The Global Smartphone Industry as a Case Study of National Competitive Advantage: Striking Lessons and Guidance from China for a Successful ‘Make in India’

Ten years after he proposed the theory of competitive advantage of firms, Professor Michael Porter proposed in 1990 a theory of national competitive advantage. Porter proposed that a nation’s competitive advantage would lie in the capacity of its industry to innovate and upgrade. He held that companies gain advantage against the world’s best competitors because of pressure and challenge. He pointed out the need for a virtuously competitive total industrial ecosystem in a country comprising not only the firms but also their strong domestic rivals, aggressive domestic suppliers and demanding local customers. Trending from the popular economic concept of national comparative advantage, he felt that nations would have sustainable competitive advantage in certain but not all industries. Looking at Japan, he argued that domestic rivalry arguably tends to be the most important determinant of national competitive advantage. He advocated collaboration between governments and industries to widen the ambit of national competitive advantage.

Porter proposed a diamond of national competitive advantage comprising four national attributes, namely, factor conditions, demand conditions, related and supporting industries and firm level strategy, structure and rivalry. According to Porter, these attributes determine the national environment in which companies are born and learn how to compete. He also observed that nations succeed in industries which are good at factor creation. Porter’s theory of national competitive advantage has relevance for India in the context of the NDA Government’s ‘Make in India’ drive. There has been a viewpoint from none other than the governor of Reserve Bank of India that Make for India is more important than Make in India (ie., relying on domestic market is more helpful than relying on overseas markets). Another viewpoint has been that there must be ‘Innovate in India’ as a precursor to ‘Make in India’. This blog post studies the global smartphone industry to establish and extend as well as customize the applicability of the concept of national competitive advantage to India.

Global pecking order

The global smartphone industry is expected to record a shipment level of 1 billion units in 2015 and is expected to grow at CAGR of 16 percent and touch a level of 3.4 billion units in 2020. The industry is dominated by five big players, namely, Apple, Samsung, Lenovo, Huawei and Xiaomi who together account for around 58 percent of the total market. Significantly, three of the top five makers are Chinese in origin, whose share increased from 9 percent in 2011 to 17 percent in 2014. Moreover, of the balance 42 percent of the market, additional Chinese manufacturers such as Gionee, Oppo, ZTE, Konka and Coolpad dominate. If Taiwanese brands such as HTC, Acer and Asus are also considered, the impact of the China region would be more pronounced. Clearly, the trends point to growing dominance of Chinese manufacturers in the global smartphone industry. They are also likely to make greater inroads into other emerging markets such as India and other Asia-Pacific countries. Interestingly, yesteryears’ Western makers like Nokia and Motorola as well as current oriental manufacturers such as Sony and Panasonic are no longer in any noticeable global pecking order.

Many analysts attribute the rise of Chinese manufacturers to their typically Chinese low cost structure and scale-oriented low price structure. In fact, Chinese manufacturers seem to have succeeded in bringing high end specifications to mid-tier budget price range. A Xiaomi phone may cost less than 50 percent of a comparable Apple or Samsung high end phone. In the strictest sense, a Xiaomi phone may not compare equally in elegance or finesse with an Apple phone but in terms of key hardware and form factor, the Chinese brands tend to be comparable or even a notch higher. The low cost cum price structure of Chinese manufacturer is clearly a driver but not the sole reason. If so, Indian low cost smartphone manufacturers such as Micromax, Karbonn, Lava and Zolo should have been in better pecking order. Also, despite its price premium, Apple is able to hold on its own globally, and even outsell the top Chinese brands in the Chinese home market. A more objective analysis would require a broader framework than a “price impact of market share” approach. Porter’s diamond of national competitive advantage provides a base theory but not the whole of explanation; this blog post deploys, extends and customizes the model of national competitive advantage in the smartphone setting.

Smart national attributes

Factor conditions and demand conditions of the national competitiveness diamond are rather self-evident in so far as China is considered. China has one of the lowest cost structures among technologically capable countries, covering not only labour costs but also energy and other infrastructure and overhead costs. Ample availability of high quality infrastructure is a clear win for China. In terms of demand, China with its population of 1.4 billion and per capita income of USD 10,000 is one of the most exciting and self-propelling markets globally, especially for stylistic and high technology products like smartphones (India, in comparison, has a population of 1.3 billion and per capita income of USD 4000).  The real competitive advantage to any nation as applicable to the smartphone industry lies in two factors: related and supporting industries as well as firm level strategy, structure and rivalry. The competitiveness of an industry in a global setting depends on the competitiveness of the total industrial value chain relating to that product, end to end. On the dimension of industrial value chain, China scores high in the smartphone industry.

China has an established base in a whole range of smartphone components such as semiconductors, audio components, transmission modules, radio frequency switches, touchscreen controls, camera chips, baseband processors, RF transceivers, IC power management systems, fingerprint sensor components, chassis components and various other electronics. In addition, Foxconn has been the world’s largest electronics contract manufacturer and assembler located in China, whose scale and working efficiencies are simply unmatched by any other manufacturer or assembler in the world. The ability to scale up subcontract operations to meet millions of units of production on a quarterly basis with robust supply chain assurance is a critical differentiator for China over any other country. It is, therefore, no wonder that the leading smartphone of the world designed in California is exclusively assembled in China, largely with components from China, Japan, Taiwan, and Korea.

The strength of related and supporting industries is not a new discrete foundation only for smartphones in China; China’s dominance in subcontracted component and product assembly operations for a host of Japanese, European and US companies in a whole gamut of electronic goods has been a very relevant precursor for smartphone industrial base in China. The firm level strategy, structure and rivalry, the fourth point of the national competitiveness diamond, also constitute a significant factor. The Chinese companies, with active support from the Government of China, have honed the abilities to become electronics and telecommunication conglomerates. Their technological conglomerate strategy is much like that of Korean Chaebols such as Samsung, LG and Hyundai but with added sharpness of scale ramp-up and cost lever. The Chinese firms have also not fought shy of keen inter firm fight for technological superiority and high-end specifications, reflecting high industry rivalry. Advancements such as bezel-less form factor, superior sensor imaging, and proprietary skin over standard Android skin have become commonplace in China.    

Innovation connect

The smart national attributes have clearly enabled the Chinese smartphone industry to jostle its way into the global smartphone industry. As of now, the Chinese (together with Taiwan) far outnumber smartphone makers from any other country. The market share in terms of units is also bound to go up. That said, industrial competitiveness does not necessarily mean market competitiveness. If the above smart national attributes were to represent the whole of the competitiveness paradigm, Apple iPhone would not have become the bestselling smartphone in Q1 of 2015 in China. On a related analogy, Korean automotive and electronic manufacturers still trail the Japanese counterparts both in scale and innovation on the supply side, and esteem and equity on the customer side. There is, therefore, a fifth element of the national competitiveness diamond (beyond Porter’s model) that relates to customer connect that happens largely through a bridge laid over several years through sustained product innovation and performance.

It is the quest for absorption and re-innovation that has made Korea a formidable competitor to Japan. Similar quest has enabled China to become a part of the global bullet train club (along with Japan and France) or the telecommunications gear club (along with Europe and USA). The Chinese smartphone saga promises to be the same. By continuously manufacturing innovative products for others, it is possible for the industry to transit a nation to its own orbit of innovation. A bit of help from the government in terms of a tweaked intellectually property regime and legal support also helps the Chinese industries. Despite that, an opaque governance system, and an inadequate judicial system, innovators of other nations, despite getting concerned on these counts, continue to depend on China for outsourced manufacture of innovative products. The Chinese smartphone industry is a striking example of innovating through manufacturing for others, and moving towards global dominance through continuous innovative manufacturing for itself.

‘Make in India’

The case study of Chinese national competitiveness in global smartphone industry has many lessons and guidance for India. In fact, fundamentally, the striking contrast needs to be appreciated before the teachings are absorbed! Viewed from one angle, India does not trail behind China in any respect in providing the market wherewithal for a vibrant Indian smartphone industry. India is the second largest telecommunications market with close to one billion subscribers. The telecom sector has been witnessing a blazing growth rate of 35 percent each year.  While the wifi connectivity is low, the Internet connectivity through a combination of wifi and cellular services is expected to touch 700 million by 2025 (currently nearly 250 million Internet subscribers). In terms of new mobile connections, India has been adding a staggering 18 million net additions each quarter, more recently outpacing China by a massive 6 million connections. All this has been in spite of high price of mobile handsets, and lack of communication contract subsidization! If this level of mobile and smartphone growth of a total population of 1.3 billion cannot support a global smartphone industry in India, nothing else would! Another factor of related and supporting factors was also taken care of when Nokia set up a huge park to manufacture handsets and also support the components and accessories industry. In glaring contrast to the immense potential, Nokia had to shut down production and the park itself is now a pale self of itself.

The lesson for India is that the mere presence of certain demand side factors or attributes of the national competitiveness diamond cannot, by itself, lead to blossoming of the domestic manufacture to the full potential. The national ecosystem must be driven by a focus on innovative manufacture and a passion for global scale businesses that can create India’s own Alibabas and Xiaomis. It is somewhat a strange commentary that certain leaders of India’s largest global scale firms and conglomerates could do none of what or Xiaomi did while they were at the helm of the respective firms and conglomerates and are now left to investing in such ventures of others! For India’s development, ‘Make in India’, the mantra of Prime Minister Modiji, is not only an essential and urgent mission but also requires a missionary and binding zeal of all stakeholders, political establishments, governments, banks and financial institutions, policy making and development institutions, businesses, policy makers, regulators, administrators, industrialists, academicians, employees, students, and the Indian people as well as the Indian society at large, whatever be the other differences! Similarly, it need not be a mission for only new ventures or private sector. India has already established a huge industrial base in public sector as well as private sector, and in Indian ownership as well as foreign participation, and every entity should take upon itself to leverage its capabilities to expand and diversify in India. The potential is so huge and the stakes are so high that India as a nation, and all the stakeholders - individually and collectively - can no longer be languid and casual about the ‘Make in India’ Mission.

Posted by Dr CB Rao on May 17, 2015  

The Seeds that Become Trees: A New Logic for India’s Industrial Forestry

There are many sayings that demonstrate the power of small seeds that could grow into massive trees. After all, nature is all about free fall of seeds in fertile lands turning into bountiful forests, duly aided by rain and shine. In a nation’s life too, industrial and economic growth tends to be based on seeds of innovation and manufacture. A few ideological moves (eg., heavy engineering thrust) or a few individual initiatives (eg., Sanjay Gandhi’s small car passion) could turn out to be major transformational revolutions years later. The drivers of development are simple and straightforward in many cases; however, only perceptive administrations at least register them while the perceptive and proactive administrations lead such transformations. Very few economies of the world are blessed with these twin capabilities; the vast majority of others need not despair, however. Not being in the forefront of revolutionary changes in the past does not mean that the country cannot be a leader in future, provided that the nation has learnt from the past as to how to visualize and develop the future!

India, despite its hoary history, had to take the bow of modern industrialization only from the time of its independence in August 1947. Indian administration’s cognitive skills, including those related to conceptualization and analysis of industrial development, have started evolving in the 1950s and started laying the developmental pathways for industrial development from the 1960s. All through the period, there have been opportunities to witness and interpret as well as absorb and implement how other nations pursued their growth. India followed a mixed economy model, and achieved mixed results until a crisis of sorts stared at the economy in the 1990s. This period of liberalization was a period of enlightenment for economic and industrial planning. That said, it cannot be denied that some of the important foundations were laid prior to liberalization while far more could have been done after liberalization. Whether a nation merely views such transformational movements as products of time or leads such transformations proactively is a resultant of many factors. This blog post reviews five ‘seed to tree’ developments in India to examine if some lessons can be read out of them.

Engineering of the 1960s

For the global industrial economy, the 1960s represented the heydays of modernization and expansion of traditional industries that represented the bulwark of a developed economy. A technologically resurgent Japan brought in new efficiencies to industries such as steel, automobiles and capital goods, and also laid the foundations of a globally networked production-consumption structure, which is based more on competitiveness than on national origin. For India, that period had coincided with the goal of self-reliance for some of the industries in the list such as steel, medium commercial vehicles and capital goods became a preferred choice, albeit with a heavy dependence on imports from countries such as Russia, UK and Germany. Unfortunately, the socialistic dogma of the Pandit Jawaharlal Nehru government served to shut out the development of other important growth engines such as automobiles and white goods.

The 1960s were notable for two concepts of indigenous development – that new cities and economies could be built around new industries, and that more industries meant more economic power to States in India’s federal development paradigm. Cities such as Bhilai, Rourkela, Bokaro, Jamshedpur, Dhanbad and Durgapur stand testimony to the first concept. The now flourishing steel plants in far-flung Southern cities such as Visakhapatnam and Salem stand as living examples of the struggles by the States to get such steel plants. Youngsters were offered only three core engineering educational streams such as mechanical, electrical and civil at that stage, keeping in view such perspectives. But, that was also the time when in other developed countries of USA, Europe and Japan transistor radios  and other electronics devices began to be manufactured in billions. Even as India built a solid traditional engineering infrastructure, the emerging electronics age got ignored by the country.  

   

Electronics of the 1970s

The 1970s were verily the electronics age of computers, audio-video devices, home appliances and a host of electronics systems that provided better accuracy and repeatability to traditional capital goods. The 1970s also saw the emergence of software coding, from the punched card readers to machine languages to FORTRAN and such other languages for man-machine interface. The Indian ministers and bureaucrats probably knew that they were wrong in giving the global electronics revolution a miss in terms of indigenization but did little to correct.  When IIT Madras imported IBM 1401 mainframe computer in 1974 to support development of indigenous technologies, C Subramaniam, the learned Union Minister for Industrial Development remarked that imports of such sophisticated technologies was probably not the best way to develop the indigenous industry. In fact, the governments of that time allowed the free import of second hand or aged equipment to promote industrialization (import of Innocenti scooter plant to set up Scooters India in Lucknow was one example!).  

If China has, over the years, become the great manufacturing workshop of the world and the preferred manufacturing outsourcing destination, the seeds of that industrial amazon were sown in the late1970s, when the concepts of market economy were first embraced in the late 1970s, and the foundations of mass consumer electronics industry began to be laid. While India started to introduce electronics and telecommunications as well as other diversified engineering courses, the country saw the flight of technical talent to USA and Europe which offered the new-age electro-mechanical and mechatronic industrial development. Continuing the inward looking traditional industrial policies, the socialistic ideologues and governments of the 1970s began to add computers, consumer electronics and home appliances to the list of “luxury goods” that only automobiles represented till then! Full four decades later, even in 2015, the country is still not sure of being an electronics-driven industrial powerhouse like China has been from the 1980s. 

  

Automobiles of the 1980s

Amidst the lag of India’s industrial and economic competitiveness, something that was absolutely maverick happened in the 1980s – the establishment of Maruti Suzuki India Limited in 1981 by the Government of India in 50:50 joint venture partnership with Suzuki Motor Corporation of Japan! Maruti Suzuki verily ushered in an automobile revolution in India with an unprecedented influx of new passenger car models and light commercial vehicles, mostly with Japanese technologies and their subsequent indigenization. This has led to the creation of four Detroits in India, one in the traditionally automobile oriented Chennai region, the second in the Northern Gurgaon region where Maruti Suzuki established itself, the third in the Western Pune region and now in the North-Western Sanand region. There were, of course, large two-wheeler facilities in Pune, Aurangabad and certain other parts of the country but the role of the automobile industry of the 1980s in starting a new manufacturing revolution in India cannot be minimized.

With a production level close to 22 million vehicles per year, India is one of the largest producers of automobiles in the world. In terms of two-wheelers, India is globally the largest with an output of 17 million vehicles. India is also the only large and structured player globally in the unique and ubiquitous three wheeler segment with an output of one million vehicles per annum. In cars (and utility vehicles) also, India is no longer a trailing country. From a meagre production of 30,000 till the late 1970s, India now clocks an output of 3.2 million! Commercial vehicles are also highly diversified and expanded with an annual output of one million. Performance on the export front has, however, been less than desirable. The only notable bright spot on the automotive export front has been the export of two million two wheelers, constituting about 12 percent of the total two wheeler output while all others have had insignificant (low single digit percentage) export levels.

Software of the 1990s

Even as automobiles began representing the new hardware of Indian industry from the 1980s, software emerged as the first driver of India’s global competitiveness. The 1980s saw maturing of Tata Consultancy Services from punching to coding, and the founding of India’s future software industry bellwether, Infosys. This phase represented the start of another type of migration of talent within India, from manufacturing to software! With the foundations laid in the 1980s, in the 1990s, software came to be associated with a larger canvas of information technology (IT), emphatically transforming the way the world looked at India and IT. The sector also established that India’s global delivery model could provide leadership not merely in terms of talent cost advantage but more in terms of seamless turnaround of systems development and transactions. IT has also laid the foundations of a new youthful middle class society that began embracing consumer economy and driving products and services typical of such economy.   

India’s IT sector has been notable for a massive investment in in-house training and development, in terms of more up to date coding skills and multi-country linguistic and cultural approaches. The industry has perfected a model of twin recruitment and development engines driving scale and globalization.  After its global success, the IT industry has been trying to move up the value system by offering consultancy services and also through vertical specializations. These are, however, logical steps and do not constitute any strategic redefinition. A major failing of the Indian IT sector has been in terms of its disinclination towards strong inorganic growth and diffidence towards developing its own product platforms. It has taken a Sikka to try to add a strong product direction to Infosys. Not many IT majors, however, seem inclined to commit resources for product investments. The future of the IT industry is as strong as ever but probably below the potential.  

Internet of the 2000s

The Internet has done wonders for globalization and communication. The Internet of People connects people and organizations across the globe through a host of devices such as computers, tablets and smart phones, connected by a telecommunications backbone. Many things that are done physically, from retailing to movie screening, began to be conducted by remote management through the Internet, in an increasing measure. After digital book publishing and reading, electronic commerce and mobile wallets have become the new platforms. This has resulted in a huge shift in how business is conducted in various fields, and the future potential. IRCTC, the eTicketing platform of Indian Railways logs between 0.5 to 1.0 million tickets per day which is still a fraction of 22 million passengers moving on any day over the Indian railway network. There could be an explosion of the Internet of People in India with better and universal broadband and wifi connectivity, lowering of tariffs for data transmission and availability of additional spectrum.

It is now getting evident that the next revolution in the Internet could be more profound. The Internet of Things could connect devices and environments in multiple ways, revolutionizing how people live on a day to day basis. Healthcare, travel, home life, retailing are all set to become more real time and inclusive. RFIDs, sensors, scanners, software, analytics, processors and telecommunications would determine if product and industrial structures would undergo a metamorphosis. Unfortunately, the greater the input of technological change the greater is also the level of waste. For example, as opposed to replacing normal electric bulbs or refrigerators after their useful life, technologically connected appliances may seek replacement every year as new technology arrives. The e-waste generated by smart phones and tablets is indicative of the waste that could occur across all product categories in the Internet of Things.

Indigenous seeds

The choice of just five sectors as above to describe India’s industrial development of the last decade is by no means comprehensive (for example, pharmaceuticals was not covered!) but is certainly illustrative. The seeds of India’s industrial development have been from trees that have grown elsewhere. Even in respect of IT where India has become a global leader, not a single computer language or operating system has been developed in India (may have been developed elsewhere partially with Indian talent, however). The transhipped seeds, and in some cases the transplanted trees themselves, grew in the eager markets of India. Over the last several decades, there have been gallant efforts to indigenize design and manufacture; yet even the new NDA government’s current manufacturing paradigm of ‘Make in India’ seems to require overseas seeds. The past experience suggests that financial investments, technologies, equipment and components come in bundles each with a cycle of cautious investment, domestic consumption, limited exports and capital repatriation with a very specific time span in mind. Every time industrial renewal is desired, the cycle of imported seeds et al repeats itself.

With the Modi government firmly committed to a policy of India’s economic growth equating with India’s self-respect, a different seeding programme for industrial and economic growth is required. India now has the option of staging the next manufacturing revolution following the previous model or improving upon it to make it a self-perpetuating cycle of indigenous development. For this to happen, a new genre of seeds is required. The past industrial revolutions were hamstrung by limited scientific and technological educational streams which came into existence only after the development of physical industrial infrastructure. This has resulted in talent bottlenecks and skill gaps. A bolder India must create educational disciplines far in advance of the sighting of new industrial infrastructure. If necessary, to cut the developmental times short, the vast Indian diaspora which is enthralled by the prospect of a new India must be encouraged to come on two to three year sabbatical to seed their talents in Indian industry, research laboratories and educational institutions. More importantly, ‘Make in India’ paradigm must be supplemented by ‘Research in India’ and ‘Design in India’ paradigms. And, as the costly lesson of missing the electronics revolution shows, no sunrise sector should be ignored by India in this phase.

Posted by Dr CB Rao on April 14, 2015           

National Competence Consistency: Key for Global Leadership through “Make in India”

There is perhaps no nation that has as much history of pioneering knowledge, dating back to several centuries, in eclectic sciences and technologies as India has but has struggled so much to rediscover and fulfil the potential in recent past (despite some significant achievements in certain areas of industry and infrastructure). Prime Minister Narendra Modi’s clarion call to global investors and global industries to “Make in India” resonates well with India as a resurgent nation that believes in self-reliance and global leadership. Modiji has also rightly laid stress on skill development as the basis for building scale and scope in the manufacturing, research and other areas. Though the national goal and the enabling strategic direction are well understood, the need for an almost revolutionary transformation in the competency paradigm is perhaps not fully understood. Successful nations on global missions have achieved such status based on making the required competencies a national comparative advantage.

India’s industrial development has been on fragmented lines as is well known. It is characterized by a few big capable firms with national competitive posture and several mid and small scale firms with regional or sub-regional presence. The former are able to develop or access, and compete on technology while the latter struggle to access, let alone develop and compete on technologies. This does not mean that a firm has to be only big to be competent; as Japan and Korea illustrate it is possible for even small and medium companies to be technologically competent. Many times the lag of the latter in India is attributed to scale related investments and finance; on the other hand, the lag is due to a managerial and leadership approach that fails to utilize all factor sets optimally. This lacuna needs to be addressed because global leadership can come about only when competencies are pan-Industrial and reflect a national characteristic of consistency. That India has some distance to go on this aspect is illustrated by a just published survey on India’s travel experience.

Unreasonable spread

Key findings of a survey by the leading travel website TripAdvisor listing Indian airlines preferred and shunned by passengers, and the reasons thereof, have been published in The Economic Times Magazine, November 30-December 6, 2014, pp 10 and 11. While the study on a travel service may apparently seem to have no nexus with the Make in India hypothesis, relevance does exist. Clearly, all the airlines have invested in having a fleet of modern planes, and all the associated piloting, crew, ground handling, maintenance and ticketing infrastructure. Yet, the way the individual airlines utilize the respective infrastructure and organization to deliver the ultimate services is paradoxical, to say the least. The survey generated ratings on twelve performance parameters. These are on-time performance, value for money, in-flight entertainment, in-flight food/beverages, cabin crew, landing/take-off, check-in, baggage delivery, cabin maintenance, seat comfort/leg room, website, and overall experience. Given the sophisticated nature of the airline industry, one would expect the airlines to uniformly meet certain base metrics.

The results of the survey bring out a huge variation in performance as perceived by travellers. For example, with reference to on-time performance the approval ratings ranged from a measly 0.4% to a respectable 69.6%. Except two airlines (the second trailing at 16.3%), all the others had a very low range of 0.4% to 6.3% on this factor. In fact, on each of the other eleven parameters too, the spread has been inordinately high. In terms of overall experience, the pecking order has been 42.0%, 37.8%, 10.6%, 5.5%, 2.0%, 1.0% and 1.0%. Even more tellingly, on safety too, the approval ratings showed a dangerously wide range from 0.8% to 31.2%, with only 14.9% of the respondents deeming all the airlines to be equally safe. Clearly, same or similar assets and talent base has been resulting in radically different perceptions of performance. If the survey brings out one factor as a common theme, it is the lack of consistency in competence as reflected in performance delivery and user experience.

National consistency

If a nation has to qualify as the world’s destination for any competitive activity it must first qualify as a consistently competent for that activity. India has been able to do that in the field of information technology. From the established metro cities to the emerging urban regions, aptitude and skillsets for information technology became available, making computer coding and system architecture a nationally consistent competency. In respect of manufacturing, however, India has been able to develop at best certain regional clusters of competency. Notable among these are the clusters for automobiles, auto components, steel making, shipbuilding, defence equipment, heavy engineering, pharmaceuticals, jewels, watches, movies, collieries and a few other sectors. On the other hand, certain industries have been just firm-specific and not even region-specific. Modern and safe construction industry has been more a firm-specific phenomenon than even a regional competence. Probably, construction safety by its absence is an unfortunate national consistency.

National or regional consistency has, to-date, been a resultant of top down initiatives. The establishment of heavy engineering and steel companies in public sector and the other noted companies in public/private sectors has created a pull factor for the generation of competencies in the 1950s and 1960s. Initial training by overseas collaborators followed by indigenisation of skills has helped development of regional clusters. As India looks at a new wave of Make in India none of the previous strategies would be good enough for the task ahead. Consistent competency development has to be a simultaneous nation-wide effort. It is not impossible. The new waves of the Indian Institutes of Technology (IITs), Indian Institutes of Information Technology (IIITs) and the Indian Institutes of Management (IIMs) that have been so successfully set up in tier 2 cities and in the far flung regions of the nation indicate that Indian population is always game for creating new centres of excellence, whatever be the domain.

Make in Education

An effective Make in India initiative can happen not in India’s industries or firms but only through India’s schools and colleges. The Indian educational system needs uniformity of high standards, encouragement of creativity, openness of evaluation and continuous bridging of theory and application. In the current India, quality is heavily tiered in terms of classes of schools and colleges. While some differentiation across institutions is inevitable even in advanced nations (like between Ivy League and other institutions), the kinds of differentials that are allowed to perpetuate between different boards of education, different types of public and private educational institutions and institutes of national importance and several other tiers in India are so huge, and in many cases so discriminatory, that a uniform quality of education on a pan-India basis has been elusive. The educational system is in urgent need of reforms ground-up in terms of building national competencies.

As this would inevitably take time, there is an urgent need for some top-down reforms too. One way would be to dedicate the final semesters of each course to finishing courses which align the students to the industries of their choice rather than to desultory project assignments in which the randomly matched firms and students have no shared interest.  The finishing courses would comprise generic toolkit such as communication, collaboration, project management and networking skills and specific industry specific toolkit such as advanced computer languages in respect of information technology industry, international regulatory compliance in respect of pharmaceutical industry, mechatronics in respect of machine tool industry, genetics and epigenetics for biotechnology industry, and so on. The finishing courses should be nationally standardised and should be of such rigor that student of any institution should be on par or above the best of global educational standards. Availability of such skill optimization would make India a natural destination for Make in India realization.

Together we succeed

While India has many industry associations, almost all of them have agendas related to policy reforms. Macro-economic factors remain their paramount engagement. Skill upgradation is seen to be the task and responsibility, or even a unique competitive advantage, of each individual firm. Many firms are reluctant to open themselves to the pathways and success factors that determine competitiveness through intra-industry collaborative dialogue. Let us take the example of upgrading rail infrastructure to a level of bullet train network. This would require most modern track making and coach making technologies. If the existing railway wagon firms such as Integral Coach Factory, BEML, Kalindee Rail, Texmaco, Stone India and Titagarh Wagons (and 12 others) do not upgrade their capabilities together there is little chance of Make in India being successful in this sector.  Similar logic would apply to indigenous manufacture of new generation telecommunication gear, defence equipment or power plants.

The national psychology must change from one of exulting over the indigenously benchmarked relative superiority of the leading firms to one of demanding absolute superiority of global standards. When there are reports of certain indigenous cars failing safety tests or certain products lagging packaging requirements, the industries as a whole must collaborate to develop and validate templates that meet global customer standards.  Even granted that some of such global concerns tend to be subterfuge for non-tariff barriers, there is merit in industry-wide analysis of causes and development of solutions. Higher level of skills when pursued by individual firms may make individual firms competitive relative to other Indian firms but industry-wide actions make the entire industry competitive relative to global firms. This transformation would influence global industries as a whole to move into India as their preferred manufacturing destination. Consistency of competence across the industries as a national comparative advantage is key to the success of Make in India revolution.

Posted by Dr CB Rao on November 30, 2014