The miracle era of Indian multinationals

(NOTE: The article was published in the INDIA TODAY edition dated August 22, 2005)

I went to a business school in the United States 25 years ago, convinced that the education would equip me with skills needed to go into the business battlefield and emerge victorious. But which battlefields and which league of competitors? Unfortunately, it was not a question I asked myself forcefully, or often, enough.

The world, according to American business schools in the 1980s, was understandably a historical record of heroes and role models thrown up by Anglo-Saxon capitalism. There were few Asian protagonists in our case studies and, certainly, no Indians. The cases on India were part of the “country” cases, in which the macroeconomic policies and political vagaries of the misguided Third World nations were sceptically examined.

My subconscious was, therefore, working up an image of the consummate Indian manager as being one who either went to work on fabulous wages for a multinational company, or who returned to India and started an enterprise that was successful within very narrow boundaries. Success was defined as healthy financial returns obtained while competing within the Indian business universe and, more importantly, with technology acquired from a venerable and admittedly superior foreign corporation. Clearly, what they didn’t teach me at the business school was outrageous ambition.

Was it something that should have been fostered on home ground where our tricolour fluttered proudly? Perhaps, but in reality, when I returned to India and went to work, the licence raj was alive and well and conspired to retard any world-class ambitions. The regulatory environment sent loud and clear messages that to create substantial wealth—even legitimately—was wrong, and that no business expansion could be permitted without some mandatory sacrifice. For example, at the steel company where I first worked, we were compelled to surrender a licence to make stainless steel in exchange for being allowed to expand our automotive steel capacity from 35,000 tonnes to 60,000 tonnes. Today, this sounds like an impossibly surreal logic, but at the time it was a harsh reality we had to live with.

As a parent, I know only too well that if I put excessive constraints on my children and protect them overzealously, I will be signalling to them that the world is full of dangers, real or imagined, and that I lack confidence in their ability to fend for themselves. The natural effect on their personalities would be lack of self-belief and self-esteem. This is a simplistic but accurate analogy for the debilitating effect of the “parenting” regulatory environment in which India’s entrepreneurs struggled.

In 1991, economic reforms provoked by an empty treasury, led to the “parent” suddenly throwing open the gates of the family compound and saying, “I’m broke, so you are now free to go out and earn a living for yourself.” So like animals reared in captivity, we warily contemplated freedom in a jungle whose rules we barely understood. And understandably, we behaved more like prey rather than predators. The focus was on working out, shaping up in order to match the operational capabilities of other denizens of the jungle. And that is what the Indian companies spent their time doing in the first few years following liberalisation. We all improved our operational efficiency and got into shape, but it was not just such “physical training” that gifted us with global aspirations. A more far-reaching transformation occurred in our mindsets and for that, I believe, we owe a debt of gratitude to two significant developments.

The first was the apparently miraculous emergence of the Indian IT industry as a world beater. Until then, we had never seen any Indian company take on overseas markets and competitors and succeed so convincingly. This had a dramatic effect on our self-belief and willingness to take global risks. The second development was the appearance on the world stage of a significant number of individual role models, businessmen of Indian origin, who had either risen to the top echelons of MNCs or built leading global companies.

It is perhaps sufficient to quote Laxmi Mittal’s example. It was not his acquisition of the world’s most expensive home that stirred us, but his belief in himself and the absence of fear even while challenging the hegemony of giants in the international steel industry. Fortunately, he was unburdened by an Anglo-Saxon business education that would have ingrained in him a respect for the superiority of global corporations.

We cannot, however, base our future success on heightened aspirations. We need to become skilled gladiators, not just chest-thumping, lag-waving soccer spectators. The most important consequence of our new-found self-belief must be the confidence to invest in and create our own intellectual property. The critical factor for the success of tomorrow’s Indian multinationals will be the ability to innovate and spawn cutting-edge products and services that will seduce the global customers.

If we succeed in this task, we will create a cycle of innovation, entrepreneurship and global scale. If we fail, we are destined to be just another Third World offshore sweatshop. Much depends on how we write this new chapter in the story of the new Indian corporation. Fortunately, the rest of the world, at least for now, seems to believe it is a story that will have a happy ending.

(The article was published in the INDIA TODAY edition dated August 22, 2005)

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