The comparative advantage of a nation is its ability to produce products or services more efficiently and cheaply than others. Nations such as China and India can power their way in global economic ranking only through sustainable comparative advantage. The comparative advantage of a nation, however, is broader than either the advantage of natural resources and factor supplies or the competitive advantage of industries in a nation.
Comparative advantage is a behavioral theorem rather than an economic model as is commonly understood. In fact, while economic parameters may quantify comparative advantage, they do not adequately adequate describe the sources or processes of comparative advantage of a nation. The comparative advantage is a function of certain basic behavior patterns exhibited by socio-economic constituents in a nation.
Each nation comprises individuals and entities. Though entities are the creations of individuals, over time entities and individuals develop their own behavior patterns. These determine the economic performance of a nation. Individuals and entities simultaneously function as producers and consumers, savers and investors, and ruled (governed) as rulers (governors). These behavior patterns in the aggregate define the national comparative advantage.
Individuals and entities in nations
At a broad level, individuals and entities of a nation need to function in harmony and synergy. The elaborate governance systems (for example, the corporate entities, the democratic polity, the administrative framework and the regulatory systems) are intended to align economic performance to society’s needs. However, individuals and entities are usually unable to make choices that are aligned to each others’ interests. Conflict rather than collaboration characterizes the functioning of individuals and entities thus affecting the comparative advantage of a nation.
There are a few cases in economic history that demonstrate how alignment of individual and entity behaviors leads to national comparative advantage. It occurred, decades ago, in America with swift economic construction, development of a large labor market and arguably one of the best university and research systems of the world. It occurred in Japan with emphasis on innovation and productivity, and almost seamless integration of social, national and corporate cultures for global economic domination. Select countries in Europe had at different points of time reflected periodic alignments and misalignments.
Nations which had individuals and entities passionate about efficiency and effectiveness clearly could generate national comparative advantage. However, over time, the very same nations began to lag as divergence between individuals and entities, and misalignment across behavior patterns within individuals and entities began to emerge. The loss of competitiveness of advanced nations, whether due to peaking of living conditions, unionism, lack of reinvestment or slowing down of knowledge formation, reflects this trend. The competitiveness of emerging countries, initially quantified through low labor costs and cheap facilities, need not as a corollary mean the natural emergence of sustainable comparative advantage.
China recognized the challenges of natural evolution of comparative advantage and began to shape the society’s behavior patterns through stringent rule. Mao’s Great Leap of the 1960s and Deng’s Great reforms of 1980s reflect unparalleled examples in behavioral management of nations. Factor supplies were regulated, utility costs administered, employee mindsets regimented and bank finances channeled to funnel competitive industrial growth. Massive investments in infrastructure fueled industrial consumption, opened up labor markets, encouraged labor migration, attracted foreign technologies and turned out cheap manufactured goods. Virtually all consumer electronic products are manufactured in millions and billions in China with perpetual lowering of scale-led manufacturing costs.
India, in contrast, relied on natural evolution to align individuals and entities for greater economic growth. Even though economic growth and export performance have been the avowed goals of post-independent India from 1947, India could not discover sources of sustainable comparative advantage for as many as five decades. The first signs of comparative advantage of India became evident in the globalization of India’s information technology and business process outsourcing industries between 1995 and 2005 during which decade China continued to take long strides as the manufacturing capital of the world. However, between 2005 and 2010 India also started to display new sources of comparative advantage on both manufacturing and services fronts.
Comparative advantage, beyond cost arbitrage
Quality related incidents (Heparin and toys, for example) and industrial regimentation aftereffects (Foxconn, for example) in China, mining backlashes in Asia, Australia and Africa, and operational safety hazards (from fireworks companies in India to oil drilling companies in advanced countries, for example) demonstrate that comparative advantage based on planetary exploitation, low labor costs, extended output targets, indiscriminate outsourcing and cheap manufacture may not constitute a sustainable phenomenon. Sooner or later cost levels and output levels would need to reflect realities of physical human life, and lead to equalization across economies and labor markets around the emerging countries eventually.
Sustainable comparative advantage, on the other hand, would stem from aligning the individuals and entities on shared responsibilities and goals, which are broader than monitory ones. The behavioral theorem is based on individuals and entities being producers and consumers, savers and investors, and ruled and rulers simultaneously. In an ideal national system production is balanced by consumption, imports are compensated by exports, savings are directed towards investments and wealth maximization is harmonized with social equalization. This process, however, gets impeded by the fact that all nations are not equally endowed.
Globalization commenced as an answer to this disparity but could not provide an equitable solution. Globalization has had three phases. In the first phase products, technologies and people were imported from advanced countries into less developed countries to meet local demand. In the second phase, technologies were imported to mass produce products for consumption in developed markets. The third phase which is now emerging involves a fusion of technologies and management approaches of advanced and emerging markets to optimize production and consumption globally. The world order should logically move to an equilibrium state as the third phase of globalization progresses.
Cost arbitrage would diminish in importance as improvements in living conditions and greater consumerism would lead to demands for higher salaries in emerging markets. Producers would need to not only channel a large part of their production to local markets but also build global brands around local designs. As earning potential in emerging markets improves savings would need to be invested in productive activities in local markets. Employees and managements as well as societies and governments need to be bound by shared ethics of productivity, efficiency and egalitarianism. This would require nations to raise capabilities in a wide spectrum of products and services rather than being focused on only a few industries or just leverage natural resources.
Intellectual edge versus physical rigor
The days of glossy products deriving attractive revenues and profits from low cost internals could be over sooner than later. Rather, high quality standards in design, manufacturing and service could differentiate products in future. The days of a pioneering brand and scores of follower clones could also be over sooner than later. Rather, novel ways of fulfilling the user requirement through innovative products and services could become necessary. There could be limits to stretching physical performance given the machine speeds and 24 hours all that being available in a day. There would, however, be no limits in stretching human intellect to generate novel products and services, and novel methods of design, manufacturing, delivery and service.
The industrial revolution started in laboratories with scientists and technologists creating new products. As demand burgeoned methods of factory-led mass manufacture shifted accent from design to manufacture. The limits of manufacturing efficiency as derived from cost arbitrage may well have been reached. There is still a residual possibility to innovate in manufacturing system design and equipment configuration as being discovered by global automobile firms with Indian engineering ingenuity. Even this phase will get over in the next five to ten years. Time is appropriate to get back to fundamental research in laboratories to develop novel products and services.
As India gets increasingly recognized as a global hub of manufacturing India has choices to make; whether to follow the established Chinese model of low-cost mass manufacture, albeit with more consistent quality, delivery and regulatory parameters, modify it with innovative manufacturing system designs or supplement it with novel research innovations. Sustainable comparative advantage emerges from all the three. Natural resources and synthetic outputs would need to be protected with novel research and manufacturing technologies. Waste needs to be eliminated and savings generated by adopting optimal business and conversion processes. Employees and citizens need to see value in generating comparative advantage. Comparative advantage becomes a behavioral and intellectual exercise.
Individuals and entities tend to have production, consumption, savings, investment, governance and governed behaviors that could be synergistic or antagonistic. The sustainability of comparative advantage of a nation arises from how well these behaviors are made harmonious.
Production and consumption behavior
Modern industrial theory is based on aggressive production and consumption behavior to boost growth. Resources being limited it is important that production and consumption are supported by meaningful behavioral patterns that support wise utilization of resources both from production and consumption points of view. China and India may have paltry automobile ownership rates of 14 and 8 respectively compared to 478 in USA but what should be the levels to which the vehicle density would need to grow? Should not road density per unit area grow first in India before vehicle density leapfrogs? And even when road density leapfrogs should not bus density jump ahead of car density? These are complex questions that need to be answered as much by public policy considerations as by individual and social behaviors.
Modern competition theory suggests that corporations intensify their efforts to segment the markets with diverse products of multiple functionalities to capture market share. Supported by saturation marketing this would prompt higher consumption, increased production and better economic growth. Such industrial theories lead to nagging worries on true competitiveness. Would not multiplication of products reduce innovation or at best perpetuate incremental innovation? Would not corporations be better placed by opening out new products with new features rather than by crowding out existing market segments with only incrementally relevant products? Would not consumers be better off by owning different types of products and services rather than many variants of the same product and service? These again are complex questions to be answered as much by regulators and strategists as by individual and social behaviors.
Modern economic theory has favored consumerism. It is believed that increased purchases and ownerships of houses, gadgets, equipment and stocks will lead to multiplier effects in the economy. Supply push and demand pull are considered synchronous. Consumerism is measured by the screens on which a movie is screened in the first days, the millions a gadget is sold on launch, the apartments that are booked on announcement and the times a capital market issue is oversubscribed. Consumerist economic thought generates its own questions. Would not overwhelming consumerism reduce product life cycle artificially and lock up capital in both production and consumption? Would not producers and consumers be better served by an orderly, rather than by a hyperactive, production and buying spree? Are considerations of quality well-served by saturated production and consumption? These are challenging issues that need to be answered as much by resource considerations as by individual and social behaviors.
Savings and investment behavior
Traditional Indian society moorings favored living within means. Savings were the pillar of social security for families and driving force of banking behavior. Typically, the Indian salaried class used to own a house at the end of the career out of the savings. The savings paradigm has undergone a fundamental transformation over the last three decades. Ambitious executives splurge their earnings on gadgets and are willing to make early purchase of loan-funded houses, only to live on wafer-thin savings. Credit cards are used by people to live beyond the means. Loans are treated as deferred savings. This distinctly American trend raises disturbing question for the Indian society. At a time when the American society has learnt at great cost the perils of living beyond means on credit the wisdom of Indian society following the disastrous trend is highly debatable. Have banks and financial institutions developed a vested interest in funding the society to profligacy? These questions need to be answered by economists and individuals as well as society in search of security and status.
Savings are meant to be channeled as prudent investments. Investments are to be made keeping in view lifestyle goals for retirement. Investments are to be made in assets to be held over a long time for capital appreciation. Modern trends have turned investment into expenditure and popularized buy-sell transactions as opportunistic short term alternatives to long term investments. With the proliferation of such investment trends America created asset bubbles in housing which shook the global economy to its core. Would not societies be safer by prudential allocation and management of investments? Should mathematical models be allowed to blur rational and logical investment behavior? Should complex instruments like derivatives and opportunistic methodologies such as short sales and day trades be banned? Again, these are critical questions for the stability of economies and societies to be answered by policy makers and market participants.
Ruler and ruled behavior
Rulers come in many forms; employers, companies, leaders, regulators, ministers, administrators, and so on. Correspondingly, ruled also come in more simple forms; employees, followers and citizens. The relationship between the ruled and rulers, or the governors and the governed, determines the equity, strength and stability of the society and polity. The drivers for rulers and the ruled are quite distinct. Rulers whether of corporations or nations are driven by control over resources and power. Ruled, on the other hand, are driven by needs for security and development. Different socio-economic systems and national governance systems sought to develop different methodologies to align the interests of the rulers and the ruled. The welfare states of Sweden and Switzerland represent one end of the spectrum while the controlled state of China represents another end. The purely capitalistic, but democratic, state of USA and the highly fragmented democratic polity of India represent other typical examples.
Totalitarian states provide quick fixes and democratic capitalistic states encourage but also punish excesses while fragmented democratic states are caught in chaotic turmoil of informed and uninformed debate. In the long run, informed democracies align the ruled and rulers better than highly controlled totalitarian states which force the ruled to subjugate free expression in exchange for economic rewards. The challenge for the ruled in democratic states is to gain absolute literacy and awareness and exercise the democratic power to keep the ruled focused on the imperatives of equitable economic growth. If any single factor is holding back India becoming a super economic power, it is neither industry nor infrastructure as commonly hypothesized but it is its inability to achieve complete literacy. The ruled in India which hitherto had a vested interest in keeping literacy at low levels has taken an epoch-making step with the Right to Education (RTE) bill. When the RTE and other education bills are implemented in letter and spirit India will beat all the emerging countries including China to a virtuous superpower status.
Summary
Comparative advantage is more of a human endeavor rather than an economic or industrial endeavor. Individuals and entities in a national system pursue aggressive pursuit of production and consumption patterns on one hand and savings and investment patterns on the other that encourage profligacy. Ruled are unaware of their rights and responsibilities on one hand and their capabilities and potentialities on the other hand. The rulers tend to have a vested interest in achieving a totalitarian control or a democratic fragmentation of these human behavior patterns. All these behaviors need to be harmonized for sustainable comparative advantage. Universal education is the key enabler for a tolerant society and democratic nation as India to discover its full potential through creative intellect rather than regimented labor.
Posted by Dr CB Rao on June 15, 2010
Tuesday, June 15, 2010
Sunday, June 6, 2010
Exit Cross-functional: Enter Cross-industry
Organizational structure is both the boon and bane of corporate development. Without organizational structure, management would be chaotic and even impossible. With organization structure, management is constrained, and even thwarted by silos. Organization experts have tried to configure several models of organizational structure – functional, product, geographic, project, matrix, congruence, strategic business to name a few – to make organizational structures support efficient and effective realization of corporate goals. As companies diversify and globalize on multiple product-market dimensions, structural and process challenges of organization design become more intense.
Whatever be the nature of business and the type of the organization however, departmental configurations perpetuate themselves into structural silos. Functions, domains, businesses or any other part of value chain of any organization turn into structural silos. As leaders of functions, domains and businesses compete to grow in an organization, silos become even more obdurate and ossified. Organization experts have tried to configure solutions by advocating cross-functional management as a process approach to break silos. In today’s fast changing technology space and competitive world, however, it is no longer sufficient to have solutions that attempt to merely overcome self-inflicted organizational problems.
Limitations of intra-organization approach
Cross-functional approach within an organization is at best palliative and is neither curative nor preventive of typical organizational ills. It merely accepts the limitations of organizational structure and leadership styles at higher levels and seeks to discover solutions by encouraging middle and lower levels to work together cutting across functions and enhance organizational delivery. Very often, these cross-functional solutions are presented to, and are discussed and finalized by cross-functional groups of leaders. The entire process merely restores value chain management within a business which is fragmented by the type of organization structure adopted.
Cross-functional groups themselves may not function to the best of the abilities of individual members as often ‘give and take’ of positions is involved in team dynamics. Very often different line functions (such as manufacturing, materials, engineering, research and marketing) and staff functions (such as finance, human resources, corporate planning and information technology) tend to have differentially respected positions in an organization. Cross-functional processes fail to remove such intrinsic legacy positions. In addition, members are often faced with conflicts of time management related to their internal functions and external functions. They are also occasionally faced with the challenges of coping with leadership conflicts. More importantly, cross-functional groups are introverted into organizational vortices rather than extroverted to discover what lies outside the organizations.
Limitations of intra-industry approach
Many times managers and leaders attempt to enhance functional and cross-functional effectiveness by focusing their own attention and the attention of team members on the more effective competitors. Benchmarking of structure, processes, talent and results against those of competitors in an industry is utilized to focus attention on potential improvements. Most such studies are done based on public domain information or syndicated information. Neither approach provides information on the true status and fundamental sources of competitive advantage of a successful competitor in an authentic manner.
The intra-industry approach is also deficient as typically players in an industry replicate the strategies of other players to reach an equilibrium state. For example, a player who specializes in mass products would endeavor to establish a division for differentiated products. A niche player, on the other hand, would seek to enter the mass markets by acquiring capabilities for cost leadership. Eventually, players within an industry tend to have little that can learn from each other. The focus then turns to execution which would require increasingly higher efforts to derive rather unfortunately decreasing levels of additional benefits.
Opportunities of cross-industry approach
Notwithstanding the organizational limitations that could exist within players in an industry, exciting things are happening across industries. These fundamental changes occur mainly as a result of science and technology across industries on one hand, and growing consumerism and egalitarianism in the societies on the other. Some of the changes are truly mind-boggling and challenge what conventional organizations understood as the limits of creativity or performance. For example, automobile industry was the only leading protagonist of consumer choice with its concept of model year for the passenger cars. Upgrades of car designs each year and introduction of new series every four or five years was the ultimate epitome of customer orientation. However, today the electronics industry surprises us by having new models launched each month. Model month, rather than model year, is the new benchmark of competitive development.
The change is not reflected merely in the speed of new product development. The change is also reflected how conventional product features are replaced by new product functionalities. If personal computers rewrote the chapter of mainframe computers yesterday, tablets and cloud computing could consign the personal computers to history tomorrow. Each such new industry development, however, flourishes on certain embedded breakthrough processes of harnessing science, technology and management, which need to be observed and assimilated by other industries consistent with their own research, manufacturing and marketing characteristics. This would require leadership teams in industries discard their dogmas and rewrite the rules of business based on breakthrough concepts that occur in other industries.
Dogmas that need to be discarded
Conventional industrial and business development is severely limited by dogmas that have taken root in the in the theory and practice of management over the years. These dogmas provide stability to organizations and comfort to leaders and managers. When followed unquestioningly these dogmas perpetuate status quo in industries and render individual players uncompetitive and even obsolete. The first trickles of novel technology and new business processes are, however, enough to destabilize such firms. Innovators as well as established firms fall victims to such changes if they hold on to their dogmas. Palm is a classic example of an innovator which almost collapsed on the dogmatic plank of the invincibility of its original innovation. Microsoft, despite being an established colossus, has been wise to discard some of its dogmas and embrace newer trends to stay competitive.
The dogmas that are limiting the innovative capacity of firms are many. A few of these follow. The first is that the longer a product stays in the market the greater is the investment recovery. The second is that it is counter-productive to make one’s own product obsolete or cannibalize one’s own product. The third is that scale of each product is more important than the scale of the overall business. The fourth is that profitability is inversely proportional to product variety. The fifth is that market segmentation is quantitative and not qualitative. The sixth is that emerging markets are only production centers and not consumption markets. The seventh is that the costs of changing the customer mindset for new technologies are prohibitive. The eighth is that digital revolution is only for younger generation. The eighth is that certain technologies, for example touch technology and convergence, are limited only to consumer electronics. The ninth is that management is a superior enabler compared to science and technology. The tenth is that structures and processes shape and harness discordant mindsets. By discarding dogmas and stretching ingenuity to rewrite the traditional economic rules of management, leaders, managers and professionals can revitalize firms and industries.
From diseconomies to economies
Dogmas survive on the basis that any opposing practice leads to diseconomies. Newer pragmatic practices, however, generate their own economies, overturning dogmas. The cellular phone industry, for example, leads all industries in product innovation and launches. Even as one product is launched the next product launch is announced by firms in this industry. The diseconomies of the startling reduction in product life cycle are countered by the economies of saturation launch sale and multiple saturation launches. The consumer electronics industry thrives by making its products obsolete and even cannibalizing its own products. The lessons are that it is profitable to pull out all stops to research and innovation. The consumer goods industry proves that multiple products (SKUs) expand the market and eventually make sub-scale products viable. Skills in retooling, outsourcing and supply chain management can help firms manage the challenges of commercialization of multiple products in quick succession and make profitability directly proportional to product variety.
Market segmentation is the only productive way to serve customers more intensely with the right products, and in the process help firms grow profitably. Market segmentation is as much cardinal as it is ordinal. Products can be designed to fulfill customer needs in terms of application granulation as much as being positioned in terms of user image. Over the last few years, even emerging markets failed to recognize their own potential. Firms which focused on a judicious mix of developed and emerging markets have become more valuable companies than those companies which focused only on any one set of markets. Today’s consumer is information-savvy. The customer is willing to discover new product features on his or her own, providing a great support to product proliferation, with all the benefits underlined above. Boxing (packaging) of each product with appropriate product usage aids is an important contributor to the process of smooth product discovery by the customers.
A digital bridge is developing at breakneck speed extending the present into a wildly different future. The digital bridge is visible to some and invisible to several others. Is the forthcoming ‘slate’ revolution only for the book readers or youngsters? Is the touch technology limited only to cellular phones? Are the robots that talk and walk robots just entertainers or real humanoids? These developments are, in fact, the start of a new wave of human engineering whereby technology would make products and people discover each other’s senses and sensitivities. Science and technology are original and dedicated to making life more productive and helpful; so much so, even human life could soon be synthetically cloned. In contrast, management has done so little in originality and creativity that it would appear counterproductive for science and technology to play second fiddle to management. Science and technology have discovered fundamental laws of life through physics, chemistry, mathematics and biology. Management needs to similarly integrate the social sciences such as economics, psychology, sociology and stochastic sciences to redefine itself.
Benefits of cross-industry assimilation
There are many lessons that can be learnt by firms through an open and structured process of cross-industry observation.
Cellular phone industry teaches one the paradigm of extremely fast-track product development. The industry believes in research as a continuous process rather than a batch process. R&D is organized as a factory operation virtually. The industry sees obsolescence as an opportunity and seeks to create as many opportunities as possible by making as many of its current products obsolete as possible. The industry also demonstrates how multiple functionalities can be optimized under a convergence model. Market segmentation in its ordinal and cardinal senses can be well-understood from the dynamics of cellular phone industry.
Automobile industry teaches one how product performance can be perked up by integrating electronics into design and manufacture. It also demonstrates how an essentially resource guzzling industry (oil reserves and road space) copes with environmental compulsions by enhancing fuel economy, using alternative fuels, and rediscovering compactness. Automobile industry also develops management as an optimal interface of man and machine where synchronization, whether on shop floor or in supply chain, holds the key.
Retail industry teaches one how a certain, fixed-cycle production system can be coordinated with an uncertain, variable-cycle market system. Firms which market non-consumer products can upgrade supply chain practices by observing how retail needs are met by the consumer goods and retail industries in tandem. Requirements of freshness and shelf-life require special capabilities in cold chain and distribution management. The industry also teaches how customer contact and communication intensity can lead to enhanced footfalls.
Infrastructure industry teaches one the challenges of dreaming big, executing under hazardous circumstances, living under regulatory uncertainty, raising massive finances and remaining motivated despite extended viability. Project management in the typically multi-dimensional infrastructure ventures demonstrates how facile should it be to project-manage normal research and manufacturing projects. Financial institutions and investors who see patience as a virtue in the long gestation infrastructure projects would help out other long-gestation industries such as pharmaceuticals and research in general.
Pharmaceutical industry demonstrates how product safety and efficacy as well as manufacturing quality and regulatory compliance determine the level of competitive advantage of a firm. The industry provides a template by which people are rigorously trained for institutionalization of quality and compliance. The industry demonstrates how multiple disciplines of science and technology to make life better for human beings, whereby an unknown molecular entity can be made to cure or prevent disease through innovation and rigor.
Fast moving consumer goods (FMCG) industry teaches how by taking care of day to day needs of individuals and families businesses can be created and grown. The industry teaches how mega businesses can be built on mini technologies. It also reflects on how perceptions and realities can be merged and de-merged to support business development. It brings forth the importance of packaging as a key differentiator. It also demonstrates the power of observation of consumer behavior as a trigger for strategy development. It is a perfect industrial crucible for merger of tradition with globalization and nativity with modernity.
The list could go on; the sooner firms realize that greater competitiveness could emerge from assimilation of best cross-industry practices the greater would be the benefits to economic, industrial and social development.
Posted by Dr CB Rao on June 6, 2010
Whatever be the nature of business and the type of the organization however, departmental configurations perpetuate themselves into structural silos. Functions, domains, businesses or any other part of value chain of any organization turn into structural silos. As leaders of functions, domains and businesses compete to grow in an organization, silos become even more obdurate and ossified. Organization experts have tried to configure solutions by advocating cross-functional management as a process approach to break silos. In today’s fast changing technology space and competitive world, however, it is no longer sufficient to have solutions that attempt to merely overcome self-inflicted organizational problems.
Limitations of intra-organization approach
Cross-functional approach within an organization is at best palliative and is neither curative nor preventive of typical organizational ills. It merely accepts the limitations of organizational structure and leadership styles at higher levels and seeks to discover solutions by encouraging middle and lower levels to work together cutting across functions and enhance organizational delivery. Very often, these cross-functional solutions are presented to, and are discussed and finalized by cross-functional groups of leaders. The entire process merely restores value chain management within a business which is fragmented by the type of organization structure adopted.
Cross-functional groups themselves may not function to the best of the abilities of individual members as often ‘give and take’ of positions is involved in team dynamics. Very often different line functions (such as manufacturing, materials, engineering, research and marketing) and staff functions (such as finance, human resources, corporate planning and information technology) tend to have differentially respected positions in an organization. Cross-functional processes fail to remove such intrinsic legacy positions. In addition, members are often faced with conflicts of time management related to their internal functions and external functions. They are also occasionally faced with the challenges of coping with leadership conflicts. More importantly, cross-functional groups are introverted into organizational vortices rather than extroverted to discover what lies outside the organizations.
Limitations of intra-industry approach
Many times managers and leaders attempt to enhance functional and cross-functional effectiveness by focusing their own attention and the attention of team members on the more effective competitors. Benchmarking of structure, processes, talent and results against those of competitors in an industry is utilized to focus attention on potential improvements. Most such studies are done based on public domain information or syndicated information. Neither approach provides information on the true status and fundamental sources of competitive advantage of a successful competitor in an authentic manner.
The intra-industry approach is also deficient as typically players in an industry replicate the strategies of other players to reach an equilibrium state. For example, a player who specializes in mass products would endeavor to establish a division for differentiated products. A niche player, on the other hand, would seek to enter the mass markets by acquiring capabilities for cost leadership. Eventually, players within an industry tend to have little that can learn from each other. The focus then turns to execution which would require increasingly higher efforts to derive rather unfortunately decreasing levels of additional benefits.
Opportunities of cross-industry approach
Notwithstanding the organizational limitations that could exist within players in an industry, exciting things are happening across industries. These fundamental changes occur mainly as a result of science and technology across industries on one hand, and growing consumerism and egalitarianism in the societies on the other. Some of the changes are truly mind-boggling and challenge what conventional organizations understood as the limits of creativity or performance. For example, automobile industry was the only leading protagonist of consumer choice with its concept of model year for the passenger cars. Upgrades of car designs each year and introduction of new series every four or five years was the ultimate epitome of customer orientation. However, today the electronics industry surprises us by having new models launched each month. Model month, rather than model year, is the new benchmark of competitive development.
The change is not reflected merely in the speed of new product development. The change is also reflected how conventional product features are replaced by new product functionalities. If personal computers rewrote the chapter of mainframe computers yesterday, tablets and cloud computing could consign the personal computers to history tomorrow. Each such new industry development, however, flourishes on certain embedded breakthrough processes of harnessing science, technology and management, which need to be observed and assimilated by other industries consistent with their own research, manufacturing and marketing characteristics. This would require leadership teams in industries discard their dogmas and rewrite the rules of business based on breakthrough concepts that occur in other industries.
Dogmas that need to be discarded
Conventional industrial and business development is severely limited by dogmas that have taken root in the in the theory and practice of management over the years. These dogmas provide stability to organizations and comfort to leaders and managers. When followed unquestioningly these dogmas perpetuate status quo in industries and render individual players uncompetitive and even obsolete. The first trickles of novel technology and new business processes are, however, enough to destabilize such firms. Innovators as well as established firms fall victims to such changes if they hold on to their dogmas. Palm is a classic example of an innovator which almost collapsed on the dogmatic plank of the invincibility of its original innovation. Microsoft, despite being an established colossus, has been wise to discard some of its dogmas and embrace newer trends to stay competitive.
The dogmas that are limiting the innovative capacity of firms are many. A few of these follow. The first is that the longer a product stays in the market the greater is the investment recovery. The second is that it is counter-productive to make one’s own product obsolete or cannibalize one’s own product. The third is that scale of each product is more important than the scale of the overall business. The fourth is that profitability is inversely proportional to product variety. The fifth is that market segmentation is quantitative and not qualitative. The sixth is that emerging markets are only production centers and not consumption markets. The seventh is that the costs of changing the customer mindset for new technologies are prohibitive. The eighth is that digital revolution is only for younger generation. The eighth is that certain technologies, for example touch technology and convergence, are limited only to consumer electronics. The ninth is that management is a superior enabler compared to science and technology. The tenth is that structures and processes shape and harness discordant mindsets. By discarding dogmas and stretching ingenuity to rewrite the traditional economic rules of management, leaders, managers and professionals can revitalize firms and industries.
From diseconomies to economies
Dogmas survive on the basis that any opposing practice leads to diseconomies. Newer pragmatic practices, however, generate their own economies, overturning dogmas. The cellular phone industry, for example, leads all industries in product innovation and launches. Even as one product is launched the next product launch is announced by firms in this industry. The diseconomies of the startling reduction in product life cycle are countered by the economies of saturation launch sale and multiple saturation launches. The consumer electronics industry thrives by making its products obsolete and even cannibalizing its own products. The lessons are that it is profitable to pull out all stops to research and innovation. The consumer goods industry proves that multiple products (SKUs) expand the market and eventually make sub-scale products viable. Skills in retooling, outsourcing and supply chain management can help firms manage the challenges of commercialization of multiple products in quick succession and make profitability directly proportional to product variety.
Market segmentation is the only productive way to serve customers more intensely with the right products, and in the process help firms grow profitably. Market segmentation is as much cardinal as it is ordinal. Products can be designed to fulfill customer needs in terms of application granulation as much as being positioned in terms of user image. Over the last few years, even emerging markets failed to recognize their own potential. Firms which focused on a judicious mix of developed and emerging markets have become more valuable companies than those companies which focused only on any one set of markets. Today’s consumer is information-savvy. The customer is willing to discover new product features on his or her own, providing a great support to product proliferation, with all the benefits underlined above. Boxing (packaging) of each product with appropriate product usage aids is an important contributor to the process of smooth product discovery by the customers.
A digital bridge is developing at breakneck speed extending the present into a wildly different future. The digital bridge is visible to some and invisible to several others. Is the forthcoming ‘slate’ revolution only for the book readers or youngsters? Is the touch technology limited only to cellular phones? Are the robots that talk and walk robots just entertainers or real humanoids? These developments are, in fact, the start of a new wave of human engineering whereby technology would make products and people discover each other’s senses and sensitivities. Science and technology are original and dedicated to making life more productive and helpful; so much so, even human life could soon be synthetically cloned. In contrast, management has done so little in originality and creativity that it would appear counterproductive for science and technology to play second fiddle to management. Science and technology have discovered fundamental laws of life through physics, chemistry, mathematics and biology. Management needs to similarly integrate the social sciences such as economics, psychology, sociology and stochastic sciences to redefine itself.
Benefits of cross-industry assimilation
There are many lessons that can be learnt by firms through an open and structured process of cross-industry observation.
Cellular phone industry teaches one the paradigm of extremely fast-track product development. The industry believes in research as a continuous process rather than a batch process. R&D is organized as a factory operation virtually. The industry sees obsolescence as an opportunity and seeks to create as many opportunities as possible by making as many of its current products obsolete as possible. The industry also demonstrates how multiple functionalities can be optimized under a convergence model. Market segmentation in its ordinal and cardinal senses can be well-understood from the dynamics of cellular phone industry.
Automobile industry teaches one how product performance can be perked up by integrating electronics into design and manufacture. It also demonstrates how an essentially resource guzzling industry (oil reserves and road space) copes with environmental compulsions by enhancing fuel economy, using alternative fuels, and rediscovering compactness. Automobile industry also develops management as an optimal interface of man and machine where synchronization, whether on shop floor or in supply chain, holds the key.
Retail industry teaches one how a certain, fixed-cycle production system can be coordinated with an uncertain, variable-cycle market system. Firms which market non-consumer products can upgrade supply chain practices by observing how retail needs are met by the consumer goods and retail industries in tandem. Requirements of freshness and shelf-life require special capabilities in cold chain and distribution management. The industry also teaches how customer contact and communication intensity can lead to enhanced footfalls.
Infrastructure industry teaches one the challenges of dreaming big, executing under hazardous circumstances, living under regulatory uncertainty, raising massive finances and remaining motivated despite extended viability. Project management in the typically multi-dimensional infrastructure ventures demonstrates how facile should it be to project-manage normal research and manufacturing projects. Financial institutions and investors who see patience as a virtue in the long gestation infrastructure projects would help out other long-gestation industries such as pharmaceuticals and research in general.
Pharmaceutical industry demonstrates how product safety and efficacy as well as manufacturing quality and regulatory compliance determine the level of competitive advantage of a firm. The industry provides a template by which people are rigorously trained for institutionalization of quality and compliance. The industry demonstrates how multiple disciplines of science and technology to make life better for human beings, whereby an unknown molecular entity can be made to cure or prevent disease through innovation and rigor.
Fast moving consumer goods (FMCG) industry teaches how by taking care of day to day needs of individuals and families businesses can be created and grown. The industry teaches how mega businesses can be built on mini technologies. It also reflects on how perceptions and realities can be merged and de-merged to support business development. It brings forth the importance of packaging as a key differentiator. It also demonstrates the power of observation of consumer behavior as a trigger for strategy development. It is a perfect industrial crucible for merger of tradition with globalization and nativity with modernity.
The list could go on; the sooner firms realize that greater competitiveness could emerge from assimilation of best cross-industry practices the greater would be the benefits to economic, industrial and social development.
Posted by Dr CB Rao on June 6, 2010
Sunday, May 30, 2010
Indian Management: The Unseen Revolution
India has made a mark globally with its software skills. More recently, India has come into global reckoning for its manufacturing capabilities. In future, India will be the hub of infrastructure building. Consolidating the gains in services and products and making new gains in infrastructure, India will keep up its growth momentum. India’s economic growth could be upwards of 10 percent per annum in the years to come which could catapult India as the fourth largest economy in the world by 2030, after USA, Japan and China. In fact, the gap, if any, in terms of gross national product could be small within these four economies.
Indian management and global achievement
Science and technology power the economy as a chip powers the computer. Management drives the economy just as software programs the computer for performance. A unique way of Indian management has emerged over the last few decades of the independent India that is shaping the new economic revolution in India despite all the constraints that exist. The distinctive Indian management paradigm is a result of the multiple ownership and organizational formats, and the diverse organizational eco-systems that evolved over the years in India.
The Indian managerial alchemy is no longer a perception or an aspiration; it is a reality. If global scale is a metric, Indian management has proved itself with several Indian companies joining the Global 2000 Club (Forbes Asia, May 2010, Volume 6, Number 6). If global recognition is a metric, most Indian managed companies have proved themselves by exporting products and services, by becoming chosen partners and in some cases by being courted by global giants to add strength to their value chains. In fields as diverse as traditional arts and culture or modern science and technology, Indian management demonstrated a sure ability for global marksmanship.
The mix of Indian companies in the Forbes list or the Fortune list of the largest publicly traded companies of the world illustrates that it is not merely the Indian factor advantage but also a pan-industry managerial capability that helped India Inc power its way into the global club. The Indian companies in such global lists come from diverse business and industrial domains, to name a few: ACC (cement), Allahabad Bank, Axis Bank, Bank of Baroda, Bank of India, Canara Bank, Central Bank of India, Corporation Bank, HDFC Bank, ICICI Bank, IDBI Bank, Indian Bank, Indian Overseas Bank, Oriental Bank, PNB, State Bank and Syndicate Bank (banking), Bharat Electronics, Bharat Earth Movers and Bharat Heavy Electricals (equipment), Bharat Petroleum, GAIL, Hindustan Petroleum, Indian Oil, ONGC and Oil India (oil and gas), Bharti Airtel, Idea and Reliance Communications (telecommunications), DLF and HDFC (real estate), Grasim and Reliance Industries (diversified), HCL Technologies, Infosys Technologies, Tata Consultancy and Wipro (information technology), Jet Airways (airlines), Ashok Leyland, Bajaj Auto, Hero Honda, Mahindra & Mahindra and Tata Motors (automobiles), Hindalco, National Aluminium, NMDC, SAIL, Sterlite and Tata Steel (metals), ITC (FMCG), JP Industries, Larsen & Toubro and Reliance Infra (infrastructure), NHPC, NTPC, Power Finance, Power Grid, Rural Electrification, Tata Power (power), Cipla, Dr Reddy’s, Piramal, Ranbaxy and Sun Pharmaceuticals (pharmaceuticals) and United Breweries (spirits). In addition, several subsidiaries of multinationals in India, ABB, Siemens, Vodaphone, Hyundai, Unilever, Proctor & Gamble and IBM, to mention a few, have acquired statures of their own.
The high number of Indian banks in the global list illustrates the overall strength of the economy. The fact that no Indian bank failed when several global banks went into a tailspin in the global economic meltdown illustrates the financial management skills of Indian economists and banking managers. Similarly, the growing number and increasing scale of firms in growth sectors such as automobiles, telecommunications, infrastructure, oil and gas and metals illustrates the diversified managerial base. Several Indian subsidiaries of global multinationals such as Unilever, Hyundai, Proctor & Gamble have consistently provided a large Indian anchor to global operations. The ability of large Indian groups such as Tata, Bharti, and Reliance to acquire overseas firms reflects new confidence in globalization. Similarly the growth of large non-resident Indian groups such as the Hindujas and Mittals on a global scale illustrates the global entrepreneurship of Indian business groups. It is also interesting that some of the largest listed companies are government owned while several government owned corporations and departmental undertakings are unlisted but are very large, reflecting the management acumen in India that transcends public-private ownership differences.
On a different but allied plane, for over five decades, Indian academic scholors enriched the global technology and management scenario. In the US alone, more than 8000 professors are said to be making important contributions to the academic life. In the management and economics areas of reputed business schools, not limited to Harvard, Stanford, Kellogg, LBS and Wharton, Professors CK Prahalad, Sumantra Ghoshal, Marti Subrahmanyam, Bala Balachandran, Krishna Palepu, Pankaj Ghemawat, Raj Varadarajan, Nitin Nohria, Amartya Sen, Jagdish Bhagwati, Kasturi Rangan, and Jagmohan Raju made a mark as eminent exponents of management. In the global consulting firms such as McKinsey, BCG, Bain and PRTM as well, Indian management consultants have become an increasingly impactful fraternity.
In a dramatic change, even the multinational corporations known for their fiercely US or European headquarter-centric structures and talent management models are beginning to engage Indian management talent in localized corporate roles. While Indian Americans have been occupying high positions in the global headquarters, global multinational corporations in diversified fields are now choosing to build new regionalized centers of excellence and corporate divisions around Indian, and on a broader base around Asian talent. This represents a paradigm shift in the MNC way of thinking on globalization of talent. The new paradigm is that true globalization extends beyond seeking wider markets or factor inputs and focuses on building global centers of excellence around proven local talent.
What do these results and trends, at both corporate and individual professional levels, portray? While modern management no doubt has its origins in the Western schools, Indian companies and managers have developed their own indigenized management alchemy based on the specific characteristics of the Indian situation.
Indian management evolution
Indian organizations typically reflect one of the three types: the government civil organizations, including the Indian Administrative Services (IAS), the government owned public sector undertakings, including those set up to own the commanding heights of economy, some of which are listed in the stock exchanges (PSUs), and the private sector companies, most of them publicly listed in stock exchanges (PSCs). The IAS typically attracted top talent that was service oriented. The PSUs attracted talent that liked industrialization with scale and scope. PSCs attracted talent that believed in capitalistic growth despite constraints. Different ownership formats and organizational templates typically created different managerial dynamics and led to multiple managerial genres.
Five major forces silently shaped Indian management to a global top spot over the decades. The first is the coexistence of, and osmosis between, the three genres of management styles: the IAS, the PSU and the PSC styles. The second is the induction of multiple technologies and with them related management concepts, from different countries as part of the industrialization from 1947; British, European, American, Japanese and Korean, to name a few. The third is the unique Indian social psyche that adapts to imposition as much as it demands independence, and that encourages creative chaos as much as it respects rigid compliance. The fourth is the motivation to do better and match the best; starting with fierce competition from the school days. The fifth is the proliferation of engineering and management education in India, with a strong influx of engineers into management. These five forces have created a unique Indian managerial alchemy.
Capable administrators from the IAS moved through public sector to private sector to leverage their skills for unfettered growth of institutions. Public and private sector managers learnt the art of positioning corporate strategies in alignment with national needs and bureaucratic challenges. This facilitated a multi-pronged osmosis of managerial aspirations, thoughts and styles. The multiplicity of behavioral approaches was sharpened with engineered precision of a liberal managerial culture. The resultant Indian management style is a unique one that combines administrative efficiency, national passion and material pursuit.
Some of the above are practical hypotheses that are built upon the proven and highly visible successes of the Indian industrial scenario. The author had personal experiences with several such leaders. Stalwarts such as V Krishnamurthy, a PSU technocrat and SVS Raghavan, an IAS bureaucrat built Bharat Heavy Electricals as a leader in power equipment. Again, V Krishnamurthy and later RC Bhargava and Jagdish Khattar, both IAS professionals built Maruti Suzuki as an automobile firm of global repute, even outshining the Japanese parent in certain aspects. S Soundararajan who turned around a sick Garden Reach and TS Kannan who repositioned NSIDC were other IAS professionals. Government-owned insurance giant, Life Insurance Corporation of India had leaders like R Narayanan who built huge strengths in the institution. The list of Indian leaders who built PSU and PSC behemoths and ran departmental undertakings with great vision and success is indeed large.
India’s private sector benefitted from the leadership of several enterprising visionaries. N Vaghul and KV Kamath who built ICICI Bank into a first class private sector bank, Deepak Parekh who built HDFC as a role model in housing finance, Dhirubhai Ambani who built India’s new generation conglomerate, the Reliance Group, JRD Tata and Ratan Tata who revved up and reshaped the Tata group, S Moolgaokar who made Tata Motors (then Telco) the first visible sign of indigenous technological capability, RJ Shahaney and R Seshasayee who unlocked value of a slow-grown British subsidiary, Ashok Leyland, Rahul Bajaj who provided an Indian techno-marketing paradigm in two-wheeler industry with Bajaj Auto, Subir Raha who globalized ONGC, Kurien who made Amul the largest milk cooperative in the world, Anand Mahindra who transformed Mahindra & Mahindra, a tractor and Jeep company into a diversified group, Kishore Biyani who built a hugely successful Indian model of retail business, Pantaloons and Big Bazaar, NS Narayana Murthy and Azim Premzi who built India’s famous global IT companies, Infosys and Wipro respectively, Anji Reddy who demonstrated to the world a new Indian pharmaceutical paradigm, Pratap Reddy who built a world-class hospitals network and K Raghavendra Rao who became a rare-in-class first generation entrepreneur in global pharmaceuticals business reflect the myriad hues of the uniquely Indian management paradigm. There are also several brilliant scientists, technologists and strategists who provided the core competencies for Indian firms and supported the leaders in their global visions; like V Sumatran who helped Tata Motors realize the first indigenous small car dream, leading the multi-faceted Indica passenger car design team, and RS Prasad who helped Anji Reddy and K Raghavendra Rao realize their global generics dreams, building world-class pharmaceutical research and manufacturing infrastructure with first-to-file capabilities. Each of the leaders mentioned above, and not mentioned above brought a uniquely Indian perspective as to how from highly modest and severely resource constrained beginnings world-class corporations could be built in India, irrespective of the ownership.
(Author’s note: In fact, this blog feels humble that it is too inadequate to accommodate the list of top leaders of the IAS, PSU and PSC streams which is so large, running into thousands. Omissions, therefore, are inevitable but are certainly neither intentional nor reflective of any priority.)
The Indian management alchemy
What do these several named, and unnamed, Indian managerial stalwarts have in common? They have, in fact, a lot in common, even if they pursued diverse business and operational models. First, as leaders all of them sought to grow their companies as the best-in-class companies. Second, they believed in Indian talent and indigenization, even if they had to rely on certain imported technologies from time to time. Third, they possessed exceptional personal and professional attributes combining intellect, grasp, memory, speed, passion and accuracy for unique managerial delivery. Fourth, they combined leadership with mentorship, building successive generations of leaders to keep up growth momentum. Fifth, they believed in empowerment of people and teams to drive into new growth horizons. Sixth, they combined global aspiration with Indian patriotism. As a result, each of the leaders could establish or grow companies which held, and continue to hold, Indian flag high.
If the above are the common characteristics of Indian leaders, what then are the common features of Indian management that helped the firms make a global mark? First, Indian management is not deterred by resource constraints. Dreaming big despite a small resource base brings out the best stretch in Indian firms, from strategic innovation to operational excellence. Second, Indian management is sensitive to national imperatives. As a result, Indian firms built unique business models on twin pillars of catering to domestic consumption and generating export revenues. Third, Indian management is a multi-tasking paradigm with low respect for robotic sequencing of events and high passion for simultaneous pursuit of activities. This helps Indian firms cut down development cycles and time to market. Fourth, Indian management looks for delivery leaders rather than deliberative teams. As a result, Indian companies have fairly simple organizational structures that have as little clutter as possible and as many single point responsibilities as can be reasonable. Fifth, Indian management is reflective of the Indian society in terms of frugality and conservation. This naturally induces Indian engineers to come up with functional and utilitarian plant designs that are cost-competitive. Sixth, Indian management is conscious of the need to build and retain reputation. This motivates employees to work on the safe side to meet future quality and regulatory requirements. Seventh, Indian management is impatient, functioning almost from thought to action, skirting elaborate planning rituals. This helps Indian firms beat the competition on speed of delivery, even on a global scale. Eighth, Indian management protects jobs as much as it can. Indian organizations typically stay together in bad times retaining the flexibility to take off when good times return. Ninth, Indian management focuses on organizational and career growth as a base motivator. This provides leaders with multiple avenues for talent management. Tenth, Indian management is intrinsically entrepreneurial and opportunistic. As a result, Indian firms are quick to capitalize on market opportunities. Evidently, some of the above characteristics have contradictory potentialities; the success of Indian management lies in its ability to harmonize the multifarious tendencies for synergy.
Probably, not all aspects of Indian management are flawless. Things possibly could be even better with stronger internal and external collaboration, clearer communication and negotiation, broader application of analytics, stronger grassroots leadership, closer alignment of aspirations and resources, greater openness to indigenous consolidation, higher belief in innovation, lower emphasis on followership, and so on. Several top rung companies not only hire the best talent from leading institutes but also have elaborate in-house leadership development programs to address the residual concerns. The forecast tripling of top-notch engineering and management institutes in India such as the Indian Institutes of Technology and the Indian Institutes of Management in the next few years would provide further reinforcement to the Indian talent pool. As Indian management globalizes and absorbs some of the finer nuances of competitive global management, and appreciates the need for innovation, scale and scope to stay on top globally, the fundamental strengths of “value with vision” and “speed with passion” that uniquely characterize Indian management would be reinforced to an even greater extent.
Posted by Dr CB Rao on May 31, 2010
Indian management and global achievement
Science and technology power the economy as a chip powers the computer. Management drives the economy just as software programs the computer for performance. A unique way of Indian management has emerged over the last few decades of the independent India that is shaping the new economic revolution in India despite all the constraints that exist. The distinctive Indian management paradigm is a result of the multiple ownership and organizational formats, and the diverse organizational eco-systems that evolved over the years in India.
The Indian managerial alchemy is no longer a perception or an aspiration; it is a reality. If global scale is a metric, Indian management has proved itself with several Indian companies joining the Global 2000 Club (Forbes Asia, May 2010, Volume 6, Number 6). If global recognition is a metric, most Indian managed companies have proved themselves by exporting products and services, by becoming chosen partners and in some cases by being courted by global giants to add strength to their value chains. In fields as diverse as traditional arts and culture or modern science and technology, Indian management demonstrated a sure ability for global marksmanship.
The mix of Indian companies in the Forbes list or the Fortune list of the largest publicly traded companies of the world illustrates that it is not merely the Indian factor advantage but also a pan-industry managerial capability that helped India Inc power its way into the global club. The Indian companies in such global lists come from diverse business and industrial domains, to name a few: ACC (cement), Allahabad Bank, Axis Bank, Bank of Baroda, Bank of India, Canara Bank, Central Bank of India, Corporation Bank, HDFC Bank, ICICI Bank, IDBI Bank, Indian Bank, Indian Overseas Bank, Oriental Bank, PNB, State Bank and Syndicate Bank (banking), Bharat Electronics, Bharat Earth Movers and Bharat Heavy Electricals (equipment), Bharat Petroleum, GAIL, Hindustan Petroleum, Indian Oil, ONGC and Oil India (oil and gas), Bharti Airtel, Idea and Reliance Communications (telecommunications), DLF and HDFC (real estate), Grasim and Reliance Industries (diversified), HCL Technologies, Infosys Technologies, Tata Consultancy and Wipro (information technology), Jet Airways (airlines), Ashok Leyland, Bajaj Auto, Hero Honda, Mahindra & Mahindra and Tata Motors (automobiles), Hindalco, National Aluminium, NMDC, SAIL, Sterlite and Tata Steel (metals), ITC (FMCG), JP Industries, Larsen & Toubro and Reliance Infra (infrastructure), NHPC, NTPC, Power Finance, Power Grid, Rural Electrification, Tata Power (power), Cipla, Dr Reddy’s, Piramal, Ranbaxy and Sun Pharmaceuticals (pharmaceuticals) and United Breweries (spirits). In addition, several subsidiaries of multinationals in India, ABB, Siemens, Vodaphone, Hyundai, Unilever, Proctor & Gamble and IBM, to mention a few, have acquired statures of their own.
The high number of Indian banks in the global list illustrates the overall strength of the economy. The fact that no Indian bank failed when several global banks went into a tailspin in the global economic meltdown illustrates the financial management skills of Indian economists and banking managers. Similarly, the growing number and increasing scale of firms in growth sectors such as automobiles, telecommunications, infrastructure, oil and gas and metals illustrates the diversified managerial base. Several Indian subsidiaries of global multinationals such as Unilever, Hyundai, Proctor & Gamble have consistently provided a large Indian anchor to global operations. The ability of large Indian groups such as Tata, Bharti, and Reliance to acquire overseas firms reflects new confidence in globalization. Similarly the growth of large non-resident Indian groups such as the Hindujas and Mittals on a global scale illustrates the global entrepreneurship of Indian business groups. It is also interesting that some of the largest listed companies are government owned while several government owned corporations and departmental undertakings are unlisted but are very large, reflecting the management acumen in India that transcends public-private ownership differences.
On a different but allied plane, for over five decades, Indian academic scholors enriched the global technology and management scenario. In the US alone, more than 8000 professors are said to be making important contributions to the academic life. In the management and economics areas of reputed business schools, not limited to Harvard, Stanford, Kellogg, LBS and Wharton, Professors CK Prahalad, Sumantra Ghoshal, Marti Subrahmanyam, Bala Balachandran, Krishna Palepu, Pankaj Ghemawat, Raj Varadarajan, Nitin Nohria, Amartya Sen, Jagdish Bhagwati, Kasturi Rangan, and Jagmohan Raju made a mark as eminent exponents of management. In the global consulting firms such as McKinsey, BCG, Bain and PRTM as well, Indian management consultants have become an increasingly impactful fraternity.
In a dramatic change, even the multinational corporations known for their fiercely US or European headquarter-centric structures and talent management models are beginning to engage Indian management talent in localized corporate roles. While Indian Americans have been occupying high positions in the global headquarters, global multinational corporations in diversified fields are now choosing to build new regionalized centers of excellence and corporate divisions around Indian, and on a broader base around Asian talent. This represents a paradigm shift in the MNC way of thinking on globalization of talent. The new paradigm is that true globalization extends beyond seeking wider markets or factor inputs and focuses on building global centers of excellence around proven local talent.
What do these results and trends, at both corporate and individual professional levels, portray? While modern management no doubt has its origins in the Western schools, Indian companies and managers have developed their own indigenized management alchemy based on the specific characteristics of the Indian situation.
Indian management evolution
Indian organizations typically reflect one of the three types: the government civil organizations, including the Indian Administrative Services (IAS), the government owned public sector undertakings, including those set up to own the commanding heights of economy, some of which are listed in the stock exchanges (PSUs), and the private sector companies, most of them publicly listed in stock exchanges (PSCs). The IAS typically attracted top talent that was service oriented. The PSUs attracted talent that liked industrialization with scale and scope. PSCs attracted talent that believed in capitalistic growth despite constraints. Different ownership formats and organizational templates typically created different managerial dynamics and led to multiple managerial genres.
Five major forces silently shaped Indian management to a global top spot over the decades. The first is the coexistence of, and osmosis between, the three genres of management styles: the IAS, the PSU and the PSC styles. The second is the induction of multiple technologies and with them related management concepts, from different countries as part of the industrialization from 1947; British, European, American, Japanese and Korean, to name a few. The third is the unique Indian social psyche that adapts to imposition as much as it demands independence, and that encourages creative chaos as much as it respects rigid compliance. The fourth is the motivation to do better and match the best; starting with fierce competition from the school days. The fifth is the proliferation of engineering and management education in India, with a strong influx of engineers into management. These five forces have created a unique Indian managerial alchemy.
Capable administrators from the IAS moved through public sector to private sector to leverage their skills for unfettered growth of institutions. Public and private sector managers learnt the art of positioning corporate strategies in alignment with national needs and bureaucratic challenges. This facilitated a multi-pronged osmosis of managerial aspirations, thoughts and styles. The multiplicity of behavioral approaches was sharpened with engineered precision of a liberal managerial culture. The resultant Indian management style is a unique one that combines administrative efficiency, national passion and material pursuit.
Some of the above are practical hypotheses that are built upon the proven and highly visible successes of the Indian industrial scenario. The author had personal experiences with several such leaders. Stalwarts such as V Krishnamurthy, a PSU technocrat and SVS Raghavan, an IAS bureaucrat built Bharat Heavy Electricals as a leader in power equipment. Again, V Krishnamurthy and later RC Bhargava and Jagdish Khattar, both IAS professionals built Maruti Suzuki as an automobile firm of global repute, even outshining the Japanese parent in certain aspects. S Soundararajan who turned around a sick Garden Reach and TS Kannan who repositioned NSIDC were other IAS professionals. Government-owned insurance giant, Life Insurance Corporation of India had leaders like R Narayanan who built huge strengths in the institution. The list of Indian leaders who built PSU and PSC behemoths and ran departmental undertakings with great vision and success is indeed large.
India’s private sector benefitted from the leadership of several enterprising visionaries. N Vaghul and KV Kamath who built ICICI Bank into a first class private sector bank, Deepak Parekh who built HDFC as a role model in housing finance, Dhirubhai Ambani who built India’s new generation conglomerate, the Reliance Group, JRD Tata and Ratan Tata who revved up and reshaped the Tata group, S Moolgaokar who made Tata Motors (then Telco) the first visible sign of indigenous technological capability, RJ Shahaney and R Seshasayee who unlocked value of a slow-grown British subsidiary, Ashok Leyland, Rahul Bajaj who provided an Indian techno-marketing paradigm in two-wheeler industry with Bajaj Auto, Subir Raha who globalized ONGC, Kurien who made Amul the largest milk cooperative in the world, Anand Mahindra who transformed Mahindra & Mahindra, a tractor and Jeep company into a diversified group, Kishore Biyani who built a hugely successful Indian model of retail business, Pantaloons and Big Bazaar, NS Narayana Murthy and Azim Premzi who built India’s famous global IT companies, Infosys and Wipro respectively, Anji Reddy who demonstrated to the world a new Indian pharmaceutical paradigm, Pratap Reddy who built a world-class hospitals network and K Raghavendra Rao who became a rare-in-class first generation entrepreneur in global pharmaceuticals business reflect the myriad hues of the uniquely Indian management paradigm. There are also several brilliant scientists, technologists and strategists who provided the core competencies for Indian firms and supported the leaders in their global visions; like V Sumatran who helped Tata Motors realize the first indigenous small car dream, leading the multi-faceted Indica passenger car design team, and RS Prasad who helped Anji Reddy and K Raghavendra Rao realize their global generics dreams, building world-class pharmaceutical research and manufacturing infrastructure with first-to-file capabilities. Each of the leaders mentioned above, and not mentioned above brought a uniquely Indian perspective as to how from highly modest and severely resource constrained beginnings world-class corporations could be built in India, irrespective of the ownership.
(Author’s note: In fact, this blog feels humble that it is too inadequate to accommodate the list of top leaders of the IAS, PSU and PSC streams which is so large, running into thousands. Omissions, therefore, are inevitable but are certainly neither intentional nor reflective of any priority.)
The Indian management alchemy
What do these several named, and unnamed, Indian managerial stalwarts have in common? They have, in fact, a lot in common, even if they pursued diverse business and operational models. First, as leaders all of them sought to grow their companies as the best-in-class companies. Second, they believed in Indian talent and indigenization, even if they had to rely on certain imported technologies from time to time. Third, they possessed exceptional personal and professional attributes combining intellect, grasp, memory, speed, passion and accuracy for unique managerial delivery. Fourth, they combined leadership with mentorship, building successive generations of leaders to keep up growth momentum. Fifth, they believed in empowerment of people and teams to drive into new growth horizons. Sixth, they combined global aspiration with Indian patriotism. As a result, each of the leaders could establish or grow companies which held, and continue to hold, Indian flag high.
If the above are the common characteristics of Indian leaders, what then are the common features of Indian management that helped the firms make a global mark? First, Indian management is not deterred by resource constraints. Dreaming big despite a small resource base brings out the best stretch in Indian firms, from strategic innovation to operational excellence. Second, Indian management is sensitive to national imperatives. As a result, Indian firms built unique business models on twin pillars of catering to domestic consumption and generating export revenues. Third, Indian management is a multi-tasking paradigm with low respect for robotic sequencing of events and high passion for simultaneous pursuit of activities. This helps Indian firms cut down development cycles and time to market. Fourth, Indian management looks for delivery leaders rather than deliberative teams. As a result, Indian companies have fairly simple organizational structures that have as little clutter as possible and as many single point responsibilities as can be reasonable. Fifth, Indian management is reflective of the Indian society in terms of frugality and conservation. This naturally induces Indian engineers to come up with functional and utilitarian plant designs that are cost-competitive. Sixth, Indian management is conscious of the need to build and retain reputation. This motivates employees to work on the safe side to meet future quality and regulatory requirements. Seventh, Indian management is impatient, functioning almost from thought to action, skirting elaborate planning rituals. This helps Indian firms beat the competition on speed of delivery, even on a global scale. Eighth, Indian management protects jobs as much as it can. Indian organizations typically stay together in bad times retaining the flexibility to take off when good times return. Ninth, Indian management focuses on organizational and career growth as a base motivator. This provides leaders with multiple avenues for talent management. Tenth, Indian management is intrinsically entrepreneurial and opportunistic. As a result, Indian firms are quick to capitalize on market opportunities. Evidently, some of the above characteristics have contradictory potentialities; the success of Indian management lies in its ability to harmonize the multifarious tendencies for synergy.
Probably, not all aspects of Indian management are flawless. Things possibly could be even better with stronger internal and external collaboration, clearer communication and negotiation, broader application of analytics, stronger grassroots leadership, closer alignment of aspirations and resources, greater openness to indigenous consolidation, higher belief in innovation, lower emphasis on followership, and so on. Several top rung companies not only hire the best talent from leading institutes but also have elaborate in-house leadership development programs to address the residual concerns. The forecast tripling of top-notch engineering and management institutes in India such as the Indian Institutes of Technology and the Indian Institutes of Management in the next few years would provide further reinforcement to the Indian talent pool. As Indian management globalizes and absorbs some of the finer nuances of competitive global management, and appreciates the need for innovation, scale and scope to stay on top globally, the fundamental strengths of “value with vision” and “speed with passion” that uniquely characterize Indian management would be reinforced to an even greater extent.
Posted by Dr CB Rao on May 31, 2010
Sunday, May 9, 2010
From Start-up to Maturity: Indian Entrepreneurial Challenge
Indian psyche is unique in that it follows an icon as much as it chooses independence. Indian corporate saga is an equally unique amalgam of followership and independence. The growth of Indian enterprise is founded on an entrepreneurial rush into an activity that is opened up. The evolution of industrial structure in India is based on a continuous expansion in the number of firms in the fray rather than a structural consolidation at any point of time. The Indian corporate sector therefore faces a challenge as firms struggle to transform themselves from start-up stage to maturity state, some passing successfully through a growth phase, and some failing to. The challenge if left unaddressed could affect entrepreneurial development, and eventually the competitiveness of the Indian corporate sector.
The Indian industrial evolution
The Indian industrial start-up model, as elsewhere, was fuelled by entrepreneurial energy. Even when India was under foreign occupation, in the 1800s and the early 1900s, Indian industrial start-ups were established by the Tatas and Birlas, with their enterprises becoming large industrial groups over the years. Post-independence, successive government policies enabled and encouraged establishment of scores of cottage and small scale enterprises in India. Some of these served larger firms as suppliers and vendors of materials and components while several other start-ups sought a direct go-to-market strategy, with varying degrees of success.
An introverted India, even post-independence in 1947, rarely encouraged free entry and exit, expansion of scale and induction of technology in its industrial and economic policies. As a result, companies stagnated and became less competitive, relative to global trends. At the same time, licensing regulations inhibited global corporations from entering into or expanding in India. On a helpful side, process patent policies (as in some other countries) ensured freedom for domestic companies to reverse-engineer global products for Indian markets. The Indian automobile and pharmaceutical industries became, for example, the epitome of low-scale, domestic-oriented direct to market fragmented industrial structures of the 1960s and 1970s.
There emerged a new Indian entrepreneurial wave from the 1970s (Ambani founded Reliance, for example). Technology induction and assimilation blazed new paths from the 1980s (Indo-Japanese automobile collaborations such as Maruti-Suzuki). Entrepreneurs and corporations were rid of controls, and certain industries started becoming global leaders in certain sectors from the 1990s (TCS and Infosys, in Information Technology). Increasing confidence in Indian competencies and policies from the 2000s and post-patent harmonization assurances led to great global interest in India with a better awareness of the competitiveness of Indian enterprise. Simultaneously, Indian industrial groups and larger Indian companies became globally aggressive, entering overseas markets (directly and through partnerships), acquiring overseas units and marquee brands.
The Indian start-up model
From a protected, regulated domestic regime, the industrial paradigm in India evolved into a liberalized, competitive globalized regime in the 2000s. The models that helped Indian start-ups to enter and stay fixed in scale and scope are becoming less tenable. The Indian start-ups are today verily at cross roads, with choices between smug stagnation and tough transformation. Yet, the continued proliferation of owner-managed companies and small scale enterprises with dated technologies indicates that a new start-up model is yet to emerge.
The Indian start-up model is highly domestic market oriented and self-reliance inspired. While start-up firms would not be averse to being suppliers to larger firms, especially in sectors such as engineering and automobile, the overwhelming preference seems to be on direct go-to-market strategies. This enables firms have a quick market-oriented entry in any industrial segment but also limits the ability of entrepreneurs to create stable, growth or niche models that could be more vibrant technologically and commercially in the long term.
The missing dimensions in the Indian start-up scenario relate to inadequate access to technology, insufficient financial resources and overwhelming reluctance to consolidate. The first two factors dictate the pace with which a start-up in India is able to navigate to, and through, the growth phase while the last factor dictates the ability of a start-up firm to stay on course in the growth phase or navigate the maturity phase. Typically, a start-up in India would have the capability to move from a USD 1 million to USD 100 million annual sales but lack the capability to move beyond without dedicated efforts to manage the three dimensions of technology, finance and ownership.
An examination of the Western and Japanese models of start-up could provide guidance for new development models relevant for Indian start-ups.
The Western and Japanese start-up models
The Western and Japanese start-up models are typically based on pioneering pieces of technology or market creation. While it may be tempting to relate this to the fact that all modern technologies emanated in the West (largely USA or Europe) or in Japan it is the start-up intent that made the difference. Entrepreneurs with truly ground-breaking products in the West or in Japan or Korea went on to make their start-ups into mega global enterprises. However, there are certain typical nuances of technology-led start-up development that are different.
Not all techno-entrepreneurs in the West were or are keen to build their start-up enterprises into mega enterprises. Entrepreneurs in the West see creation of commercial value (for themselves) more important than either reaching the market or expanding the scale of the enterprise. Entrepreneurs see technology as a concept to be commercially proved at their hands rather than converted into commercial saleable products in their hands. Entrepreneurs benefit from an equity environment that provides multiple-series funding. Finally, entrepreneurs are willing to monetize their technologies and firms to generate surpluses for new endeavors. Ownership and management are treated as very important in the start-up phase but are considered expendable for leading into the growth and maturity phases.
The techno-entrepreneurs in Japan are different. They tend to innovate for larger industrial firms or trading groups and in the process help create multi-level business arrangements. The start-ups set up by the techno-entrepreneurs typically grow with the larger firms and groups, and become global enterprises in their own right. The entrepreneurs are typically attached to their technologies and family presence but are also able to evolve to the higher levels due to the synergistic relationships. Typically, the larger firms in Japan respect the origins and independence of the smaller suppliers and desist from the Western temptation of acquiring promising technologies and firms. Instead, the accent is on letting the smaller start-ups grow into mature, innovative enterprises.
A hybrid model for Indian start-ups
Given the constraints the Indian start-ups face in accessing technology, finance and markets, and the attachment of the entrepreneurs to continued ownership of the firms they founded, a hybrid model is relevant for Indian start-ups. Assuming that a base level of promoter and external funding is arranged, typically, start-ups fall into one of the three categories: those that make better use of available technology, those that make their operations more competitive and those that access certain market segments more creatively. Needless to say, firms which achieve a virtuous combination of technological innovation, operational efficiency and market penetration would be in a position to drive into a growth phase on their own. The hybrid model would be relevant to start-ups having competencies in one of the three dimensions.
Firms which are technologically innovative need to aim at achieving the earliest proof of concept, following which they should be prepared to license or sell the technology to larger firms which can take the product to the market. This phenomenon is widely prevalent in the West, especially in technology and biopharmaceutical fields, and needs to be adapted to the Indian situation. Firms which have pieces of market would do well by either taking in products from other start-ups or providing market access to larger firms. Firms which are operationally efficient must focus on gaining market access in partnership with larger firms having Indian and global market presence. This could enable a longer independent functioning to such firms, enabling growth journey on their own.
The hybrid model for Indian start-ups thus envisages growth through inorganic relationships across fragments of value chain rather than through organic end-to-end value chain. Many Indian start-ups in India have evolved into mid-sized firms through such relationships. Still some decisions have to be customized: for example, the scale and scope of such relationships, whether such relationships would need to be limited period relationships or permanent relationships, and whether the end game is surplus generation through value monetization and exit as per the Western model or lifetime domain commitment.
Founder-Manager transformational issues
Part of the evolutionary response would emerge from how the founders of the Indian start-ups manage the entry, growth and maturity phases of an enterprise. Entrepreneurial firms tend to be typically founder managed. Investors gain confidence with the founder being in total control of the enterprise while the employees get inspired by the leadership of their founder. As enterprises move into growth phases, investors need to let go of their control on the founders, and the founders need to let go of the control on their enterprises. As an enterprise becomes larger it needs to organize itself into organizational and business units that can be driven by independent managers to generate greater value.
While no professional manager can bring the passion and feel of a founder-leader to an enterprise, start-ups need to find ways and means of institutionalizing the entrepreneurial passion and feel through diversified professionalization. Indian start-ups which moved into the big league have done so not only on the basis of technology-efficiency-market grid but also due to organizational development. Serial entrepreneurship could well help Indian entrepreneurs to continue to feel their passion with newer enterprises while helping their earlier enterprises move on their own steam.
The suggested organizational model is based on the unique Indian psyche that complies as much as it commands; that follows as much as it leads; and that is as much professional as it is entrepreneurial. Compensating any limitations it has, the Indian employee base is driven by a deep sense of loyalty and frugality that can be leveraged by placing capable people in commanding positions. The success of large Indian private and public sector corporations is related to the diversified ownership model that is extended to individual organizational units of an enterprise.
Science and finance for start-up transformation
Start-ups need access to science and technology. Indian entrepreneurs are adept at adapting technology, enhancing efficiency and perching their firms on market niches. They are, however, diffident in taking science and technology from Indian research laboratories. For example, there are over 40 specialized laboratories under the umbrella of the Council for Scientific and Industrial Research (CSIR) as one of the largest publicly funded research network in the world. In addition, institutes of higher learning such as Indian Institutes of Technology and Indian Institute of Science have cutting edge researchers. These competencies can be leveraged to establish new drivers of growth through win-win commercial arrangements. Indian start-ups can place a just small proportion of the risk on using and developing indigenous science and technology to secure cost-effective business development. There is a great potential for Indian science and technology that is waiting to be captured.
Western and Japanese angel investors and private equity funds can achieve substantial returns by considering multi-phase investments in Indian start-ups that could transform themselves into future growth engines by utilizing India specific science and technology. There is tremendous potential that is untapped in social and industrial infrastructure, as well as rural and urban development. A comparative inventory of small enterprises in US, Europe and Japan with those existing in India will indicate the enormous possibilities.
Central and State Governments in India have traditionally supported start-ups by policy measures. Newer and more creative measures are required. Encouragement of single person companies, creation of financial exchanges exclusively for start-ups, channeling of a certain proportion of CSIR research effort for small enterprises, creation of start-up finance divisions in all banks and financial institutions, exemption of small enterprise promotion and management from complex legal hurdles and encouragement of mentoring of start-ups by working executives, all of these supported by governmental policies, could add up to a great entrepreneurial start-up movement in India.
Posted by Dr CB Rao on May 9, 2010
The Indian industrial evolution
The Indian industrial start-up model, as elsewhere, was fuelled by entrepreneurial energy. Even when India was under foreign occupation, in the 1800s and the early 1900s, Indian industrial start-ups were established by the Tatas and Birlas, with their enterprises becoming large industrial groups over the years. Post-independence, successive government policies enabled and encouraged establishment of scores of cottage and small scale enterprises in India. Some of these served larger firms as suppliers and vendors of materials and components while several other start-ups sought a direct go-to-market strategy, with varying degrees of success.
An introverted India, even post-independence in 1947, rarely encouraged free entry and exit, expansion of scale and induction of technology in its industrial and economic policies. As a result, companies stagnated and became less competitive, relative to global trends. At the same time, licensing regulations inhibited global corporations from entering into or expanding in India. On a helpful side, process patent policies (as in some other countries) ensured freedom for domestic companies to reverse-engineer global products for Indian markets. The Indian automobile and pharmaceutical industries became, for example, the epitome of low-scale, domestic-oriented direct to market fragmented industrial structures of the 1960s and 1970s.
There emerged a new Indian entrepreneurial wave from the 1970s (Ambani founded Reliance, for example). Technology induction and assimilation blazed new paths from the 1980s (Indo-Japanese automobile collaborations such as Maruti-Suzuki). Entrepreneurs and corporations were rid of controls, and certain industries started becoming global leaders in certain sectors from the 1990s (TCS and Infosys, in Information Technology). Increasing confidence in Indian competencies and policies from the 2000s and post-patent harmonization assurances led to great global interest in India with a better awareness of the competitiveness of Indian enterprise. Simultaneously, Indian industrial groups and larger Indian companies became globally aggressive, entering overseas markets (directly and through partnerships), acquiring overseas units and marquee brands.
The Indian start-up model
From a protected, regulated domestic regime, the industrial paradigm in India evolved into a liberalized, competitive globalized regime in the 2000s. The models that helped Indian start-ups to enter and stay fixed in scale and scope are becoming less tenable. The Indian start-ups are today verily at cross roads, with choices between smug stagnation and tough transformation. Yet, the continued proliferation of owner-managed companies and small scale enterprises with dated technologies indicates that a new start-up model is yet to emerge.
The Indian start-up model is highly domestic market oriented and self-reliance inspired. While start-up firms would not be averse to being suppliers to larger firms, especially in sectors such as engineering and automobile, the overwhelming preference seems to be on direct go-to-market strategies. This enables firms have a quick market-oriented entry in any industrial segment but also limits the ability of entrepreneurs to create stable, growth or niche models that could be more vibrant technologically and commercially in the long term.
The missing dimensions in the Indian start-up scenario relate to inadequate access to technology, insufficient financial resources and overwhelming reluctance to consolidate. The first two factors dictate the pace with which a start-up in India is able to navigate to, and through, the growth phase while the last factor dictates the ability of a start-up firm to stay on course in the growth phase or navigate the maturity phase. Typically, a start-up in India would have the capability to move from a USD 1 million to USD 100 million annual sales but lack the capability to move beyond without dedicated efforts to manage the three dimensions of technology, finance and ownership.
An examination of the Western and Japanese models of start-up could provide guidance for new development models relevant for Indian start-ups.
The Western and Japanese start-up models
The Western and Japanese start-up models are typically based on pioneering pieces of technology or market creation. While it may be tempting to relate this to the fact that all modern technologies emanated in the West (largely USA or Europe) or in Japan it is the start-up intent that made the difference. Entrepreneurs with truly ground-breaking products in the West or in Japan or Korea went on to make their start-ups into mega global enterprises. However, there are certain typical nuances of technology-led start-up development that are different.
Not all techno-entrepreneurs in the West were or are keen to build their start-up enterprises into mega enterprises. Entrepreneurs in the West see creation of commercial value (for themselves) more important than either reaching the market or expanding the scale of the enterprise. Entrepreneurs see technology as a concept to be commercially proved at their hands rather than converted into commercial saleable products in their hands. Entrepreneurs benefit from an equity environment that provides multiple-series funding. Finally, entrepreneurs are willing to monetize their technologies and firms to generate surpluses for new endeavors. Ownership and management are treated as very important in the start-up phase but are considered expendable for leading into the growth and maturity phases.
The techno-entrepreneurs in Japan are different. They tend to innovate for larger industrial firms or trading groups and in the process help create multi-level business arrangements. The start-ups set up by the techno-entrepreneurs typically grow with the larger firms and groups, and become global enterprises in their own right. The entrepreneurs are typically attached to their technologies and family presence but are also able to evolve to the higher levels due to the synergistic relationships. Typically, the larger firms in Japan respect the origins and independence of the smaller suppliers and desist from the Western temptation of acquiring promising technologies and firms. Instead, the accent is on letting the smaller start-ups grow into mature, innovative enterprises.
A hybrid model for Indian start-ups
Given the constraints the Indian start-ups face in accessing technology, finance and markets, and the attachment of the entrepreneurs to continued ownership of the firms they founded, a hybrid model is relevant for Indian start-ups. Assuming that a base level of promoter and external funding is arranged, typically, start-ups fall into one of the three categories: those that make better use of available technology, those that make their operations more competitive and those that access certain market segments more creatively. Needless to say, firms which achieve a virtuous combination of technological innovation, operational efficiency and market penetration would be in a position to drive into a growth phase on their own. The hybrid model would be relevant to start-ups having competencies in one of the three dimensions.
Firms which are technologically innovative need to aim at achieving the earliest proof of concept, following which they should be prepared to license or sell the technology to larger firms which can take the product to the market. This phenomenon is widely prevalent in the West, especially in technology and biopharmaceutical fields, and needs to be adapted to the Indian situation. Firms which have pieces of market would do well by either taking in products from other start-ups or providing market access to larger firms. Firms which are operationally efficient must focus on gaining market access in partnership with larger firms having Indian and global market presence. This could enable a longer independent functioning to such firms, enabling growth journey on their own.
The hybrid model for Indian start-ups thus envisages growth through inorganic relationships across fragments of value chain rather than through organic end-to-end value chain. Many Indian start-ups in India have evolved into mid-sized firms through such relationships. Still some decisions have to be customized: for example, the scale and scope of such relationships, whether such relationships would need to be limited period relationships or permanent relationships, and whether the end game is surplus generation through value monetization and exit as per the Western model or lifetime domain commitment.
Founder-Manager transformational issues
Part of the evolutionary response would emerge from how the founders of the Indian start-ups manage the entry, growth and maturity phases of an enterprise. Entrepreneurial firms tend to be typically founder managed. Investors gain confidence with the founder being in total control of the enterprise while the employees get inspired by the leadership of their founder. As enterprises move into growth phases, investors need to let go of their control on the founders, and the founders need to let go of the control on their enterprises. As an enterprise becomes larger it needs to organize itself into organizational and business units that can be driven by independent managers to generate greater value.
While no professional manager can bring the passion and feel of a founder-leader to an enterprise, start-ups need to find ways and means of institutionalizing the entrepreneurial passion and feel through diversified professionalization. Indian start-ups which moved into the big league have done so not only on the basis of technology-efficiency-market grid but also due to organizational development. Serial entrepreneurship could well help Indian entrepreneurs to continue to feel their passion with newer enterprises while helping their earlier enterprises move on their own steam.
The suggested organizational model is based on the unique Indian psyche that complies as much as it commands; that follows as much as it leads; and that is as much professional as it is entrepreneurial. Compensating any limitations it has, the Indian employee base is driven by a deep sense of loyalty and frugality that can be leveraged by placing capable people in commanding positions. The success of large Indian private and public sector corporations is related to the diversified ownership model that is extended to individual organizational units of an enterprise.
Science and finance for start-up transformation
Start-ups need access to science and technology. Indian entrepreneurs are adept at adapting technology, enhancing efficiency and perching their firms on market niches. They are, however, diffident in taking science and technology from Indian research laboratories. For example, there are over 40 specialized laboratories under the umbrella of the Council for Scientific and Industrial Research (CSIR) as one of the largest publicly funded research network in the world. In addition, institutes of higher learning such as Indian Institutes of Technology and Indian Institute of Science have cutting edge researchers. These competencies can be leveraged to establish new drivers of growth through win-win commercial arrangements. Indian start-ups can place a just small proportion of the risk on using and developing indigenous science and technology to secure cost-effective business development. There is a great potential for Indian science and technology that is waiting to be captured.
Western and Japanese angel investors and private equity funds can achieve substantial returns by considering multi-phase investments in Indian start-ups that could transform themselves into future growth engines by utilizing India specific science and technology. There is tremendous potential that is untapped in social and industrial infrastructure, as well as rural and urban development. A comparative inventory of small enterprises in US, Europe and Japan with those existing in India will indicate the enormous possibilities.
Central and State Governments in India have traditionally supported start-ups by policy measures. Newer and more creative measures are required. Encouragement of single person companies, creation of financial exchanges exclusively for start-ups, channeling of a certain proportion of CSIR research effort for small enterprises, creation of start-up finance divisions in all banks and financial institutions, exemption of small enterprise promotion and management from complex legal hurdles and encouragement of mentoring of start-ups by working executives, all of these supported by governmental policies, could add up to a great entrepreneurial start-up movement in India.
Posted by Dr CB Rao on May 9, 2010
Sunday, May 2, 2010
From Planet to Person: The Third Wave of Technology
The history of mankind and industrialization helps us to understand how technology has, over the years, impacted human life, of course overwhelmingly in a positive manner. The first wave of technological revolutions comprised electricity, telephony, printing, radio transmission, transportation, imaging and curative medicine, as well as sadly nuclear detonation, to name a few. The second wave of technological revolutions comprised computerization, television, internet, cellular telephony, software and diagnostic and surgical medicine, again to name a few.
If the first wave was supported by mechanical and electro-magnetic devices, the second wave was primed by electronic devices and the ubiquitous chip. In the first wave, devices were designed to perform as per laws of science. In the second wave, devices were instructed to perform as per human needs. If the first wave of technology was characterized by fundamental enablement, the second wave was characterized by transformational enhancement. How will the third wave of technology be different from the previous ones? What will support the third wave and how will it be characterized?
The third wave of technology would in all probability be a combination of the first two waves. It will be both fundamental and transformational simultaneously. The devices – mechanical, electro-mechanical and electronic – will be all there, made more powerful and friendly by more versatile and more capable embedded hardware and software. The devices will incorporate hitherto unchartered laws of science and will feature software that mimics human need fulfillment to a greater degree. Combining the two waves, the third wave of technology will probably rewrite human and industrial paradigms, covering both the planet and person in a holistic sense.
Food security
Topping the agenda would be technological levers for ensuring global food security. With land being increasingly utilized for industrialization and urbanization, especially in emerging countries, the need to use technology for ensuring affordable food for all is a major imperative. The unpredictability and harshness of climate change accentuates the need for better technology markers for agriculture. As opposed to the second wave which sought to propagate factory style farming, the third wave would address the need for sustainable agriculture.
According to United Nations, by 2025 the global population would cross 8 billion. Of this 6.7 billion (84 percent) would live in the less developed or emerging countries. A vast proportion of this population currently lives without even one square meal a day. The need to ensure food security to this huge population would be the most impactful technological challenge. The advanced sections of the global society would simultaneously need to reassess and moderate its approach towards dietary habits, including the dependence on meat consumption. Several studies have pointed out the adverse impact of current approaches on global farming and climate warming on one hand and the direct adverse linkages with animal ethics and human health on the other (reference, Eating Animals by Jonathan Safran Foer, The End of Overeating: Taking Control of our Insatiable Appetite by David A Kessler, and An Edible History of Humanity by Tom Standage, FT Bookshop).
Drought-tolerant seeds, perennial grains, non-toxic fertilizers, titrated plant nutrition, weather-timed sowing, sensor-driven irrigation, clinically validated GM foods, meat-mimicking vegetarian food options, drip irrigation, soil fertility strategies, no-loss harvesting, nutrition-driven grain processing, multiple crop patterns, recyclable agriculture and customized farm equipment could combine to trigger huge spikes in farm productivity with sustainability. Biotechnology, nanotechnology and information technology should drive new technological innovations in agriculture. An emerging country such as India can take the lead by establishing a string of Institutes for agricultural technology on the lines of the famous Indian Institutes of Technology.
Energy security
Energy is the fuel of growth; unfortunately, however, it is also the greatest contributor for loss of natural resources, increase of carbon emissions, and worsening of climate change. From around 500 quadrillion BTU in 2010, the world energy consumption is forecast to increase to 532 quadrillion BTU in 2015 and 678 quadrillion BTU in 2030, representing an increase of 44 percent. China and India, the emerging economic powers, are the two largest consumers of energy. Their share in world energy consumption which was 10 percent in 1990 has increased to 20 percent currently and is forecast to increase to 30 percent by 2030. While advanced nations may be accusative of this trend, the growing share of China and India, as the world’s largest people base (around 40 percent of global population), is an inevitable and logical corollary of their emergence as global hubs of research and manufacture as well as outsourcing.
Currently, oil, coal and natural gas together contribute to around 80 percent of total energy generation. The first challenge for technology is to increase the inter se share of natural gas within these three fuel sources and to make coal a super-clean source of energy. The second challenge is to make energy generation from renewable sources of energy, wind, ocean, solar and geo-thermal, intrinsically economically viable, weaning them away from government subsidies and incentives, and making them contribute a larger share to total energy generation. The third challenge is to make nuclear energy multi-atomic element and super-safe with terror, and accident proofing. The fourth challenge is to shift hydro-energy generation from stored river water dams to naturally flowing waterfalls, releasing river water to uses that are more critical, such as irrigation and domestic and industrial uses. The combined impact of the technology redefinition in energy sector should be to make oil, coal and natural gas (as a group), all renewable sources as a group, and nuclear sources contribute equally to energy generation, at around 33 percent each.
How would China and India, and their technologists cope with the challenges of the required tectonic shift in energy consumption and generation? Massive replacement of dated generating equipment, optimization of energy distribution and upgrades of machinery in user industries are the low hanging fruits which will serve to lower the cost of energy generation and consumption. It is, however, in establishing new infrastructure for renewable energy generation that technology needs to provide a new definition. Given that India is a hot, tropical, windy country with an enormously long coast line it is possible to make India a hub of renewable energy. Technologists, industrialists and bureaucrats need to collaborate to establish solar energy and wind energy cities across the length and breadth of the country, and ocean energy plants all along the coastal line. It is a technology challenge that could redefine the scale, scope and competitiveness of India’s economic and industrial growth in future for India.
Expanded convergence
The second wave of technology was characterized by a new principle of multi-function delivery, aptly called convergence. Devices began to be designed to perform more than one function; and in some cases the distinction between the primary function and the secondary functions got diffused. Cellular phone is a classic case that overrode the primary function of long distance speech communication with secondary functions such as camera, music player, organizer, multi-channel messaging, GPS navigation and social networking. Thousands of software applications have served to convert the mobile phone into a powerful daily aid and a virtual pocket computer.
In the third wave, the principle of convergence will test new frontiers even in mobile telephony, expanding to cover more functions, some of which could not be linked previously even in concept. Current email messages could be replaced by voice and video mail messages, making mobile phone interactions virtually face to face human interactions. From today’s finger touch banking the mobile phone could morph into tomorrow’s portfolio manager, making program-guided transactions. A hand held mobile phone could in future become a virtual health companion by diagnosing body health parameters real time through new sensor technologies.
Convergence could take multiple forms. As a hypothetical but potentially feasible proposition future televisions could come with video capture potential while set-top boxes could have reverse transmission capability enabling aspiring citizens participate in reality shows of the studios direct from their homes. Direct-to-home television transmission could also become direct-to-studio transmission. New power generation equipment could be designed to work equally effectively with all kinds of feedstock, from coal to oil, or from hydro to solar. Applications of convergence could be as many as human ingenuity could dream; the third wave of technology could make them possible.
Diversified concurrence
The automobile industry made a major contribution in the second wave by conceptualizing and implementing concurrent engineering. By involving all the domains of an automobile value chain, from market research and product development, through facility planning and manufacturing, to supply chain and marketing, the Japanese automobile industry created a paradigm that brought new products on time to market , with targeted quality and cost profiles. The third wave of convergence, which involves designs without walls, requires concurrence across businesses which were traditionally built around mono-function products.
Hitherto, convergence has been technology driven. Innovative technologists utilized adjacent usage spaces to develop design-driven products with multi-market segment capabilities. The third wave would require different business segments, and perhaps even different companies, to collaborate and define new product possibilities. For example, laptop makers and projection device makers could collaborate to develop a laptop which could also project the presentations. Flower vase makers could collaborate with organic farmers to develop readymade vases with green plants for homes. Food processing firms could collaborate with pharmaceutical firms to develop immune boosting functional foods. Possibilities could be many.
Concurrence may not be natural and collaborative either due to competitive business compulsions or due to an inability of firms to balance mutual contributions and rewards. Concurrence would have to be achieved in such conditions through creation of requisite technical capabilities, licensing arrangements or downright acquisitions. Organic or inorganic, an ability to combine multiple technologies to develop multi-functional products will be the new dimension of competitiveness. Google’s acquisition of YouTube was an example; so is HP’s acquisition of Palm. Valero’s acquisitive move into ethanol production and ExxonMobil’s multi-million dollar bet on in-house research into algae and synthetic genome technologies reflect the opposite, but equally relevant, approaches to merge businesses without borders.
Efficiency in form factor
A new found focus on form factor has been at the core of the new wave of miniaturization and the emergence of convergence devices. The third wave of technology, however, has to look beyond miniaturization to exploit the full potential of form factor, and to conserve resources. The fundamental premise for the third wave technologists is that at least 50 percent of any device is a wasted, non-usable or non-used space, partly due to the technological limitations and partly due to user habits. Take, for example, a television in which the back of the panel is a completely wasted space. It is possible to design televisions with back-to-back twin panels if only users are willing to use televisions as central pieces of entertainment rather than as corner pieces!
Laptops, notebooks, net-books and computer display screens are yet another device group that reflect an enormous waste of space. At a very simple level, with more robust display screens, the effective display screen size within the total screen can be increased from the current 85 percent to 95 percent. In addition, with the advent of touch screen technologies, there is no reason why both the internal sides of a laptop cannot be fully utilized to achieve total display or partitioned display; for example, the top of the opened laptop for typing in of information and the bottom for simultaneous browsing of the Internet. The front of a notebook can also feature an optional screen for two co-workers to simultaneously see, discuss and edit. Electronic readers and mobile phones can be released from the constraints of passive space design to active space design, with some ingenuity.
Form factor efficiency need not be confined only to electronic devices. Industrial machinery, farm equipment, automobiles and home interiors, to quote a few, could benefit from new dimensions in form factor efficiency. Machining centers were a great advancement in multi-machining of components, especially complex automobile parts such as cylinder head and cylinder block. Typically, the part to be machined is kept in the centre of the machining centre. The idle exterior of the machining centre can also be designed to perform other machining activities such as planning and shaping or to perform certain surface measurements. Farm equipment constitute yet another example of how the total surface area can be differentially designed and shaped to meet different soil conditions and tilling requirements. Automobiles can be designed for example to offer seat configurations that can be modified to suit the occupiers’ body profiles and driving preferences. Home interiors offer enormous potential for space-optimized and convergence-oriented designs.
Regenerative engineering
Technology has, so far, made life easier for the human being with the advances in science, engineering, information processing and medicine. Devices and equipment are continually upgraded to newer levels of efficiency and new devices and equipment are also continuously developed to offer new applications. Creation of robots and humanoids has been the crowning glory of this technological achievement. The next wave of technology could create robots which replicate human beings with thought processes and movements which are as close to those of human beings as possible. The third wave could see two different dimensions of medical technology.
The first is a chip-empowered human being. If a chip can power a computer or a device to the highest realms of performance, it would be equally feasible in future for a chip to power a handicapped person to overcome his or her handicaps. Physically challenged special persons can look forward to previously unforeseen contributions from third wave of technology. Technologists, physicians and surgeons, however, need to collaborate to establish connectivity between the human chip and neural networks of the human brain. Just as a pacemaker did wonders to cardiac performance, the new human chip would be the future brain maker, duly supported by a slew of bio-medical parts.
The second is creation of human organs through regenerative medicine. Stem cells are showing enormous promise to rebuild human capabilities, whether of weakened heart muscles or re-growing lost organs. While immortality is certainly antithetical to rules of life, enhanced span of life and improved quality of life are certainly possible through regenerative medicine. Technology would need to create appropriate environmentally conditioned laboratory suites and new generation equipment for cellular and molecular analysis. Aseptic cryogenic, genetic and incubating equipment with enhanced bioengineering capabilities are required for scientists to explore new vistas in regenerative medicine .
Summary
The world is in the throes of several challenges posed by depletion of resources, global warming, and increasingly volatile economic and social conditions. Technology has made life meaningful in the past bringing previously inconceivable things into the realms of life; there is no reason why technology would not usher in yet another transformation for a society that is being increasingly pressured not only by technology itself but also by the way technology is deployed.
The new third wave of technology will express itself in four essential dimensions. The first will be in terms of ensuring food and energy security for the planet, through new infrastructural technologies. The second will be in terms of growing businesses without borders through new convergence products and concurrence businesses. The third will be in terms of greater utilization of form factor design for each device and equipment to be spatially and functionally more utilitarian. The fourth will be in terms of integrating technological and human capabilities to regenerate and reinforce human capabilities.
The world would be a far better and rejuvenating place to live for the human race if the third wave of technology pans out as presented herein.
Posted by Dr CB Rao on May 2, 2010
If the first wave was supported by mechanical and electro-magnetic devices, the second wave was primed by electronic devices and the ubiquitous chip. In the first wave, devices were designed to perform as per laws of science. In the second wave, devices were instructed to perform as per human needs. If the first wave of technology was characterized by fundamental enablement, the second wave was characterized by transformational enhancement. How will the third wave of technology be different from the previous ones? What will support the third wave and how will it be characterized?
The third wave of technology would in all probability be a combination of the first two waves. It will be both fundamental and transformational simultaneously. The devices – mechanical, electro-mechanical and electronic – will be all there, made more powerful and friendly by more versatile and more capable embedded hardware and software. The devices will incorporate hitherto unchartered laws of science and will feature software that mimics human need fulfillment to a greater degree. Combining the two waves, the third wave of technology will probably rewrite human and industrial paradigms, covering both the planet and person in a holistic sense.
Food security
Topping the agenda would be technological levers for ensuring global food security. With land being increasingly utilized for industrialization and urbanization, especially in emerging countries, the need to use technology for ensuring affordable food for all is a major imperative. The unpredictability and harshness of climate change accentuates the need for better technology markers for agriculture. As opposed to the second wave which sought to propagate factory style farming, the third wave would address the need for sustainable agriculture.
According to United Nations, by 2025 the global population would cross 8 billion. Of this 6.7 billion (84 percent) would live in the less developed or emerging countries. A vast proportion of this population currently lives without even one square meal a day. The need to ensure food security to this huge population would be the most impactful technological challenge. The advanced sections of the global society would simultaneously need to reassess and moderate its approach towards dietary habits, including the dependence on meat consumption. Several studies have pointed out the adverse impact of current approaches on global farming and climate warming on one hand and the direct adverse linkages with animal ethics and human health on the other (reference, Eating Animals by Jonathan Safran Foer, The End of Overeating: Taking Control of our Insatiable Appetite by David A Kessler, and An Edible History of Humanity by Tom Standage, FT Bookshop).
Drought-tolerant seeds, perennial grains, non-toxic fertilizers, titrated plant nutrition, weather-timed sowing, sensor-driven irrigation, clinically validated GM foods, meat-mimicking vegetarian food options, drip irrigation, soil fertility strategies, no-loss harvesting, nutrition-driven grain processing, multiple crop patterns, recyclable agriculture and customized farm equipment could combine to trigger huge spikes in farm productivity with sustainability. Biotechnology, nanotechnology and information technology should drive new technological innovations in agriculture. An emerging country such as India can take the lead by establishing a string of Institutes for agricultural technology on the lines of the famous Indian Institutes of Technology.
Energy security
Energy is the fuel of growth; unfortunately, however, it is also the greatest contributor for loss of natural resources, increase of carbon emissions, and worsening of climate change. From around 500 quadrillion BTU in 2010, the world energy consumption is forecast to increase to 532 quadrillion BTU in 2015 and 678 quadrillion BTU in 2030, representing an increase of 44 percent. China and India, the emerging economic powers, are the two largest consumers of energy. Their share in world energy consumption which was 10 percent in 1990 has increased to 20 percent currently and is forecast to increase to 30 percent by 2030. While advanced nations may be accusative of this trend, the growing share of China and India, as the world’s largest people base (around 40 percent of global population), is an inevitable and logical corollary of their emergence as global hubs of research and manufacture as well as outsourcing.
Currently, oil, coal and natural gas together contribute to around 80 percent of total energy generation. The first challenge for technology is to increase the inter se share of natural gas within these three fuel sources and to make coal a super-clean source of energy. The second challenge is to make energy generation from renewable sources of energy, wind, ocean, solar and geo-thermal, intrinsically economically viable, weaning them away from government subsidies and incentives, and making them contribute a larger share to total energy generation. The third challenge is to make nuclear energy multi-atomic element and super-safe with terror, and accident proofing. The fourth challenge is to shift hydro-energy generation from stored river water dams to naturally flowing waterfalls, releasing river water to uses that are more critical, such as irrigation and domestic and industrial uses. The combined impact of the technology redefinition in energy sector should be to make oil, coal and natural gas (as a group), all renewable sources as a group, and nuclear sources contribute equally to energy generation, at around 33 percent each.
How would China and India, and their technologists cope with the challenges of the required tectonic shift in energy consumption and generation? Massive replacement of dated generating equipment, optimization of energy distribution and upgrades of machinery in user industries are the low hanging fruits which will serve to lower the cost of energy generation and consumption. It is, however, in establishing new infrastructure for renewable energy generation that technology needs to provide a new definition. Given that India is a hot, tropical, windy country with an enormously long coast line it is possible to make India a hub of renewable energy. Technologists, industrialists and bureaucrats need to collaborate to establish solar energy and wind energy cities across the length and breadth of the country, and ocean energy plants all along the coastal line. It is a technology challenge that could redefine the scale, scope and competitiveness of India’s economic and industrial growth in future for India.
Expanded convergence
The second wave of technology was characterized by a new principle of multi-function delivery, aptly called convergence. Devices began to be designed to perform more than one function; and in some cases the distinction between the primary function and the secondary functions got diffused. Cellular phone is a classic case that overrode the primary function of long distance speech communication with secondary functions such as camera, music player, organizer, multi-channel messaging, GPS navigation and social networking. Thousands of software applications have served to convert the mobile phone into a powerful daily aid and a virtual pocket computer.
In the third wave, the principle of convergence will test new frontiers even in mobile telephony, expanding to cover more functions, some of which could not be linked previously even in concept. Current email messages could be replaced by voice and video mail messages, making mobile phone interactions virtually face to face human interactions. From today’s finger touch banking the mobile phone could morph into tomorrow’s portfolio manager, making program-guided transactions. A hand held mobile phone could in future become a virtual health companion by diagnosing body health parameters real time through new sensor technologies.
Convergence could take multiple forms. As a hypothetical but potentially feasible proposition future televisions could come with video capture potential while set-top boxes could have reverse transmission capability enabling aspiring citizens participate in reality shows of the studios direct from their homes. Direct-to-home television transmission could also become direct-to-studio transmission. New power generation equipment could be designed to work equally effectively with all kinds of feedstock, from coal to oil, or from hydro to solar. Applications of convergence could be as many as human ingenuity could dream; the third wave of technology could make them possible.
Diversified concurrence
The automobile industry made a major contribution in the second wave by conceptualizing and implementing concurrent engineering. By involving all the domains of an automobile value chain, from market research and product development, through facility planning and manufacturing, to supply chain and marketing, the Japanese automobile industry created a paradigm that brought new products on time to market , with targeted quality and cost profiles. The third wave of convergence, which involves designs without walls, requires concurrence across businesses which were traditionally built around mono-function products.
Hitherto, convergence has been technology driven. Innovative technologists utilized adjacent usage spaces to develop design-driven products with multi-market segment capabilities. The third wave would require different business segments, and perhaps even different companies, to collaborate and define new product possibilities. For example, laptop makers and projection device makers could collaborate to develop a laptop which could also project the presentations. Flower vase makers could collaborate with organic farmers to develop readymade vases with green plants for homes. Food processing firms could collaborate with pharmaceutical firms to develop immune boosting functional foods. Possibilities could be many.
Concurrence may not be natural and collaborative either due to competitive business compulsions or due to an inability of firms to balance mutual contributions and rewards. Concurrence would have to be achieved in such conditions through creation of requisite technical capabilities, licensing arrangements or downright acquisitions. Organic or inorganic, an ability to combine multiple technologies to develop multi-functional products will be the new dimension of competitiveness. Google’s acquisition of YouTube was an example; so is HP’s acquisition of Palm. Valero’s acquisitive move into ethanol production and ExxonMobil’s multi-million dollar bet on in-house research into algae and synthetic genome technologies reflect the opposite, but equally relevant, approaches to merge businesses without borders.
Efficiency in form factor
A new found focus on form factor has been at the core of the new wave of miniaturization and the emergence of convergence devices. The third wave of technology, however, has to look beyond miniaturization to exploit the full potential of form factor, and to conserve resources. The fundamental premise for the third wave technologists is that at least 50 percent of any device is a wasted, non-usable or non-used space, partly due to the technological limitations and partly due to user habits. Take, for example, a television in which the back of the panel is a completely wasted space. It is possible to design televisions with back-to-back twin panels if only users are willing to use televisions as central pieces of entertainment rather than as corner pieces!
Laptops, notebooks, net-books and computer display screens are yet another device group that reflect an enormous waste of space. At a very simple level, with more robust display screens, the effective display screen size within the total screen can be increased from the current 85 percent to 95 percent. In addition, with the advent of touch screen technologies, there is no reason why both the internal sides of a laptop cannot be fully utilized to achieve total display or partitioned display; for example, the top of the opened laptop for typing in of information and the bottom for simultaneous browsing of the Internet. The front of a notebook can also feature an optional screen for two co-workers to simultaneously see, discuss and edit. Electronic readers and mobile phones can be released from the constraints of passive space design to active space design, with some ingenuity.
Form factor efficiency need not be confined only to electronic devices. Industrial machinery, farm equipment, automobiles and home interiors, to quote a few, could benefit from new dimensions in form factor efficiency. Machining centers were a great advancement in multi-machining of components, especially complex automobile parts such as cylinder head and cylinder block. Typically, the part to be machined is kept in the centre of the machining centre. The idle exterior of the machining centre can also be designed to perform other machining activities such as planning and shaping or to perform certain surface measurements. Farm equipment constitute yet another example of how the total surface area can be differentially designed and shaped to meet different soil conditions and tilling requirements. Automobiles can be designed for example to offer seat configurations that can be modified to suit the occupiers’ body profiles and driving preferences. Home interiors offer enormous potential for space-optimized and convergence-oriented designs.
Regenerative engineering
Technology has, so far, made life easier for the human being with the advances in science, engineering, information processing and medicine. Devices and equipment are continually upgraded to newer levels of efficiency and new devices and equipment are also continuously developed to offer new applications. Creation of robots and humanoids has been the crowning glory of this technological achievement. The next wave of technology could create robots which replicate human beings with thought processes and movements which are as close to those of human beings as possible. The third wave could see two different dimensions of medical technology.
The first is a chip-empowered human being. If a chip can power a computer or a device to the highest realms of performance, it would be equally feasible in future for a chip to power a handicapped person to overcome his or her handicaps. Physically challenged special persons can look forward to previously unforeseen contributions from third wave of technology. Technologists, physicians and surgeons, however, need to collaborate to establish connectivity between the human chip and neural networks of the human brain. Just as a pacemaker did wonders to cardiac performance, the new human chip would be the future brain maker, duly supported by a slew of bio-medical parts.
The second is creation of human organs through regenerative medicine. Stem cells are showing enormous promise to rebuild human capabilities, whether of weakened heart muscles or re-growing lost organs. While immortality is certainly antithetical to rules of life, enhanced span of life and improved quality of life are certainly possible through regenerative medicine. Technology would need to create appropriate environmentally conditioned laboratory suites and new generation equipment for cellular and molecular analysis. Aseptic cryogenic, genetic and incubating equipment with enhanced bioengineering capabilities are required for scientists to explore new vistas in regenerative medicine .
Summary
The world is in the throes of several challenges posed by depletion of resources, global warming, and increasingly volatile economic and social conditions. Technology has made life meaningful in the past bringing previously inconceivable things into the realms of life; there is no reason why technology would not usher in yet another transformation for a society that is being increasingly pressured not only by technology itself but also by the way technology is deployed.
The new third wave of technology will express itself in four essential dimensions. The first will be in terms of ensuring food and energy security for the planet, through new infrastructural technologies. The second will be in terms of growing businesses without borders through new convergence products and concurrence businesses. The third will be in terms of greater utilization of form factor design for each device and equipment to be spatially and functionally more utilitarian. The fourth will be in terms of integrating technological and human capabilities to regenerate and reinforce human capabilities.
The world would be a far better and rejuvenating place to live for the human race if the third wave of technology pans out as presented herein.
Posted by Dr CB Rao on May 2, 2010
Sunday, April 18, 2010
CK Prahalad (August 8, 1941 – April 17, 2010): Timeless in Strategy, Tireless in Creativity
In the sudden demise of Dr CK Prahalad in San Diego, USA, the world of strategy has lost one of the most perceptive, innovative and influential strategic thinkers of all times. Strategy would not have been what it is today but for the innumerable path-breaking conceptual and analytical constructs that Professor Prahalad developed and propagated over the years. With indefatigable energy and passion he taught, wrote, consulted and mentored, on a global platform for over 44 years, leaving behind his unique and distinguished stamp on management thought and practice.
CK Prahalad (CK or CKP as he is popularly called) represented the very best of Indian intellect that found a global home. Born into a large family of Sanskrit Brahmin scholars in the South Indian city of Coimbatore in August 1941, Coimbatore Krishnarao Prahalad obtained his B Sc degree in Physics from Loyola College, University of Madras in 1960. After graduation, he worked in Union Carbide as industrial engineer and later in India Pistons as training manager. Setting sights on management education, he earned his PG diploma in Business Administration from the prestigious Indian Institute of Management, Ahmedabad, as a student of the first batch in 1966. His stint at Union Carbide and the move into the management studies were perhaps the critical inflexion points of his life.
Prahalad, armed with the MBA from IIMA, proceeded to Harvard Business School, USA where he earned his Doctor of Business Administration in 1975. He returned to India to teach at his Alma Mater, IIMA during 1976-77. He thereafter joined University of Michigan, USA and made his mark as a foremost management teacher in the United States. He served as the Distinguished University Professor of Corporate Strategy at the Stephen M Ross School of Business in the University of Michigan. Dr Prahalad was the recipient of several honors and awards globally. Honorary doctorate degrees from global universities and high-ranking civilian awards from the Government of India such as Padma Bhushan were part of the recognitions.
Though a bit dated, one of the best accounts of CK Prahalad’s passions expressed as his reflections can be found in the paper “C.K. Prahalad’s Passions: Reflections on His Scholorly Journey as a Researcher, Teacher and Management Guru” co-authored by Lynn Perry Wooten and Anne Parmigiani from University of Michigan and Nandini Lahiri from Indian School of Business (Journal of Management Inquiry, Vol. 14, No. 2, June 2005, pp 168-175).
This blog post presents Dr Prahalad’s genius from diverse perspectives based on the author’s understanding of his works and the author’s attendance in Dr Prahalad’s speaking forums.
Sweeping in canvas
Throughout his long distinguished career Professor Prahalad helped reshape strategy and set new directions for business. He had an unparalleled genius for developing seemingly abstract yet elegantly simple constructs, marked by lateral and out-of-the-box thinking. His teachings helped future managers and leaders acquire leading-edge conceptual, analytical and strategic skills. His articles and books, which went on to become bestsellers, shaped innumerable professionals, across domains and countries, to think differently. His consultancy assignments helped companies plan and grow existing and new businesses or turnaround the ailing ones. His speeches and presentations in several global forums helped strategy acquire a distinctiverecognition as a critical domain. More importantly, his mentoring of corporate boards, chief executive officers, entrepreneurs, bureaucrats and ministers helped India, Inc recognize its global potential.
If there is one factor that characterized all of CK’s contributions it is the unique trail-blazing nature. While several management gurus are content to spin extension and analogue theories around their first fundamental premise, CK constantly and consistently propounded new trail-blazing concepts and theories. As a result, CK made a more complete and holistic contribution to business management than any other exponent, save perhaps the legendary Peter Drucker. Each of Dr Prahalad’s bestselling books and award-winning articles exemplifies a thought process that is refreshingly different and genuinely creative.
Prahalad’s books institutionalized new ways of strategic thinking through elaborate paradigms, well-illustrated with real time case studies. His notable works include “Competing for the Future”, co-authored with Gary Hamel (1984), “Multinational Mission: Balancing Local Demands and Global Vision” (1987), ”The Future of Competition: Co-Creating Unique Value with Customers”, co-authored with Venkat Ramaswamy (2004), “The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits” (2004), and “The New Age of Innovation: Driving Co-Created Value through Global Networks” (2008), co-authored with MS Krishnan. Each of the books created a new strategy paradigm completely different from the previous ones and laid new trails of strategic thinking.
Prahalad’s award-winning articles almost inevitably churned management thought and laid new pivots of strategic thinking. Prahalad’s “The Dominant Logic: A New Linkage between Diversity and Performance” (1986), co-authored with Richard Bettis,” Strategic Intent” (1989) and ”The Core Competence of Corporation” (1990), both co-authored with Gary Hamel,” The Role of Core Competencies in the Corporation” (1993), “A Strategy for Growth: The Role of Core Competence in the Corporation” (1993),” Weak Signals Vs. Strong Paradigms” (1995), “The End of Corporate Imperialism” (1998), “Serving the World’ Poor, Profitably” (2002), co-authored with Allan Hammond, “The New Frontier of Experience Innovation” (2003), and “Twenty Hubs and No HQ” (2008), co-authored with Hrishikesh Bhattacharyya, have each led to entirely new waves of thinking in corporate strategy.
Unlike many management gurus who preferred to plough their own lonely paths, Professor Prahalad believed strongly in collaborating with other management thinkers, including his students who evolved into independent thinkers in their own right. The array of books and articles he co-authored with such experts, some of them listed above, is proof of his cross-institutional, cross-border collaborative research and writing, often taking years of dedicated work before a publication is made. Quite often, however, it fell on his shoulders to present and communicate thoughts to several learned forums across the globe. While there could be effective class room teachers and public orators, Dr Prahalad had a unique capability to connect with the audience, influence listeners of varied mindsets, and instill a sense of purpose in each listener.
Pioneering in theory and practice
Amongst the many conceptual contributions of Prahalad, ‘strategic intent”, “core competency” and “bottom of the pyramid” have been the truly game-changing ones. Though these were initially proposed by Dr Prahalad as case based theoretical constructs and caused intellectual upheavals in management thought when they were first presented, all of these have now become viable practices.
The construct of strategic intent comprised three attributes of direction, discovery and destiny. It required a company to think of a long term and differentiated competitive position that a firm must seek over a decade or so, which in turn would motivate the employees explore the new terrain with a sense of purpose. Prahalad advocated upward movement of new ideas from all across the organization to help the company chart out a competitive future stating that a company’s strategic orthodoxies would prove to be more dangerous than its well-financed rivals. The prime message was one of doing things differently to achieve desired differentiated outcomes.
The concept of core competencies made fundamental departure from the established concepts of strategic business units and outside-in models of competitive strategy by arguing that only the core competency of a firm could truly drive its strategy and business. Each firm could have its own core competency or a portfolio of core competencies but a true core competency would be one that remained difficult to replicate by the competitors. The theory advocated building of core competencies that support a strategic intent. It proposed a core competency mind-set that would unchain talent from the imprisonment of business units, identify projects and people who embody core competencies and a game plan to identify next-generation competencies.
The paradigm of “fortune at the bottom of the pyramid’, was India-centric theory with truly global implications. It argued that by developing low cost products and services that serve the poorest of the poor, corporations would actually earn profits with a social purpose. It hypothesized that by focusing on the demand at the bottom of the social pyramid companies would help eliminate poverty. The book supported the theory with several actual case studies from India. While it had its share of skeptical critics it is now well established that Prahalad’s BoP theory has become viable industrial practice. Tata’s USD 2,000 dollar Nano small car, Nokia’s and Samsung’s USD 20 mobile phones and Yunus’s Grameen Bank demonstrate how profits get generated by focusing on, rather than shirking away, from poverty.
Equally path-breaking have been Dr Prahalad’s other concepts; for example, that the consumer and the firm are intimately involved in jointly creating value that is unique to the individual consumer and sustainable to the firm (“The Future of Competition”) or that the emerging markets can be a source of innovation, which can be captured by accessing global resources and talent to create customized co-created experiences for consumers. The attempts of global automobile firms and innovator pharmaceutical firms to collaborate with Indian partners indicate that the time has arrived, as always, for Prahalad’s futuristic propositions.
Passion for India as a global force
CK Prahalad was perhaps the only Western management thinker who believed that India would be a global leader sooner than later. He appreciated and forecast global competitive dynamics as much as he understood and formulated dynamic corporate strategies. He held that leadership was all about the future, about hope and change.
In 1994 Dr Prahalad addressed a select group of CEOs of India, Inc in Windsor Club. He suggested to them that they must build multinational firms from India (Indian MNCs) rather than be paralyzed by the entry of multinationals into the Indian market. Very few of the assembled CEOs thought then that it could happen. Probably saddened by this reaction he started working with Indian corporations and individual CEOs to prompt a multinational mindset. Surely to Prahalad’s satisfaction, he saw in his lifetime the concept of Indian MNCs becoming reality. Today virtually all industrial sectors of India are significantly globalized while several top Indian corporations have made major global acquisitions.
In 2007-08, as the celebrations of India@60 wound down, he formulated a new vision for India@75, ie., India by 2022. He argued that India’s success in this endeavor would depend on economic strength, technological vitality and moral leadership. He set several exciting goals for India. He urged the governments to convert the huge population into a distinct advantage through quality education. He believed that India would account for 10 percent of global trade. He exhorted India, Inc to get 30 of its firms onto Fortune 100 list. He wanted India to have 10 Nobel Prize winners based on research conducted in India. He believed that India’s unique manufacturing and R&D paradigms could be developed to develop cost-effective breakthrough innovations.
Dr Prahalad advocated game changing accomplishments for India to move to the next higher trajectory. He said: “ Focus on the future, and not on the present or the trajectory of the past; Aspirations must exceed the resources; and Imagination is more important than analysis”. By focusing on inclusive growth that would emphasize the larger rural landscape as micro-producers and micro-consumers as much as the more visible urban landscape as major producers and consumers he felt that India with its 1 billion plus population could turn his India@75 vision into reality.
People power of strategy
Prahalad’s works are characterized by an unflinching faith in people as shapers of strategy and drivers of growth. Prahalad never looked at strategy as an impersonal corporate construct or as a mere structural enabler. CKP’s recent works have focused explicitly on consumers as the co-creators of value; however, even his earliest works integrated people as the essential component of strategy development.
In Prahalad’s framework people emerge as the primary constituency, either as generators of demand or creators of products, with his strategy linking both. For example, in Strategic Intent Prahalad dwelt with an active management process that would include: focusing the organization’s attention on the essence of winning, motivating people by communicating the value of the target, leaving room for individual and team contributions, sustaining enthusiasm by providing course corrections and using the intent consistently to guide resource allocations.
Needless to say, his work on core competencies is completely people focused. Here, however, he focused on the intellectual competencies of people. According to Prahalad, core competencies are the collective learning in the organization, signifying a unique ability to coordinate diverse skills and integrate multiple technologies. He argued, correctly so, that several individualized skills would not lead to the competitiveness of an organization, unless they were woven into a core competency that was distinctive to the organization. In his view, core competence would many levels of people and all functions, with top management looking at the company as an amalgam of skills and not as a collection of departments or products.
It is, however, in the “Fortune at the Bottom of the Pyramid” that an entirely new human dimension of CK Prahalad emerged. By all accounts, no management guru (or any corporate honcho) until then considered poverty-stricken sections of the society as one deserving of any mention in strategy formulation. In an era where consulting organizations and corporate strategists encouraged companies to focus on advanced markets to drive revenues, Prahalad in his landmark book advocated creation of fortune by focusing on poor people in emerging markets. The tag line “enabling dignity and choice through markets” is evocative. Post-publication of this book, creation and delivery of low cost but high quality products for customized applications became a board room topic, finally.
A loss, a void and a duty
Typically, Prahalad never stayed in a zone of comfort. If consulting assignments to top ranking global firms provided early challenges and opportunities, his passion to evengalize his strategic philosophies globally with a special focus on India made Dr Prahalad a truly jet-set global management guru. Very often, he is reported to have placed his external commitments ahead of his personal comfort and health. He founded and personally ran entrepreneurial ventures (Praja, Inc) which sought to harness the power of the technology and Internet. As with the philosophy he advocated for others, he set aspirations higher than resources and aimed to push the boundary farther, ever often.
The passing away of Dr CK Prahalad has snatched one of the most innovative and prolific management thinkers from the business world. Many academic institutions, industry associations, corporate boards and chief executives, directly served by his thoughts through association and indirectly influenced by his written and spoken thoughts, will be orphaned. More than anything else, the employee-on-the-frontline and the man-on-the-street would be impacted by the snapping of his creative thoughts that targeted common good, globally.
In Professor Prahalad’s demise, companies have lost a mentor who encouraged managements to engage the apparently ordinary people in their organizations and feel their extraordinary potential in strategy formulation and execution. Societies have lost a benefactor who could develop new business constructs which would harmonize the profit motives of a capitalistic corporation with the equity needs of a handicapped society.
Needless to say, India has lost a towering icon of great intellectual capability, acclaimed as the most influential management thinker of the world. Converting Dr Prahalad’s vision for India into a reality is the most relevant homage that India’ strategists can pay to his unique and distinguished memory.
Posted by Dr CB Rao on April 18, 2010
CK Prahalad (CK or CKP as he is popularly called) represented the very best of Indian intellect that found a global home. Born into a large family of Sanskrit Brahmin scholars in the South Indian city of Coimbatore in August 1941, Coimbatore Krishnarao Prahalad obtained his B Sc degree in Physics from Loyola College, University of Madras in 1960. After graduation, he worked in Union Carbide as industrial engineer and later in India Pistons as training manager. Setting sights on management education, he earned his PG diploma in Business Administration from the prestigious Indian Institute of Management, Ahmedabad, as a student of the first batch in 1966. His stint at Union Carbide and the move into the management studies were perhaps the critical inflexion points of his life.
Prahalad, armed with the MBA from IIMA, proceeded to Harvard Business School, USA where he earned his Doctor of Business Administration in 1975. He returned to India to teach at his Alma Mater, IIMA during 1976-77. He thereafter joined University of Michigan, USA and made his mark as a foremost management teacher in the United States. He served as the Distinguished University Professor of Corporate Strategy at the Stephen M Ross School of Business in the University of Michigan. Dr Prahalad was the recipient of several honors and awards globally. Honorary doctorate degrees from global universities and high-ranking civilian awards from the Government of India such as Padma Bhushan were part of the recognitions.
Though a bit dated, one of the best accounts of CK Prahalad’s passions expressed as his reflections can be found in the paper “C.K. Prahalad’s Passions: Reflections on His Scholorly Journey as a Researcher, Teacher and Management Guru” co-authored by Lynn Perry Wooten and Anne Parmigiani from University of Michigan and Nandini Lahiri from Indian School of Business (Journal of Management Inquiry, Vol. 14, No. 2, June 2005, pp 168-175).
This blog post presents Dr Prahalad’s genius from diverse perspectives based on the author’s understanding of his works and the author’s attendance in Dr Prahalad’s speaking forums.
Sweeping in canvas
Throughout his long distinguished career Professor Prahalad helped reshape strategy and set new directions for business. He had an unparalleled genius for developing seemingly abstract yet elegantly simple constructs, marked by lateral and out-of-the-box thinking. His teachings helped future managers and leaders acquire leading-edge conceptual, analytical and strategic skills. His articles and books, which went on to become bestsellers, shaped innumerable professionals, across domains and countries, to think differently. His consultancy assignments helped companies plan and grow existing and new businesses or turnaround the ailing ones. His speeches and presentations in several global forums helped strategy acquire a distinctiverecognition as a critical domain. More importantly, his mentoring of corporate boards, chief executive officers, entrepreneurs, bureaucrats and ministers helped India, Inc recognize its global potential.
If there is one factor that characterized all of CK’s contributions it is the unique trail-blazing nature. While several management gurus are content to spin extension and analogue theories around their first fundamental premise, CK constantly and consistently propounded new trail-blazing concepts and theories. As a result, CK made a more complete and holistic contribution to business management than any other exponent, save perhaps the legendary Peter Drucker. Each of Dr Prahalad’s bestselling books and award-winning articles exemplifies a thought process that is refreshingly different and genuinely creative.
Prahalad’s books institutionalized new ways of strategic thinking through elaborate paradigms, well-illustrated with real time case studies. His notable works include “Competing for the Future”, co-authored with Gary Hamel (1984), “Multinational Mission: Balancing Local Demands and Global Vision” (1987), ”The Future of Competition: Co-Creating Unique Value with Customers”, co-authored with Venkat Ramaswamy (2004), “The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits” (2004), and “The New Age of Innovation: Driving Co-Created Value through Global Networks” (2008), co-authored with MS Krishnan. Each of the books created a new strategy paradigm completely different from the previous ones and laid new trails of strategic thinking.
Prahalad’s award-winning articles almost inevitably churned management thought and laid new pivots of strategic thinking. Prahalad’s “The Dominant Logic: A New Linkage between Diversity and Performance” (1986), co-authored with Richard Bettis,” Strategic Intent” (1989) and ”The Core Competence of Corporation” (1990), both co-authored with Gary Hamel,” The Role of Core Competencies in the Corporation” (1993), “A Strategy for Growth: The Role of Core Competence in the Corporation” (1993),” Weak Signals Vs. Strong Paradigms” (1995), “The End of Corporate Imperialism” (1998), “Serving the World’ Poor, Profitably” (2002), co-authored with Allan Hammond, “The New Frontier of Experience Innovation” (2003), and “Twenty Hubs and No HQ” (2008), co-authored with Hrishikesh Bhattacharyya, have each led to entirely new waves of thinking in corporate strategy.
Unlike many management gurus who preferred to plough their own lonely paths, Professor Prahalad believed strongly in collaborating with other management thinkers, including his students who evolved into independent thinkers in their own right. The array of books and articles he co-authored with such experts, some of them listed above, is proof of his cross-institutional, cross-border collaborative research and writing, often taking years of dedicated work before a publication is made. Quite often, however, it fell on his shoulders to present and communicate thoughts to several learned forums across the globe. While there could be effective class room teachers and public orators, Dr Prahalad had a unique capability to connect with the audience, influence listeners of varied mindsets, and instill a sense of purpose in each listener.
Pioneering in theory and practice
Amongst the many conceptual contributions of Prahalad, ‘strategic intent”, “core competency” and “bottom of the pyramid” have been the truly game-changing ones. Though these were initially proposed by Dr Prahalad as case based theoretical constructs and caused intellectual upheavals in management thought when they were first presented, all of these have now become viable practices.
The construct of strategic intent comprised three attributes of direction, discovery and destiny. It required a company to think of a long term and differentiated competitive position that a firm must seek over a decade or so, which in turn would motivate the employees explore the new terrain with a sense of purpose. Prahalad advocated upward movement of new ideas from all across the organization to help the company chart out a competitive future stating that a company’s strategic orthodoxies would prove to be more dangerous than its well-financed rivals. The prime message was one of doing things differently to achieve desired differentiated outcomes.
The concept of core competencies made fundamental departure from the established concepts of strategic business units and outside-in models of competitive strategy by arguing that only the core competency of a firm could truly drive its strategy and business. Each firm could have its own core competency or a portfolio of core competencies but a true core competency would be one that remained difficult to replicate by the competitors. The theory advocated building of core competencies that support a strategic intent. It proposed a core competency mind-set that would unchain talent from the imprisonment of business units, identify projects and people who embody core competencies and a game plan to identify next-generation competencies.
The paradigm of “fortune at the bottom of the pyramid’, was India-centric theory with truly global implications. It argued that by developing low cost products and services that serve the poorest of the poor, corporations would actually earn profits with a social purpose. It hypothesized that by focusing on the demand at the bottom of the social pyramid companies would help eliminate poverty. The book supported the theory with several actual case studies from India. While it had its share of skeptical critics it is now well established that Prahalad’s BoP theory has become viable industrial practice. Tata’s USD 2,000 dollar Nano small car, Nokia’s and Samsung’s USD 20 mobile phones and Yunus’s Grameen Bank demonstrate how profits get generated by focusing on, rather than shirking away, from poverty.
Equally path-breaking have been Dr Prahalad’s other concepts; for example, that the consumer and the firm are intimately involved in jointly creating value that is unique to the individual consumer and sustainable to the firm (“The Future of Competition”) or that the emerging markets can be a source of innovation, which can be captured by accessing global resources and talent to create customized co-created experiences for consumers. The attempts of global automobile firms and innovator pharmaceutical firms to collaborate with Indian partners indicate that the time has arrived, as always, for Prahalad’s futuristic propositions.
Passion for India as a global force
CK Prahalad was perhaps the only Western management thinker who believed that India would be a global leader sooner than later. He appreciated and forecast global competitive dynamics as much as he understood and formulated dynamic corporate strategies. He held that leadership was all about the future, about hope and change.
In 1994 Dr Prahalad addressed a select group of CEOs of India, Inc in Windsor Club. He suggested to them that they must build multinational firms from India (Indian MNCs) rather than be paralyzed by the entry of multinationals into the Indian market. Very few of the assembled CEOs thought then that it could happen. Probably saddened by this reaction he started working with Indian corporations and individual CEOs to prompt a multinational mindset. Surely to Prahalad’s satisfaction, he saw in his lifetime the concept of Indian MNCs becoming reality. Today virtually all industrial sectors of India are significantly globalized while several top Indian corporations have made major global acquisitions.
In 2007-08, as the celebrations of India@60 wound down, he formulated a new vision for India@75, ie., India by 2022. He argued that India’s success in this endeavor would depend on economic strength, technological vitality and moral leadership. He set several exciting goals for India. He urged the governments to convert the huge population into a distinct advantage through quality education. He believed that India would account for 10 percent of global trade. He exhorted India, Inc to get 30 of its firms onto Fortune 100 list. He wanted India to have 10 Nobel Prize winners based on research conducted in India. He believed that India’s unique manufacturing and R&D paradigms could be developed to develop cost-effective breakthrough innovations.
Dr Prahalad advocated game changing accomplishments for India to move to the next higher trajectory. He said: “ Focus on the future, and not on the present or the trajectory of the past; Aspirations must exceed the resources; and Imagination is more important than analysis”. By focusing on inclusive growth that would emphasize the larger rural landscape as micro-producers and micro-consumers as much as the more visible urban landscape as major producers and consumers he felt that India with its 1 billion plus population could turn his India@75 vision into reality.
People power of strategy
Prahalad’s works are characterized by an unflinching faith in people as shapers of strategy and drivers of growth. Prahalad never looked at strategy as an impersonal corporate construct or as a mere structural enabler. CKP’s recent works have focused explicitly on consumers as the co-creators of value; however, even his earliest works integrated people as the essential component of strategy development.
In Prahalad’s framework people emerge as the primary constituency, either as generators of demand or creators of products, with his strategy linking both. For example, in Strategic Intent Prahalad dwelt with an active management process that would include: focusing the organization’s attention on the essence of winning, motivating people by communicating the value of the target, leaving room for individual and team contributions, sustaining enthusiasm by providing course corrections and using the intent consistently to guide resource allocations.
Needless to say, his work on core competencies is completely people focused. Here, however, he focused on the intellectual competencies of people. According to Prahalad, core competencies are the collective learning in the organization, signifying a unique ability to coordinate diverse skills and integrate multiple technologies. He argued, correctly so, that several individualized skills would not lead to the competitiveness of an organization, unless they were woven into a core competency that was distinctive to the organization. In his view, core competence would many levels of people and all functions, with top management looking at the company as an amalgam of skills and not as a collection of departments or products.
It is, however, in the “Fortune at the Bottom of the Pyramid” that an entirely new human dimension of CK Prahalad emerged. By all accounts, no management guru (or any corporate honcho) until then considered poverty-stricken sections of the society as one deserving of any mention in strategy formulation. In an era where consulting organizations and corporate strategists encouraged companies to focus on advanced markets to drive revenues, Prahalad in his landmark book advocated creation of fortune by focusing on poor people in emerging markets. The tag line “enabling dignity and choice through markets” is evocative. Post-publication of this book, creation and delivery of low cost but high quality products for customized applications became a board room topic, finally.
A loss, a void and a duty
Typically, Prahalad never stayed in a zone of comfort. If consulting assignments to top ranking global firms provided early challenges and opportunities, his passion to evengalize his strategic philosophies globally with a special focus on India made Dr Prahalad a truly jet-set global management guru. Very often, he is reported to have placed his external commitments ahead of his personal comfort and health. He founded and personally ran entrepreneurial ventures (Praja, Inc) which sought to harness the power of the technology and Internet. As with the philosophy he advocated for others, he set aspirations higher than resources and aimed to push the boundary farther, ever often.
The passing away of Dr CK Prahalad has snatched one of the most innovative and prolific management thinkers from the business world. Many academic institutions, industry associations, corporate boards and chief executives, directly served by his thoughts through association and indirectly influenced by his written and spoken thoughts, will be orphaned. More than anything else, the employee-on-the-frontline and the man-on-the-street would be impacted by the snapping of his creative thoughts that targeted common good, globally.
In Professor Prahalad’s demise, companies have lost a mentor who encouraged managements to engage the apparently ordinary people in their organizations and feel their extraordinary potential in strategy formulation and execution. Societies have lost a benefactor who could develop new business constructs which would harmonize the profit motives of a capitalistic corporation with the equity needs of a handicapped society.
Needless to say, India has lost a towering icon of great intellectual capability, acclaimed as the most influential management thinker of the world. Converting Dr Prahalad’s vision for India into a reality is the most relevant homage that India’ strategists can pay to his unique and distinguished memory.
Posted by Dr CB Rao on April 18, 2010
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