My Professional Journey and Where we Head Next
The author uses his professional experience from the 70’s to the present century as a lens to re ect on the impact of globalization on India
“Invest heavily to ensure that there is a market share in these new growth countries and ensure you have an advantage by localization.”
“GE began following the Citibank lead in establishing beach heads in to places where few dared to venture.”
I am presenting during thoughts drawn from experiences my professional journey. The objective in doing it this way is to set the context for conclusions the way forward and some out of the box thinking.
Life was much easier when I commenced my career in the India of the 70s. One had a choice to either work for the government or a government owned entity or for one of a handful of private sector enterprises if one wanted to gain experience as an engineer! I chose the latter and started working in a US owned tyre company with a factory in India. It was by sheer luck that it happened to be an industrial company and that too US owned. In the 70s the USA was not a very welcome country in India which had turned sharply left and socialist! So, here I was in a US owned company in sharply socialist India. I am glad it was that way as I would never have learnt the contrast between private enterprise and the freedoms enjoyed therein versus the strait-jacketed socialist pattern of life, as I came from a long line of government servants and had seen plenty of that.
When we look at the 70’s there was a strong dominance of innovation done in the West and all technological developments arose from there, except when it came to space and military materiel in which the USSR was ahead in many ways. It appeared then that this dominance would continue forever. Consequently, most of the West did not realize that the Japanese were about to re-order that thinking and boy, did they do it! I remember well the period of the rise of Japanese automobile the and appliance companies and their entry into US and Europe causing the first major developments in automation and new style of management to emerge in the US as, to put it in the words of a former boss of mine, “We’re going to need to hunker down, re-invent ourselves and not let them eat our lunch”. Well that’s what that company did. I am referring to GE. It hunkered down and re-invented itself, setting the trend for dozens of others to follow and left behind an iconic figure in Jack Welch, who re-ordered GE as an enterprise and if I remember correctly took it to a market cap close to that which Apple enjoys today and, that was twenty years ago. It was about productivity gains, capital turns, “boundarylessness”, transparency, ethics in business, and above all globalization.
Few recognize or, indeed know the cause of the move of USA companies abroad in the early 80s. As the Japanese were moving in to the USA as their new frontier, at the behest of a great American banker, Walter Wriston, a Board Member of GE and the first really great globalizer of US companies, GE began following the Citibank lead in establishing beach heads into places where few dared to venture. If I may be permitted to say so, it was his Citibank that afforded the opportunity to a number of my peers to begin to see over the lip of the cup that was India of the 70s. I know that classmates of mine rose to high positions in Citibank and helped in the revival of South America and manage the wealth of Saudi Arabia. This again is relevant. Were it not for a confluence of two matters: the rise of the Japanese and the external outreach to the US as a consequence and the lack of opportunity in India, a whole bunch of brilliant Indians would not have left India to search for pastures abroad and therefore, the West wouldn’t have learnt of brilliant Indian minds and the East may not have been discovered as fast as it was.
Most people think that behind closed doors, great strategies are thought through and then implemented with the excellent results for all to see. Perhaps, this is true once in a while. In my global exposure, perhaps it is personal to me, but, then having had the privilege of being at the table when many a key strategic decision has been made, I can say, yes, there is strategic thinking, but, finally it is the resoluteness of leadership in the face of opposition to make counter-intuitive decisions that work because the heft of an organization backs these decisions.
To round off the 70s and 80s, and connect the dots for you, let me remind you about the asymmetry of the times and the unintended consequences that resulted in creating new management and strategic thought paradigms. This is from my own experience as I, unlike large numbers of my peers chose never to leave India and saw it from a different vantage point. I now realize that this has provided me with a ringside seat to having seen about two thirds of India’s post-independence industrial and management development. I wouldn’t exchange that for love or money with anything else!
Unintended was the fact that Mrs. Indira Gandhi brought in an internal emergency in 1975. By 1977, a new government came in and a die-hard socialist Union leader became Industry Minister driving out amongst others Coca-Cola, Pepsico, IBM and GE from India! In came brands such as “Double Seven” and “Lehar” for example. But, this was not to last. The Japanese were entrenching themselves in USA and the USA needed to re-enter India industrially. Not many know that it actually occurred at the behest of Indira Gandhi. She returned to power in 1980 and amongst the first things she did was to diversify her military purchases. Few will know just how strong this is in assisting trust to develop between nations as you depend on your security needs on a foreign power. In this case a gigantic shift after the rebuff Indira Gandhi had suffered in the 60s at the hands of President Lyndon Baines Johnson.
Contained in two major purchases of that time rests the story of almost all the India-USA high technology relationships that developed as a consequence. The military engine for the Indian Light Combat Aircraft was a GE F404 engine and the Cray supercomputer for the Indian Meteorological Department was authorized for sale to India. This actually occurred over a cup of tea between President Ronald Reagan and Prime Minister Indira Gandhi in Cancun in the early 80s.
This opened the doors to a vast number of new investments from the USA to India. Thus, whereas strategies may have been discussed in many a Board Room as to how to enter India and seek a base here, it was disparate strategic needs of India that caused the opening to happen. The jet engine was important to India as India needed to design a unique delta winged fighter plane with the lightest engine by weight with the highest thrust and the Indian Meteorological Department needed to provide the Indian farmers with at least 72 hours predictions of weather so as to assist them in protecting harvested crops. But, this had the impact on all that came in the future.
In summary, if you were to climb into a time machine and arrive into India in 1980, all that you had learnt in Management School would have helped, but, you would have needed a dose of deep strategic political knowledge to predict the future and assist you in your investment decisions. Above all you would always need “intelligence” in all meanings of that word. This is what I wish to emphasise so far. To succeed you need to have all the basics and then a secret sauce. India received a dose of new USA investment on the back of these key events. Coca-Cola, Pepsico, IBM and GE were all back and on the back of these, came a large number of other companies to re-establish or establish themselves in India.
Coming to the 90s there are multiple reasons attributed to all that happened in the world in that decade. When we read in the future about this period, we will be told of all the massive changes that occurred. The Berlin Wall had already fallen. Words such as Glasnost and Perestroika had become household names. Deng Xiao Pengs’ aphorisms were Legend and China had embarked on becoming the factory of the world. Suddenly, what the USA had experienced about its lunch being eaten in the 70s and 80s by the Japanese, the Japanese now had the same queasy feeling and began their outward expansion into East Asia and India. In India, it caused the creation of the automotive sector as well as the home appliances sector like never before and then this was followed by the great South Korean arrival of Hyundai, LG and Samsung. Names that are now so familiar to Indians that they are taken for granted as forever having been here.
Quite separate from this, something else was cooking. Going back for a moment to the IBM exit from India in 1977, it left behind the worlds’ largest number of programmers who knew conversion from UNIX to DOS. Then came Y2K. Guess what. Unintended consequences went to work again. It was a discovery the world made when TCS and Patni computers sent their programmers overseas to protect the banking and insurance companies of the world from a crash that could have occurred on 01/01/00 meaning 2000 or Y2K. This is significant because all the great Indian IT companies viz. TCS, Infosys, Wipro, HCL etc. commenced their global foray on the backbone of this event. The rest as they say is history. So, how much of the decision would you attribute to core strategic thought and how much to asymmetrical events? I am sure there is analysis available on this.
Also, were it not for the ignominy India suffered in having to despatch gold to London as collateral in 1991, would India have gone for the massive re- opening of the economy it did then? I don’t have an answer, but, most probably not. Also, did the collapse of USSR also have something to do with it? Perhaps, yes. Nevertheless, India changed like never before and to my mind what was ushered in as a veritable revolution was the arrival of mobile telephony. I remember well sitting in meetings in which India’s present day largest mobile telephony provider, Bharti, would be discussing whether in 5 years they would achieve 36,000 subscribers in Delhi! At about 900 million users in India today, that is so laughable. But, see what else that caused. Globalization by Indian companies. Bharti is now the largest telephony provider in Africa. And, what a change it has brought to all Indians. Today, on TV as I see the son of a street side banana seller arrive at the Junior Indian Idol and on being asked upon his selection to the next round say that all the music he learnt he did so using his mobile phone, I know that the revolution is complete!
The 90s were a decade of massive change. The greatest decadal change in the Indian economy took place in that decade. The greatest, largest IPOs took place then. The arrival of the private sector in all kinds of space occupied by government: roads, airlines, airports, telephony, electricity etc. has changed
the way business in India is done. There is so much excitement in the air. The opportunity to build a modern nation arrives but once.
2008 will be forever remembered. Lehman will be remembered. The cause and effect is epic and continues. We have all had to tear up our scripts and re-write them as a result. Again the effect of unintended consequences. This time, the terrible contraction of Europe resulting in despair in country after country with acronyms being developed such as “PIGS” for Portugal, Ireland, Greece and Spain and so on.
As I now head the India and South Asia operations for a company headquartered in France, let me share a statistic or two. In the past five years the markets have shifted so dramatically that no management teaching could prepare you for these. Survival and in the midst of crisis, expansion and maintaining profitability is no mean feat. Yet that is what we are doing.
We used to have 70% of our business arise in Europe and North America. Now it is 40%. The shift has largely been to developing economies, India, East Asia and Africa. China has hunkered down and has created its own national champions and no longer welcomes setting up of manufacturing by global Original Equipment Manufacturers. As a matter of fact it is using its vast financial reserves as a sweetener to sell to, guess where, India, East Asia and Africa. So, yet a new paradigm shift is in the making. Surviving locally in Europe and North America, whilst expanding in new markets, without the sweetener of money. Quite a challenge you would agree. I cannot speak for others, but our reaction has been exactly the same as that anyone would take to protect their future: invest heavily to ensure that there is a market share in these new growth countries and ensure you have an advantage by localization.
What I do know is that India is not yet well prepared, and I hope sincerely it will move in
that direction to encourage entrepreneurship and innovation. I have tried my personal hand at that and came face to face with the strong arm of the State in everything we do in India. The way the country is set up is not for flourishing private enterprise, but, for a strong State control as in the past. I hasten to add that most leadership in India now understands this. Therefore the atmosphere should or hopefully will arrive where this kind of a remark is a thing of the past.
India has jumped to being a disproportionately service sector economy before becoming an industrial economy. In agriculture China has a share of 34.8% of labour force vs. India’s 53%, in industry China is 29.5% vs. India’s 19% and in the service sector China is 35.7% vs. India’s 28%. Thus, we now enjoy the dubious distinction of having more people in organized security services than in all of organized manufacturing! This just must change, as otherwise 10s of millions of Indian will not move from farms to industry. 53% in farms is just too much. In USA as an example, only 0.7% of labour force is in agriculture and 20.3% in manufacturing with the balance in services sectors.
In conclusion….
Today’s scene in India is that we haven’t really designed the framework to build India insofar as large infrastructure is concerned. The excruciating pain to implement projects in power generation, power transmission and rail transport is of such an order that we truly have to enjoy pain to jump into these sectors! Across the board, we have complicated matters to a point that we appear to be at as standstill.
What are the solutions? I believe we will need to have the construction of physical infrastructure recognized by political parties as a key element lf their respective manifestos. We will need massive amounts of land, cement, steel, copper, aluminum and all the skill sets thereafter to build projects. We lag in this area to a shameful extent. You just have to see the abject failure of municipalities to collect and dispose off garbage to understand this.
Going forward, I do believe that if we are to achieve the goals of providing electricity for all and vast expansion of rail transport, we will need to modify the administrative processes and methodologies dramatically. Otherwise we will not get to where we need to. In other words we will need to dismantle the complex state run structures and move to open and transparent mechanisms with a greater and greater role by regulators and a minimal intervention by bureaucrats.
I believe that we in India will need to write our own rules of the game. Nowhere in history, including in China has so much been attempted to be built simultaneously as we are attempting to do in India. As you would have noticed, I haven’t relied on statistics based on, we achieved this and this against that and that as per the Five Year plans. It is irrelevant as we never ever achieve any of the planned targets on infrastructure. Therefore, a vast dose of expansion in both the investments and concurrent with that the rewriting of the rule book is essential.
What I am suggesting is akin to rewriting the very manner in which Government is to run to the manner in which the private sector participates in this vast sector.
We would need to identify common thought and work towards writing these new rules for building India. I look forward to sharing ideas on this with like minded friends.
