November 2003

Sensitive chaos

R Gopalakrishnan, executive director, Tata Sons, explains the managerial view of how and why India works

R Gopalakrishnan
Foreigners understand a country through economists, historians and tour guides. Mine is an attempt to draw a manager's perspective, based on social and organisational dynamics. It too is flawed in its own way, but perhaps it is different – and maybe, thought provoking.

In 1991, the Economist published a supplement in which India was depicted as a tiger, no doubt nspired by the Asian tigers. Gurcharan Das, a successful international manager and now a writer, has rightly observed that India will never be a tiger. It is an elephant that is lumbering and moving ahead. It will display more stamina than speed. A Buddhist text says, "The elephant is the wisest of all animals. It remembers its former lives. It remains motionless for long periods of time, meditating thereon."1 Foreigners find India intriguing, but so do Indians! What Winston Churchill wrote – "Without measureless and perpetual uncertainty, the drama of human life would be destroyed" – certainly applies to India. I will focus on five headlines.

For many Indians knowledge sits on a pedestal
As the role of Indians in software is applauded it is sobering to reflect that India accounts for under 2 per cent of the world's software market. Thanks to our software engineers, Indians are thought to be clever and efficient by more and more people. Sir Keith Whitson, former CEO of HSBC, said, "Indians are quicker at answering the phone, highly numerate and keen to come to work everyday." In October, the Guardian revealed that the British National Rail Enquiries service is likely to move to Bangalore2. It is surreal to contemplate someone in Bangalore passing on information about the 8:42 fast train to Brighton! BT, BA, Lloyds TSB, Prudential, Stanchart, Abbey National, Powergen and many more have already begun to move their call centres to India.

It is not just about call centres. In the USA, 38 per cent of doctors are Indians, so also 12 per cent of the scientists. Thirty-six per cent of Microsoft employees as well as NASA scientists are Indians. One out of eight management faculty in American-B schools is Indian. The 250 Indian engineering colleges produce 300,000 engineers out of a world output of 900,000 engineers per annum. We have 800 management schools which turn out 100,000 management graduates each year, compared to 13,000 in Britain and 1,500 in Germany3. Admittedly the quality is highly variable but the quantity is staggering. Is this predilection for knowledge an outcome of recent development and awareness of the emerging knowledge society?

There are gleeful cognoscenti who will tell you facts from the past. The world's first university was established in 700 BC in Takshila. It had 10,500 students from all over the world and 60 subjects were taught. On the Indus river was born the art of navigation and although the dictionary states that the word is derived from Latin, your attention would be invited to the Sanskrit word, Naava Gatih, which predates the Latin origin! British scholars have published just four years ago that the value of pi was calculated by Budhayana in 600 BC. Quadratic equations were invented by Sridharacharya in 1100 AD. There is debate on whether the pioneer of wireless communication was Marconi or Acharya Jagdish Chandra Bose. And so this list can go on.

Keeping the aberrant experience with a cab driver or shopkeeper aside, uniquely, a very large number of Indians place knowledge, not money, on a pedestal. Even in the old caste system, the first rung was occupied by Brahmins, the purveyors of knowledge. The next three rungs were occupied by warriors, business people and finally the workers. Indians are keen absorbers of knowledge, often for its own sake, even if they do not always demonstrate the application of that knowledge. In the last two centuries, wealth was acquired by societies through owning mines, gold, oil, etc. In the future, it is said ownership of knowledge will bring wealth. Maybe, just maybe, India will find its place in the sun!

The collective ambition of Indians exceeds the resources they command
Ten years ago managers everywhere were fascinated by the term 'core competence'. This too came from an Indian – C. K. Prahalad – along with Gary Hamel. One element in their thesis was that it is not cash that fuels the journey to the future, but the emotional and intellectual energy of the people involved. The dream that energises an organisation is more positive than a simple war cry4. Strategic intent conveys three senses: of direction, of discovery and of destiny. Prahalad argued that it is essential, by design, to create a chasm between ambition and resources. It is this chasm that allows people to be planfully unrealistic. If Torakuso Yamaha had been "realistic", he would never have dreamed of turning Yamaha into the world's leading manufacturer of grand pianos and musical instruments. If Nehru had been "realistic", he would not have committed to the IITs as the "temples of modern India". Or indeed Shastri or Indira Gandhi later to the setting up of an Indian space programme or the super computer Param. Such audacious unreasonableness is becoming increasingly visible in India and among Indians. Where is the world's largest manufacturer of motorcycles? Where is the world's largest single-location forging facility? Where is the world's largest single-stream, fully integrated printing inks plant? Who is the world's largest manufacturer of laminated tubes? No prizes for guessing correctly.

As a nation we possess a collective ambition that is a stretch over the available resources. Two of the three senses implicit in strategic intent are often visible, i.e. the sense of discovery and of destiny. Paradoxically, the sense of direction is less visible!

In India, effectiveness is more important than efficiency
The Anglo-Saxon approach to managerial problem solving places a premium on logic, analytics and efficiency. In this approach, the shortest distance between two points is a straight line, but in India, it can be a spiral that goes around in circles. The Indian approach lays less emphasis on efficiency and more on effectiveness. It is important to achieve the goal in a particular way, more so than to reach the goal. The difference with other societies is that it is not about efficiency versus effectiveness, but rather a balance between the two.

In 1920, the British faced a bloody revolt in post-Ottoman Iraq. On the assumption that Iraqis were waiting for democracy and freedom, they installed a Hashemite king. In reality, they stirred up a hornet's nest as subsequent events have shown. The Americans are once again discovering that due to a poor evolution of political institutions, too many in Iraq depend on a regime of violence, patronage and ethnic division to maintain their grip. The Americans are making this mistake for the first time, I wonder about the British.

Let us consider a metaphor. One way to cope with external turbulence is to suppress its effect and navigate the path with efficiency. Another is to leverage the external turbulence and navigate it effectively. Contrast the way in which a plane navigates the skies with how a glider does. Or how a steamship goes through the waves as compared to a surfer. In 1978, China announced the Three Gorges project on the Yangtze river, displacing millions. Now they are ready to inaugurate it, the world's largest hydroelectric project. Yet India's 1946 Narmada project is still hanging fire! We are trying to get consensus. In confederated organisations and confederations, consensus and decisions take time e.g. the EU, the WTO. That is a reality, for good or for bad! It may or may not be true that such organisations are weak brotherhoods of well-intentioned people!

Managers and administrators in India are in a somewhat unique position. Their intellectual exposures are often western while their social moorings are very Indian. Many of them would speak and even think in English, much of their daily reading would also be in English. Yet their behavioural pattern is rooted in a local ethos. So while intellectually they may know how to solve a particular problem efficiently, in the actual implementation, they seek social effectiveness. This is visible in disinvestments, economic reform and several other public policies. I do not make a virtue of our slow public policy processes nor do I seek to explain it away through socio-cultural theses. I am merely attempting to place a set of observations, which just may help you to understand what I am also trying to understand.

A business visitor to China or Russia is fairly dependent on the interpreter to understand what is going on. In India, he can read five English newspapers with six opinions. No wonder, he feels bewildered. He wonders whether his ability to comprehend bears an inverse correlation with his ability to read!

India is outward-looking, yet cautious about foreign investment
This is not jingoism. There is no general abjuring of things that are foreign. When India won independence, English was not discouraged. In fact, today, every youngster believes that progress and prosperity for him is dependent on learning English. This is so unlike Israel or Indonesia where Hebrew and Bahasa displaced another language. The influence of English and western media, movies, dress and so on are visible everywhere. How, otherwise, could it be that the Times of India is the second largest read English daily in the world? Or that the Economic Times is the third largest read English financial daily in the world? So the roots of India's caution with foreign investment lie elsewhere.

In our economic history, it is noteworthy that right from ancient times until 1900, India was outward looking and had a foreign trade surplus. As late as the 1920s, India was ranked fourth in the world trade with a market share of 2.5 per cent as against under 0.7 per cent today. Its outwardness has allowed it to absorb within itself myriads of cultures brought through invasion and trade. In 1498, when Vasco da Gama sailed into Calicut, he recorded that it was a port quite familiar to Arab and Chinese merchants. In 1608, when English captain William Hawkins carried a letter from King James I to Mughal Emperor Jehangir, he was amazed by the diversity of wares and people. He wrote, "Nothing that England makes at this time is really desired by Indian merchants or officials."

Foreigners rightly worry about religious and ethnic strife in India. We probably have as much of it as western countries had in their corresponding stage of economic development. American philosopher, Martha Nussbaum5, says that human beings are frail and like to surround themselves with people like themselves. They persecute those around them who are different, as the Salem "witch trials" demonstrated. So, these represent the unfortunate aspects of economic development in any nation.

Therefore, the post-independence half-century has been the aberration when we became an inward looking economy – mercifully that too has been broken. I think the late Rajiv Gandhi may well have had a valid point when he mused that the conversion of a mere British trading interest into an empire could have had a deeper impact on the collective psyche of the people, making foreign investment somewhat suspect.

There is excitement in the air today
Till 400 years ago, in all societies, most of the people lived off agriculture, which was done in about the same way for a long time. Many countries have eradicated poverty since then by adopting growth policies and establishing institutions. As Nobel prize winner Douglas North has pointed out, institutions are the "rules of the game" for the players in the economic game, which are the political parties, companies, consumers and so on. It is here that India has had its share of learning because institutions are determined by history, culture and tradition. They include the laws, regulations and their enforcement, along with social norms and belief systems. Unless a nation has established these institutions [= rules of the game] as uniquely suited to itself, in a democratic framework, it is difficult to break out of the poverty cycle. I think India is now at approximately that position.

Vijay Kelkar has pointed out that if you consider the 30 years from 1972 to 2002, per capita GDP grew in the three-decade periods at 1.2 per cent, 3 per cent and 3.9 per cent. At the rate achieved in the 1972-82 period, it would take 57 years to double per capital GDP, at the current rate it would take 18 years – a huge change. Already on a PPP basis, India is the fourth largest economy in the world.

Since deregulation began in 1992-93, as many as 100 million people have been taken out of the poverty. Our imperfect democracy is the foundation for stable policies. I do not blame our democracy, rather I give it the credit for our policies. Since 1991, we have had coalition governments, and there is broad-based support for reforms. The country has established the institutional architecture for infrastructure regulation. There is probably no other developing country which is trying to achieve growth with democracy. I saw a hoarding in Kuala Lumpur which read, "If you bend with the wind, you will bounce back stronger" and depicted a tall tree, swayed by its environment. Indeed, the world is getting up and beginning to notice this. Goldman Sachs has recently published a report, which states that India has the potential to show the fastest growth over the next 30 years. By 2030, India's economy will be third after the US and China.

However, there is one huge assumption underlying all such fanciful projections, i.e. India will continue to maintain policies and develop institutions that are supportive of growth. I believe this will probably happen, because to borrow from John Maynard Keynes, India has exhausted all other alternatives!

Napoleon said of China, "Let China sleep, for when she wakes, she will shake the world." Maybe India too. That is why there is a palpable excitement in the air. For thousands of years, India occupied the top league table in the world of economic growth and world trade. Then, over the last few centuries, we lost it. Maybe over the next 50 years, we could clamber back on the top of the league tables again, not in my lifetime, but God willing, in my son's lifetime – democratically and sustainably. That would truly be a great moment in Indian economic history. There are a billion people who are excited by this possibility. What a moment!

India Unbound by Gurcharan Das
The Flight to India by George Monbiot, Guardian, October 21, 2003
Tough at the Top, Economist, October 25, 2003
Competing for the Future by Gary Hamel and C. K. Prahalad
On Equal Conditions by Martha Nussbaum

Speech given by R Gopalakrishnan to BP Senior Management at Delhi on November 18, 2003.

More Speakers' Forum articles:

Learning to live and living to learn: One must learn to manage oneself well before one can manage others well, says R Gopalakrishnan, executive director, Tata Sons
What injures the hive injures the bee: R Gopalakrishnan, executive director, Tata Sons, shares his views on the three Ps of business: productivity, progress and people, and the importance of managing each well
Making India Inc angry: R Gopalakrishnan dissects the challenge of making India the manufacturer to the world from the managerial viewpoint