January 17, 2008

India Trip Summary

At the majority of the meetings we have attended, we have been told that India is no longer a land of snake charmers and elephants. This comment moved from slightly humorous to an overdone cliche in no time. As a side note, I was slightly disappointed that we saw neither. While I think this perception of the outside world's view is inaccurate, I do believe that American business owners generally do not grasp the extent of what globalization means and need to reevaluate their strategies in order to compete successfully in the long term.
Some significant considerations include:

-There are many more similarities between business in India and the US than I anticipated.

-Managers talk about the same strategic concepts, value relationships similarly, and need to invest time to understand their target market's needs.

-The top two buzzwords were innovation and scalability. Innovation refers not to an R&D lab as part of a company, but a mindset whereby any and all strategies, products, and processes need to be constantly updated to meet changing market needs and competitive dynamics. In a market of 1 billion people, including a vast low-income consumer market, scalability means bringing solutions to the individual level through cost-effective technology and easily replicable delivery methods.

-Outsourced services have become very sophisticated. Call centers are just scratching the surface. To be competitive in the changing business environment, managers need to understand the opportunities and embrace them.

-Low average ages of 26-28 at Wipro and Infosys reflect the general shift of valuing KSAO's over experience. Learnability is a valued trait and popular buzzword.

-The IT infrastructure at top companies in India is on par with the top US companies. Sometimes Indian subsidiaries teach their foreign parents how to use IT.

-The pace of change is so fast that disruptive technologies need to be searched for and exploited quickly.

-India is very diverse, so generalities are meaningless, and local market research is key. Companies that learn this will likely also succeed in the next major growth region: Africa.

-Indians are ambitious and proud of their progress. Businesspeople tend to be resourceful and have a can-do attitude. Companies have become more acquisitive, but still prefer partnering with targets (ex. Tata Steel and Corus).

-Venture capital is flowing from all over the globe to support economic growth in India. Entrepreneurship is valued and respected. Still, the lackluster expected returns for developed economy equity markets has overheated Indian stocks.

-Possibly due to the obvious social needs, companies frequently undertake social causes and divert significant cash flows to charity.

-Bureacracy burdens many interactions from retail purchases to starting a business, but this is changing. "The Fortune at the Bottom of the Pyramid" taught me that villages are riding the IT wave to improve efficiency of everyday transactions, boosting productivity one person at a time.

-High demand for talented labor means turnover and wage inflation of 50% are common. HR managers say it cannot continue, but global demand continues to stoke the fire.

The big question is "Can the growth continue?" We have heard multiple overwhelmingly bullish perspectives, but uncertainties about price and wage inflation, government intervention, and infrastructure constraints remain. Most major consultancies and research institutions are predicting Indian Real GDP Growth of 7-10% over the next several years. In order for this to materialize, educational institutions need to improve starting at the primary level to build the knowledge workers of tomorrow, the government needs to improve efficiency to promote business activity, the business landscape will need to decouple from developed economies to avoid following the US into recession, and companies will need to continue to innovate to improve productivity of existing human capital and infrastructure resources.