Tuesday, March 13, 2012
Will the "I" in BRIC become Indonesia? CNN Says So.
What Indian Management Needs to Understand About the Global Economy
I watch CNN a lot. Recently on "Quest Means Business", Quest asked an Indian business analyst, "Aren't you concerned about India's failure to deliver?" Fareed Zakari of "GPS" on CNN recently did a spot on the potential of Indonesia and forecasted that with India's slowing growth, and Indonesia's rise, that BRIC (Brazil, Russia, India & China) may soon replace the "I" in BRIC with Indonesia.
There are substantial flaws in India's ability to evolve, from its lack of quality education for the majority of its citizens, its substantial failing at providing infrastructure (roads, water, electricity, housing, etc.), and by far the worst, the deep, long term and entrenched corruption at local, state and national levels. Manufacturing and (some) innovation have been making substantial change, but I keep hearing, "Where is India's Google, Facebook, or Groupon?" What's built here, while some are wildly successful, are copycats, not gamechangers.
Indians like to point at the Tata Nano as a gamechanger and I scoff at that, especially for India. While the idea at heart makes sense, there problems that make it not a game changer:
1. It is a cheap car for the masses in a country of 1 billion that doesn't have roads to handle the current traffic.
2. It uses fossil fuels. If this car was green -- electric, or built on a Stirling engine using hydrogen, thereby reducing CO2 in a country rapidly succumbing to the worst pollution levels in the world, it could have been a gamechanger.
3. It's not as cheap as it was supposed to be. The design itself has issues (try fixing a stall on the road - you have to take the back seat out to access key components) so it won't work in Western countries (and I'm not sure it has the emissions technology built in to allow it to be sold in the EU or California).
4. An industry insider said that 25% of the components that make up the Nano are manufactured in China.
5. It was a marketing disaster.
Another weakness than many Indian companies have selling overseas is that many don't respect that the customer is king and you need to respond to them as such. One Indian CEO said to me. "Why should I bother with customer service when there are a billion of us here?" Ethics are expected in global business. Excellent customer service is expected. Product quality is demanded, on time at the price quoted. This issue becomes more dominant when working with Western buyers because we don't negotiate off proposal prices. What you've presented, we usually believe to be the final price. We respect that and pay it. Our Indian vendors consider us fools for doing so, thus their existing high profits. This is changing as salaries continue to rise and Western companies go elsewhere.
So where should Indian companies go? Start domestically. Every MNC is salivating on India's fast rising domestic market and there's a lot of money up for grabs. Foreign products go for high prices due to draconian tariffs, but people are willing to pay for them because they expect a quality product and customer service, things they're not sure they'll get with a domestic product. The Chinese have been successful here by producing low quality goods at a price that's more affordable, providing long term pricing contacts that allow for minimized risk, even though there are conflicts on their shared border. India is trying to keep the "Giant from the North" from flooding their market with cheap goods, but they're coming in anyway, cutting into the domestic market that India's companies should already be serving.
Another issue is culture. Middle managers build fiefdoms for themselves and seek short term solutions, instead of convincing their seniors on long term strategies that will sustain them over the next decade instead of the next year. Incentives based on performance need to be standard practice. Communications from the CEO all the way down to the tea boy needs to be clear, measurable and effective. People need to know what you want, when you want it, and engage across the company, You're a team, people, not silos of information and skills sets to set upon each other in a drag-out fight for supremacy.
Invest in serious innovation, not copying other companies. Sure, you might be able to copy a widget, even make it better at a lower price, but that's not really innovation. Make a widget that the consumer doesn't know he wants yet. Find ways to see a problem and come up with a different, more elegant solution. Figure out how to change the world. That's innovation, and if Indian companies really do start investing in real innovation, no one would question the "I" in BRIC. Watch out.