India: Start of an interesting Journey, but are we building the right Roads!

Date:   Saturday , June 28, 2008

India of today is very different from the India I left in 1981. In those days we had a lot to talk about our glorious history and maybe India being the largest democracy in the world, but not much about India blazing new trails. It seemed as if the world had moved forward and India was still dreaming about history. World was focused on China and the “Tigers of Asia”, while India was more associated with snake charmers and camel riders. Indian bureaucracy was world famous for its “License Raj” mentality and almost everything was on allocation with people waiting for years to get a telephone line connection or a car, among other things. Although we had some world-class educational institutions such as the IITs and IIMs, some of the best technical brains were leaving the country and driving innovations globally, especially in the U.S.A.

Today we have a well established “Brand” especially in the high technology industry. License Raj is gone and some of the best economic brains are driving our economic policies. Our economy is growing at a rate of 8-10% a year and there is a thriving middle class that has become a big consumer of products and services. India and China are considered the emerging global economic power houses. We are starting to see the reverse brain drain with Indians in India and from abroad starting many new companies and institutions here in India. Some of the big business houses in India such as Reliance and Tatas are going global and taking leadership positions in their respective fields. When we set up our India operations at SiRF, we called it our “Center of Excellence”, not just a development center, with a charter to develop products and technologies for global and local consumption.

During a visit to Europe recently, a German editor asked me a very interesting question: “What should Europe and U.S.A. do to be competitive against India and China in future?” Who would have imagined such a question few years ago!

It has taken significant effort from Indians within India and all across the world to establish the credibility of India as a country to reckon with. However, we cannot rest on our laurels; we are just getting started on an interesting journey and where we end up will depend a lot on the kind and quality of “Roads” we build as we go along.

Good “Roads” make the journey easier
Very often I am asked to compare India and China and how these two countries are evolving as economic (and military!) powers and where do we see them in future. My typical answer is: “China is growing because the government put a very robust infrastructure in place to drive the economic growth, while India is growing because the government just got out of the way. If we can grow like this despite having no infrastructure, imagine what would happen if India had an infrastructure!” This is, of course, a very simplistic view but not too far away from reality.

Infrastructure is the core around which a country can build its sustainable competitive advantage. Unfortunately we are significantly behind the curve in this area. Infrastructure is a multidimensional entity: transportation, education, electricity, communications, and many other aspects. No question, it is a tough problem to solve, but we have no choice. We have some of the world’s most beautiful sights and monuments but no easy way for people to get there. We have some of the best companies and teams in high technology, but our high technology centers and our educational institutions already seem to be bulging on seems. Lack of infrastructure is replacing License Raj as the main obstacle to our economic growth. This clearly should be the first priority for both the public and private sector in India.

Building just “Low Cost Roads” for others may not get us to our desired “Destination”
India has achieved a significant success in servicing the needs of others whether it is the call centers or outsourcing of development work for companies in developed nations. However, most of our success so far is based on lower cost of labor which is a good way to start, but not a long term sustainable advantage. As the economic level of India rises and other developing countries start aggressively going after services business, the low cost advantage will dissipate very quickly. In the 1950’s Japan started becoming successful in many industries by building products cheaper, but over a period of time they built a sustainable advantage by building products better. Today Toyota is on the cusp of becoming the largest automobile company in the world with a well deserved reputation for its quality and innovation. We have to create similar differentiation in services based on specific knowledge base; processes that enable us to do things better and quicker; and last but not the least, intellectual property protection for our services business. Many innovative companies in India are starting to do that, but most of the proposals I see are still based primarily on lower cost of labor.

Building “Vehicles” enhances “Exploration”
While services are a good business to build global enterprises, there are very few examples of countries becoming global economic powers without building world-class products. Japan, Germany, and Korea are classical examples of countries that have become economic powers in the last fifty years by focusing on few areas to build differentiable products, in most cases using domestic market as a test case for new concepts. China has not only become the manufacturing hub for others, it also has a very healthy national product development strategy focused on both global and local markets. There are many companies in China that are focused solely on addressing the needs of their large domestic market. With a population of billion plus people, there is no reason why India can’t use the domestic market to test and validate innovative product concepts for global deployment. We are starting to see this trend in India, with companies such as Reliance building world’s largest refinery and Tatas building world’s lowest cost automobile. However in high technology, while Indians are involved in leading edge product developments worldwide, India as a country is very far behind in developing innovative products for either global or local markets. India needs to have a focused development effort on building world-class products, products that blaze a new trail, to create a sustainable advantage as a world economic power.

Explorers blaze “New Paths”
If Columbus had not “Failed” in his quest to find India, where would be America! Calculated risk taking is a very important part of success of any enterprise or country. One of the reasons Indians, or for that matter most immigrants, have been very successful overseas is that they have had the adventurous spirit and in most cases no fallback if they failed. We learn from our failures, but traditionally risk of failure has prevented usfrom doing more creative things. I believe it is very important for Indian system to encourage the spirit of exploration, creativity, and risk taking: in education, in government institutions and in private sector.

India needs to be confident in its ability to compete globally without being arrogant about it. One change I have found in China in the last decade is the level of confidence they have in themselves as a global power as well as in their ability to compete in a global market place and on latest technology fronts. They are developing leading edge technologies such as 3G wireless, MobileTV, and now even navigation satellites and proposing many of their own technologies as the basis for worldwide standards. Even if they do not succeed in all these endeavors, they are clearly a force to reckon with in new technology frontiers.

Any “Journey” is an “Adventure”, but we can learn from history
I see the India of future finally regaining the glory of the past and going a step beyond in the world of tomorrow. However, this will require a well thought out and coordinated strategy at a national level to achieve global leadership. We need to position ourselves as a country by first defining as to where and how we differentiate ourselves in the global market place and then delivering on it. During our childhood we have read many stories of bravery during the “1857 Kranti” and how we won many battles, but lost the war. Recently I read a book “The Last Mughal”, and it is interesting to see how we surprised the British and won the initial battles, but ultimately lost because we did not have a coordinated strategy to win. This time we are not in a military war, but clearly in a global economic battleground and we will need strategy to win. Let us not lose the momentum this time. We need to keep in mind that history has a tendency to repeat itself, because people don’t learn from it.