In an interaction with Sanjiv Puri, Chief Executive Officer of ITC Limited, Michael Porter, Professor, Harvard Business School, shares his insights on the Indian growth story and experience while also talking about the need to tap shared value opportunities within the country.
The only way a big country like India can become highly productive and successful is that the strategy gets broken down and applied into smaller units where you have leaders focusing not on the country but on the states and the cities.
Shared Value is nothing but the way to understand and think about things differently.
Recently the Government of India has taken a very aggressive transformation agenda to create economic empowerment for the people of the country. What kind of opportunities and challenges do you see for India?
I believe that India is in a very different place today than it was 14 years ago. The growth is robust and quite impressive. The required momentum is there and as such the GDP per capita, business environment, infrastructure, tax system, etc. has got better with time. However, unfortunately, all this is still not amongst the best in the world. Surely the growth rate difference with China is closing but still, too much complexity exists in doing business in India. So, if there are better techniques to be more efficient, then we can certainly create one Indian economy where all the states are able to manage trade and become competitive nationally as well as internationally. The only way a big country like India can become highly productive and successful is if the strategy gets broken down and applied into smaller units where you have leaders focusing not on the country but on the states and the cities. I think, to get internal competition and differentiation across the Indian states, a lot will first go into simplifying the complex rules and setting up of policies that are exclusive to the specific features of the different states. The momentum is building and the question now essentially is how do we keep pushing the reforms further. There are plenty of challenges that the country is facing today but then it is also on its way to achieving a greater good for the citizens. I am hopeful that India will not get trapped in terms of internal divisiveness as is the case with most of the countries.
What kind of strategic options do you think enterprises have before them that can address the twin challenges of being competitive and the ability to create employment opportunities for their societies?
India’s economy is growing and it also seems that the rate of growth of population is slowing down in the country reflecting better education and opportunities. However, right now the engine of growth is not getting amplified as fast as it is capable of. Considering the tremendous amount of needs that India faces today, we need to get the ball rolling at a time when the growth rate and the evolution of the economy is not spinning out quite enough jobs for the youth. Hopefully, all the transformations that are taking place will continue in near future but with the demographic growth in action, as those entering the workforce will need jobs amid concerns regarding technology automating most of our work. Although partly true, I feel that we cannot and should not get afraid of a “no jobs” scenario. The solution lies in starting to create the underpinnings of rising prosperity leading to greater number of needs being fulfilled. In India, much of the real growth is going to be domestic that presents an opportunity to create an economy and a set of companies that are efficient enough to have involved an enormous working population with them. Therefore, to start the positive cycle of meeting new needs we will need more companies, more services and hence more employment. While this cycle has started to surface in the country, there is still a long way to go, get the impediments out of the way and throw open all the necessary forces of competition. As I am aware, the present government has been taking some forceful actions towards this so that at least the economy is on the right track but I think India can grow exceptionally for many more years to come if it is successful in avoiding divisiveness and be united in solving some of the greatest problems like unemployment.
Idea of ITC on Creating Shared Value
ITC while looking at inclusive growth options in its paper business has come to pioneer the concept of agro and social forestry thereby creating about 110 million man-days of employment in close to 600,000 acres. It is all about working with the entire community to improve their productivity and create a virtual cycle because they only become the consumers of other products and services leading to further growth.
An elated Professor Porter stated that this was a great example. Businesses have the power to influence their external environments in a lot of positive ways which they must recognize I order to become the drivers of growth and societal change. Initially, the pace has been slow because companies historically have had narrow views of how to optimize their performance but now we can see some great work and we need to encourage this now even more greatly.
Concluding Remarks by Professor Porter
On being asked about how fast we can incentivize the shared value perspective among different sets of investors and policymakers, he said that according to him it is the idea that changes the world. It is nothing but the way to understand and think about things differently. This is one area where if we can get the business community to start looking at the opportunities differently, then we can change everything.
