August - 1999 - issue > Business

Management crises are not unique to India; throughout the 1980s, most of American industry struggled to break out of its own management mold. The common perception of American management was that its managers were continuously hired and fired, and it did not understand the basic problems it faced. Today nobody is laughing at the US. In fact, the symptoms of resistance to much-needed change have shifted to Europe and Japan.

There is a dominant, steadfast mindset among managers in India that one must come to terms with. As members of the Indian community, we need to question the debilitating effects of the frame of reference Indians have grown up with and discuss how to deal with those effects so that we too can break out of our management mold. Given the discontinuities in the competitive landscape and the nature of emerging opportunities, Indian managers need to share a point of view about how to manage differently to become competitive.

Framework
Let’s look at the key elements of India’s public policy framework, within which most managers in India have lived:
1 Managers are self-sufficient; they are accustomed to significant limits to size and growth, and have deep concerns over appropriate technologies.
1 India has a strong domestic market orientation in terms of size, product range, technology and growth opportunities.
1 Licensing has been a major instrument for enforcing public policy.
1 Conglomerate diversification is significant, partially as a result of licensing and partially due to domestic market orientation.
1 The dominant role of family-controlled groups, a public sector controlled by bureaucrats and the financial institutions in the patterns of capital structure in Indian firms restrict the ability to "think big."
1 Central and state governments have provided, over time, a wide range of politically motivated subsidies that have distorted basic economics in every sector. As a result, no one really understands the true economic costs of any of the products and services in the economy.

As a result of this framework, at least until 1982, India did not provide a hospitable base for multinational companies. More importantly, Indian firms did not export. The net result of the policy framework in India was low productivity, stagnation, scarcity and an economy that didn’t take consumers’ preferences or needs into account.

Today’s India
Today, the Indian economy is radically changing. Multinational firms (MNCs) are in full force. There has been significant growth during the last six years, which provides a challenge. If an Indian firm wants to compete with MNCs, they must be matched in a short period of time in quality, cost, innovation, scale and governance advantages. Even if it’s only just to defend one’s own turf, Indian firms must become world-class.

How do we change to this managerial perspective? The real issue in India is that few managers think strategically. Very few firms in India work with the 15- to 20-year time frame they should work with. Indian managers have to learn to think big. Managers in all transformational societies have three tasks. First, they have to manage the present. Second, they have to selectively forget the past. Third, new skills must be learned to build the future.

Changing Minds
A change in the Indian manager’s mindset from defending domestic markets to building export markets is needed. Companies that build export markets would have no difficulty defending domestic markets. Worrying about MNCs is a good thing, but creating Indian MNCs is really what the goal should be.

Let’s look at some fundamental drivers that could force creativity in Indian managers if they would only listen and open their eyes. First, capital market discipline is becoming a part of the way they work. Returns to shareholders are becoming a very important consideration. Second, many family groups are breaking down. This is one of the results of the emerging capital market discipline, as well as the inability of family groups to fundamentally change their internal governance. India is experiencing a tremendous clamor for accountability, both private and public.

The need for private and overseas capital to cope with the needs of infrastructure development will force a different way of running India’s public sector. Regulatory authorities, statutory bodies with independence, and expert staff will be making techno-commercial judgements. The most interesting change taking place in India is that there is finally recognition that public administration requires different skills than does coping with complex economic questions inherent in the telecom and power sectors. Economic logic (not political logic), accountability, global orientation and transparent governance are gaining recognition as important organizing ideas.

Opportunities Abound
While it’s true that India is a complex country of 950 million people, it’s also true that just a thousand people can make a difference there. Let us focus on the nature of the opportunity for Indian industry, whether through restructuring existing industries, reshaping existing businesses, creating new businesses or exporting more products.

India can create world-scale businesses. The size of the domestic market is huge, and Indian managers have access to technology and capital from around the world. In addition, India has tremendous human resources. Domestic distribution is one of the extraordinary capabilities that most established firms have in place, and India has all the pre-existing conditions needed to become globally competitive. Countries like Holland, Finland, Switzerland and Singapore have created world-class capabilities even without a world-scale domestic market. Until recently, India, Brazil, Indonesia and China could not boast of either a large domestic market or home-grown, world-class competitors. China has broken away from the group by creating world-scale domestic markets.

What will it take to transform Indian industry, placing it in the same group as the US, Germany, Japan and China? Getting there will require a fundamental transformation. Learning requires accepting personal risks and personal vulnerability, as well as organizational risk and vulnerability. High performance organizations must focus on performance, reconsideration of the business and product portfolio, a reworking of the price-performance of the products and services offered, and a clear focus on becoming the best of breed on quality, cycle-time and logistics. When creating an investment space, high performance leads to investment capacity.

Creating a shared long-term competitive agenda within the company requires a capacity to anticipate customer needs and technology trajectories, as well as a certain willingness to invest in the future. It also requires the desire and commitment to create new businesses. After 20 years of working with large companies, I have come to a very simple conclusion: At the heart of radical transformation is always the individual manager. The only way India will change is when every manager, every employee, every person associated with this country says, "First, I have to change — not make someone else change." It’s easy for Indian managers to feel trapped and frustrated, to focus on current problems rather than new opportunities. In other words, a vision of the future, confidence and faith are prerequisites in managing this transformation. Because transformation is about innovation — not routine or efficiency — Indian managers must be leaders in the innovation process. We need to be motivated by imagining what India can be, rather than being constrained by what it is today. That is our challenge.