In Conversation with Michael E. Porter

In Conversation with Michael E. Porter Michael Porter, Bishop William Lawrence University Professor at The Institute for Strategy and Competitiveness, based at the Harvard Business School, speaks with Sajjan Jindal, Chairman and MD of JSW Group, on the likely future in the age of smart, connected products. “We have to seize the broad opportunity. We cannot stop moving in this direction because we are afraid that it will not create more jobs.” “Smart, connected products can hold a significant opportunity for government functions, public services and social services.” Sajjan Jindal: India’s manufacturing sector has remained quite dismal at 15% of its GDP (gross domestic product) since we have traditionally been an agricultural society that leapfrogged to become a services hub. What would it take to take the Indian manufacturing sector to its stated goal of 25%? Especially given that manufacturing sector will have to evolve to the new world where the product manufacturer will not only manufacture that product but other IT (information technology) services that would be associated with it to give a different product to the customer? Michael E. Porter: India is little underweight in manufacturing relative to many of the other leading economies in the world, but the good news is it is overweight in services and IT expertise. I hope that the IT expertise of the country will give rise to a lot of entrepreneurs who will be the pioneers of some of the new manufacturing companies in India that take advantage of this opportunity and manufacturing leaders in the country will see that here is our leapfrog opportunity. When compared to China, India brings in some benefits. It is the deep IT expertise, the experience that many Indians have in software and processes and the IT dimensions that we don’t see companies having in other countries. Everybody is dedicated to moving on this and here is our chance to quickly catch up. To do that firstly, we need to make sure that Indian institutes are not training for the past IT jobs; they are training for the future IT jobs at the highest level. Secondly, we are going to try to master the security, IP (internet protocol) and regulatory issues of how to protect data, how to establish data rights and how to create a regulatory environment that fosters this set of innovation. If this is taken care of, we can tell a very positive story. And we should not view it as a threat, but we should see it mostly as an opportunity in India. Sajjan Jindal: Close to 15 million educated, well-trained youth are entering the job market every year in India. Will these IT enabled services hinder their opportunity to get jobs? Michael E. Porter: I don’t think we know how this can play itself out because every time we see a clear pattern, there is another innovation and product area is changing in ways that are not anticipated. I am convinced that there are so many new things that can be done and new needs that can be met here that the net effect will be positive for growth. India needs a lot more healthcare. India can improve its housing for lots of people and so there are a lot of requirements in India. The problem is not needs; the problem is the ability to meet those needs cost effectively, and this technology is going to be a discontinuity in the capacity to meet those needs. As a result, it will have a net positive impact on growth and jobs. The other aspect is how it is going to affect the ability of individuals to do jobs and if we can harness the possibilities of using technology to supplement and enhance people’s capabilities. It will give people an opportunity to do jobs that are more productive and will command a little bit better wages. There is a deep concern in the world about the effect of technology on work, on jobs and if any jobs will be left as everything gets automated. However, it is a bit different than just automating ways in which work is done. There is a lot of new work that is necessary here, and a lot of new opportunities can be created. I believe that we can make this a good story for jobs. Sajjan Jindal: India is known for its traditional industries like leather, textile, diamond, and other such industries where a lot of people are employed. With global companies adopting high-end technology probably manufacturing similar things like textile and leather, would that give restricted employment opportunities in our country? Michael E. Porter: As economies advance, the service component of the economy grows, and many of those services are quite local. If we look at the points mentioned earlier about healthcare, housing, childcare, education, and beautification of the environment, etc. then there are ways to improve the quality of life. Hopefully as the economy gets more productive, though that is going to take some regulatory simplification, the forecast is that over time, there would be a tremendous need for services within India. It is a positive trajectory as services are much more labor intensive than goods. The manufacturing firms are going to have to embrace all of this stuff inside the company. This means that one will not need as many service people who can do the service predictably or one can do it remotely. We have to seize the broad opportunity. We cannot stop moving in this direction because we are afraid that it will not create more jobs. India has made strides in opening up and those strides need to continue and hopefully over time, those are going to start to come back and benefit citizens who need better and lots of different kinds of things, to improve the quality of their lives. Sajjan Jindal: Can you share how governments can also benefit from Internet of Things (IoT)? Are there any case studies of IoT being used for smart cities and smart governance? Michael E. Porter: It’s an excellent point, and it has not been our focus to highlight those examples, but they exist. It could allow improving and optimizing the nature of water systems, electrical grids, and highway functioning in a city. One can reduce congestion dramatically with this technology, when one has the data about the cars. So smart, connected products can hold a significant opportunity for government functions, public services, and social services. The executives who are leading those activities in government need to see the smart, connected products as a major lever to make a discontinuous change in how these public functions are being performed. We do see examples around the world of various cities, regions, and countries embracing this. The first aspect in this regard could be to do with the inside machinery of the government. It could be about the government functions of traffic control, safety, water management et al. We need to be focused on public services and how to make those more productive. Sajjan Jindal: In the healthcare sector there is a huge shortage of skilled labor in India, there is also a tremendous capability of cost-effective caring. The concept of remote care has been proven a long time ago but hasn’t scaled appropriately. How do you see the ability of a young India in the future to care for an aging world in an environment where there is such a global shortage of healthcare capability? Michael E. Porter: We work very heavily in healthcare delivery. One of the first level implications has to do with the ability to tie all equipment together in the healthcare delivery process. So, if one is in the hospital, it allows us to get a much higher visibility on a lot of data on the ways in which various equipment and machineries are being used. Then there is the opportunity to remotely monitor the people. We now have pacemakers, so one does not have to come in for a checkup. The doctor or the nurse can see how your heart is doing remotely, and that applies to many other medical devices and implants. We have the ability to remotely monitor people’s blood pressure and various other values that give us a sense of how they are doing regarding their health and tell us whether they are moving in the right direction. So, the first wave here is going to be tying together devices and products within the healthcare delivery process and then taking advantage of the capability to gather information and the ability to have service delivered by being actively connected to patients. One can do virtual visits, and it is getting better and better.

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