Prof Vijay Govindarajan is widely regarded as one of the world's leading experts on strategy and innovation. The Earl C. Daum 1924 Professor of International Business at the Tuck School of Business, Dartmouth, US, worked for several years as the chief innovation consultant in GE. A chartered accountant from Chennai, Prof Govindarajan earned an MBA and a doctorate from Harvard Business School. In this recent interview to The Hindu group of publications, Prof Govindarajan observes that the mobile telephone revolution will change India the way automobiles changed America. Excerpts:
How do you see the evolving global economic scenario?
The world has been fundamentally reset in three important ways. One, growth is shifting from the rich countries to the poor. This has implications for countries, companies and individuals. Two, the government is going to play a much bigger role in economic growth than in the past. It will be a partner, customer, supplier and regulator and this changes the dynamics between companies and governments. The third reset is that business has lost credibility. The reputation of businessmen is at an all time low now. In fact, in a recent poll, businessmen have been rated lower than politicians. That's the context in which we are going to live for the next 10-15 years.
How do you see India in this context?
Actually there's a lot of negative feeling over the India story in the U.S. now, largely due to short-term factors that are not going the right way. I'm very optimistic about India in the medium to long term. If India were a corporation and issuing stock, I'll buy that stock.
There are three fundamental strengths that India has which I believe will help it overcome short term problems and have robust growth in the medium to long term. First, is the demographic strength. When you have a large population that is young, you have many advantages. India's demography will provide a more productive workforce apart from future consumers. So we have a potential for a large consumption base for many years to come.
The second is 100 per cent connectivity. I think mobiles will change India the way automobiles changed America. When automobiles were introduced in America in the early 20th century it fundamentally transformed the U.S. economy. That's what we are going to see in India.
Third is democracy. At a very basic level, there is something inherently attractive about freedom at the individual level. This is what propels humanity forward. We have built institutions which have preserved this concept called democracy.
But we need to tackle three issues head on. The first is corruption. I think the extent, depth and scale of corruption in India is shameful. The second is jobs. The demographic strength should be well deployed. That requires us to really focus on manufacturing because you cannot create so many jobs with IT services. The third is infrastructure.
What is the big debate now in the corporate world in the U.S.?
I think the big focus in American multinationals is ‘how do you grow' in a world which is really going to experience overall slow growth. The glory days of the 1980s and 90s are over where the wind was behind your back so you could just do almost nothing and still you were growing pretty impressively. And people are also beginning to realise that growth is going to come only through innovation. And that innovation agenda has to be in poor countries. Of the 7 billion world population, there are 3 billion who are rich enough for the products which have already been invented. But the 4 billion poor who are non-consumers of just about everything, have to be brought into the consuming base.
You have to innovate what I call under ‘constraints'. It is not so much ‘jugaad'. That word implies somehow we can make products which are cheap with inferior technology. Of course, cost is important, but you have to bring the latest technology. And you have to bring the latest design. So it is the design-led, technology rich, constraint based innovation. This is a very different thinking.
What do you think of the Tata Nano? Is that the kind of innovation you like to see from Indian companies?
Let me back up and talk about two important traps Indian companies should absolutely avoid. The first trap is to somehow think of ‘jugaad' and frugal innovation and therefore dumb-down the technology and make something cheap. That is not what people want. People want technology rich, but also at the right price point.
The second trap Indian companies should avoid is assuming innovation means products. Your job is not over because you come up with an engineering wonder. You have to think of business model innovation. How do you position the product? How do you have a ‘go to market' strategy? All of that is also innovation. These kinds of fundamental innovations take time to produce results. Even if they got the strategy right, Tata Nano would not have been successful even today, because it takes time for such radical innovation to pay off. Think of cell phones. Cell phones, as a technology, as a product appeared in the late 1970s. But as a business model, cell phones became a successful business may be in the late 90s. It takes 20 years for adoption.
What do you think about protectionism rearing its head now?
I think that is one of the biggest risks. I think protectionism is beginning to show its ugly face even in the US. In fact, the three big topics in the US today is jobs, jobs, and jobs. There is not enough jobs in the US. The thinking is that they can create jobs by focussing on America and American consumers. I say, you can create more jobs in the US by being curious about problems in poor countries. I say, let's not focus on outsourcing jobs to India, but innovate for India. If we can innovate for India, it actually creates more jobs for you here therefore I would say the more insular thinking we have, the more protectionist feeling we have, we actually create less jobs in the U.S.
