India’s future: superpower, super market, super innovator?

Citation

Leavy, B. (2014), "India’s future: superpower, super market, super innovator?", Strategy & Leadership, Vol. 42 No. 2. https://doi.org/10.1108/SL-01-2014-0009

India’s future: superpower, super market, super innovator?

Article Type: The strategist’s bookshelf From: Strategy & Leadership, Volume 42, Issue 2

Reimagining India: Unlocking the Potential of Asia’s Next Superpower

Edited by Clay Chandler and Ad Zainulbhai (McKinsey & Company, Inc.), Simon & Schuster, 2013, 381 pp.

The economic rise of India has been the defining event of my life. It is not only good news for 1.2 billion Indians, but it is also reshaping the world. At a time when Western economies are faltering, a large nation is rising in the East based on political and economic liberty, proving once again that open societies, free trade, and multiplying connections to the global economy are pathways to lasting prosperity and national success (Gurcharan Das, author and commentator).

Few now doubt that India will become a new global superpower. What is much less certain and more debatable is how and when? Also, what is the nation’s true potential as an economic powerhouse and world-class innovator? And what can be done to fully unlock it?” These are the questions that Reimagining India: Unlocking the Potential of Asia’s Next Superpower explores.

The book features 63 essays covering many aspects of modern India assembled by a McKinsey editorial team seeking wisdom “from many dimensions, social and cultural as well as economic and political.” They secured contributions from several of “India’s leading business executives” and from “CEOs of some of the world’s largest multinationals,” along with others from influential “economists, investors, entrepreneurs, scholars, journalists, artists and athletes.”

Reimagining India offers wide ranging insights into “the strengths and weaknesses of India’s political system; growth prospects for India’s economy; the competitiveness of Indian firms; and India’s foreign policy,” while also exploring “how India might harness the power of new technologies, improve its infrastructure, expand access to health care, revamp its education system, rethink its energy strategy, and halt destruction of its environment.” As the editors point out, all of their contributors are “independent voices,” and the intention was not to extract a McKinsey “white paper” or policy document from the compilation but rather to “create a platform for others to engage in an open, free-wheeling debate about India’s future,” one that should be of great value to any strategist or policy shaper with an interest in India’s current prospects and future potential. The 63 essays are grouped under six main headings: reimagining, politics and policy, business and technology, challenges, culture and soft power, and India in the world. The early sections deal with India’s progress since independence in forging a unified vision for the world’s largest, most diverse democracy and its ongoing attempts to evolve the relationship between national and state government best suited to realizing its full potential and aspirations.

For many of the essayists, independence represents the first modern imagining of India, but the template for nationhood is not like any that modern history has witnessed to date. The most striking thing about India is its diversity. According to Fareed Zakaria, Time editor-at-large, India “gives diversity new meaning.” The country features “at least 15 major languages, hundreds of dialects, several major religions, and thousands of tribes, castes and sub-castes,” with a “Tamil-speaking Brahmin from the south” sharing little with a Sikh from Punjab each with “his own language, religion, ethnicity, tradition, and mode of life.”

Against this background, and the separation of Pakistan at the outset, a major preoccupation of successive national administrations in the decades immediately following independence was keeping India together long enough for a stronger, more embracing sense of nationhood to take hold. It is testimony to India’s increasing resilience as a country that many contributors to Reimagining India no longer see break-up as a major risk. If India’s success in holding the nation together has been remarkable, the country’s economic record is widely seen as one of chronic underachievement. Does India now need to concentrate more power in its national government in order to accelerate its further economic development, and become more like Singapore and China, or should it give more freedom to the individual states to drive the process from below?

The promise of decentralization

Many influential Indians, like Anand Mahindra, CEO of the conglomerate and car and truck maker Mahindra and Mahindra, now prefer to put their faith in greater decentralization, and he believes the time is ripe: “For India’s economy to expand as rapidly and yet more sustainably than China’s, we need to make our differences into virtues,” and “the best way to propel the economy may be to encourage different parts of the country to go their own way,” now that “the idea of a united India runs so broad and deep.” Promoting healthy competition between states for major projects will help to “drive innovation and changes to the system much more efficiently that any edict from Delhi could,” and “we should encourage a similar competition between cities as well,” since “India’s biggest long-term challenge, like China’s, is to figure out how to urbanize a population of more than a billion people.” While author and commentator Gurcharan Das supports this “federal trend” as “virtuous,” he does not see it being able to address the national issue “of how to reform the state institutions,” many still mired in excessive regulation and bureaucracy. For him, what India also needs is a “strong liberal state with three core elements: the authority to take quick and decisive action, a transparent rule of law to ensure that such action is legitimate, and accountability to the people.”

What most of the contributors seem to agree on is that India’s future route to economic development will be different than China’s. India’s federal democracy has proven its resilience against all the odds, and the country can be expected to seek and find solutions to the development challenges that continue to face it within the democratic model.

Realizing India’s potential – business, public policy, infrastructure and technology

The heart of the book deals with the key challenges still to be met in unleashing India’s full growth potential, and the opportunities for business, technology and public-private partnership to play imaginative and rewarding roles in addressing them.

The opening out of the Indian economy in 1991 and the dynamism that followed were a revelation to all. For foreign-based multinational companies now ready to take a more strategic look at India, a number of path-finding CEOs offer valuable insights. Common is the importance of getting to know the local needs at first hand and the willingness to become a fully authentic insider in developing and delivering solutions.

Modern India was first colonized by a commercial organization, the East India Company. So, it should not be surprising if Indians show some wariness when it comes to welcoming foreign direct investment. As Muhtar Kent, the CEO of Coca Cola notes, Indians have had “a long and painful experience with foreign businesses exploiting their market without contributing to the well-being of the local economy.” Coca Cola’s experience in India over the decades is a microcosm of independent India’s changing attitudes to foreign direct investment up to the reforms of the early 1990s. The company first launched operations in India shortly after independence in the early 1950s, and the business “grew steadily,” but it exited again in 1977 “after a new law diluted ownership of our assets and operations.” It returned to “rebuild our business” in 1993, but found it to be “harder going that we’d imagined.”

Among the major challenges was the struggle at first “to find and keep talented employees.” The company also learned that “that while Indian consumers seemed ready to embrace global brands,” they “resented any hint of global corporate dominance,” and it also took the company some time to recognize that small stores were “an unappreciated source of economic opportunity.” It addressed the first challenge by recruiting “a lot of young professionals with deep experience in India’s retailing culture” and “providing them additional training in customer relationship management, sales, service and conflict resolution,” and the second by deepening local ties. Coca Cola has “worked hard to source more products from within India” and help finance supplier productivity initiatives, so that people all over the country would know that “we were there not just to sell to them but to buy from them and invest in them as well.” Addressing the third challenge, the “huge role” that the small store plays “in the lives of our customers” required the company “to do many things differently than we do in developed markets.” For example, since small stores are usually run by women in emerging markets, the company recently launched a “5by20” initiative to help bring “business training, finance opportunities, and mentoring” to “five million women entrepreneurs across our global value chain by 2020,” with Indian women among the major beneficiaries. It also developed a new solution tailored to the needs of Indian small retailers, a solar-powered mobile cooler called eKOCool, “a sophisticated marriage of technology and local market savvy” to help the myriad of villages with no reliable access to electricity.

Today, Coca Cola’s business in India is “thriving” and the company and its global bottling partners plan “to invest $5B” in it over the remainder of the decade. Key to its success to date has been “learning to see the Indian market as it is, not as we wished it to be,” and recognizing that the rewards “will materialize only if we see our investment in broad terms: not just capital investment in bottling plants and trucks but also human investment in schools and training, social investment in women entrepreneurs and technological investments in innovations like solar carts that can power a cooler, a mobile phone, or lantern,” all of which is “an expression of our commitment to India – and our commitment to succeed on India’s terms.”

Other multi-nationals also have ambitious investment plans. Starbucks CEO Howard Schultz fully expects that over the coming decades “the number of our stores in India will rival the size and scale of what we have planned for China” notwithstanding a 14-year head start in the case of the latter. The company had tried several times earlier to enter the market, but “kept running into obstacles.” It finally entered India in 2012, in partnership with the Tata Group.

Schultz strongly extols the virtues of an alliance with the right strategic partner and “can’t imagine bringing Starbucks to India without the assistance we’ve received from Tata.” Tata, with its local knowledge and “revered” corporate image, helped Starbucks with recruitment and menu selection, as well as store design and location. Moreover, Tata’s demonstrable commitment to a profit with a social conscience helped to convince Schultz that it was “the right partner for us.” For its part, one of the most significant commitments that Starbucks has made to becoming a true insider in India was to co-develop a new Indian Expresso Roast to be sourced from, and roasted by Tata, the first time in its 40-year history that Starbucks has outsourced the roasting process. As Schultz points out, “teaming up with Tata to come up with an Indian roast was a huge step for us” and “we learned a lot about ourselves in that process: that not everything needs to be invented in Seattle and that we can collaborate and coauthor, as long as there is a foundation of trust.”

While Foreign Direct Investment (FDI) with the right approach can do much to help accelerate India’s economic progress, the impact is unlikely to be only one way. Indian MNCs, as they widen their own global reach, also look set to bring some innovative influences to the world of corporate management. For example, Nisaba Godrej of Godrej Industries, a diversified subsidiary of one of India’s leading conglomerates, describes how the concept of “antevasin” has helped his company in its efforts to create “a modern successful but also socially and culturally relevant” firm. Antevasin is a Sanskrit term and refers to living “at the border between the material and spiritual worlds.” Godrej now recognizes that “like an antevasin,” it must learn to “live on the border” between its “storied past and an exciting if uncertain future” if it is to “understand the aspirations of young Indians and to respond to new challenges facing our ancient land.” This antevasin perspective has since influenced its approach to product design and marketing, its decision to launch India’s first agricultural technology venture fund, its creation of an experimental space, Culture Lab, to help “blur the boundaries” between academia, creative industries, NGOs and the public sector, and its new selection criteria for recruiting summer interns.

Embracing challenge and opportunity

Many of the articles in Reimagining India focus on challenges and opportunities. The challenges are many, with health, education, energy, and transportation among the more notable. The huge opportunities lie in the demographics and in the potential to address many of these challenges through technological leapfrogging in the new digital era. India is not only set to become the world’s most populous country within the next two decades, but, with 50 percent of the population currently under 25, and mobile connectivity rapidly spreading, it is set to become the “digital generation” capital of the world by an even wider margin, with implications for game-changing innovations in technologies and business models that will ultimately ramify well beyond Indian shores.

India already has the third-largest base of internet users in the world (after the US and China) with 120 million active participants, and this still represents only 10 percent of the total population. Little wonder that Tesco CEO, Philip Clarke, believes that “over the next ten years, new technologies will have a profound and lasting effect on the way Indians shop,” and that India could well leapfrog from traditional retailing” directly into the multichannel world of “bricks and clicks.” Furthermore, as McKinsey partners Vikash Daga and Vivek Pandit point out, “India’s Internet growth story will be led by mobile devices,” and digital technologies will represent more than just major business opportunity. This m-commerce technology revolution will “also transform how Indians connect with their society,” as citizens, “particularly in rural areas,” and begin to “find health, education and financial services available to them in a way they have never been before.” As K. Srinath Reddy, president of the Public Health Foundation of India, highlights, “India’s strength in information technology and the ubiquitous use of mobile phones” are already “the sources of several innovations in health service delivery and monitoring,” allowing doctors to amplify their impact through dispensing care remotely. Similarly, social entrepreneurs, Salman Kahn and Madhav Chavan see imaginative use of digital learning technologies as crucial to their respective efforts to provide quality, more personalized, education to the masses.

A key enabler of this m-commerce/m-services revolution in India will be the government’s Unique Identification (UID) initiative, Aadhaar, launched in 2010, which as Nandan Nilekani co-founder and former CEO of Infosys, and chairman of the Unique Identification Authority of India, explains will itself be revolutionary. “In the rapidly urbanizing India of today, lack of proper identification bars millions of Indians from gaining access to health care, education, and basic government services,” so the country has “embarked on one of the world’s great social experiments, aimed at giving every resident who wants one a nationally accepted, unique identity number that public agencies, banks, and private companies can use with ease and confidence.” The new system, based chiefly on the latest fingerprinting and iris recognition technology, is “all but impervious to fake and duplicate identities.” Its potential to help accelerate the growth of m-commerce in India is clear and substantial.

Reimagining India also offers a range of insights on other major issues facing India from relevant experts, including ideas on how to address the energy and environment challenge from United Technologies CEO Louis Chenevert, Schneider Electric’s CEO Jean-Pascal Tricoire, and Indian biotechnology entrepreneur, Kiran Mazumdar-Shaw, with a particular emphasis on “smart grid” and renewables technologies. Also, Cisco CEO John Chambers opines on how to tackle the challenge of urbanization by using “smart cities” concepts. All the experts emphasize the importance of openness and transparency. “The essential building blocks,” as Chambers sees them, are “visionary leadership buttressed by global open standards, smart regulation and public private partnerships – all underpinned by technology. “ Extensive private sector involvement is also seen as crucial, because the government has neither the finance nor the expertise to drive all of the developments that are urgently needed. The book ends with a section devoted to foreign policy, and India’s shifting relationships with the new century’s other major global powers, particularly the US and China, and features key contributions from Bill Emmott, former editor of The Economist and Stephen P. Cohen senior fellow of the Brookings Institution among others.

All in all, for business leaders with a strategic interest in India, and its likely future trajectory, Reimagining India, offers a very timely, and valuable, single-volume tutorial. The overall tone is one of excitement, tempered with realism, and Cisco’s CEO Chambers sums it up well when he says: “I visit India regularly and always return with deep admiration for its people’s optimism and work ethic. In the world’s largest democracy, change happens slowly, and it can seem messy and chaotic. But I have no doubt that change will come to India. Its people will face up to their problems and get the solutions right.”

Brian Leavy
AIB Professor of Strategic Management at Dublin City University Business School (brian.leavy@dcu.ie) and a Strategy & Leadership Contributing Editor.