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1 APR 2022
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APR 2022
BUSINESS MANDATE
fountainhead of excellence
The panel included Shivansu Gupta, Sr Partner, McKinsey & Co., K Anantha Krishnan, CTO, TCS, and Dr Kamakoti, Director, IIT Madras.
Mr Shivansu Gupta, Sr Partner, McKinsey & Co
to make their supply chains resilient. Not only do they
G
want to make them efficient and get the lowest possible
lobally, if we look at what is happening in the last couple of years and what it means for India, we can see three major trends that will
affect the way companies operate: •
A fundamental shift in supply chains, which will lead to a very different future of global
•
Value
one and diversify the supply chain. The supply chains that can take some level of fluctuation are now having to fulfill anywhere between 15 to 17 percent of demand growth; they are not used to this. Also, the value chains themselves are shifting. In
trade. •
cost, but they also want to be resilient, like China plus
migration
towards
digital
native
the automotive sector, for instance, due to the shortage
businesses.
of semiconductors, a lot of the OEMs are thinking about
The shift in consumer preferences which have
how to bypass the Tier 1 semiconductor suppliers. This
evolved quite significantly.
is a massive shift and it continues to grow. This will
Our research shows that anywhere between three and five trillion dollars of trade flows every year will shift locations or shift countries in the next half decade. For instance, in the automotive sector, of the 1.7 trillion dollars of trade flows that happen globally, we expect anywhere between 260 to 350 billion dollars of trade flows to shift. This continues to grow because of the Covid shock and a lot of countries and companies want
have a lot of implications for all of us.
Value migration Value
migration
towards
digital
natives
is
happening. Over all, market capitalization has grown from 2019 to 2021. We saw that more than 40% of capitalization growth was captured by only 25 digital native companies—the Apples, Amazons and Microsofts of the world. A lot of them are electric vehicle suppliers
BUSINESS MANDATE
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The pandemic has triggered and
smaller size companies and grow bigger and
accelerated it significantly but it
bigger, which will also help drive value
has been building up over the
creation.
last 5 or 10 years.
Six imperatives There are six imperatives for most companies in India. These are:
~ K Anantha Krishnan, CTO, TCS
or producers like Tesla and other e-commerce companies.
•
Investing in innovation.
•
Focussing on growth, which will be driven in large part by Tier 2 and Tier 3 cities.
•
Building
cost
leadership
as
a
key
differentiator.
As people work from home, they prefer ordering
•
Improving engagement with consumers and connectedness.
things from home. This will be a big driver of growth. Also, this is something that we need to be careful
•
Driving partnerships and building asset light
about. In the Indian context, two aspects need to be
systems as opposed to investing in capex
considered:
based assets.
In the next seven to eight years, there will be
•
•
Investing in sustainability and focussing on ESG.
about 90 million job seekers in India. For that to happen, we need to drive a GDP growth of 8 to 8.5%. That is not going to be easy. Because,
K Anantha Krishnan, CTO, TCS
this means that both net employment and
W
productivity growth will have to be the best. We have to continue to grow the economy at a very high rate to be able to absorb them. A lot of value creation happens with large
•
firms that do anything more than 500 MN USD of turnover. 40% of India's exports are driven by these firms. Almost half of the revenue contribution to nominal GDP happens from these firms and the productivity they drive is more than 10X of other smaller firms. If we compare ourselves to even our Southeast Asian peers, we are much smaller in terms of the number of such firms of this size that we have in India as opposed to any other country. So to drive growth, we have to migrate from 18
APR 2022
hat you have illustrated is not just an India opportunity or India specific analysis, but I hear very similar messages from many parts
of the world.
Secondly, the expectations of the
consumers are also surprisingly uniform across the world. People have got used to digital intermediated consumption. The pandemic has triggered and accelerated it significantly but it has been building up over the last 5 or 10 years. This is a trend which will drive change in multiple industries and in multiple contexts, because the consumer finally drives your products or services, designs supply chain and everything else. Though unglamorous, the production and supply chains are very necessary at the back end. Sustainability is also changing things dramatically.
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•
The second bucket is what I call the AI-driven
Dr Kamakoti, Director, IIT Madras:
mania. AI technically has blossomed in the
C
last 15 years.
When I graduated from IIT
ovid has actually normalized things. We now
Delhi in the mid-80s, AI was not a field
compare India versus Europe as an apple
anybody would go to.
versus apple. The needs and trends seem to be
about 2006 or 2007, it shot up, predominantly
the same everywhere. We have our own strengths and
because of processor improvement, data
weaknesses. The game is all about exploiting the
capacity to handle large amounts of data and
weaknesses of others and leveraging our strengths to
so on.
grow. That's what we see in the semiconductors chip
industries, in the supply chain, in production
shortage. For example, the price of network switches
and even agriculture. Let's call this the
has increased from 15,000 to 36,000 rupees today.
Intelligent
Overall, I think, we are in a very good situation. We
continue.
should fight this battle. Being a Director of a premium
•
The
But suddenly after
Now it has become mainstream in
third
Enterprise. is
This
is
‘Ecosystem
going
to
Connecting
technology institution in the country, I am very excited
Technologies.’ In the last 100 years of
to make this better.
industries, supply chains essentially meant
Shivansu: Ananth, you have a unique vantage point
there is a well-defined outcome. There is
of being at the center of technology and innovation in
usually a set of players close to the outcome
one of the largest firms not only in India, but in the
and then there will a set of two, three or four
world. What do you think about the role that technology
tiers of suppliers—from the raw material all
will pay play across industries in the next decade?
the way to the end product. Everybody
Ananth: If you look at the global trend, there are four horizons or buckets of activity across industries. They are: •
expects value along the way. This way of thinking got established, perhaps in early industrial revolution. Now there is a slightly different twist because of the consumer’s
Leveraging digital technologies in any shape
changing behaviour.
With paths to the
or form as fast as possible. I've heard banks,
consumer
heavily
airlines and hospitals saying that we are a
intermediated, the supply chain is becoming
technology company with a banking license or
more and more dynamic. The data generated
airline license and so on. So aspiration is for
from the transactions has become fuel for
free but execution is hard. In the last 20 to 30
additional industries or additional players to
years, all technologists have become very
buy and sell that data and make something
good marketers. You said that the world's top
out of it. This results in very dynamic value
companies are all digital natives. It is fuelled
chains. We haven't yet found a good word for
by consumer demand and it will be a secular
it. Web 3.0 and Blockchain Technologies are
trend for the next 20 to 30 years. Some of us
coming up. Even 5G is jumping onto the
are involved in the India 2047 initiative.
bandwagon.
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19 APR 2022
•
Data, of course, is a well-established platform.
I feel that we have not tapped
So let us watch this space. The experience of it
real intelligence. I believe that
will be real. It could be virtual, like education
we need to set up some rural
online. Entertainment is served up virtually on
Technology Centres.
OTT and Metaverse. What else will be served virtually will be interesting to see. The bad guy industries like gambling and illicit trade
~ Prof. Kamakoti, IIT‐M
will be the first ones to adopt the new trend. So
we
have
to
watch
that
ecosystem
technology space quite closely. •
Finally, we have the science-led future. It is about grand challenges. Sustainability by itself is a huge one and there are many hard to abide by problems in sustainability. People talk that IT Industry is 2 percent of the world's emissions. But we have 30% problems.
the value chain of what goes into a test kit. There is a very efficient data marketplace which are stronger and which connects the demand and supply. It's a case study in itself. It's a very low-key kind of an achievement but it is important in the context of supply chains and new value chains.
processor
Shivansu: Prof Kamakoti, you are at the centre of
improvements, science and engineering in
training all our future leaders of the country. What is
healthcare, etc will play a big role. All these,
the foundation that is required in these leaders, so they
we will see in better context in India.
help capture this opportunity that we see in the next
Here,
I
think
computing,
The same experience story we have seen will unfold in two or three much unheralded ways. One is health. Take, for instance, CoWin app. The vaccination surge
decade, whether it's skill, infrastructure, talent or regulations? Prof Kamakoti:
I'll share my experience. Three
has, of course, now reached a plateau. If you go for
months before, we needed a bunch of Java coders to
vaccination today, you can get a certificate within five
develop some simple software for our process
minutes, which is outstanding. This kind of expectation
workflow. After six months of struggle, we got one
is there now in every industry. Every service product
person whom we offered Rs 80,000 as salary, which by
will become digitally intermediate in India.
IIT standards is a good pay. Two days later, he left
Every
industry must worry about this.
saying he got a job for Rs 1 lakh. This is the reality.
Lastly, let us look at the supply chain shifts, in
The point is we need to make them employable.
automotive, pharmaceuticals and chemicals. Covid test
There's no question about it. I always draw parallels
kit manufacturing in India was zero at the beginning
between banking system. I was on the board of one of
of the pandemic. Today, we are not just self-sufficient,
the oldest banks and I went through the records of how
but we export it. This has happened not because large
promotions were done. I noted that the person who
companies stepped in. It is a very large number of small
could count thousand notes in half an hour was given
and mid-sized companies, which have really dissected
promotion. Today, of course, we have counting
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Covid test kits, many industries from semi-urban areas
We have AI in every
pitched in. Some of them approached us for evaluation.
Department‐ chemical, chemistry, engineering design, applied mechanics and
I feel that we have not tapped real intelligence. I believe that we need to set up some rural Technology Centres. CAMS has helped to set up two centres where we keep
computer science. Therefore,
some 3D printers and computers. We train people. We
reskilling is very important and
can reach out to kids for their online education from
we have to make it more
these centres. We see some good improvement in the
inclusive.
rural colleges and we need to address this, if we really want to scale. Shivansu: We talked about digital natives and value
~ Prof. Kamakoti, IIT‐M
creation.
machine. Not just because of technology, jobs have been
cut
down.
Reskilling
becomes
extremely
What is the role that digital natives or
startups will play? Ananth: A mindset shift has happened in India in the last 10 or 15 years. Earlier, it was not respectable
important. From IIT, we are trying to bring a lot more of reskilling opportunities. Our online BSc in Programming and Data Science is a first of its kind, probably in Asia. We have 12,000 online students. We also have 12,000 offline students who joined earlier. So, in one year, we doubled the intake. Every year, 15 lakh students write the JEE for IIT admission but only 15,000 get selected. What happens to the remaining students who are not
for a person to say that he/she works for a startup after graduating from any institution. We would all try to join either an academic institution or go abroad or join a big company. Today, people join startups, not just at entry level, but at mid carrier level and even senior levels. So the talent pool is coming into the startup world. The quality and quantity has jumped up dramatically. It is a very positive shift.
selected? Online education is the answer. We can
Across sectors, there are low hanging fruits
definitely scale it up and if all IITs chip in, we can reach
available to all startups. Startups involved in SaaS are
out to many students.
doing B2B business and there are enough examples in
Though we teach online, there is live interaction and proctored examination. We conduct labs. We have started with AI and Data Science. Everyone today wants
Chennai. However, there is a lot of opportunities for core engineering or deep tech engineering companies and there are not many of them.
to attend the Deep Learning course. We have AI in every
Not much of Indian venture capital has gone into
Department- chemical, chemistry, engineering design,
this. A lot of work is done in this area in premier
applied mechanics and computer science. Therefore,
educational institutions but this is not getting
reskilling is very important and we have to make it
exploited. This is where the role of big companies in
more inclusive.
supporting the startups becomes very important.
During the lockdown, when we had shortages of 22
APR 2022
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