Monday, March 4, 2013

Innovation Indianised

Entrepreneurship is on the rise these days. People are increasingly getting out of their comfort zone and diving into the rigors of starting a business. Doing business is no longer the cup of tea of only the wealthy or those with political connections. A business idea and the right attitude is all you need to make it big. Entrepreneurs are leaders – they bring about change, innovation. And innovation is THE thing for economic growth.

As this New York Times article explains, there are three types of innovations – empowering, sustaining and efficiency. Empowering innovations or those more popularly known as disruptive innovations are those that revolutionize industries – they create altogether new markets for themselves. Facebook, which brought about a whole new dimension to advertising or the iPad, which made access to computers a lot easier, are examples of empowering innovations. They are the ones that create the maximum jobs, expand capacity and make products available to those consumers who did not have access to them before. They give the maximum boost to growth. Sustaining innovations replace old products with new ones with small improvements here and there, for example replacing LCDs with LED TVs. They, sort of, keep the innovation engine running. They fill up the demand-supply gap in developing economies but have a more or less neutral effect in developed economies. Lastly, efficiency innovations enable us to do more with less. They help in reducing costs by making better use of resources. For example, e-commerce companies have brought around a new way to distribute retail products and the comparable cost advantage that they have allows them to provide attractive discounts. However, these innovations tend to automate processes and hence sometimes even lead to loss of jobs. They work best in mature markets.

So, what sort of innovation does India need? Generally, all three types would only do good and bring about positive change in a growth hungry country. However, let us dig a bit deeper see what type of innovations would most benefit low-income, middle-income and high-income consumers. We’ll worry about the low and middle income consumers only because they form, in terms of population, more than 90% of the total market.

The middle-income group presents the largest business opportunity because it is increasing both in size and in per capita spending power. It is what is attracting many foreign business houses to India. Consulting firms would be doing a lot of “India Entry strategy” projects these days! Sustaining innovations would work best for this market. Better mobile phones, better cars, easy finance, affordable housing, exotic food would sell a lot! The burgeoning middle-income population has almost created a situation of excess demand. Thus, their hungry stomach pretty quickly gulps down any excess capacity created.

The low-income group has been greatly under served because it seems to have hardly any purchasing power. This consumer group traditionally did not appear lucrative enough for businesses. However, times have changed and a number of social enterprises have sprung up, both for-profit and not-for-profit. They have been engaging with sectors of agriculture, agriculture support, health care, sanitation, education and clean energy. A lot more can be done in the areas of agricultural technology, logistics, rural banking, rural tourism etc. Organising the unorganised sector presents a huge business opportunity in itself! Amul Dairy is the best case study here – a fascinating story of how a group of milkmen came together to create a Co-operative which is today one of India’s largest dairy product manufacturers. These are empowering innovations indeed!

Thus, the Indian market has huge potential! And to tap this market, our Gujju and Marwari businessmen have their own home-grown way to innovate! This stems from the fact that we Indians always have had limited resources on hand. We have large families living together in small houses, we love small hatchback cars and Nokia still manages to sell millions of low cost handsets. We learn to adjust, and that’s how was born – “Jugaad” innovation! It translates into an innovative fix for a business problem born from ingenuity and cleverness. Navi Radjou, Jaideep Prabhu and Simone Ahuja have in fact co-authored an entire book on the subject – “Jugaad Innovation: Think Frugal, Be Flexible, Generate Breakthrough Growth”.

How much Jugaad can our entrepreneurs do? And how far will it take us? Only time will tell.


Monday, February 25, 2013

What do people work for?

I wonder why some people enjoy their jobs so much, while others work for the sake of it. For whatever they bring to the table, they expect something in return. It is important for both the employee and the employer to know these expectations – better termed as work values.

Work values may include anything – from earning loads of money (let’s be honest here!), travelling the world, taking on intellectual challenges, exercising authority to earning recognition and respect or having a better work-life balance. They differ from person to person. The extent of job satisfaction achieved depends on the degree to which these work values are met.

Many people jump jobs just because the other pays more – but is money everything in life? Would a graduate from Harvard take up a clerical job even if it pays him/her a fantastic sum? Sure, everyone does not have a Harvard degree and there are responsibilities to shoulder, but think of it this way: would you like to have a boss who yells at you all the time or would you like that high paying job if you can’t spare time for your family and friends?

While evaluating a new job, however, most people don’t know the extent to which their work values will be met. In a job interview, employers always look for what you can give rather than what you want to take. When the interviewer asks “why do you want this job?”, it would be stupid to say that it pays more than the current one. Hence, it is best to do a background search and gather enough information to help take a better decision. And when the interviewer asks, “Do you have any questions?”, then try to gently slip in a couple on the work culture.

For an employer it would be great to have a highly satisfied group of employees. The job fit should be decided not only by the employee’s core business interests and skills but also whether his/her expectations will be met. So, it would be best to make every potential joinee know about what the job has to offer, enabling him/her to make an informed decision.

For people who are just starting off their careers, in the short term it makes sense to do jobs which are in line with your core business interests. The rewards will follow!

Wednesday, January 30, 2013

The Great Indian Dream – What?

I wrote about the need to have an Indian Dream a while back (refer my earlier post). What do you think the Dream should be? Should we target a particular level of GDP to be achieved by say 2020, or since inclusive growth is on the agenda, a per capita GDP target? Another approach could be to benchmark a country like China or Brazil and try to grow on a similar path. We can set a target and then frame a plan to achieve it, but the question is – will this be the true measure of success?

Overpopulation, poverty, illiteracy, health, corruption, sanitation, riots, terrorism are the most important socio-economic problems that plague our country today. Will GDP growth solve all of these? Does money alone have the power to eliminate all these problems?

The other day I saw this TED talk video (it’s pretty long, but it’s worth seeing). One slide that caught my eye was this one:

So, are things listed on the left side more important or the ones on the right? When you go out for a walk, would you prefer to see two people beating each other up over a trivial matter or someone helping a blind man cross the street? Would you like to see our government spend money after acquiring modern warships and airplanes or invest the same money in educating children?

My dream for tomorrow’s India would be one where people are more loving, caring, friendly and honest. If you care enough for your fellow Indian, would you loot him by collecting bribes? Would you burn down the neighbourhood in riots? If you love your country, would you throw litter all around?

My dream for tomorrow’s India would be one where people are more educated, self-aware, well-informed and innovative. Wouldn't you like the next Facebook / Google / iPhone to come from India? Imagine what 1,200 million (that’s India’s population) doctors or engineers could turn the world into.

My dream for tomorrow’s India would be one where people are more courageous, expressive, participative and assertive. As India slowly grows into becoming the world’s largest economy, it needs to produce distinguished leaders to lead the world towards the next renaissance.

So according to me, compassion, education and leadership are the 3 pillars of the Indian Dream. We first need to break these down into more measurable and tangible objectives and then work towards achieving each of them one at a time. If we are able to do this, I believe that over the long term we can surely make a huge difference to the Indian community and the world at large.

Sunday, January 13, 2013

Meritocracy: Privatizing Governments

Democracies today don’t have fully representative leaders. Coalition government is the norm now and is expected to continue in the future. Most of the candidates who win elections are elected on minority votes. Check out this TOI article in which our Vice President Hamid Ansari points out that in the first general election in 1952, the percentage of successful candidates who secured less than 50% of the votes cast was 67.28%. This figure went down to 58.09% in 1957. In the 13th, 14th, and 15th general elections in 1999, 2004, and 2009 respectively, it was 60.03%, 75.87% and 82.68%, respectively. Another article analyses voting patterns in the USA over the last couple of decades. It also concludes the same thing. Multiple parties are in power and differences between them are affecting decision making.

The Indian Parliament hardly functioned in the monsoon session of 2012 with the BJP pushing for the PM’s resignation over the Coalgate scandal. The Congress then diverted public attention by coming out with FDI reforms. BJP took this up in the winter session heavily objecting these reforms saying they would affect small retailers and hence were damaging. The BJP led NDA government had in fact pushed for 100% FDI in retail back in 2002. Back then, it was the Congress that opposed these reforms arguing that they were anti-aam aadmi. The legislation ultimately went through, but only after a delay of 10 years! A rough calculation shows what effect has this delay caused –
In the table below, row 1 shows the net income of Wal-mart over the past 5 years. Assuming this to be equal to value added and further assuming India’s share to be 10% of the total, row 2 shows the value that Wal-mart could have generated in India over the last 5 years. Converting it into Indian rupees it shows that, had the reform been passed earlier, approximately INR 36,000 crores could have been generated in the last 5 years alone! And additionally, there would have been several intangible benefits. Of course we have to reduce from this, the value generated by the domestic retailers because only the incremental value added is relevant.
Possible Value generation by
Value added (assumed = Net income)
in Million USD
India share (assumed 10%)
Total value added in India over 5 years
in Million USD
Total value added in India over 5 years
in INR crores (at an exchange rate of 50 INR/USD)
The only winners in this delay have been the political parties. By managing to pass the reforms, Congress played positive politics by trying to project itself as a reformist party and bringing the country back on the road to fast paced growth. On the other hand, BJP has tried to project itself as supporting the common man’s will. Parties go to any extent to win and retain power. They use the situation to their advantage irrespective of whether it is good or bad for the economy. Once they are in power though, coalition politics doesn’t allow them to be reformist, even though they may want to. And the economy does bear the brunt, big time!

The same thing is happening in the US. While the Democrats control the Senate, the Republicans hold the majority in the House of Representatives. The fact that the government is run by parties with different plans and ideologies doesn’t help fast-track decisions. The agreement to avert the fiscal cliff is just a stop-gap arrangement. God knows how quickly and effectively will the Obama administration be able to work out a good deal!

So, why is this happening? Can’t coalitions be effective as single party governments? If so, does it mean that democracy is no longer going to work? Is it only going to give you coalition governments that take forever to make decisions? If you see states like China, for example, its communist government (though it may have its own downsides) has been able to set targets and do the necessary to achieve them. May be because it faced no political pressure! So, do we move back to old times and adopt Marxist laws? That might be a bit too extreme, isn’t it? So, what do we do?

How about this: We bring in “Meritocracy”. In simple terms it would mean that we have to elect candidates, not because they are linked to a particular political party, but because they are the right people for the job. They have the right skills and expertise to carry out the job. In the long term this may mean the end of party politics and individuals, experts rather, fighting it out to win each post. Isn't this how we work in private organisations? We don’t elect our bosses do we? Most people get the job because they have the credentials to show for it; because they have the necessary skills, education, experience and passion that is needed to get the job done. Britain in fact has a “Meritocracy Party” which preaches the same cause. A Wikipedia article lists its objectives.

What would it be like if professionals rather than politicians ran our country? What if Deepak Parekh was the Finance Minister and Ratan Tata was the Steel Minister? I call it Privatization of the Government. What say, will it work?

Sunday, December 23, 2012

India’s population – our Oomph factor?

People say that our vast population is our strength. We grew from 360 million in 1951 to over 1200 million in 2011 at an average rate of over 20% every 10 years. We are estimated to surpass China by the year 2030 to become the world’s most populated country. This is believed to give India a huge labour force on one hand and a large consumer base on the other. India's workforce, those aged between 15 and 64, is expected to rise from almost 64% of its population in 2009 to 67% in 2020. More workers means more savings and hence more spending. This is what is attracting a number of foreign companies to set up shop here and take advantage of the purchasing power that this population is expected to generate. Over 35% of our population is below the age of 20. These young Indians are expected to be enterprising and innovative and to take India to the next level.

India has certainly hit a sweet spot as far as demography is concerned. Some of the more developed countries in Europe and America have an ageing population leading to an expected demographic crisis over the next 10-15 years. It takes almost a generation to revamp the demography of a country and this gives India a significant advantage, to say the least.

However, the question is will we truly be able to leverage our strength? Will we realise our “expectations”? See the table below. We’ll have 882 million people working in India by 2020 – 747 million already are working while 135 million (882-747) will get added from the under 15 age group.
Under 15
Total population (in millions)
Source: Wikipedia

Now check this out:
Poverty effect
From the age group
Under 15
Relevant population (A)
Poverty (<$2 a day) % (B)
Portion rendered useless (A*B)
Illiteracy effect
From the age group
Under 15
Relevant population (A)
Illiteracy % (B)
Portion rendered useless (A*B)
Unemployment effect
From the age group
Under 15
Relevant population (A)
Unemployment % (B)
Portion rendered useless (A*B)
Source: Wikipedia
*assumed to be same
** when this population becomes of working age, a portion of them will also face unemployment. The rate is assumed to remain the same as it is currently.

Poverty turns 606 million people useless. How are people living on less than $2 a day going to go to Walmart to buy grocery? Income is highly unequally distributed in India with the top 20% having a 42% share of the country’s income. Check out World Bank’s stats on this. Illiteracy is the next big problem, chucking out 218 million people. Unemployment renders 69 million people useless. Hence, the people effectively working towards generating GDP goes very low.

Hence, it isn’t just the quantity of population but the quality that matters more. When people live in slums, face health problems, children face malnutrition, schools don’t have enough seats to accommodate kids, we aren’t going to be able to create an environment where people can work efficiently. The productivity levels of people are significantly affected by the environment they live in and the standard of life that they enjoy. The government can’t just sit around being proud of the size of our population. It ought to recognise these issues and work towards eradicating them. We first need to create opportunities. Only then can our people take advantage of them.

That’s why inclusive growth is on the agenda. And that’s why the common man’s voice is so important. What can 1200 million enterprising, opportunistic, rich Indians turn the world into? Just imagine!