya Kumar

Jan-Benedict E.M. Steenkamp

Pankaj Ghemawat

Jagdish Sheth is the Charles H. Kellstadt Chair of Marketing in the Goizueta Business School at Emory University. He is widely acclaimed as a renowned scholar and world authority in the field of marketing.

Jan-Benedict Steenkamp is C. Knox Massey Distinguished Professor of Marketing at KenanFlager Business School, University of North Carolina. He has co-authored, Brand Breakout: How Emerging Market Brands Will Go Global (Palgrave-Macmillan).

Kevin Stolarick

The author is research director at The Martin Prosperity Institute at the Rotman School of Management, University of Toronto and the Inaugural Walton Distinguished Visiting Fellow in Sustainability at the School of Sustainability, Arizona State University.

Mark Esposito

Mark Esposito is Professor of Economic Strategy at Grenoble Graduate School of Business and Instructor at Harvard University Extension.

Navi Radjou

The author is an innovation and leadership strategist based in Silicon Valley. He is a Fellow at Judge Business School, University of Cambridge and a member of World Economic Forum’s Global Agenda Council on Design Innovation. He is co-author of the best selling Jugaad Innovation and From Smart To Wise: Acting and Leading with Wisdom.

Nila Madhab Panda

The author is one of India’s emerging and innovative young filmmaker with international success with his debut feature film “I Am Kalam”, produced by NGO Smile Foundation and presented by Smile Foundation and Century Ply in association with Surya World.

The author is Member-Group Executive Council Tata Sons & Professor of Marketing, London Business School. He has co-authored, Brand Breakout: How Emerging Market Brands Will Go Global (Palgrave-Macmillan).

The author is the Anselmo Rubiralta Professor of Global Strategy at IESE Business School. He is author of the book World 3.0: Global Prosperity and How to Achieve it. Between 1983 and 2008, he was on the faculty at the Harvard Business School where, in 1991, he became the youngest person in the school’s history to be appointed a full professor.

Paranjoy Guha Thakurta

The author is an independent journalist and an educator. His work experience, spanning over 36 years, cuts across different media, including, print, radio, television and documentary cinema. His main areas of interest are the working of the political economy and the media in India and the world, on which he has authored/co-authored books and directed/produced documentary films.

Pramath Raj Sinha

The author is Founder and Managing Director of 9.9 Media. He has also served as the Founding Dean of the Indian School of Business (ISB). He previously led the ABP Group, one of India’s leading and most diversified media conglomerates.

Prasad Kaipa

Prasad Kaipa is an executive coach, mentor, author and founder and executive director (2007–2009) of the Centre for Leadership, Innovation and Change at the Indian School of Business. He is co-author of the book, From Smart To Wise: Acting and Leading with Wisdom.

THINKERS

Jagdish Sheth

118 Raj Sisodia

Raj Sisodia is one of the thought leaders of the Conscious Capitalism movement globally. His book Firms of Endearment: How World Class Companies Profit from Passion and Purpose is considered a foundational work in explaining the precepts and performance implications of pursuing a conscious approach to business.

Ravi Venkatesan

Ravi Venkatesan is the author of the critically acclaimed book “Conquering the Chaos: Win In India, Win Everywhere” published by Harvard Business Review Press. He is the former Chairman of Microsoft India and Cummins India, and currently is a member of the Boards of Infosys Ltd and AB Volvo, and Chairman of Social Venture Partners, India.

Rishikesha T. Krishnan

The author is currently a Visiting Fellow at the Indian School of Business (ISB), Hyderabad, and Professor of Corporate Strategy & Policy at the Indian Institute of Management, Bangalore (IIMB), India.

Roger Martin

Stuart Crainer

The author is one of the founders of the Thinkers50. He is a partner at Crainer Dearlove and also an editor of Business Strategy Review. His books include, “Key Management Ideas,” “The Management Century,” “The Ultimate Business Library,” and “The Tom Peters Phenomenon.”

Susan Zielinski

The author is managing director of SMART (Sustainable Mobility & Accessibility Research & Transformation), a unique global new mobility tech transfer / applied research initiative of the University of Michigan. Just before joining SMART, Susan was awarded a Harvard Loeb Fellowship based on her trailblazing work in sustainable transportation systems and in naming, framing, and advancing the emerging new mobility cluster through public-private innovation.

Terence Tse

Terence Tse is Professor of Finance at ESCP Europe and Director at i7 Institute for Innovation and Competitiveness in Paris.

Vijay Govindarajan

Roger Martin is Dean of the Rotman School of Management. Mr. Martin also serves on the Boards of Thomson Reuters Corporation and Research in Motion and is chair of Tennis Canada.

Vijay Govindarajan is Earl C. Daum 1924 Professor of International Business at the Tuck School of Business at Dartmouth College. He is widely regarded as one of the world’s leading experts on strategy and innovation

Sachin Garg

Vineet Nayar

Sachin Garg is a young author, entrepreneur and a sought after speaker at B-school events. Recognized as a distinguished alumnus of Delhi College of Engineering (now DTU) and an MBA graduate from MDI, Gurgaon, he is one of the highest selling authors in India, known for a strong connect with the youth of the country.

The author is vice chairman, HCL Technologies; founder Sampark Foundation; and author of ‘Employees First, Customers Second’.

Yogesh Kochhar

The author is Director-Policy, Microsoft Corp India. Views in the article are personal.