Unleashing Your Entrepreneurial Potential (Response Books)

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Author: Raghu Nandan

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Preamble

Unleashing Your Entrepreneurial Potential

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Preamble

Unleashing Your Entrepreneurial Potential Raghu Nandan

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Copyright © Raghu Nandan, 2009 All rights reserved. No part of this book may be reproduced or utilised in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage or retrieval system, without permission in writing from the publisher. First published in 2009 by Response Books Business books from SAGE B1/I-1 Mohan Cooperative Industrial Area Mathura Road, New Delhi 110 044, India SAGE Publications Inc 2455 Teller Road Thousand Oaks, California 91320, USA SAGE Publications Ltd 1 Oliver’s Yard, 55 City Road London EC1Y 1SP, United Kingdom SAGE Publications Asia-Pacific Pte Ltd 33 Pekin Street #02-01 Far East Square Singapore 048763 Published by Vivek Mehra for Response Books, typeset in 10/12pt Bookman Old Style by Star Compugraphics Private Limited, Delhi and printed at Chaman Enterprises, New Delhi. Library of Congress Cataloging-in-Publication Data Available

ISBN: 978-81-7829-908-2 (Pb) The SAGE Team: Reema Singhal, P.K. Jayanthan, Sanjeev Kumar Sharma and Trinankur Banerjee

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Dedication

For over 35 years, I lived and worked on industrial development assignments in many developing nations across the world. Though I was based in Kuala Lumpur, I travelled the world over and would often come to India as a part of overseas delegations: not as an Indian but as one of ‘them’. I learnt to see my country and my people as others see them. Indians who moved out of India long ago and have settled in countries like Fiji, Malaysia, East Africa and in the West Indies have been overwhelmingly shopkeepers, small time businessmen and semi skilled workers. It hurt me to see that they did not have much respect for themselves and nobody respected them either. But a few decades ago, things started changing. Their children started getting educated and entering professions like medicine, law and accountancy, in that order. These youngsters changed our image in the eyes of the world and our people started earning solid respect. Today, a local person anywhere would rather go to an Indian doctor or a lawyer, than to anyone else. I have noticed the same in India too. I have realised that the next generation is a breed apart from the earlier generations in talents and aspirations. They are brilliant, inquisitive and challenging, and far more eager to leave their mark on the world. Our youth, with their new found vitality, calibre and the remarkable capacity for sheer backbreaking hard work, are driving astounding changes in the marketplace. As I said, they are demanding solid respect from the world. I am convinced of the following: 1. The new breed, the qualified professionals coming out of our premier institutions would be the relentless driving force of our economy. 2. For most of human history the middle-aged have ruled. Maturity has almost always trumped youth. It was taken for granted that only with years came wisdom, experience, connections and influence. At work, like everywhere else, grey hair, years of loyal service and seniority counted most. Now the tables are turning, may be for good. Older entrepreneurs will not disappear, or even necessarily shrink in numbers, but they will now have to share power with fresh-faced youths. 3. Our new breed of professionals, while running the economy, will make the babus, the bureaucrats, the politicians and the political activists more and more irrelevant. Just like I have seen in Thailand, Taiwan, Korea and, to some extent, Japan, how the relentless onslaught of their powerful economic workhorses

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has almost made the politicians sit back, watch and enjoy the benefits of the economic windfalls. 4. They will also make the hordes of children of politicians—and the children of the friends of politicians—masquerading as entrepreneurs equally irrelevant. Already, the culture of political patronage and the power of black money are disappearing.

I dedicate this book to The New Generation of Our Qualified Professionals

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Contents

Dedication Introduction

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PART 1: Your Personal Skills 1. 2. 3. 4. 5. 6.

The New Face of Our Nation The New Definitions of Entrepreneurship The New Entrepreneur New Soft Skills for Entrepreneurs New Communication Skills for Entrepreneurs Your Attitude to Life and Work

3 11 17 38 51 67

PART 2: Your Intrapreneurial Skills 7. 8. 9. 10. 11.

What is Intrapreneurship? The New Executive Environment New Manufacturing Opportunities Making Intrapreneurship Work The New Meaning of Quality and Finish

81 89 99 110 122

PART 3: You, the Globalised Entrepreneur 12. 13. 14. 15. 16. 17.

Our Rapidly Globalising Nation Having a Global Mindset Understanding the Overseas Indians Understanding the Overseas Chinese Understanding the Koreans Understanding the Japanese

135 161 177 199 211 221

PART 4: New Opportunities in Tourism 18. 19. 20. 21.

What Part 4 is All About New Face of Tourism Handicraft Tourism Heritage Tourism

237 251 258 272

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22 Gastronomic Tourism 23. Festival Tourism

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PART 5: And Finally, the Project Plan 24. 25. 26. 27. 28. 29.

Do Your Homework First Stages of a Project Plan Opportunity Study Pre-feasibility Study Explaining the Financial Tables for Non-financial Executives Sample Financial Tables (Tables 1 to 8)

295 301 306 311 319 325

Appendices 1. 2. 3. 4. 5. 6.

Can India Overtake China? Who’s Got Performance? Indian Business vs. Chinese Global Entrepreneurship Monitor 2005 The Global Competitiveness Report 2006–2007 International Trade Statistics 2000

Index About the Author

332 339 341 342 345 348 351 355

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Introduction

I want to begin by introducing myself and talking about the homework I do before starting to write my books. In doing my homework for this, my second book, I had some surprising interactions with the students coming out of the premier management, engineering, finance, tourism and other professional institutions across the country. These have radically changed my approach to writing this book. Before I started writing my first book, Unleashing India on World Markets, I travelled across the country and met many businessmen and exporters, socially and through various chambers of commerce and trade associations. I found that they, the next generation of Indians, sure, were different from what we were at their age. Fifty years of Independence had indeed created a new breed of entrepreneurs and businessmen, but sadly, there was no quantum leap. In attitudes, business cultures and professional mindsets, they were just about the same as what we were. Now, in researching this book, I interacted with what I thought was my new target readership—our young entrepreneurs and executives, what I can call the third generation. I got the shock of my life when I started doing workshops and seminars in some of our premier management, engineering, finance, tourism and other professional institutions across the country and started informally interacting with the youngsters there. I would make it a practice to join the students for dinner in the college canteen after my presentation and chat with them casually, often without any faculty being present. I saw them; I spoke to them; but I did not recognise them. This new breed of qualified professionals of my country do not have the slightest resemblance to what we were at their age, or, for that matter, the highly westernised youngsters one sees hanging around the malls and disco halls. When I was with the students, I, of course, could not take any notes, but as soon as I got back to my room in the guest house, I would try to recollect every precious word that they said and made copious notes. Then, I would lay awake the rest of the night, filled with thrilling visions of the direction these powerhouses were going to take my country. The youngsters in different institutions in different parts of the country talked about many things, but there was nothing frivolous or casual about what they said. They knew what they were talking about, and spoke with conviction. There is one strong theme that seems to brand many of these youngsters. They have not seen the nation go through bad times, thanks to the economic boom that has been running for nearly their entire memory, and they know that their prospects are brighter

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than for any before them. Plus, their parents are increasingly affluent, employed and, compared with previous generations, more in touch with their children’s interests. So, this new wave of professionals no longer have ‘getting a good job’ as their top priority; or rather, any priority at all. They are confident that come what may, they will make a good living. Instead, I think for the first time in our history, our youth is no longer thinking about themselves and are getting more and more obsessed with giving India a commanding presence on the world markets.

I had started off trying to find out how I should focus my second book and what the youngsters would find interesting, useful and inspiring. Instead, it was I that ended up learning a lot of interesting things and, in the end, it was I that got inspired! Now, it is time to talk specifics. Do sit back and relax and I will tell you what the children told me that I found so amazing and inspiring. In reading this, please remember that the children are not criticising their elders or running anyone down. Instead, they are articulating their plans and dreams about what they need to do to make our presence felt in the world markets and make India a world power. I am thrilled with the fact that, at last, we have a generation of youngsters who feel so strongly about their nation and about what their older generation of businessmen, in cahoots with the politicians, has done to the nation. They see it; they do not like it one bit; and of all the people, these young dynamos would have the guts to do something about it. I am sure they would turn the tables and, as happens in the US, instead of the business magnates running after the netas, it is the netas that would come looking for handouts. Here is what the youngsters said.

Are Our Domestic Firms Internationally Competitive? Remember, the students are looking at this from their own points of view, and there are two delightful aspects to this. First, they feel strongly about how our nation spends enormous amount of money and brainpower to train the cream of the Indian youth in the IITs, IIMs and other toprung institutions. Then, the best of the lot gets plucked up, first by foreign firms and then by foreign joint ventures in India, leaving only the dregs for our domestic firms. Why does our media talk about this with pride? Splashing the huge salary figures on the front pages, they proclaim how good our students are. Concomitantly, they also advertise how awfully non-competitive our domestic firms are. And, by giving the foreigners our best talent, we are making ourselves even more non-competitive! But wait. There is a delightful aspect to this. Students from at least six institutions have told me with pride that they will be quite unlike the earlier generations of subservient cap-in-hand, ji-hazoor type of executives. They know that they are the world’s best

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and do not need to kneel before anyone to beg for a job. They are capable of making the choice for who they want to work for, and demand to be treated with respect, as equals. As a particularly brilliant student remarked, ‘You better treat me like an equal, a partner or you will find me a competitor.’

A Remarkable Show in Davos? So What? I was talking to the students of a management institution in Mumbai about what I saw at the World Economic Forum in Davos. I noticed that there were a few overseas students there. I told them about the remarkable show India put on for the world to see and mentioned that the heartwarming thing about the presentations was that the old fogies and suffocating babudom were missing and it was the youth of the country that actually carried the show. While I was excited, I was also confused when I saw the reactions of the students. I asked myself whether I was missing the point of the whole exercise. Sure, I was delighted about India’s chest thumping declaration of arrival on the world’s stage, and surely I have my own views on the issue, but the youngsters had their own views on this. z z

That evening, after dinner, the students let me have it. They really let me have it! What they said leads me to include appendices 4, 5, and 6 here. Not only that, two overseas students, one from Kenya and the other from St. Lucia in the West Indies, both born to parents of Indian origin, opened my eyes on where we really stand on the world’s stage. I talk of this below.

You will see in Appendix 4 that a study of entrepreneurial activity in various nations conducted every year since 1998, by Babson College, London, The London Business School, The Kauffman Center for Entrepreneurial Leadership and Ernst & Young (UK), say that the Total Entrepreneurial Activity Index averages 9.6 per cent for the whole world and is 3.4 per cent for Asia. Where are we? We are an unbelievable 17.9 per cent! Sorry, I take that back. We are one of the most entrepreneurial countries in the world. One look around myself in India, and I see that there is nothing unbelievable in that. And remember, size has nothing to do with this, as we are talking percentages. So, we are recognised as being highly entrepreneurial, but the Global Competitiveness Index presented in Davos, (Appendix 5) places us at 43 out of 125 economies: we are entrepreneurial but not at all competitive. We just want to stay at home and do not want to step into the wide world to compete! Then again, we are the world’s second biggest nation, but the International Trade Statistics published by World Trade Organization (WTO), (Appendix 6) says that our share of the world trade is a humiliating 0.7 per cent. We stand nowhere in the world when it comes to competition and trade and yet, we are declaring our arrival on the world’s stage! I do not imply that we are not doing well. Surely, we are doing better than the previous years, but many tiny countries, which are a fraction of our size, are doing far better

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in areas that matter. For example, post-war Japan, whose commanding position on the world’s markets gave it a clout grossly out of proportion to its size or wealth, the Asian Tigers and now China are increasingly dominating the world’s markets and are getting in a position to demand respect. They have the clout that the world respects. We already have our outstanding managerial competence which means that we can succeed in any sector anywhere. If I add the unchallenged superiority of our intellects and our inner spiritual strengths to this, we should have had a commanding position on the world economy long ago. But we are far from attaining any commanding position and there is something missing. Moreover, the younger Indian generation is of the opinion that what is missing is our attitude towards entrepreneurship in manufacturing world quality goods and areas like innovative tourism. Allowing the world to come here and exploit our huge markets, and use our superb brain power in Information Technology Research and Development (IT R&D) and outsourcing surely brings us money, but not clout. To this I would add that it is only when our young entrepreneurs lead us to a commanding position in the world’s markets that we can get respect and be influential.

How the World Looks at Us I have lived and worked with people of diverse races across the world and my views on how the developing world looks at us are expressed throughout this book. I have always maintained that to be able to sell to any market away from home, it is essential to have friends there. I would, further, like to add some delightfully refreshing comments of the two foreign students I mentioned earlier. They put forward three points: 1. Indians are only interested in India. The students said that the most remarkable thing about being in India and talking to Indians here is that no one is interested to know about the countries they come from and about their life there. The overwhelming feeling is that India is surrounded on all sides by India and the only other country that matters is the USA, albeit far away. People have no interest or awareness about what is happening in, say, Africa or the Carribbean except, of course, when India is playing cricket there. Sure, many youngsters can give you the personal details of players in the West Indies team, but ask someone to show the place to you on the map and the topic is changed. 2. The perception of the common man-on-the-street in most of the smaller nations is that India is a competitor; most of the East Asian nations are friends; and the West is too high-tech to bother about. This is something I have noticed myself too, because all the developing nations are trying to make and sell low technology, labour intensive items like readymade garments, leather goods and agricultural commodities, and this is where India

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competes with them. By contrast, these nations admire the success of most of the East Asian nations because these have become a part of their daily lives. The common people there use mainly Korean, Japanese and, of course, Chinese products in their everyday life; see most of the roads and bridges being built by Malaysian and Korean contractors; and are familiar with telecom and aviation help being provided by tiny Singapore. The small countries turn to these nations when they are looking for technology, training and equipment for their low technology projects. India does not come into this picture. 3. Where is the international clout India is supposed to have? Putting the aforementioned points together, it is no surprise that when faced with international competitive situations, India finds it has no friends: be it the election of top UN officials or the bidding for sites for future Olympics. When it comes to voting on international platforms, people vote for their friends! This gets extended and these nations prefer to trade with their friends too. So, the list goes right down to selling a host of daily-use items like hardware, sewing machines and bicycle spare parts where again India is losing its markets to small nations from Fiji to Malaysia to Kenya and all the way to the West Indies.

Our Inward Looking Attitude Listening to the young people express themselves was both exciting and inspiring. They said, ‘Sure we are the world’s best, but who is there to assert the superiority of our nation over the wide world, when all that our big firms want to do is to look inwards?’ The young generation feels very strongly about this and soundly condemns the Indian corporate sector for its lack of competitive spirit. Strong words indeed, but notice two things. One, you read earlier how our firms are meekly giving away the cream of our expensively trained talent to foreigners. But there is also the fact that a growing number of young professionals coming out of premier institutions are themselves rebelling against big Indian companies for their entirely inward looking attitudes. They are increasingly choosing not to work for such large firms because of the strong corporate cultures that do not suit their personal beliefs or their character. They do not like the degree of undeserved economic and political power that these corporations wield merely by political manipulation. To support this, the students first showed me a detailed analysis of the 50 top corporate houses of India, excluding the recent IT and the newly emerging high-tech firms. It seems that none of them, not one of the large corporate houses, is a net foreign exchange earner! Huh? Then they compare this with the large business houses in every successful nation where the large corporations are the vanguards of overseas market penetration. A householder in Kenya, who uses a National Iron or a Sony Walkman, is happy with it and his respect for Japan increases. At our side, it is a fact that we have always been inward looking and have never tried to aggressively capture foreign markets. However, it is also true that this is now

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changing and there are some notable exceptions. But by and large, it is the world that is getting unleashed into India and not the other way around. The idea behind the opening up of our markets to Multinational Companies (MNCs) was to upgrade our performance by exposing us to open competition: It was an excellent concept, but it did not work. There are a number of case studies that show that our firms either meekly stepped away from any sector where an MNC entered or joined them and helped them produce consumer goods for domestic markets. There is not a single instance of an Indian firm having held its own against an MNC on our own home turf. Moreover, the world finds it immensely attractive to come here and use our superb brain power for IT R&D and back-office work. American business is not just shifting research work because Indian brains are young, cheap and plentiful. Our engineers combine skills, mastery of the latest software tools, a knack for complex mathematical algorithms and fluency in new multimedia technologies that surpasses those of their American counterparts. As Cisco’s Scheinman puts it: ‘We came to India for the costs, we stayed for the quality, and we’re now investing for the innovation.’ z

This has always been the case with us. It is only the others, the outsiders that have been able to cash in on our unique skills and talents.

The world comes here, tells us what to do and we do it superbly and inexpensively: They save money and we make plenty of dollars. But, this, in no way, makes us superior in the eyes of the world. The youngsters are particularly bitter about the top priority strategies of some of the largest and the most successful firms who are shouting from the rooftops about their grandiose plans to enter the retail sector and, for example, buy out entire cinema chains. They are planning massive investments and even boast of the foreign retailers that plan to join hands with them. Of course, there is no denying that we need to upgrade and organise our retail and entertainment sectors, and this is good for the shareholders and their image in the country, but is this a step in the right direction to improve our presence in the world markets? The students were keen to know what percentage of the goods, apart from clothing and leather goods, sold in these massive malls were made in India by Indian companies?

Who has Read Chanakya (Kautilya)? I felt stunned, while talking to these youngsters. So would you have been, had you been there. You will get what I mean when I take you on a trip to the past, via the northernmost part of India. I was saving the best for the last. I particularly remember a very fair and petite student who was doing her MBA from a premier institution in Delhi. She looked Chinese, and said that she was from the northern most part of India: Ladakh. I found her as charming as intelligent. It was

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much later that I found out that she was the grand-daughter of my colleague and close friend, Dr Tashi Tongyal, who you will read about in Chapter 11. Talk of coincidences! She told us that being snow-bound for most part of the year with no TV, and so on, the educated youngsters in Leh get into the habit of reading. I was expecting her to be like the most of her generation and say that she had read everything that Sydney Sheldon or Fredrick Forsythe had written, but she surprised me by saying that she had read all the translations of the works of the great sage Chanakya. She, also added, that she could read Kanji, and had read the transcripts of the copious notes taken by his Chinese disciples. These disciples were mostly interested in Chanakya’s discourses on entrepreneurship and competition, and so took notes only on these. This again came as a surprise to me, since the great sage, also known as Kautilya, is known more for his work on statecraft and statesmanship than on entrepreneurship. I myself had never thought of the sage in this light. All through my professional life, my interests lay in the promotion of manufacturing and entrepreneurship and I have not been the least interested in ancient Indian philosophy of any kind. Seeing my blank expression the young lady went on to explain the life and works of this sage of the 3rd century BC and I was amazed to find that she did not merely quote him but had incisive comments and analysis to give. Being a management student, she had been particularly interested in the great sage’s thoughts on entrepreneurship: It showed him in a completely new and different light. That night, I sat till the morning, making notes of what we had discussed. I was getting more and more impressed with the calibre of the young professionals my country is now producing: An MBA student presenting an in-depth analysis of the thoughts of Chanakya! She gave me many quotations, but I made separate copies of two quotations I found particularly interesting. I had them engraved, and they are framed above my desk at home. The quotations are in the form of discourses to the King. Here is the first one: My Lord, every living being, be it a lion in the forest, a fish in the river or a bird in the sky, has been charged with the primary task of feeding itself. I may call this the task of earning one’s own living. Man is a superior being and is charged with some superior responsibilities. Of course, the most sacred task for any man is to earn his living, but he has been charged with some other sacred tasks too. He has to bring up and protect his family. Then he is charged with the sacred task of building, strengthening and protecting first the society he lives in and then his state. Man can only do this by producing more than he himself consumes. Not only this, he has to tirelessly strive to make himself better and better at whatever he does. This brings enduring prosperity and prosperity brings strength and peace. If the state is weak and withers away, no citizen can feel secure and at peace.

Remember this was said more than two thousand years ago! Of course, the young professionals of my country are living up to what one of our greatest minds said, but it would surprise you to know that most of the Asian nations have based their business cultures on very similar thoughts of a later sage, Confucius of China. You will read about this in Chapter 5, and a more detailed discussion in Part 3.

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I will close now, by giving you the other quotation that I have had engraved and framed. My Lord, your humble servant would like to pose a question to this court: ‘Loving the whole world and being kind to everyone’ are of course, very laudable thoughts but then, how do you compete?

These are our children to whom I fondly dedicate this book.

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Part 1 Your Personal Skills

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1 The New Face of Our Nation

Before we talk about the personal aspects of entrepreneurship, we need to have a quick look at our rapidly changing nation. This is because the skills needed by the next generation to succeed as entrepreneurs, do not have the remotest similarity to the ones that made the earlier generations successful. Here are some notes to lay the foundation for what is coming in this chapter: 1. In this book I talk to three kinds of youngsters: z z z

Young professionals wanting to go on their own. Children from business families who want to take their family business in a new direction of growth. Young entry level executives in the fast changing corporate world.

2. My focus is to help you develop your entrepreneurial skills. 3. This is not a book about our performance on the economic front, globalisation, multinational firms or direct foreign investment. Whatever is discussed on these and other related topics is purely in the context of the main subject. 4. This book consists of personal experiences. You would not find here, any text book element, or any of the enormous mass of material one reads on the Internet. I have read a lot of this and, I assume, so have you. In the appendices, however, I have included useful downloaded reference material indicating their respective sources. 5. I will often be taking a hard look at ourselves from various angles and do some plain speaking. There is no other way to prepare our youngsters for the very cutthroat world of competition. I am neither running down my team, nor am I praising the opposing one. But when, despite the superior calibre of individual

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players, our team loses matches, we do indeed need to talk about where we are going wrong.

The New Face of Our Nation The international media is all hyped about the two emerging entities on the world scene—India and China. But. Read carefully what the world is saying. The major corporations say that they are keen to do business with China and in India. They are making it clear that they will treat China as a partner but will treat India merely as a market. Yesterday, I would not have liked the sound of it. But today, my nation is not the same. We have changed and are increasing the pace of change. How? I feel very strongly about this and have addressed this at considerable length in my dedication. Let me quickly summarise what I said about who is taking us forward: I see a bus. I see our qualified youngsters, our new generation of professionals, firmly in the driving seat. They are Indian to the core and I see them taking India forward towards a commanding position on the world economy. I also see many passengers on this bus. They want to go ahead and get somewhere but need to be driven. These are the sharp, brainy, enlightened, but highly westernised youngsters. Sure, if you see them tomorrow, they would have gone ahead. And then, we have the bystanders, the roadside spectators who will see the youngsters moving ahead and wave at them. These people, our politicians, the hordes of political activists, and the black-money class of our businessmen, are happy to be where they are and are not at all interested to go anywhere. But yes, they can indeed ‘participate’ by throwing stones and putting barriers on the road to our progress.

In this book as well as in my previous one, Unleashing India on World Markets, there is neither any mention of government policies, nor a discussion on the role of the state in the economy. The reason is simple: The days of the all powerful bureaucrats and politicians are over. z

They are powerful only in a closed, inward looking economy. The more our entrepreneurs venture out on to the world market, the more irrelevant these fellows are becoming.

Do look around yourself: How much role did our politicians play in our resounding success in the IT, R&D, Bio-tech, Pharma and Auto-component manufacturing sectors? How much can our bureaucrats interfere? Except, of course, to create nuisance by holding back resources for infrastructure. Also, I am convinced that it is not so much the government policies as the attitude of the businessmen and the people that takes the country forward. You will see in

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Part 3 that similar closed door, protectionist, policies that we had in India produced diametrically opposite results in Korea and Japan.

The Power of Social Stigma This is an unusual topic for discussion in a book on entrepreneurship. Do bear with me and you will agree that this is by far the most important concept that we need to understand. In simple words, the power of social stigma means, when a society solidly condemns something, the people just do not do it. Tragically, in India, the reverse is true. We do more and more of what our society does not mind, and this has played its part in the mess that we are in. I have never read or heard this term being used by our media. I will explain by giving an easy to understand example from our daily life. Every society is built upon what people learn from their childhood—things they, as children see their elders doing. This is what gets embedded into our psyche and this is what forms the basis of our nation’s character and attitudes. Remember, we do not learn much from what our parents, elders and teachers tell us. All this goes in from one ear and out from the other because we hear them telling us one thing but doing quite the reverse. What do our children see their elders doing? On the positive side, they see us rigorously following certain religious traditions, they see our moral behaviour, and accordingly imitate us. But, on the negative side, for example, in Punjab and most of North India, they see the way the elders never ever trust each other; they hear a mother talk nothing but nasty things about her in-laws; and they see how some of the elders bring cash home in paper bags. They see all this and it becomes a part of their mental make-up too. So what happens? Well, two things: On the positive side, we see the moral behaviour of our elders and we grow up with strong moral character. Moral character, is what we Indians have in our blood. This is true across the length and breadth of the nation, irrespective of caste, religion or social status, and sure, nowadays there is a decline, but by and large, this is true today as it was yesterday. For example, if a teenage unmarried girl from a middle class family in a small town gets pregnant, it no longer remains a private issue concerning the family. Instantly, the entire family becomes the subject of ridicule, the younger brothers would hesitate going to school and the father may even consider committing suicide, not to mention the horrors that are brought down upon the poor girl. This is the meaning of social stigma. If you do something against well accepted social norms, the entire power of social stigma is brought down on you. Now, take the same case anywhere in the West. The children in the West are brought up on very different moral values. They routinely see their friends’ sisters getting pregnant, they see and hear their parents say, ‘Ho hum, what is new?’ There is no social condemnation and no one bothers about teenage pregnancies.

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We will now come to the topic of the negative aspect of our daily life, I said earlier that every society is built upon what the children learn from childhood and what forms the basis of their characters and attitudes are things they see the elders do. How can we expect our children to grow up and respect us when they saw in their childhood, that we did not respect our parents? What if a teenager knows that the junior excise inspector in the next house has property worth crores? Or, he/she knows an uncle who has always been a good-for-nothing crook but has joined politics, got elected, and is now suddenly living very well? We grow up never having heard anyone condemn all this. These are generalisations but I think you have got my point: social stigma is a very powerful weapon, but it works either way. If a Marwari cheats and breaks up the family business, entire society comes down on him like a ton of bricks. The children grow up seeing this and it gets embedded into their psyche. It is the same for a traditional South Indian family—children see how the elders treat their elders and consequently, respect for elders becomes a part of their society. Their family businesses are built on this foundation. On the other hand, children of the Punjabi families see that internal rifts, bickerings and dishonesty with one’s own people are the norms of the day. They grow up seeing that the children of the wealthy businessman across the street, who died last year, have split and ruined the business. Or, an uncle has cheated his brothers and run away to the US. So, how can anyone dare to tell them that breaking up a family business is bad? As I said earlier, everyone makes it clear that he will trust no one and that he expects no one to trust him, siblings included. Social stigma is a very powerful weapon indeed, but it works either way. On the positive side, it is responsible for a teenager getting pregnant being a comparatively rare occurrence in India. On the negative side, we are unique in the world when we repeatedly split up political parties because everyone wants to be the boss and make the most money. Our society says that this is perfectly acceptable and respectable, and we merrily go on doing this. We can only have coalitions as merger means bosses giving up their status. And, a politician getting filthy rich is only a part of the game. It is OK, there is no point blaming the fellow. Ever heard of any party in the UK, US or Japan splitting? The reason is that while children in these nations, indeed, grow up with very different moral values, they never see an all powerful Margaret Thatcher being thrown out of her job and starting a new party. What they never see is a junior excise inspector in the next house, strutting around showing off property worth millions. And so on. I have made three points above: 1. Family traditions of a particular community are not built overnight. 2. For anyone to learn from them, it will take at least a generation. 3. But it is imperative that we learn as we are no longer merely competing with each other in India. Others are here, ready to step in and take over whatever we cannot do.

Perhaps, you have got my point, but I can see you asking yourself: what does all this have to do with entrepreneurship and our competing with the world market? Read on.


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Our Competitors are Brought up on a very Different Diet Social stigma is one of the most powerful tools responsible for the mind-boggling success of the Asian nations, right up to Japan. People of Chinese origin anywhere in Asia, as well the Koreans and the Japanese, are brought up from childhood on the teachings of the great sage K’ung Fu Tzu (Confucius) (551–479 BC). He was a famous sage and social philosopher of China whose teachings deeply influenced East Asia for 20 centuries. z

If you have not read about him, I suggest that you do. There are plenty of references on the net.

The ‘Teachings of Confucius’ is a Chinese ethical and philosophical system and is a complex system of moral, social and political thought. The cultures most strongly influenced by Confucianism include those of China, Japan, Korea and Vietnam, as well as various territories (including Singapore, Hong Kong, Taiwan and Macau) settled predominantly by Chinese people. His teachings are completely non-religious. He teaches the need for society to organise itself and for people to form strong economic and social bonds at family, clan, village and community levels. He preaches that you must join hands and work together to defeat the outsiders. And, this is driven deep into the psyche of the common man. If you do not do this, the society condemns you. As simple as that! I need to repeat what I said above. He preaches that you must work together to defeat the outsiders. And, outsiders nowadays mean your competitors. z

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Just think for a moment. All successful nations are like that. The French love the French and hate everybody else. Same is the case with the Germans. This is exactly the reverse of what we do. We love the whole world and hate our own people. How can anyone compete against deep-rooted ideology? How can you compete against someone who is a fanatic about, not personal growth, but the growth of his firm, his community and his nation?

The followers of the great sage among the modern generation, have taken the teachings a step further and believe that permanently destroying your enemy is better than winning the battle. Japan and Korea have captured the world markets by a determined policy of creating and producing products that no one can compete against, in price or quality. Their first objective is to kill the competition before it is born. Now, China is determined to become the sole factory in the world by relentlessly upgrading the design, finish and variety of consumer goods at a price that no one can match. This is not anyone’s individual strategy. This is in their blood. Their people and their society, demand that their entrepreneurs and their businessmen should do this. If they do not, the entire society condemns them. This is the power of social stigma.

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I need to make it clear that all of this has nothing to do with personal morals, business honesty, ethics and human kindness. I am not even remotely suggesting that they are not corrupt, and so on. But they have their own code of ethics that they rigidly follow. This is the reason why our people find it difficult to understand the Asians and their code of ethics. This is also the reason why our people find the Japanese and the Korean bosses here, very difficult to work for. Since you are not one of them, they can be ruthless to the point of being cruel. You will read a number of examples in this book where I have described the amazing success of entrepreneurial ventures where a number of different small firms join hands and work for the common good without any sort of a written agreement. The power of social stigma makes sure that you do not cheat one of your own. Cheating others is, however, a part of the game. Before going on to the next point, I will point this out to you in chapter 5 where I have asked four questions based on the teachings of the great sage. I know that all of us would give very different answers.

Does Anyone Talk to us about this? Whereever I go in India, read the Indian newspapers, talk to the professional students and meet the people in social gatherings, I get confused. I cannot understand why my entire country is so overwhelmingly westward looking. It is almost as if nothing else exists. Also, the exposure that the average young Indian professionals, the MBA and engineering graduates, get; be it a text book or a book on popular management or light reading in our newsmagazines or TV programmes, everything is again slanted towards the West. So is the case with our entrepreneurial skills. These have always had enormous influences from the West. India has always been known as one of the easiest countries for Westerners to adapt to and to be comfortable in. And that’s the reason the way things are done here and all our institutions are of the West, not the East. So, now we thoroughly know and understand the West: We know how they live and work; how they run their business and their attitude towards work; in short we have a deep insight into their entire mindset. We can’t necessarily say all those things are bad, but the strongest competitive challenges are now coming from the East. It is the East that is ruthlessly capturing the Indian, and indeed, the world’s markets. Yet, our young people are taught nothing of the Eastern mindset. Do we understand their mindset? Does anyone talk about this? Surely, something is not right. I do not know the answer to that one, but I do know that the West cannot teach us how to take India to a commanding position in the world markets. We need to look towards the East and understand their mindset. There is only one way we can fight them: by understanding them and then confronting them with their own techniques. Like the Japanese did, when they learnt marketing from the Americans and then went and conquered their markets.


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Menial vs Skilled Jobs Late Mr S.L. Kirloskar wrote: Whether India will be a leading player in the coming years will depend to a large extent on how fast we increase the scope of our industrial activities and sell quality goods abroad….Charity never gave anyone self-respect. Well paying jobs do. And industry alone can create them on a mass scale. (Kirloskar 1982)

What the great Indian industrialist meant by ‘charity’ were the demeaning handouts we give to our rural people in the form of various types of employment guarantee schemes: paying people for doing nothing. I do not pretend to be an economist or a social scientist, but I fully agree with Mr Kirloskar in that, by simply creating more menial jobs cannot take us forward, this creates more problems than it solves. Apart from initiating undesirable urbanisation, the menial, unskilled or low paid workers become a burden on the state and society. While not making any contribution to the economy at all, these workers need subsidisation of their health, housing, sanitation, education, kerosene and ration benefits, and, they need it lifelong! The dictum of many successful developing nations has been ‘not more but better jobs.’ No other country in Asia, not even high-flying service hubs such as Hong Kong and Singapore, has climbed out of poverty or lower-middle-income status without a manufacturing boom. Even in India, despite manufacturing’s low profile, it contributes a much higher share of GDP (16 per cent ) than IT does; it is the source of 53 per cent of exports (compared with 27 per cent from services); and it is the destination for four-fifths of foreign investment. In industry as in services, India has produced world beaters: in pharmaceuticals, steel (where Tata Steel is the world’s lowest-cost producer), in automotive components, precision forgings and now, in bio-technology. On the other side of the coin, despite manufacturing’s remarkable success, the number of jobs in our ‘organised sector’, that is, firms employing more than 10 people, have hardly changed since 1991. It is just above 6 million, out of a total of about 48 million in manufacturing as a whole. The needs of the Indian economy have changed beyond recognition. I seek to establish that now we do not merely need enterprising people who set up trading organisations to create wealth. The need is less for labour-intensive projects and more for upgradation of employment levels. We need entrepreneurs who create jobs—professional, well paying, managerial jobs. z

So, in this book, we will discuss entrepreneurship only in the context of creation of professional jobs: jobs mainly in the manufacturing and tourism sectors.

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The Way Ahead I believe that for my country to become an advanced and globally competitive economy within the next decade, we must have manufacturing and services as our twin engines of growth. This strategy would help diversify our dependence beyond any single industry, sector or market, thereby reducing vulnerability and providing a broader economic base. Manufacturing must become an integral component of India’s new outward looking economy, with capabilities in the entire manufacturing value chain beyond production, from research and development and design to marketing and sales. We are weak in this area because our manufacturing capacity is mostly in the small and medium scale sectors. Unless we try to upgrade ourselves, we can make no progress. Having said that, it should be noted that manufacturing can never become the base for India’s growing economy, if India remains purely a production base. This is already changing. We are on the way to positioning ourselves as a critical hub where MNCs and our own firms use India as a base, both for the manufacture of high-tech highvalue-added products and to provide manufacturing related services to companies all over Australasia. We are already moving upstream in the value chain of R&D and design in some sectors like pharmaceuticals, bio-technology and automobile components, and are encouraging overseas firms to have their regional operational headquarters here.

Reference Kirloskar, S.L. 1982. Cactus and Roses: An Autobiography. Pune: C.G. Phadke.

Preamble

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2 The New Definitions of Entrepreneurship

The Approach Entrepreneurship is a highly context-sensitive activity and it can mean different things in different circumstances. So, there are many text book definitions. Because the focus of this book is on entrepreneurial skills rather than on the vast subject of entrepreneurship itself, I am starting with a very limited discussion on the new definitions of entrepreneurship in the context of rapidly globalising India. The idea is to lay the foundation for what has to follow in the subsequent chapters, as well as to explain the approach I am taking to the subject. The needs of the Indian economy have changed beyond recognition. I seek to establish that now we do not need only enterprising people who set up trading organisations to create wealth. The need is less for labour-intensive projects and more for upgradation of employment levels.We need entrepreneurs who create jobs—professional, well paying, managerial jobs. z

So, in this book, we will discuss entrepreneurship only in the context of creation of professional jobs: jobs mainly in the manufacturing and tourism sectors. The entire focus of this book is to help motivate and train our youth to go out and create, not menial or unskilled, but professional jobs.

Three points: 1. I have noticed that before the management, engineering and tourism students come to my workshops and seminars on entrepreneurship, they have already

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surfed the Internet and familiarised themselves with the subject. I think I can safely assume this for my readers too, so I will try not to repeat what you are likely to have read. 2. I said earlier that there are many kinds of entrepreneurial activities and it is clear that the entrepreneurial skills and training needed by the rural self-help groups in India are nothing like the skills needed to promote, say, a tourist resort. These again are markedly different from the entrepreneurial skills and training needed for the promotion and management of IT, software and sectors like BPOs, and so on. Any discussion on these is outside the scope of this book. 3. I have already said that entrepreneurship should only be taken to mean creation of professional jobs, so almost all kinds of trading activities, such as the setting up of retail and wholesale outlets, and service activities, apart from tourism, are also outside the scope of this book.

Entrepreneurship in the Indian Context Everybody says we need to create more entrepreneurs to keep the economy rolling. Everybody also says that finding them won’t be easy because we are a conservative-minded nation, but I do not agree. So let us begin by being clear about what we mean by the term, in the Indian context. There is no general definition for the word, as the term has come into common usage in India only a few decades ago. It has been used in a large variety of ways and has been defined in different ways by different people. As far as the classic text book definitions are concerned, they are almost all of American origin. The term entrepreneur applies to someone who establishes a new entity to offer a new or existing product or service into a new or existing market. These are people who, based on a strong feeling about a market opportunity, are willing to accept a high level of personal professional or financial risk to pursue that opportunity. These people do so without any regard to resources currently controlled. In other words, if they do not have adequate funds on their own, they still push ahead, being confident of being able to raise the money. Some of the classic text book definitions used in India are: z z z

Entrepreneurship is the process of creating wealth by bringing together a unique package of resources to exploit an opportunity. Entrepreneurship is the practice of starting new organisations, particularly new businesses generally in response to identified opportunities. Entrepreneurship is about risk-taking, as many new businesses fail.

In the context of the new emerging India, I would condense and modify the above to say that: Entrepreneurship is less about creating wealth than about creating new organisations that generate upscale employment. But of course, any successful organisation is sure to

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create wealth in the long-term. As regards risk-taking, surely there would be risks, but a good entrepreneur does his homework so thoroughly that the risk is minimised. The Japanese are notorious for not taking risks, and yet they are highly entrepreneurial. This is because anybody and everybody connected with the idea is included in the discussion process and every idea or proposal is taken apart and discussed threadbare. This takes time, but prevents heartbreaks.

In other words, an entrepreneur is a risk-taker who enjoys the work he is doing and has a fully integrated personal and professional life. Entrepreneurs are not only representatives of their company, they are the company. They are the image; they possess the skills and knowledge and in the last analysis, they are the limits of what the company is capable of doing.

The Motives The answer to the question of why should one become an entrepreneur in India, depends on the person we are talking about. In the context of our discussions, he/she could be any of the following: (a) Someone who wants to do something on his/her own, or (b) Someone from a prosperous family who wants to take the family business in a new direction, or (c) A young executive in an intrapreneurial organisation. Broadly speaking there is entrepreneurship that comes by way of necessity and there is entrepreneurship that comes from opportunity. Till the last decade, being entrepreneurial in India simply meant starting any business and the reasoning given invariably was that good job opportunities were few and far between. So that meant entrepreneurship by necessity—start a business if there was nothing else to do so. Now, by raising the standard of living and providing many jobs, India has raised the bar to the point where necessity-based entrepreneurship has been virtually wiped out: Nobody needs to set up an industry simply because there is nothing else to do. Is that a bad thing? Maybe, maybe not! We will talk about this in Part 2. Talking of entrepreneurship that comes from opportunity, if we look at wealthy countries like the US, we see many instances of entrepreneurship that is not driven by necessity, in all sectors. We see young people detecting opportunity in simple concepts like a coffee house or a video store and build billion dollar empires like Starbucks and Blockbuster. Look at Hong Kong (also Singapore) where you have more entrepreneurs per square foot than almost any other country in the world. Yes, all over the world, there are people who have good employment opportunities, yet are seeking that dream and willing to take a risk. Surely, there are an increasing number of people in India who have other avenues open for them, but choose entrepreneurship for the challenges, the rewards and maybe

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the glamour. But the irony is that most of them have been enamoured of the high profile IT and the BPO sectors.

Indian Entrepreneurial Mindset I would have like to say that things are changing here too, and that there are an increasing number of young people who fit in the first two categories I mentioned above, that is, of those who want to do something on their own, or those who want to take the family business in a new direction. But that does not seem to be happening. This may sound strange but it is true. I know it from my own experience. When I go into professional institutions, I ask the MBA or postgraduate Engineering students what they want to do when they leave college. The unanimous reply is that they what to join an MNC, failing which, they will work for a Lala company1 for some time and then do something on their own. When I press them into telling me what they would do when on their own, the reply is, ‘Get into marketing, or consultancy, or some good agencies and set up a trading firm,’ in that order. This seems to be the meaning of ‘seeking that dream and willing to take a risk’, and this seems to be the meaning of entrepreneurship to us. The very attitude of an entrepreneur reflects that of a person who is willing to put his career and financial security on the line and take risks in the name of an idea, spending time as well as money on an uncertain venture. Do we have such people? Why are our talented young people moving away from entrepreneurship to seeking employment with MNCs? For an answer, we need to ask ourselves if there are any common traits among entrepreneurs in India. Yes, there are three. z

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One, almost every single successful entrepreneur seems to have skipped school. Probably they never fitted into our school system, and maybe they ended up as entrepreneurs because they escaped the brainwashing that goes on in our schools and colleges that eventually makes us job oriented. Two, our style of entrepreneurship is very much the lone ranger, I-am-the-boss kinds. Nobody works with anybody and no one trusts anyone. I will buy from you or sell to you but never work with you! Though we have produced many great workers and managers, an employee’s ability to think independently has been a disqualification. Three, the mentality of why should one does something that someone else is willing to do for one? India has always been known as one of the easiest countries for Westerners to adapt to and to be comfortable in. ‘Let them come here and set up the larger manufacturing units and we will take agencies for what they make.’

It is to the credit of the next generation that in the last few years the profile and recognition of entrepreneurs has been raised. Ten years ago, the word ‘entrepreneur’ was not even in our vocabulary. We only had ‘businessmen.’ And they were generally thought

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of as sleazy and money-grubbing, concerned more with avoiding the taxman than with improving quality and finish of their products. Further, our entrepreneurial skills have always been enormously influenced by the West. And that’s the reason why things are done here the way they are and why all our institutions are biased towards the West, not the East. We can not necessarily say all those things are bad, but the strongest competitive challenges are now coming from the East, and our young people are taught nothing about the Eastern mindset. A question needs to be asked. How long is it going to take India to create an entrepreneurial mindset? To some extent, it is already happening but it will probably take a full generation to do so completely. We need more role models, more success stories and critical mass. It’s not just about finding and grooming more entrepreneurs. In the new India, an entrepreneur’s first dozen or so employees really have to be treated as co-entrepreneurs, in a way. They may not take the full risk, but as members of a small and young team, they need to have a slightly different mindset. If they think that everything will be neatly laid out for them in terms of what they should be doing, it won’t work. So how do you find the people who will work for you? This is a tough one. You can’t hire people for whom you will need to do the thinking. You have to encourage diversity and hire people with some ability to execute independently. Here again, things are looking up and graduates from some of the better institutions are showing greater ability to think out of the box. They have been exposed to alternative ways of thinking and they don’t take everything as exactly what it is said to be; they tend to look at things from a different point of view. These are the people that will take India forward!

The New India I lived and worked outside India for over 35 years, during which I visited her many a time. I have started looking at my country from an outsider’s view-point and thus, am taking a unique and different approach to the subject. I would say that six critical aspects have changed: The new entrepreneurs have changed. The next generation of India is a breed apart from the earlier generations, regarding talent and the aspirations. They are brilliant, inquisitive and challenging, and far more eager to leave their mark on the world. Our youth, with their newfound vitality, calibre and the remarkable capacity for sheer backbreaking hard work, are the driving forces behind the astounding changes in the marketplace. They resent orders—they need directions. The rules of competition have changed. Our young entrepreneurs are no longer merely competing with each other. They know they do not have the protection of the license raj. They know that rampant globalisation has brought all kinds of people into all the aspects of Indian economy. The very meaning of entrepreneurship has changed. The days of making cheap imitations year after year are gone. Now you need to relentlessly upgrade, improve and

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innovate, repeating the process continuously. The tragedy is that the teaching of industrial product design, the most critical subject for this, is disappearing from the Indian academic curricula. The markets have changed. We have had astonishing changes in recent years, making the older concept of entrepreneurship meaningless. The attitude of the Indian corporate world has changed. Indian companies now consider training their junior executives in entrepreneurship, an essential asset, rather than considering it as a risk of the executive leaving and starting something on his own after the training. Our position on the world market has changed. Our youth have realised that merely performing well on the world markets is not enough if the others are performing better. Everything boils down to competition.

A Quick Summation z

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Rule 1: ‘ You do not have to do it alone.’ Forget our centuries-old mindset. It is good to reach out, to ask for help, to outsource your mundane activities and to team up with like minded people and work with them. You will read more about this in Chapter 5. Rule 2: ‘ The pie is big enough for everyone.’ Establish alliances and partnership with complimenting organisations and institutions. The most effective marketing strategy is based on referrals from partnerships and alliances. Learn from what I say of the overseas Chinese in Chapter 15. Rule 3: ‘A five-year business plan is a box you don’t want to live in.’ If you think you need someone else’s money to start with, you will be marching to the beat of someone else’s drum. Learn from what I say in Part 5 about raising money. Rule 4: ‘Recognise your successes.’ Success comes from your personal assessment and acceptance of accomplishments. You must make time to sit back and enjoy what you are doing and what you have accomplished. Even the small things like making your first presentation or public speech. There is more for you, on this, in Chapter 4.

Note 1.

A local, individually-controlled company.

Preamble

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3 The New Entrepreneur

While talking about our next generation, I have a unique advantage. My professional work over the last 35 years has been such that I have been able to live and work with executives and entrepreneurs in India as well as in many developing nations all across the world. I have seen both grow in their own ways, and I am looking forward to talking about this here. During my frequent visits to India in the last few years, I have been overwhelmed by the collective euphoria over our huge international success, particularly in the software field. Our children in the US and our software companies here are glowing examples of what my country is capable of. People get emotional while talking about how, at last, we are able to teach the world a lesson. Of course, I too feel proud too when I look at our next generation, but when I go to other countries in Asia and look at the people that we are competing with, I feel equally strongly about what we easily can be. That, my readers, is the focus of this chapter: We take a hard look at our youngsters who are doing such a remarkable job of taking India forward, and then we also take an even harder look at the youngsters of the Asian Tigers— Malaysia, Singapore, Taiwan and Korea, who have taken their countries further. It has always been my principle in life to try to understand the mindset, the way of life and the work ethics of my competitors and then try to hit them with their own techniques. We will do the same here.

I am dividing this chapter in four sections: Section I:

First we will take a hard look at the new breed of our entrepreneurs and executives.

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Section II: I will take you on a very interesting trip to the US, the main battleground of international competition. Section III: Then, we will take a hard look at the entrepreneurs and executives of the Asian Tigers. Section IV: Lastly, for the benefit of my young readers, I will spell out some useful ‘mantras’ to help them in their professional lives.

I: The New Breed of Our Entrepreneurs The Youngsters who are Taking India Forward When I am in India these days, I look around myself and see the youth of our country. I hardly recognise them: They do not have the slightest resemblance to what we were at their age. Things are indeed looking up and graduates from some of the better institutions are showing greater ability to think out of the box. They are getting exposed to alternative ways of thinking and they don’t take everything exactly as what it’s said to be; they tend to look at things and analyse them from all points of view. I can see that the next generation of India is also a breed apart from the earlier generations, with regard to talent and aspirations. They are brilliant, inquisitive and challenging, and far more eager to leave their mark on the world. Our youth, with their newfound vitality, calibre and the remarkable capacity for sheer back-breaking hard work, are driving the astounding changes in the marketplace. Indian society is going through rapid technological evolution and this is one of the reasons that the relationship between the young and old is becoming a dialogue, rather than a lesson. It should be noted that now parents have little to offer their children in terms of professional guidance because their knowledge is no longer relevant. Adults don’t have all the answers any more and are not in a position to tell young people what to do. This is affecting the traditional role of authority in a delightful way because it brings generations closer together: The young cannot rebel against helplessness.

Rebelling against Big Companies But there is one strong theme that seems to unify many youngsters. As I said in the beginning of this book, our new breed of professionals has, no longer, ‘getting a good job’ as their top priority; or rather, any priority. A growing number of young professionals are rebelling against big companies. They object to the undeserved economic and political power these corporations wield. On a personal level, they are increasingly choosing not to work for such large firms that have strong corporate cultures that do not suit their personal beliefs or their character. This might seem odd, at first glance. It is also a fact, that our companies are becoming more youthful and are offering more responsibility and opportunity to the young, thus,

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allowing more scope for youthful individualism. So, what is the problem? The reality may be that although traditional firms are changing for the better, attractive alternatives are popping up even faster. Thanks to the technology boom, the opportunities to work for a new enterprise, or to start one yourself, have multiplied enormously. The mindset of our budding young executives has undergone a remarkable change. They no longer have to make safe bets by sticking with big firms to protect their careers. More and more young people are choosing to turn away from the corporate world to take their chances with smaller, fastergrowing firms where they have the opportunity to do more, have more fun, and give their personality free rein. As such entrepreneurial firms grow in number; the pressure for established firms to encourage their own youth movements gets stronger. Technology and a tight labour market have done more to break down the walls of a corporation than any amount of protest. In the past, our youngsters had a lot more stumbling blocks in their careers, and they were never so outstandingly successful as the youngsters of today. In today’s India, youth is increasingly a powerhouse, both at work and in society at large. Thanks to technology and the ever-accelerating change, they know all this and are thoroughly enjoying themselves. They are bright and full of optimism; and every day is a keenly anticipated brand new day. They see the world with fresh eyes every day. The young in today’s India will be the richest, best-educated and healthiest generation in history, and the largest one, too. The future belongs to them. I am sure their accomplishments will exceed our wildest dreams. We are in the middle of a changing of the guard. The young are moving from the shadows, towards the spotlight in the workplace, thanks to a convergence of forces that play to youth’s strength—from technology to the pace of change to the tearing down of the traditional corporate order. These days, young people are increasingly creating their own environment, thanks to the shift in power that gives them opportunity, responsibility and tools that were once reserved for their elders. The same has happened to all types of entrepreneurial activities. It is to the credit of the next generation that in the last decade or so, the profile and recognition of entrepreneurs has changed beyond recognition.

A Quick Summary Now, let me summarise what I see of you, as the new entrepreneurs who will take India forward. 1. You have Technological Adeptness. The technology you grow up with can have a profound impact on your life, even if you are not particularly interested in it. If there is a digital divide today, it is between generations. Most of the Indian households with children have computers with Internet access. Youngsters are technologically precocious, growing up with a rattle in one hand and a computer mouse in the other. By contrast, the Indian adults who do not have children at

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home generally do not have Internet access, and the group that is least interested in getting online, consists of those over 50 years of age. For the first time in history, children are more comfortable, knowledgeable and literate than their parents about an innovation central to society. You are Immersed in Technology. The profound difference between learning something and being immersed in it is familiar to language students. There is the same sort of difference between the way young people and adults approach technology. Children are immersed in it and adults have to make special effort to learn it. You Welcome Change. Our young adults are, by nature, better suited for the unpredictable workplace of the future. They have less baggage and can, therefore, afford to take risks. Young Indians are getting married at a later age and the women are giving birth much later as compared to their mothers. Each generation is born into an era of rapid change, making them ever better adapted for the frenetic world they are about to enter. You Think Differently. While years of training and experience were once considered necessary to succeed, young entrepreneurs now increasingly see them as irrelevant, even a liability. Young companies are running circles around their older, richer, slower rivals. It is a good idea to remember that if you want your company to think outside the box, try working with people who don’t know there is a box. This trend is already showing up in teenagers with self-taught technical skills. They know that they will never again be as quick learning and full of energy, as they are now. You are Independent. One of the most pervasive business trends of the past decade has been the rise of the ‘self employed’ caused by the breakdown of the social contract between companies and employees. Today’s twenty-somethings came of age when that social contract was dissolving. They have never expected loyalty from a company, nor are they looking forward to giving it. They define themselves by their skills, not the firm they work for. The overwhelming majority of graduates see their career at graduation not as a straight line of advancement in one company but as a zigzag path from company to company, job to job, skill to skill. You Don’t Need Job Security. Our children face an employment market that offers no hope of long-term job security with any one employer. The new economy, being unpredictable and fiercely competitive, has shaped the habits and career expectations of our youth. All they have known is a technology-based economy that moves quickly, downsizes constantly and places a premium on change. Young managers are quick to roam from job to job, hungry for quick results, willing to do things differently. You are Entrepreneurial. With a booming economy, capital for the taking and unprecedented technological opportunity, it is of no surprise that more young people are thinking of striking out on their own. When asked to name their hero, almost everyone would take the name of Bill Gates (who dropped out of college to start Microsoft) or the senior Ambani. Nor is this just the bravado of callow youth. By the time they enter university, most teenagers know far more about the business world than their parents ever did.


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8. You want opportunity more than money and security. Given the choice between being someone’s assistant or getting real responsibility and challenges, a lot of young people are going to smaller companies. Given the strength of the economy, they know they will not starve whatever they do. So, they prefer smaller companies because that is where they get ‘real responsibility and challenges’ that allow them to grow professionally much faster. And job security, well, is there such a thing any more? 9. You Demand Respect in a way young people never could before. Thanks to the tight labour market and the high demand for technical skills, young people have a say over their future, and no longer need to defer to older generations, be they parents or bosses. I repeat what I said above about the prospects for the current new generation being brighter than for anyone before. We have an entirely new breed of youngsters, due to the economic boom that has been running for nearly their entire memory, and their parents being increasingly affluent, employed and compared with previous generations, much more in touch with their children’s interests. It has made today’s youngsters aware that they will be entering a changed, highly competitive world, where their ideas, skills and talent will be valued only if they have the correct training. Surely you are good, but so is the fellow sitting in the next seat in your class. z

So, how well we are doing is not important: how many others are doing better is more crucial. Like, when I was in College in the early 1950s, passing in first division, getting more than 60 per cent marks was considered an outstanding achievement. You know how this is looked at, now. 60 per cent is good, but there are many who leave you behind!

A Small Wet Blanket I hate to break this delightfully euphoria-filled line of thought, but I have to explain the apparent conflict between what I just said and what I said in the previous chapter. I said in the preceding section that it is our youth that is taking India forward, but in the previous chapter I said that the need is less for labour-intensive projects and more for upgradation of employment levels, and we need entrepreneurs who create jobs— professional, well paying, managerial jobs which does not seem to be happening. Well, both are true. Indeed, our economy is booming and the credit for this goes completely to the newcomers who were nowhere on the scene, 10 to 15 years ago. But looking at the direction they are taking our economy, where are we headed? The new employment we are creating is, overwhelmingly, in the services sector. Looking dispassionately, this simply means that the world likes to give us work because we are good and everyone likes to come here because of the increasing opportunities we offer. This does not give us any commanding position or any clout over the world economy. What sort of jobs are we creating? Apart from the IT sector, are we upgrading employment levels? Are we creating better paid jobs across the board, rather than just more

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jobs, for our professionals—our mechanical, electrical, mining, metallurgical and chemical engineers? Published statistics do indeed show that we have made some remarkable progress in manufacturing, but the same statistics show that the number of jobs in the ‘organised sector,’ that is, firms employing more than 10 people, has hardly changed since 1991. Well, something is not right, and I think it will be a good idea to take a hard look at the youngsters of the Asian Tigers because their economies seem to be going in a better direction. Before taking you to study the army that is putting up such a tough fight for us, let us go straight to the battlefield—the marketplace, where the main battle is taking place—the US. z

z z

From this point onwards, my readers would detect a strong undercurrent of a thought running throughout this book: That we are good at everything except at working with each other. The fact that we do not easily trust each other, that someone will buy from you or sell to you for years and yet never work with you, is holding us back. This is a complex issue and I will be looking at it from various angles.

II: Let us Go to the US I have found an excellent person who can help us with some information. Meet Dr AnnaLee Saxenian. Dr Saxenian is Dean and Professor in the School of Information and Professor in the Department of City and Regional Planning at the University of California, Berkeley. Her most recent book, The New Argonauts: Regional Advantage in a Global Economy (2006) explores how the ‘brain circulation’ by immigrant engineers from Silicon Valley, has transferred technology entrepreneurship to emerging regions in China, India, Taiwan, and Israel. z

I would strongly suggest to my readers to read some of her publications and speeches, on the performance of immigrants in the Silicon Valley, on her website. There are a few lessons to be learnt there. In particular, I would refer you to Saxenian 1999.

Though this paper is now more than six years old, the data and the arguments still remain valid. Building on her earlier research on Silicon Valley, Dr Saxenian takes a careful look at the role of immigrant capital and labour in the development of Silicon Valley that is now considered an economy by itself and is an example of how a region can develop. She finds that immigrants account for one-third of the scientific and engineering workforce in Silicon Valley and that Indian or Chinese Chief Executive Officers are running one-fourth of all of the high technology firms in the region. The focus of the study is Asian immigrant engineers and scientists in Silicon Valley. When local technologists claim that ‘Silicon Valley is built on ICs,’ they refer not to the


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integrated circuit but to Indian and Chinese engineers. This case has relevance beyond the region. She makes four points that have relevance to our discussion here: 1. The maximum contribution of brainpower to the Silicon Valley is by the Indians, but it is the Chinese that are drawing the maximum benefit. 2. Comparing the average productivity per person of the firms of the same size, the Chinese owned firms come first, Americans second and Indians last. 3. Again, comparing the average wages per person of the firms of the same size, the Chinese owned firms have the highest and Indian owned ones the least. 4. The Chinese build strong cohesive associations that command respect and have a clout. The Indian associations are known for their divisiveness and internal bickering and that they often split up. Some extracts and some comments: The Chinese are simply better organised and this is reflected in all spheres of activity. The National Taiwan University Alumni Association in the Silicon Valley has 1,500 members in the Bay Area, and Chiao-Tung has 1,000. These alumni associations are extremely active and serve as important sources of trusted personal and business contacts among the Taiwanese engineering community in Silicon Valley. (Saxenian, 1999)

The Indian Institutes of Technology (IITs), which are our elite engineering institutions, appear to have played no such role among Indian immigrants to Silicon Valley. Indian Alumni Associations are insignificant and disorganised. It is a prominent characteristic of the successful Chinese entrepreneurs all over the world, and a very common experience in the Silicon Valley that the successful entrepreneurs become community leaders and role models for subsequent generations of Chinese entrepreneurs. As their communities grew during the 1970s and 1980s, these immigrants responded to the sense of professional and social exclusion by organising collectively as well. The feeling of being an outsider, not knowing the language, and so on was common for Chinese immigrants in that period. This sense of being an outsider was reinforced in many ways. They often found one another socially first, coming together to celebrate holidays and family events with others who spoke the same language and shared similar culture and backgrounds. Over time, they turned the social networks to business purposes, creating professional associations to provide resources and support structures within their own communities. The institutions they created have mirrored those created in an earlier generation by native engineers in the region. (Saxenian, 1999)

There is nothing even remotely close to this among the Indians, and this contrasts sharply with the arm’s-length behaviour of Indians in the US towards each other, in general, and towards newcomers, in particular. It is a rare Indian student or job hunter who finds any social or community support, except from immediate family members who happen to be there. The networks Silicon Valley’s Chinese immigrant entrepreneurs are building are not simply local. They have far-reaching professional and business ties to regions in Asia.

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They are uniquely positioned because their language skills and technical and cultural know-how allow them to function effectively in the business culture of many Asian countries. A transnational community of Chinese—primarily Taiwanese—engineers has thus fostered two-way flows of capital, skill, and information between California and the overseas Chinese people in countries like Taiwan, Malaysia, Singapore and Thailand. In this process, Silicon Valley–based entrepreneurs benefit from the significant flows of capital that these immigrants coordinate, as well as from the privileged access that they provide to Asian markets and the region’s flexible, state of the art semiconductor and personal computer manufacturing capabilities. (Saxenian, 1999)

It is true, Silicon Valley’s Indian engineers have played a similar role, linking technology businesses in Silicon Valley with India’s highly skilled software programming and design talent. But this role has been played more at an arm’s length. ‘I want to help you, can tell you what to do, and how to do it and give you all the contacts, but leave me out of it. I am busy with what I am doing.’ The result of that attitude is reflected in the poor productivity of our people (Table 3.1). Table 3.1

1998 Sales and Employment of Silicon Valley High-Technology

Firms Led by a Chinese or Indian CEO Indian Chinese

No. of Firms 774 2,001

Total Sales USD Million 3,588 13,237

Total Employment 16,598 41,684

Average Sale Per Employee USD 216,110 317,555

Source: Dun and Bradstreet database 1998. Quoted in Saxenian 1999. Note: The average sale per employee of all the technology firms in Dun & Bradstreet database, 1998 for Silicon Valley is USD 242,105.

III: The Mindset of the Asian Entrepreneurs Now, A Short Trip to Malaysia I am going to tell you a story—a Malaysian story. In this story I will not talk about Indians in India, but about Indians who have lived in Malaysia/Singapore for generations and who, in many cases, have never been to India. But, it is surprising to note that in attitude, thinking and behaviour, they are exactly the same as our folks back home. The following description of how a car mechanic in Malaysia runs his business could well be the description of a fellow in Bhagalpur. z

I wish it to be clearly understood that it is very much outside the scope of this book to discuss the business ethics, and so on, of the overseas Chinese or of anybody else, for that matter. We shall be talking only about the art of working together, the art of integration of diverse capabilities, that too, only in the context of how the Chinese are able to do things that we cannot. This will lay the foundation of what I will be talking about in the subsequent chapters.


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There is a common saying in Malaysia: z

While driving in the Malaysian countryside, if you have an accident and your car is damaged, you should hope that the nearest mechanic is a Chinese. But if you are hurt, you should pray that the nearest doctor is an Indian.

Before proceeding further, a word on the ethnic composition of Malaysia. The nation consists mainly of people of three racial origins—the Malays who trace their origin to the Arabs, the Chinese and the Indians. All are Malaysians, have local citizenship and are either called Malaysian–Indians or Malaysian–Chinese and so on. The Indians, especially the South Indians, were brought in by the British as indentured labour; and the Sikhs for the police force. The other people followed as traders. Today, Indians, about 10 per cent of the population, overwhelmingly form the working class and are into small time trading. Some have done well and have educated their children to be professionals—doctors, accountants and lawyers—but there are very few architects and engineers. Indians the world over do very well only in professions where one can look forward to being self-employed. The Chinese, in contrast, are almost everywhere and are the work engines of the economy. The Malays, with the encouragement provided by the government, are catching up fast. The Indians are losing ground everywhere. But that is another story. I also need to explain that, much like the situation in India, there are no large clinics in the small upcountry towns in Malaysia—only the small individual doctors’ clinics of various specialisations. Similarly, for auto repair, there are only small mechanics doing minor repairs in the countryside, as the large automobile workshops are only in the big towns. Coming back to the common Malaysian saying, the reason one wishes for the nearest doctor to be an Indian is that our people make the best doctors anywhere in the world. They are clever, considerate, take genuine interest in their patients and one can wake them up at any time of the night. Notably, the doctor works purely as an individual, but that is all that you need for emergency treatment. On the other hand, if your car is damaged, you may need an engine mechanic, a body repair workshop, an electric wireman, an aircon mechanic, and so on, or all of them, before you can get on the road again. If you take your car to a small town Indian mechanic, if he is, say, an engine mechanic, he will do the repair work he is good at and direct you to the other mechanics as required. If he needs any spare part, he will invariably, not have any in stock and you have to wait till he gets it from the nearest source. The other fellows would also be in small independent workshops. Each will do only his job and have an arm’s-length attitude to the other problems you may have. Everyone makes it clear that he is an individual and minds his own business. You pay him and then pay the others separately. However, if you find a Chinese mechanic, no matter what his particular skill is, he will have a good look at the problem, and tell you to go across the road and have a cup of coffee. You will be surprised at how organised he is. He will create an instant network of other Chinese mechanics to participate in the repair of your car. ‘Participate’ is the correct term as you will be surprised to find that the other mechanics are quickly informed, and a schedule of work is set up. Remember, all are independent

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workshops, can even be some distance away, but you will be amazed to see them working as an ‘instant consortium’. Before you know it, the spare parts are already on the way. Though the first point of contact would not automatically assume the role of the leader, you will see that your work gets done with an incredible degree of efficiency without any one being the leader or the boss. Each is clearly his own boss, but works as a part of a unique team to seize the opportunity that has arisen. You can pay your first point of contact by credit card or cash for the entire work done. What is the lesson of the story? At the end of the day, one finds that though there are plenty of excellent Indian car mechanics in Malaysia and Singapore, they remain small and the business dies out with the old man. The children have nothing to inherit unless they become mechanics too. Even then, there is work only for one son. The Chinese mechanics do much better, are more expensive, yet do better business and can afford to build their businesses into small organised set-ups. Most can afford to carry a good inventory of spare parts. Often the whole family is involved. An educated daughter may be working as a secretary during the day, but she sits in the shop in the evening to help out.

The Korean Entrepreneurial Mindset In this section, while giving you an insight into the Korean mindset, I will tell you about an incredible situation that was occurring right under our noses but none of the people I spoke to were aware of what was happening and why. z

Do read this section carefully as there are many lessons to be learnt.

The first lesson is that you cannot really understand someone’s mindset, the way he works and does business, unless you have been really close to him and he has treated you as a friend. (I will talk about this in considerable detail in Part 2.) For example, I am able to give you this amazing insight into the Korean mindset because, as I said at the beginning of this chapter, I have the unique advantage of having lived and worked with executives and entrepreneurs of many races in many nations across the world: I have lived and worked with the Koreans and am giving you a view, so to say, from the other side. A few years ago, I happened to be a guest speaker at one of the smaller business schools in a small town in Tamil Nadu. I would not have gone there except for the fact that the Dean was a former colleague and a good friend. In the class, I was surprised to see a Korean student. This did not make sense. Why was a Korean student in such a nondescript college, in the middle of nowhere? I would have understood someone from a poor country, but why Korea? When I asked my friend the Dean about this, he saw nothing remarkable about it as many colleges in India admit foreign students. In the evening when I was having a drink with the Dean, he mentioned that the Korean student, I will call him Kim, had requested if he could come and see me. I invited him to join me for breakfast the next day. I found Kim to be a very pleasant young man with a sharp inquisitive mind. He had become fluent in spoken and written Tamil and had endless questions about


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the Indian economy and market. He said he liked India and wanted to live here as long as possible. That was the start of a superb friendship. After finishing his course, Kim joined a Korean firm in Chennai and was a frequent guest at our home in nearby Pondicherry. He had the remarkable knack of making everyone feel comfortable with him, and my wife started treating him as her son. Though he said that his joining the particular college was a mistake on his father’s part, I did not believe him. But I kept quiet. I knew that Koreans do not make mistakes of this sort. My romantic heart told me that there must be some Tamil young lady somewhere in the background. I found later that this was not so, because he went back to Korea to get married. He brought his charming wife to meet us and to give us the good news that he had taken over as the manager of the Korean trading firm in Chennai. My curiosity would not let me rest and, with my contacts in Korea along with my probing into the Korean mindset, it took me quite some time to put together the entire story. z

Here, my readers, are some important lessons for you. Please read this carefully.

About a dozen or so Korean trading companies had got together to work out a strategy to enter the Indian market, both for buying and selling. No single firm had the range of products to justify the cost, so it was a joint effort. They did a careful study of what they needed from India and zeroed in on Kolkata and Chennai as the ideal bases for the location of their trading offices. They selected two suitable young men to send to India to pursue MBA in small business schools located deep into the countryside. The idea was to understand what the Indians were taught about business, how they behaved and how to win their affections. The logic was impeccable: spend a couple of years with simple country folks deep in the interior of the country and become one of them. If the boys had gone to prestigious business schools in Mumbai or Bangalore, they would have become half Americans. I never met the other fellow who went to Kolkata, but admired the way Kim tried to get to know my country from the inside out. He spoke the local language, knew the ways of the local people and his wife was learning Indian Classical dances in Chennai. He had established a strong circle of local well placed friends and knew who to turn to for help, get the information and turn it to his advantage without hurting anyone’s feelings. I can guess what all of this has to do with business. Here is a possible scenario. Say, Kim is interested to buy granite for export. He is friendly with all the main producers, and over drinks and dinner with each of them, he does not have to pump anyone for information. The fellow will invariably boast about his own business acumen and the prices he is able to get, and he will let out the prices the others are selling at, what he calls distress sale. It is in our nature to run down our competitors, and we love blurting out the juiciest gossip about them. The strategy is reversed when Kim has something to sell. The actual price does not matter, because he always found out the highest price the customer can pay. During my long years of association with business persons from the East—not only Koreans, but also the Japanese and Singapore Chinese—I have found that they

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somehow get priceless insider’s information. They always do incredibly profitable business, and yet no one can accuse them of being even remotely unethical. People do indeed call them cruel and ruthless, but they queue up to do business with them. One last point. It was by a sheer stroke of luck that I found that Kim had been sending daily reports to Korea, to all the participants in the scheme, where everything including the eating and drinking habits of the people he met, were detailed. Are there any lessons for us? You bet there are: z

z z

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Can a few small Indian companies join hands and invest in developing a longterm strategy for entering, say, the Kenyan or the Brazilian markets? You ask me to join and my first thought would be, ‘Can I trust the fellow you select? Will he be neutral when some juicy business opportunities arise?’ And the idea is dead before it is born. When we buy from or sell to someone, how much do we know about him? How much time and effort do we put in to know him and his business from the inside out? How much of our social skills do we put into our day-to-day business? How many Indian businessmen you know who meet and have, say, a family meal with someone who is not his relative? When our executives go overseas on assignments, how detailed are their reports? How much information do they send to the head office and how much they keep to themselves for use if they leave the company?

Asian Executive Mindset In addition to the traits I have discussed above, I would quickly list five points that I think are worth noting by our young entrepreneurs and executives. I feel these are conducive to the corporate success of executives from the East. My personal view after having lived and worked with executives of many races is that it does not matter how outstanding you are in your subject, you will be defeated in the international arena by executives who have the following five characteristics that I am spelling out in an easy-to-remember acronym: ROADS

1. 2. 3. 4. 5.

R—Relentless drive for upgradation. O—highly Organised and systematic in daily life. A—Attitude to quality in daily life. D—personal Dignity and self-respect in daily life. S—Sharp and observant everywhere and at all times.

R—Relentless Drive for Upgradation Upgradation does not simply mean improvement. It is the same as the difference between improving your employment prospects and upgrading them. Improving means you have more chances of getting a job, but upgrading makes you aim for a better job. And relentless means continuous.


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So, what I am talking about here is pushing yourself in an unremitting and ruthless manner for doing things better and better—all the time and everywhere. How does one do this? You are your own teacher. Keep your eyes and ears open and look around you. Observe things and then analyse. Why is this being done like this? Can I do it better? And then, if the activity directly concerns you, go ahead and change it for the better. This is what I have noticed in the executives of the East. These people are trying all the time to do everything better and better, and it shows in the products they make and in everything they do. People who regularly do business in Singapore have noticed that if they go to someone’s office, home or study room after some months, they find changes. The changes by themselves are not important; the attitude is. We are not like that at all. The older generations in India, even when rich, have always been happy with the way things are. Simple living is one thing, not wanting to change is quite another. Why bother to change? My father did it this way and I do it the same way. We do not want to change. I repeat. We are happy with the way things are, and do not want to change. We have plenty of shops and stores doing excellent business, but over the years, the set-up remains the same. And we have factories producing what they were making 10, or even 20 years ago. 9 That was fine for my generation. But if you youngsters do this, you are sunk. And remember, a relentless drive for upgradation should be a matter of attitude. It should be your comfortable way of life. It does not mean a mindless pursuit of better things in life, because that can only lead to stress, hypertension, and so on.

O—Highly Organised and Systematic in Daily Life The problem with modern executive life is that everything has to be done on the run, and you have to do many things at the same time. This makes the task of being organised and systematic a highly challenging one. Here is a scenario that is common in all parts of India, particularly in the smaller firms. Walk into the office of any senior executive of a company and see how he is working. This could be the office of your father, your uncle, or anybody who is a reasonably senior executive in a commercial organisation. Sit down and watch. You will notice that he has to look at, read, understand, assimilate, and decide on a large number of memos, notes, minutes and papers put before him throughout the day. He does not get time to look at these papers in a completely undisturbed manner. Invariably he does not have a private cabin and nobody can have a ‘do-not-disturb’ sign all the time. Remember, what he is doing is far more critical than, say, your cramming for an exam. You were left alone in peace and quiet and you can always revise what you read, but an executive does not get a second chance. Now imagine a situation when the executive has to go to Mumbai with his boss, by the late flight, for an important meeting. He has his juniors, or his colleagues, or suppliers sitting in front of him discussing some very critical aspects of a memo he is preparing for the meeting. The phone rings. His wife is on the line. She wants to ask him what suit she should pack for him. He talks to her calmly, remembering to tell her that he would be late and to have the bag ready. By the time he puts the phone down

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and is ready to get back to the topic which was taking up his full attention, the door opens and his boss pokes his head in and asks ‘What time do we leave for the airport? Do we take your car or mine?’ Again, an important client comes on the line and asks for some bit of information. Our executive says he will check and call him right back. You can see that neither can the executive shout at his wife, nor at his boss, and he has to keep switching his mind from what he was doing, to completely unrelated topics and give his full attention. He has to keep doing this again and again, throughout the day. And, if he forgets to call the client, he can forget about the promotion he was promised! This happens to every executive, most of the time. Life is to be taken at a run. It is an essential part of an executive’s life to often make decisions under pressure and severe time constraints. On the run. Not only that, he has to read the documents and memos in such a manner that he retains critical pieces of information for future meetings. Sure an executive who cannot tackle this will have stress, hypertension and so on, but that is not the point I am making. This executive also has to remember which critical files to take with him and keep checking whether they are ready. Then, he may also have to remember to pick up the tickets from the agent on his way home. In his frantic schedule it would need a superhuman mind not to forget any item and prevent the trip from turning into a disaster. One of the ways an organised and systematic executive does is to keep a scribbling pad at his elbow all the time, jotting down the points as they occur to him and keep updating the tasks. I may have over-dramatised the example, but how many executives do you see around you who are organised thus?

A—Attitude to Quality in Daily Life This point is closely related to the fourth point below because a manufacturer who is fastidious about the quality and finish of his products, is indeed a person who is proud of what he is doing. The word quality has as many meanings as there are management gurus. You do not have to be a manufacturer to be quality conscious. To me, quality as a way of life simply means ‘doing things in the correct manner, all the time’. It is the firm belief of world class customers that you must have a tradition of stringent quality control for all activities at all times, rather than doing something especially for a purpose, or doing it because you have been ordered to do it. This is never as good as doing the same thing automatically, by habit. The operative phrase here is ‘all activities at all times’. Let me also make it clear that I am not only talking about how we do things in India. I have lived and worked with people of Indian origin all over the world. Well, they may have lived overseas for generations, but their attitudes, particularly towards shabbiness and shoddiness, remain the same. The point I am trying to make is that even if we see people next door doing things in a different way, we simply ignore it. Well, we ignore it, but the world does not. I remember a news item in the press, sometime in December 1999, about Prince Charles commenting on the shoddy wiring in his bedroom. He said, ‘It must have been an Indian contractor.’ There was an uproar,


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of course, but can anyone who has lived anywhere outside India, honestly deny the truth contained in this remark? Like the point discussed before this, all this is not as simple and insignificant as it sounds, and I am going to devote a full chapter to the topic of ‘finish as a part of quality’ in Part 2.

D—Dignity and Self-Respect The fourth point pertains to the immense amount of personal dignity and self-respect that everybody has, as I have noticed, particularly in the East. Anybody; executives, managers of shops or anybody one meets. People are proud of themselves, their organisations and their nations. You will be surprised when I compare this with our attitude towards personal dignity and self-respect. One can think of countless instances in our everyday life, but here I am talking about executive life, particularly in the international context. One of the worst examples I can think of is about the visitors from India I had while living in Kuala Lumpur—top level executives, big businessmen, professionals and so on. I, or the people who were interested in what the visitor had to offer, would invariably arrange a small dinner for the visitor to meet other local people. Always, the visitors would give endless assurances and made promises—we can do this and we can do that, and I can send you this and I will send you that, and so on. I never got a note of thanks and only few people in Kuala Lumpur got a follow-up. One person from Delhi put it straight, ‘Why bother? I just went to see what it was like. I am not interested in the market and I am not going there again.’ So, where is his dignity and self-respect? I am talking of an international situation and these people humiliate themselves, their companies and their nation in the eyes of others. If nobody takes Indian visitors seriously, it is because of our own doing. All of this is not as simple and insignificant as it sounds, particularly when you are working for or with MNCs. We will be talking about this in some detail in Part 2, when I discuss the normal interaction our executives have with foreigners, both when the latter come here and when we go to their countries.

S—Being Sharp and Observant Many of you may have liked the concept of upgrading yourself but would want to know how to do it. My answer is: The only person who can show you new avenues to upgrade yourself is you. You have to be sharp, alert and observant, all the time and everywhere. See things that others miss. My mantra for doing this is to ‘Look, Observe, Analyse and then shut up.’ Wait, this is not a misprint. The ‘shut up’ part is crucial, but before I explain that, I will mention two things I have noticed in all successful executives in the East. The first is that these people are very sharp, alert and observant. They notice things that others do not. And they do this all the time. No matter where they are—at home, in the workplace or travelling. Apart from that they keep what they notice to themselves.

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They offer advice, help and ideas only when asked. This does not mean they are selfish, because they are often involved in social activities and help out where needed. The point is that they participate but do not interfere. To you, as future executives, the ‘shut up’ part is also crucial. You will meet many sharp, alert and observant executives visiting your factory or office. Surely they will notice things. But they will not tell you what they have noticed. An executive who goes around poking his nose into other people’s business, is asking for trouble. People do not take kindly to being corrected, no matter how well meaning the other person may be. Those of my readers who have heard me talk will remember an anecdote I told you. Here it is: I was travelling from Chennai to Delhi by train in a two tier A/c sleeper. It was a long journey and I was not able to concentrate on the book I was reading, so I was happy to see a very interesting person sitting on the opposite seat who appeared to be an authority on management. He had two teenaged children, a boy and a girl, with him. He was a fascinating talker and I found it impossible not to eavesdrop on what he was saying. Though I was pretending to read, my ears were only for him. He was talking about simple rules of management in our daily lives but was illustrating them with lots of hilarious jokes. Suddenly, he looked up at a person sleeping on the upper berth. The person had pulled up the blanket to cover his face. He asked the children if there was anything they would comment on. ‘Remember I have just told you that you must always look, observe and analyse everything around you. Everything. So, tell me what you see.’ The children looked up and then at each other. One of them got up to take a closer look, but none spoke. By this time, I had forgotten all about the book that I had in my hand and was listening intently. Then he asked something that I thought had no relevance at all. He asked the girl if she noticed the footwear most of the passengers were wearing and the condition of their feet. She said, ‘Dad, these are train passengers and they are mostly wearing chappals and of course their feet are filthy.’ ‘So, people travelling by train mostly have filthy feet. Right? Now imagine that I give you a piece of cloth and tell you that this has been used by many such travellers to cover their feet when sleeping. This piece of cloth is used for months without washing. Would you put that piece of cloth on your face?’ ‘Come on Dad,’ the girl said, ‘ you are making me sick!’ What a stupid question to ask, I said to myself. ‘OK, now let us look around us. Look and observe. The Railways give you one clean dhobi-washed cotton sheet, one clean pillow-cover and one blanket. But the blanket is dirty. You can see that it is almost never washed, and hundreds of people have possibly used these blankets. Now listen carefully. Analyse. The problem with the blanket is that it does not have any top or bottom, it does not have any front or back and the area of the blanket that comes in contact with your feet is exactly the area that will touch someone else’s face if they take the blanket on the face.’ I could see the two children actually starting to feel uncomfortable. To save them further misery, their father continued, ‘I ask you as future managers, if there is anything you can do about it. No, I am not asking you to complain to anyone.’ Again the children looked at each other and nobody spoke. I was very impressed with the way the fellow was explaining the problem. ‘You will notice that the fellow has


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taken the clean white sheet and spread it on the seat. He is sleeping on the clean sheet and is taking the filthy blanket over himself. Why not sleep on the bare seat, take the clean cotton dhobi-washed sheet on yourself and put the blanket on top of the sheet? This way, you do not let the dirty blanket touch your body at any point.’ Suddenly the person sleeping on the upper berth spoke up. ‘Why don’t you shut up and also teach the children to mind their own business?’ He had obviously realised what he had been doing and was very upset. He said a lot of things in a nasty language and moved off to the toilet in a huff. This ruined the rest of the long journey for all of us.

I repeat the point I am making. People do not take kindly to being corrected, no matter how well-meaning the other person may be. And an executive who goes around talking about what is obviously none of his business is asking for trouble. So the ‘shut up’ part is crucial. A small anecdote. My friend and mentor, the late Dr S.V. Narayanan, the former Vice-Chancellor of Pondicherry University, was the guest of honour at a University seminar and I was one of the speakers. At the end of my talk where I had spelled out the five points R.O.A.D.S., I asked if anyone had any questions. I was surprised when Dr Narayanan smiled and raised his hand. He is one of the wittiest persons I have known and from his expression I knew he was up to one of his tricks. He said that he had a question to ask the students, ‘What is wrong with the following sentence: People of most successful countries have these five traits?’ There was pin-drop silence and the entire hall was looking up to the Vice-Chancellor with pleasant expectation because we all knew it was a loaded question. He pretended to wait for an answer and said, ‘ The correct sentence is: Nations where the people have these five traits are successful!’ There was a stunned silence as the students let the message sink in. Dr Narayanan had, in one phrase, summed up my entire talk! The students are not going to forget this lesson in a hurry.

Thank you, my friend.

IV: Some Useful Mantras Entrepreneurship is a lot more than just getting an idea and starting a company. It is a tough choice, not an easy one. It requires a great deal of sacrifice. The odds of failure are incredibly high, so in order to succeed, one needs an incredible amount of dedication and a generous degree of luck. But this is one journey where the joy is as much in the ride as in reaching the destination. What I am talking about here is applicable not only when you are starting or running your own company but also where you are working, so you can make the project that you are doing more entrepreneurial to the benefit of yourself and your employer.

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A Vision for the Future Perhaps the most important aspect of being an entrepreneur is developing a vision for the future. You need to have a deep understanding of the business you are in, and build a mental map of the players, the companies and the trends in the marketplace. This is not something which will happen overnight, but requires an immense amount of research, reading and thinking, as well as your personality and mental make-up. You need to develop this thinking as if your life depends on it (doesn’t it?) so you can place developments as they happen in this map, and even anticipate what is going to happen. This envisioning of the future also lets you paint a picture of tomorrow’s world for your employees and customers, and enables you to see trends in the industry faster.

Getting to the Future First Creating the future is more challenging than playing catch up, in that you have to create your own road map. The need is to develop an independent point of view about tomorrow’s opportunities and then work out a plan on how to exploit them. Path breaking is a lot more rewarding than benchmarking. One doesn’t get to the future first by letting someone else blaze the trail. There is not one future but hundreds of them. Getting to the future first is not just about outrunning competitors bent on reaching the same prize. It is also about having one’s view of what the prize is. There can be as many prizes as runners; imagination is the only limiting factor. In business, as in art, what distinguishes leaders from laggards, and greatness from mediocrity, is the ability to uniquely imagine what could be. Other people and companies may have more resources, more money, more of everything, but what you have as an entrepreneur is your vision, your imagination, your passion. Define what will be, define tomorrow, envision the future and then make others play according to the rules you set.

Plan to Create that Future Once you have a vision of your place in tomorrow’s India, the next step is to build a plan to create that future. In doing so, ideas form a very important part. Ideas are like Lego blocks—they can be assembled in many different ways. At the same time, ideas are not everything. We get ideas all the time. The problem is that we all get too fascinated with ideas. In fact, it should be just the other way round. All ideas are, in general, good; it is what you make of these that separates winners from losers.

Ideas are Commodities While dealing with my countrymen over the years, I have come to the conclusion that we Indians tend to keep our ideas to ourselves. I view ideas as commodities, which are


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to be shared with everyone. Only if you share will you get feedback, new inputs and fresh insights from others who may have a different perspective. This is the only way ideas can get refined. Only if you discuss your ideas with others, only if you present your ideas to people different from yourself, will you get viewpoints which can add depth to your thinking and provide varying ways of getting to that future. It is important also to expose yourself to various situations which can stimulate thinking—it could be reading different books, meeting people you have never met before, visiting trade shows and conferences. Different environments help you think.

Do not think of Exits When you are building a business, do not think of exits. You should only be building a business if you believe enough in it to run it for the rest of your life. Making money has to be an important objective, but if you run after money, it will not come. Build the business as a labour of love. Make it the best thing you have ever done. No halfmeasures, no short cuts. Your passion must reflect in every aspect of the business.

You cannot do Everything Remember: you are the brains, the eyes and the ears of your company, so everyone looks up to you for vision and direction. But you also need to accept that you cannot do everything. This means being open to ideas and suggestions from others. Listen to people and then make up your mind. Also, develop the social skills to manage the relationships with your employees, customers, partners and vendors well. Being in a small company gives you the advantage of adding that personal touch—which can make all the difference.

Worst Case Scenario Imagine and be aware of the worst case scenario. Know when to call it quits. No one creates a business to fail, but in the event that your business does fail, get ready to start all over again: make a clean break from the past, and focus once again on the future. There is always some good which comes out of everything. In today’s India, ideas and capital are not in short supply. If there is a shortage of anything, it is people who understand the marketplace and are willing to think deeply about the future.

Our Economy is Booming Opportunities for growth, contribution, and true success were never greater than they are today—from both the corporate and the individual viewpoint. New product development is looked upon all too often as a panacea for sagging sales, seasonal fluctuations, dipping profits and corporate politics. But in the globalised Indian scenario, the

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mortality rate for newly conceived product ideas is painfully high, not so often because the basic idea was poor but because of poor planning, organisation, coordination, execution and marketing efforts. What about the individual? Many senior and junior executives and non-executives still bewail the lack of personal opportunity in India today. The bald fact is that there are far more big opportunities than there are big men. It behooves the little man to become a big man or quit griping.

Broad Gauge Top Management Today’s executive must have a wide range of skills, and this should constitute the finest sort of challenge to the man emerging from the shop, or to the college graduate whose training has consisted largely of principles derived from various academic text books. The man who wishes to prepare for the broad gauge top management position must realise that production, marketing, engineering and financial problems are caused by people and can be solved by people. Thus an enlightened, tough-minded approach to management requires a thorough knowledge of how to develop and motivate people. Without this, few can qualify for the big assignment.

Pride in Yourself While going over everything I said above, a thought came to me. I have lived with all sorts of people in many countries across the world as one of them and I got a unique insight into their attitudes and mindsets. One thing that I noticed in all the developing countries that have been particularly successful in attracting more and more investment is the attitude of the people about where they live, what they do and how they do it. I have detailed in Chapter 5 how one of my colleagues very dramatically demonstrated that your desk, room, office, factory or even your mother’s kitchen may be clean but it does not automatically mean it is neat, tidy and orderly. Then she went on to show that if something is clean and tidy, it does not automatically mean it is beautiful and aesthetically appealing. This is the only way of making sure that your output would touch the hearts of your customers or consumers or guests. Putting it in another context, I said that an executive cannot be meticulous in bits and pieces—he is either meticulous in everything he does, as a habit, in his personal and professional life, or he will lose out to someone who is.

And, Finally, It is almost a truism that the busy, productive, outgoing mind is the happiest, yet this concept seems to be eluding the majority of our youngsters. Listen on a Monday morning to the tales of what happened over the weekend. Note the zest with which most executives look forward to vacations. Of course, this is healthy and normal.


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What is not so healthy and normal, however, is that so many dread—or pretend to dread—the return to work. Undoubtedly this is a reflection of the desire to conform (when we were youngsters, after all, we never dared say we ‘loved’ school, we ‘hated’ it), but what sort of thinking is it that views time spent on the job as time sacrificed till we can again enjoy ourselves? Clearly, something vital is missing from our typical business environment. The willingness to create, to produce, to mould and build, and, above all, the willingness to give just isn’t there. I repeat: this is abnormal, rather than normal. Research has shown that the average top executive made things happen to him instead of waiting for them to happen. He was not preoccupied with security. He reacted to the requirements and privileges of our free enterprise system with individuality, a generous expenditure of midnight oil, and tough-minded follow-through. This is the only way to get there—short of being born the boss’s son or marrying the boss’s daughter—and it can, and should, be fun. The realisation that productive work is one of life’s greatest pleasures is not just desirable—it is absolutely essential for our nation to earn the world’s respect.

Reference Saxenian, A. 1999. Silicon Valley’s New Immigrant Entrepreneurs. California: Public Policy Institute of California. Available online at http://www.ppic.org/content/pubs/report/R_699ASR.pdf.

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4 New Soft Skills for Entrepreneurs

As I said in the previous chapter, my experience of working over the years, with the boys and girls who form the next generation of India, is that though they are ahead of almost everybody else in the world with regard to intellect, and so on, they lose out to people from other nations, in the rapidly globalising environment of new India when it comes to communication and social skills. Please note that I said, ‘lose out to people from other nations’. When I go to various academic institutions and talk to young people there, often I am asked, ‘Why should we bother knowing about these foreign people.’ My answer is simple. No matter what type of a job my fellow Rotarians are having, and no matter what your business is, invariably you are buying from, selling to, or servicing the multinationals, right here in India. One does not have to go overseas to meet the world. The world has got unleashed into India. Not only that. It is a fact that, even domestically, our people will have to increasingly deal, interact, work or live with people of other language groups, communities, races and nationalities. If you have to compete and win, you have to understand the mindsets of people. You have to understand how these people think, how they behave and how they do business. An essential tool for this is developing your social skills. A common remark one hears about our professionals is that they are good workers, but they lack interpersonal or communication skills. I need to mention that I am talking to you, my Indians not only for yourselves, but also for you in your capacity as teachers and parents. I think it would be a good idea if the points I am making here are conveyed, emphasised and explained to the young people around you.

New Soft Skills for Entrepreneurs

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I am dividing this chapter in two sections: Section I: I will explain the new meaning of social skills. Section II: I will discuss some other soft skills you need. And then, we will discuss Communication Skills in the next chapter.

I: Social Skills I feel very strongly about the lack of social skills. The problem is serious. True, some of our boys and girls, particularly from big cities like Mumbai, Delhi and Bangalore are facing the challenges superbly. Yet, there seem to be some glaring shortcomings when it comes to personal skills in the rest of the country. You will understand what I mean in a minute. Though our youngsters from small towns and rural areas are very friendly, they tend to make friends mostly with their own people and those from their own language group, and do not seem to be comfortable interacting with people from other races.

Defining Social Skills Social skills can mean many things to many people. It can have a different meaning for, say, politicians, insurance salesmen and children of the very rich people, than that for budding entrepreneurs and executives. Remembering that we are talking only about our young entrepreneurs and executives, I will explain what I mean by social skills: z

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In new India’s rapidly globalising environment, it is a fact that our entrepreneurs and executives have to increasingly deal, interact, work or live with people of other nationalities, communities, races and language groups: A young Gujarati entrepreneur may find it attractive to set up a unit in Tamil Nadu, or a Bengali executive may get posted in Punjab. In this context, your success would depend largely on your social skills. When dealing and interacting with people of other language groups or races, it is not enough that you try to feel comfortable with them: It is far more important that you make them feel comfortable with you. If you have to be successful in whatever you are doing; if you have to compete and win, it is essential that you understand the mindsets of people; understand how they think, behave and do business. The essential tool for all this is social skills, because you need to get close to people to really understand them. It is only when you have a friend who is not from your own background that you can see and learn new things.

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Now, let me list out a few things that I do not label as social skills for entrepreneurs and executives. z

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By social skills, I do not mean grace or etiquette; I do not mean eating with knife and fork, attending cocktail parties, and so on. These are traditional English or European manners. I have said earlier and I repeat that I am against your giving up your traditional way of life. When interacting or developing personal and friendly relations with people, do not make friends simply to use them: for example, my son is looking for a job in a company and I start playing golf with the owner. This will quickly backfire and there would be long-term repercussions. You must create an ambience, an environment or a circumstance where others meet you as equals, or as friends, and whenever needed seek your help or use the services provided by you. The over-friendly lifestyle is also wrong. An insurance salesman can stand next to you in a bus queue and by the time the bus arrives, he becomes your best friend. There are the highly social people who live a five star, flamboyant lifestyle that starts on Friday evening and lasts till late Sunday night. In my dealings with Indian organisations, I have noticed that the highly westernised Indian boys and girls do not make good executives and more rarely, good entrepreneurs. They have what is called ‘street smartness’ and can make excellent presentations, but they are not there when solid performance and back-breaking hard work is required.

The subject of social skills is vast and a lot of academic research is going on it. If you access the Internet and search for ‘social skills’ you will get many write ups, information and a lot of help. Academically, you will learn that the meaning of acquiring what is called ‘social wealth’, is your ability to interact with people who are not of your language group and are not even of your nationality or race. This is wealth like any other kind of wealth. Wealth is something that you have, it is your possession, but if you put it to productive use it becomes capital. So terms like ‘social skills’, ‘social wealth’ and then going on to ‘social capital’ are being increasingly discussed and written about. I will say to the young entrepreneurs, that the more time you spend reading this highly academic material, the more confused you will get. All of this is quite irrelevant to how you have been brought up in India, and the working environment you will find in the new India.

Do not Follow your Parents Huh? Well, it may seem funny, coming from a strong believer in traditional values like myself, but my strong message to you youngsters is that you should not follow everything that your parents have been doing. There are many traditions, and I am going to talk of a tradition that we need to give up.


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Or rather, we need to acquire a tradition that we do not have. Let me explain. I look around myself in India and at the businesspeople of my generation. Many of my friends are running fairly large enterprises, but these are all family owned and family managed businesses. I see how they conduct business with people they have been dealing with, for years. These friends of mine will sell to you or buy from you for years but always keep you at arm’s length. All business is conducted in the office, your office or mine, and there is zero contact of any nature outside office hours. Apart from invitations to weddings and auspicious occasions, nobody makes an effort to know the person he is dealing with. Businessmen and their customers, or suppliers hardly sit together for an informal lunch, or dinner, to discuss each other’s plans or problems. Let us look at the opportunities for social interaction in our daily life. Unlike in the West, where children are trained to be comfortable with strangers, in India, children, particularly from the small towns, have no such opportunities. Nobody drops in to their homes except for relatives. Remember, almost every businessman in India is also a member of some trade association, chamber of commerce, cultural sabha and so on. Look at the vast difference between the social aspects of these and similar organisations in the West. The concept of fellowship is completely missing. Imagine yourself at a meeting of, say, the Andhra Sabha or the Punjabi Sabha or maybe the governing body of a charitable institution. You go to the meeting, sit down in the hall, and observe that there are three, four or five people sitting on the dais. You listen to the speeches, get up and ask questions, and go home. Of course, you wave at people you know and they wave back. That is it. z

Where is the opportunity for your wives and your children to meet the families of the people you conduct business with? Where is the chance for the children to learn any of the social skills we are talking about?

I am going to say something that will surprise you. It is interesting to note that our society has no tradition of social skills because, say, for my grandfather’s generation, their circle of business interaction was probably no more than 25 to 50 miles from their home base and they rarely needed to interact with people outside. If my father was a Punjabi, he interacted mostly with Punjabis. At the time we got our independence, everybody lived and worked in the immediate vicinity of their homes. So, the problem is that our elders did not train us for social skills because they never needed to. They dealt only with people they had known all their lives, and that was that. Whatever my generation has learnt, we have learnt ourselves. In contrast, children in the West grow up learning social graces and how to interact with people not directly related to them. From childhood, they are accustomed to being comfortable with strangers, that is, with people outside the family. Children are encouraged to attend birthday parties, club evenings and all kinds of social gatherings. Every festival is a social festival. Even the Sunday church is more of a social occasion. Children are taught the meaning of formal dress and the meaning of society.

Of course, the last few decades have seen enormous changes in this.

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Life, in India, is changing. The western way of life is here and is becoming more and more an essential part of commerce and trade. People nowadays do more business over lunch and dinner, than in the office. Now, if one of my readers is happy remaining a shopkeeper, you can forget all of this, but if you want to grow to be a business leader, you have to have friends. Friends of all sorts and everywhere.

Forget Working your Way up! Huh? It seems I am getting into the habit of saying something that sounds silly. Who in his right mind would advise you not to work your way up? Well, read on. Here is something interesting for you. Say, you are trying to make a sale. It could be your idea for a new project or even a new assembly line of machines. You have made your presentation and you feel that your prospect responded well to your presentation. So, you’ve made a sale, got the job, or obtained the funding you were looking for. Right? Wrong! In the modern world, you already know—most likely from experience—what usually happens next. You don’t yet get what you’re after. Instead, you get the chance to make your presentation again, to someone higher up in the chain of command. Think about this for a moment. If you’re very good, and if the person you made your presentation to, was paying enough attention to realise that you have something valuable to offer, then your reward is the chance to do it all over again in front of somebody else, who is a little higher up in position. You already know what often happens after that. While there’s a chance that you’ll be speaking to some of the same people you’ve dealt with already, you’ll be doing so before one or more strangers. And for these people you’ll have to begin your presentation from the scratch. If this ‘somebody else’ is impressed by your second presentation—and if they have the time, the willingness, the interest, the authority and the gumption to pursue your proposal within the organisation—do you then get the job, the sale or the assistance? Most likely, not yet. They tell you that they will talk to the top management and let you know. Sounds familiar? This is what I call the bottom-up approach, and is possibly the best case scenario for anyone who is following this approach. Also, notice that you still haven’t gotten the sale, the job, or whatever. Let’s say that you’ve made your presentation, have done a good job of positioning yourself and/or the product or service you’re offering, and you’ve clearly demonstrated that what you’re offering your prospect, addresses their needs, goals and objectives very well. You’ve created a groundswell of support, and it seems your prospect will make a decision in your favour. Now, what could go wrong? All too often, here’s what happens next. Along comes your competition—either another company in the same industry or someone else who wants the same job, or the funding. Except that, they are coming in with a difference. They have got a connection, a referral, or some other ‘in’. Maybe, they


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know someone who plays golf with the head of the company. Or maybe, they have done business with (or worked for) the organisation before. Whatever the connection, they breeze in at a level way above from where you began—and, most likely, above where you are now—and quickly sew up the deal, the job, or the assistance, even before the top bosses even get to know about your proposal. And where does this leave you? Dead in the water. Sure, I may have exaggerated the scenario and this does not happen every time. But it does happen often enough that I can bet you predicted it as you were reading it. This is where your social skills come in. If you observe what the bottom-up approach is exactly, it becomes obvious why it is so ineffective in the modern world. The bottom-up approach involves approaching the person with the least amount of power, authority and decision making ability—and then slowly working your way up. Most of us have been taught to target one person/client at a time, make our best effort and then follow up for a response. But, in the highly competitive globalised world that we are living in now, the bottom-up approach is just about the slowest, most indirect and most roundabout approach you can take. Nevertheless, it is what most of us have been taught, as the proper way to do things.

Learning Social Skills Remember what I said earlier: It is not about how comfortable you feel with people you have just met; but about how comfortable they feel with you. I have seen many simple and unassuming people do a superb job of going out and getting a job done, by simply making people feel comfortable with them. You must learn to create an ambience, an environment or a circumstance where others try to make friends with you, to seek your help or use the services provided by you. I must tell you about a lesson I learnt about social skills from a young Chinese girl who was my secretary when I was at Kuala Lumpur. I was running a unit for making ultra fine gauges of enamelled copper wires for electronic industries and we made a stupid mistake while testing one of our batches. It was a durability test with the result normally taking three days. As luck would have it, before we could find out that some of the material in the batch was defective, it had been shipped to Hong Kong and the customer there had already started using it. In cases like this, it is understood that we would be liable for compensation, but a lot depends upon how vindictive the customer is. For a stupid mistake like this, he could easily drive a small unit like mine, to bankruptcy. Before we could take any remedial measures, I got a very nasty message from the customer that he was on his way to Europe with his wife and would be in Kuala Lumpur that very evening. He made it clear that the only reason he was coming here was to chop off my head! I called a meeting of my engineers but we already knew that we were in the wrong and all that we could hope for was an equitable settlement with the client. I had four of my executives in front of me, all Indians: One from India and the other three local Malaysian Indians. I suggested that instead of me going to the airport, it would be better

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if an executive went, preferably with his wife, to receive Mr and Mrs Wong. Since my wife was not in Kuala Lumpur at the time, the idea was that if a couple took the very elderly visitors to their hotel and then to dinner, and showed them around, this may remove some of the sting of the punishment that was sure to come. I wanted a volunteer who would be with them for the entire evening and somehow bring them to the office the next day in a little mellow mood. That was all I could hope for. Here, I was let down by my executives. At the back of my mind, I knew that none of the wives would be comfortable with a foreign, Chinese couple. Then, we were surprised when Yoke Chan, my secretary, walked to where we were all sitting. She had been listening to our conversation and volunteered. I knew she had been married for just over a year and her husband was a mechanic in another factory nearby. They were simple folks and not used to going to posh places, but in my heart, I knew she would do the job. Well, that is exactly what happened. That night I could not sleep. Obviously, I was very restless and after pacing in the verandah I went to my study to read. But it was all useless. I was too tense. Then, a little before midnight, I was jolted by the sudden ringing of the doorbell. I was not in a state to think about what I was doing and went to the door in my dressing gown. I saw a very well dressed, elderly Chinese couple standing there. Though I had never met them before, I knew it was Mr and Mrs Wong. Their expression gave it all away, I knew Yoke Chan had worked a miracle. He tried to be stern and walked into the flat without saying hello and asked, ‘Where is your kitchen? I need a knife to cut off your head!’ But as I said, his expression had told me everything. I looked behind them to see if Yoke Chan and her husband were there but Wong told me that he had sent them away. Wong had a delightful way of putting things. He said, ‘No business talks tonight. I know what sort of a fellow you are and what sort of a company you run, so we do not want to have much to do with you. We have booked on an early morning flight out of here. We see no point in staying here any longer.’ All the while he was trying to keep a stern face but he almost said it with a smirk. ‘Do you have something decent to drink around here?’ Then looking at my still stunned expression, he continued, ‘Your girl has told me that a replacement lot has already been sent. I will send you the rejected stuff and my accountants will tell you the extent of the damage you have caused me. So no more business talks and where is our drink?’ While we sat to have a drink, the story came out. Wong had decided to treat this as an honest mistake, and had come to my flat to meet me and shake hands as friends, and since there was nothing much to work out, they were simply leaving earlier than scheduled. He explained that he fully understood why I had not gone to the airport and that, if he were in my place, being a manufacturer himself, he would have done the same. But when Yoke Chan met them, introduced herself and her husband at the airport, and offered to shake hands, they were surprised to find that her hand was ice-cold! The poor child was scared stiff! For what? Mrs Wong immediately put her arms around her shoulders and gave her a small hug. Here was a mere secretary, sent on a simple errand to receive visitors, scared stiff because the company was likely to be in some sort of trouble! Mrs Wong said they were touched by the honesty and the depth of feeling the young girl had for the company and obviously, for the management. Just by her attitude and conduct, she captured the emotions of the elderly visitors and the rest of the evening; they were all just like one family. I learnt a strong lesson that day.


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Can I tell you what I think Yoke Chan did to win over the visitors? Nothing! Absolutely nothing! She did nothing apart from being her natural unassuming self. She did not pretend to be what she was not, she did not pretend to be an important executive sent to explain matters, nor did she go out of her way to see that the visitors had a good time and enjoyed themselves. True, she had spoken about me and the company, but only as a part of the conversation and not to plead any case. This had won the day. Sincerity of purpose and basic strength of your feelings is all that you need to get your point across. That is what social skills is all about. Long arguments, stunts and pretences are short-term and, in the end, quite useless. So, as an answer to the question I posed earlier on how to learn social skills, I close this section by saying that the only one, who can teach you how to do this, is you.

II: Other Soft Skills Changing Careers Until very recently, people often changed their jobs, but relatively few changed their careers. You were a Chartered Accountant and you were an accountant for life. Mention an entrepreneur starting a new project and immediately the picture in one’s mind was that of an engineer. People would decide on a career and that remained for life. People who did change careers were considered unstable, untrustworthy, irresponsible or desperate. Now, in India and throughout the world, the general employment conditions have changed—that changing careers is no longer considered an exception to the rule. Today, people often change their employers, job titles or employment basis (for example, from employee to self-employed). Obviously, there are a number of factors to consider before you change careers. If you have decided that you want a change, you should undergo some self-examination and be aware of why you want the change. Surely, being bored or being in a rut would be a good reason, but change in career or position may not necessarily be the answer. No doubt about it. We are living in the changing times. Some of the changes are within our control, and some are not. You need to be ready to accept and even anticipate these changes. You need to be proactive in your career management. And for this, you need skills that were not required by your parents. Because, the entire career scenario has changed. Look at the jobs your parents did or the job which someone did five or 10 years ago. These jobs may not exist at all today, or if they do, they will likely be unrecognised from what they were back then. Also, consider the job you are doing today. Did it exist 10 years ago? If it did, is it the same as it was when you started? Was it the same as even, say, three years ago? What I am saying simply recognises the trends and extrapolates them over time.

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There are three factors that are inherently good for the world at large. They are Globalisation, Open competition and Technology. Like most good things, they come with a price, one is paid in human currency, unemployment or, at best, redeployment. You may be in a splendid job, or you may be in the process of setting up what seems to be a superb project, or anything in between, but whatever your circumstances today, you cannot be sure what changes these three factors, and a host of more visible ‘threats’ or ‘opportunities’ will bring. These factors are increasingly shaping the world we live and work in, at an accelerating rate because they eliminate (but also create) jobs faster than ever before. Jobs are changing at a pace never known before. Your supervisor may change, your budget may be cut or your department may be closed. A year ago, this was your ideal job; today, there is no job at all. The impact of these factors on the world at large and on employment markets in particular, are nothing short of staggering. If you are smart, you will learn to pay more attention to how these factors are affecting you and your job situation, regardless of the present. z

This is what I mean by learning other soft skills.

Contrary to how corporations operated a generation or even five to 10 years ago, when jobs were often in the same organisation from cradle to the grave and there was no need to worry about job security because ‘either the company or the union will take care of me,’ today’s situation is different. There are still a handful of companies which treat their employees this way, but they are few and if you are employed in one of them, do not make the mistake of thinking that you are safe, because no one is. The reason is that companies must respond to the factors I have mentioned and the typical response is to cut the number of heads on the payroll, something often roundly applauded by the financial markets. The people affected by these changes are thrown on the scrap heap, some are left with no place to go. Many are too underqualified and/or overaged to have much hope of getting rehired.

Managing your Career Managing your career is not something you do once every 10 years. In the days of corporate paternalism, some people never thought about their careers as something to be managed. They took up whatever job came along, or their company managed their careers for them. In India, even the oldest family-owned and managed firms, even the most paternalistic of employers have completely revised their thinking in this area. They did not necessarily want to, but they have been forced to, in order to compete (or even survive).


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This is not the case only in India. In Japan and other parts of Asia, where paternalism has always been a way of life far beyond what it has ever been in the West, this philosophy no longer enjoys the same degree of support. The market is far too dynamic, to rely on your employer to plan your career. Your boss and his boss are too busy thinking about competing, succeeding and self-preservation to give due thought to your future. One simple reason for this is that often your boss is in the same boat: no one is thinking about his career! Of course, many bosses rightly consider their staff as their greatest assets, but in times of trouble, they can become their greatest liability and indeed, are the most ‘controllable’ expense, the one most able to be cut at short notice in response to market pressures. I am talking to our youngsters who need to be aware of the changing facts of life. If your career needs a pick-me-up, it does not necessarily mean leaving your present company or even your present job, but it does mean learning how you can respond best to today’s environment.

Lifestyle and Work Ethic I meet many young people, or young professionals, who are in a dilemma regarding how to behave in society, and more important, in their workplace. The dilemma arises out of the fact that the world is getting unleashed into India and India is changing. People of all races are coming into our country and influencing everything from how we work and how we spend our leisure time. Our youngsters realise that they have to change, but how much? How much of their traditions, their own way of life they can keep and how much should they westernise? Well, before globalisation, when international business in India was mostly in western hands, the more a person gave up his traditions and became westernised, the better were his chances of success. Invariably, one felt that the bosses from the West expect one to be westernised. This was certainly true of the earlier generations, but now that has changed. Rampant globalisation has changed it. Now you will find that the firms from the West are changing in their attitudes. This will create a bit of a problem for you. Please remember that if you are working for or dealing with an MNC, the boss may not be white: you might be living and working with Koreans; dealing with the Chinese; working with the Japanese or even dealing with West Indian Blacks. This is even more relevant if you are planning to do something outside India. Surely, this makes the rules of the game confusing as the Germans do not live like the Chinese, and either do not live like the Americans. But there is one thing in common: All of these respect their own traditions and way of life. This means that because the bosses in the New World, particularly from the East, are themselves intensely nationalistic and traditional, they hate people who easily give up their traditions. They do not like to see youngsters merely aping them. You get more respect if you are good at your own traditions.

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I will confuse you a bit here. I need to make it clear that by traditions, I mean lifestyle. You have to understand the difference between your traditional lifestyle and your traditional work ethic. Here my motto is: ‘When living with foreigners, you do not have to live like them, but when working with them, you certainly have to work like them.’

Understanding Work, Mindset and Work Culture I will explain what I said in the preceding paragraph in some detail as this is an important point. You have to understand the difference between what is meant by lifestyle and what is meant by work ethic. Please note that I am not talking about business ethics. That is a different subject and beyond the scope of this book. I am talking about what is called work ethic—our attitude to work and that towards earning our livelihood. So far as lifestyle is concerned, people from almost all successful nations of the world are here in India, and have their own traditional lifestyles. You will notice that most of the people from the West—Americans, Europeans, and so on do have more or less a similar lifestyle. This is what we call the Western way of life, and as I said earlier, this is what we can see and understand, but do not have to copy. But, coming to work ethics, you will see that each western nation has a markedly different attitude to work. Look at the Germans and compare them with, say, the Italians. Look at the way the Germans design and produce their goods, their sometimes unnecessary rigid standards of quality control and incorporation of long-term durability that is the integral part of anything they make. Compare this with the Italians, and the picture is vastly different. I do not say that the Italians are better or worse: that is certainly not the point here. What we are saying is that they are different. If you go on to compare either of these to, say, the Greeks or the Portuguese, the picture becomes unrecognisable. You would be wondering about the point of this discussion, and what it has to do with soft skills. Well, if you have to make a success out of whatever you are doing; if you have to compete and win, it is essential that you understand the mindsets of many people; understand how these people think; how they behave, and how they do business. The essential tool for this is soft skills—skills that cannot be acquired from any text books.

Learning from other People When we are at home, surrounded by our own people, with similar habits and attitudes, we see everybody doing the same thing the same way, so we do not take any particular notice of what we are doing. I realised this very early in my professional career during my first trip out of India. Let me tell you about this:


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The first time I left India, I went to Bangkok. I had taken my lunch at a roadside café and bought a couple of apples from a roadside vendor and kept them in my bag. It was early afternoon, the weather was good and since I had some time to kill before my next appointment, I casually started walking down an almost a deserted street. I took an apple from my bag and started eating it. After one bite, I found that the apple was rotten. I casually threw it away and was just going to take another from my bag when I felt a tap on my shoulder. It was an old man, simply and decently dressed. He smiled, folded his hands in the traditional Thai greeting, Swaddi Khrab, and bowed from his waist. I smiled back but could not understand what it was all about. Then, he took a tissue paper from his pocket, went and picked up the apple I had carelessly discarded, walked to a rubbish bin a few feet away, dumped the apple in it, and smiled back at me. He bowed again and walked away.

This old man had given me a stinging slap on my face. Till today I have not forgotten it. Since then, I have never thrown even a piece of crumpled paper, anywhere except in a rubbish bin—be it at home, in the office, or on the street. z

The point I am trying to make is this: I was doing something nasty routinely and without thinking, simply because ‘we all do it’ until I was exposed to an alien atmosphere, was shown how others do the same thing, and learnt my lesson.

I feel I am, in a small way, a better person: I have not merely improved but upgraded myself. This, my readers, is my message for you. The more you become close to people who are not what you may call your own people, and the more you get exposed to the environment away from home, the more you can change.

Teaching Yourself Note that I said that you can change. Whether you use this type of opportunity to upgrade yourself and change depends entirely upon you. Are you one of those who often says, ‘I can’t’, ‘Not with my luck,’ or ‘Nothing ever goes right for me’? If you are, you are certainly in the majority. However, it also means you are not fulfilling your potential, because that is also the category the majority are in. I am sure you do not lack the desire to succeed. All of us have hopes and dreams, but few are able to realise them because we use the wrong tools. The problem is that most of us do not know what the proper tools are or how to use them. So, our dreams remain just that. In this book, I will ask you to entertain several new ideas, some of which you might find silly or wrong. But keep an open mind. Do not reject the ideas on sight. Think about them. Try them out. You need not apply all of them. Choose the ones that apply best to your situation, but apply them with enthusiasm and conviction, and direct all your action towards your specific concrete goal.

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You may be shy. You may be nervous about meeting new people (sweaty palms, bowed head and pounding heart). But to make progress in life, and certainly in the job hunt, you must be comfortable with meeting new people. Other people are, undoubtedly, the key to your success. I repeat this throughout the book and make no apologies for doing so. It is truly vital. You will need to get over your shyness and not let your feelings of inadequacy stop you from getting what you want. People often cannot stand being alone and simply must be in a crowd. Such people usually have a poor self image and lack confidence. Many people spend much of their time alone. They should spend a necessary proportion of this time trying to understand themselves. What do you want to do, have and be? This self-analysis is extremely important. Learn how to entertain yourself. If you are prepared to entertain these things in your life, you are already way ahead of the pack.

Preamble

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5 New Communication Skills for Entrepreneurs

This chapter is divided into two sections after the Introduction. Section I: A general discussion on communication skills. Section II: A practical training using the acronym SLURP-TEA to explain the fiveplus-three mantras.

Introduction I want to talk about what I consider to be a serious handicap for the promising next generation of professionals in India. What I noticed and have started feeling very strongly about is that in many developing countries, from Malaysia to Fiji to Africa to the West Indies, nations that have youngsters of Indian origin who were born there, did well only as petty traders and invariably lost out in professional situations to people of other races. I have myself been an employer and have worked with many employers of small, medium and large projects in these countries. I found that though our boys and girls, the next generation of India, are way ahead of almost everybody else in the world in intellect, calibre, talent and sheer capacity for back-breaking hard work, we are losing out in open international competitive situations. Sure, there are outstanding exceptions but this is true even now, back in India. I am not talking of the IT professionals going to the US. Our success in IT is a very recent

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phenomenon and confined to a very narrow spectrum of professionals. I am talking about what I found over the years, across a wide spectrum of professions—accountants, civil engineers, architects, pharmacists and so on—in many developing countries including India. The problem is serious and what has been true over the years is true even today, and what was true overseas is now becoming true right here in India. Sure, some of our boys and girls are facing the challenges superbly, but there seem to be some glaring shortcomings regarding communication skills. I wish to make it clear that I am talking of this handicap in the context of modern India. Both the employment scenario and the entrepreneurial world have changed beyond recognition. z

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As long as the employment scenario is concerned, you are no longer competing only with other Indians. One does not have to go overseas to meet the world. The world has got unleashed into India and the best in the world in almost every field are here and these are the fellows our next generation will be competing with. On the entrepreneurial side, the days of setting up a new enterprise in India merely as a retail or wholesale outlet, a plastic factory or a printing press are long gone. Considering the degree of sophistication needed to be a successful entrepreneur today, the person needs a different kind of personal skills.

These essential personal skills are neither taught anywhere nor can be learnt by the youngsters by emulating successful Indian entrepreneurs as role models. The older entrepreneurs succeeded in a very different India and needed to have very different kinds of skills. I have thought a lot about this and to me lack of communication skills means three things: z

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First, I find it strange that though our youngsters are often better educated, they lose out when it comes to putting their thoughts on paper in a concise readable manner. Speaking good English is one thing, writing it well is quite another. Again, when it comes to writing, our brilliant youngsters are handicapped while using computers, because they are not good at touch typing. While children of most countries are taught touch typing as a compulsory subject in schools, Indians consider ‘learning typing’ a degrading term. Then, there is a serious lack of personal skills. Though our youngsters are very friendly, they make friends mostly with their own people and seem to be uncomfortable while interacting with people of other races. (We will talk about this in the next chapter.)

I: General Discussion For the young entrepreneurs, India is now a very different place.

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My strong message to you youngsters is that, in the New World, as managers and entrepreneurs, your brilliance and technical skill will be of no use if you cannot express yourself on paper. Everything boils down to the quality and lucidness of your memos, reports, multimedia presentations or even a briefing to your senior management. Everything boils down to how you get your point of view across, and there is no way you can do this unless you first put it down on paper, and keep editing and polishing it till you get it exactly right. There are no shortcuts to the power of the written word.

I am not talking of the power of the pen here: I am not talking about journalism; nor am I talking about writing powerful speeches. I am talking of a basic skill that is crucial to the growth of an entrepreneur or an executive in the globalised business environment of India; that is, being able to communicate one’s thoughts and ideas effectively, using a variety of tools and media. You will need to develop and use this skill especially, when you start working in the big wide world. It is often said that technical people do not possess the ability to communicate well. Of course that is a load of nonsense. The problem of poor communication is complex and cannot be solved by a single book, a course and certainly not by this short guide. We will point out the critical elements and questions to think about. The idea is to get you to start thinking in a new direction. I talk to postgraduate engineering, management and tourism students across India. Sure, they are already graduates and are training to become managers, but I am amazed at the picture they have in their minds about their life as managers, and that of the ‘paperwork’ being left for junior clerks and stenos. I need to remind you that the very word ‘manager’ nowadays conjures an image of a desk and, maybe, a cabin. This means paperwork. Every meeting that you attend would mean presentations and that means paperwork. And, that is what you will be doing day in and day out, because the days of secretaries and stenos are over. No matter what profession you get into: You may be a marketing specialist, an accounts executive, an engineering shop floor supervisor, a self-employed entrepreneur, or even a banker, you will have a desk and on that there will be a computer. A better part of your working day would be spent working on and reading and writing reports, memos, comments, analysis and recommendations. You cannot get away from it. At the end of the day, everything would boil down to paperwork. Gone are the days when it was just you and your boss in the firm and you spoke to each other many times a day. Now, your boss or an important customer or a difficult supplier may be in another city or even in another country. And, often there would often be times when you have to put your point across to someone through a powerful memo. And, that memo cannot be more than a couple of pages. You may be fluent in English and may have the power of persuading people, but presenting strong arguments delicately in a couple of pages is not easy. This is what I mean by the power of the written word: The quality of your memos, reports and presentations often would make or break your career. Your own words are the bricks and mortar of the dreams you want to realise. Your words are the greatest power

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you have. The words you choose and use will establish the direction your life and your aspirations will take. And, the higher up you get the more crucial this becomes. z

I am going to give you some mantras to help you on your way; I am also going to give you an easy to remember acronym for these. On the face of it, they would appear ridiculously simple and out of place in a book like this. But, the higher you get in corporate life, or, the more ambitious entrepreneurial projects you start to tackle, the more you are going to need these.

Before that, I am going to give you some pointers on writing skills, then on presentation skills and then give you what I call five-plus-three mantras.

Writing Skills for Entrepreneurs Writing is a complex tool for executives and managers. You need to train yourself in its use or a large proportion of your professional activity will be grossly inefficient. You must reflect upon your writing lest it reflects badly upon you. I have explained above how it is absolutely vital for you as a young executive or an entrepreneur to actively develop the skill of writing; not only because of the time involved, but also because your project’s success may entirely depend upon it. Indeed, since the business environment in India is changing, and a lot of communication between you and the senior management would be occurring in writing, your entire career may depend upon its quality. The most significant point about writing skills in management is that it is completely different from what most people were taught about writing, and it is important that you recognise and understand this difference. Management writing has very little to do with the composition and literature you learnt at school: the objectives are different; the audience has different needs; and the rewards can be far greater. As a young executive or an entrepreneur, you write for a very distinct and restricted purpose, which is best achieved through brevity and simplicity. In school you are taught to display knowledge: knowledge of English and the topic being written about. The more information and argument you wrote, the more marks you got. In industry, it is exactly the reverse. Here the wise executive must extract only the significant information and support it with only the minimum amount of argument. The expertise is used to filter the information and remove the ‘distracting noise.’ People in business do not have the time to marvel at flowery language or your poetic imagery. They quickly want to know what the memo is about; there is no real interest in style, except for ease of access. Your report or memo is primarily designed to convey information. Sure, your job is helped if the report is interesting; but time is short and the sooner the meat of the document is reached, the better. Today’s senior managers have a lot to do all the time; they are busy and distracted. On a top manager’s table, your document has possibly 20 seconds to justify itself. If by then it has not explained itself and convinced someone that they need to read it, they will go on to tackle something else. If this person is a good manager, he will insist on a rewrite; if not, the document may never be read.


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Thus the beginning of your document is crucial. It must be made obvious to the reader what the document is about, and why it should be read.

You start with your aim. Every document must have a single aim—a specific, specified reason for being written. Once you have established your aim, you must then decide what information is necessary in achieving that aim. The reader wants to quickly find the outcome of your thoughts. So, apply your expertise to the available information, pick out the very few facts which are relevant and state them precisely and concisely. Writing can be very powerful—and for this reason, it can be exploited in management. It all comes down to the problem of busy people and their short attention span. You have to provide the information in small manageable chunks. When you have decided what to say, to whom you are saying it, and how to structure it; put it on paper in whatever form that first comes to your mind and then edit and polish it again and again till you are happy with its clarity and effectiveness. The time spent doing this will be far less than the time wasted by the others while struggling with a verbose and unreadable document.

Presentation Skills for Entrepreneurs It is important to understand that the central issue in communication is not the transmission but the reception. In multimedia presentation, be it a performance analysis presented to a board of directors, a new project proposal presented to senior managers or investors, or a new work scheme presented to staff members, the whole preparation, presentation and content of speech must therefore be geared not towards the speaker but to the audience. In other words, it does not matter how well you made the presentation, all that matters is how well the audience reacted to it. The presentation of a perfect project plan is a failure if it is not in a language simple enough for the audience to understand. The objective of communication is to make your message understood and remembered. z

The calibre of your presentation should be such that no one should argue with you or ask you questions: They should only seek clarifications.

In this, it is difficult to overestimate the importance of careful preparation. Five minutes on the floor in front of senior management could make or break several months of hard work by the executive and his team. With so much at stake, the presenter must concentrate not only upon the facts being presented but upon the style, pace, tone and ultimately, the tactics which should be used. The next task is to consider the audience. Begin by identifying their aims and objectives for attending your presentation. Think about why they are there. If you can somehow convince them, without actually saying so, that you understand that they are busy people and that you are there to give them something they want, you will not only find a helpful and receptive audience, but will also be able to easily achieve your own objectives.

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This is not as simple as it seems. This task of matching with the aims of the audience goes beyond the simple salesmanship of an idea—it is the task of obtaining their attention right in the beginning in the simplest and most effective manner. As I said, if your opening remarks should imply, in a subtle manner, that you understand their problem, or desire or plan or whatever, and that you have a solution, then they will be attentive to your every word. If you can win over the audience in the first minute, you will keep them for the remainder. You should plan exactly how you wish to appear before them and use the beginning to establish that relationship. You may be presenting yourself as their friend, as an expert, perhaps even as a loyal and trusted employee, but whatever role you choose you must establish it at the very beginning. Also, please remember that the final impression you make on the audience is as crucial as the first. The final impression is the one they will remember, so do not neglect planning your last few sentences. This should be done with extreme care. As with the beginning, where you managed to get their attention, it is important to hold their attention which may have wandered. This may require a change of pace, a new visual aid or perhaps the introduction of one final culminating idea. In some cases, the ending can well be the summary of the main points of the talk, but here you need to be extremely careful as this is also one of the greatest mistakes you can make. If you tell the audience that this is going to be a summary, they will simply switch off, at that very moment. Indeed, the style of concluding would depend upon your topic and your personal manner of presentation. I always try that the ending comes unexpectedly with a flourish, with the pace and voice leading the audience through the final crescendo onto the inevitable conclusion. It is only then that the final vital phrase will be left hanging in the air and ringing through their memories for a long time. Whatever you say and present; it is you, who will remain the focus of the audience’s attention. So, there is no substitute for a rehearsal. You can do it in front of a mirror, or in an empty room. In both cases, you should accentuate your gestures and vocal projection so that you get used to the sound and sight of yourself.

II: The Five-Plus-Three Mantra I am going to give an easy way for remembering this. Here are: z z

Five mantras that would address the power of your presentations, and Three mantras that would be more specific for written reports and memos.

An easy way of remembering these mantras is to take your mind to a shop or an office of a small businessman in North India. When you meet him, he invariably will offer you a cup of tea. Remember he does this for many visitors during his working day, so he orders only one cup of tea and offers to share a few sips with you. He will pour out a small quantity into the saucer and offer the almost full cup to you. While you are

New Communication Skills for Entrepreneurs

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having your tea, he will sip from the saucer. I will be a little rude here and say that he will slurp from the saucer, because that is the exact description of what he does. So, the easy to remember acronym for you is SLURP-TEA.

SLURP-TEA The First Part: SLURP The first part of this acronym is SLURP. This is an easy-to-remember acronym for the five mantras for making your multimedia presentations more effective. These mantras—See, Listen, Understand, Remember and Ponder—are not what you should do, rather, what you should make your audience do. Also, these mantras are not stand-alone activities but are stages of a powerful presentation. We will come to the second part, TEA, later on. This is an acronym for three mantras for improving your writing skills. S—See The first contact that your audience has is with you and for them the main difference between reading a report and attending a presentation is that they are looking at you and at what you are showing them. Both presentations and reports are ways of communicating ideas and information, but unlike a report, a presentation carries your personality and gives you an opportunity to interact with others. You must make sure that you capture their interest and whatever your audience sees, they should find interesting. As I said earlier, it is you, who will remain the main focus of the audience’s attention, and so you must concentrate not only on the facts you are presenting but on your style, pace, tone and ultimately, the tactics. Of course, like the overhead projector of the past, you will be using multimedia devices to project your information onto a screen. Here is a thought. Say, you are projecting six points that you wish to highlight and explain. The biggest mistake you can make is to list out the points, or the headings and project them all on the screen. While you are reading and explaining the second point, someone in the audience is reading the sixth point and wondering what it means. This person did not hear what you said and by the time you come to the last point, you have lost him. This happens all the time. So what is to be done? I do not have an easy answer to that, except to point out that this is an inherent danger while using projection devices to project text. How would you solve this, and how much would you rely on what you project on the screen would very much depend upon your own personality and presentation style and how you make everything interesting to watch. I am sure you have watched hundreds of presentations. Think back not on what was said but how it was said. Think back and make a list of the things you would not do and you are on your way. My style is that I try to make my presentations a fun event. I use them as my chance to speak my mind, strut my stuff and tell the people what I think they have come to listen to. For me, the eyes are the keys to the soul and I use them as an effective weapon

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for convincing the audience of my honesty, openness and confidence in the objectives of my presentation. Sure, in real life, one often has to fake it, and how effectively you can do it, of course, depends upon your own personality. During the presentation, establishing eye contact with each and every member of the audience as often as possible is an excellent method of enhancing your rapport with the audience. For small groups this is easily possible but it can also be achieved in large auditoriums since the further a person is from you, the harder it is to tell precisely where he or she is looking. Thus by simply staring at a group of people at the back of the hall or room, it is possible to convince each of them individually that he or she is the object of your attention. All said and done, your presentation puts you on display. If you are a young entrepreneur and are talking to your newly recruited staff, they probably need to see evidence of decisive planning and leadership and you need to make them confident of your position as their manager. Only then will they be motivated and inspired to undertake the tasks which you are presenting. If you are a young executive presenting a new idea for a project, project leaders from other sections need to be persuaded on the merits of your project and to provide necessary support. Senior management should be impressed by your skill and ability so that they provide the resources to enable you and your team to get on with the job. L—Listen The situation here is quite similar to what I said before about seeing, because, unlike reading a report, the audience expects to see and hear something interesting. The main problem here is, of course, the people to whom you are talking. The average human being has a very short attention span and a million other things to think about. Your job in the presentation is to reach through this mental fog and to hold the attention long enough to make your point. One of the most irritating things I have noticed about people who use PowerPoint or other multimedia devices is that they have written their speech on the computer and merely read out the points as they are projected. Instead of facing and talking to the audience, thereby holding their interest, they make the fatal mistake of turning their back to them and, pointer in hand, talk to the screen. Nothing could be more boring. I wonder why these people do not simply print out the PowerPoint file, distribute it to the audience and go home! Sure, there are presentations where it is crucial to use graphs, tables or illustrations, and the advantage of this is that the audience knows this and looks forward to the complexities being explained to them. The trick here is to realise that the audience is already reading what you have projected on the screen and your job is to explain it and not to read it out to them again. If you do this by facing them and not reading out from the screen, you will reinforce the impression that you know what you are talking about. Here again, I will repeat that the important part is—practice, practice and practice. You should know your presentation so well, that during the actual presentation, you should only have to briefly glance at your notes or the screen to see that you are on track. But never read from your notes.


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There is also the question of your fluency in the English language. I meet many students and executives, particularly from the rural areas, who say that they can read and understand English easily but they face problems when it comes to writing and speaking. I will give some suggestions through the three mantras under the acronym TEA.

I have already explained about the importance of eye contact. After this comes the voice contact. I have known very few people who can take their ordinary conversation voice and put it on stage. In an ordinary conversation you can see from the expression, perhaps a subtle movement of the eye, when a word or phrase has been missed or misunderstood. In front of an audience you have to make sure that this never happens. My simple advice is to slow down and take your time. The voice is probably the most valuable tool of the presenter. It carries the content that the audience takes away. One of the oddities of speech is that we can easily tell others what is wrong with their voice, for example, too fast, too high, too soft and so on, but we have trouble listening to and changing our own voices. Remember the audience is constrained by good manners to not cut in and interrupt you, so there is no need to maintain a constant flow of sound. A safe style is to be slightly louder and slightly slower than you would be in an informal chat. And, you can adjust this by watching the audience. A monotone speech is both boring and soporific, so it is important to vary the pitch and speed of your presentation. At the very least, each new subsection should be preceded by a pause and maybe a change in tone. My own experience of talking to students in India is that the students who failed to get the point I was making did so because they were not aware of what they were looking for. If the audience knows when to listen, they will. So I tell them: ‘…the important point is…’ Another thing I have found useful is repetition. I have told you that the average audiences are people who are busy and are easily distracted; their attention may slip during the most important message of your speech—so use repetition. You don’t have to necessarily use the resonant tonal sounds of the repeated phrase, but simply make the point again, and again, and again, with different explanations and in different ways. I saw a cartoon on the Internet about a British Sergeant Major. ‘First you tell ’em what you are going to tell ’em, then you tell ’em, what you told ’em!’ U—Understand What is said in the preceding section is fine as far as it goes. These were the first two stages of a powerful presentation. Sure, you must make the audience see and listen to something interesting but it is of no use if they have not understood much. This is not easy but it is the whole point of the exercise. Finding what you say interesting is one thing, understanding it is quite another. You need to make a careful point of knowing who you are talking to and then making sure you only talk in a language they understand. You may be talking to your board members about a new project, but if they are all businessmen and financiers, and you talk hard core engineering, you are sure to have your proposal rejected. I have attended many presentations where it was clear that the line of thought and the string of arguments were clear and logical only to the presenter. The reasoning made

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sense only to him and we as the audience felt lost. We had to work hard to find our way through the information. These presenters forgot that it is only when the audience will have to apply the least mental effort and where the facts are presented in an easily digestible form that they will be able to receive a positive response. Then there is another problem that is a fact of life in most organisations—the problem of a hostile audience. Often, the young entrepreneur or executive is faced with an audience that does not want to listen or understand. They are there merely because they have been ordered to be there. Say, the entrepreneur has been working on a project that has come up against vested interests and so is unpopular, or, there has been a serious problem in a particular department and the executive concerned is faced with the problem of presenting his point of view. There is no easy formula for handling this kind of an audience. What will work for me will not work for you, but the basic fact remains that no one can remain immune to a show of sincerity and honesty. If the audience feels that you are sincere in your efforts to get them to understand what actually happened, you will win the day. How you make them feel this way is your business. As I said, what works for me will not work for you. R—Remember Now we come to a very difficult stage. You made what the audience saw and heard interesting, and then you got through to them and made sure that they understood what it was all about. That was not merely good: It was excellent! What you have done so far is not easy. But then, these stages would work out fine if you are acting in a theatre or have been called to entertain people in an after-dinner speech. Nobody needs to remember anything, except that it was fun. The crucial aspect of a professional presentation, be it a position paper presented to a board of directors, a new project proposal presented to senior managers or investors, or a new work scheme presented to staff members, is that the points you made should sink in, people should take them home with them and keep turning over in their minds what you said: In simple words, they should remember what you said. I know that the art of making presentations is a compulsory subject in most postgraduate management and engineering institutions across India. Every week a group of students are given a current topic, generally from a recent issue of Economic Times, and asked to make a presentation to the rest of the students. I have sat through many such presentations and find that at the end there are lots of discussions and even arguments but nobody asks a single question seeking clarification. The problem is this. The group of students that were asked to make the presentation read the same magazines and books and went to the same Internet sites as did the audience, and so the presenters only spoke about what the audience already knew. The result was that every one in the audience had their own point of view on the topic, there were arguments and discussions and nobody learnt anything new. I have said it time and again that before preparing for your presentation, make an assessment of the audience and how much they know about your topic. Never, ever, make the mistake of telling people what they already know. Remember you are not a group of friends chatting in a coffee shop where anyone can say anything—the people in front of you expect to hear something new from you.


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Try to crystallise your thoughts and combine your main message with some memorable phrase or imagery. Try the anecdotal type of presentation—weave everything into a story. Everyone loves a story, and stories can both instruct and convey a message: Ancient Hindu philosophy is recorded in its stories, and most religions were originally taught in parables. If you can weave your message into a story or a personal anecdote, it is easier to remember—even if the entire thing is fiction and you made it all up. If you but strut and fret your hour upon the stage and then are gone, no one will remember what you said. The presenter has the power to either kill the message or enhance it a hundred times beyond its worth. Your job is to use the potential of the presentation to ensure that the audience is motivated and inspired rather than disconcerted or distracted. P—Ponder There are presentations and presentations. Most are mere reporting of facts, an analysis of the situation or prattling away of the features of a product you are trying to sell. You have your say and that is that. z

But for an executive who knows he is on his way up, or for a young entrepreneur who wants to make his mark, no matter what, a presentation has only one objective: it should make people ponder.

These four stages above are a build-up to this, the most powerful tool you can have. Your presentation should have the clout and the punch to make people think. You should have presented something new and original, a new method of production, a new sales strategy, a proposal for a new range of products, or a solution to an irritating problem. And your proposal must have the calibre to be taken seriously. This can only happen if it is backed by your own determination to succeed, plus of course, your personality, your brains, training and years of experience gained out of sheer back breaking hard work. If I say that learning this skill is not easy, it would be a gross understatement. There are skills that cannot be taught and the art of making people ponder is certainly one of those. But look around you. This seems to be a characteristic of all the successful entrepreneurs and top executives: When these people say something, everyone shuts up and listens. You do not have to know the person, but if you listen to him for five minutes, you know he is somebody. Make this the end objective of your communication skills and you are on your way to the top.

Second Part: TEA The second part of this acronym is TEA. This is also an easy to remember acronym for the three mantras on making your writing more effective. Unlike the five mantras earlier, these three mantras, ‘ Typing, English and Attitude’ are about what you should be doing. Again, these mantras are not stand-alone activities but stages towards powerful writing.

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I have explained already that no matter what profession you get into, as a manager you will have a desk and on that will be a computer. You cannot get away for the fact that your job would mostly consist of working on, reading and writing reports, memos, comments, analysis and recommendations. Your success as an executive or an entrepreneur would often depend upon how you get your point of view across to a wide spectrum of people and there is no way you can do this unless you first put your thoughts down on paper, and keep editing and polishing it till you get it exactly right. Remember, you need to fully exploit the power of the written word because the people you are dealing with are successful people and these people are busy. They have short attention spans and there is no way anyone would wade through a 10 page memo. z

The way to do this is first to decide what to say, to whom you are saying it and how to structure it. Then put it all on paper in whatever form comes to your mind first and keep editing and polishing it again and again till you are happy with its clarity and effectiveness in a one page summary.

So now we come to the second part of the acronym, TEA—Typing, English and Attitude. T—Typing The first mantra is that you must learn what is called touch-typing or keyboarding—the proper use of the keyboard of our computer. You should be able to type effortlessly; you should be able to fluently transfer your thoughts onto the computer without looking down at the keyboard. While children of most countries are taught touch typing as a compulsory subject in schools, we Indians consider ‘learning typing’ a degrading technique. In India, if I suggest that it is good that your children learn typing, it has unfortunate connotations. ‘Hey, my child is not going to become a typist or a steno.’ The world has changed and India is changing too. It is with most developed countries and it is now with India too, that the corporate organisations can no longer afford to have secretaries, clerks, steno-typists, and so on, for the executives. It is a fact that even the chairmen of some of the larger companies type their own personal and confidential memos. It is my contention that if you are not really fluent in the use of the keyboard, you will feel handicapped in preparing reports, memos and presentations. The easy flow of thoughts and expressions will become severely limited, and of course, your output will be shorter and laborious. I need to repeat what I said above. Remember, you cannot prepare a powerful onepage memo unless you first put all your thoughts down on 10 or more pages and then edit, cut, polish and improve your presentation. And keep on doing this till your memo becomes an outstanding work of art. Only then can you be sure to get results. But if you are doing the two-finger ‘seek-and-you-shall-find’ method of typing, you will get tired and fed up after a couple of pages and the easy flow of ideas and persuasive arguments will dry up.


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Learning typewriting on the computer is no big deal. You do not have to join a typing school: You can learn at home and it is fun. There are many typing tutors available on the net and they can be downloaded for free. Also, you have typewriting tutors available on CDs in every computer shop and you do not need to spend more than 15 minutes every day for a couple of weeks. The surprising part is that these tutors make the whole thing into a game. I found it immensely enjoyable.

E—English The second mantra is that you must improve your English language skills. This is not as difficult as it appears and I will show you a simple trick to do this. Initially people wonder what I am talking about. Particularly when I say this even to students of prestigious business schools in India, students who are absolutely the cream of Indian youth. These are people who are fluent in English. They talk, fight and think in English. How is it possible that they cannot write good English? z

Well, talking, arguing and so on fluently in English is one thing; writing good, readable English, and getting your point across on paper is quite another.

Again, please remember that, as I have explained earlier, I am not talking of academic or journalistic standards of English. There is now something called Business English. You are not taught this in school. But this is what you are expected to use in letters and emails. Talking of emails, I regularly get them from students and junior executives some of whom are from prestigious institutions. Sure there are exceptions, but the average standard of English is atrocious. One of the reasons is that, people are not comfortable on the keyboard and are laboriously typing what they have to say. I think there is another reason too. I said in the earlier chapter that people from the rural areas, even when they can read and understand English easily, face problems when it comes to writing and speaking. When I ask the students how they can improve their English, I get all sorts of answers. To me, the only way of improving your command and your fluency of the English language is, not by reading, watching television, listening to other people or even by speaking, but only by writing. And another thing: There can be no better tutor for teaching you written and spoken English than yourself. I will give you a very simple way of first testing yourself and then teaching yourself how to improve your written English. You can follow that by improving your spoken English too. I suggest that you try this. A very simple and effective way of rapidly improving the fluency of your written English, and, a very simple way of testing yourself, is to spend fifteen minutes every day reading a single paragraph in a newspaper, a magazine or any sort of a write up. Read a paragraph, and read it three, four, five times. Pay attention to the language rather than the contents. And then, keep the paper or the magazine away. The trick is to step a few feet away from where you have kept the magazine, sit down and give yourself a couple of minutes to think. (Box continued)

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(Box continued) Don’t start writing immediately. Then, write what you have read. Do not write a summary, do not write about the ideas you read, write the exact language that you have read. Try to recall and then write the sentences as they were. Do not look at the original paper again. After writing it, show the original and what you have written to somebody else and you will be amazed at the mistakes you made. Now you can follow through and make an effort to improve your spoken English too. You will notice that by reading the paragraph a few times you have somewhat internalised it and if you try to read it aloud, you can read this more fluently than the other paragraphs that you read for the first time. So, go ahead and read this paragraph aloud and record yourself on a tape recorder. The trick here is not to listen to this recording immediately. Give yourself at least a day and then when you listen to yourself, it would be the voice of a stranger. You will yourself notice mistakes in your own pronunciation and be able to correct them. Try to make it a daily habit. Soon, you will notice a remarkable improvement in your command and your fluency of the English language.

By the way, this is an excellent way of reading your textbooks while cramming for your exams. Try it. Read a page or two, step away from the book, give yourself few moments and write a summary without peeking at the book again. A—Archives I have saved the most important mantra for the last. I will seek to establish that this is one skill that we sadly lack and this indeed reflects on our overall competitiveness. z

I am talking about making a habit of taking notes everywhere and to build an extensive personal archive: a solid data base of ideas, thoughts, information and basic knowledge.

I am not talking of what you have in your memory. I am not talking about being sharp and noticing things, and remembering them. I am talking about the need for you to learn to build your own stockpile, a hard copy data bank, an easy to access reference source of your own collection of ideas, thoughts, information and basic knowledge in the form of a collection of notebooks and indexed files. What I am saying is that you must make it a habit of taking notes, not only in formal meetings but everywhere. Somehow our executives do not easily get into the habit of making notes immediately after the occasion. I have had many Indian businessmen and executives visiting my projects overseas. Invariably they go around with their hands in their pocket and if they see something they wish to take a note of, they ask me for my card and scribble at the back! Carrying a note pad does not seem to match the suits they wear. I am sure they give long dictations to their secretaries back in their offices, but by then the good stuff is lost.


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I have lived and worked with the Japanese, the Koreans, the Chinese Singaporean an so on and one thing I noticed, in sharp contrast to our people, is that they always have a small notebook in the pocket and they take copious notes everywhere. They talk very little, observe the smallest detail, listen to the most casual hint and write it down. These people place an enormous importance on keeping records. They build up a data bank of whom they are dealing with. They want to know you as a person and then they decide how to deal with you. They do this by noticing and keeping a detailed record of your personal tastes, likes, dislikes and attitudes. Our people take notes only in meetings, and so on, but these visitors take notes everywhere. And by everywhere, I mean everywhere. You might think this is simplistic, but look around you and notice. How many people do you see having a pen and paper handy if they need to note something? I see our Indian businessmen and the very casual attitude they have towards keeping records and maintaining their own reference stockpiles. Look at any entrepreneur or executive that you know. Say, this person had an important visitor—a customer, a supplier or a possible investor, about six months ago. If your friend is a good executive, sure he will have a record of the important points discussed, but does he have a record of anything that the visitor showed particular interest in, outside the area of your discussion? Does your friend remember any casual hints of their future plans? Is there any record of the visitor’s personal tastes and habits? What sort of food he likes? Is he a vegetarian? And so on.

I have noticed time and again when I am in other countries, that a series of their executives will spend the whole day with you discussing various aspects of the business, then do a late night on the town and yet have a full report ready on their tables the next morning. I do not know how they manage this, but there are details of everything discussed along with your eating and drinking preferences. I have seen them fill many notebooks regarding this. So the last mantra is that you should make a habit of taking notes: Not only in meetings and your classrooms, but everywhere. You have to make a habit of keeping a small notebook in your pocket all the time. See or hear anything interesting, jot it down. This may appear as a simple suggestion but I seek to establish that this is one of the crucially important tools for our executives and entrepreneurs. I will give you an example where my habit of not taking notes lead to a feeling of humiliation in front of others. I was in Malawi (Central Africa) some years ago on an assignment and was invited for dinner to the home of one of my friends, Mr Waseem, a local Gujarati-Muslim trader. He had invited three visiting businessmen from India and had asked me to join in. As it turned out, the group was from India but all three were not Indians. There were two Indian industrialists accompanied by one Mr Kim, a Korean representative of the Indian branch of a Korean trading firm. It appears that the Korean company in India was exporting Indian products to the East and Central African markets, and had sole export rights to the products of the two Indian businessmen. (The issue of why a Korean firm,

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and not an Indian one were exporting Indian products and why we cannot do it ourselves, is not the subject of discussion in this book.) As is the case with Indians living in Africa, the dinner was a very informal family affair. We all noticed that Kim enjoyed the food but in particular commented on the very crisp Papads. Mrs Waseem casually mentioned that this was the last of the stock they had and were waiting for someone coming from India, particularly North India, bringing fresh stuff. This lead to a discussion on the huge variety of Papads made in different parts of India and it turned out that our hosts, though Gujaratis, were particularly fond of the more spicy Punjabi variety. Both the Indian industrialists said, ‘Bhabhiji, your worries are over. We live in Punjab and we will send you some by parcel. Plus the next time we are here, we will bring you some more.’ Kim quietly asked me. ‘What is puppad? What is Gujaraty? What is Poonjbi?’ and so on. He quickly took out his notebook and noted everything down. Some months later, I got a call from Waseem again, to say that the two Indian businessmen were there at his house, but instead of Kim, someone else had come from the same Korean firm. He asked if I could join them for dinner. Before sitting down, the Korean gentleman opened his brief case and took out a beautifully gift-wrapped parcel from his bag and presented it to the lady of the house. On opening it, she found five packets of excellent quality Punjabi Pappads! This left the three of us intensely humiliated by our own actions, or rather the lack of them. In the meanwhile I had myself been to Delhi for some work. Despite my trip to Delhi and the loud assurances given by the visiting Punjabi businessmen earlier, all of us had forgotten about what the lady had asked for: simply because we did not bother to note down this insignificant matter.

The Korean executives take copious notes, and everything goes into the company database and the result is the massive goodwill benefit they earn. This brings me to some points I am trying to make. z

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One can see that a simple practice of keeping records earned the Korean company a huge goodwill bonus. Waseem is not going to forget this in a hurry and of course, he will talk about it all over the place. The firm has got itself a long-term friend it can depend upon. The Indian businessmen and I cut an extremely sorry figure. We simply do not bother to take notes and do not give importance to things like this. There was nothing individual about the Koreans. The person who brought the gift was not even there when the topic was discussed, and was merely following company procedure. This is simply the Korean way of giving priority to developing personal relations with whomever they are dealing with. They sent out a strong message: we are here and we are here to stay.

This explains why the Koreans (and the Japanese) put great value on the background information of the business, political and economic climate of the region. This also explains how some nations manage to get advanced commercial information on tenders and upcoming projects long before these are published. Indians get the information when it is of almost no use. That was the point of my third mantra—Make it a habit of taking notes.

Preamble

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6 Your Attitude to Life and Work

‘I do not think you can produce quality products.’ I was shocked. I had never expected Kimoto to say such a rude thing. I have known Kimoto for many years and we have often been team-mates on industrial development projects in many countries. I have been to his home in Osaka many times and he too has been our guest in our home in Kuala Lumpur often. The only other person in the car was our host in India who was chairman of a large group of companies. What prompted this crude remark was that our host, while driving us back to our hotel after a late dinner at his home, had not put on his seat belt and he had driven through three red lights. Well, I do not blame him as it was late at night and the streets in the open Rohini area of Delhi were quite deserted. We could see that there was no oncoming traffic on both sides of the crossings. I am aware that the Japanese would not cross a completely deserted road late at night even against the pedestrian crossing light. But this is how they are and this was India and he was our guest here. Kimoto realised his mistake and immediately apologised, saying that he was drunk. He lapsed into silence for the rest of the journey. It has taken me a lifetime to understand the immense depth of the casual remark made by my Japanese friend. My readers would have, by now, noticed the undertone of a message in this book. One of the things I have started feeling very strongly about is something we do not normally notice or talk about in India—our attitude towards shoddiness in everyday life, and our very casual attitude towards cutting corners, taking shortcuts and the way we work. In sharp contrast to what I have seen in successful nations, and in the newly emerging nations like Malaysia and Singapore, we are very comfortable with shabbiness and tackiness all around us and the happy-go-lucky attitude to everything including

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earning our living. True, there are flashes of elegance and real good workmanship, which further proves my point. Making a special effort to do something is not the same as doing it automatically, or by habit. Yesterday, this was fine; we were a protected economy. Today, our young entrepreneurs need to understand that this will not do. It is my conviction that the newly emerging successful nations in Asia have acquired a reputation for producing quality goods and offering a superior standard of service, not because of particular government policies or incentives but because of the attitude of the common people: The attitude of doing everything properly and diligently even in daily life, and that towards work and earning their livelihood that borders on worship. And, it is not only the Asian people; you will get an amazing insight into the mindset of the Western people when I talk of how they select their top people for their projects in India.

As I said, I feel very strongly about this. z z z

In Section I below, I will talk about our attitude towards the way we live. In Section II, I will discuss our attitude towards our professional lives. I will talk about Finish and Elegance of Design as an essential part of Quality in Chapter 11.

I: Our Attitude towards Life I need to make it clear that I am not only talking about how we do things in India. I have lived and worked with people of Indian origin all over the world. Well, they may have lived overseas for generations, but their attitudes, particularly towards shabbiness and shoddiness, remain the same. I am not happy talking about this, but to see a situation where shoddiness and shabbiness hits you in the face, is also to see it starkly contrasting with elegance next door. Take a drive to Southall, the Indian conclave near London. Nobody has to tell you that you have reached Southall. The very look of the Indian owned shopfronts tells you that you are back home. The dirty and smudged glassfronts, showcases used for storage of cardboard cartons rather than showing, the crude hand scrawled signs for prices and announcements, the unkempt and unshaven shopkeepers, and the muddy floors all have a story to tell. Contrast this with the squeaky-clean shops run by the local whites, and as I said, you get hit in the face. This is true of the Indian shopkeepers all over the world, be it in UK, USA, Singapore or Malaysia. Do you want to see a really filthy toilet? The only place in the US you can see it is an Indian restaurant, and I mean any Indian restaurant, anywhere in the US. Our establishments are known for their casual upkeep, in stark contrast to superbly maintained shops right next door. It is only fair that we talk to the shopkeepers and get their side of the story. The fellow says he has to work long hours seven days a week. The business is good and the more they work, the more money they make. As simple as that. They also make a point

Your Attitude to Life and Work

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when they say that keeping their shops clean, and so on, is lost effort as it will not improve their sales. Their customers, invariably Indians, cannot be bothered by how the place looks! I am sorry; I have to repeat what I just said. We Indians cannot be bothered by how our surroundings look! I apologise if I appear to be running down my country but I do not think any of my readers will deny the harsh truth behind this. Let me go back to the point I was trying to make at the beginning of this chapter. I am intensely proud of our cultural and social traditions, especially that of our attitude towards simple living. All over India, many of our homes are clean but basic and simple, to the point of being austere. Even the rich have usually almost spartan homes. I am proud of this, but simple living is one thing, and shoddiness right outside your door is quite another. Let me say straight off that of all the chapters in this book, writing this particular chapter has been the most uncomfortable, or rather painful one, for me. When I see my nation and my people as others see us, I do not like what I see. Now, don’t get me wrong. I am the last person who can have a holier-than-thou attitude. But the message was driven deep into my psyche long ago when I was a young consultant starting out on my professional consultancy career. Let me tell you about this.

Selecting a General Manager My client was a German wholesaler of grocery items and they were setting up a fruit processing unit in India, to produce canned and bottled fruit jams and preserves purely for export back to Germany. The Managing Director was an elderly Jewish lady who visited India frequently. Her name was Ingemer Johanstien, but she wanted everybody to call her Inge. She had become a family friend and often spoke to my wife and to me as if we were her own children. I learnt a lot from her. I was responsible for planning and implementing the Indian aspects of the entire infrastructure of the factory to the very rigid German specifications, and that is when I started learning about what it meant to be really fastidious. My assignment would end when the first Chief Executive Officer of the company took over. We had short listed three Indian candidates for the post of CEO, who would be solely responsible for the entire operation as the Germans would not be sending any expatriates after the initial training period. All of the three, Suresh, Anand and Sitaram happened to be in the same city and were neck and neck in qualifications and experience. I did not know how our German MD would select one for the job. Well, what she did was surprising and was a lesson that was driven deep into my psyche. I have never forgotten it. One Sunday morning, two days after our final interviews, she called to say that she would be picking me up from my house at 8:00 am. On the way, she told me that she had rung up all the candidates, one by one. She told them that something urgent had come up and she would be leaving India the same day. Could we come to their respective homes and talk for a short while? She fixed up the three appointments an hour apart. Surely, there was nothing urgent and she was not leaving, but she explained that she

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needed an excuse to go to their homes to see how they lived without giving them time to prepare for our visit. I could not see how this had anything to do with deciding about the final candidate. While travelling in the car, she saw the puzzled look on my face and posed a dilemma: ‘Say, you are selected as the CEO of this food processing unit. What if you find that a particular small batch had been processed in some empty containers that had been left overnight? The containers had looked clean, but had not been properly washed and sterilised. Would you reject the whole batch and make the firm lose a fair bit of money along with facing a lot of unpleasant questions from the head office?’ Then she answered her own question and explained that this would depend upon how fastidious the CEO was in his daily life. She added that this did not apply only to food products. Her group had some engineering projects in some other countries and they had seen time and again that one can order a person to be quality conscious at work, but if he is not neat and clean by habit, always and everywhere, it will not consistently show in the quality of the work that he does. And, for a new project, the first CEO makes a lot of difference. The systems and procedures he sets up would always have a tinge of his own personality because there is a lot that cannot be written down in specifications, and this would be very difficult to change later on. ‘See how the first CEO lives and you will know how the new factory will end up looking.’ I sat in the car, stunned. No management book ever talked in this language. So, for this project, she said she would decide on the candidate after seeing how they lived. She added that, for her, the focal points of personal hygiene in a home were first the kitchen and then the bathrooms. She would find some excuse to see both. Well, the first home we went to was surprisingly large. We knew that Suresh came from a well-off family, and his father was a well-known businessman in the city. As we entered the large compound, we saw all sorts of flower pots and plants randomly spreadout all over the place. Some were expensive types but were badly laid out and in a poor state of maintenance. The place was a mess and I would not call it a garden. As we entered the house, a simply but elegantly dressed elderly person came to the door to welcome us, obviously Suresh’s father. He led us into the house and, as he was ordering tea and sweets for us, Inge started looking around while pretending to admire the house. The house was superbly and expensively furnished, was clean but had an untidy and cluttered look. Clothes, books, old newspapers and children’s toys were all over the furniture and floor. She continued walking and looking all around and, greeting Suresh who had come and joined us, casually started walking towards the kitchen which we could see was just off the main hall. There she pretended to be surprised and said, ‘Oh, you have a large kitchen.’ We were there for a few seconds but could see that the kitchen was quite clean but here too, everything was disorganised. There were plenty of utensils, clean but all over the place. There was an elderly man, obviously the cook, who greeted us respectfully with folded hands and went back to what he was doing. He was dressed in a white dhoti and singlet. I say white but it may have been white long time ago. It was almost grey now, and not particularly clean. He was wiping his hands on a dirty looking towel he had on his shoulder. There was a young boy sitting on the floor under a window, next to a tap, washing dishes. His clothes were positively filthy. We quickly walked out and Inge made a pretense of discussing some points with Suresh from the office file. Then, she said she wanted to use the bathroom. Suresh asked a servant to lead her upstairs to one of the bedrooms. She told me later that


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everything in the bed room looked very expensive and the room had just been tidied up. The bathroom was luxurious too; but not at all clean. She said she noticed a few toothbrushes lying flat in small pools of water on a glass shelf just over the sink, right next to a soggy cake of soap in a cheap plastic soap dish. There was a decorative tooth brush holder and a soap dish that had been ignored. We pretended to discuss some more points and made it clear that we were in a hurry. We walked out of the house and I noticed that we had been there for exactly 14 minutes. I also noticed that we had seen none of the ladies of the family. The next candidate, Anand, lived with his wife and young son in a small but new flat. As we entered, we saw Anand’s wife bring out two steaming cups of tea and some snacks on a tray. Her timing was perfect. We sat on their dinning table, talked to them and enjoyed the tea. The wife was an accountant and worked for a multinational bank. They said they had a maid who came in during weekdays to take care of the child. We spent a few minutes with the young couple and I was surprised to see that Inge did not make any attempt to make the quick trips to the small kitchen and the bathroom. The last candidate, Sitaram, was something else again. His father had retired as the headmaster of a local school and they lived in a simple house, on the outskirts of the city. Sitaram and his wife heard our car coming in and came to the door to greet us. As we were going to enter, the lady apologetically looked at the shoes we were wearing. I understood and immediately started to take off my shoes. Inge also understood that shoes were not permitted in the house. As I was going to take off my socks, Sitaram said with a naughty smirk, ‘You can keep your socks on. Do not worry, they will not get dirty!’ As we entered the house I felt good, for no reason at all. The house was simple, sparsely furnished and the floor was plain mosaic, but the entire house was remarkably clean. That was not all. It was neat and tidy too, with everything in its place. But that, again, was not all. There was something else. The ambience was aesthetically appealing and an effort had been made to make everything pleasing to the eye. There were plenty of books, magazines and newspapers everywhere, but neatly arranged in shelves and piles. The two pictures on the wall, probably of immediate ancestors, had garlands of fresh flowers. We found that the family was reasonably large and they all lived in this house. Sitaram had been married only for a few months and had a younger brother and a sister living with his parents. As we entered, we saw a good sized old-style kitchen straight ahead. The family had been sitting on the bare floor, around an old lady who was making something on a stove. They were probably having their breakfast. Seeing us, they all got up and Sitaram’s father came out of the kitchen wiping his hands with a towel. As we were lead into the house towards the half a dozen chairs there, Inge started walking around admiring the house. As she neared the kitchen, she surprised everyone by saying, ‘Oh please do not get up. You are eating breakfast? What are you eating?’ I saw that they were having Dosas and immediately the old lady, Sitaram’s mother, said, ‘Would you like to have some? Sitaram Beta, please take the guests to the hall and arrange some plates.’ I was surprised when Inge immediately said, ‘Why not? I like Dosas and this time I want to try the homemade version, but why in the hall? Why not right here?’ Saying this, she started to sit down on the bare but very clean floor! Then she looked at me and saw that I was going to the kitchen sink to wash my hands. She did the same and, almost instantly, the younger girl was at our side with a clean, fresh towel.

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We were in the house for more than an hour and thoroughly enjoyed ourselves. After breakfast, we kept sitting in the kitchen, talking. Inge asked, ‘How many servants do you have? Who keeps the house so clean?’ No one answered and the old lady was a bit flustered. She said, ‘Well, no one. I mean, I mean, everyone. I mean why should we have anyone clean anything? You dirty it, you clean it. See dirt anywhere, just clean it. This is our own home, is it not?’ As we were leaving, before getting into the car, Inge turned around, put her hand on Sitaram’s shoulder and said, ‘I am going to make a rule that no one enters my new factory wearing shoes. And, you better make sure that their socks do not get dirty!’ So, Sitaram was selected. In the car, Inge explained that Suresh would never have understood the need to sterilise all the vessels. For him simple washing would be enough, plus he would never bother about how the workers were dressed. The Anands were a typical professional young couple and their lifestyle was hardly different from couples anywhere in the Western world. He is what I call a career professional and he would have done exactly what our specifications required, to the best of his ability. But when I was in Sitaram’s house, I felt a sense of peace and tranquility deep inside me. It was so palpable that I could almost reach out and touch it. I have selected him because he would bring the traditions his mother has drilled into him. Remember the dilemma I posed for you? Sitaram’s mother would never ever cook something in a vessel she is doubtful about. So now you know why he is our man.

Patronising Shoddiness Ever since the experience I just talked about, I have been asking myself a question. True, we are fond of simple living and do not particularly bother about how things look. But if we are asked to choose between an elegant looking place and an ordinary or shabby one, how many of us would offer a premium for elegance? I remember going to Sahar Airport at Mumbai. This was the old airport. Before one entered the departure area, there was a restaurant run by a local hotel group; the usual not-very-clean humdrum décor and fairly reasonable food. An NRI put up a new restaurant in the same lounge, just a few feet away. This was a neat and clean, spanking new glass and aluminium place, of the type one sees in the West. The menu and the prices were about the same, but I found the old place full and the new place almost empty. The reason? All my friends avoided the new place simply because, ‘it looks expensive.’ Well, it seems that far from paying a premium, we are intimidated by the mere elegant looks of a place. My experience in nearby countries like Malaysia and Singapore is that customers would first try the more elegant place and if they do not find value for money, they would go elsewhere. Firms fight on the basis of price, quality, service and elegance. Nobody would buy a car if the showroom looked shabby. Not so in India. Price and the basic minimum quality were all that you needed to fight in the marketplace. Notice that I have used the past tense. Kentucky Fried Chicken, McDonalds, Dommino’s Pizza, Wimpy, and so on, are all changing the rules.


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Education, Training and Attitude It is common wisdom that the main role of education is to make us trainable. Training, in turn, makes us employable. But it is our attitude that will make us successful, or otherwise. Indian organisations and individuals are slowly coming to understand this. Of the three, the first two— education and training, are the easiest to tackle, quantify and assess. Attitude is the one that takes the longest to form and is, indeed, the hardest to change. I have seen a very interesting posting on the Internet where a consultant says that we should ‘Hire for Attitude, Train for Competence, Coach for Performance, Manage to Retain.’ I fully agree with this. He begins with attitude because, if the right attitudes are in place, it is much easier to transform all the others. It is easier to go back to school to upgrade qualifications or learn a skill but it is very, very difficult to change attitude. It is also necessary to focus on attitude because attitude predicts behaviour. This works the other way around also, because once we see certain behaviours, we infer a particular attitude. We always extrapolate that attitude to a cluster of related behaviours that are then used to define the person, whether positively or negatively. Attitude can make all the difference. But what is Attitude? There are as many definitions as there are management gurus, but to me, attitude is a deeply entrenched mental state involving beliefs, feelings and values, and the disposition to act in certain ways. We develop attitudes depending upon our enduring feelings about objects, events or issues. An attitude can be seen as being either positive or negative in a specific cultural context. We in India certainly act on the basis of our attitudes, but we are not the only ones. Take the Japanese. They strongly dislike all nonJapanese, and no matter how long a Korean or a Chinese has lived in Japan, they will always treat them as social misfits. This is regardless of the place they meet them, the station they hold and the substantive relationship between them. On the positive side, it is seen in India that time and again managers are willing to give individuals with the right attitude extra assistance, more opportunities for growth and development, and more forgiveness. z

We all have come across persons who were a joy to work or deal with. If you are perceived as a person with a positive attitude, options will become available to take your life in directions that you could not have predicted.

You and your Attitude I have found many executives who had their careers stagnated or even ruined just because they had joined the wrong organisations. This is equally true of entrepreneurs who started off with the wrong project and got stuck with it. z z

So, it is very important that you must carefully and wisely choose the ‘battlefield’ that you wish to fight on. There are some roads which we must not follow; some enemy troops we must not fight; some cities we must not attach; some grounds we must not contest; even

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some orders from the ruler which we must not obey. (I have taken this from the Internet. I do not know who said it, possibly the Chinese sage Confucius.) There are certain priorities to consider when selecting the right ‘battlefield’ to fight. First, know what you want, that is the job you would like to do. Talking to the students in professional institutions, I have noticed that many of them do not seem to know what they like or what they want or ought to do. I believe the root problem is that these youngsters, while building small worlds around themselves, have lost the ability to look beyond themselves and their immediate protective surroundings. Next, consider the type of working environment that suits you best. While some are more productive in a highly charged and tense atmosphere, others may work better in a slower and easygoing one. There are as many definitions of corporate culture as there are management gurus, but, I would sum it up simply as ‘a complex set of assumptions, beliefs, perceptions, symbols and values that define the way in which an organisation goes about conducting its business.’ In this way, corporate culture can greatly influence the choice of goals, policies and strategies in an organisation. Serious differences could lead to clashes if you try to make people do things that are counter to their beliefs and values. Without doubt, if you cannot take to the firm’s culture, there is no way you can be happy working there. That is why I have tried to impress upon you the importance of choosing carefully. Whether you are a fresh job seeker, a seasoned executive, you must make sure you are joining an organisation suitable for your temperament and capabilities, or you are unlikely to go far. And do not rely mainly on the wording of the job advertisement or the words of the Human Resource Manager or even the boss himself. He may tell you things like ‘you will enjoy working here. Absolutely no politicking at all.’ Do your homework—observe for yourself when you are visiting the company. Watch for the little signs which can tell you whether the people there work as a team or just could not be bothered about one another. Seek out people who had dealings with the company and talk to them.

II: Your Attitude towards your Professional Life In this section, I will take you deep into the mindsets of our competitors from the East, the Japanese, the Koreans and the Chinese, and will give you four very surprising and maybe shocking insights. These are four points that I think are highly conducive to the outstanding success of their executives. I will be talking about some more attributes of these highly successful nations in Part 3 of this book. I am going to repeat a question which some of my students pose to me all the time. ‘Why should we bother about the executives of these foreign countries?’ And, I will repeat my answer. What I had said was that no matter what type of a job you young people are going to get or are having, invariably your companies are either multinationals, or they are buying from, selling to, or servicing the multinationals, right


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here in India. You do not have to go overseas to meet the world. The world has got unleashed into India. When we talk of foreigners, you youngsters do indeed have an excellent degree of awareness about the Western world. Our media, the TV, your textbooks and most of the literature on what is called popular management are all overwhelmingly slanted to the West. So, here is a question: How much do you know about the people from the East and their business culture? Look around you. Look at the products you use at home and office. For every item made here by a Western MNC, there would be 10 made by Asian companies. So, if you children have to compete and win, you have to understand the mindsets of the highly organised and ruthlessly efficient Korean, Chinese and of course, the Japanese people. Understand how these people think, how they behave, and how they do business. I have lived and worked for many years in the East. I was on the other side of the fence, so to say. Living and working with the Japanese, the Koreans and the Chinese, and having Indian executives working there side by side in countries like Malaysia and Singapore, and so on, I learnt a lot. I will begin by introducing you to K’ung Fu Tzu (Confucius) (551–479 BC). He was a famous sage and social philosopher of China whose teachings deeply influenced East Asia for 20 centuries. If you have not read about him, I suggest that you do. There are plenty of references on the net. The teachings of Confucius is a Chinese ethical and philosophical system and is a complex system of moral, social and political thought which has had tremendous influence on the history of Chinese civilisation up to the 21st century. The cultures most strongly influenced by Confucianism include those of China, Japan, Korea and Vietnam, as well as various territories (including Singapore, Hong Kong, Taiwan and Macau) settled predominantly by Chinese people. His teachings are completely non-religious. He teaches the need for the society to organise itself and for people to form strong economic and social bonds at family, clan, village and community levels. He preaches that one must join hands, work together to defeat outsiders. Just think for a moment. All successful nations are exactly like that. The French love the French and hate everybody else. Same is the case with the Germans, the Japanese and so on. This is exactly the reverse of what we do. We love the whole world and hate our own people. Today, the teachings of Confucius are taught even in the primary schools all over Asia. The strange part is that the ideas Confucius has taken and developed into very powerful tools for economic progress are all very similar to what we already have in our Vedas and our Shastras. But we have ignored them. To illustrate what I have been saying above, I am going to ask you four questions: Now, please read these four questions carefully. These questions have the potential of changing your way of thinking. But, more important, you can use these points to change the attitudes of the people who will work for you. You will understand what I am talking about in a minute.

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I am going to ask you the four questions and I know the answers that will immediately come to your mind. I am an Indian and I thought the same answers when I first heard these questions from one of my teachers who had lived for a long time in Cambodia. I am going to give you the answers as explained to me by my teacher, as explained by teachers in schools in Asia, and as explained by the parents to their children right from childhood. You will see the potential of having a profound influence on their attitude to life and work and on their behaviour patterns. You will be shocked by how much the answers are in sharp contrast to our way thinking. Now the four questions. The first question: What is the most sacred Prashad or Prasadham that you ever got? I am asking this question to all of you. You might be a Hindu, a Muslim, a Christian, a Sikh, or anybody in India. I am convinced that no matter what our religion, our attitude to life and our work ethic is reasonably similar. So, I ask the question again. No matter what your religion, what is the most sacred Prasadham you ever got?

The second question: What is the most sacred task for which God has sent to you on this earth?

The third question: Which is most sacred place for you on this earth?

And the fourth question: What is the most sacred thing that God has given you?

Remember, I am using the word ‘sacred’. You can say holy, revered, divine, something you worship, and so on. I told you earlier that I am not talking religion or philosophy. The reason why I am asking you these questions is that this will help you understand the mindsets of your new competitors. So going back to the first question: What is the most sacred prasadham you ever got? I know what you are thinking, but the correct answer, according to Confucius is your mother’s milk. There is no greater gift God, your mother and your ancestors gave you than your first gulp of life giving nectar. Everything you are today started with it. Taking this line of thought a step further, the nation you belong to is your mother too. Every thing you are today is because of the nation to which you belong. If I was born an Indian, I will remain an Indian till I die. I might take up American citizenship, my great grandfather might have gone to live in Malaysia, but I will remain an Indian. No matter for how many generations we live out of the country, we remain Indians. It is important for us to understand this because when we meet other people from Asia, at every step we realise that they worship their own country. While talking to a


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Japanese you cannot say anything against Japan. He is likely to knock your head off. The same goes for the French, the Germans and so on. This is in sharp contrast to our attitude to our mother, our motherland. The point I am making is that when talking to or in the presence of foreigners, we love running down our country, our government and our businessmen. When your non-Indian boss hears you criticise and abuse India, he feels as if you are doing something obscene and you lose your own respect and dignity. Second question: What is the most sacred task for which you have been sent here? Invariably I get the answer from students, referring to prayer or something religious. No. That is not the correct answer. According to Confucius, God has not sent you to this world to only praise Him. To thank Him, yes. He says that your most sacred task is to earn your livelihood. Here I will again give a comparison. We Indians invariably think that if we do our prayers and rituals properly, religiously and sincerely, our livelihood will improve. Followers of Confucius think that if they work sincerely, with full dedication, as if it is a sacred task, then, maybe, their prayers will be heard. Third question: Which is the most sacred place for you on earth? Again the answer is not a temple. A temple is a House of God. A temple is the house we have built where we go to worship, to perform our rituals and offer our thanks to the Almighty. That, according to Confucius, is not the most sacred place. The most sacred place for us is the place where we earn our livelihood. Our Vedas call it our Anndaata. Here again the contrast is remarkable. Do we, in India, worship our place of work? Whenever the workers of a factory, the workers of any organisation in India go on strike, the first thing they do is damage their own machines, their own equipment, their own office building, and so on. We burn buses and the very next day we stand on the roadside complaining of the shortage of buses to take us to work. After the strike is settled, the workers come back and ask to be paid to repair and undo the damage they themselves have done. Where is the sense of worshipping your Anndaata, your place of work? If you read the newspapers, you will notice that the workers in entire South-east Asia, all the way from Singapore up to Japan go on strike, and are often violent, but they never ever burn buses, damage their own machines or do anything which will affect their livelihood tomorrow. And the last question: What was the most sacred thing God gave you? The most sacred thing that God gave you is your body. Your body is God’s gift to you, and your first task is to look after it. Now look around you. Look at the executives; look at the business people around you. How they work, how they live. You will find signs of complete neglect as if their bodies are something that they are least worried about. You might be brilliant; you might be hard working; but unless you are healthy and unless you are fighting fit, your attributes will fall by the way side. Your success will either not be there or would become meaningless. z

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I told you above that these points have the potential of changing your way of thinking. But, more importantly, you should use them to change the attitudes of the people who will work for you. Don’t preach or give sermons. Talk about these without being obvious. The results will amaze you and your bosses.

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Preamble

Part 2 Your Intrapreneurial Skills

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7 What is Intrapreneurship?

The term ‘intrapreneurship’ has been brought into the mainstream management jargon very recently by various American gurus. I have not read any serious discussion on this topic anywhere in India and the reason is clear, if we look at the meaning of the term. The recent editions of the American Heritage Dictionary define an intrapreneur as ‘a person within a large corporation who takes direct responsibility for turning an idea into a profitable finished product through assertive risk-taking and innovation.’ So, by extension, intrapreneurship is the development of an enterprise culture within an existing company. This can not happen in our family owned enterprises as any entrepreneurial spirit is actively discouraged. The boss tells you what to do and your job is to do it well. As simple as that. Try to be ‘too clever’ and you are out. But, in the rapidly globalising India, this is changing and this is the reason I am discussing it here at length. The development of an enterprise culture within an existing company, what we call ‘intrapreneurship,’ is crucial if our companies are to get the maximum benefit out of the young professionals of today. The Internet informs me that in an article in The Economist in 1976, Norman Macrae predicted a number of trends in business—one of them being ‘that dynamic corporations of the future should simultaneously be trying alternative ways of doing things in competition within themselves.’ In 1982, he revisited those thoughts in another Economist article, noting that this trend had resulted in confederations of intrapreneurs. Again, the Internet says that the term itself dates to a 1985 book by Gifford Pinchot, ‘Intrapreneuring’; taking the concept from the 1976 article. He says that ‘An Intrapreneur is the person who focuses on innovation and creativity and who transforms a dream or an idea into a profitable venture, by operating within the organizational environment.’

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Thus, Intrapreneurs are inside entrepreneurs who follow their founder’s example. Intrapreneurship, then, is the practice of entrepreneurial skills and approaches by or within a company. Employees, perhaps engaged in a special project within a larger firm are supposed to behave as entrepreneurs, even though they have the resources and capabilities of the larger firm to draw upon. Capturing a little of the dynamic nature of entrepreneurial management (trying things until successful, learning from failures, attempting to conserve resources, and so on) is claimed to be quite valuable in otherwise static organisations. At some point an entrepreneurial venture reaches the point of being an established business. While reaching a point of ‘being there’ is an achievement, a real concern for most businesses is that somehow becoming an established business means the entrepreneurial spirit is getting diluted and would be lost. Hence, the growth of intrapreneurship—fostering entrepreneurism within established organisations.

New Attitudes of Indian Firms When I organise my workshops on entrepreneurship, a point is often raised that the larger firms may not send junior executives for training in entrepreneurship since they may leave and start something on their own. It may have been true 20 or 30 years ago in India. In those days Indian business had an autocratic management style. People were told what to do and they did it. Nobody liked employees as decision makers. India is changing rapidly and this is no longer true today. 1. Today, particularly in the professionally managed larger firms, managers are looking for entrepreneurial decision makers: Employees who understand the meaning of business risks. All potential managers, even if they do not start business themselves, should have enough of an entrepreneurial background to have good business sense so that they can take the firms towards new directions of growth. 2. Our management style is becoming much more democratic. Managers realise that they do not have time to think of all the new ideas or be aware of everything happening in the marketplace. Training in entrepreneurship would help junior executives take a more creative role in business development: Instead of simply reporting on and researching existing trends, the youngsters are encouraged to participate and see things develop first-hand. 3. An enterprise grows faster if the planners and decision makers (often executives) are also entrepreneurial, are able to perceive further business opportunities and are capable of innovating, using current enterprise and its available resources as a base. 4. Young executives in companies that have survived the economic downturn understand their business model much better. They have become really lean and really, really tough. It is hard to teach toughness any other way.

What is Intrapreneurship?

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5. Entrepreneurship is by its nature multi-disciplinary, combining elements of strategy, business law, human resources, leadership and finance. 6. In any case, today there is very little corporate loyalty and most people, from the CEO downwards can now expect to have three to four different careers in their work lives. So, denying training to a person to prevent him from leaving is self defeating. 7. The working culture that the young entrepreneur wants to create is open, nonhierarchical and energetic. Far from being threatened by having entrepreneurial employees who will act on their own initiative, the new entrepreneurial managers are actively seeking out such people to work for them. Ideas and resourcefulness are qualities that should not just be encouraged but expected of those employed and, as a result, it is not always clear who is the entrepreneur because everyone in the organisation tends to be acting with the same dynamism.

Use our Young Intrapreneurs, or Lose Them Although increasingly young people are attracted to start a new business, it is clearly not an ideal path for everybody. More likely, they have the desire to create their own enterprise but lack the means. So, our young people need corporate entrepreneurial environment to work. A corporate environment and culture in which an individual can learn, develop and contribute to the success of a business is crucial if a company wants to attract, foster and retain young talent. These potential entrepreneurs can offer the industry sectors fresh talent, creativity and new ideas. Most family owned Indian firms are failing in this respect. I travel all across the country for my workshops and seminars, and interact with young professionals employed in both large and small businesses. My talks with them make it clear that many young people within Indian companies are not performing to their full potential and they believe that employers underestimate the abilities of their young employees. Young professionals say repeatedly that they do not get the chance to stretch beyond their current roles, and have little opportunity to be creative or innovative at work. The warning to these businesses who do not engage with their young talent is obvious—they are likely to lose them to the more dynamic MNCs. Our employers must seek out new opportunities for young managers to be engaged. They must work even harder to uncover the passion that fires their young managers’ vision of what is possible, and provide opportunities for them to develop it and nurture it. And employers must be proactive in this. It is no longer possible to expect young talent to put a part of themselves aside, in the work place. Employers must address the needs of the whole person and recognise that the desire to make a difference will not go away. Instead the employee will. Another danger for our larger companies is that as well as losing their existing young professionals, they may fail to attract emerging talent. The young professionals I talk to, feel that our large companies are more rigid and less creative than the small and young businesses. While they believed they would be more highly valued by a small company,

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these young people express preference to work in a MNC rather than a large Indian firm, for reasons of security and personal betterment. An entrepreneurial environment is crucial for inculcating an entrepreneurial mindset. This is demonstrated by the propensity of successful young entrepreneurs to have grown up in a household where at least one parent ran their own business. In the same vein, the ventures created by young entrepreneurs are excellent breeding grounds for other young entrepreneurs who learn rapidly in this environment and, consciously or unconsciously, pick up elements of the culture.

Partnership Approach and Intrapreneurship Corporate venturing is an umbrella term coined by management gurus and covers a range of mutually beneficial relationships between companies. Often it involves a larger company investing in a smaller, younger company in partnership where strengths are traded, and risks and rewards are shared. The smaller company retains its independence and the larger company gains a window on a new technology, product or niche area. It can also entail a larger company ‘spinning out’ a small venture started within it. One of the advantages of a larger company investing in a smaller one will be clear if you look at our overall approach to productivity. In most Indian firms, supply chains are still operated and driven on a lowest price competition basis rather than on what provides the best solution to take the business forward. Our attitude begins and ends with seeking the lowest price rather than seeking a longer-term partnership approach. The partnership approach is not really embedded in our supply chain culture. You need to get that right before you make the next leap forward to a more formalised corporate venturing approach. The employees in new companies created by our young entrepreneurs seem to have four things that enable them to contribute to the success of the venture: they are informed, engaged, empowered and rewarded. The entrepreneurial environment is very open with individuals being able to readily access information and have a clear appreciation of the aims for the enterprise and their contribution to it. It is all about access to information. Everyone here knows everything about the company so that they are empowered to understand the big picture. I believe the more you understand them, the more they care. I need to make it clear that it does not make sense for an entrepreneur to build a company full of entrepreneurs. You need a balance of skills, competencies and personalities. Surely, the motivations of employees will be different to those of the entrepreneur that founded the enterprise. I think what is important is that you must have an open culture with very healthy communication relations so that if anybody has an idea about how something could be improved, that idea can be picked up, nurtured and turned into something really exciting.


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How do MNCs Become MNCs? While there are as many definitions of what is an MNC as there are economists and management pundits, I do not think there can be a universal definition of an MNC. It can generally be said that a company that has become an MNC, must have been a world class intrapreneurial company at home first. You must be front-runners in your respective fields, subscribing to state-of-the-art management and technological practices in keeping with environmental changes at home. Only then can you hope to enjoy global and diversified operations, and get the top market shares in your respective business areas. Today, size is no longer synonymous with being world class, as new manufacturing techniques and computerised production allow small factories to produce customised goods at mass-produced prices. The emphasis has shifted from size to efficiency, dynamism, agility and a reputation for timeliness. A world class company today is one that can meet the highest standards anywhere, in order to command resources and operate beyond borders. World class companies are significant contributors to domestic economic growth. The Scandinavian countries provide an interesting example. Unlike India, these countries have limited manpower and domestic markets. Nonetheless, they have companies that are world leaders in their respective high technology fields and are key pillars of their economies. Nokia of Finland, for example, is the world’s second largest producer of mobile telephone and Ericsson of Sweden, the third. I would also say that any Indian firm with strong entrepreneurial base can develop into a world class company if it continues to build up it’s core competencies and is seriously interested to compete in the international market. I will not go into much detail here as there are any number of excellent books on the subject. On a very rough basis, I can list out several key capabilities which are necessary for our companies to grow into world class companies: 1. Skilled Manpower Resource. Apart from highly trained workers, management must be intrapreneurial, with an international perspective to track and capitalise on the latest business trends in the region and around the world. 2. Research and Development. Firms must have an ability to develop proprietary R and D in order to maintain their competitive edge. 3. Adequate Capital and Financing. Local companies with sound expansion plans must have easy access to funding. This is especially important for high technology start-ups, which are normally deemed to be more risky by investors. 4. Market Networks for Access to Regional Markets. Apart from good distribution channels, firms must also have market intelligence to meet customised market needs. An essential feature of being an intrapreneurial world class company is that you should be able to bring along relevant smaller firms as your partners in rendering supporting services for their operations. With this partnership, the expertise and

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knowledge gained by the bigger companies will filter down to the smaller firms and in due course allow them to gain their own foreign market experience and a foothold in the region.

Need for Indigenous World Class Companies As I said in the preceding section, if, in the list of MNCs we include partly foreign owned firms who have been here for a long time, we can certainly say that the MNCs have provided a considerable contribution to India’s economic growth. We have attracted these world class players here by offering a cost-effective work force, good supporting physical infrastructure and an emerging pro-business environment and the second largest domestic market in the world. As compared to many developing nations, we are politically stable and efficient. However, as an infrastructure scarce country, we have a long way to go before we can reach a near-developed state of economic development; this MNC-driven growth will not be good for us in the long-term. Indian companies now face intense competition, both in the domestic market and an increasingly borderless world. In this context, as I said earlier, we need to build up a stable of our own intrapreneurial world class companies with core competencies, which can compete effectively in the global economy. Our ability to deploy relevant technology and manage our resources efficiently will help to ensure our competitive edge. These competitive elements will be more and more important in the next chapter of our economic growth. We must spare no effort to upgrade the operating environment so as to both continue to attract world class MNCs and root them here and to nurture the growth of our own firms. I have already said that there is already a growing trend for Indian companies, both local and partly foreign-owned, to have a global or regional emphasis. This expansion of local companies into regional and even global markets is helping to build up our external wing, and thus provide a firm foundation for India’s growth. For our firms to develop into intrapreneurial world class players, they must be prepared to recruit the best talent from around the world. Not necessarily expatriates. In most cases, people of Indian origin are doing superb work all over the world. Indeed, if our ambition is to build world class companies with a significant presence around the world, the top management of these companies should take on a transnational complexion and have an intimate knowledge of all the major world markets relevant to the particular industry. This is where people of Indian origin who have been working abroad come in. Of course, we should be prepared to pay competitive rates for international or domestic talents and, more important, have a risk-taking and entrepreneurial culture. Many world class companies have found that the principle of giving subsidiary companies the autonomy and responsibility for their own business and investment strategies has been the key to their successful growth, and should be upheld. The parent firm’s stewardship role should also be in ensuring that the right people are in place and there is sufficient funding for the firms to grow, especially internationally.


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Budding world class companies in India should build on this role, to oversee and monitor the strategic business thrusts of the subsidiaries and associated firms and improve the flow of information on business opportunities open to them.

Benchmarking for Indian Intrapreneurial Companies Typically, benchmarking against global practices comes into the picture when an Indian firm wants to start having employees in far-flung locations. This calls for both empowerment and systems as these firms are increasingly looking for executives with transnational experience. People who would fit the bill here are those who have either worked in different countries or at least in an environment of international best practices. Practices ranging from concepts like measuring customer satisfaction and innovations to improve it to efficiency-enhancing methods on cutting costs and increasing speed, or simply to a more structured style of functioning like having an agenda for a meeting, keeping on time, and restraining from loose brainstorming. My own experience is that such moves are mostly happening in Indian companies that have attained a certain size and now have a problem with future growth. They are the types that are now retaining management consultants. They have the vision but not the competence to get there. The challenge of driving this change for India Inc. is one of the charms for multinational hands, long used to working as small cogs in a wheel. Because the managerial base in most Indian companies is still in its infancy, Indian industry today provides an environment where a dynamic executive can redefine and recreate. The creativity employed can be a source of immense satisfaction. An important benchmarking point is that an executive leaving an MNC and joining an Indian firm has several aspects that he needs to look into. For example, does the company have an open and free working style? Are its people valued components? The level to which it runs on methods and systems is important too. One of the negative factors is the influence of family members, particularly when they have the authority without proportionate accountability or power without the maturity which comes after years of public dealing. Actually, it should not matter if the company is small, as long as its vision is clear and it has the wherewithal to get there. One has to see whether it gives an assurance of it being in an acceptable level of risk and not a gamble. It should not be whimsical and not operate on a day-to-day basis. The new intrapreneurial organisation culture is one fallout of management philosophy. Individual-driven to the core, employees in a large number of Indian companies confer an almost God-like status on promoters, whereas most multinationals have a more casual and open atmosphere. There are always a number of people referred to as ‘sirs’ and no one could think of arguing with the promoters. Respect for the elders is fine and is the basis of the success of most Japanese firms, but sometimes thoughts need to be challenged. When companies hire professionals from other MNCs, the old hands do expect some changes anyway.

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What remains unchanged is compulsions like managing in limited budgets. Indian firms are more cost-conscious. Too much money to put behind a brand or a project is just not available. Another difference that needs getting used to is little or no benefit of global learning in local companies. When launching a new business or product, vast amounts of data are normally just a phone call or an e-mail away in a multinational. An immense degree of resourcefulness is necessary in an Indian company, which may have to depend upon an advertisement agency with overseas links or a branch office which may still be unable to come up with the sought information. MNCs will remain an integral part of our economy. They are world class companies, bringing with them the best concepts, competence, connections and knowledge of world markets. We have to use this to develop our own pool of indigenous world class companies to provide a major source of economic growth. This also has nothing to do with whether an organisation is family managed, and so on. As an example, in the western world, only professionally managed firms grow into large organisations. But in the East, purely family managed Chinese firms exhibit all the signs of a professionally managed firm and grow likewise. In most cases in India, none of the above factors are visible. The organisational infrastructure is simply profit motivated. The entire commercial activity is aimed at tangible profit in the short-term, and the only effort made is to maximise this profit. Invariably, the profit is ploughed back into the business only to an extent that it results in immediate extra profit. No thought is being given to the growth of the set-up as an organisation. The owner designs the managerial setup more for absolute control and power rather than for growth inducing strategies. ‘I want the firm to grow only to an extent that I can keep everything under my own control.’ If the activity is profitable, the surplus is withdrawn for secure investment in real estate, and so on. The owner has palatial houses and lives in fivestar comfort but the factory, the offices and so on, are shabby and ill maintained. This is one of the points I often raise when talking to the MBA students. I ask them the meaning of success in life. To most of them, it is simply making a lot of money. I have not met anybody who is determined to work right from the beginning towards growing into an organisation. I hear a lot of them planning to ‘work for sometime and then do something on my own.’ Here is an interesting example. Many years ago, I was quite fond of visiting a restaurant called Moti Mahal in old Delhi. This was in the early 1960s, and the Tandoori Chicken dish served there was just out of this world. The place was shabby and reasonably dirty, but the food was superb. Recently, I went there again and found that the place is all but closed down. I was told that the old man died and left an enormous fortune to his children who have no interest in the business. They are simply enjoying the money. Right across the world, in USA, I have been following the fortunes of another outfit famous for chicken. The old man also died and left only a reasonable fortune for his children, but the organisation he founded is now spread worldwide— Kentucky Fried Chicken. In the Indian example, the business died with the old man and the money went soon after. In the American example, the massive organisational infrastructure he built, keeps on growing. I think I have got my point across: It all depends on what you want to leave behind—money or an organisation.

Preamble

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8 The New Executive Environment

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The Internet is chock-a-block with superb stuff on Teamwork, Leadership and Loyalty. I have read a lot of it and I am sure, so have my readers. We will ignore all of it and instead take a frank look at what these concepts mean to us in India and, more importantly, what these should mean to the next generation in the context of rapidly globalising India. At the end of this chapter I will get you thinking about a concept that I am sure most of us have never given a second thought to: The concept of loyalty to yourself.

Read on. I have always said that the future of entrepreneurship (and intrapreneurship) in the fast globalising India is not with large industrial houses, but with a number of small specialist firms working together as a network. I am talking about manufacturing and the idea is that each firm should do only what it is good at, rather than one firm doing everything. I am not talking of the Western model where large firms have now started outsourcing their inputs, but a vastly different concept that is the foundation of the success of the Asian Tigers. Implementing this concept in India is not going to be easy. While I will be explaining it in its various aspects in the following chapters, here we will discuss a very critical intrapreneurial skill needed to make these small specialist firms a success: The art of working with each other. Often in this book, I will be hinting at a thought that has always been bothering me: While we are outstandingly brilliant and talented, we are not good at working with each other. (Box continued)

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(Box continued) This is nothing new or recent. Recorded history shows that we have always been so. We have always had a tradition of excellence running parallel to our divisive nature. For our next generation, the need to understand this and to learn to work together is critical because that is what leadership, teamwork and loyalty is all about in the context of modern India.

A Trip into our History Throughout history, we have had far more talented, dedicated and brilliant people than in most other nations. As an example that we can see and feel today, look at the exquisitely carved temples and other structures our ancestors have left behind. Every inch speaks volumes about our brilliance, our work ethics and our attitude towards quality consciousness. As a student I was very fond of going to the great temples we have in South India: not for any religious reason; and not even to admire the handiwork of our ancestors, but to try to understand what sort of people they were. I wanted to see, touch and feel the superbly laid out and meticulously crafted stones to get the feel of their attitude towards life. What sort of man, I asked myself, would devote his entire lifetime meticulously following the very rigid specifications laid down in our ancient Agama Shastra, creating something magnificent without any supervision or even reward? Not only that, nobody left any signatures on any carvings. My ancestor was not seeking any personal credit or recognition. All over the world, I have seen many splendid places of worship. Every race has built them over the centuries. I compare these to our ancient temples and I notice a remarkable difference. I notice that, in their case, the grandeur is in the design, construction and in the sheer scale. In our temples, we have these too, but there is something else. One is stunned by the incredibly intricate carvings and designs woven into the structure. Every meticulously handcrafted stone tells the story of a lifetime of the love, dedication and devotion of the individual craftsmen. On touching the stones, one message comes to me loud and clear. This was not the attitude of any single individual but that of generation after generation. We were a great people, did what we thought was right and that was that. I have often asked myself. Supposing, one of my ancestors was carving a piece of stone that would go into the structure. Say, he had painstakingly spent months chipping and carving the stone into a beautiful figure or an intricate design. After three or four months, he detected a hidden crack or a flaw in the stone? Did the great Indian, my ancestor, quietly look left and right, patch up the stone and put it in? There were no supervisors. There was nobody looking over his shoulder. My heart tells me the answer. He understood the sanctity of what he was doing. I knew that he threw away the stone and started carving all over again, irrespective of the effort spent on the work; irrespective of whether the stone was only part of a compound wall.

The New Executive Environment

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Hence, I believe that man has created no greater monuments dedicated to God than the ancient temples all over India. And this is not all. My ancestors have left behind equally extraordinary structures all over the country that did not have anything to do with religion. Also, we were outstanding in arts, science and literature. This fills my chest with pride, but then, my blood runs cold when I read in the history books how we behaved with each other. We did not build strong social structures, and while some of my ancestors were dedicating their lifetimes building the unmatched temples, others were busy fighting with each other, breaking up the kingdoms into smaller bits and pieces, or joining hands with the invaders. The latter took advantage of our internal bickering, got us to do what they wanted and could easily rule over us. In today’s world, we are still outstandingly brilliant, but, except for the very recent case of IT, we always perform superbly when working for others. On our own we tend not to build strong commercial, professional, political or cultural institutions. Rather, we are good at splitting them, as each of us wants to be the boss. We have indeed built successful business houses, but the organisation has always been a single generation success story, the sons splitting and killing it as soon as the old man dies. Well, my readers, that was the foundation of what I have to say in this chapter. I said earlier that our next generation should understand the need to learn to work together. That is what leadership, teamwork and loyalty is all about in the context of modern India.

New Face of Leadership and Teamwork What I have to say here is as relevant to those of you who are looking forward to starting your own organisations, as to the corporate executives. In the past, teamwork meant ‘together, everyone achieves more.’ In the fast changing business and corporate environment of today, this term has taken on a completely different meaning. The very concept of teamwork has changed and become complex. Teamwork used to simply mean a group of people working together as one body and under one leader. A sports team, a debating team, or a sales team on a special task—all are people working as one. While I want you to understand that, as a small business leader, of course you need to have leadership skills, and your growth would depend on teamwork and leadership skills of your staff, there is another side of the picture too. z z

Things have changed; now, teamwork means relationship. Relationship between people and relationship between companies. Also, there can no longer be one definition for teamwork and leadership for every one at all times. The same persons can be excellent leaders and show superb team spirit in one case and can be awful in another. I will show that this depends upon the situation and it depends upon the organisation you create.

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For my younger readers, what I have said may not be easy to understand. You are told that some people are born leaders, and so on, so how is it possible that a person can be an excellent leader, an excellent team member, and an excellent performer in one circumstance, and be awful in another? I can explain this with an example from our history. Let me take you back a few hundred years to the time when the British were in India. The British Army in India consisted of almost entirely Indians. As time went by, the Indian soldiers working under the British developed a solid, worldwide reputation for being one of the world’s best fighting force. They were outstanding in discipline, dedication and in sheer performance. The qualities of leadership and team spirit, the Indians showed became legendary and the historians are still writing about them. Please remember that I am talking about the Indian soldiers that were fighting under the British. But, there were Indian soldiers fighting on the opposite side, under the Sultans, the Rajahs and the Nawabs. Similar people, identical in every way were on both sides. Now please understand the difference. You must remember that the Indian soldiers, on the Indian side, say, under a Rajah were also very brave, highly motivated and ready to lay down their lives. There were many legendry figures that even today the world is proud of. But they lost almost all the battles. This is because at the battlefield they were nothing better than an uncontrolled and wild rioting mob. There was no military organisational structure, or no line of command of any sort. So the qualities of leadership and team spirit were just not there and so, the Rajahs lost almost all the battles. What I am saying is that the same soldiers who were a rioting mob became the world’s best when they went over to the British. Whom should the credit go to? The credit goes to the organisation, the system. Admittedly, the British were not most brilliant people. We had far more brilliant brains on the Indian side but the British had something we did not have. And that was organisation. British were organised and it was because of their organisational skills that the Indian soldiers under them performed superbly. I am making a point here that is relevant even today. The new face of leadership and team spirit depends less on the individual and more on the organisation. It was seen, time and again, that if a soldier left the British and went home to his native army, he quickly reverted to his old ways. The qualities of leadership and team spirit just evaporated. Today you have examples of the multinational companies in India. Say, a local executive is giving an awful performance while working for a local company. As soon this executive switches to a multinational company, his performance improves by leaps and bounds. The same fellow joins the ranks of the world best executives. Though many of our executives are far more brilliant than their foreign bosses, the credit, again, goes not to the individuals but to the organisations that provide them the tools to perform. In the end, we need to look at not only the relationship between people within an organisation; we also have to look at the relationships of different competing organisations with each other. Building teams, networking together, are how you will get important work done in the future. Teams are where the relationships will be created, where problem solving will take place. Teams are where partnerships will be truly forged. Networking is where the benefits are spread-out.


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Here we have a problem. Many managers in India have experimented with new ideas in leadership development programmes. One of their most frequent laments is that injecting a new idea, or a different concept based on new knowledge is one thing; its sinking in and taking root is quite another. In other words, we certainly want people to try out new ideas and new ways of working but they do not see any sense in it. ‘I am doing this, have been doing it and it has worked fine.’ Why change? Well, pushing something down someone’s throat will not work because you cannot drill something into a modern youngster. ‘Hey you! Do this and after that do that! It is good for you!’ To tell him constantly and benevolently what is good for him is, in effect, to emasculate him, ‘Don’t you think I can think for myself?’ So it is essential that we create a total climate, an ambience, which gives the person individual dignity and self respect. The planting of the seeds of a new idea must be done such that it gives a man the feeling that he is the master of his own destiny. And that he is doing something of his own free will. It is all a question of motivation. I have found that it is very difficult to motivate people from a rural or a small town background. As I said, you can only provide the environment, the climate, or atmosphere that will help him supply his own motive. I have seen that these people can be made to learn, but not by simply feeding them knowledge. With these people, learning must take place within some kind of emotional context: that is mixtures and combinations of enthusiasm, fear, anxiety, grief, disappointment and hunger. This basic principle is widely misunderstood, and no one should attempt consciously to apply it without a measure of training. One the other hand, I have known several executives who provide the right climate for learning without even thinking of words like ‘emotional context,’ in most cases because they are so genuinely convinced of the benefit of their counsel, and so objective in giving it (or, so interested in the other man to the exclusion of self ), that these very qualities stimulate a wholesome emotional context and promote real learning. In the final analysis, a person must see the advantage, to himself, of learning. He must want to grow, or very little development will be accomplished.

New Face of Negotiating Skills Youngsters in India are deluged with an enormous mass of mostly American literature, ideas, text books and media exposure. You have no problem understanding the Western mindset. But the real threat to you comes from the East: The highly efficient and ruthlessly aggressive Japanese, Koreans and of course the overseas Chinese. Also, you must remember that the overseas competition is no longer ‘there,’ it is right here at home. The world has got unleashed into India. No matter what type of a job an executive has in India, he would either be working for an MNC, or his firm would be selling to, buying from or servicing MNCs. Right here at home. I will explain what I mean by the new face of negotiating skills. I have often come to India as a part of overseas delegations. I must say that most of the executives we have met are indeed brilliant, have done meticulous homework about their own products and services and make very impressive presentations.

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But, I have more often than not found the Indian businessmen at the losing end of any hard negotiation. I think this is mainly because the foreigners, particularly from the East, already knew all about you, your personal habits, your weaknesses and the status of your firm before coming here. They had placed you and your set-up under a microscope. They have an incredible insight into the mindsets of the people they are going to meet, and they already know exactly where you stand. But, the Indian counterpart knows very little about the people on the opposite side of the table. We do generally have published information and data, but only about the firm and have no idea of the personality and the attitudes of people we will be talking to. We have done no homework before we face them across the table. How do they know this? Simple. If an overseas firm is dealing with, say three Indian firms, someone will casually meet some executives in these firms over dinner and drinks—separately and purely socially. After that it is smooth sailing for them. Please permit me to say that, often, when we have an informal meal with an overseas visitor, the entire conversation would consist of us telling him stories about running down our own government and our competitors. Our people take great delight in running down everyone, because we probably think this raises our own status. Our man will talk his head off and disclose everything about the two competitors. And I mean everything: the juicier the better. Please note that we talk and talk and ask nothing. If you notice carefully, the visitors from the East talk very little, and take copious notes. If our next generation has to compete and win, you have to understand the mindsets of the people you deal with. I often hear you saying that the Japanese and Korean bosses are very difficult to work with, as they are ruthless and sometimes cruel. Right. That is why they are so successful. So try to read some more and try to understand how these people think, how they behave, and how they do business, and you will do well when negotiating with them.

New Face of Loyalty in India The very definition of the term ‘loyalty’ has changed. There was a time when loyalty played a much larger role in everyday life in India than it does today. We were deeply loyal to our families, of course, but we also displayed unquestioning loyalty to a long list of authorities plus to the organisations we worked for, and more important, bought from. Almost all of these unconditional loyalties have now become almost extinct. Earlier, loyalty meant one thing when majority of workers in the firms were unskilled or semi skilled. Now, it means something else in the fast moving, modern high-tech corporate environment, where employee mobility at all levels, from the CEO downwards is taken for granted.

The unqualified, hierarchical loyalty that looked so much like blind obedience is gone. Free markets have replaced it with something far superior—mutual, earned loyalty. It is loyalty that works in two directions. It has become an investment.


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Now we say to the corporations we buy from or work for, ‘I will invest my loyalty till this business can deliver superior value. When value is insufficient or a reasonable effort to fix the problem fails to produce results, I will defect to a business in which my loyalty can get me better returns.’ No organisation can hope to work towards high productivity if the management keeps chasing after new customers, employees, and/or investors. Here, what works is the system, not isolated bits and pieces of best practice. I have seen time and again, in Africa and in India, that when an executive shifts from a local company to an MNC, he undergoes a magic transformation and becomes a very different person in attitude and behaviour. In the local company, all that he cared for was ‘What is the future of this firm?’ ‘What is my future here?’ And, ‘How will it show in my CV?’ When he shifts to an MNC, often for only a little more money, far less job security, and much greater work load, his focus becomes on helping the MNC to succeed. The best employees, as the best customers, are those who get swept up in a kind of value-and-loyalty spiral. Specifically, the best employees are those with the talent and motivation to raise their own productivity, their own incomes and they fuel even greater upgradation in quality and productivity. The world has changed and India is changing. Of course, the people who keep you in business are your customers, employees and investors, but to them, loyalty is not simply an isolated quality. It is an integrated system that affects everybody. The tragedy in India is that there are many investors who are not committed to the long-term welfare of the companies they own and are not loyal to their own investments. This seems a silly thing to say, but a large number of our smaller firms have owners who are busy fighting among themselves or playing hide and seek with the tax man. The owners are doing one thing and are expecting their staff to do quite another. z

A company has to be loyal to itself before any sort of upgradation can even be thought of. If the investors do not have a sense of commitment to themselves, the workers cannot afford to have a sense of loyalty to them. Money does not come into the picture.

Any objective of long-term growth has to go beyond mere loyalty slogans on the factory walls, because the real attitude of the company never remains a secret. The workers know it and the market knows it.

Loyalty and Talent The entire corporate scenario in India has undergone a remarkable transformation and there have been incredible changes in the balance of power in the corporate world too: Talented people need organisations less than organisations need talented people. Our larger organisations are losing many of their bargaining chips, such as being able to exchange loyalty with job stability and security. A permanent job in return for the employee’s loyalty does not exist anymore because even if companies want to

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provide such jobs, they have a hard time delivering them, because the average life of an Indian company is now far shorter than the employee’s working lifetime. The upshot is a steady decline in the number of people willing to wear the company badge and at the same time, the average length of job tenure for Indian executives has shrunk: Some of this movement is no doubt involuntary, but some of it reflects a disenchantment with their current employers. A growing number of high flying managers now change organisations on their way to the top. Many Indian companies have CEOs that were recruited from the outside. Young high-tech professionals are also finicky about jobs. They have a strong sense of their market value, plus they also have access to inside information. They know what it is like to work for a particular organisation, and also have an excellent idea of what they can expect to earn. But growing Indian organisations still have a few things going for them. z z

First, many people actually enjoy the sense of belonging and the rituals of office life. Second, the best companies are repositories of skills that are hard to replicate. Talent may reside in the brains of individuals, but it is also nurtured by organisations. Talented people may think that their brainpower allows them to walk upon water, but in reality many are walking on the stones that their employers have conveniently placed beneath them.

The most important thing that Indian companies can do to attract talented people is to boost their workers’ long-term employability. Employees no longer expect companies to offer job security, but they do expect their employers to help them keep their skills up to date.

Loyalty to Yourself, Huh? Here is an anecdote that illustrates one of the very common problems faced by foreign importers when dealing with small manufacturers in India who try to do their own exports. It should be remembered that the bulk of India’s export in manufactured goods is through this channel. Foreign importers dealing with individual manufacturer/ exports here. Exports via large organised firms which have their own network of representatives overseas is mainly in commodities and other low value added bulk items. Here again, it will be seen that the problem is the poorly organised small family owned firm where the owner has to allocate his time between taking his sick mother to the hospital, look after the purchases, production and sales, plus the huge amount of paperwork involved with exports. For small export orders, it is obviously not worth while to engage a professional to handle all the paperwork. The problem I am highlighting here, results from the common practice of avoiding record keeping. For fear of the taxman, firms try to have as little information on paper as can be helped, making it impossible for the owner manager to keep track of inventory, and so on.


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This story repeats itself all over India and is typical of the case of one man trying to do everything. Now to the anecdote I am talking about. Once, when I was living in Malaysia, I had a visitor from Delhi; who was a friend of a friend. He was keen to export bicycle seats. I took him to a Chinese friend who was importing the items from Taiwan and Hong Kong. He was shown two brands, Ajanta and Ellora. The quality and the price were about the same. The main difference lay in the very attractively designed brand emblems in embossed brass fixed to every piece. My friend liked the look of the products and the price and decided to place an order for a fairly large consignment. My Chinese friend had two conditions. One, he would not, under any condition extend the letter of credit (L/C) beyond the stipulated three months delivery period as this would add to the cost, and two, the supplier was free to choose any of the two brands he showed, but the brand must be mentioned in the L/C and cannot be changed after the order was placed. The supplier agreed to supply Ajanta and accepted the order. I had been quite impressed with the way the exporter had presented himself and his products, so I was not prepared for a frantic telex (this was before the days of the fax and the Internet) which I got a couple of weeks after the L/C expired. It said that the consignment was already at Bombay port, but could not be shipped as the L/C had expired and if it could be, please extended by another three months. If the consignment was already at the port, why three months? Anyway, I could persuade my friend to extend the L/C by taking part of the cost. Silence reigned for another two months. No response to our telexes. Then, I got a very interesting and an unexpected telex again. I was told that the entire consignment at Bombay port was stolen! However, to keep up the goodwill, they were willing to resupply the whole order and take the loss, but Ajanta was not available and I was requested to modify the L/C for Ellora! Anybody but a fool could see through the ploy. As I confirmed later on, the ‘consignment at Bombay’ was just a bluff. The exporter could not get the consignment ready till the first L/C had already expired. Then, on getting everything ready, he found that he did not have any stock of the embossed emblems for Ajanta. The lead time for delivery of the new emblems was three months, so the fellow had no choice but to supply the other brand and cook up a clever story of the theft. This not only destroyed this fellow’s chances of ever getting any business from Malaysia, he also destroyed his country’s goodwill because the Chinaman openly ridiculed India and Indians.

I would say that the brilliance of thought and inventiveness shown by the fellow after the event should have been redirected towards working more productively! I cannot say that the fellow was a crook or a cheat or even a bad businessman. He simply had too much on his hands and never bothered about thoughts of losing goodwill, and so on. Do look around at the businessmen you know. How many of them would fit into this mould? Question: did this fellow have even the rudiments of personal loyalty? Was he loyal to himself, to his firm or to his nation? Did he have any sort of loyalty to his friend in Delhi who had introduced him to me?

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Loyalty to Yourself, Asian Version Here is another anecdote from long ago when I had just set up my own consultancy practice in Kuala Lumpur. My secretary was a young Chinese girl, Yoke Chan who had been working for me for just over an year. I had three other engineers, all expatriates from India. I had to go to Australia for an important presentation, and one of my engineers was to travel with me. Those days, there were not too many convenient direct flights from Kuala Lumpur to Brisbane, so my agent had booked us one via Singapore. That evening, we were delayed rushing through last minute corrections to our presentations and barely had time to rush to my flat on the way, pick up my bags and reach the airport for the 8 pm flight. At the check-in counter, as I was opening my bag to take out my passport, I got a shock. I noticed that in my hurry I had picked up the wrong set of files. There had been three piles of files on my table and I had just picked up the wrong set. I was in a funk. I saw that there was another flight to Singapore at 9:30 pm, enough time to make the connection to Brisbane but my office was a good one hour drive so there was no way I could go to the office, pick up the correct set of files and come back in time. Then it struck me that I did not have the keys to the office. I had left my set of keys with Yoke Chan and I had no idea where she lived or how to contact her! Those days, there were no cell phones. I felt numb and dizzy and tottered towards a chair. I could not think straight. Lekhvir, my senior engineer, just stood looking at me. We could not think of what to do. We looked at the airline schedules. The first flight to Brisbane the next day was late in the evening so there was no way we could reach the client’s office for our meeting. Then, a thought struck me. Hoping against hope, I rang up the office and got another shock when Yoke Chan picked up the phone. We all breathed a collective sigh of relief, but then I got worried. My first thought was that something was seriously wrong. I knew that my other engineers would have left office the minute I left, so why should a young girl be alone in the office at 7:30 at night, particularly when the boss has left for overseas for more than a week? I asked her and she said, ‘No Sir, there is nothing wrong, but Sir, I am not very smart and am just writing down all the instructions you gave me. Then I will sort out all the papers and files. I do not want to forget anything important by the time I come back to work tomorrow. ‘Of course, from tomorrow onwards, I certainly will take it easy.’ You can imagine the immense sense of relief that flooded over us. I told Yoke Chan what had happened, and asked her to immediately jump into a taxi and bring the files to the Airport. We could comfortably look forward to catching the next flight.

Talk of not being smart; the girl deserved a medal! Over the years, I have thought about Yoke Chan’s actions that evening. I had just come from India and the work attitudes of our people were fresh in my mind and I could not immediately understand the motives of this girl in doing what she did. It was only later, much later, after working with people of many races, that I understood that she liked the job; she felt that my firm had a good future and that she had a good future with me and was just being careful not to lose her self-respect and dignity by doing something silly by mistake. In other words, she was merely being intensely loyal to herself!

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9 New Manufacturing Opportunities

While looking at the immense new manufacturing opportunities in India, I will seek to establish that: We need to think ‘out of the box’, and take a hard look at the world around us. There are huge emerging markets in consumer goods all around us. If we are not looking for them, sure we will not find them and that is why our larger business houses cannot be bothered. It is true that whatever we can make, China already has a better and version cheaper on our shelves. We should stop looking at what China is making, and start understanding how they are doing it. Sure, we have the technology and the people, but something else is needed. We will talk about it in chapter 10. It is also wrong to say that all that a budding entrepreneur can export is garments, or leather goods, or commodities. Here again, we should stop thinking about what to export and start understanding how others are doing it. While this topic is fully addressed in my first book, Unleashing India on World Markets, I will briefly discuss the various entrepreneurial angles here.

New Markets in the West There are thousands of very simple, but highly innovative, plastic and wooden products currently being sold in the USA and all over the western world. Cheap, well designed, elegant and very popular—plastic toys, soft toys, games, gimmicks, kitchen and garden items, clocks, picture frames, hobby and craft items, and so on. You go to the same shop after a few months and a new version is already on the shelves.

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In the West, the market for these items is growing exponentially. The reason is the increasing spending power of the consumers. People want to live better, their children expect better toys and their wives expect better devices in the kitchen. This has created a massive new opportunity. Coupled with the shortage of skilled workers like carpenters, masons, and so on, people find themselves doing everything. So, the mentioned list gets enlarged to include items catering to the ‘Do it yourself’ trade. These items are widely advertised and sold all over the western world, almost all are ‘made in China.’ ‘Made in China,’ on the label of a product we see in the overseas markets can mean two things. It could either be read as, ‘Made in Hong Kong’ which is also China or ‘Made in China by the overseas Chinese.’ We are talking about a completely new range of immensely profitable products which did not exist a decade ago. These are all quick turnover, high volume and low lifecycle cost items. The western market has a voracious appetite for these items which come and go in a few months, sell in huge numbers and cost very little. Every day there is a new item on the market. India has never been able to make and export such simple items, has no share in this fantastic market and is not likely to have it either, unless the next generation of our entrepreneurs wake up to the realities of the modern world. It is not as if we do not have the technology. We are producing and exporting a number of far more complex and sophisticated plastic, metal or composite products, mostly without any foreign technical inputs, at prices comparable with world prices. So what is wrong? The reasons are very complex, and were articulated in my first book.In particular, we have to look at the very concept of entrepreneurship, innovativeness and the way new products are made and marketed in the world.

The Approach: Three Angles In order to understand some aspects of the highly complex reasons for not being able to manufacture and export the items mentioned, I will be looking at the very concept of manufacturing entrepreneurship from three angles. 1. I will give a stray example of an item that has a substantial market in India, and discuss it in detail to show how others can earn huge profits from simple innovative ideas. India has been making some very crude versions of this particular item for generations and we are still making and selling what my grandmother used. 2. In Part 3 of this book, when I talk about the globalised entrepreneur, I will introduce you to Guanxi, the Confucian concept of networking. This is a complex philosophy and its literal meaning is the ‘art of working with each other’. (For now, it would be a good idea to surf the Internet and take a quick look at the huge number of entries, when you type Guanxi. Be careful with the spelling!) This is a concept where a number of small independent firms work together,

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integrating an entire spectrum of activities from design talent, manufacturing capacity, production management expertise, marketing and packaging skills, and financing without which development of innovative items is not possible. In a later chapter, I will give an example of how Guanxi caused us to lose a simple but highly profitable project to Thailand. 3. Lastly, we shall be looking at our own way of producing and marketing new innovative industrial and consumer products. This is a major bottleneck for exports. Indeed, India has an exemplary track record of innovation in the entire spectrum of items from pharmaceuticals to computer software. We have a long tradition of innovation. The roadside mechanic managing to repair a complex carburettor with a piece of string is innovation also. Though we are very good at this sort of a thing, but it is also a sad fact that the subject of industrial design is no longer being taught in the country. Except for some stray examples, our industrial houses have no need for industrial designers and our innovations in consumer goods have not been able to win any world markets.

New Opportunities in India The driving force behind the creation of this enormous new demand is a new breed of consumers: Our young professional couples. They are creating an incredible demand for some upmarket daily use items. Young Indian consumers and companies now demand the latest technologies and features. If you search the Internet, you will find a plethora of academic and marketing studies that show that the attitudes and aspirations of today’s young Indians resemble those of the Americans a few decades ago. In particular I would refer you to a survey of thousands of young adults in India by the marketing firm Grey Global Group where it was found that our youngsters are overwhelmingly optimistic about the future, believe success is in their hands, and view products as status symbols. It’s fashionable for the upwardly mobile to switch high-end cell phones every three months, because an old model suggests ‘you are not getting ahead and updated.’ That means India will be a huge proving ground for next generation multimedia gizmos, networking equipment and wireless Web services, and will play a greater role in setting global standards. Apart from the Multimedia gizmos, networking equipment and other high-end products apart, I will show you that there are a number of huge, new and fast growing simple consumer markets in India that the Indian manufacturers are ignoring. In the Indian society, there is a revolutionary change in the young people’s outlook on life. The country’s younger generation wants careers, and longs for wealth and the good life. While they know that they will have to work hard, they also want to play hard. Thus they need everything that goes into making a good life. Since the young people of today form the key consumer group of tomorrow, these shifts have huge implications for the marketing companies and they should offer interesting new opportunities for the former to exploit, but are our manufactures paying

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attention? Look at what the affluent young people are buying; except for clothes, accessories and cosmetics, everything you see in the shops is imported. Unfortunately our rising consumer class is not yet driving innovation in this sector. In the example that follows, I will use young professionals in the big towns as my target market and will talk of a simple item they would like to buy from the market. I will show how simple items are beyond the scope of our manufactures unless the young entrepreneurs have a radical change in their thinking. (Remember, this is just one of the segments of the large range that one can talk about.) Let us first take a close look at our young professional women and then we shall discuss the couples. 1. Traditionally, Indian parents regard girls as someone else’s future property. They arrange marriages for their daughters, and the daughters go away to take care of their in-laws, so the parents need and dote on sons. ‘As a girl, you never spoke to your parents. They spoke to you.’ While this is by and large still true in small towns, young women of in large towns are rebelling against all this. 2. A decade ago, most young women saw themselves as housewives. If they had a profession at all, it had to be a noble cause, like teachers or doctors. Now, it is all about glamour, money and the good life. 3. The relationship with the husband was that of awe. Now, women want a partner and an equal relationship. They want to marry a man who takes an equal share in the housework. Now, let’s look at the young couples. You will notice that: 4. 5. 6. 7. 8. 9. 10.

Today’s young professionals are far more affluent than the previous generations. Both husband and wife are working. They invariably live in a big city like Bangalore or Hyderabad. Most young couples now live away from their parents and families. Their lifestyle is very different from that of the previous generation. They use many appliances and household goods that their parents never used. As soon as the first baby arrives, they visit the market for items that did not exist when they themselves were babies. 11. Their lifestyle does not permit them to use hand-me-downs from friends and relatives. They mostly buy new things for their baby. 12. Their lifestyle is more westernised and they bring up their children very much like young parents in the West. These young people are creating an enormous demand for many new and innovative products and as I said, by and large, the Indian manufacturers are ignoring this sector. I am not talking of baby food, clothing or toys. Walk into the children’s section of any large department store and see for yourself. You will notice an amazing range of upmarket consumer items that were not there 10 or 15 years ago, and the shopkeeper will tell you how rapidly the market is growing.

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Believe me when I say that the future of Indian manufacturing, that is, your future, lies in making thousands of items like these. The market is lucrative and fast-growing. Surely it will not be easy, but you can do it and have the world market at your feet.

Points to Note 1. Walking through a large store of any big town, you will notice that the vast variety of items on sale carry the label of Made in China or Korea. 2. You will also notice that even though the plastic or metal working technology needed for these items is freely available in India, the large range of designs and the comparatively small turnover rules out the interest of our large firms. 3. It is left to the small firms in China and Korea to conquer the world markets because of a unique manufacturing strategy that I will describe to you here. 4. Modern small-scale manufacturing of upmarket consumer items, in the Asian style, is not at all capital intensive. You may not need much of your father’s money, after all! Just for the sake of discussion, I am going to take one item, and explain, step by step, what would be involved in manufacturing it.

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Remember, I am choosing this particular item only for a discussion. After you read and understand what I have to say here, and in the rest of the book, you can work on a number of such items as and when you are ready to test yourself in the marketplace.

The item, in question, is what is called a baby walker. This is not a pram, but a device that helps toddlers to learn to walk. Every small town in India has a different and simple design of this item: just a small wooden stand with four wheels. The toddler takes its support and pushes it around. In some cases, it is a round plastic or metal device with wheels and a hanging cloth seat into which the baby can be placed. The feet just touch the ground and the baby can propel itself in all directions. There are many traditional designs that are crude but quite decorative in their own way. Walk into any large store and see for yourself. You will find a whole range of walkers: From the crude local ones costing a few rupees up to very fancy imported Chinese ones for a few thousand. The imported walkers have a superb finish with all sorts of toys and gadgets attached which the baby can play with. I am not suggesting that you imitate any design. But please remember that if you are able to offer something new to the market at an attractive price, young couples across the nation are your potential customers. The market is huge.

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The Starting Point As I said, you have hundreds of items like the baby walker to explore. Please keep in mind that in the first reading, what I say here would appear confusing. It would be a good idea to take a quick glance at the following, get the overall picture and then read it once again. Walk into any department store and look at an imported baby walker. It would be an original design, obviously not a copy or imitation. You will see that the item needs a combination of metal and textile technologies: The framework is all electroplated steel and the upholstery textile. Now ask yourself. Who was the person that first thought of making this item? How did the idea take birth? Maybe the person has the manufacturing capacity and is looking for new items to make. Say, the person could be someone from a metal working firm, or an upholstery making firm or a firm making similar composites for other types of furniture. He could be exploring new items to add to his production line. Or, maybe the person has the market and is looking for more items to sell if someone could make it for him. What I mean is that he could be someone from a retail organisation already selling similar but simpler items. Or, the person could be a budding entrepreneur, keen to enter manufacturing. He could have liked this idea while looking at other imported items. As I said, the starting point would have to be someone’s mind. Surely, someone somewhere would have conceived the idea, developed the design, and produced and sold it. Right? Wrong! Now read on!

Three Types of Integration While reading the above options, you may be thinking of vertical and horizontal integration: A firm may be exploring its options for expansion by setting up wholly owned subsidiary units to produce new items. This is where the two types of integration come in. But, please note that the heading for this section calls for three types of integration, not two. No, this is not a misprint. Let me explain.

Horizontal Integration You must have read in your text books on microeconomics and strategic management that the term horizontal integration describes a type of ownership and control while adding capacity. It is a strategy used by a business corporation that seeks to sell a type of product in numerous markets. The horizontal integration of production is where a firm sets up plants in several locations producing similar products. Horizontal integration of marketing is where, to get better market coverage, several small subsidiary companies are created. Each markets the product to a different market segment or to a different geographical area. Horizontal integration in marketing is much more common than horizontal integration in production.


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Many large retail clothing corporations are good examples of businesses that practice horizontal integration. They often control many distinct companies, each having its own brand equity. Each company has stores that market clothes tailored to appeal the needs of a different group. Some can sell expensive clothes with an ‘upscale’ image, the others sell ‘moderately’ priced clothes that appeal to middle-aged men and women, and the rest sell ‘inexpensive’ clothes geared towards children and teenagers. By using these three different companies, large firms have been very successful at controlling large segments of the retail clothing industry.

Vertical Integration Again, you must have read in your text books that the term vertical integration also describes a style of ownership and control. Vertically integrated companies are united through a hierarchy and share a common owner. Usually each member of the hierarchy produces a different product or service, and the products combine to satisfy a common need. It is contrasted with horizontal integration. Vertical integration is one method of avoiding the hold-up problem. One of the earliest, largest and most famous examples of vertical integration in India, is our steel industry. The companies control not only the mills where the steel is manufactured, but the mines where the iron ore is extracted, the coal mines that suppy coal, in some cases the ships that transport the iron ore, the coke ovens where the coal is coked, and so on.

Networking Integration This type of integration is practiced only in the East and is a new term in management jargon. This is a networking of disparate capacities: small specialist firms integrate their design talent, management expertise, marketing and packaging skills. The entire spectrum of economic activities is carried out mostly by small family owned firms. Their businesses stay singularly apart, but they work together all the time. We will talk about this now.

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One, no single firm can undertake to develop and manufacture items like Baby Walker and so on. You need to develop a very different strategy. For this new strategy to work, you have to come together with some friends and form the basis of a network. I am describing the various skills or disciplines needed for this new style of manufacturing. Each of you has to select a skill and work at it. Two, very little investment is needed till you are ready to offer the first item to the market. After that, the entire operation would need self-financing. The idea is that each of you should do what you are good at. The more you do this, the more you will upgrade yourself and make your network more competitive.

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Three, I am certainly not assuming any quantum change in your attitude and behaviour, and you do not need any long sermons on anything. Just learn to work together as a network without any of you being the leader. Once you see the prospect of making good money, you will yourselves be surprised at the changes in your attitudes. Four, surely there will be problems and conflicts. You will see that an important aspect of networking is that all parties will develop the patience, the motivation and the training in conflict resolution. The idea is basic instinct for survival. Each member of the network will very quickly realize that there is money to be made only so long as all the links in the network work well. That itself is incentive enough for you to learn to work with each other. Five, I am describing the various steps of this strategy. In due course of time, people who work at each step for your network would specialise in it and do more and more of only what they are good at. Six, do not worry about being copied. You will see that in order to copy you, the person would need to form his own network. But once he has such a network, why would he bother to copy? Seven, it is crucially important for you to meticulously record all your findings and discussions and these have to be easily available to all members of your network. You will see that the more you are open to each other the faster you will grow.

You Need a New Mindset Remember I am talking only of the manufacture of consumer items—items that would go on the shelves of stores, the growing market that is now mostly captured by China.

The Basic Idea I have seen in Hong Kong how small specialist firms join hands and integrate their design, production, marketing and packaging skills. The entire spectrum of economic activities is carried out mostly by small family owned firms. Their businesses stay singularly apart, but they work together all the time. Each is a ruthlessly efficient entity but they work very closely with each other almost as a strong cohesive group. When a crisis arises or an opportunity presents itself, they close ranks and co-operate. I have used the word ‘small’ above in ‘small specialist firms’ and ‘small family owned firms’. This has to be taken in the context of the traditional style business because many of them employ hundreds of engineers and have dozens of factories—exactly like you have ‘small’ Indian owned trading firms in countries like Malaysia and Kenya that can have the equivalent of a multi-million rupee turnover. All family businesses of the overseas Chinese are networks of companies and other enterprises, of clans and villages. An outstanding characteristic of the ethnic Chinese network is that no one is in charge. The marketplace is in charge.


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In India, there are excellent firms capable of all the operations I am listing below. But each firm works in isolation. No single firm has the resources or the organisational infrastructure to undertake all the essential tasks. So, if the idea appeals to you, your project will have to be promoted, undertaken and financed exactly as I am detailing below, because Indian firms rarely form consortiums or networks. Brainstorming First step is to decide on what to make. You do not pluck an item out of thin air and say you have a gut feeling about it. This is nonsense. You have to evolve a systematic and a continuous ongoing process where you do a lot of brainstorming and look at all possible ideas: Even the wildest ones. Listen to everybody. Then very diligently and systematically prepare a short list of a few items. Do further brainstorming on these items in detail, but only on paper and in the field, without any investment. Talk about, discuss and study all aspects as detailed in the steps that follow and eliminate items you think are not feasible. If you end up liking the concept of making, say, a baby walker, go on to step two. Market Feedback Talk to as many people as possible about the item. Be very open, and pick the brains of anyone you can find who has a comment to make. Talk freely. Nothing is confidential and secret. You are not the first to think of this item and certainly not the last. The more frankness you show, the better feedback you will get. Find out what people think of the item, who sells it, who makes it and most importantly who tried making it and failed. Find out why he failed. Do not use pre-prepared questionnaires as you will get ‘yes’ or ‘no’ for answers. For projects like this, it is always a waste of time sending college students with three page questionnaires. At this stage you do not even know what questions to ask. You want discussions, opinions and people opening themselves to you. You can see that as time goes on, the fellows in your network who do this investigation would get specialised and it is better that they be left alone to do this more and more. Initial Design Concept If your initial market feedback is positive, you start the design stage. Remember you are making an item that is already in the market so your motto is not to merely imitate but to study and improve. There are many baby walkers already on sale but you will be making something new and unique. Offer something different and next year offer an improved version. That is the secret of success of the Chinese people. So go to the market again and the market will tell you how to make it better. People will give you a wealth of ideas. Traders, particularly those who are impressed with what you are doing and are looking forward to sell what you will make, are the best source of ideas. Talk to customers who are in the stores. What is wrong with the design as it is, what sort of complaints were received, what is needed to improve it, and so on. This again is a continuous ongoing process where, even after your item is in the market, your network

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keeps doing a lot of brainstorming and continuously looks at all possible ideas for further improvement. Safety and Security Making world class consumer items no longer means engineering production technology. A very difficult but essential part of the product design is the incorporation of a lot of new safety and security features. This is one aspect that is, by and large, ignored by manufacturers in India. Pick up an imported baby walker in a store and you will be amazed at the number of safety warning labels and instructions all over the item, on the carton box and in the leaflet that comes with it. See the safety and security features that have been built into the design. USA is leading the world in demanding the incorporation of endless safety features in consumer items, and the rest of the world, including India, is not far behind. This is a difficult subject. I feel it will be essential, and lucrative, for you to have a member of your network specialising in the study of these features and requirements. No matter what consumer item you make, particularly for use by children, this fellow would have a significant role to play. Knocked Down Packaging This is again an aspect that is, by and large, ignored by manufacturers in India. I suggest you walk through the children’s goods department of a big store, but notice this time how the items were shipped to the store. Compare a baby walker made in India and to an imported one. You will find that the Indian item was fully assembled in the factory and shipped to the shops as it is. Not packed, but generally wrapped in plastic or gunny. The item was bulky and meant to be sold for nearby markets only. The parts and sections are often first encased in thin polythene tubing and then screwed on and assembled. The flimsy polythene becomes an integral part of the item, making it impossible for the customer to fully remove the ugly sheet from the product. Bits and pieces of the torn polythene remain sticking and soon become black and dirty. This is dangerous for young toddlers. Now see the very nifty box the imported baby walker came in. Look around you some more. You will see fairly large swing sets, very fancy baby cots, and even prams dismantled and packed in impossibly small cartons. Not only that, the items are designed to be sturdy even when put together and assembled by lay people without any tools, and comply fully with the safety and security regulations. This is the most difficult part of modern consumer product design. Each part is carefully designed and manufactured such that it would snap together and click on firmly to another part, and yet can be easily dismantled. And then, the cartons are designed with pockets and compartments to accommodate all the parts and accessories without the risk of anything dropping out or getting damaged in transit.


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Pre-manufacture Market Testing This sounds silly. How can you test market an item before actually making it? Well, this is how modern manufacturers do it and this is where computer graphics specialists come into the picture. I have seen superb leaflets, brochures, advertising video clips and customer handouts of items that were yet to be manufactured. This is essential. The computer aided print and other media comes in handy in two ways. One, you can find out in advance about unexpected problems, hurdles or design defects before burning your fingers, and two, your marketing team can book advance orders to help design production strategy.

Wish List Registration Before going on to show you how people make incredible advances simply by working together, I will divert for a moment to show you a highly innovative marketing gimmick I saw in the US. This is the gift marketing system in the Western world in nationwide store chains. These are the large stores which have branches all over the region. Say, my son is getting married. In India, the couple would get 15 toasters, 22 electric irons, and maybe half a dozen rice cookers, and an assortment of items which have no use except to pass on as wedding gifts to others. A complete waste of money for the couple and there is nothing one can do about this. In the US, most of the big chain stores have what is called ‘the store gift list’ computer. My son and his future wife would visit a branch of a nationwide store chain. They would select the items they need and enter the list in the store gift list computer with their names, doing this in two or three different stores. When they print the wedding cards, they mention the names of the stores they visited, at the bottom left of the wedding card. Any of their friends would go to any branch of these stores, in any part of the US, enter the couple’s names and see the items they selected. Depending upon the budget, the person buys the gift and it gets deleted from the list. The couple get what they need, and no useless gifts pile up in their home. This works very well for birthdays, weddings, anniversaries, anything.

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10 Making Intrapreneurship Work

I said it in the introduction and I say it again here: It is my firm belief that the only way we can start making our presence felt on the world markets is to undertake a deep study of the work ethic of the people of the East. I also said that we have nothing to learn from the West. In this chapter, I will be talking about the work culture of the overseas Chinese and the unique way in which they are using intrapreneurship and competing with us. I will give examples drawn from my own experience, and talk about the Chinese in China and those in Thailand. Then I will explain how we lost an excellent export project to Thailand merely because of a weakness in our intrapreneurial style. I am sure this would lay the ground for you to understand what I say in chapter 15, ‘Understanding the Overseas Chinese’.

A Unique Perspective I said in chapter 7 that an intrapreneur is defined as ‘a person within a large corporation who takes direct responsibility for turning an idea into a profitable finished product through assertive risk-taking and innovation.’ Intrapreneurship, then, is the practice of entrepreneurial skills and approaches by or within a company. Employees, perhaps engaged in a special project within a larger firm are supposed to behave as entrepreneurs, capturing a little of the dynamic nature of entrepreneurial management (trying things until being successful, learning from failures, attempting to conserve resources, and so on) is claimed to be quite valuable in otherwise static organisations.

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There is another way of looking at intrapreneurship, which is the Chinese way. I had explained in chapter 9 that there are now three types of integration: Horizontal, Vertical and Networking. I suggest that you take a quick look at what I said about networking where there are no large firms but several small firms joining hands, forming a network and working together as one. Not as a team and not even as a consortium. A close knit network, without any identifiable leader. Since members of the network remain independent, each member doing only what he is good at, the network quickly becomes a front runner in its respective field. z

I need to explain that when I say the ‘Chinese way’ I am not talking about China but about the Chinese people, mainly the Chinese people who live outside China.

In other words, the network has become a world class MNC. This also means that size is no longer synonymous with being world class, as new manufacturing techniques and computerised production allow these small factories to produce customised goods at mass produced prices. The emphasis shifts from size to efficiency, dynamism, agility and a reputation for timeliness.

Cigarette Lighters in Wenzhou Now, you will see an example of this manufacturing strategy—the strategy of small independent firms working together—that has been working very successfully for many years now. (You can read a lot more about this on the Internet.) z

Before reading the following, please close your eyes and imagine the sad situation of our lock manufacturing clusters in Aligarh, brassware manufacturers in Muradabad, bicycle parts manufacturers in Ludhiana and carpet manufacturers in Murshidabad. These industries are dying out and there is no hope of revival. Here is what I think is the reason.

Located in the southern part of the Zhejiang province, is the city of Wenzhou. This smog-filled Chinese city alone is responsible for a majority of the world’s smokers to be able to light up a cigarette; for tens of millions of sight impaired spectacle wearers to be able to see; and for supplying zippers and buttons to most countries. 60–70 per cent of the world’s metallic shell lighters, zippers and spectacles are produced in Wenzhou. A significant reason for the city’s success is the development of a unique cluster model that is more of a network, whereby hundreds of small enterprises work together producing complementary goods based on a very efficient division of labour. The city’s lighter manufacturers, for example, comprise hundreds of firms, some specialising in particular components, others in final assembly—leading to fast, flexible and competitive production. As a result of this much specialised division of labour, the city can produce over 10,000 different varieties of lighters.

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The lighter makers grew from a mere flicker in the late 1980s to dominate the world market in cigarette lighters, snuffing out the competition not only from the West but also from Japan, South Korea and Taiwan. Wenzhou does not have any large units. All are small but highly specialised family owned units functioning as a network under the unique self-regulatory and protective umbrella of the Wenzhou Lighter Industrial Association. This guild style organisation comprising around 300 companies is a legacy from the traditions of long ago: the rigid following of the teachings of the sage Confucius. The methods of the association are typical of how business is done by the Chinese where local merchants form highly disciplined networks of credit and co-operation which even extend to overseas relatives. The association enforces strict regulations that ban member companies from copying the products of other association members. It registers new designs, regulates supply and cracks down with a vengeance on infringers, giving iron-clad protection against counterfeiters. When a company brings out a new design, it registers its product, the style and type and a picture of it. An expert checks whether it adheres to international standards and whether it is being produced by another member or not. A description of the new product is carried in an industry bulletin. That enables the companies to freely conduct research and design, and properly market and distribute products without constantly looking over their shoulder for lowend fakers who might undermine their product. It is described as ‘an informal strategic network combined with a governance mechanism’ where enterprise and civil society have replaced the government. Any member company found imitating a locally registered design gets heavy punishment. It has happened on a handful of occasions when the association found a breach, destroyed the rival manufacturer’s equipment and confiscated the counterfeit products. But while tight-knit local loyalty has brought immense protection to the Wenzhou lighter manufacturers, foreign brands are ruthlessly eliminated. Foreign brands and designs are blatantly copied, improved upon and sold back to the same markets at, sometimes, below cost. The banking sector in China is in a mess, so nearly all the units have to depend on ‘shadow banks’. These technically illegal institutions comprise groups of family members, neighbours or friends who pool their cash and lend it. This is an advantage of the tight-knit loyalty. This ‘networking’ assures that though the world market for lighters is now declining because of the increasing ban on smoking, Wenzhou is prospering because it has rapidly branched out to a host of other decorative, gift and presentation markets. The overseas Chinese, particularly from the US, are bringing a host of ideas and designs for development and production for their own markets. For the foreseeable future, a steady stream of razors, buttons and lighters will continue to flow from Wenzhou for consumers in the far reaches of the world. A very crucial aspect of Wenzhou’s success is that overseas customers rarely need to go there or even talk to someone there. A customer invariably has a member of the network close to him in his own country. z

Wenzhou could turn out to be an interesting model for Indian companies, which currently spend very little on R&D (research and development) because they have


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no way of protecting their innovations. This would be a significant change from our past experience and would serve as a model for the future. This was the Chinese style of networking integration in action. It is called Guanxi. You will read a lot more about this funny sounding word in chapter 15. I will talk about another completely unrelated, yet remarkably similar example below.

Pantip Plaza, Bangkok Here is another example of this strategy, the strategy of small independent firms working together, that have been working successfully for many years now. This is by far the world’s largest and the most successful market for pirated and original CDs, DVDs and Software of all types. You name it, they have it, and the quality is excellent. Though this is also probably Bangkok’s largest computer market, I will confine my discussion to the business angle of how the CDs and DVDs are sold. I will also not concern myself with the legality or otherwise of the operation. I feel there is something for us to learn from how the place is run and that is all that I will look at. It is a sprawling six story building swarming with dozens of small shops and stalls, with a very elegant upmarket look. On entering the building, the first thing one notices, is the obvious prosperity of the place. I have been going there for many years now and every year I notice improvements in the way the place looks and the manner in which the wares are offered. Over the years, I have noticed another thing. The price has remained rock steady: A video CD for Baht 100 and software CD for Baht 150. (Roughly, a Baht is one Rupee.) Thousands of the most recent titles are on offer and hundreds of smartly dressed young men and women jostle you for business. But there is no bargaining. I repeat. There is no bargaining! You get one CD free for every 10 movie CDs or five software CDs. That is it. Nobody expects a higher price and nobody would sell for a lower price. If you need wholesale, you are taken to the boss, and what happens there is just between the two of you. I am amazed at the incredible efficiency of the huge operation. I am always delighted to go there as a customer and I have never had a problem with the quality even though there are no arrangements for checking or testing anything one buys. Remember, I am talking of pirated stuff. If you do find something wrong, it is replaced with no questions asked. The way the CDs are sourced, compiled, printed and presented shows painstaking effort. Songs, movie clips or software files are carefully sorted, and every CD is full of recorded stuff. No half full or scratchy CDs and no shabbily printed covers. If you buy pirated software, the access key or registration code is there too! Sure, the reputation of the place is spreading around.

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From the top to bottom, it is run by local people of Chinese origin, in Chinese style. With a blank CD costing less than Baht 5 and selling for Baht 150, there are superb margins for everyone down the line. I cannot but wonder on how is it possible to hold the price so firm. Remember, all that it takes is a computer and a blank CD costing a few Baht and you can produce and sell your own copies. Why does someone not offer cheaper stuff ? Why don’t traders undercut each other? I cannot understand how one cannot get cheaper copies even across the street or anywhere else in Bangkok. True, there are stalls selling the same stuff on the footpaths in some of the tourist areas, but here the price is far too high, as in any tourist destination, and of course there is bargaining. This, again, is Guanxi, the Chinese style of networking integration in action. I have said earlier that you will read a lot more about this in chapter 15.

Working with each other, Indian Style I have said repeatedly that the days of, one firm doing everything, are gone. Now I will talk of two personal experiences of overseas buyers coming to India to get something made. I will show how our smaller businessmen and entrepreneurs work with each other while dealing with them. Or rather, how they do not work with each other and are scared of trusting anybody. I will show how our style of playing with all our cards held close to the chest make our overseas buyers feel highly frustrated. Our businessmen and entrepreneurs need to remember that a buyer interested to buy from India—someone who comes here bringing business for our manufacturers—is not looking at India alone.

Idea Born in India but Developed in Thailand As the first example, I will talk of an American friend of mine who was interested in getting a simple food item made here. Browsing through the supermarkets in the US, one finds superbly produced cans of simple coconut water. The quality, design, and printing of the cans, packing, and so on, are superb. This item is being promoted as a natural health drink which sells very well. Thailand exports container loads of it every month with other items like coconut milk, not only to the US but also to all the developed nations of the West. Coconut water is no longer an ethnic drink popular only with Asians. The whole world is drinking it and Thailand is the main beneficiary. Here are some questions: Why Thailand? Why not India? Do we not have a huge surplus of coconuts? Do we not have a well-established food canning industry? Why are we not exporting this item? Why not indeed. I was based in Kuala Lumpur at the time, and was involved in the setting up of the project. I will tell you the inside story. The idea was actually born in India.


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I have an American friend who is married to a lady from Kerala. They were travelling in rural Kerala on a holiday. He had a little tummy upset, and was advised that the roadside fresh coconut water was perfectly safe to drink. He fell in love with the drink and he could not stop talking about the possibility of canning it for the American market. Since he owned a supermarket chain and had a fair amount of money, the market was no problem. I came to India again with my American friend, specifically to prepare an initial feasibility study. The objective was simple: Get the stuff made as per the very rigorous American standards. On the positive side, the first thing we realised was that there would be no problem in getting the raw material, the suitably printed cans and the packing material for our initial target of exporting one container load per month. So I was sure that the project would be ideal for India. The supply and transport of coconuts, the availability of cans, the cost of the inputs and the export infrastructure in the southern state of Kerala were highly competitive. (Thailand, where the project ultimately went, was about 40 per cent more expensive.) We found that there nobody had a suitable manufacturing facility for an output of this quality and magnitude. Either a considerable upgradation of an existing cannery or a new unit had to be set up. My friend was willing to make a considerable investment but did not want to set up the new unit all by himself. He did not want to live here so we were faced with the problem of immediately finding an entrepreneur willing to join him by making the large investment envisaged for an untested product market. I will spell out what happened and why the project went to Thailand. Simple: It was all about competition. To understand what I am saying here, we have to look at this from the point of view of an overseas buyer. He was not looking at India alone. I will describe the response we got in India which was lukewarm and disorganised. Then I will explain our going next door to Thailand and the highly enthusiastic response we got. We never came back. z

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I wish to be clearly understood that I am not running down our businessmen. They spoke to us and behaved in a way that was perfectly normal, natural and respectable. They spoke to us as they would to prospective customers from another part of India, though with some reservations, as we Indians have a tendency not to waste time on long-term export inquiries. But, if we have to start winning international business, we need to change.

Our Talks with our People My friend made it clear that though he was keen to invest he did not want to live here and run the project. The main problem was to find an entrepreneur or a businessman who would be a minor investor but who would promote, implement and manage the entire project as if it was his own. We found many rich individuals and small oneman-show kind of firms. Each person spoke as an individual. Though some of the people we spoke to were very rich, we could not find any of the larger well-managed business houses interested in the project. We spoke to a few of the bigger firms in

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Bombay and Chennai. They liked the idea and promised to look into it and let us know! This stands out in stark contrast to what we found in Thailand. I will talk about this in a minute. During the initial survey, we met a number of entrepreneurs, businessmen, suppliers and subcontractors. While we were looking for firms to take up the project, we were also looking for quotations, terms of service and the organisational details of the suppliers. Talking to suppliers and subcontractors created a problem. I will tell you how. There were some outstanding characteristics of our talks with the Indian people. 1. We were well-received and enjoyed the hospitality of some very nice people. However, everybody we met from the plantation owner to the transporter, wanted us to deal only through him, leaving him to deal with people down the line. Each clearly wanted to be the boss. The person talking to us as, say, the main entrepreneur, did not like our talking to the suppliers and subcontractors. He asked us to tell him what we wanted and leave him alone to do it for us. z

No problem here. This is common.

2. When we insisted on talking to everybody, each person made it clear that he will talk of his own aspect of the deal only. Say, the coconut supplier made it clear that he wanted the sole contract for the supply of the coconuts to the factory but his role would be to supply and he would not have anything to do with any transporter we selected. If we had problems with the transporter, it was our business, and so on. He said that, of course, he could give us the names of some good firms, but after that we were on our own. z

No problem here too. This is also common.

3. A very unpleasant aspect of our talks was that everybody we met talked his head off over dinner and drinks, repeatedly stressing his own business ethics being above those of the others in his line of work. People were full of nasty and mean gossip about their competitors. It seemed as if the entire PR effort of the businessmen was to run down others. z

Serious problem here. This created a terrible image.

4. The attitude of the large number of trade associations, government bodies, entrepreneurs, businessmen, suppliers and subcontractors was the same. We were well-received and promised all sorts of help, but every offer was at an arm’slength. ‘We will help but if anything goes wrong, you sort it out.’ Everybody knew by this time that we were also considering Thailand but nobody was bothered that India could lose the project. z

Though this also created a terrible image, it is quite usual everywhere.


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We Go to Thailand There was an amazing and very reassuring characteristic of our talks in Thailand. We spoke to a single, cohesive group of people, each of whom spoke for everyone else. The response was nothing but enthusiastic. Let me explain. Our first point of contact was a large coconut plantation near Hadyai, in the South. I spoke to them on the phone and was directed to meet the owners in Bangkok. The person on the phone said he would fix up an appointment for us. We went to Bangkok and met the owner who was a Thai of Chinese origin. His English was not very good, but he easily understood what we told him. He gave us a patient hearing and took us out to lunch. Over lunch he asked a lot of casual questions in his broken English and suggested we meet again the next day. When we turned up at their office, we were surprised to find there about a dozen people from different organisations. All were people of Chinese origin. I was amazed to note that there were three competing plantation owners, and two aluminium can manufacturers. And of course, the transport contractors, the shipping agents and the food technologists. How can competing firms meet some prospective customers at the same time? I had a question in my mind as to why they were giving us so much importance, but then I was amazed to find that they had already run a check on my friend’s credentials via their contacts in USA. Overnight! We could see that everybody had businesses that stayed singularly apart, but they instantly formed a network and worked together when an opportunity presented itself. z

I have explained earlier that this is the Chinese way of doing things: They compete in the morning for something and close ranks and co-operate in the evening for something else.

It was immensely reassuring talking to a cohesive body that spoke with one voice. Our discussions went smoothly because everybody connected with the proposal was there, participating. People who were obviously competitors were co-operating! We spoke directly to everybody and got data, offers, terms and conditions right across the table there. We could see that the prices they were going to charge for the canned drinks were much higher than India, but we did not care. We were at least sure of getting what we wanted. The bottom line is that we ended up with a firm proposal from the group with the outline of the corporate structure of the new firm to be set up. z

We did not have to run from pillar to post, like we were doing in India, trying to put together a workable proposal. Sitting in Bangkok, we even got the involvement of a Chinese firm in the US who would handle the American side of the clearing.

We never had the foggiest notion of who the shareholders of the new firm were. A person was nominated as the CEO and thenceforth we dealt with one person only, but were free to call any of the constituents and check on anything.

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The project is now doing very well and is exporting a few container loads every month to many countries. Walk into any supermarket in the West, pick a can of coconut water and see where it is made. Thailand. z

In many places in this book, I am speaking about this Chinese concept of networking or integration of an entire spectrum of activities. The trick is in networking of disparate capacities and in how small specialist firms integrate their talents and management expertise. This is called Guanxi. Do look this up on the internet. You will find many articles and books. Also see chapter 15.

A Trip to Pondicherry and Auroville I said I will give two examples of how we are losing manufacturing opportunities to other people. Here is my second example where I will show how others are coming into our country and doing far better. In India, Pondicherry (and nearby Auroville) are probably the only places where there are many non-missionary, non-religious foreigners who have settled down and made India their home. These people have established a number of small enterprises and are making an excellent living out of them. Enterprises like screen printing, bakeries and confectioneries, handicrafts, decorative candles, greeting card production, furniture and so on. The list is endless. These enterprises exist side by side with similar units run by our local people. The contrast between foreigner run units and Indian ones is shocking, and is there for everyone to see. The former are excellently organised, clean and tidy, with a place for everything and everything in its place. Workers invariably wear clean uniforms, are better paid and more committed to their jobs. Everybody knows what is going on and if you call when the boss is away, you will get a decent response and maybe even the information you need. Though the prices are invariably high, the business is obviously better. It is a pleasure doing business with these people. I do not think they advertise or do any export promotion, but somehow they have an excellent export market. Anyone who has been to Auroville will vouch for this. The local run units are smaller and shockingly shoddy. Inventory, cartons, boxes and the workers’ Tiffin boxes are all over the floor. Nobody but the owner knows what is going on. There is a phobia of keeping any sort of records, and if you call when the owner is away, you are told to call again. I have seen owners who send someone to the store rooms to check how much of a particular size of an item is in stock. It is almost as if the owner is not aware that there is a customer out there who can go elsewhere. I am neither running down my own countrymen nor am I praising the opposing team. I am talking of a personal experience. Some years ago, when I was living in Malaysia, I visited Pondicherry in India on a holiday. For a social function that was arranged unexpectedly, I decided to have some special type of greeting cards produced in a hurry. I knew the cost would be a fraction of what it would cost me back home in Kuala Lumpur. The work involved some digital photography, computer graphic design, screen printing and a special way of folding


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the cards. I knew that there were plenty of local people who could do these jobs. I went to a well-established local printer and took great pains to explain the complications of what I wanted. The owner listened, took the sketches I gave him, but I could see that he made no detailed notes. I suggested that I talk directly to the various people who would do the different jobs so that they understood exactly what I wanted. The owner refused to let me talk directly to any of the other firms, insisting on doing the explanations to them himself: ‘No problem, Sir, I will handle it.’ I was sure that I was heading towards a nightmare. Sure enough, when the initial proofs came, they were such a disaster that I walked out disgusted. I was running out of time when I was introduced to a French lady running a screen printing workshop in Auroville, about 5 kms away. She took one look at the job and quickly brought the other people in to talk to me. Everybody understood what I wanted and I got a fantastic job done. Of course, the cost was higher but I got the results I wanted. Indeed, the local small firms do realise that the local and overseas customers are going away frustrated. The point I am making is that the local fellows have success stories right next door, but they make no effort to learn. Increasingly, overseas customers are demanding and receiving, customised solutions tailored to their specific needs. The customer does not want what you have readyto-sell. He knows what he wants and if we cannot offer this, we should not only forget about exports, we also look forward to losing our home markets to outsiders who are increasingly coming here to do business. The new customers are individuals, with distinct needs, requirements and concerns. The generic customers are gone, and so are generic solutions and the ‘one size fits all’ sales process. The best of all worlds is that in which we are versatile enough—as organisations, as individual businesses and as instant consortiums—to match export requirements with the right products and processes. This can only be done by different businesses working together as one. I am trying my best to establish that the only viable, sustainable future business model is one of collaboration. In almost every market today, the competitive dynamics and the global economic system are simply too complex for any single player to bring all the core competencies needed to the marketplace. The future will require instant alliances, often with companies that were formerly competitors. For example, players A and B compete in the market, have always competed against each other and would always continue to do so, but for an opportunity C they join hands and win. Today, collaboration and competition co-exist in relation to the market requirements. Today, you may compete in the morning with a company and collaborate with them in the afternoon.

Guanxi in India What I have described above is the direct result of the first thing the Chinese (and the Japanese and Korean) children learn from their mothers: The teaching of the sage Confucius and the strong tradition of working with your own people: You can fight, you can disagree, but you remain within the same network. No splits, no staring rival

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organisations and no involvement of outsiders in whatever you do. There is a close knit networking combined with a ruthless attitude to eliminate outside competition. I have seen mortal enemies working together when an opportunity arose, yet remaining enemies. People outside the region I mentioned are beginning to understand that to survive and grow one needs this immense degree of trust, born out of a simple profit motive. People find they do better if they are a part of a network, a group of people working with each other purely on an understanding for individual profit, and so everybody abides by the unwritten rules. The relationship extends to the particular project only. It is a good business practice, pure and simple. Ethics and honesty do not come into the picture. Everybody realises that if you trust me and I trust you and that if everybody in the network follows a particular code, we all make money. That is it.

But, Things are Changing I had asked some students to comment on what I have written till now and compare with what they thought happens in India. Their comments were understandably negative. The students mentioned first, the awful way pirated CDs and DVDs are sold all over India. Each seller is on his own: everybody has his own price, everybody undercuts everybody else, the quality is invariably junk, the customer gets a raw deal and nobody really makes any money. Then, some students mentioned our bicycle manufacturing industry in Ludhiana which is now in a state of rapid decline, having lost most of its lucrative export markets to China. There are hundreds of small and large manufacturers of component parts, accessories, tools and the assembled bicycles, but each has an arm’s-length attitude while dealing with everybody else. Nobody trusts anybody, there are too many people doing the same thing and nobody has been able to specialise in anything. The net result is that for outstation or overseas buyers, finding good suppliers and then dealing with them is a nightmare. I agree that what they said was true, but our country is changing and I will show you how Guanxi is working in the new India. The changes are driven by forces of globalisation. Here are three examples. One, I know some specialised engineering sourcing companies in Bangalore. They get high-tech steel forgings, stampings and precision machined parts made in India for American customers. Their main selling success is in the very stringent quality checks they do here before an item is shipped. They have developed very viable networks of engineers, raw material sources, vendors and fabricators, and the degree of trust and cooperation between them is incredible. Everybody knows everybody else, work closely and help out where needed. I know of an instance where some vendors chipped in to help out a fellow supplier who was in temporary financial difficulties, so as not to disrupt a lucrative chain of supply.


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Two, another sector of the Indian industry where this is happening is the newly emerging manufacturing sector of automobile components, spare parts and accessories for the world market, mainly in South India. A large number of world class firms, each specialising in what it does best, are working together as close knit networks to capture more and more of the world market. These firms talk to each other and help each other in improving quality and reducing costs. Everybody is benefitting. Three, the large and growing number of engineering firms in Coimbatore are getting what places in the North, like Ludhiana, are losing. There is really no identifiable leader, and these firms are realising the advantage of ethical dealings, promising only what they can do and closely working with others above and below them in the chain of supply.

This, I think, is the new India.

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11 The New Meaning of Quality and Finish

I have said repeatedly that one of the great strengths of our nation is our managerial competence. The world recognises this. Because of our managerial excellence we can succeed in any sector anywhere. In addition, with the unchallenged superiority of our intellect and inner spiritual strengths we should have had a commanding position on the world economy long ago. But we are far from attaining any commanding position. With the world’s second largest nation having a humiliating 0.7 per cent share in the world trade, something is surely missing. I do not have an answer to that one, but from my own experience I know that this has something to do with the response of our businessmen to the protectionist policies we had to adopt immediately after independence. This response has left deep scars on our economy, and the irony is that even more rigid protectionism that is still functional in countries like Japan and Korea have produced diametrically opposite results. Let me first talk about our people and then I will do so about the Japanese.

Shoddiness as a Policy Looking at the huge mass of industrial policy papers published during the first decade of our independence, it is clear that our government made shoddiness and shabbiness of the products produced in our country an accepted norm. It was the declared policy that finish and aesthetic appearance did not matter and all that was needed was for the product to work. This basic philosophy soon got gleefully adopted by the entire spectrum of our society and the tragically pathetic results are there even today.

The New Meaning of Quality and Finish

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I have a copy of a speech made by one of our senior ministers at one of the symposia organised by the United Nations Industrial Development Organization (UNIDO) (1972). There are many tendencies that make the issue of Indian employment very complicated, but the long established rigid consumption preferences of Indian society, are a very serious obstacle. If the accent on labour-intensive industrial enterprises is desirable, and has to be pursued, our society ought to be prepared to accept less sophisticated and somewhat shoddy products for some time to come. If locally manufactured shoes are offered at cheaper prices with a slightly inferior finish, the consumer rejects them, preferring the better finished chain-store shoe manufacturers whose prices are much higher. The fiasco of the hand-woven and hand-spun ’Khadi cloth in the land of Mahatma Gandhi is too still vividly remembered; all the official patronage and heavy subsidization cannot popularize coarse Khadi cloth among consumers who are pining for synthetic fibers. The same fate awaits small-scale industries working in the underdeveloped regions, whose products have to withstand oppressive competition from the large-scale producers whose output enjoys a marked consumer preference in our society. Thus, if the labour-intensive industries are to succeed, it will be necessary to inculcate, if necessary by force, a deeper social consciousness and to develop a preference for the rough and slightly shoddy in order to meet the great crisis of unemployment.

True, this philosophy was based on very laudable motives of a socialistic pattern of society, because, at that time, the entire developing world was immensely fascinated by the Soviet model of development. It is only by hindsight that we now know how the results of this ideology have been disastrous for the Soviet Union and more than tragic for us. Our businessmen quickly found it convenient to misinterpret this message to mean that they can go ahead and produce anything of any quality. No one needed worry about overseas competition because the Government was there to protect them to the hilt as long as they created employment. While our manufacturing sector grew by leaps and bounds, producing overwhelmingly shoddy goods, our service sectors too used the protection from overseas competition to give us incredibly shabby roads, buildings, airports and so on. It is also true that our protectionist policy did indeed produce many outstanding success stories, but the success was short-lived as the newly emerging Asian economies came on to the scene.

Here is a Thought It was in 1969 that I was first posted to Kuala Lumpur. I noticed then that the supermarket shelves in Malaysia and Singapore were overflowing with Indian goods. Everything from electric irons to ceiling fans to sewing machines and bicycles were from India. Sure, the items were rough and tough, had no finish at all, but they worked and were value for money. Indian engineers and contractors were in great demand, helping the locals make roads and bridges, and our airlines were helping set up their airports and airlines. We had a strong presence there.

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In three decades, all of this has disappeared. Now it is their products that are flooding our shelves, their contractors that are building our roads and bridges and their airlines that are showing us how to run our airports and airlines. Sadly, what is true of Malaysia and Singapore is also true of Kenya and the West Indies. During the last three decades, we have not only lost our very lucrative export markets in entire Asia, Africa and the Caribbean, the highly aggressive and efficient trading organisations from the East, from Korea, Taiwan and Singapore, are now making mindboggling inroads into the Indian markets, bringing products and services. Where we played a leading role once, now there is a fast growing tribe of business people in India that are buying from and servicing the companies from the East, and their number is increasing exponentially. To add insult to injury, our traders now merrily import items that have been a part of Indian tradition for centuries: superb quality Hindu religious idols, ceremonial lamps and dipawali diyas, mostly from China.

A Dramatic Presentation I want to talk about a remarkably dramatic manner in which my friend Dr Tashi Tongyal drove home this point to some students of a prestigious institution in North India. This is one presentation that neither I nor the students are going to forget in a hurry. Tashi says he has an Indian heart with a Chinese mind: He is Chinese by birth and Indian by adoption. He was born to Chinese parents in Tibet, but his family moved to Leh, in Ladakh when he was a baby, and his father took up Indian citizenship. After graduating from Dehradun, he went on to pursue his PhD from the London School of Economics. He has been with the UN all his working life and has been the economic adviser to the Prime Ministers of many developing countries as a part of his UN assignments. I have known him for over 30 years ever since he was first appointed as a junior member of my team to Lesotho. Tashi, with his pure Chinese blood, Indian upbringing, international exposure and powerful intellect has remarkably down-to-earth opinions on what our youngsters are and what they can easily be. What he has to say, and how he said it, would surprise and indeed shock my readers. Dr Tongyal and I were visiting India and he was the Guest of Honour and the keynote speaker at a ceremony to mark an Engineering college that had just become a deemed University. It was a formal occasion; there were many invitees and all the boys and girls had worn full-sleeved white shirts and neckties with dark trousers. The faculty and the guests were wearing full suits. I was stunned to see Dr Tongyal walk in wearing a very shabby cotton shirt that was not even tucked in. While the shirt was obviously clean, it was badly rumpled and looked as if he had slept in it. It also had a bad ink stain on the pocket. I was speechless. I have always known him to be a very fastidious dresser. He nonchalantly walked to the podium and smiling at everybody, took his seat. Well, he was the Guest of Honour and after due introduction, he was asked to speak. He ignored the podium, took a wireless mike and coolly walked to the front of the stage, to be in full view of the students. He opened his talk by asking the students


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about the muted sounds of smirking and laughing from the back of the hall and said that if the students did not like the way he was dressed, he wanted to know exactly what was wrong with it. Of course, no one volunteered. Then he challenged the students saying that they were training to become entrepreneurial professionals and the first thing they should have learnt is to look at everything analytically. If there was something they did not like about his dress, he asked them to be specific and list out as point A, point B and so on. He kept goading them while the Dean and I smiled and nodded to each other. By now, we understood that he was doing this to prove a point. On probing repeatedly, he managed to get some hesitant responses, and cleverly put words into their mouths by adding some comments of his own. Finally he said, Boys and girls, I have your verdict. You have not liked the way I am dressed even though I find nothing wrong with it. My shirt is modest, clean and very comfortable. You have said four things: one, it does not look nice; two, it is not how one should dress; three, coming to a function like this I should have had some self respect and four, sure it serves the purpose but that is about all.

Saying this, he started to take off the shirt and we noticed that he was wearing something underneath. He paused and said: My children, you have just received one of the most important lessons of your professional life. Before I take off this offensive shirt, please remember your feeling of repugnance when you saw me walk in. I will ask you to feel the same repugnance in many different contexts today.

Then he took off the shirt and we were delighted to see that he was wearing a smart designer safari under the shirt. There was pin drop silence and he had everyone’s rapt attention, but I could not see the point that he was making. I could see the bewildered expressions on the face of the students too. But Tashi was in his element, and was relishing the confusion he was creating. ‘I am going to rearrange and rephrase the four comments you made on my dressing’, he continued, ‘and make what I am going to call the SINS test. S for Self Respect; I for It is not the way it should be done; N for It is not Nice and S for Sure it serves the purpose but is that enough?’ Then in an equally dramatic manner, he asked the students to come to the windows on the left of the hall and look out. He said: As I was being driven to your college, I noticed that this is a newly built area. But look at the main road. It is obviously new, but look at the rubble and debris that is there on both sides of the road, giving it an awfully shabby look. And again, look at the row of small shops across the street.

Now children, I am going to ask you to close your eyes and imagine that this college is in Singapore, Malaysia or anywhere in Europe. Imagine what the road and the shops across the street would look like. Imagine the neatness and tidiness that you will see as far as your eyes go. Before opening your eyes, ask yourselves ‘if they can do it, why

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cannot we?’ Now, open your eyes and I am sure you will get the same feeling of repugnance as you got when you saw my shirt. Look at the shops again. They seem to have good business but they already have a derelict and ramshackle look. Can we apply the SINS test to the shops? Does the owner have any self respect? Is this the way it should be done? Is it nice? And, sure it serves the purpose but is that enough? You now understand the meaning of the SINS test and have seen how these shops have failed the test. Can I ask why you have never had any feeling of repugnance when you have seen these shops many times? How is it that you see shoddiness and shabbiness all around you and do not give it a second thought, but are so particular about my shirt? Your own answer to this would teach you an important lesson. I said earlier that you have just received one of the most important lessons of your professional life. I need to correct myself because you have just received not one but three important lessons: 1. One, I have just shown you a new technique of dramatising a presentation to maximise the impact. You have seen that today I am not using any media aids or reading any text from a paper. This is my way of creating an informal ambience with you. If I were to be reading points on a screen projection, I would be reading and explaining the second point, but your attention would wander to the sixth. Sure, there are many ways of explaining something but making you remember what I said is something else again. I am sure even after five years, when you think of me, you will remember my shirt and then recall a lot of what I am saying. z

So, lesson number one: How you say something is as important as what you have to say.

2. Two, my shabby shirt would not have been noticed if I was travelling in a bus in Bihar, but while comparing with the way you all are dressed, I cut a sorry figure. That is comparison, the other word for which is competition. The same is the case with any product you make. In the marketplace, yesterday, most Indian products had a minimum quality standard which merely served their purpose so the poor finish did not matter. But today the same product would suffer in comparison with vastly better finished imported products. z

So your second lesson: As India is increasingly globalising, how your product looks is as important as how it performs.

3. Three, you found my shirt distasteful yet you never noticed the shabbiness of the shops across the street. It is all a question of comparison. Surrounded by your meticulousness and elegance, my shirt stood out. The shops represent all small shops in India; it is shoddiness surrounded by more shoddiness so, of course, you do not notice it. I remember I was in Chennai the other day and we were passing an industrial area. All the industrial buildings were, as usual, shabby and ill maintained, but suddenly we passed a very elegant looking building with an


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attractively maintained compound. The person next to me immediately commented that it must be a foreign company. This is no doubt a strong indictment of all industrial buildings in India, because the first reaction of an Indian was that elegance is not a part of our thinking. This has to change. Indeed it is changing, as increasing globalisation is bringing our industries to the attention of the world. The world first puts you and your set-up under a microscope before it deals with you. z

That is my third point: now, how you make it and where you make it is becoming as crucial as what you make.

I sat back, stunned. I had never heard such a perceptive analysis of our industrial scenario and so brilliantly presented. I could see the entire audience; students, faculty members and invitees, sitting on the edges of their seats, hanging on to every word my friend Tashi was saying. I remembered his saying that he had a Chinese body and mind but an Indian heart. Of course, Tashi was fully aware of the grip he had on his listeners, and concluded. When India got its independence, we took the highly glamorous route of socialism and our sole thought was to somehow make the products we needed and employ as many people as possible. The thing had to work and that was that. Considerations of quality, durability, elegance, finish and of course, prices were ruled out by ruthlessly barring the entry of better products. The foundation of the entire nation was built on this attitude that quickly got extended to the buildings, schools, hospitals, roads and other structures. And, everything the government built was outstanding in tackiness and shoddiness. The young Asian nations that came on the scene much later saw the resultant damage to our economy. Governments in the newly emerging Asian countries; Singapore and Malaysia, from the very start had the attitude that every thing had to be done correctly and no short cuts were to be adopted. From the start, they built superb cities, highways and airports. Their post offices look better than hotels in India. It is amazing that intensely Communistic nations like China also said that the private sector had to fall in line because, as a policy, no protection was available to anyone who could not compete in the world market. As my friend finished his very impressive presentation and we were walking towards the dining hall where we were to have an informal lunch with the students, I thought about what he had said. I agreed with him fully. Elegance means a lot in the increasingly competitive world, and while other nations are making elegant products, our manufacturers have a could-not-care-less attitude. Sloppiness has become our trademark, and is almost a way of life for us. We have built an enormous number of factories, offices, schools, hospitals, and of course, homes and while still having the world’s best brains, the overwhelming shoddiness and shabbiness of everything hits one in the face. Be it, a worker in a factory fixing labels at the bottom of a product, an electrician fixing a new light switch in my house, a carpenter making a new table for me, or a painter whitewashing my kitchen: The work is sloppy, nobody bothers about appearance and everyone leaves behind a mess. It is all around us and we do not give it a second thought. It is there in the structures we build, in the products we make and in the surroundings we live in.

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My reader may ask: We may be shoddy or we may be neat and tidy. Why make an issue of it? What has all this to do with entrepreneurship? Well, two things. One, I am not talking of shoddy workmanship as a stray example and I am also not talking of the superb quality high-tech goods we are now making. I am talking of the connection between the overwhelming shoddiness of consumer goods produced in India and our way of life. To a small manufacturer, ‘quality’ does not include ‘finish’. I said at the beginning of this chapter that many decades of indoctrination of the idea that finish and aesthetic appeal do not matter has made shoddiness almost a part of our psyche. Second, it is my firm belief that if the next generation has to make daily use products that can compete in the world market, they have to understand this and break free from it. There is no point in doing something that you really do not believe in. Doing something meticulously for a purpose, or doing it because you have been ordered to do it, is never as good as being meticulous by habit. You need to have a tradition of stringent quality control for all the products at all times rather than for some items you make especially for export. To me a label saying ‘Export Quality’ is an advertisement that the rest of the goods are shoddy. Like a hotel advertising ‘clean sheets and towels in the deluxe rooms’.

In the dinning hall, I saw that we were to have a traditional Indian lunch of rice and curry and stainless steel plates and bowls had been laid out on tables. The Dean waved us to the tables and told us to feel free to sit wherever we felt like. It was all informal. As the Dean and I were sitting down, we saw Tashi standing across the table from us with a small curry bowl in his hand. He did not sit down. He was turning the bowl in his hands, carefully looking at the inside and the outside. He held the bowl aloft and called out, ‘Boys and girls, can I talk to you for a moment?’ Immediately the students surrounded him and he continued: My children, here is a lesson for you. I told you that you can apply the SINS test to any Indian product you see. You will know if the item can withstand international competition. Here is a very common example that you can buy in any utensil shop anywhere. Pick up this bowl from your tables and take a look. Notice that it is a superbly finished stainless steel item, obviously new. Now notice three things. z

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One, there is a very poor quality paper label of the brand name, Azad, stuck on with a water-proof adhesive, but it is on the inside of the bowl. I find this amazing. Who can eat hot curry out of a bowl that has a paper label inside? I would find it intensely repulsive. Try peeling it off. Go ahead, try it. You cannot. See, if I try to peel it off, all that I can do is to peel off one layer of the paper, leaving a very rough inner layer, making it all the more awful. Two, someone has scrawled Rs 10 with indelible marker pen, also on the inside of the bowl, partly covering up the label. There is no way of telling if this ink is toxic or not. Three, there is a proper bar coded label at the bottom of the bowl, obviously put there by the retailer, that says the price is Rs 8.50.

My own experience of all domestic use items abroad is that all labels are pasted on the outside and that too with water soluble glue. The same is the case with price markings. Everything must easily come off at the first washing or else the utensil just cannot be used for any edible thing. Now, let us apply the SINS test. S for Self-Respect; I for It is not the way it should be done, N for It is not nice and S for Sure it serves the purpose but is that enough?


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Let us talk of self-respect. The greatest item of concern for any manufacturer is his brand image. Does this particular manufacturer have self respect? He has not only used a very poor quality label, he has carelessly slapped it on in the wrong place with the wrong adhesive and in doing all this he has destroyed the finish of an otherwise elegant product. All that he has succeeded in doing is to create a nuisance for the user who has to use the product. Believe me; removing this label is not a joke. No amount of scrubbing will do. You need paint thinner. How many households would have paint thinner handy at home?

Tashi quickly ended his talk by saying that the students could apply the rest of the SINS test and we all sat down to lunch. I noticed that almost everybody ignored the bowls and had the curries poured directly on to the rice, which again is the traditional way of having rice and curry.

Actively Creating Shoddiness I am reminded of one of my earlier visits to India. I have been to hundreds of factories in India and elsewhere, but I need to mention this particular visit to make a point about the role finish and elegance plays in modern manufacturing. I need to interject here and explain what elegance means to me personally and what it means to the buyers of most of the multinationals. For me, elegance comes in three stages. First, my eyes would tell me if it is clean. It may be my room, my mother’s kitchen, my desk in my office or even a project report I am working on. I first notice if it is clean. Then, my brain takes over and checks if it is neat, tidy and orderly. It is only then that my heart tells me that it is not merely clean, neat and tidy, but it also appeals to the heart: It is elegant. Elegance has nothing to do with cost. I have seen far more elegance in simple homes in villages in Rajasthan than in flashy and gaudy homes of businessmen in Delhi. To the buyers, it means something far deeper than the mere finish of your product. They want to be sure that you will produce batch after batch of superb products with no one breathing down your neck to check every piece. To do this they put your own lifestyle, the upkeep and layout of your factory and the attitude of your staff under a microscope.

I was a consultant to a Singapore–Chinese group of companies, and the project was to set up a facility in Singapore to manufacture various types of Air Conditioners, Refrigerators and other domestic appliances. We were exploring the possibility of outsourcing the supply of various types of automation switches and control devices from India. I located a fairly large firm near Delhi who were already manufacturing these items along with a number of other more complicated items for the local appliance manufacturers. They sent us their detailed specifications, testing and quality control procedures. We were impressed with the technological standards and so I came to India with a German engineer to see the plant and to talk about the technical aspects.

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The owner had told us that he would be flying in from Bombay the same evening and that he would arrange to have us picked at the airport and taken to his home. He was keen that we accept his hospitality and stay with him for the night. The factory visit was scheduled for the next morning. The driver of the car that had come to take us to the home of our host was a young turbaned Sikh. Just as I was getting into the car, I had an uneasy feeling that this was not going to be a successful trip. I was happy to see the car that had come for us as it was a medium size luxury model but my happiness was short-lived. Though it was an almost new car, had been cleaned and polished, it had a shabby look because the seats were covered with torn and dirty plastic sheets. I need to explain this. I have always noticed that the interior of a new car is designed to be the last word in finish and style for that particular class of vehicle. Even for what are called people’s cars, that is the smaller economy models, the interior has an elegant look and the upholstery material is designed to last a lifetime of the particular model. However, all the car manufacturers routinely install protective polythene sheet covers on the door panels, the seats, and so on, to protect for damage during transit to the showrooms. My experience with cars overseas is that before leaving the showroom, these thin polythene sheets have to be completely removed. I have always wondered why is it only in India that car owners insist that these covers not be removed. After a couple of months, these thin sheets become discoloured, torn and filthy. They look black with dirt and muck and offer absolutely no protection. Not only that, they are hot and uncomfortable to sit on, are awful to look at and yet, in India, they often remain in place till they completely disintegrate. This car was of the semi luxury class and we should have looked forward to a comfortable one hour ride, but sitting on torn and dirty plastic sheets was not my idea of comfort. I looked at my colleague. He had a grim expression and said nothing. Well, I thought to myself, here is a sorry example of our creating shoddiness ourselves! The owner’s house was a mixed surprise. It was a very impressive medium sized fully carpeted and air conditioned bungalow and the family were very hospitable. On one hand, the lady of the house made us feel at home and saw to it that we had everything we needed in our guest rooms. On the other hand, we could see that our rooms had been specially done up for our visit and stood out in neatness from the rest of the house which was in a sorry state of mess: our rooms were merely clean and that was it. That evening, we met some of the young technical people from the factory over a sumptuous dinner and were impressed with their knowledge and enthusiasm for what they were doing. It was clear that the firm had an excellent track record of sales to local appliance manufacturers, but had never exported. The next morning we went to the factory. As we were nearing the factory in an old industrial area, my feeling of unease returned. The area where the factory was located was a typical industrial area, dusty with poor roads and rubbish piled up everywhere, but I have seen worse industrial areas in other parts of India. Then we entered the factory. It was a new building in a large compound but the state of chaos hit us as we entered: discarded packing cases, scrap and factory waste were dumped all over the place. My pleasant surprise for the day was when I saw the manufacturing layout. Manufacturing is my specialisation and I was impressed. I saw a sophisticated operation.


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The products that were being manufactured were various types of miniature electrical and electronic switches and control gear. The production equipment was mostly new and possibly bought from the best sources. The machines were very well laid out. There were separate, well lit areas for assembly line tables and for testing and quality control. There must have been over a hundred workers of various ages very skilfully operating the machines. We noticed that there were very few women workers: Even the assembly line workers were men. On the one hand, I was impressed with the degree of sophistication. On the other, the standard of housekeeping was atrocious. I was amazed at the all-pervading untidiness and scruffiness of the whole place. None of the workers had a uniform, the walls had been roughly plastered but not painted, and upper ventilation windows were black with cobwebs. Goods, materials and cartons were cluttering up the already messy floor. There were new racks and shelves, but these too were overflowing with randomly dumped material. We went around the production area and picked up some finished items at random. These were in trays ready for packing. My German friend called me aside and showed me some of the pieces. Though it was a sophisticated electronic device, it had a very poorly finished plastic casing. There was a rectangular marking at the bottom where a self-adhesive label detailing the technical specifications was fixed. None of the items had a properly fixed label in the space provided. In some cases, the label was almost outside the space provided. Pure sloppiness. We could not help mentioning the finish of the items when talking to the owner and we got a very logical response. The item is meant to be fixed inside the appliance, where nobody will see it once it is fixed. Why comment on the finish of the casing and the mere positioning of the label which, in any case, are not critical to the performance of the item? He added with pride that his items were just about the best in the Indian market: The customers have been happy and there have been no complaints! Then he assured us that if we wanted he could arrange to have the casing better finished and the labels properly fixed for an export order, as it would not cost anything extra. Then I understood. In a flash, I understood the owner’s mindset. He was a top class engineer, knew exactly what he was doing and did it with the best possible equipment and workforce, but that was it. Nothing more. To him, what he made was important, how he made it and how it looked was not. Everything else was a waste of effort and money. I went back to Singapore with a heavy heart but that was not the end of the story. Many years later, the Singapore–Chinese firm that had sent their German engineer with me to India decided to relocate their factory from Singapore to Pondicherry and I found I had no problems in helping the above firm to bring their operations to international standards.

Reference UNIDO. 1972. Small Industry Bulletin. Bangkok: Economic Commission for Asia and the Far East, United Nations. No 9: 3–5.

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Preamble

Part 3 You, the Globalised Entrepreneur

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12 Our Rapidly Globalising Nation

There are as many definitions of globalisation as there are politicians, and everybody twists the definition to their convenience. Also, it means different things to different nations. Japan and Korea have not opened up at all and they keep out the MNCs. They still import only raw materials. You cannot sell even a screwdriver there. They are as fiercely protective of their home markets as they are ruthlessly aggressive overseas. China has made excellent use of imported technology to develop massive exports of consumer goods and is now spreading out by building roads and bridges all over Africa. They may soon build a harbour for us too. Malaysia now has a commanding position as one of the world’s best suppliers of quality wooden furniture. Singapore is now second only to Switzerland as a financial services hub. We are exactly the reverse of Japan and Korea. For us, globalisation is all inwards, being all about MNCs and Foreign Direct Investment (FDI). The world has got unleashed into my country and everybody is here to take advantage of our superb brain power for IT and of course our huge markets for consumer goods. All said and done, no matter how we define the term, the rapid globalisation of my country is a fact. While there is endless argument and discussion on whether this is good or bad for us, I think it will be a good idea to leave this discussion to academia and of course, politicians. Let us go on to what matters for our youngsters, because it is crucial that our youngsters understand and benefit from the changes this is bringing in.

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There is one other aspect of globalisation that I need to particularly highlight to our youngsters: Our young entrepreneurs and executives need to see through the hype surrounding the success China has achieved on the world market and understand what it really means. I said at the beginning of this book and I say it again that it is the Chinese business culture and the mindset of the overseas Chinese that our youngsters need to understand and copy. There is nothing, I repeat, nothing for us to learn from China. The difference is critical. In China, it is the state that is getting all the benefit of international success and not the people of China.

While any discussion on the comparative economic development of India and China is well beyond the scope of this book, I will discuss this briefly later and there is some additional reading for you in the Enclosures at the end of this book. But, the Chinese business culture and the mindset of the overseas Chinese is an important topic and is discussed in detail in chapter 15. This chapter has four sections: Section I, MNCs and Foreign Direct Investment in India: Forget the text book definitions, what do our common people mean when they use the terms MNCs’ and Foreign Direct Investment? We welcome NRIs but not foreign firms. What happens if tomorrow Coke or Pepsi is bought in the US by someone like Lakshmi Mittal? Sure it can happen, but would our NGOs still single out these companies for their violent protests? In this part, we take a hard look at what MNCs are doing to the world and the new business culture they are bringing into India. Section II, Globalisation in India and China: China and India are said to be the world’s next major powers. They offer competing models of development. When it comes to gross domestic product (GDP) figures and other headline numbers, India is still no match for China, but statistics tell only a part of the story—the macroeconomic story. At the micro level, things look quite different. There, India displays every bit as much dynamism as China. Indeed, by relying primarily on organic growth, India is making full use of its resources and has chosen a path that may well deliver more sustainable progress than China’s FDI-driven approach. Let us talk about this in some detail. Section III, MNCs and Indian Firms: True, there are dramatic changes taking place in the Indian market due to the entry of the MNCs. Dramatic but tragic, because our firms are not making the MNCs work for us. They are learning nothing from them. We are not even working with them as equals. We are ending up working for them, just like we did for the British. Nations like Malaysia and Singapore, that were only yesterday begging us for skilled professionals, have harnessed the energy of the MNCs to get where they are today. To me, all of this merely indicates an immense opportunity for our young entrepreneurs to upgrade themselves and take us to the world markets. Section IV, MNCs and Our Young Executives: There is a recent trend among Indian organisations to bring in top professionals from overseas. Why should this be so? There is a reason for this inspite of the hoopla about Indian professionals being

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the best in the world. Jet Airways always had expatriate professionals at the top, but these people have not brought in any phenomenal managerial styles. The airlines in their home countries are performing very poorly. The outstanding success of the airline is less due to them and more due to the superb performance of the Indian executives working under them. It is a regrettable fact that our executives have a quantum leap in their performance if they shift from a Lala company to an MNC. It is more regrettable that if, by a twist of fate, this executive reverts back to a Lala company, his performance plummets once again. So, what does this mean to our budding entrepreneurs and executives? The one thing we need to learn from the foreigners is how to build strong, highly disciplined organisational infrastructures. We have everything else.

I: MNCs and Foreign Direct Investment When the East India Company came to India, the structural weakness of our society led to us losing our nation. Well, to some extent, it is happening again. This time, it is the structural weakness of our commercial and professional sectors. It is a sad fact that there is not a single example where an Indian firm has stood up, put up a fight and won even though it is on its own home turf. Hardly a day goes by without one of our political or business leaders voicing concern about the almost unrestricted entry of the multinational companies (MNCs) into the Indian market. I will establish that though our nation is once again fighting a losing battle against the conquerors, the result can be different this time. It is our youth who need to wake up. They have everything and it is only a matter of time before they start giving the MNCs a run for their money.

A Question of Definition First, what do we mean by a multinational company in India? There have been many partly foreign owned firms doing business in India for decades: Phillips, Glaxo, ITC, ICI, Hindustan Lever, Colgate, Cadburys and so on. The list is endless. Do we call them MNCs? And is the money they are investing called FDI? Our definition of an MNC and Foreign Direct Investment (FDI) is hazy at best. We welcome FDI from firms owned by NRIs with open arms but not from other MNCs. As I have said above, if Coke becomes an NRI company, which it easily can, would its status change in India? Would we lay out a red carpet and offer it all sorts of incentives? We forget the fact that the ownership can change hands overnight. Look at this another way. If an MNC coming to India is simply an outsider coming here to do business, then this has been going on here for generations. Almost every state in India has ‘outsiders’

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who always remain outsiders. A Marwari or a Punjabi going to Bengal, Assam or Orissa is an outsider and will always remain an outsider for generations. If there is any doubt regarding this, then consider this: A third generation local Marwari born, educated and brought up in Bengal, can never be the Chief Minister there. So also, a Punjabi in Tamil Nadu, and so on. BEWARE OF THE MNCs! Huh? We are not alone in our attitude towards the MNCs. The world press is often screaming and telling us. Beware: multinational companies are on the rampage, destroying jobs, stamping on wages and generally wrecking local economies! Or so the far left critics of globalisation make out. But a cool look at the numbers tell a different story, as is clear from a cross-country study published in 1998 by the World Bank. This was the first document to take a detailed look at the contribution of foreign firms to national economies. You can see the full text on the Internet. To be fair, the critics are right about one thing: multinationals are becoming increasingly important. Foreign firms account for a growing share of production and employment in most developed economies. In 1996, for example, the latest year for which comparative figures were available in the study I mention, foreign firms produced 15.8 per cent of manufacturing output in America, up from 13.2 per cent in 1989 and 8.8 per cent in 1985. They accounted for 11.4 per cent of jobs in manufacturing, up from 10.8 per cent in 1989. Britain, Canada and Sweden display a similar trend. In Ireland, foreign firms account for a whopping 66 per cent of output and 47 per cent of employment. Some countries have been able to keep out the multinationals. In Japan, the world’s second-biggest economy, foreign firms scarcely figure: they employ a mere 0.8 per cent of workers. The report goes into a discussion on whether the importance of the growth of the foreign firms in national economies a bad thing. The facts suggest not. Fact one: Foreign firms pay their workers more than the national average—and the gap is widening. In America, for example, foreign firms paid 4 per cent more than domestic ones in 1989 and in 1996 they paid 6 per cent more. Fact two: In most countries, foreign firms are creating jobs faster than their domestic counterparts. In America, the workforce of foreign firms rose by 1.4 per cent a year between 1989 and 1996, compared with an annual rise of 0.8 per cent at domestic ones. In both Britain and France employment at foreign firms increased by 1.7 per cent a year; at domestic ones it fell by 2.7 per cent. Fact three: Foreign firms spend heavily on Research and Development (R&D) in the countries where they invest. In 1996 they accounted for 12 per cent of America’s R&D spending, 19 per cent of France’s and a remarkable 40 per cent of Britain’s. Indeed, in some countries foreign firms spend more of their turnover on R&D than domestic ones. In Britain, for example, foreign firms spent 2 per cent of their turnover on R&D; domestic firms only 1.5 per cent. Fact four: Foreign firms tend to export more than domestic ones. In 1996 foreign firms in Ireland exported 89 per cent of their output, domestic ones only 34 per cent. The gap was 64 per cent to 37 per cent in the Netherlands, 35.2 per cent to 33.6 per cent in France


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and 13.1 per cent to 10.6 per cent in Japan. The big exception is America, where domestic firms exported 15.3 per cent of their output, foreign ones only 10.7 per cent.

These benefits of foreign investment are even bigger in Europe’s poorer economies. Take Turkey, for example. Foreign firms’ wages are 124 per cent above average; their workforce has risen by 11.5 per cent a year compared with 0.6 per cent in domestic ones; and their R&D spending is twice as high as in domestic firms. Clearly, we are in the midst of a revolution. A revolution, that is shaking the foundations of business the world over. But this revolution is not just about the kind of large-scale change that you watch on the evening news. It is more dramatic. This revolution will forever change the basic and the most primal connection of business—the relationship between the buyer and seller. During this revolution, the organisations and individuals which can create new relationships with customers will find themselves in an unimagined competitive advantage. Those who cannot will lose. Let us talk some more about this.

You Win if you are Organised Before going further, I am going to go back a long time in our history. One of the unusual ways you can understand the term ‘organisational infrastructure’, is to go way back into history. Let’s look at the ‘how’ and the ‘why’ of the British people coming to India, and subsequently taking over the whole world. I will seek to establish that the strong and well-established corporate organisational infrastructure they had at home was the foundation on which the British Empire grew. Also, I will compare the way the British set up colonies with the way the Spanish and, to a lesser extent, the Portuguese did. I will show that the common man back home in England got immense benefit from this, but the common people in Spain, and so on, got no such benefits.

The British Conquest True, the British people came and conquered India mainly because of our own weaknesses and faults. But, that is not the aspect I am talking about. If one looks at the conquest by the British from their point of view, and from a purely managerial and organisational one, one is amazed at the amount of infrastructure and commercial organisation they had even 400 years ago. They needed to have a solid base back home to have successfully established such a large trading empire in India. They could not have set up their trading and subsequently the political empire if they did not have a well-established banking and financial system, a legal system, postal services, company laws and regulations, and some large, efficiently managed private companies in every field of enterprise. Remember, this is the early 17th century we are talking about.

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One should notice that each Englishman who came here did not come as an individual. He came as a team member, an integral part of the British empire. And everything the British did in India was to the benefit of England as a nation and not for any individual. The individuals who came here were not particularly clever, rather the reverse, but they had the skill of setting us Indians against each other and making us work for them. It is indeed, a credit to their style of management that the Indians who fought for them were much better soldiers than those who fought for the local princes. They ended up having the whole world working for them to the benefit of England. There was a mind-boggling rise in the standard of living of the common people of Britain. There was never an armed invasion by the British. They came here only as traders. Neither an armed battalion nor a navy vessel was sent from England. They only came as traders. Their success is entirely due to the massive amount of organisational back-up back home.

The Portuguese They were here around two hundred years earlier, having defeated the combined Gujarati–Calicut fleet in February 1509 at Diu. The Portuguese had immensely superior naval firepower, and their arrival can be said to mark the beginning of European colonialism over the subcontinent. With the discovery of a sea-route to India by the Portuguese at the close of the 15th century, movement in the Indian Ocean was strictly controlled. There are ample records to show that right from the first decade of the 16th century, the Portuguese under the presumption of having the right to supremacy over the Indian Ocean, insisted on ‘passes’ for all ships plying in it. After Malacca, in the Malay Peninsula, was occupied by them, the system of passes was enforced with great strictness. They established their fortresses and settlements on eastern and western coasts of India and detailed patrolling vessels to stop and confiscate ships which were not provided with their passes. But the point is that the people of Portugal, the common man, hardly benefited from all this. The Portuguese had better naval and military capabilities and they could control the sea trade routes to a great extent, but the advantages were purely militaristic and non-civil. The Portuguese lacked the discipline, and the technological and economic infrastructure back home to really benefit from all this. They controlled the sea trade routes but, unlike the British, had nothing much to trade in. They had no manufactured products to export and no marketing networks to sell what they could import from the East.


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Every commander who came here was almost in the business for himself and there was absolutely no rise in the standard of living of the people back home. The new colonies they set were small and were quickly lost to the more enterprising British, and other North Europeans.

The Spanish The same was true of the Spanish, and to a greater extent. They were more powerful on the seas and conquered a greater part of the world, but Spain was and remained a poor and backward nation.

Business Culture We have been talking about the attitudes people of various nations have towards running their businesses. We can look at this in a more academic context. We can say that, based on these attitudes, specific business cultures develop within individual businesses and industries of various nations. Our management gurus have been talking about business culture for a long time, without discussing what our business culture is doing to our competitiveness in the world markets. What is a business culture? A detailed discussion on this topic can indeed get to be highly academic and would be completely beyond the scope of this book. Cultures can exist across a society or in elements with it—families, religious groups, regions or any other social institution. However, it does exist in economic organisations such as industries or businesses, and this is relevant to what we are talking about. A business culture will have its own special features. The origins of a corporate culture might reasonably be expected to lie in the past and present entrepreneurial leadership of the company, the type of employees it recruits, the way in which work is organised, the technology used and the competitive environment within which it operates. The characteristics of a culture will be found in the relations between individuals, and between them and the organisation seen through various dimensions, such as the exercise of power, the forms of communication, symbols and rituals, the degree of commitment that the organisation and the individual offer one another, the capacity to accept dissent, the ways in which new individuals are integrated, and the existence of shared attitudes and objectives. The strength and distinctiveness of the value system through which these various dimensions are shared will vary from nation to nation, as will the extent to which members of the organisation are committed to it. I will discuss it from another angle later. I am giving a number of illustrations in this chapter explaining in simple language how business culture has implications on the efficiency of the organisation in the short run, and its strategy in the long run. Efficiency can be seen in terms of cost, innovation and competitiveness. Strategy may be seen in terms of the explicit plans that emerge from the organisation’s controlling group, or the direction taken as an implicit consequence of a particular culture.

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Business Culture and MNCs When an organisation is functioning only in the domestic environment, its business culture can be recognised by practices, forms of communication and physical symbols to which meaning is attached. These are the outward signs of a culture rooted in the minds of its participants, created by shared experiences and routine exchanges of technological or organisational requirements. These then get reinforced by group pressures and the influence of those with power. This business culture then becomes imprinted on the organisation and its members develop a strong resistance to change or manipulation. To a great extent this gives meaning and validity to the action of individuals and they become committed to it. For this reason, attempts to impose a business culture of one organisation or nation on another may prove superficial and often operates against organisational interests. As an example, I remember that many years ago, Malaysia had Dr Mahathir as the new Prime Minister. The first thing he did was to deflect the immense influence the western business houses were having on the local business culture. He saw that the deep imprint of the western business culture on individuals and organisations was creating an inertia that prevented the necessary adjustments when the nation’s political structure, environment and objectives were changing. It was clear that such a strong culture was proving dangerous for organisations facing change, by reinforcing individuals’ capacities to continue to act in opposition to organisational needs and to work in contrary directions. Prolonged dissonance between culture and organisational needs was reducing efficiency or even leading to an organisational collapse. Hence, Dr Mahathir brought in a policy of ‘Looking East’ and encouraged the import of the Asian business cultures of Japan, Korea and so on. Of course, organisations initially contained overlapping or conflicting cultures. Modern businesses are complex organisations undertaking different activities in a variety of locations. Malaysia was developing into an open economy and there were a number of cases where the corporation was the product of a merger between firms with distinct histories and cultures. The result was that few organisations, especially businesses, had memberships that shared a single culture. Technology, organisation and experience helped in shaping a new business culture which was a variant of the original corporate cultures. In India, the Malaysian example cannot work. There is no powerful central leadership, and we do not have any history of a strong business culture. The conflicts of the imported business cultures and our individualistic style of functioning can threaten organisational efficiency and survival. Individuals or sections may pursue goals that differ from the rest of the organisation. The benefits of a clearly identified business culture for communication, co-operation and motivation are lost. It is true that a successful business culture will not save a firm from the consequences of a business situation that is disastrous—though it will certainly help it to adapt and respond more effectively. Conversely, firms with a powerful market position generating substantial profits may survive with apparently inappropriate cultures—though they may be less able to cope with change and their survival may be temporary.


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The Opportunities and the Challenges of a New World Order I am saying nothing new or original here. Everyday we read in the Indian media about how rapidly the external environment is evolving. A number of journalists and academicians are trying to make us understand the important changes in trade, investment, technology, employment, finance and even ideology which are taking place all over the world. Rapid technological improvements and globalisation have had a dramatic effect on production and consumption patterns, particularly in the developing world. So, let us take a quick look at the key global trends and the opportunities and challenges they pose to India in the immediate future. An in-depth understanding of these critical driving forces and the uncertainties in the global environment is essential for our business houses to develop an attitude to grow into world class companies. For the last two decades, the world’s economy has been going through two great changes. The first change is that a lot of industrial production has been moving from the United States, Western Europe and Japan to developing countries in Latin America and South-east Asia. One can take the examples of the exodus of low-cost production of things like textiles, clothing, shoes, handbags, car seats, electrical wiring, plastic toys and cheap electronic devices from the rich world over the past two decades. Already many big western and Japanese companies have more employees (and customers) in poor countries than they have in rich ones. The second great change is what I have already highlighted at the beginning of this book. An important aspect for India to note and take advantage of, is that in the rich countries as well as in countries like Hong Kong and Singapore, the balance of economic activity is swinging from manufacturing to services. So what has happened? Global merchandise trade has flourished, driven by the pressure of trade liberalisation in most of the countries. Most countries now recognise the benefits of economic liberalisation, boosting international trade and investments. The direct result of this has been that the tariff barriers the world over have fallen, and India is following suit by demolishing the massive import restrictions which have been in place for a long time. A household can use only as many cars and refrigerators and dishwashers in its members’ lifetime. As countries get richer, a rising share of income goes on holidays, health and education. Busy people want to hire other people to clean their homes, launder their clothes, plan their holidays, entertain them and so on. Many jobs traditionally thought of as part of ‘manufacturing’ such as the design and marketing of products are now becoming service jobs. As demand for them increases, these service jobs become better paid and more interesting compared with the drudgery of factory work, much of which is, in any case, moving overseas. In Asia, Hong Kong and Singapore now lead the world in the service economy showing strong growth. I see on the Internet that in the United States and Britain, the proportion of workers in manufacturing has shrunk since 1900 from around 40 per cent to a fraction of that. Even in Germany and Japan, which rebuilt so many factories after 1945, share of jobs in manufacturing is now well below 30 per cent. The effect of the shift is increasing as manufacturing moves from rich countries to the developing ones.

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The global and transnational trade in services is also growing in value and importance. The rapid growth in global services trading is the direct consequence of two factors: The global and regional liberalisation and deregulation I mentioned earlier leading to greater market access. The technological innovations and improvements like the Internet and electronic commerce has eased the manner in which services can be traded across national borders and great distances without the need for the physical movement of people or goods. Also, the unbundling and outsourcing of previously in-house services such as logistics and IT services by the manufacturing sector has created vast opportunities in services trade which will continue to grow. This will be driven by further services liberalisation, increasing affluence and further development of e-commerce. The rapid technological improvements in information and communications networks have also been reflected in massive improvement in all sorts of freight movement and transportation. While the volume of the goods handled has taken a quantum leap, the cost of air and sea transportation has fallen significantly. This has lead to globalisation of production networks.

The New Business Model So, as I explained, a new business model has been created. One cannot find a single large manufacturing conglomerate in any developed country that does not have subsidiary or contract manufacturing facilities in many parts of the world. There is a steep worldwide rise in the number of foreign affiliates boosting intra-firm trade. WTO, in its annual reports has been estimating that one-third of world trade takes place within transnational corporate networks, and more than half of foreign affiliate exports of Japanese and American MNCs are conducted on an intra-firm basis. This greater interconnectedness implies dynamic growth and change. Developing economies can enjoy an accelerated transformation of their industrial, business and trading structures and environments. Even services which were traditionally localised and domestically-oriented have restructured to take advantage of economic liberalisation and to serve customers overseas. The day-to-day management of widely dispersed production and service networks offers no problem. This ease of communication and movement of goods has also intensified competitive pressures. Companies are pushed to reap the benefits of economies of geographical diversification. MNCs traverse the world in search of markets and profits. The result is the integration of value added chains across the global economy, converting global inputs into outputs for global markets. Whole industries no longer migrate, as ship building did from Europe to Asia in the 1970s. Because of the number of factors detailed before, manufacturing is becoming a genuinely international affair. Production of the critical parts and the final assembly


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work gets done in rich countries by skilled workers, the simpler parts and the noncritical components are made elsewhere in the supply chain. The multinational companies are developing the skills to see what is best done where.

Social Fabric of Competitiveness I think the phrase ‘social fabric of competitiveness’ was invented in Singapore, because I have often heard it used in all sorts of situations. This is probably one of the ways the government is making the citizens aware of their responsibility in keeping Singapore intensely competitive. This is an admirable attempt to make people recognise that economic competitiveness and the ability to respond successfully to global forces, has a strong social dimension. Of course, it is understood that the social fabric, or the relationships between different groups in society, has important effects on competitiveness. In India, the sharp divisiveness of society has an immense effect on our competitiveness in the face of globalisation. The Marwaries and the Bengalies find it difficult to work with each other in Bengal, so is the case with the Brahmins and the lower castes in the South, the Hindus and the Muslims in UP and so on. It is impossible to think of, say, a Muslim owned organisation in Chennai where the Brahmin staff works sincerely and with complete dedication. While there are as many theories about the competitiveness of nations and of economies as there are economists and social scientists, the underlying fact remains undisputed. The agency which drives this competitiveness resides in individuals and organisations.

II: Globalisation in India and China While I compare next, the performance of domestic firms with that of the MNCs in India, do remember that I am talking in the globalised context. India is no longer an isolated, protected economy and we need to take a hard look at others who are said to be doing better than us. When I said ‘others’, of course I mean China. So, I take a quick look at China in the context of what we are talking about in this book and see if there is something to be learnt.

Comparing the economic progress of India and China is to embark on an old puzzle that has fascinated academicians for some years now. The new question of economic leadership, however, of ‘which country will overtake the other in the foreseeable future?’, is an urgent and important one, because the two countries have embraced very different models of development. The reasons they have done so are complex and are beyond the scope of our discussion, but the paths they have taken

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are sharply different and are important for our young entrepreneurs and executives to understand. If one listens to anyone who has been to China for a few days, one gets the impression that he has been to Switzerland or Germany. The fact is that visitors see only a tiny fraction of what is happening there, and come away with a grossly lopsided view. I have lived and worked with the Chinese, not as a casual customer or supplier, but as one of them. What I say here is amply corroborated by the enclosures at the end of this book. Our young entrepreneurs and executives need to see through the hype surrounding the outstanding success of China in world markets. Walk into any department store in the West and you see the shelves sagging with China-made goods. You will be surprised to know that none of these products are made by indigenous Chinese companies. In fact, you would be hard-pressed to find a single homegrown Chinese firm that operates on a global scale and markets its own products abroad. That is because China’s export-led manufacturing boom is largely a creation of foreign direct investment (FDI), which effectively serves as a substitute for domestic entrepreneurship. During the last 20 years, the Chinese economy has taken off, but few local firms have followed, leaving the country’s private sector with no world class companies to rival the big multinationals. China has discouraged or actively undermined local entrepreneurship in favour of an overwhelmingly FDI-dependent approach. It is only recently that China has started taking tangible but slow steps towards embracing private entrepreneurship which is a big departure from the past. China concentrates on producing for export, and Chinese households are given a chance to consume less than half of what the country produces—a mere 38 per cent. Consumers are simply not permitted to buy what they want. The economy completely relies on export demand and investment as its engines of growth. The fortunes and fancies of western consumers determine China’s GDP: The more they buy, the better China does. As I said at the beginning of this chapter, it is China as a nation that is benefiting and not it’s people, as the industrial production for exports is concentrated in a couple of special districts which are cut off in many ways from the rest of the economy. Productive assets in China are held mainly by the government. The largest Chinese corporates are Public Sector Undertakings (PSUs), which are owned by the government, and are not widely held publicly owned companies. However, PSU profits do not flow back to the government, but are held back by them as retained savings. The bulk of household income in China comes from wages. Pushing down consumption, raising savings to increase investment and then exporting its products gave China a sharp rise in growth, but now this strategy is increasingly appearing to be non-sustainable. It is only the two industrial districts that are the showcase of the nation, the life of the common people outside these districts is still as miserable and poor as it was under Chairman Mao’s great leap backwards. The questions international economists are asking are: how will China give political voice to the public, if at all, along with increasing economic autonomy? There is the serious problem of instability caused by massive migration to cities and the large (though decreasing) role of bankrupt, state-owned enterprises that continue to play a social security-like role in China. But the biggest source of worry is the state of China’s banking sector, which is technically insolvent. The banking problem is one of


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the biggest costs of the delay associated with developing a vibrant, domestic private sector. India, on the other hand, is continuing to struggle with making things easier for multinationals and is building an infrastructure—however slowly—that allows entrepreneurship and free enterprise to thrive. You will read in appendix three that by making full use of its resources, India’s long-term outlook may be stronger. True, macroeconomic statistics indeed show China clearly in the lead, but the real issue is not where China and India are today, but where they will be tomorrow. The Indian consumer is India’s strength. Indian companies are focused on selling their products primarily to domestic consumers. Production takes place all over the country. Even foreign producers come to India, not to set up export units using cheap labour, but to sell their products to the Indian consumer. Indian households, in contrast, consume more than two-thirds—68 per cent—of what is produced in India. Demand comes from millions of people buying goods and services across the country. Moreover, the reason behind India’s high domestic consumption is not that households in India do not save enough for their needs. At 22 per cent of GDP, households in India save more than Chinese households, who save barely 16 per cent of GDP. The difference in the levels of consumption lies in the fact that households in India own most of the country’s productive assets which are land and capital, and the income from these assets, the profits flow back to households adding to their income. This brings us to the luxury India has. Given the strength that the economy derives from domestic consumption demand, we need not focus on export demand in the same way as China. At least we need not keep our currency weak, or devote resources to special export zones at the cost of building better infrastructure for the rest of the country.

III: MNCs and Indian Firms Working for the MNCs The feedback I have been getting from ex-MBA students who have been working for the MNCs for some years is interesting. Our youngsters feel that sometimes excessive control by the parent company is a bother. Multinationals talk about concepts like thinking global, acting local, but it is often the other way round. It is more like ‘let the globals think and let the locals act’. Due to this extreme centralisation, our people here never felt a sense of ownership for the brand. I know many past students who had the capacity to make good operations persons, but in the jobs they had there was not much they were doing in terms of thinking. The strategy was decided overseas. In other words, most MNCs are intrapreneurial back home but not here. This of course is not strictly true for all global companies. Only multinationals from the West have a more democratic approach for managing their worldwide subsidiaries. A point to be noted here is that there is no question of Japanese or Korean companies

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here letting local staff even fully understand what is going on leave aside giving them a chance at higher level decision making. Multinationals from the West indeed offer a good lifestyle with a reasonable amount of security. It is a good, clubby kind of atmosphere and what you enjoy most is your interaction with a bright bunch of people, both professionally and personally. That certainly gives you a certain degree of learning and maturity. Rewards, in this instance, are not purely intangible like job satisfaction but visible like remuneration. In the end, multinational employees get a premium attached, so that most Indian companies have to shell out handsome packages to wean them away. Extensive training is another hallmark of multinationals. Multinationals regularly motivate employees by constant upgradation of their skills through training and job rotation. They impart a lot of in-house as well as external training. This is one aspect missing in Indian firms. In the first 10 to 15 years of your career, training is externally induced. As you move along you get into the self learning mode. You move from an explicit to a tacit learning stage. In the initial period the stimulus is given to you, but later you search for your own. While multinationals impart exemplary training for use in that particular company or business, one area they miss out on is managing uncertainty. For ambitious professionals, future growth in a local company is an issue. The avenues are fewer. The option is to grow with the organisation, in both new businesses and geographies. As long as Indian companies can create fresh challenges to satisfy their spirits, it may well be just the beginning.

The New Economic and Commercial Scenario In the past, India was isolated and insulated from the rest of the world. Also, the employment structure in India was mainly small and medium sized family owned enterprises, which did not really offer much scope for professional employment or organisation building. Now, however, the economic and commercial scenario is changing with the entry of the much better organised MNCs, but we need to take a hard look at how our firms are shaping up against the new order. To illustrate this point, let us look at the organisational infrastructure of some of the Indian firms in fast moving consumer goods (FMCG) sector and compare these with some MNCs in the field. There are indeed many excellent local companies in the business of selling common household items like toothpastes, soaps and detergents. Companies like Godrej and Balsara in Bombay, Dabur in Calcutta and so on. However, their nationwide presence is nothing as compared to that of the multinational companies like Hindustan Lever, Colgate, Procter & Gamble and so on. These MNCs have extensive network of branches and distributors in most of the small towns even in the remotest parts of the nation. Their organisational infrastructure is highly intrapreneurial, disciplined and massive. The Indian firms I mentioned before are indeed excellently managed but their set-ups are markedly different and very much more regional.


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The organisational infrastructure of the MNCs is such that they not only have a vast network of dealers and stockists all over the country, but also have dozens of contract manufacturers in many small towns. Sure, our local firms have started doing this too but not on the scale as the foreigners. I am not sure how many of us know that the MNCs farm out most of their manufacturing to contract manufacturers—small local firms who do nothing but produce finished goods from raw materials such as packing materials, printed cartons, labels, collapsible tubes and so on, supplied by the MNC. These supplies are generally sourced within short distances from the contract manufacturer. The contract manufacturers and the packing material suppliers, and so on are often set up with technical and financial assistance from the MNC. The quality of the products produced is rigidly monitored by the MNC. It is clear that this requires immense logistical support and indicates the type of organisational infrastructure the firm has. One cannot say that our indigenous firms lack managerial or organisational skills. Far from it, we have some of the best brains in the world. But our attitude towards building the intrapreneurial organisational infrastructure is miles apart from that needed to grow nationwide, leave aside into world class companies.

Fast Moving Consumer Goods Let us take a hard look at the FMCG market. As far as professional management is concerned, nobody can deny the massive changes taking place, and all for the better. The entire professional management scene in India has had a massive overhaul and boost. But what was the problem with the well-established Indian household names selling toothpaste and soaps to the Indian villages and small towns? What are these MNCs bringing in that we did not already have? What exactly is new about them? There is no Indian brand equity in Walls, Maggi and so on. Nobody outside the few well-heeled and well-travelled urban elite knows that these are foreign brands. These are all new and unknown brands to consumers in smalltowns in India. There have always been a number of foreign sounding brand names in India. The majority of the new entrants are not bringing in any remarkable new technology. The technology they are bringing in was always within reach of the large Indian business houses. Indian made ice-cream, spectacle frames, breakfast foods or soups were already using the technology these new entrants are going to use. The new ventures are not managed by Westerners. Hardly any expatriates are being brought in. All the new firms are managed from top to bottom by Indians. The Indian managers were always there, their considerable skills already available to our Indian business houses. Even in the professional fields, our small one-man-show legal, accountancy, management consultancy, architectural and consulting engineering firms set up joint ventures with large professional firms and find that they end up providing the intellect.

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Compare Coke/Pepsi with the Thums Up Gang Here is another example. When we threw out Coke from India, they left behind an excellent production and distribution network. Everything was in place. It should have been a simple matter for an Indian organisation to step in and continue to develop the market under a new brand name. Instead, what we got instead were a number of small soft drink manufacturers all over India with the following profiles: They were small, individually owned, regional companies that wanted to remain regional only. Without exception, they were poorly managed family owned firms. Their contribution to the national economy was nil. They were small companies, so generally paid no taxes. The employment opportunities they offered were very low level menial jobs, because the family or the owners did everything themselves. There were absolutely no employment opportunities for, say, qualified MBAs. And of course, the quality standards were quite non-existent. None of the small fellows had any infrastructure to feed the market beyond, say, 100 miles from its location. Parle was a big company in Bombay but had no presence in Bengal, Bihar, Orissa or in Tamil Nadu. In contrast we now see Coke and Pepsi once again all over India. As one of my MBA students pointed out after a rural project visit, ‘You get Coke and Pepsi in villages where you do not even have clean drinking water!’ Their profiles are as follows: Coke and Pepsi have such a nationwide organisational infrastructure that a bottle of Coke in Pondicherry would be identical to the one you will buy in Assam. Or in Singapore, for that matter. These firms have excellent employment opportunities for all sorts of professionals at all levels up to the top management positions. The Indian treasury gets good taxes. The firms have massive budgets to participate in India’s economic and cultural life, by sponsoring sporting, cultural and academic events.

Why Stop with One Example? I can go on and compare the tomato sauce or the fruit juice cordial markets. Before Nestlé came on the scene, there were excellent Indian firms producing the same quality products. But it is only Nestlé that has been able to establish a strong nationwide presence, and hardly a day goes by without their introducing a new product. And remember, most of the success is to be attributed to Indian managerial talent that has always been available to our Indian companies.


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The other classic example is one which has been worked at by every journalist in India: Hindustan Motors vs. Hyundai vs. Maruti, and so on. What the Indian media did not mention is that Hindustan Motors was working under no more a protectionist regime than were the Japanese or the Koreans. Japan and Korea are still the most aggressively protected markets in the world. There are hardly any MNCs there and they do not import anything but essential raw materials. But the Japanese and later on the Koreans took advantage of the rigorous protection in the domestic market to develop into world class players. The Indians only concentrated on making quick money for themselves, for their dealers and for their political masters. True, there are a number of MNC failures too, but that is not the point. The point is that these newcomers are rapidly eroding the market shares of well-established Indian firms.

One-Man-Show vs. Organised Corporate Effort Coming back to the contemporary times, I would like to reiterate what I said before about MNCs in professional areas. Let us look at the professional services sector. Indian architects, accountants and engineers are held in high regard, and are eminently successful all over the world. This is so only when they are employed in the Western world or small individual professional practitioners in Africa, South-east Asia and so on. The practice never spreads out from the home base and invariably dies out with the individual. True, many multinationals like Price Waterhouse have many Indians as partners. This does not make them Indian firms; it only goes to prove the point. In contrast, all over the Western world, one finds large accountancy, legal, architectural and consulting practices. These have sometimes hundreds of partners and many are now strong multinationals. Recently, large professional firms from the newly emerging Asian Tigers have joined the scene. I have said this earlier in a different context and I repeat now that many of these firms are now in India too. These Immensely better organised professional firms are coming in and taking away the cream of the business.

Professional Firms Our defeat is not only in the consumer market. It is everywhere. Examples of this are: On the domestic front, let us look at the professional services sector. Immensely better organised professional MNCs, legal, accountancy, management consultancy, architectural and consulting engineering firms are coming in and taking away the cream of the business. Increasingly, the large multilateral funded projects are going to them because of their outstanding international credentials. Our brilliant but poorly organised one-man-shows are no match for the world

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class firms. Forget about international credentials, most well-established professional firms in Delhi are not known in the South. Indeed, our small firms happily set up joint ventures with the MNCs or work as subcontractors. After having built half of the Middle East, we thought that our construction sector has acquired all the modern high-tech skills. Instead, we find that the best high-tech construction and infrastructure building jobs at home are going to MNCs. See any massive overseas funded hotel, resort, condominium, road or bridge project. It is quite likely that you will see an MNC doing it, mostly from China. Yet, only a couple of decades ago, it was exclusively an Indian domain. I have spoken with many of our respected individuals in the construction industry. They are really worried. As I said earlier, if the MNCs are able to penetrate our own domestic market so easily, how can we compete with the same fellows for international contracts? We are rapidly losing our best brains to the MNCs. The creamy layer of the MBA and other professional institutions as well as highly experienced managers prefers a job with an MNC. The last 15 years have seen phenomenal growth of Japanese, Korean and Singapore Chinese export houses. These firms now have an extensive network of branches in all the major cities in India as well as all over Asia, Africa, West Indies and South America. They are rapidly taking away the market for non-traditional exports from the Indian export houses that have absolutely no network outside India. The tragedy extends to overseas Indians settled in Africa and South-east Asia. Last 15 years have also seen phenomenal growth of large Japanese, Korean and Chinese trading firms who have set up very well-managed supermarkets and department stores in big cities in the regions as above, in partnership with local people. They are edging out the small businesses, the grocery and sundry shops owned by the overseas Indians who are selling out and coming back to India. I seek to establish that the problem is purely managerial. We need to take a hard look at how we organise ourselves and how we run our businesses. True, there are a number of MNC failures too, but that is not the point. The point is that these newcomers are rapidly eroding the market shares of well-established Indian firms. What is so unique or great about them? This does not make them Indian firms; it only goes to prove the point.

The Way We Work The point is that we Indians do not work well with each other; we are, as a rule, intensely individualistic people. We perform best when we are our own bosses, and tend not to build large economic institutions. Of course, we are brilliant, hard working and loyal but only while working for, or with non-Indians. That is the crucial point. How do we learn from the MNCs? It may well be asked, ‘Can we not turn to our NRIs for help?’ Nobody is clear about what contribution the NRIs can and should make to the Indian economy. Indeed, overseas Indians make considerable contributions to the economies of many


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countries, but the Indian businessmen and traders overseas almost never grow into large organisations. Sure there are outstanding exceptions like Laksmi Mittal and Lord Swaraj Paul, but as a rule our overseas businesses remain petty one-family outfits, some with a multi-million dollar turnover, splitting as soon as the old man dies. The employment opportunities they offer to our own people are only at unskilled clerical or menial levels. Their children who qualify as trained professional managers, financial executives and so on, in turn become self-employed, or, rise to senior executive positions in the service of non-Indians. It is no use comparing the NRIs with the overseas Chinese and what they are doing in China. The overseas Chinese are the engines of the outstanding success of the Asian tigers. They are corporate leaders who have developed and command massive organisational infrastructure, and so effectively control the economies of many Asian countries. They are now helping develop China’s economy by using it as a base to feed their own substantial markets. The NRIs are professionals and traders who control nothing. Their success depends upon the success of the West and can bring in only funds and professional skills to India. They have no captive markets to offer. As far as the NRI funds are concerned, there is no nationalistic attitude. The NRI money and skills will go where it always has—anywhere it is secure and offers a better rate of return. They can even go to Pakistan if it offers better interest. In pragmatic terms, how and why should India be the country of their choice? This fact points to an urgent need to change the mindset of our commercial and professional people. We need to build a strong and resilient growth oriented organisational infrastructure in all walks of commerce and perhaps even in politics.

IV: Our Executives in the New India MNCs and Our Young Executives India has changed so much that our children can no longer use our successful entrepreneurs as role models whose times were different and who succeeded in a very different India. What this means for you youngsters is that though we are doing well, there are others right here in India that are doing far better. And, unless you are fighting fit to defeat the competition, you will be left behind. Another thing: More and more MNCs are coming into India and most are doing very well which naturally means that they need lots of local people. This is where your problem starts. They offer attractive prospects and can afford to pick and choose the best, making the competition very tough for you. This is exactly the reason why you must understand the changes and learn how to sharpen your skills, to compete with the fellow sitting right next to you in class.

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In the context of the modern corporate environment, globalisation has been the bearer not just of capital but of an immense range of ideas, practices and culture as well. The ways in which you create value, get things done and achieve your goals have changed. The very rules of the game have changed enormously. You do not have to go abroad to meet the world. The best in the world are here. No matter that you are planning to run your own business, work for an Indian company or an MNC: You will find that you are up against the best in the world in almost every field. In the rich countries as well as in countries like Hong Kong and Singapore, the balance of economic activity is swinging from manufacturing to services. It is crucial that our entrepreneurs and executives understand, note and take advantage of what this means as they now need to operate transnationally to a greater extent than before.

Indigenous Technological Capability Our economy is moving up the value chain to produce high-tech and high quality goods and services in tune with the rest of the world. So, we need to consciously develop our indigenous technological capabilities. Growth cannot be based on emulation and modification of technologies and ideas developed by others. We have reached the stage where we are competing head-on with developed nations and the ability to innovate is critical. I will discuss this at some length in the chapter on innovation. Having indigenous capabilities will enable us to capture more of the high-end value in the production process. It will accelerate the process of internalising new technologies so that we are able to creatively apply and develop them further to create commercial solutions to meet market needs. At the same time, it will help ensure that our local companies remain relevant to the world economy and become value-adding strategic partners to MNCs operating in India.

Growing the External Wing All that I have been saying can be summarised in a sentence. With our domestic constraints and a huge population with a limited purchasing power, Indian companies will need to learn to venture abroad to expand and ride on growth opportunities beyond our national boundaries. It should be pointed out here that hordes of Indian companies did venture abroad in the late 1960s, with utterly disastrous results. Disastrous because only riff-raff firms with no domestic base and absolutely no organisational ability plunged the nation into a small crisis. The lesson to be learnt here is that venturing abroad requires a complete and careful assessment of your own organisational structure and strength. It is stupid to venture into setting up a project or a base overseas simply because ‘my wife’s brother has just passed his MBA and needs something to do’. I am personally aware of many Indian joint ventures which were set up in South-east Asia for this reason.


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I said in the chapter on intrapreneurship that our firms first have to become intrapreneurial, then world class and only then should they think of venturing overseas.

If you cannot Beat them, Join them Of course, the most challenging and lucrative job prospects are with the MNCs. World trade is here, right next door. The entry of foreign entities into India has changed the competitive environment enormously. The pressures are not only in the marketplace but also within organisations. Foreigners are here and are growing. These fellows are highly organised and ruthlessly efficient. The problem in seeking employment with them and then in working for them is that the rules of the game are confusing. Everybody follows different rules. The Japanese do not work like, say, the Germans. And both are very different from the Americans. For our budding young professionals just coming out of the universities, recruiters from world class companies do not come to test you for your textbook knowledge. They are fully aware of what you are and what you have been taught in your institution. Rather, they want to know what new attitudes you have cultivated, your mindset and if you are capable of fighting your way through the fast changing business environment of India. They ask if you are capable of taking their companies to new directions of growth. Prospective employers are very impressed if the candidates show proficiency in three things: 1. In-depth knowledge and awareness of the world at large, particularly of our new trading partners. 2. Attitude towards quality as a way of life. 3. Ability to interact with non-Indians. Another thing that you must remember is that in India professional success lies in increasingly becoming social. The more organised the environment in which you are working, the more important the cultural component becomes. The people who succeed are often not the cleverest, the best educated or the most talented. True, individual effort is crucial but in the highly competitive modern life, talent can only be expressed via relationships with others. It is by understanding the role of relationships that one can tap one’s inherited and acquired personal resources. I have discussed this at length in the chapter on soft skills.

Creative Destruction It is interesting to see how different races deal with competition in the borderless, globalised world. The American and European firms grow and swallow up the competition.

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The Japanese are obsessed with market share, sometimes to the exclusion of short-term profits. The people of Chinese origin, as I have explained already, join hands with their own people, form formidable networks and do what Confucius has taught them—destroy the competition. I have seen what our people do. Time and again, in sector after sector, as soon as a superior MNC comes on the scene, instead of putting up a fight, they join the MNC or, pull back, stop manufacturing and start selling the better products the newcomer offers. There is another concept that has been discussed by some academicians and is worthy of note. I see on the Internet that creative destruction, introduced by the economist Joseph Schumpeter, describes the process of industrial transformation that accompanies radical innovation. In Schumpeter’s vision of capitalism, innovative entry by entrepreneurs was the force that sustained long-term economic growth, even as it destroyed the value of established companies that enjoyed some degree of monopoly power. Companies that once revolutionised and dominated new industries—for example, Xerox in copiers or Polaroid in instant photography have seen their profits fall and their dominance vanish as rivals launched improved designs or cut manufacturing costs (lowering their own costs allows them to charge lower prices to customers, thereby drawing customers away from less efficient competitors who eventually close their doors or move into other products where they are able to find a cost advantage). Creative destruction may also go the other way, pushing an industry to a monopoly situation. Wal-Mart is a clear example of this, as it is a corporation that increasingly dominates retail markets by using new inventory-management, marketing and personnel-management techniques, at the expense of older or smaller companies. However, this is not a problem for those who support the process of creative destruction because if Wal-Mart does not keep its prices low, they risk losing their market share to new competitors. The fact that they must sustain low prices in order to prevent competition is seen as a good thing for consumers. Also, there is nothing to stop another firm from discovering how to become more efficient than the monopoly firm which would allow them to charge lower prices than the latter and erode their market share, and so on. This Dr Schumpeter writes, is the process of creative destruction. In fact, successful innovation is normally a source of temporary market power, eroding the profits and position of old firms, yet ultimately succumbing to the pressure of new inventions commercialised by competing entrants. Creative destruction is a powerful economic concept because it can explain many of the dynamics of industrial change: the transition from a competitive to a monopolistic market, and back again. It has been the inspiration of endogenous growth theory and also of evolutionary economics. Unfortunately, for many, mindless and ruthless creative destruction can hurt. Layoffs of workers with obsolete working skills sometimes signal these new innovations. Though they allow more workers to be available for more creative and productive uses, they can cause severe hardship in the short-term.


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Manufacturing and Services are Twin Engines of Growth For my country to become an advanced and globally competitive economy within the next decade, we must have manufacturing and services as our twin engines of growth. This strategy would help diversify our dependence beyond any single industry, sector or market, thereby reducing vulnerability and providing a broader economic base. Manufacturing should become an integral component of India’s new outward looking economy, with capabilities in the entire manufacturing value chain beyond production, from research and development and design to marketing and sales. We are very weak in this area and unless our manufacturing capacity is upgraded in the small and medium scale sectors, we can make no progress. Having said that, it should be noted that manufacturing can never become the base for India’s growing economy if India remains purely a production base. This is already changing and we are on the way to positioning ourselves as a critical hub where MNCs and our own firms use India as a base to manufacture high-tech highvalue-added products and provide manufacturing related services to companies here and in the region. We are already moving upstream in the value chain to do R&D and design in some sectors like pharmaceuticals, bio-technology and automobile components, and are encouraging overseas firms to have their regional operational headquarters here. For the world’s second largest nation, the quantum of progress on this is slow and the pace can pick up only in the larger corporate sectors and not in the small-scale units. We already have a strong technological capability but are missing a vibrant entrepreneurial culture that thrives on creativity, nimbleness and good business sense. Apart from a few outstanding exceptions, our entrepreneurs are mostly inward looking and intensely individualistic. They like to start small and remain small, and are not interested in organising themselves into larger institutions. Though our workforce is already cost-competitive, with world class capabilities in business management and technology, we are extremely poorly motivated and fare badly as compared to nearby Asian countries in productivity, innovation and international market development. We have to do something about instilling a greater sense of pride, professionalism and commitment in our workforce and attract, motivate and retain staff in growing Indian family owned organisations. Whether we like it or not, foreign MNCs have had a considerable contribution to make in India’s economic growth. We must continue to attract them and root them here. Indeed, while MNCs will remain a crucial component of our economy, we should also strengthen our already successful partnerships with them, because these will build up domestic capabilities and forge strategic linkages with other regions. This is the only way our more promising local enterprises could be nurtured into world class companies.

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It is only when we have our own stable of intrapreneurial world class companies which can compete effectively in the global economy can we increase the depth of our corporate profile and broaden the economic base for more sustained and resilient growth.

The Challenges As I mentioned, the external environment is evolving rapidly. Massive changes in trade, investment, technology, employment, finance and even ideology are taking place at a mind-boggling pace. Rapid technological improvements and globalisation and expanding tradability of services across national borders and great distances without being hampered by the physical movement of people or goods have dramatically altered production and consumption patterns. Most countries now recognise the benefits, or rather, the inevitability of economic liberalisation, which has boosted international trade and across-the-border investments. The external economic environment which is changing so rapidly is posing significant challenges for India. Let us talk about them. The first challenge is to become competitive amidst intensifying competition and technological leapfrogging. Here we do not have a level playing field as we have to overcome a massive negative bias within the country against anything global. With few exceptions, our corporate leaders just do not have a global mindset. Also, we face competition from both developed and newly developing Asian Tigers. The former benefit from a stronger indigenous technological base, a higher skilled workforce and a long tradition of world trade, while the latter are endowed with highly dynamic and better organised commercial sectors. To stay competitive, India has to find, develop and market sustainable ‘niches’ where we can start providing attractive total cost-capability business packages. I am not talking here about the very low value-added work we are doing in software sectors. To continue to participate and benefit from growth all around us in Asia, we need to develop world class capabilities to position India as a strategic partner for MNCs and other investors. The second challenge is the shortage of talent and entrepreneurs. On the face of it, this sounds silly. Shortage of talent and entrepreneurs? Surely I must be joking! What I mean is that we need people with good business acumen and enterprising spirit to turn business opportunities into long-term profits. We need to continue to develop, attract and retain talent, including foreign talent. The implications for the workforce of the future are immense. Internationally mobile capital and labour is now traversing the world in search of best returns. More complex and demanding systems call for more innovative workers. So, new work processes and skill sets are required. The third challenge is the need for a paradigm shift in our peoples’ mindset. The dependency mentality of Indians to look to the Government to solve their


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problems and make decisions for them, and their aversion to risk-taking and change, has to be corrected. We need to adapt and initiate change or else become obsolete in a rapidly evolving world. The fourth challenge is to manage our economic restructuring. We should be able to distinguish the tiny but very much more productive internationallyoriented sectors from the less productive, domestically-oriented sectors. The latter consist of an entire spectrum of enterprises from the small village units to the large business houses. It is critical to manage this dualistic nature of the India economy. We must continue to encourage restructuring and upgrading of the internationally-oriented sectors. True, these global trends do pose significant challenges but they also offer tremendous opportunities for the long-term survival and prosperity of a large opening economy like India. Our future growth will depend on our ability to enhance existing strengths and leverage on new opportunities. India needs to position itself to ride on these trends.

Where do we go from here? All I can say in this connection is that we should seriously look at some of the very relevant routes taken by the newly emerging Asian economies and that we should try to see if there is anything here for us. 1. Among these nations, Taiwan has been most successful in using public research institutes to promote the diffusion of industrially relevant technologies. Our research institutes in India are only useful for converting highly theoretical academicians into practicing bureaucrats. 2. Where Korea differs from other developing countries in promoting big business was in the discipline that the state exercised over these Chaebols by penalising poor performances and rewarding only good ones. (Chaebol is a uniquely Korean business concept. It can roughly be used the way ‘conglomerate’ or a ‘business group’ or ‘trust’ is used in English.) Certainly, Korea differs from us in this respect. We already have an excellent system of rewarding our friends and cronies and penalising those who oppose us. Nevertheless, the basic idea of ‘contest-based’ resource allocation and the need to achieve sufficient scale economy remain valid policy concerns for economies like India seeking to enter a wide range of capital intensive high-tech industries now dominated by advanced industrialised countries. 3. An important lesson for us is in the instance of Hong Kong moving upwards from manufacturing to service and now becoming the centre for product design, marketing, logistics management, technical support, accounting and administration. I explained before how Hong Kong firms have developed

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sophisticated CAD/CAM design and electronic data interchange capabilities that allow them to quickly turn buyer requirements into design specifications. Here is something our technocrats can do as we have no shortage of excellent brain power. An important point to be noted in this regard is that our moving in this direction requires only private sector initiative without any government interference. 4. Singapore can best be described as one that emphasises on government induced facilitation of MNC induced technological learning. Though we are also moving in this direction, our initiatives here are seriously hampered by political interference and our apprehensions of what the MNCs may do to our economy.

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13 Having a Global Mindset

The Global Marketplace The world is now rapidly becoming a global marketplace. Just about every aspect of our lives, from the food we eat, to transportation, energy, clothing, financial services, household goods and entertainment, is either sourced from or exported to other countries. Anything a young entrepreneur can think of doing, in any sector, he will either be buying from, selling to, or servicing an MNC, right here in India. The new economy of the world today is dominated by intercompany trade and person-to-person communication across the table. Countries no longer trade; people and businesses do. Networks, strong in commercial and organisational infrastructure, are at the core of the new global economy. Sure you are also thinking in the globalised language. But look deep into yourself and think again. If you still have doubts, stay domestic until you are sure that going global is a good decision. Companies with highest rates of success in the overseas markets have cultivated ‘global mindsets’ from the very beginning. When you expand globally, you will do it because it is best for your company. If your firm is just getting started or just becoming a regional company, you may need to concentrate your resources and capital. International expansion can fuel rapid growth and make demands on your resources that your firm cannot yet handle. The crunch may not only be financial. You need trained and trusted people and you need the infrastructure within your organisation.

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This chapter is in two sections. Section I: The global business culture Section II: Global mindset in the Indian context If one is living and working in familiar surroundings, one tends not to notice many things. Say, a person who has lived all his working life in Tamil Nadu, venturing out only on short trips, gets posted in Assam for a couple of years. He will come back home and notice things he never noticed before. Well, this has happened to me and after having lived and worked with people of many races across the world for over 30 years, I am now back home and tend to look at ourselves with a new perspective. I notice how we do things and compare this to how others do the same thing. If I find someone else winning, inspite of our doubtless superior intellect and calibre, I ask myself why. To me, one of the major barriers to the growth of entrepreneurship in manufacturing in India and placing our consumer goods on the shelves of the world’s supermarkets, is the way we work with each other, how we build and nourish organisations and how we respond when faced with an onslaught of competition. Our people have to start thinking and doing business differently and new entrepreneurial styles must evolve in India. It is not only the way new organisations are set up and developed that needs to be changed: The very business mindset must change to counter the pressures created by the entry of foreign entities. z

The foreign entities that are here and are taking away large chunks of our domestic and export economy are not only MNCs from the West. The competitive pressures are coming increasingly from the ruthlessly efficient Korean, Chinese and of course, the Japanese trading houses.

If our youngsters have to start winning, they need to do two things. One, look at the mindsets of these nations, understand how they do business, and hit them with their own techniques like these nations did when they learnt marketing from the Americans and went and captured their markets. Two, our youngsters must have a hard look at our own traditional mindset and understand how we have always done business and where this is taking us.

I: The Global Business Culture Cut the World in Three Parts I am going to give you a unique perspective on the difference between how we build organisations and how others do it. I am going to divide the world in three parts and give you three faces of entrepreneurial mindset. To understand the new entrepreneurial styles evolving in India, my presentation would contrast:

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1. The Western entrepreneurial mindset. 2. Our lone-ranger, I-am-the-boss Indian entrepreneurial mindset. 3. The Asian group or networking entrepreneurial mindset.

The Western Entrepreneurial Mindset In the West, entrepreneurs are known to be intensely individualistic and rarely follow any set patterns or strategies. Yet, they all have one thing in common. A person invariably works towards building a business bigger than himself, making it into an organisation. In most of the successful enterprises all over the West, an outsider is hard put to identify the individual behind the success. Who founded Starbucks Coffee, Blockbuster Video, Walmart, Nokia or Ikea? These are recent household brands and have rapidly grown into multibillion dollar operations, but can you name an individual who is the power behind the scenes and is all powerful? Basically, these entrepreneurs dreamt of transforming a small business into a conglomerate, one that eventually would become a powerhouse in the particular sector of the economy. A key characteristic of these entrepreneurs is that they do not merely dream of becoming wealthy. The fellow does not mind owning a small chunk of business that he built, even compromising some form of control, or whatever it takes to make the business grow really big. Western entrepreneurs pursue lives of extremity—extreme ideas and expectations, extreme workloads, impelled by their dreams and passions. The dream is to make it big—really big! The entrepreneur dreams of attracting big venture capitalists, and maybe even launches an Initial Public Offering (IPO) later on. He measures his success not by the money he is making, but by the market value of his shares and the number of people he employs. And for this dream, the entrepreneur is willing to accept significant financial risks and challenges. Indeed, Western entrepreneurs are willing to make decisions that will threaten their wealth and their reputations. They understand that entrepreneurship is about risk. The important thing to notice is that none of the Western organisations have ever split. A split does not make sense because as I said above, the organisation is invariably bigger than the founder. Ask a well-informed management student in India to name a single organisation in the West, which has ever split. z

Please note that this is not a treatise on how business is run in the West. I am only making an important point in the context of how we do things in India. You will understand this in a minute.

Our ‘Lone-Ranger’, I-Am-The-Boss Indian Mindset It is typical of the Indian entrepreneur that he looks for the freedom and profit that comes from being on his own. He does not want to operate a large organisation. Instead, our fellow will build small-size businesses in which he is more comfortable. He will

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ignore opportunities for growth and let the business grow only to the extent that he, or his immediate family members, can personally control it. Sure, there are large business houses too, but the overall pattern remains small family owned firms. I have explained that my profession has been to promote manufacturing in developing countries and I have personal experience of coming to India with lucrative opportunities for medium-sized projects in other small countries. In most of the cases, the overseas firm had international funding and was looking for a technical collaboration. All that we wanted from the Indian firm was to export know-how, training and semi processed goods, and to take full technical responsibility for the management till the locals could be trained to run the show. The question of the Indian partner making substantial investments did not arise. I have detailed many examples in this book where the Indian entrepreneur just ignored the opportunity simply because, ‘I have only two sons and they are both in the US, so I have no one to spare.’ Our entrepreneur values his independence in running the business. The idea of being his own boss is more important than the size of the company. This kind of a business owner would rather own a big part of a small company than a small piece in a big company. Seeking outside investors is not a priority as he is unwilling to relinquish any control of his company. He would rather let the business grow slowly, without the headaches that come from building a significant venture. He is a freelancer, a lone ranger, a one-man-show. Sure, he is interested in a better lifestyle and control over his time but at not too much risk. His main weakness is that he wants to call the shots and have absolute power. Neither is he interested to share any of this power with any investors or shareholders, nor do they expect it. They too will have the same mindset and will only be interested in the returns of their money with the least headache. z

That doesn’t mean our businesses do not grow. Indeed, many become multimillion operations having a number of employees, but the absolute control rests with the owner or his immediate family.

A major tragedy of our style of entrepreneurship is that the business remains a first generation success story and often dies out with the old man. There are very few examples of businesses where the children and family members have not split and ruined the company. Almost the entire domestic owned industrial, trading and service sectors in India are small, individual or family owned and managed firms who operate in isolation. There is no cohesive effort towards organisation or institution building. I can give an example where our management mindset is brought out in stark contrast to the Western one. This mindset extends to every sector of society. Take politics, for example. The political structure of every successful nation consists of two or three large political parties that have never split. For this reason, they can afford to have transparent and legitimate sources of funding and have democratic organisational infrastructures. I do not need to say how this compares with what happens in our nation.


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Take the time when the British left India. There were a number of excellent organisations functioning here then. Three things happened: One, the pure retailing firms like Whiteways Laidlaw, Army Navy Stores and so on, had to close down as they merely lived off the colonies by selling European products here. They could not but die a natural death. Two, some large firms like Imperial Tobacco Company, Lever Bros, Phillips, Cadburys, Colgate Palmolive and so on, took locals as shareholders, maintained their managerial styles and prospered. Three, many highly profitable and excellently managed firms were completely taken over by Indians. Not one of them survived.

The Asian Entrepreneurial Mindset The Asian entrepreneurial mindset is in stark contrast to the two mindsets described earlier. To understand what I am going to say, consider a situation: Say, you are working for a large firm where the annual day, organised purely by the staff, is a prestigious event. This event can be organised in two ways. One, the management can select an executive who takes four or five volunteers. Two, the management can leave it to the staff who can have some volunteers joining hands and forming an informal committee or a group. Remember there is no profit motive and no remuneration is involved. People do it purely for the satisfaction of a job well done. In the first scenario, it would invariably become a one-man-show. The selected executive would assume the role of a boss and the contribution of the other volunteers would at best be half-hearted. Each volunteer would be more concerned with being selected as the boss the next year than doing a good job this time. In the other scenario, there would be no boss and the team members would mutually allocate some part of the work to each person, and the co-operation would be superb. The result would be better as each person would volunteer for the job he is good at. The next year the same team would do a better job as each member did only what he was good at, got experienced and became better at it. Well, the first scenario is how the management of Indian firms work, and the other one is what I am calling the Asian entrepreneurial mindset. It is not teamwork but formation of a network where there is no boss and each member is intensely individualistic but works together with other members of the network. This is the Chinese business culture. I have given some examples of how this works in chapter 10, and we will again be talking about this at some length in chapter 14. While talking of the Chinese entrepreneurial mindset, one needs to remember that we are talking mostly of the overseas Chinese—things in China under an authoritarian rule and are very different. The Chinese are a network of networks. The enterprises are all small family owned businesses that stay singularly apart, but work together all the time.

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The family businesses of the Chinese overseas are networks—of companies and other enterprises, of clans and villages. An outstanding characteristic of the ethnic Chinese network is that no one is in charge. Individual companies are completely decentralised from the whole; yet they are extraordinarily efficient parts of the whole. These small family owned firms excel at integrating design talent, manufacturing capacity, production management expertise, marketing and packaging skills, and financing to produce products which nobody can compete with. When a crisis arises or a great opportunity presents itself, they close ranks and co-operate.

Mindsets cannot Change The essence of what I said here is that no one can or should copy another person’s mindset. You cannot think and act like I do. You are you and it would be silly to try to copy the way I do things simply because I am more successful: You must try to become successful in your own way. The Western people can never do things like the Asians do and we Indians have to realise that we have been doing things a certain way for centuries and cannot change overnight. Let us talk of the way we build our organisations. This has also nothing to do with whether an organisation is family managed or not. As an example, in the Western world, only professionally managed firms grow into large organisations. But in the East, purely family managed Chinese firms exhibit all the signs of a professionally managed firm and grow, because of their attitude to networking. In most cases in India, none of the above factors are visible. The organisational infrastructure is simply profit motivated. The entire commercial activity is aimed at tangible profit in short-term, and the only effort is to maximise this profit. Invariably, the profit is ploughed back into the business only to the extent that results in immediate extra profit. No thought is given to the set-up growing as an organisation. The owner designs the managerial set-up more for absolute control and power rather than for growth inducing strategies. ‘I want the firm to grow only to an extent that I can keep everything under my own control.’ If the activity is profitable, the surplus is withdrawn for secure investment in real estate, and so on. The owner has palatial houses and lives in fivestar comfort but the factory and the offices are shabby and ill maintained. This is one of the points I often raise when talking to the MBA students. I ask them the meaning of success in life. To most of them, the meaning of success is simply making a lot of money. I have not met anybody who is determined to work right from the beginning towards growing into an organisation. I hear a lot of them planning to ‘work for some time and then do something on [their] own.’ Now, take our large firms. India has always been an inwards looking nation and so the firms here are all inwards looking. They have mind-boggling schemes for doing things domestically. Compare this with the newly emerging economies like Malaysia and Singapore that have deep rooted Asian business culture I have described before. Our firms buying out overseas firms, which is our only overseas foray, is not the same thing as firms in Asia spreading their wings in Africa, South Pacific, the West Indies and even South America. The goods produced in these nations are increasingly getting on the shelves of the world and Malaysian and Singapore firms are taking


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up large infrastructure contracts all over the developing world. The tragedy is that today the best employers for our brilliant civil, mechanical and electrical engineers are Malaysian firms. Another point to be noted is that rather than personal or individual, there are strong social aspects to the success of the enterprises in the Asian nations, aspects that do not exist anywhere outside the region. Even though the very definition of entrepreneurship assumes risk-taking, these people have minimised the risk aspects because every idea or proposal is examined in detail from all possible angles by a number of people. In Japan, Korea (and recently, Singapore), though they have made remarkable progress on economic fronts, one would be hard put to name some outstanding entrepreneurs. The success of every enterprise is the result of a cohesive group effort. True, this is slow but the results are long lasting. This is in sharp contrast to what happens in India where, as I have already said, the fortunes of every major business house begin and end with an individual. It is clear that this will not change. To catch up with the fast globalising world, we have to evolve a new way, quite unlike our own way of working.

II: Global Mindset in the Indian Context First National Mindset, then Global Mindset I have a friend in New Delhi who is manufacturing superb quality bathroom fittings. Items like taps, showers and soap holders—Chromium plated brass. He has an extensive range and is very careful about quality control. His brand is increasingly getting respected and the business is growing. He has made considerable investment of his time and money in making a number of trips to nearby South-east Asia and Kenya. He has been able to get small orders but no foothold in these markets. What I found surprising was that in India, his market is only in Delhi, Punjab, Haryana and UP, within a radius of about 400 kms. Also, in some small markets in Madhya Pradesh and Rajasthan. He has never sold anything in the South or in Bombay. He makes no secret of the fact that he has never made an attempt to penetrate these markets. He has all sorts of reasons which, considering his tight financial and manpower resources, seem valid. His competitors in Bombay and Chennai are based there and service the customers on a personal day-to-day basis. He will have to sell through agents and stockists and will have all sorts of problems requiring him to make frequent trips. It is clear that if he wants a reasonable degree of market penetration, he would need a long-term presence there. This does not fit into his management strategy of keeping an absolute control over all the operations. So, this is not feasible. Very correctly, he points out that the Bombay and Chennai firms do not have much of a market in the north. All true. But looking at it from another angle, he thinks he will succeed in exporting to far away overseas markets when he does not have the managerial set-up to handle markets in his own country. Every entrepreneur in India thinks exports are a breeze.

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This is not a stray example, but rather a rule in India. There are countless manufacturers who are thinking global before thinking national. Every other manufacturer will tell you that he sells only in the immediate region and that ‘we are also exporting.’ If you look at it carefully, all that it means is that businessmen from countries like Nigeria and Tanzania come to India looking for supplies, meet these people and buy in cash. This is always short-term and the exports fizzle out after a couple of deals. Invariably, there are problems when the customer has complaints regarding the shipment. And, we end up having an unhappy customer who swears never to deal with India again.

First Go Global within your Company Let us now assume that you have decided to expand your business outside India and are aggressively seeking expansion into foreign markets. The text book approach of expanding overseas only after you have reached your maturity in the domestic markets does not work in a huge market like India. Indeed, one of the reasons for our dismal export performance is that there is always a lot to do in the domestic market. Wait. There seems to be a contradiction here. I said before that before you develop a global mindset, it is a good idea to see if you have a strong national mindset. I said it is going to be very difficult for some of the well-established and respected firms, say, in the South, who are completely unknown in Delhi or Punjab, to start thinking global. The point was that they obviously do not have the organisation, or the resources and certainly not the mindset even to go national. If you look slightly below the surface of these firms, you will find an owner or a boss who is a one-man-show. He does everything, decides everything and trusts no one. As an individual, he grows, but his organisation does not. So, for a firm that wants to aggressively expand overseas, the managerial set-up has to be professional and there must be experienced senior executives who have decision making leeway. So, let us go back to assuming that you have decided to expand your business outside India, which means you already have the attitude of letting professionals manage the show. While the thought of entering foreign markets is exciting, optimistic and exhilarating, it is also overwhelming when you consider the size, complexity and risk of expanding into global markets. Certainly, when you consider all of the barriers to entry into foreign markets, you may become overwhelmed by the thought of whether it is worth the risk. Also, you should not approach global expansion as an alternative or sideline to your domestic business. Having a global mindset means realising that the need to go global lies at the heart of your business. z

Within your firm, the biggest problem that you will face is internal: the inward looking mindset of your owners/shareholders, management and staff.

True, you will find anybody and everybody willing to take up an assignment overseas but when you tell them that you are not sending them to New York or London but


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to places like Nairobi or Dar es Salaam, they lose interest and try to oppose the proposal. You will be told that: z z z z z z z z z

We have limited resources. We can barely handle our domestic business. It is too risky. We are not making enough money at home in our local market. How can we make a profit in foreign markets? It will take years for international business to pay back. We have never exported any of our products. How do we go about this? Who in our company can/will handle this effort?

Timing and commitment to globalisation are critical. Similar to a family’s decision to have another child, there is never an optimum time. You have to make the plans to expand your business and follow through. On the other hand, should political and economic conditions of select countries change dramatically, of course it is prudent to delay your expansion efforts.

Learn to Make Useful Friends But don’t make the mistake of thinking that the world is as competitive as it can get. This is only the beginning. Let us look ahead to the next century by looking back 50 years. In 1945, the United States was the only industrialised nation that was untouched by the devastation of two world wars. American business had no competition. The world was borrowing money from them to buy their products, and they could set prices and standards based solely on what they felt like. So what did they do? Sit back and enjoy the monopolies they had like our big business houses did in the heyday of the license raj? Everybody knows the answer to this. They went out all over the world and set up joint ventures, joined hands with others and set up subsidiaries in their countries to capture their markets. And then, dozens of firms like McDonald, Kentucky Fried Chicken, Pizza Hut, Starbucks and so on, spreadout all over the world by getting others to invest in and run their branches in their countries as franchises. They did all this in a big way and made sure the world market remained in their hands. Then came the Japanese, followed by the Koreans and the Taiwanese. All ruthlessly protected their home markets, and went out and conquered the world. That was only the beginning, because now we are starting to hear from countries who were never imagined as competitors, countries that were pejoratively labelled ‘ Third World’ countries because they would never ‘measure up’—Mexico, People’s Republic of China, Malaysia, Thailand and Singapore. What does this mean for you? What will your business be like when all those countries will be powerful industrial forces competing for your market share? They will be hungry for what you have. They will work long hours and, in the beginning,

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they will work for less. They will exploit your competitive weaknesses just as the Japanese exploited the quality gap. Most senior managers in India understand all too well that if their companies do not awaken to the global challenge, competitors from outside will surround them and eat them alive. There is already the price competition in our own domestic markets. Others can imitate us and do it cheaper. There are companies that add more value. There will be companies that will innovate around us. Finally, if we stand still, there will be competitors who will lock us out of new customers through single-source relationships. The competitors might be next door, or they might be halfway around the world. Armed with the Internet and a telephone, our global competitor will be talking and proposing to our customer whose workplace is only two blocks from us! The challenge in today’s marketplace is to beat all other products around the world in innovation, price, quality, service, sales, marketing and responsiveness. But few Indian companies have the expertise to address all these areas with world class leadership results. As such, it is indeed prudent for Indian companies to team up with outsourcing or alliance partners in other countries that have the competencies and expertise that they lack. While this has been going on in the inwards direction, and Indian companies have been forming joint ventures and technical collaborations here, it is only now that some companies are discovering the power of teaming up overseas for mutual performance advantages. I am not talking about Indian firms going to other developing countries and setting up joint venture manufacturing operations with local partners. This was done in large numbers in the 1970s and 1980s, with disastrous results. I am talking about networking with other firms elsewhere to have integrated marketing or manufacturing operations. I have talked about this in section one of this chapter. The overseas Chinese are exceptionally good at this and there are hundreds of examples all over the world. The advantages are obvious. Companies choose which suppliers have the needed expertise and resources for a given venture or product line. Selected partners can foster peer relationships. Working together with overseas partners to solve problems and explore opportunities for greater achievement becomes easy. This form of business should not be confused with what is commonly done when firms form consortiums to bid for large projects, joining together for a market opportunity, dissolving when the opportunity ceases. What we are talking about is to seek long-term presence in each other’s territory without the massive investment a branch office or a subsidiary would need. It is clear that in the 21st century, companies in India will be operating in much more open market situations, so those that are unable to adjust their operations to changing market conditions as fast as their competitors do will lose their market share, partners, investors and possibly, employees. Remember, the competitor may not be an Indian company! Indian companies of the future should be able to quickly change their business processes and operations without putting undue strain on resources, both at home and overseas. They must also be able to redesign processes in support of new market opportunities, supply chain partnerships, product characteristics, organisational changes or virtual operations. The only way of doing this is to have friends working with you in other countries.


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Do Not Think of Just Going There. You Must be There Greater interconnectedness of the world business scene implies dynamic growth and change, so it is no longer enough to go to your market frequently: you must be there. You must establish your own presence and let the customer know whenever he needs you that you are nearby. I will seek to establish how the last 15 years have seen phenomenal growth of Japanese, Korean and Singapore Chinese export houses. These professional export houses trade by being there, and have changed the rules of the game. These firms now have an extensive network of branches in all the major cities of the world. They have conquered the developing world, by having a presence all over Asia, Africa, West Indies and South America. In India too, they have learnt to develop a strong organisational infrastructure which is rapidly taking the market for non-traditional exports away from the Indian export houses. When it comes to the very essential network of branches we need all over the world, forget our large business houses, even the large export houses have almost no professionally managed network outside India. ‘I have my son in New York and my cousin in Frankfurt’ seems to be just about it. Having a presence does not mean the very expensive option of setting up an office and posting an executive there. Another way of looking at it is that as recently as the 1970s, in the West, it was only the very large corporations that had the resources and capabilities to grow internationally and they did so primarily by establishing marketing offices or branch plants overseas. So, a large number of multinational firms made direct investments in other regions. Today, by contrast, new transportation and communications technologies allow even the smallest firms to build partnerships with foreign producers and entrepreneurs to set up foreign bases to service the distant markets. This is the way smaller to mid size firms in the West and in South-east Asia are currently exploring ways and means of expanding their businesses in the global marketplace. It is a sad fact of life that our very large business houses are all inward looking and do not consider exports as a suitable activity for them to be in. In India even today most foreign business development efforts by our firms are a result of a casual or ‘knee jerk reaction’ to what they read in the press or media on nearby countries and what fantastic markets they offer to all sorts of goods. Coming to the point I started with, firms which have been able to develop a deep rooted national mindset and which have a strong presence in most parts of the country are the ones who are likely to be successful as professional export houses, exporting items outside the run-of-the-mill items like readymade garments and leather goods. True, unlike the large multinational firms which generally have hefty research budgets for international market research which is critical to market entry in foreign markets, our smaller firms have limited financial and human resources and cannot afford to take significant risks in the global marketplace. This simply means that the nature and extent of homework we must do before entering into a new market is more critical. You must do your homework and research not only on other markets and cultures but also on the driving forces of these markets and cultures.

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One point I need to repeat here is that we do have big export houses which can only be called ‘petty traders with a multi-million dollar turnover’. In their attitude towards professionalism, in organisational structure and in commitment to earning long-term goodwill, they remain small time traders. Not forgetting that we are competing in most of the export markets with excellently organised firms from South-east Asia, which have an incredible degree of professionalism. So, let us assume you are a firm which has nationwide operations and has already a strong national mindset. You may be a manufacturing, or a trading, or a services firm. If you are a large business house, you are probably all of these. The next step is to decide that you want to have a long-term interest in developing the export markets. This can, or rather should, be a project by itself. So, you must start thinking of having a presence outside India. As I said, you cannot simply hire a suitable executive, set up an exports division and go hunting for orders. You must determine to be a global player. Remember, once you enter a foreign market with your products or services, you have to stay there. Companies that have entered a market, withdrawn and then tried to enter again have not only had a very hard time regaining any market position but also earned negative goodwill. International markets, particularly in the developing world, are like elephants— they do not forget anything. If you are not ready to make the kind of commitment necessary, you should rethink your globalisation efforts. I must also admit that getting this sort of a commitment in India is easier said than done. Given our strong inward looking mindset, people around you will come up with hundreds of reasons and excuses to avoid doing this. You will need all the will power you can muster to resist every step, more so because most of the reasons given are very valid. Of course, expanding globally is very risky. But if your firm had an operation in, say, Delhi, expanding domestically by having additional units in Hyderabad and Coimbatore was risky too! If you could manage this, you already have a national mindset, and you certainly can expand your business in international markets. Certainly you are overwhelmed at the thought of globalising your firm. My own experience in the developing world has shown that there are no short cuts and no strategies or action plans that carry a sure fire guarantee. This is understandable as we live in a complex and fast-paced world, but you must be clear about what you want to do. Along with courage, you must develop the stomach for international political risk and long-term results. Going global entails immense amount of research and a lot of midnight oil burnt in planning. With some cost-efficient preliminary market research, you should be able to develop a workable strategy. We will talk about this later on.

Inward Venture Partnering It is essential for future Indian companies to be able to quickly change their business processes without putting undue strain on operations. And they must be able to redesign processes in support of new market opportunities, supply chain partnerships, product characteristics, organisational changes or virtual operations.


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As such, it is prudent for Indian companies to team up with outsourcing or alliance partners that have the competencies and expertise that they lack. We should learn a lesson from Malaysia and Thailand where more and more companies are discovering the power of teaming up with overseas firms for mutual performance advantages. Selected partners can foster peer relationships and work together to solve problems and explore opportunities for greater achievement. This form of business can even be based on partnership fluidity: companies joining together for a market opportunity and dissolving when the opportunity ceases. In the 21st century, companies that are unable to adjust their operations to changing market conditions as fast as their competitors will lose their market share, partners, investors and possibly, valuable employees. I say employees, because today’s youth in India is educated in a global economy. Firms that can offer international experience are very attractive to young university graduates. As our economy becomes more global, with global financial markets, telecommunications, transportation systems, firms that lack a global presence will be a strategic disadvantage in the job market.

Learn from Successful Nations The spectacular results of international business competitiveness are evident among firms from the United States, Europe and Japan, which moved away quickly from simple foreign trade activities to foreign direct investments and then to competitive links across all continents of the world. Their efforts in creating multinational firms have been outstandingly successful. We will very briefly discuss the various aspects to gaining, maintaining and sustaining competitive advantage. These are academic and text book aspects and are taught in most business schools under the topics of international marketing and management. I am detailing below some points that I think are crucial for any Indian firm evaluating the prospects of going global. These are commonsense and are based on my own experience and on what I have seen others do. You can read more about these on the Internet. The following points are, in a very brief outline, on how countries, management, and organisational issues affect international business. If all are investigated and implemented successfully, executives can go about the business of creating a global business network for their firms. So the first point: How do international firms gain competitive advantage on the global arena? Well, every nation is unique and has it is own language, culture, history, economy and political system. It is different from its neighbours, friends and allies. All of these make the United States different from Mexico, France different from Germany, Japan different from Korea, and so on. Therefore, the CEOs of the international firms direct their executives to seek information and feedback on hundreds of questions. What do they find in each country? Can they use their core skills to export to, or invest in each country? And, will they be able to overcome the entry barriers raised by local firms in their home markets? Only if the risks are acceptable, skills are transferable and barriers are surmountable international business takes place. Let us talk about this in some detail.

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Choosing Market Opportunities: Because international business crosses many national frontiers, executives must deal with political, currency and cultural risks. Their task is to avoid high-risk countries, find high-growth market segments in low-risk countries, and capture significant market share in all mass consumer markets of the world. Given that Japanese executives prefer a longer time horizon for gaining market share and becoming profitable than the American executives, the former see less risk and more opportunities than the latter. Fitting Core Skills: Not every product, manufacturing system, marketing strategy and organisational technique crosses national boundaries with ease. Some countries show a great deal of similarity in their ability to absorb new technologies and the willingness to copy consumer preferences established elsewhere in the world; others do not. Given that customers worldwide prefer Japanese technology incorporated within an international (sometimes referred to as Western or American) lifestyle, executives across the globe must get new products out more quickly and commit themselves to foreign market development in all parts of the world. Overcoming Barriers: Incumbent firms use their home market advantages (such as scale economies, learning curve, links with distributors, and so on) to keep out foreign contestants. The latter must overcome these entry barriers through new technologies, products, services and markets. Through a combination of technological competition and home market protectionism, Japanese executives have emerged as active players in international business. This is a wholly new lens through which American and European business executives must learn to view international business.

So, this was regarding the entry. Then, how do international firms from these nations maintain competitive advantage? Many manage entry into overseas markets with only a minimum of difficulty. They learn to deal with the reality of domestic firms that have fully depreciated plants, strong links with local wholesalers and significant market shares. Nevertheless, new foreign competitors face several disadvantages. First, their sunk costs are not depreciated; second, their forward pricing strategies are racking up losses instead of profits and third, their local competitors are doing everything possible legally to keep them from gaining significant market share. Therefore, foreign firms must find least expensive offshore products, seek customers with the highest discretionary income and create valuable new products and services. Let us look at these strategies: z

Sourcing: Executives look for raw materials, parts and components and finished goods from low-cost areas of the world. They want products with high export sales potential that meet the technological and lifestyle expectations of customers abroad. Their task is to adapt international products to national, regional and local markets. In the past, American mass market and European high-class products built strong market segments throughout the world. Today, products from Japan and other Asian countries are capturing market share with the expectation that Japanese executives have something to say about the long-term development of international business.

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Selecting Customers: Executives seek to improve the quality of demand by going after customers with high incomes, refined tastes and preferences for expensive goods. Executives seek out goods from countries whose reputation is good in the eyes of customers. This country-of-origin affect is one of the several cues that convince customers of quality. Today, high-performance cars from Germany, and low-, medium- and high-priced cars from Japan have excellent ratings, whereas cars from the United States have fair or poor ratings. The key to long-term development of international business is to pitch products with the right price, quality and service to the most appropriate customer, niche, and market segment irrespective of national boundaries or differences in language, culture and history. Creating Value: Executives acquire brands, trademarks and other intellectual property to create value for their firms. They measure the actual movement of the brand-name products through the channel of distribution, and they develop promotional campaigns to pull products faster from the manufacturer to the customer. Today, valuable American and European brands are for sale to those who have the cash: the Japanese, Koreans and other East Asians. The key to long-term development of international business is to create new brands, service marks, and other forms of intellectual property so that value is enhanced for customers everywhere in the world.

Finally, how do international firms sustain competitive advantage? Information is the lubricant of organisations and helps the executives to decide on which markets to enter, how many and at what pace to finance market expansion. To make an expansion strategy work requires capital, human resources and other assets to be leveraged to their fullest, with an eye on the detail of national differences worldwide. Some more thoughts on these: z

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Using Information: Organisations use production, marketing and financial information to determine how management should go about its job in international business. Sometimes information is kept internally within the multinational firm, whereas at other times information is used as the carrot to induce other firms to join in licensing deals and joint venture partnerships. Also, information is used to scan many markets and then decide which of these are similar enough so that the cost of additional market penetration is not prohibitive. Positioning Assets: After decisions are made concerning concentration versus diversification, then executives position capital, human and other assets. All expansion strategies require executives to make a host of predictions about the chances for success, for example: sales response functions, industry growth rates, competitive lead times, spillover effects, costs of product and promotional adaptation, distribution expenses, costs of managerial control and the loss of revenue due to external constraints. The task of executives is to leverage their assets to outperform their sales quotas so that the whole company grows internationally. Understanding National Differences: Information and data are no good without executives who have a feel for the real local, regional and national differences

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among countries. Some of these are specific to one language or cultural group (for example, the respect for the King and the royal family among the Thais). Others transcend cultural groups and bind peoples into nations (for example, the Maple leaf of Canada, or the Stars and Stripes of the United States). Still others cut across nations and bind market segments worldwide (for example, the Union Jack of Great Britain as a symbol of quality on Reebok running shoes). These competitive connections among countries turn projections into international marketing plans that are integrated into a worldwide corporate strategy for enhancing the firm’s international business. Knowledge of the detail of national differences is the all important information that executives must know and utilise.

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14 Understanding the Overseas Indians

I have said it repeatedly and I am saying it again that it is India’s young men and women who are at the centre of the knowledge revolution that has swept the globe. However, so far, on the ground, Indian businesses are creating new paradigms by only making India a world class sourcing base, a hub of global service and, to some extent, manufacturing activities. For us, globalisation is about MNCs coming here and Foreign Direct Investment (FDI), it is all inwards. We have encouraged the world to get unleashed into our country and it is here to take advantage of our superb brain power for IT and of course our huge markets for consumer goods. The other side of the coin is that the last 25 years have seen a remarkable change in the attitude of our Indian entrepreneurs. During this period a new generation of Indians has taken over. They are tech savvy, knowledge savvy, having an urge to excel and eager to go global. They represent a new confident and resurgent India, an India where people are willing to go that extra mile to create a global enterprise. For keeping the promise of making our presence felt in the world’s markets, our young entrepreneurs need help. The very obvious source of this help would be the Indians who are already well settled overseas. And, this is where we face a serious problem! I am going to do some plain speaking here. I am not a politician and do not say things only to make you feel good. If there are hard, unpleasant facts that have to be faced, so be it. Let us face the situation in a positive manner: I will tell you the facts and discuss where we go from here. The very unpleasant fact remains that, far from providing us a base for us to start going global, the overseas Indians are a bottleneck.

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The world is watching with excitement the emergence of this new economic superpower. It is clearly in the hands of the young Indian entrepreneur, the new powerhouses, to make our presence felt. The youngsters know what is expected of them and also that now is the time to deliver. On the face of it, it looks silly to mention our NRIs or overseas Indians as a bottleneck. Wherever I go to India and meet young people, I notice that they have a common impression that Indians do well when they go overseas. This impression needs to be corrected, because when our young people talk of Indians overseas, they only mean IT professionals in the US. Not many people know that there are over 25 million persons of Indian origin living outside the country. In the countries where they live, they are called ethnic Indians. From Fiji to Singapore, Malaysia, Africa and all the way to South America, there are many countries that have a sizeable percentage of ethnic Indians. Forget the Lakshmi Mittals and Swaraj Pauls, who are indeed outstanding exceptions, but the vast majority of our people are not doing well. I will tell you some surprising things about Indians in the developing world, which is the best target market for our goods. The Indians in these countries are mostly professionals and traders who are each-man-for-himself and are known for their internal bickering and disunity. So, they have no clout and no captive markets to offer. Their success depends upon the success of the host countries. Some time ago, I attended a seminar organised by The Export Credit Corporation of India (ECCI) where Mr G.M. Ganapathy, the then DGM of the ECCI spoke about the risk of dealing with overseas Indians. He said that ECCI has identified as many as 2,000 ‘negative buyers’ mostly from the developed countries, who have a consistent track record of bad dealings with Indian exporters. Most of the negative buyers identified were traders of Indian origin settled in countries like the USA, UK and Germany. He said that while steps have been taken to create awareness among the exporters in this regard and though the corporation had the details of bad buyers, it could not release the list as there were legal complications. Since these rogue traders were Indians, they were fully aware of the weaknesses in the system. They easily exploited the exporters because the Indian exporters did not have a legal recourse. The Indian exporter is at the mercy of the buyer because of the prevalent practice of under invoicing. While the Indian exporters were forced to adopt a ‘casual approach’, their counterparts in other Asian countries did not have any such restraints, were alerted by their watchdog bodies and did not deal with the overseas Indians. The net result is that Indians, both as the exporters and the importers, lost out. The problem is that when a budding entrepreneur from India makes the first contact in any country, invariably it is with the local people of Indian origin, if there are any. And the matter ends there, as this precludes direct contact and dealings with other ethnic people in the particular country. Particularly in countries like South Africa, Kenya, Thailand, Malaysia and Singapore, the local Indian generally does not have the capacity, or the organisation or even the inclination to develop the market for a new product. He will, at best, import what he needs for his own set-up. But the real tragedy is that he will never say so. He will never introduce a visitor to a suitable local party and stand back.

Understanding the Overseas Indians

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I am getting ahead of myself. Let me start from the beginning. I will be using the term ‘diaspora’ in this chapter, and I will tell you what is meant by this term in the context of what I am talking about.

The Approach I need to refine my definition of the scope of this chapter. I would like to talk about an entire spectrum of our people who are living outside India. As I said, in the countries where they live, they are called ethnic Indians. On one hand, one has people who left our nation even before it was called India, and went to places which are now called Sri Lanka, Malaysia, Singapore, Fiji, all over Africa and as far as South America, and on the other there are the recent emigrants, our youngsters who go mainly to the US for education and stay back. Indeed, we call the Indian diaspora by many names. We have NRIs, Overseas Indians, Non-Resident-Indians and People of Indian Origin. The last, ‘People of Indian Origin’ is a term which has been coined recently and is taken to cover all the above. This presents a complex picture. It is only recently that our people living outside India have started meaning something to the nation, but not much data and information is available on them. Some excellent purely academic socio-economic studies are being carried out to find out who, where and what they are. In the forefront is an institution called the India International Centre (IIC) in Delhi. They have organised a number of seminars and conclaves on the Indian Diaspora. This is a subject of many on-going research studies. I am going to look at the Indian Diaspora, spread-out all over the world in general, and in Asia in particular, from four angles.

Our People Living Overseas After explaining what is meant by this unusual term, Diaspora, I would discuss the nomenclature our social scientists have given to various categories of our people living overseas, how many of them are out there and what history tells us about how they happened to be wherever they are. I would discuss, at some length, the status they enjoy in the countries where they live.

Economic Clout I have lived and worked in many nations which were ruled by the whites. The whites were never more than a tiny fraction of the population, yet they could manage to rule with an iron hand.

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I have also lived and worked in the South-east Asian nations where the Chinese constitute a small minority but have enormous economic clout. I have always wondered why Indians, in spite of having a substantial presence in many nations across the world, and in some cases a majority, never had any sort of a clout. The dissolution of a democratically elected government, as in Fiji, for no other reason than that it was headed by a person of Indian origin, even in a country where Indians predominate, points towards their fragile position. I need to ask myself the question why the discriminatory and blatantly racist mechanisms, which others can easily deploy to keep Indians subjugated, work only against us.

Overseas Chinese and Overseas Indians I would address very sensitive issue of what India can and should do for the Indian Diaspora. While doing this, I would also talk of what sort of a contribution the Diaspora may be able to make to their country of origin. I will be contrasting the economic status, the business attitudes and the social interaction of the overseas Chinese with that of the overseas Indians. Here, I will highlight from my personal experiences, one aspect in particular: The overseas Chinese in Asia are making an enormous contribution to the economic development of mainland China. But, as loyal citizens of other nations, they do not call China ‘home’ and, in times of racial crisis, do not expect mainland China to come to their assistance. In contrast, the overseas Indians, are not making any contribution to the economic development of India, do not even talk well of their mother country, yet are extremely bitter when India does not come to their aid.

The Future of Overseas Indians On a positive note, I do not agree with the realms that have been written about the manner in which the overseas Indians isolate themselves in air tight pockets and do not mix and interact with the locals. While this is true, it is a pity that this is mostly written by Indian journalists and always with a negative connotation. I would discuss, again with examples from my own experience, that we are better at mixing and interacting than many other immigrant communities all over the world. I would seek to establish that all immigrant communities indeed isolate themselves as a defensive mechanism. So what if the Indians do it too? So where do we go from here? The future of Indians in the Diaspora revolves upon many modalities of thought and action. I will address these issues at some length. Indeed, the future of our young entrepreneurs venturing overseas and making use of our own people in these countries will depend upon these.


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Our People Living Overseas Diaspora This is a word which has only recently come into common use by the Indian media after people living outside India have started meaning something to the nation. This is a Greek word and originally referred to the forced dispersion of Jews among the Gentiles between the 8th and 6th century BC. At that time, it described Greek and Armenian dispersion. Now, it is loosely used to describe any transnational community. So Indian Diaspora means Indians living outside India for any reason. There might still remain questions about whether the term Diaspora can be applied to Indians overseas. The word ‘Diaspora’ was first employed only with respect to the Jewish people and then also only to convey the idea of forced dispersal and fragmentation. There was a strong presumed relationship between the diasporic community and the land which they left. There was always the possibility of return to what we may term ‘motherland’ or ‘home’. In the modern world, the conditions that make for a diasporic community have admittedly become complex, and the presumed link between the Diasporic community and the motherland has all but disappeared. It thus appears perfectly reasonable to speak of an Indian Diaspora, as it does of the Chinese Diaspora, the African Diaspora, the Palestinian Diaspora, and of course the Jewish Diaspora.

The Indian Diaspora For the purpose of discussion here, I will split the Indian Diaspora into four classes. Overseas Indians The term ‘overseas Indians’ has different meanings in different contexts. It is generally employed to designate both the people who hold an Indian passport and who are working or temporarily living overseas, and people of Indian origin who have taken the citizenship of the host country and have therefore attained a distinct political status in the country of their settlement. For the purpose of this discussion, the term ‘Overseas Indians’ refers to people who left India some generations ago and have settled in UK, USA, Canada as well as in Malaysia, Singapore, Fiji, East and South Africa and South America. They are predominantly traders and small time businessmen, with the younger generation getting educated and becoming professionals. This represented a distinct phase in the history of Indian emigration. Most of them emigrated as indentured labourers during the British colonial period under the assisted emigration scheme when the British took Indian labour to raise sugar plantations in countries like South Africa, Mauritius, Trinidad, Jamaica, Guyana and Fiji, and rubber plantations in Malaya. Unlike the NRIs, these people are now local citizens, well within the legal fabric of the country of their domicile and have full voting rights.

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As such, their links with India are not political but purely family and sentimental. India is their ancestral and cultural home. They keep alive their linkage with India through emotional, not political, bonds because they do not consider themselves as Indians but as people of Indian descent.

Non-Resident-Indians (NRIs) The term NRI refers to highly qualified and skilled people who are recent migrants and are working mainly in USA and Canada as professionals. In other words, Non-Resident-Indians (NRIs) are those who had emigrated voluntarily during the post-independence period for an indefinite period of stay in foreign countries. Despite their absence from India, many are Indian citizens because they continue to hold the Indian passport. The status they enjoy in the country of their settlement is thus that of an alien. True, many have taken citizenship of the host country but for all practical purposes they remain Indians and their ties to the home country remain strong. It is this knowledge-based group, largely drawn from the ‘privilegentsia’ and based mostly in North America that is the focus of all our media attention. This is the group that has surplus funds to invest in India and are the target of all promotional efforts.

People of Indian Origin This term has acquired very different connotations in the recent past and has now two meanings as discussed before.

Export of Manpower The export of unskilled and semi skilled manpower to the Middle East is not relevant to this discussion because their stay outside the country is short-term and there is no question of their having any economic status outside India. This group comprises of workers in Saudi Arabia, UAE, Oman, Kuwait, Bahrain, Qatar and other West Asian countries. Our people are called by different names in different countries. In East Africa, Uganda, Kenya and Tanzania, we are called ‘Asians’, which clubs us with Pakistanis, Bangladeshis and Sri Lankans. In North and South American countries, the term ‘East Indians’ is used to mean people from Pakistan, Sri Lanka and Bangladesh and all those South Asian descendants (predominantly Indians) who had migrated from West Indies, Fiji, South Africa and East Africa. This is to differentiate us from the West Indians, that is indigenous black people of the West Indies.


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How Indian is the Diaspora? What is the Indian Diaspora, and what makes it Indian? I was in Trinidad when former President Late Dr Shankar Dayal Sharma paid an official visit to the Republic of Trinidad and Tobago. Later the University of the West Indies at St Augustine, Trinidad, hosted a major 10-day conference on the Indian Diaspora worldwide. President Sharma’s trip coincided with the unprecedented decision by the Government of Trinidad to proclaim 30 May a permanent national holiday, as the ‘Indian Arrival Day’. It seems that, 150 years ago, a ship carrying 217 Indians had set anchor on 30 May in Port of Spain, thereby inaugurating a new chapter in the history of Trinidad, the Caribbean and indeed the Indian Diaspora. It was unusual that a holiday, and one which concerns Indians, should have received prominent attention on Indian news discussions and the media. Had such a holiday been proclaimed in the United States, the event would have been celebrated in India as an acknowledgement, howsoever belated, of the achievement of Indians, and of the ‘arrival’ of India upon the world stage as a considerable economic and military power. But Trinidad, and indeed a greater part of the non-Western world, is of little interest to middle class Indians, and few people in India are aware that Indians have been settled in Trinidad, Guyana, Surinam, Mauritius, Fiji, Malaysia and a host of other countries for a much longer period than they have been in the West. Historically Indians are not reputed to be very outgoing and mobile. India is a continent of deeply rooted people. Indians do not just own the ground beneath their feet; our lives are so overwhelmingly tied to the land that it owns us too. Therefore we can understand the orthodox Hindu tradition that goes so far as to warn that anyone who crosses the ocean instantly loses caste. However, these strong strictures against travelling overseas that are said to be found in the ancient Shastras, make the socalled Indian diaspora, which have taken Indian communities and their descendants from their overpopulous country across the world in every direction and as far as Fiji, the most improbable of phenomena. The presence of Indians abroad can be attested to from the days of remote antiquity. Early Indian migration, such as to Ceylon and South-east Asia, owed its origins to the impulse of Buddhist missionaries and the well-known Hindu kingdoms of Southeast Asia in the medieval period continued to attract labour and craftsmen from India. Long before the Mediterranean trading routes were established in the early modern period, the Indian Ocean trading system facilitated the migration of Indians to the east coast of Africa, South-east Asia and the area that is now encompassed under the term Middle East. Diverse streams of the Indian population have fed into the Indian Diaspora in the 20th century: while a professional elite found its way to the United States, Australia and other nations of the ‘developed’ West, the labouring poor were recruited to build the shattered economies of Britain, Holland and Germany in the aftermath of World War II. Another strand of this working class has been providing for some years its muscle power and much more to the Sheikhdoms of the Middle East. If there is an Indian Diaspora, we must logically inquire what makes it ‘Indian’. What is common between Hong Kong South Asian Muslims, Indo–Trinidadians,

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Punjabi Americans, Canadian Sikhs (or Sikh Canadians), Hindi-speaking Mauritians, Tamilian Guadeloupeans and the twice or thrice migrants, such as Indians from East Africa who moved to Britain and from there making their way to Canada, Australia, or the US? This question can reasonably be asked for the myriad number of people residing in India itself, but the question of the ‘Indianness’ of Indians acquires a particular poignancy overseas, as Indians abroad are presumed to shed their regional, linguistic and ethnic identities in deference to the more general identity of being an Indian. It is arguable that one is more easily an Indian abroad than in India; the category of ‘Indian’ is not contested abroad as it is in India. This is perhaps all the more remarkable, when one considers that the ‘Indianness’ of the Indian Diaspora is not as evident or even visible, as the distinctly Chinese characteristics of the Chinese Diaspora or the Islamic features of the Arab Diaspora. Hindi does not bind together Diasporic Indians in the manner in which Chinese holds together the Chinese Diaspora; nor does Hinduism play in the Indian Diaspora a prominent role as compared to that of Islam within, if one could speak of such a thing, the Islamic Diaspora. Thus, in Mauritius, the national language remains a French Creole, though Hindi is the language of the preponderant portion of the numerically dominant Indian community. Nevertheless, if one unequivocally speaks of an Indian Diaspora, it is because other forces have emerged to cement the widely disparate elements from the Indian subcontinent into an ‘Indian’ community. One can point, for example, towards Indian cinema and food. Popular Hindi films provide a considerable element of commonalty to Indian communities, even among those where Hindi is not spoken. This fact pays a profound homage to the Hindi films’ rootedness in the deep mythic structures of Indian civilisation. Across the globe, popular Hindi films command an extraordinary allegiance from Indians. Finally, as far as food is concerned, one beholds with amazement how Mughlai food has become the cuisine of India, entirely synonymous with Indian food. The same surely cannot be said of the cuisines of Gujarat, Andhra and Kerala, or even of the popular snack food, iddlis and dosas of South India. In the Indian Diaspora, the plurality of India is condemned to disappear, even as the most esoteric traditions are given a fresh burst of life.

How Many of Us are Out There? Well, nobody really knows. There is a considerable statistical bewilderment about the exact number of Indians of all categories living overseas. The usual difficulties encountered in any attempt to estimate their total population are many. In some countries censuses are not taken regularly and the census figures are often ‘adjusted’. As such, collecting a reliable cross-national data regarding the overseas Indians is a difficult task. Further, in several countries Indians are too small in number to be considered for separate enumeration and in many others they are classified under a monolithic category and computed with one or more minority groups.


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Above all, there is a high risk involved in relying on the Indian government’s own estimates. All these difficulties suggest that almost all population estimates of the Indians overseas are unreliable. Notwithstanding the aforementioned, it may come as a surprise to some that People of Indian Origin are a majority in many countries and the single largest group in many others. Examples are: 1. 2. 3. 4. 5.

Mauritius (68 per cent). Guyana (51 per cent). Fiji (about 50 per cent—the single largest ethnic group). Surinam (37 per cent). Trinidad and Tobago is different from most other states—all its people form minorities. Indians are the second largest group (40 per cent). 6. Indians’ position is third or fourth in the population ranking: z z z

In Malaysia (9 per cent) Singapore (6.4 per cent) Sri Lanka (5.5 per cent)

7. We also form an important group in French Guyana (12 per cent). Any detailed discussion on the Indians in the countries mentioned above is outside the scope of this discussion. We are essentially looking at the Indians in Asia and the only countries which have a sizeable percentage of people of Indian origin are Malaysia and Singapore. Thailand has strong religious and cultural links with India which are generations old but unfortunately we have no presence there worth talking about. The Indians there are mostly what I have defined earlier as Non-Resident-Indians.

Indians in Malaysia Let us now go to Malaysia and meet her people. Then we will be able to better understand the plight of the Indians there. Cultures have been meeting and mixing in what was known as Malaya since the very beginning of its history. More than 1,500 years ago a Malay kingdom in Bujang Valley welcomed traders from China and India. With the arrival of gold and silk, Buddhism and Hinduism also came to Malaysia. Also, Arab traders arrived in Malacca and brought with them the principles and practices of Islam. By the time the Portuguese arrived in Malaysia, the empire that they encountered was more cosmopolitan than their own. Malaysia’s cultural mosaic is marked by many different cultures, but several, in particular, have had lasting influence on the country. Chief among these is the ancient Malay culture and those of Malaysia’s two most prominent trading partners throughout history—the Chinese and the Indians. The Malays are Malaysia’s largest ethnic group, accounting for over half the population and the national language. Before the Muslims came there were a number of

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indigenous tribes. Almost all of them have embraced Islam and merged with the immigrants. Now they form a group called ‘bumiputera,’ which translates in Hindi as ‘sons of the soil’. Now, they are all called Malays. All Malays are Muslims, though Islam here has a more moderate and progressive face—far less extreme than in the Middle East. Traditional Malay culture always centred around the kampung, or village, though the present government has policies in place to urbanise them and to bring them into the mainstream of national life. The Chinese traded with Malaysia for centuries, then settled in large numbers during the 19th century when word of riches in the Nanyang, or ‘South Seas’, spread across China. Though perhaps a stereotype, the Chinese have always been regarded as the foundation of Malaysia’s economy, having succeeded in most enterprises. When they first arrived, however, Chinese often worked the most gruelling jobs like tin mining and railway construction. Most Chinese retain strong ties to their ancestral homeland. Today, they form about 35 per cent of the population. Indians had been visiting Malaya for over 2,000 years, but did not settle en masse until the 19th century. Most came from South India, fleeing a poor economy. Arriving in Malaya, many worked as rubber tappers, while others worked on building the railway and the roads. Some who were a little educated worked as junior administrators and small businessmen. Today about 10 per cent of Malaysia is Indian. Our culture, intact with its exquisite Hindu temples, cuisine and colourful garments, is visible throughout the land. I can say without the risk of contradiction that one can get a better iddli dosa in the Chettiar restaurants in Kuala Lumpur than in Chennai. An example of Malaysia’s extraordinary cultural exchange is the Malay wedding ceremony, which incorporates elements of the Hindu traditions of southern India; the bride and groom dress in gorgeous brocades, sit in state, and feed each other yellow rice with hands painted with henna. Muslims have adapted the Chinese custom of giving little red packets of money at festivals to their own needs; the packets given on Muslim holidays are green and have Arab writing on them. You can go from a Malaysian kampung to a rubber plantation worked by Indians to Penang’s Chinese kongsi and feel you’ve travelled through three nations. But in cities like Kuala Lumpur, you’ll find everyone in a grand melange. Though Indians lived and still continue to live under conditions of appalling poverty in many places of the world where they were first taken as indentured labour, a number of remarkable transformations were effected in Malaysia over two or three generations. Through sheer perseverance, labour and thrift, and most significantly by a calculated withdrawal into their culture, in which they found forces of sustenance, some Indians successfully laboured to give their children and grandchildren better economic futures, and they in time came to capture a big chunk of the professional fields like medicine, law and accountancy. This was just as true in South Africa, Kenya and Uganda, as it was in Malaysia. Malaysian Indians have always kept a low profile in Malaysia. These migrant workers, majority of them Tamils from south India, have got used to being forgotten in official discourse, which focuses mainly on the two largest groups: the politically dominant ethnic Malays, who make up about half the population and the better organised and economically better off ethnic Chinese. Indian professionals do have a visible presence on the social circuit but nil impact on the corporate or political world. There is far too much divisiveness to make any sort of an impact.


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The larger Indian trading houses are confined to mostly the textile trade and these too have been losing ground to the better organised Chinese. Invariably, as the children get educated and get into their own professions, the family business which was organised as a one man show dies out. This dismal position is directly related to poor organisation of the Indian community. The Chinese and now the Malays have social leadership which is the foundation for keeping the communities together and to make them put up a solid united front. The Indians are grossly disunited and completely unorganised. Finally, the question should be legitimately asked: what is the future of the Indians in Malaysia? Factional struggle and disunity have been major setbacks for the Indian community. Since its inception in 1946, fight for power, petty politicking and mudslinging have been the major attributes of the Malaysian Indian Congress (MIC). The open and bitter rivalry between all the top leaders brings no laurels either to the MIC or to the Indian community. What is more, self-help measures initiated by the MIC to uplift the community, with lot of fanfare, have not led to any sort of results. The Indian community in Malaysia is at the crossroads today. If the present situation is allowed to drift, it will do serious damage to the future of the community. If the present hardships are to be overcome, the Indian community must sink its differences and work together. The smallness of the Indian community and its present vulnerable position makes such a team effort all the more imperative.

Indians in Thailand Though the Indian culture has been a part of the Thai landscape for centuries, one finds we are often misunderstood and sometimes disliked and resented. True, the official religion is Buddhism and the local script is based on Pali, the Sanskrit script and the former capital was Ayudhya and the present king is King Rama IV. Nevertheless, it does indicate how little Thais understand a group of people who have been living among them for years. The Thais are not to be blamed for this. It is the Indians who live in airtight compartments and do not make any efforts to be noticed. Like in Malaysia where there is a predominance of Tamils, the spectrum of Indian communities in Thailand is not too broad. They are mostly Punjabis (Sikhs, Hindus and Muslims,) who mostly run flourishing textile businesses. Many have branched into other business areas of manufacturing, real estate or fast food chains. Their offspring have entered other professions—medicine, finance and government service. The other large community is from Uttar Pradesh, and these people mostly work as watchmen at factories and warehouses, doing part-time trade as petty moneylenders. Going back into history, there are traces of Indian cultural influence which can be found in the Brahmin ceremonies, and there are records going back to about AD 1350 when King Uthong invited Brahmins from Varanasi to institute proper ceremonies, which are still performed today. History records that in the early centuries of the last millennium, trade and travel to Siam, as it was known then and to other areas in South-east Asia flourished with the seafarers from Cholla and Kalinga. There are records of elephants being exported from Siam to Hindustan, which in turn exported to Siam cloth, gold, silver and gemstones. Scholars, skilled craftsmen, monks and priests often accompanied traders, and it was through trade routes that religion,

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political systems, astrology and other Indian influences were brought to Thailand. Some Chinese annals indicate that the first Thai Kingdom, Nanchao, used an alphabet of Indian origin and identified itself with India rather than with China. The peculiar thing about the Thai language is that it is a tonal language like the Chinese, but is written in a script of Sanskrit or Pali origin. In the present times, like in nearby Malaysia, the Indians have been able to maintain their own cultural heritage. But that is not a plus point. It is a characteristic of the Indians in Thailand, like overseas Indians in many countries, that they keep to themselves and do not assimilate any other culture. I will talk about this in the next paragraph that by itself, this is not a bad thing. Many immigrant communities do this. But the real tragedy is that even among themselves, there is nothing but divisiveness and disunity. Take a small community like the Sikhs. There are three distinct sects which have their own places of worship and each remains in water tight compartments. Forget about intermixing with the other Indian people, they rarely have social or cultural exchanges with other Indians. The businesses owned by the Indians remain small and isolated.

Indians in Fiji Though Fiji is outside the geographical scope of this discussion, I feel it a good idea to have a quick look at our brothers in Fiji as this has relevance to the section where I will discuss the future of the Indian Diaspora. Fiji and neighbouring Tonga were first visited by a white man called A.J. Tasmaan in 1642. The British annexed the group of islands called Fiji in 1874 and the Imperial Government started to send Indians to Fiji as indentured labourers. The first Indian workers, mostly from Bihar and Uttar Pradesh arrived in Fiji in 1879. About 60,000 Indians came before the indenture system ended. The indentured term was for five years and labourers signed to work five and a half days a week, nine hours a day. Then if they remained 10 years in the colony, the government helped them to go back to their mother country. Most of the migrants, some of whom were married and brought their families were between the ages of 20 and 30. They were born into castes which knew the meaning of manual labour. They thought that Fiji was a promised land of opportunities where they could make their fortune, but life was hard. It was difficult to maintain any sort of privacy in the environment of the cramped coolie lines. There was illness, murder, suicide and overwork, but most of them chose to remain in Fiji. The colonial government encouraged them to stay and employers welcomed their labour. Fiji was a more comfortable country than their mother country, and having an income was also nice for them. Indians who settled in Fiji were rewarded with economic success. The population of Indians increased year by year until it outnumbered the indigenous Fijian population in the 1940s. However, in 1990s Fijians once again became the majority as Indians had started to emigrate to Australia and New Zealand. In Fiji, the unity between Indian families or relatives is very strong. It’s quite a natural thing because their ancestors came to Fiji from a far away homeland and had to struggle to make their lives better. So, if one in the family who had a job and earned money, he shared it with the rest. If there were two in the family who were


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earning, that family could live in ease and comfort. I need to make it clear that this unity is purely a protective mechanism and remains within the family: No two Indian families would see eye to eye on any issue. This is also one of the reasons why the youngsters in the better off families, often do not have jobs and do not feel keenly the necessity of working. They can live and eat comfortably. Of course many Fijian-Indians have important positions in the government, are doctors, teachers and in other professions, but the main activity is trading, which offers very little employment opportunities for their own people. About one-third of Indian houses I visited do not have electricity. These were houses along the highways, near the bigger towns, so I am sure the houses in the interior would be even less likely to have power. This is not a story about extremely poor families. It is about the ordinary families. However, it seems that they do not mind these inconveniences. Just as in India, there are several religions among Fijian-Indians and even for a small community, they strongly discriminate among themselves. The majority is Hindu and the next greatest number is Muslim. Then, there are few Sikhs, Christians and so on. As for Fijians, most are Christian. The rigid caste system of the Hindus has somewhat broken down among Fijian-Indians. Probably the cramped conditions on the ships which their ancestors came in, travelling for months, made it impossible to observe all the rules of caste especially those related to eating. In addition, it was very hard to keep the rigid system in their community life in Fiji. However, Hindus and Muslims go to different schools and keep apart. One thing a visitor notes in Fiji is that the Indians go out of their way showing their disunity and divisiveness to everybody. There are as many as 180 associations representing various communities and cliques and they are always at loggerheads.

Economic Clout The Status of the Indian Diaspora It is an understatement to say that all is not well with the Indian diaspora. The journey of Indians all over the world is though one of the great sagas of our time, it is replete with misadventures—starting from Burma in 1948, to Idi Amin’s vicious expulsion of the Ugandan Asians, the tensions between the black and Indian populations of Trinidad and South Africa, ‘Paki-bashing’ in Britain, the tough treatment of Indian workers in Gulf states, and now Fiji. Of course these hard-working migrants and their descendants have a single-minded dedication to bettering their families’ lot. But because they are harder working, their success is resented by others. Somehow this admirable trait comes across as reprehensible. I have talked about this at some length while discussing some of the Asian countries and Fiji. It is true in most other developing countries. The resident Indian population has acquired something of a reputation for exploiting the indigenous people, for having cornered trade and business and for being possessed of a greedy disposition. True, wherever the Indians were able to establish themselves, they became indispensable

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principal arteries of trade as shopkeepers to the nation, but they exposed themselves to the charge that they did so with the intention of enhancing their own interests and prosperity. These charges could scarcely justify the cruel and brutal treatment meted out to the Indians first in Burma, and then in such places as Uganda, from where Idi Amin effected their wholesale and immediate removal, or Kenya, from where their eviction was only slightly less callous. In Uganda, where Indians had first been brought by the British to labour on railway lines, the charge that Indians were taking away from the black men their livelihood and not contributing to the national coffers either was writ large on the political agenda of black nationalists. Indians were sacrificed, in both countries, to black nationalist politics. Migrants do not remain visitors forever. In the end, their new land owns them as once their old land did, and they have a right to own it too.

India and Overseas Indians What I have said here is nothing recent. The position of Indians overseas has always been precarious. This problem was underlined soon after Burma attained its independence in 1948. Indians were prominent property owners and significant in business and trading circles; their property was appropriated by the state, their possessions confiscated and many Indians were exiled. When the Indian community appealed to Nehru for assistance, he took the stand that this was a matter between them and the Burmese state and that India was unable to intervene in the internal affairs of a foreign state; moreover, Indians who had been settled overseas were to reconcile themselves to the fact that having abjured Indian citizenship, they had no substantial claims on India. This has, in effect, been the position of successive Indian governments to this day. Though India certainly is a reasonably major player on the world scene, there is no gainsaying that the Indian government might not attempt to use its influence to protect the lives and interests of those who, though they may not be Indian citizens, are Indians in ancestry. However tempting it might be for the Indian government to intervene to protect the interests of diasporic Indians who are foreign nationals, the brute fact remains that India can do little more than indicate its displeasure with the allegedly offending party. I will seek to establish below that even this ‘indication of displeasure’ itself considerably damages the status of the Indians left behind in those nations. I repeat that diasporic Indians cannot and, more important, should not look to the Indian government for even reasonable succour and assistance: Whatever the strength of the emotional and cultural ties between them and the ‘motherland’, their centre of being lies elsewhere. The question of what India can do for people of Indian ancestry abroad, need never be asked. It is a different matter when Indians have gone as labourers on short-term work permits. These people are Indian citizens. This is the case with, for example Indian migration to the Middle East. The Indian government is duty bound to lodge, whenever necessary, protests over their ill-treatment, or to otherwise act to protect their lives


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and property. In the days subsequent to Kuwait’s invasion of Iraq in 1990 and before the beginning of the war between Iraq and the US in 1991, the Indian government took upon itself the mammoth task of evacuating the greater part of the Middle East’s Indian population. It did so at the request of a panic-stricken people who could claim their Indian citizenship as a passport to safety. That most of these Indians have returned to the Gulf is another story.

Asking NRIs to Help Hardly a day goes by without some politician or the other ‘going overseas to invite the NRIs’. For overseas, read mostly USA. Of course, we know what overseas trips by our politicians mean, but the declared reason is that the overseas Chinese are helping build China, so why cannot the NRIs do the same for India? I seek to establish that the contribution the overseas Chinese, that is the Chinese living in Taiwan, Singapore, Malaysia and of course, USA have made towards massive growth of the Chinese economy is in stark contrast to what the overseas Indians can do for India. The overseas Chinese have economic clout in many countries and they go to China to get goods produced for their own captive markets. Indians have neither captive markets anywhere nor can they get anything specially made in India for themselves. Indeed, it will take a full discussion to establish that far from being of any help, the overseas Indians have, albeit unwittingly, become a barrier to our exports. As I said above, our Eximbank publishes a long blacklist warning us against dealing with many importers in other countries. These are mostly overseas Indians.

Overseas Chinese and the Overseas Indians Let us Look at the Overseas Chinese In this section, I will discuss the economic performance of the overseas Chinese only in the context of comparing them with the overseas Indians. A full discussion on the mindsets of the overseas Chinese follows in chapter 15. We have had a good look at who the overseas Indians are, and how they are participating in the economy of the mother country. Well, now we contrast this with what the overseas Chinese are and what they are doing in China. All my life, I have lived and worked with Indians in many countries. Based on my own experience in employing overseas Indians and in dealing with them, I will say two things: One, we are known all over the world for our outstanding brilliance and two, for our appalling internal rifts and divisiveness. Others, particularly the Chinese, who are not so clever but always work together as a cohesive body are defeating us almost everywhere.

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Let me explain. Everyone talks of the remarkable success of our people in the Silicon Valley. I have discussed this in some detail in chapter 3. Here is a tragedy. True, the people who are making the most outstanding contribution to the Silicon Valley are the Indians, but the people who are getting the maximum benefit of it are the Chinese. You will read that there are far more Chinese owned and managed firms there than Indian ones. The former are better managed and are far more profitable. Again, I think the reason is mainly that Chinese work well with each other and no Indian, given a choice, would like to work for another Indian. Before going into this, I would like to mention that economic reforms started in China about 20 years ago. Since then, the country has received enormous amounts of foreign investment. About three-fourths of this is estimated to have come from the overseas Chinese, a vast prosperous community numbering about 55 million. The overseas Chinese presence is in all over the South-east and East Asia—Taiwan, Hong Kong, Indo-China, Thailand, Singapore, Malaysia, Indonesia and of course, the US and Canada. Estimates say about two-thirds of Chinese mainland exports are from the investments made by the overseas Chinese to markets controlled by themselves. These investments are everywhere: manufacturing, service and infrastructure projects. These projects are making a direct contribution to the growth of employment in mainland China. If one goes by the massive amount of money going into China, clearly, the overseas Chinese are richer and have greater investible surplus than the overseas Indian. This is true, because the Chinese have a massive economic clout in most of the countries I named above and control large chunks of the Asian economy. Contrast this with the total picture of Indians living overseas and not only with the IT professionals in USA. We are, largely speaking, either in retail trade or salaried employees or professionals. There is no economic clout anywhere and no real possibility of promoting any manufacturing, service or infrastructure project in India. I also seek to establish that the emotional ties of the non-resident Chinese to the mother country are far more enduring, durable and deep than they are for the overseas Indian.

Can the Indians do this for India? I do not have an answer to this. We are a nation of intensely individualistic people where everyone is for himself and we tend not to build large and strong commercial organisations. Do not get me wrong. The Chinese are individualistic too and the only concern a Chinaman has is for himself, his family and his company—in that order. z

Whatever a Chinese businessman does in China is not for love of his motherland. If tomorrow, say, Vietnam becomes more attractive to do business in, the Chinese will shift there in a moment.

But in the case of Indian businessmen, everyone has to be the boss. Be it in India, Kenya, UK or USA, an Indian organisation is allowed to grow only to the extent that the owner can personally control it. If he does not have children or they are not interested


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in the business, the business dies out with the old man. I have seen countless cases of this in India and in Indian owned businesses in many countries. The business remains small. The result is that the small Indian businesses offer very little scope for employment of professionals. The educated children of the Indian businessmen in all countries which have a sizeable population of Indians, in countries like Malaysia, Singapore, Kenya and South Africa, and so on look for employment to people of other races. So there is no question of our disorganised overseas Indians coming to India and promoting large manufacturing, service, tourism or infrastructure projects. The exception is, of course, the recent phenomena of the IT projects. All that they can do is bring in short-term money. In the modern globalised scenario, no big project can be promoted in India without a captive tie-up with an established world class entity.

The Future of Overseas Indians Isolation of Immigrant Communities The citizenship laws of many nations are designed to help in the quick merging and intermixing of immigrant people once they take local citizenship. As an example, it is a little known fact that the citizenship laws of Thailand and Indonesia insist on deleting your original identity when you become a citizen. If my son gets American citizenship, his name, religion and beliefs remain exactly the same. Not so in these two nations. In Thailand one has to accept the nation’s official religion, Buddhism, while retaining one’s own beliefs and traditions. Also, one’s name changes. Every one becoming a Thai citizen has to take a Thai name making it impossible to identify a person’s original race or religion by name. Another factor is that everybody speaks the same language. There are different dialects, but script and the language is same. I have been to my Indian friend’s homes where I could not talk to the children. They only spoke Thai. One thing I have noticed here though is that the Chinese children fluently speak their mother tongue too, but the Indians abandon theirs. The same is the case in Indonesia but here only the name changes to a first name only, the religion and beliefs remaining untouched. In Indonesia people of all races and origins are known by their first names only—Suharto, Sukarno, Hartono and so on. In modern times, people have added a surname or an additional first name for convenience. Here too everybody speaks the same language. And again, the Chinese children fluently speak their mother tongue, and the Indians have abandoned theirs. The result is that there is an automatic intermixing of all races and creeds in Thailand and Indonesia. It is almost impossible for an outsider to know if a person is Chinese, Indian or native born. True, the differences are there, but the intermingling is considerably greater. Since the children grow up in a homogeneous society, freely mixing with other children, they acquire common food and cultural habits and attitudes.

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This is in sharp contrast to next door Malaysia and Singapore where the Indians, the Chinese and the Malays have distinctly different identities, different lifestyles and they speak their own languages. As far as the Asian Indians are concerned, only the Muslims and the Christians have intermingled to such an extent that they are almost unidentifiable.

An Outsider is an Outsider, Always One point to be taken note of is that all immigrant communities all over the world tend to isolate themselves. Every social scientist has a different theory of why this is so, but it seems to be some sort of a defensive mechanism. A new family migrating anywhere prefers to look for accommodation within their own community or nearby. This is true within India too. The Marwaris in Bengal and the Punjabis in Tamil Nadu have very little social or cultural contact with the locals even when they are born there and speak the local language fluently. The fault lies as much with the locals as with the outsiders. It is how the locals treat the ‘outsiders’. A Bihari family living in Bengal for generations, speaking the local language never becomes ‘one of us’. There are many Punjabis and Marwaris living in Tamil Nadu, or Bengal, or Assam for generations and it is the same case: An outsider is an outsider always, everywhere. Nevertheless, the fact of Indians keeping to themselves and not intermingling with the locals is nothing as compared to the substantial population of people of Japanese origin living in Peru, South America. They send their children to their own schools, shop at their own supermarkets and one would rarely find ‘outsiders’ at their weddings or social functions. The same goes for the sizeable population of Koreans living in places like Los Angeles. However, one community which takes the top slot in keeping strictly to themselves all over the world are the Jews. They do not intermingle with anybody, anywhere and do not welcome any sort of a contact with outsiders. It is a known fact in most American cities that if a crime is committed inside a Jewish community, the local police find it very difficult to investigate it. It is to be noted that there is very little one can read about the social, cultural or family problems of the Jews. Even the details of their rituals and lifestyle are not known to the world at large and are not matters for public discussion. It is to the credit of the Jewish journalists who are careful not to write too much about their people in the press. It is unlike the case of India, where anything that degrades India in the eyes of the world is invariably written by an Indian journalist.

The Future of Indian Diaspora So where do we go from here? The future of the Indian Diaspora revolves upon many modalities of thought and action. I have a few points to highlight. 1. Respect your Ancestry


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Nobody will respect you if you do not respect yourself. President Kennedy was an American but was also intensely proud of his Irish blood and ancestry. Other Americans noticed this, appreciated it and respected him for it. I have lived and worked with overseas Indians in many nations and know them well. I have never heard any of our brothers speak with pride of his Indian blood or ancestry. Rather, running down India and anything Indian, mainly in front of people of other races, gives them enormous delight. Everybody gives wide publicity to the horror stories of their last visit to India. Indeed, this does not bring us respect. I have noticed that people of other races are very careful while talking about themselves in front of others. 2. Respect and Honour your Citizenship Here is a paradox. On the one hand we have a tendency to run down India and everything Indian. On the other, without exception, the overseas Indians who have long ago abjured their Indian citizenship are very loud in proclaiming that they hope to go back home one day. This doubly ruins their prospects in their host nations. Sure, the native citizens of those nations are not happy with this open display of crass disloyalty and we see the results every day. I will illustrate this with an example from our own nation. There was a sizeable Chinese population in Calcutta till mid-1960s. They were by and large peace loving people, minding their own business, and were of no problem to anybody. While they were Indian citizens, they lived in airtight communities and made no secret of their dreams of one day going back home to China. They made absolutely no effort to enter the mainstream of Indian life and made it clear that they were Indian in passport only. Well, I was living in Calcutta at the time and had Chinese carpenters working for me and was very happy with them. During the Indo-Chinese war of 1962, I developed an instant dislike for them though these people had absolutely nothing to do with the war. All of us suddenly did not want them and made things very difficult for them. They had to leave India. They were not accepted back by China so they went initially to Bangladesh and thence to Thailand, and so on. The same is the case with our brothers overseas. The recent crisis in Fiji made it abundantly clear yet again that very few Fijian-Indians consider Fiji as their motherland. This was the root cause of the problem in the first place. For them their motherland is still India, the country their ancestors left a couple of 100 years ago, a country they have never even visited. When reporters of the website http://www.indiainfo.com visited the chat room at www.fiji-online.com, they found the room crowded with Indians who had left Fiji and who found yet another reason for screaming abuses at India: this time, for not coming to their rescue. They were holding on to a dream that India is theirs, they are Indians first. They suddenly realised that this dream was false. This is the sad story of all overseas Indians. People who are Indians only in ancestry and are citizens of another nation, asking India for help is highly damaging to their own stay in those nations. Further, it is a tragedy that the people who have run away are the loudest in running down both India and the nation they ran away from, leaving the people who were left behind to face the nasty music.

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3. Help the Mother Nation I have lived and worked with the overseas Chinese in many Asian nations. These people earn solid respect when others see them making enormous contributions to the economic development of mainland China, but they do not consider China their home. I have personal experience of the Chinese Malay racial riots in Malaysia in 1969 and again the recent riots against the Chinese in Indonesia. No Chinese expected mainland China to come to their assistance, even on a diplomatic level. By contrast, for the Indians, it is a purely one-sided story. Nobody dare ask our overseas brothers what they are doing for their so-called motherland. As I said earlier, the overseas Indians are not making any contribution to the economic development of India. True, this is because they are traders and professionals who have no economic clout anywhere and just cannot participate in India’s economic development. I have already established that they cannot even help in India’s export. True, they make cash remittances. There is a difference between sending money home and making cash deposits. The real remittances come from our own people working overseas on short contracts. Overseas Indians make deposits and these are on the basis of the best rate of return. I know Indians who would as readily deposit their money in Pakistan for better returns. Yet, as I mentioned, they are extremely bitter when India does not come to their aid. 4. Learn from others All over the world we have immigrant communities. Let us look at some of these people and try to see how they managed to do well wherever they went. (a) The British: Let’s look at how and why the British people came to India and subsequently took over the whole world. I will seek to establish that the strong and well-established corporate organisational infrastructure they had at home was the foundation on which the British Empire grew. True, the British people came and conquered India mainly because of our own weaknesses and faults. That is not the aspect I am talking about. If one looks at the British conquest from a British point of view and a purely managerial and organisational point of view, one is amazed at the amount of infrastructure and commercial organisation the British had even in the 17th century. They had to have a solid base back home to have successfully established such a large trading empire in India. They could not have set up their trading and subsequently the political empire if they did not have a well-established banking and financial system, a legal system, postal services, company laws and regulations, and some large, efficiently managed private companies in every field of enterprise. Remember, this is the early 17th century we are talking about. A very important point to note is that each and every Englishman who came here did not come as an individual. He came in as a team member, an integral part of the British Empire. And everything the British did in India was to the benefit of England as a nation and not for any individual. The individuals who came here were not particularly clever, rather the reverse,


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but they had the skill of setting us Indians against each other and making us work for them. It is indeed, a credit to their style of management that the Indians who fought for them were better soldiers than those who fought for the local princes. They ended up having the whole world working for them to the benefit of England. There was mind-boggling rise in the standard of living of the common people of Britain. There was never an armed invasion by the British. Like the Indians in many countries, they also came here only as traders. Not a single armed battalion was sent from England. Not a single navy vessel. Their success is entirely due to the massive amount of organisational back-up back home and to the economic, and political institutions they built wherever they went. Can we do this? (b) The Japanese in Peru: In Fiji there was a Prime Minister who was not a native. He was thrown out only because he was Indian. In Peru, there was a Prime Minister who was also not a native. But he was respected only because he was Japanese. I would like to repeat two points I mentioned above which are strong negative points for Indians, yet the same points become strong positive points for the Japanese in Peru. The first I have already mentioned: ‘The Indians keeping to themselves and not intermingling with the locals is nothing as compared to the substantial population of people of Japanese origin living in Peru, South America. They send their children to their own schools, shop at their own supermarkets and one would rarely find “outsiders” at their weddings or social functions’. The second: ‘ The resident Indian population has acquired something of a reputation for exploiting the indigenous people, for having cornered the trade and business and for being possessed of a greedy disposition. True, wherever the Indians were able to establish themselves, they became indispensable as the principal arteries of trade, as shopkeepers to the nation, but they opened themselves to the charge that they had done so with no other thought than of enhancing their own interests and prosperity’. This is exactly the situation of the Japanese in Peru, but they are respected for it! For a simple reason: Overseas Indians run small enterprises and are such poor employers that even their own children have to look up to others for jobs. By contrast, the Japanese have built strong commercial and economic institutions in Peru and are the largest employers in the nation. Everybody who has a good job is sure to be working for the Japanese. In the world over the locals want Indians to leave. In Peru, the locals want the Japanese to stay! Can we do this? (c) The Chinese in Asia: I have lived and worked with the Chinese for many years and I am impressed with the immense unity they show when faced with a problem. I remember, many years ago in Malaysia, a large MNC in the tobacco business raised the prices of premium brands of cigarettes just before the Chinese New Year. The Chinese took this as an insult, because

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they have a strong tradition of offering cigarettes to visitors during the New Year celebrations. The visitor politely takes it and pockets it, and maybe throws it away later. Though the executives who decided to raise the prices were Chinese and they explained that the timing was a mere coincidence, the Chinese people in Malaysia and the neighbouring countries boycotted all the products of the MNC. There were no protests, demonstrations, bus burnings and so on. I read nothing in the local press, but the boycott was complete and devastating. The MNC took many years to recover its business. Can we do this? It is for Indians in the diaspora to forge links between themselves, to enter into coalitions with other minorities and marginalised people, and more significantly, to formulate for themselves a moral, sensitive and democratic politics. Diasporic Indians must attempt a reconciliation with other communities in the nations they live in. Only then, can India benefit from their resources and skills.

Preamble

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15 Understanding the Overseas Chinese

A word of explanation before I go further: Why ‘overseas Chinese’ and not simply ‘Chinese’? Also, why should we bother about the Chinese, overseas or otherwise, in a book on Entrepreneurial skills? Well, the first point: I have made the distinction earlier that there is nothing we have to learn from China, but a lot to learn from the Chinese. The distinction may not always be clear. So I need to add that it is not China as a nation, nor the Chinese in China, but the overseas Chinese that are the driving force behind such incredible advances Chinese economy has made. I will come to this point later on in this chapter. I do not have to comment on the second question of why we should concern ourselves with the overseas Chinese, because I have discussed this repeatedly in the earlier chapters. I will again seek to establish that in all fields, all over the world, the overseas Chinese have done far better than our people. In many nations, the Chinese immigrants are commanding a powerful position in the local economy while the local Indian immigrants have made themselves irrelevant. I will be talking how, in particular, about the Chinese in two nations, Thailand and Indonesia because they are there in small numbers and they not only wield immense economic power, way out of proportion to their numbers, but also have remarkably integrated into the indigenous population. z

I have said it repeatedly that if we have to compete and win, we need a deep insight into their mindsets, about how they live and conduct business, and their attitude to earning their livelihood. It is only then that our youth can prepare itself before venturing out in the wide world.

I have discussed the overseas Indians in chapter 14 and in this chapter I am going to take a hard look at what makes the Chinese tick and contrast it with how our people behave under similar circumstances.

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Definitions Ethnic Chinese There are many nations like Cambodia, Vietnam, Malaysia, Indonesia, Brunei, Thailand, Peru, Brazil, South Africa, Myanmar, Singapore and Philippines where the people of Chinese descent are in a minority, are citizens and have full voting rights. For the purpose of discussion I will use the term ‘ethnic Chinese’ for these people. In addition, there are many Asian nations like Singapore, Taiwan, Macau and the former British colony of Hong Kong, which are actually called Chinese nations. For the purpose of my discussions here, I will lump together all the people of Chinese descent living in all these countries are under ‘overseas Chinese’. This, I repeat, is only for convenience.

Ethnic Indians Similarly, I will use the term ethnic Indians to refer to people of Indian origin who are citizens of, or, permanent residents of Malaysia, Singapore, Kenya and South Africa. I have already explained in chapter 14 that the term NRI refers to a completely different category of Indians, and is not relevant to the discussion here. The idea is to compare the behaviour of people when living ‘away from home’. The context is a continuation of what we discussed in chapter 14, that the ethnic Chinese are responsible for the massive export growth of mainland China but the ethnic Indians have been able to do no such thing for India. Indeed, the Chinese are now making successful inroads into the domestic markets of India too. z

Another strong reason for writing this is to explain why our visitors often get cold responses from the Chinese in South-east Asia when seeking appointments.

The Chinese Diaspora Many countries produced travellers, but generally in a limited range of modes—the Romans conquered, the Venetians traded and conquered, the British conquered and traded, the Spanish and the Portuguese only conquered but hardly traded. Annexing a new territory to the parent body is what is known as colonisation. The Chinese have also planted such colonies. South China was not a part of China. It was only when huge masses of the people had to flee the foreign invaders that what is now known as ‘the new territories’ became a part of China. I have discussed in chapter 14 that the word Diaspora conventionally applies to the Jews because they were expelled from their own country by a foreign power.

Understanding the Overseas Chinese

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The similarities with the Chinese end there. The Jews settled overseas and stayed there. They were however, not so starkly driven overseas as were the Chinese and yet the vast majority of them stayed put in their own sovereign country. Before, during and after the days of the British conquest, Indians also left and took abode in many lands in fairly large numbers, but were happy to become second-class citizens and made no conquests. (See chapter 14 for a detailed discussion on this.) Every historian has a different view on why this was so, but the fact remains that this was indeed so. The precursor wave of the Chinese going overseas started during the late Ming dynasty, in the form of Ming loyalists who settled in what are now called Indo-China and Taiwan. This should not be taken to mean that everyone who ventured across the waves was running away from the invaders. A fair few went because they managed to see the opportunities abroad. Quite a few managed to get a strong foothold, in South-east Asia to begin with and further afield later on. As is usual among Asians, they encouraged family and neighbours to shift and eventually built up the classic system whereby a family would have two homes, one in its adopted country and another in China. Younger brothers and cousins would be sent for to help set up and run the family business; successful merchants would travel home to marry, show off outrageously and bring with them a bride; subsequent sons would be sent ‘home’ for ‘proper’ education; all aspired eventually to be buried with their ancestors. Today, the young and dynamic nation called Singapore owes much of its basic ideology to Chinese traditions, with the population being over 70 per cent ethnic Chinese. Confucianism is taught in schools.

Chinese Business Culture Let’s look at some aspects of the Chinese business culture as a contrast to the Western (American) and the Indian business culture discussed earlier, and explore how the former is manifesting itself in entrepreneurship and in the management of businesses by the ethnic Chinese. Remember, my discussion is limited to business aspects only and my intention is not, of course, to discriminate against or to belittle any other aspect of Indian culture. In other aspects of culture, we are closer to the Chinese than to the Westerners. It is an interesting fact that the Chinese business organisation has so strongly retained its original basic character in spite of open economics in nations where the overseas Chinese are in place, and in spite of potential influences by MNCs and trans-global connections. To be the boss, autonomy is a dominant driving force in Chinese entrepreneurship. But this driving force seems to be more vigorous and widespread in, say, Hong Kong than in Singapore. The former is fostering what may be called entrepreneurial capitalism while the latter is championing managerial capitalism.

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Guanxi This is a nice sounding Mandarin word which is pronounced exactly as it is written. It reminds me of the sound of a large gong in a temple. Guanxi describes the basic dynamic in personalised networks of influence. It is very difficult to translate it and can roughly mean ‘relationships’, ‘common bonds’, or ‘connections’. None of these are adequate as they do not sufficiently reflect the wide cultural implications that Guanxi describes. I have already given some very interesting examples of Guanxi-in-action in chapter 10. It will be a good idea to take a quick look at these. Guanxi is a central concept in Chinese society and describes, in part, a personal connection between two people in which one is able to prevail upon another to perform a favour or service, or be prevailed upon. The two people need not be of equal social status. It could also be a network of contacts, which an individual can call upon when something needs to be done, and through which he or she can exert influence on behalf of another. It can also describe a state of general understanding between two people: ‘He/she is aware of my wants/needs and will take them into account when deciding his/her course of future actions which could concern me’. I would roughly call it a human version of the Internet, because the Chinese business environment can be best described as a series of interlocked networks. This is a key element of Chinese business. The distinctive feature of the overseas Chinese model has never been the individual firm, but a network of them. This is Guanxi. It is a very complex concept and I would suggest that you read more about this on the Internet. Hundreds of books and papers have been written on it, but it takes a lifetime for a non-Chinese to master the concept. True, everywhere in the business world you need contacts, but if you magnify their importance many times, you understand Guanxi. Every Chinese society in Asia is built around relationships, around a unique sense of trust. In the West, there is business first, then sometimes comes the trust and the networking; in Asia, there is networking first, then starts the business. ‘I will start dealing with you only after you become my friend’. An important aspect of this networking is the mentality or the attitude of the people involved. All the parties need the patience, the motivation, the training and tools in conflict resolution. How do we agree to disagree? How do we agree to solve our problems together? For example, do we agree to trust each other’s intentions regarding the unwritten partnership regardless of the depth of the disagreement? Guanxi has to be in your blood or it will not work. Guanxi is based on mutual obligations. In an extended family, members are in a mutual obligation to help one another. For instance, a wealthy member helps a poor one. Also, in business organisations, it is common for members of a family to use their family connections to try to obtain jobs or other benefits. The overseas Chinese found that dialect, kinship or common origin in a clan or a village gave a more sure footing of trust to a business deal conducted even at a great distance. In fact, the overseas Chinese power rests on a kind of an underground network. Regional identity is important to a Chinese everywhere in the world. Same-native-place ties can play a crucial role.


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Please understand that there is a vast difference between networking and teamwork. Teamwork simply means a group of people working together as one body. A sports team, a debating team or a sales team works together on a special task. All people working as one and under one leader. There is nothing like this in networking. In the concept that I am explaining here, generally there is no leader. As I said, it is almost like the Internet where there is no central computer. There appears to be a contradiction here. I said the typical Chinese firm is run and controlled by one autocratic boss at the top. So why did I say that there is no leader? Both are true. All over Asia, we see how small, intensely independent, family owned firms work with each other. Independent family owned firms specialising in different fields of design, manufacturing, marketing and finance build instant networks whenever an opportunity arises to produce products that nobody can compete with. This is typical of all overseas Chinese. z

An important aspect of the failure of Indian firms is that the Indian firms are all small, independent units, each working on its own and happy to remain small and isolated. To us, if growth requires giving up or sharing absolute control we rather not have it. Though the Chinese businesses also stay singularly apart, when an opportunity presents itself, they close ranks and co-operate.

Familism Family is not only the bedrock of Chinese society; but also that of the Chinese business. A Chinese firm is almost always a family firm. Chinese tradition puts the rights of the group ahead of those of any individual. In Asian cultures, individuals have a very deep attachment and sense of belonging to ethnic groups, and Chinese like the Japanese, and very unlike the Indians, score very low in individualism. One reason why the Chinese family system is so important is that it provides security in an insecure world. For the Chinese who left their homeland (often forced out) and tried to settle abroad, environments were not always easy. If we exclude Hong Kong, Macau and Taiwan, where the people are not strictly overseas Chinese, society was often outright hostile. As a consequence, strong family self-interest is rampant in many of these societies. Perhaps not surprisingly, in Singapore, there are strong declarations by the government supporting social responsibility of the businessman towards family, and so on. z

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Peter Drucker said that ‘the secret of modern Japan consists in Japan’s ability to make a family out of a modern corporation’. The secret of Chinese management may well consist in the ability of the Chinese to make the family into a modern corporation. Comparing Japanese and Chinese managements, I can also say that Japanese style of management may be described as ‘head office oriented’, while Chinese style management may be characterised as ‘grandpa oriented’.

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It should be noted that a ‘family’ may here include the people from the same ethnic background and even birthplace. Kinship terms (like ‘uncle’ and ‘aunt’) are widely but loosely used in social interaction, even if not genealogically related. Overseas Chinese have built up their strength, among other factors, on an unusual ethnic solidarity. We may even call it clannishness.

How about European Family Businesses? ‘Family run businesses’ is of course not the monopoly of the Chinese. There are many studies which show that family businesses dominate in the economies of many countries. Jonathan Boswell in his excellently researched book The Rise and Decline of Small Firms, 1973 (You can read it on the Internet), said that the boards of nearly two out of three medium sized British manufacturing enterprises (25–500 employees) were family dominated. He also estimated that 80 to 90 per cent of all Dutch businesses are family owned. Comparable findings have reported that ‘family farm products accounted for two-thirds of the value of farm products sold in the US’. There are similar studies for rural agricultural and industrial enterprises in India. However, the ‘family’ in a Chinese ‘family firm’ is something deeper than in most other cases. There is, for instance, a much stricter borderline between family and non-family (or non-ethnic) members both in attitude and behaviour. Also, growth in Chinese business is commonly done not by expanding the same firm too far (and possibly losing the family control), but by mushrooming another family unit, run by a relative. For the new Chinese family member, starting a business is relatively easy. First, the former employer gives his or her blessing for the new venture, and indeed often encourages and assists the employee financially to become established. Second, businesspeople from within the ethnic network provide facilities and credit. In cultural terms, this opens doors which are locked for others. This sense of family loyalty and mutual responsibility is reflected in the fact that most shares of large Chinese Indonesian companies are owned only by the families of Chinese Indonesian business magnates. z

I would contrast this with the overseas Indian families where business invariably splits and is often destroyed when the old man dies and the children fight to split the estate. The Indian owned businesses in South-east Asia are characterised by infighting and bickering. Not only businesses, but also the Indian political parties in these countries have been split many times.

Hong Kong Chinese Success Story For the success of the overseas Chinese, one needs to start with the story of Hong Kong. It was manufacturing that made built Hong Kong’s fortune. When more than


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one million refugees from the Communists’ victory in China’s civil war flooded over the border in 1949, the British colonial authorities had to do something to keep them alive and to keep Hong Kong afloat. Cheap land for building factories, and public housing, were the answer. Helped by the networking talents of entrepreneurs who had fled from the mainland, the rescue operation worked. By the early 1950s, Hong Kong was supplying the world with T-shirts, plastic flowers and flip-flop sandals. The big industry was textiles, but handbags, toys, watches and shoes also poured out of tiny sweatshops for export to America and Europe. Then the Chinese government took a historic decision which changed the fortunes of the entire overseas Chinese community. In 1978, China opened up some of its coastal regions, including the area on Hong Kong’s border, to foreign investors. Suddenly, Hong Kong’s Chinese businessmen had a new supply of cheap labour and new land for building factories. Most of the light manufacturing that used to take place in Hong Kong crossed the border into China. Today, over 5 million mainland Chinese are employed in factories owned by Hong Kong businesses. Much of the businesses which began in Hong Kong and then moved over the border into mainland China now have to think of migrating even farther afield. The continuing search for cheaper labour is not the only reason for this Diaspora. There are some disadvantages in selling things made in China through Hong Kong. Anybody exporting anything from China has to live with the risk that one day Congress in Washington will take away China’s most-favoured-nation trade status, which allows easy access to the huge American market. So some manufacturers have started to move on from China and put at least some of their production into countries where they can hope to disguise its Chinese origins.

Comparing Indians and Chinese in Indonesia and Thailand I would particularly like to talk about the Chinese in Indonesia and Thailand where they are in small numbers but wield immense economic power which is out of proportion to their numbers. Ethnic Chinese constitute a small proportion of the Indonesian population, numbering no more than 5 million, or about 3 per cent of the population. This figure includes Indonesia-born Chinese, and those Indonesians who were actually born in China. The ethnic Chinese in Thailand are about 18 per cent of the population. Ethnic Chinese in Indonesia, as also in Thailand, have demonstrated a remarkable talent for integrating into the broader community. This is very unlike the ethnic Indians in all areas of South-east Asia. Indians live in tight close-knit communities and do not mix socially with the other races. I need to add that the Indians of different language groups do not even try to live near each other and mix socially only with each other. It is true that at different times various administrations and governments have encouraged the Chinese community to intermix with the other races, to the extent that ethnic Chinese in Indonesia and Thailand have local names, speak only local languages and send their children to same schools. For a number of reasons, many ordinary

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Chinese in these nations have had little or no contact with mainland China, with an estimated 90 per cent of all ethnic Chinese born in the nations where they live. This group is not then simply Chinese living in, say, Indonesia, but rather Indonesians of Chinese ethnicity. As I said above, historically, the people of mainland China have been very successful in trade. Unlike other Asian trading people such as Indians and Arabs, the Chinese have dominated commerce in Asia because they have a knack of building extensive international trading networks. Whether it is because of social, cultural, demographic or political reasons, the Chinese are famous for their mercantile acumen and economic power. They have in fact dominated business across South-east Asia for centuries. The Chinese in Indonesia are a small minority but a very well-established minority. Small communities existed throughout the Indonesian archipelago long before Dutch colonisation. They learned to appreciate the fundamentals of commerce and trade, and how to avoid making mistakes committed by others.

Characteristics of Ethnic Chinese Most ethnic Chinese in Indonesia and Thailand live in urban areas and are involved in what can only be loosely called ‘business.’ This is not to say that all are entrepreneurs. Indeed, one finds ethnic Chinese, in all walks of life, as wage earners, professionals, civil servants, army officers and so on. Nevertheless, it is important to realise that although this group makes up no more than 3 per cent of the total population in countries like Indonesia, they control approximately 80 per cent of all private business. Their activities encompass almost every sector of the Indonesian economy. Wealthy Chinese Indonesian capitalists have for many years enjoyed the enthusiastic patronage of Indonesia’s most powerful men and women. This is in contrast to the Indians in countries like Malaysia and Singapore where they are about 12 per cent of the population but have no tangible control over anything. Even in countries like Fiji, where Indians are about 45 per cent and completely run the economy, they have no tangible control over anything. The size of a particular Chinese business can vary as much as the goods and services in which it trades. Individual concerns range from small family firms to the corporate empires. For anybody intending to conduct business anywhere in the Asia Pacific, it is difficult to avoid this highly successful group. This is the reason I am encouraging our people to take a hard look at them and appreciate their distinctive business culture. This can be an enormous advantage to those wanting to export to these nations. For the Chinese everywhere, networking builds trust: Guanxi, as explained above. This is a fundamental principle of conducting business with the ethnic Chinese community. A trustworthy associate will find it easy to obtain concessions. Moreover, the advantage of gaining trust of a partner or associate is that often investment capital can be raised very easily and repaid after the enterprise is established. I have already explained the networking concept of the Chinese above. I have seen that this is very much more so in Indonesia and in Thailand. A network is often the


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spontaneous creation of an informal business group to seize an opportunity. This group centres its activities on mutual objectives and is formalised merely by a gentleman’s agreement. There are many such groups operating within the Chinese community, frequently competing with each other in other activities. The important question is, how does the non-Chinese businessperson gain access to these networks in these countries? Network groups often use the services of a common, always Chinese, accounting firm, corporate lawyer or business consultant. There are many such professional firms in Indonesia and Thailand. The boss of a particular company often organises this type of professional assistance. Each accounting firm, lawyer or consultant co-operates within several different networks at the same time. The assistance of these professional firms makes breaking into a network possible, and accelerates the building of mutual trust. The importance of trust can be further seen in the fact that ethnic Chinese prefer to deal with reliable people rather than through formal business systems. A very important point to note is that a visiting Indian businessman often finds an unpenetrable wall in front of him when seeking an appointment with ethnic Chinese in Malaysia and Singapore. This is because there were Indians before him who did not bother about what sort of goodwill were they leaving behind. The Chinese talk to each other about such people much to the disadvantage of the newcomers.

Chinese Management Style In a Chinese company, the formal organisational structure is often similar to the Western model. However, it is the management practice which differs from similar models in the West. It is characterised by what appears to be a distribution of authority through various departmental managers with almost no clear delegation of authority. Instead the ‘system’ is characterised by a ‘one-person show’. For example, the managing director, who is usually the head of the family, gives commands, oversees and controls departmental managers without conforming to the formal management structure. Again, one reason for this is that the Chinese trust people rather than systems. This patriarchal approach is very common and successful. The manner in which the ethnic Chinese conduct business, while distinctive, is not as secretive as some believe. Business people use a simple principle of being what I would call creative imitators. They readily adopt the successful methods of others and adapt them to their own requirements. They have a very sharp eye for good ideas. Simply, they are not restricted by political dogma, philosophy or method. They are impressed by, and use, whatever method works best.

Never Say Never Another way in which ethnic Chinese have been successful is that they almost never say they cannot do something. When asked if they have the organisational or technical

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ability to provide a service or manufacture a specialised item they will always give the same answer—Yes. This is despite the fact that they may not have the capacity to do so at the time. This is true of the Indian businessmen also. Everybody thinks they can do anything. But here the difference comes in. A Westerner may refuse to accept an offer on rational grounds, seeing his own limitations. He will see that he cannot do it and so refuse. I have seen that Indian businessmen are in the habit of making a commitment without seriously thinking about it, ‘Of course I can do it, it is so simple!’ And once things go seriously wrong, as expected, quietly walk out and never be seen again. We never ever bother about what it does to our goodwill and how this will affect the prospects of those who follow. For the ethnic Chinese, the humiliation associated with failure to fulfil a commitment will cause him to ‘lose face’ because this can almost be fatal; it enforces his or her own resolve to achieve success. I have seen many cases where the Chinese businessperson embraces the project as a personal challenge. The ability to fulfil these commitments is often tied up with the concept of ‘credit worth’. Again, this is developed through a business network. This phenomenon encompasses an international ‘brotherhood’ of Chinese people, people from the same clan or a dialect group. Membership is based on trust and reliability. If you can prove to your business associates that you have these qualities, then you are welcome into their network, and they will see to it that you do not fail your commitments. Another thing to remember is that the Chinese have the cultural capacity to meet any specification you want. This deserves further explanation. In some Western countries, take-away fish and chips are very popular. One day a man went into a fish and chips shop and tried to place an order for something which was not on the menu. Ordinarily, fish is fried in crumbs or batter, but this order was for fried fish without crumbs or batter. The customer was unable to find a shop which could fill this order: it is outside certain cultural and cognitive terms of reference. Apparently no one orders fish like this, perhaps because it is difficult to determine the price, or that there is extra work involved, or the order is unbelievable, or perhaps the store owner felt that the man might not know what he wanted himself. Again, an example comes to mind. Some years ago, a small German car maker wanted a special hand tool kit to be fitted into the boot of every car they sold. I came to India and contacted a number of hand tool manufacturers. Each has almost the entire range that we were looking for, the quality was satisfactory, but there were some additional things the firm had to do. They had to design and supply a special box in which the kit could be fitted, they had to procure some items that were outside their normal range of production and they had to improve the finish of each item. I could not find any firm willing to take full responsibility. The order went to a Malaysian Chinese firm. The Chinese businessperson gladly accepted such an order. The same principle is applied to everything the Chinese do. In the absence of formal procedure anything is possible.


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Relationship Building For a business visitor to any of the Asian countries, it is essential to remember that business negotiations take a lot longer with the ethnic Chinese than they do in the West. It is common for all Chinese to invest a great deal of time in getting to know their business associates before they settle contracts, and it is culturally appropriate that most of these discussions take place over dinner or later into the evening. Because of this, the best time to make an appointment to see the ‘big boss’ is after the so-called office hours. Many Westerners are failing to take advantage of the enormous business opportunities that exist in Asia, because they tend to contract their time: they start and finish their business meetings according to strict and predetermined timetables. Remember, if an agreement is not achieved within what you regard as a reasonable period of time, you should not try to end the meeting. Be patient, keep going. Continue talking until you get an invitation for dinner. That is an important first step. You continue before, during and after dinner.

The Chinese are Here Too In 1962, China took India by surprise when its soldiers crossed the Himalayas, overran the Indian outposts and moved through the hurriedly mobilised defense columns. We did not learn any lesson from that because China still believes in surprise and scale. Only the battle is now being fought in the marketplace. The Indian industry is getting a storm alert, caused by an enormous increase in Chinese imports in the last few years. This time the advance army of the Chinese invasion was made up of products like cigarette lighters, electrical components and toys. From attacking the low-end of the Indian market in the early 1990s, the Chinese have now begun raising their sight. For Chinese, please read overseas Chinese, because as I explained, it is mostly the overseas Chinese who have gone into China and set up superb manufacturing capacities using equipment and technology which is obsolete (and useless) elsewhere, but excellently suited to the hordes of low skilled and low wage Chinese workers. They are knocking at India’s gate with a range of consumer durables. The products do not have the brand aristocracy of American labels, or the marketing chutzpah of the Japanese, but they can give goose pimples to domestic producers because of the ridiculously low prices. The Chinese challenge is not just the market opening kind. It is real. The value of China’s export of electronic components to India has shot up unbelievably. If you dismantle an Indian TV set, you will see ‘Made in China’ labels on dozens of parts.

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These labels are embedded not only in CTVs but behind the ‘mouse’ being clicked to write this, in the hard disc of the computer, or within the compressor of the air conditioner. The Chinese companies are obviously orchestrated on one hand by the Chinese government which fully owns all the new entrants to India, and on the other by the overseas Chinese entrepreneurs from Singapore and Taiwan who bring in the technology and take away the output. India has become a market of choice for the Chinese. India is now the focus market, because of her trade liberalisation and steady economic growth. The consistent lowering of the tariff wall has made it possible for the Chinese companies to bring many items even in completely built-up forms and sell in India after paying the import duty. China’s globalisation efforts, sponsored by overseas Chinese, have obviously resulted from the same cycle that Japan and South Korea went through in the past—of domestic demand push leading to capacity expansion so large that only low-cost subsidised export could save the assembly lines from rusting. The only difference is that the production capacities in China are too large even by the standards of its Asian neighbours. This should worry particularly the Indian appliance makers, many of whom have begun vertically integrating themselves, making all components under one shed. Still, they play on small volumes and cannot match the price from China, even after paying customs duty.

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16 Understanding the Koreans

I will slightly modify the question I asked at the beginning of the last chapter and I will repeat it in the next chapter when I talk of understanding the Japanese. Why should Indians bother about the Chinese, the Koreans and the Japanese in a book on entrepreneurial skills? How does this matter to us? And, if we are talking of the wide world, is it not equally important for our children to understand the Americans and the Europeans? First, about the West. The coverage of international news, news about the region outside the Indian subcontinent by the Indian press is overwhelmingly tilted towards the politics of the US and towards the countries that are of particular interest to the US. Entire pages are devoted to syndicated columns from Washington and London that are nothing but hard-core political analysis, with a sprinkling of some popular management subjects. Thus, the exposure that average young Indian professionals—MBA and engineering graduates, get either through text books, books on popular management, newsmagazines, or TV programmes, is again overwhelmingly tilted towards the West. So now, we thoroughly know and understand the West: we know how they live and work; how they run their businesses and their attitudes towards work; in short, we have a deep insight into their mindsets. But how about the East? Do we need to understand their business culture and mindset too? Does anyone talk about this? Look around yourself. Look at the brands that are taking away the market from our own well-established brands. The fiercest challenge to our home grown firms comes, not from the West but from the East—the Japanese, the Koreans and the Chinese. The challenge is not so much from the products they make. It is more from the ruthless efficiency of their large trading houses. They are increasingly setting up offices and

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factories in India, not only benefitting from our huge domestic markets, but also exporting Indian products to third countries, hitting our exporters right at home. The modernisation of Asia—economically, politically, and culturally—is by far the most important event taking place in the world today. The true force behind this modernisation is a force which is ruthless and immensely sophisticated but very secretive and invisible to most: It is the mindset of the Asian people.

It has been my contention that it will not be possible for us to deal with and maybe compete with the people from the East unless we understand their mindsets and develop our strategies accordingly. It should be remembered that all the Asian business firms do their homework before coming and setting up base in India. They take pains to understand our mindsets and base their business and managerial strategies in India on this. It has been seen time and again that these strategies are considerably different from those they use in, say, the Middle East. z

It is high time we made some efforts to penetrate and benefit from their incredible networks. Indeed, there is a market for many of our products in many Asian countries if only we understand how to reach it.

So back to the Korean mindset and what this has to do with their corporate scenario.

Korea and Globalisation I explained that our attitude towards globalisation has been that of letting the world come here and take advantage of our superb brainpower and immense markets. The Korean (and the Japanese) attitude has been the exact reverse. It is by now no secret that Korea’s globalisation level is one of the lowest among major nations in the world. Korea, although often described as the Land of Morning Calm, is still viewed by many outsiders as the Hermit Kingdom, a country that is tightly shut for the outsiders. For many years foreigners have been complaining that they cannot conduct business easily in Korea because of many barriers in trade, capital movement, foreign exchange, stock market, labour market and so on. Not only that, they are also critical about ‘the Korean way of doing business’ which is far different from, and far short of, the global standards. Of course it is the un-open, un-globalised economic environment mindset of the Koreans, including political leaders and government bureaucrats, that judges a something as wrong if it is different from what they have been doing traditionally. It is the kind of mindset that does not allow Toyota cars to roll on the streets of Seoul.

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A Quick Comparison Before taking a close look at Korea, it would be good to set a background by making a short comparison with ourselves. 1. It remains a fact that we have had one of the most stable governments in the entire developing world. But, we seem to be very fond of blaming the government for all the shortcomings in our economic performance, and then, if that does not hold water, blame the politicians and the corruption. Lastly, we can always blame the British! By contrast, while Korea has never had a stable and powerful government, it has made mind-boggling progress in world markets. Business leaders driven by the onslaught of their overseas economic success have largely determined government policies and placed Korea on the world map.

2. Our earlier governments implemented various policies of import substitution and protecting the domestic markets. But, having a protected market, or a closed economy, by itself does not lead to damaging the economy. Almost every emerging economy has tried to protect the fledgling domestic producers. I have said above that no domestic market has been more jealously and rigorously protected than those in Japan, Korea and also, to some extent Taiwan. Much like in India, Korea follows rigid protectionist policies where foreign investment is still strictly forbidden. The Korean people have an inherent dislike of anything foreign, so a number of tariff and non-tariff barriers are in place on all imports, except for much needed raw materials. This makes imports of finished items into these countries next to impossible, and nobody can even sell a screwdriver to the Koreans. In the case of Korea, this lead to an enormous export thrust and the establishment of many world class companies. The result of similar protectionist policies in India was an unmitigated disaster.

3. Look at our economic history. We have never been aggressive exporters. Import substitution as a strategy for industrial development is nothing new. It has always been there in the Indian mindset many decades before independence. It was certainly not the brain child of our founding fathers, though they are solidly blamed for it. Prof. Mahalanobis and possibly Pandit Nehru merely developed the centuries old Indian mindset into our first comprehensive master plan. In contrast, the people of Asia have been historically very successful in trade. Unlike the Indians, the Chinese, the Koreans and the Japanese have always dominated commerce in Asia because they have a knack of building extensive international trading networks. Scholars will always argue if this is because of social, cultural, demographic or political factors, but these people are famous for their mercantile acumen and economic power. They have in fact dominated business across South-east Asia for centuries.

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A Little Historical Background The Koreans, an ethnically cohesive and linguistically united people, formed over a thousand years, a unified, independent kingdom until the Japanese annexation of 1910. After Japan’s defeat in 1945 Korea was divided into Soviet and American zones of occupation and then in 1948 into two hostile republics. North Korea’s invasion of the south in 1950 led to three years of war, in which the UN supported the south and China the north. The two sides were left glaring at each other across a ceasefire line not far from the 38th parallel, which marked the original US and Soviet zones. South Korea gave priority to education and made owner-occupation by smallholders the basis of land tenure. In 1962 a military government, seeking an engine for growth in a country with few natural resources, initiated a strategy of export-oriented industrialisation. It depended on South Korea’s two major assets: Cheap but well-educated labour; and the skill of building extensive international trading networks. The next quarter century was one that barely interrupted boom, with Gross National Product (GNP) growth averaging 8.8 per cent a year. Positive agricultural policies maintained self-sufficiency in food grains, with some of the world’ highest rice yields. South Korea at the beginning of the 1990s was in a state of transition. In domestic politics, it was moving slowly from military dictatorship to a more democratic system. In the context of international relations, erstwhile communist countries had moved towards recognition of South Korea and even North Korea had relaxed its hostility sufficiently to agree to ‘talks about talks’. In economic terms, the question is not that of whether South Korea will leave developing country status behind and will join the Organisation for Economic Co-operation and Development (OECD), but when.

South Korea on the World Market Lending credence to the view that South Korea may well be the country to lead an Asian economic recovery, ratings agency Fitch-IBC raised the country’s debt rating from ‘junk bond status’ to one level behind ‘investment status’ in late 1998. Moody’s and Standard and Poors also acclaimed the progress in developing a debt accord between South Korea and international bankers and they too are revising their ratings. Yet, as always in South Korea, the behaviour of the Chaebol, the major Korean conglomerates that dominate Korean international business will determine to a large extent the country’s revival. z

Quite unlike the large Indian corporates, the major Korean conglomerates have concentrated on expansion rather than profit, assisted by a close relationship with government.


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The Korean route to manufacturing upgrading was by deliberately promoting huge, high-tech conglomerates in the private sector and to leave it to them to spearhead export development. The top four, Samsung, Hyundai, Daewoo and Lucky Goldstar, all with management portfolio strengths, were exposed in the Asian currency crisis, not so long ago, due to expansionary acquisitions which in a climate of never ending Asian growth made sense. These are high-tech conglomerate enterprises of sufficiently large-scale and have followed the classic Korean Chaebol model of expansion through horizontal diversification in product space and vertical integration in process space. In the early stage of development of ‘strategic’ industries in Korea, the Korean government deliberately encouraged the growth of large-scale Chaebols as an instrument to bring about the economy of scale in capital intensive industries that were deemed ‘strategic’.

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Central to the growth of the Chaebols, is the Korean attitude towards co-operating with each other. I have not been able to find similar traditions in the Indian folk or cultural literature, where society demands mutual help or assistance. True, helping others is considered as a good thing in India, but nobody has said that it is mandatory.

There is a lot of published literature on the Internet on Korean social values systems, some of it because it has had such a profound influence on the nation’s economic success. There is a lot of literature that refers to the influence of three major sources, namely: 1. Confucian thought imported from China, 2. The Patriarchal system of large joint or extended families, and 3. The collective community system. First, the heritage of Confucian thought is still deeply rooted in the social values of Korean people. Confucianism emphasises virtuous human character in terms of generosity (ren), righteousness (yi), etiquette (li), wisdom (zhi) and trust (xin). It also advises people to take the middle path (zhong yong) in dealing with tasks or problems, avoiding extreme measures. In the folk culture of Korean communities, there were three kinds of what can be called social or community co-operative customs: Kye, Dure and Pumatshi. Kye refers to the association for mutual help for ceremonial occasions such as marriage and funerals, or for financial needs, or just for friendly goodwill. The Kye is still

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widely practiced even in urban areas, especially among schoolmates, members of the same workplaces and even among those with same hobbies. Both Dure and Pumatshi are like manpower banks created through co-operative effort for serving mutual needs in farming activities. The effect of such customs and folk culture has been to foster group unity and cooperative spirit. Together with group orientation, the Koreans have traditionally been very conscious of reputation and face-saving in terms of social role and status in the community. A person is judged usually by his/her overall character or personality, not by manifest ability and/or short-term achievements. This Confucian heritage is believed to influence the criteria for both evaluation and recruitment of personnel in the business organisation. As a result, in matters of recruitment and promotion, the quality of personnel is judged largely in terms of overall character and personality and not necessarily by specialisation or ability.

How Does all This Matter to Us? Throughout this book, it has been my contention that it will not be possible for us to deal with and maybe compete with others unless we understand their mindsets and develop our strategies accordingly. It should be remembered that this is what the Koreans do before they come here. They do their homework before coming to India. They take pains to understand our mindsets. So let us come back to the Korean mindset and to what this has to do with their corporate scenario. It is true that there has always been the problem of nepotism, believed to be derived from the patriarchal large family system. Korean society, like many others, is characterised by the extended large family system, where the majority of members live together, including both grandparents and members of married brothers’ families. The extended family system is patriarchal in that it emphasises the principles of strict hierarchical order and Confucian filial piety in father-son relationships. However, the same tradition has resulted in the establishment of strong corporate entities or Chaebols because in the patriarchal family system, children are expected to be obedient to their parents and to pay them respect. In return, the father, as the chief of the family, is expected to be benevolent to family members by caring for their welfare. Thus, large patriarchal families are authoritarian, with strict hierarchical orientation and at the same time benevolent paternalism in organisational life. Because large families were traditionally cohesive and self-sufficient ‘in-groups’ with a common destiny, their social values and interpersonal relationships get translated into corporate loyalty and dedication. Another aspect where the Indian and the Korean people differ is in value orientations. While in India, we are generally highly individualistic, in Korea they are oriented to group or collective thinking. This is said to be attributable to the characteristics of their traditional rural communities.


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Like many other societies, Korea consisted of typical agrarian rural communities which were relatively closed and self-sufficient, requiring co-operative effort among community members for production, consumption and also for various social events. A very important point to be noted about the Koreans, again in sharp contrast to us, is that they have a ‘this-worldly’ thinking. Though they follow different religions, including Buddhism, one thing common to all Koreans is their wish to attain worldly success in this life rather than bliss in the after-life. Having experienced conditions of destitution until recent times, wealth and fame have become their life goals. Koreans are materialistic in orientation with strong motivation to achieve success here and now. This is immediately evident when one sees the ruthless and almost inhuman efficiency of their dealings with other people in India. I said ruthless efficiency. I may as well call it a callous and often hostile attitude towards the others. This is among the more obvious and important characteristics that result from their emotion centred mindset: Extraordinary goodwill, co-operation, and hospitality towards family, clan members and close friends, and as I said, a callous, often hostile attitude towards the others.

Now a Quick Comparison of Corporate Cultures I have talked before about the attitudes of the people and how this is reflected in the way business is done. Now, let me talk about corporate culture itself. I see an important difference between Indian business houses and the Korean ones. 1. First, corporate culture in India is highly individualistic: one man show, theboss-decides-everything sort of a thing. z

On the other hand, corporate culture in Korea is group based or collectivistic with emphasis on order and harmony among group members.

2. As a result, work preferences and evaluation systems vary sharply. Workers in India tend to prefer specific work assignments on an individual basis and expect to be evaluated and rewarded in terms of individual achievement. z

Workers in Korea feel more comfortable with teamwork assignments and a reward system based on seniority.

3. Indian management in the larger firms is task centred, and specialised division of labour is emphasised. z

In Korea this is more person centred, rooted in personal trust because of family connections. In general, both managers and employees tend to regard the work organisation as an extension of the family.

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4. Morality in Korea has been traditionally based on Confucian concepts of ‘virtue’ rather than universal principles. Confucian relationships—the family, clan, hometown, tie, school tie and company ties (generally in that order), come before everything else. z

In the Western management style and thinking we follow in India, this is often irrational and unethical because it ignores the very foundation of rational behaviour. It ignores universal rules of conduct that transcend personal feelings and personal relations.

I come back to what I said about the Korean way of respect to older members. Within companies, particularly among management and white-collar workers, seniority is generally equated with rank and authority and demands strict conformity to a minutely prescribed protocol. Having said that, I find Koreans are usually more amenable to adopting Western concepts than the Japanese or Chinese. One finds a wider variety of management philosophies and techniques in Korea. Employees expect companies to be paternalistic. It is a serious breach of social and business etiquette, to put a young person in charge of older people which invariably causes endless problems. Obviously there is some merit in the purely Korean way of conducting personal and business affairs, as evidenced by a number of Korean companies that are now among the world’s leading enterprises. The challenge in facing any enterprise wishing to deal with the Koreans is to achieve a balance between Western and traditional Korean behavioural patterns—a merging of the best of the two systems.

Hints on Doing Business I have discussed the Korean attitude towards each other which has resulted in building world class companies. Now, let us talk about going to Korea to do business, or, as is increasingly becoming the case, dealing with Korean firms here in India. 1. For the Koreans business is a personal affair, very much like it is for us in India. The product, the profit and everything else take a backseat when it comes to personal relations. We bend backwards when dealing with a friend. If you do not or cannot establish good personal relations with a large network of people, it is either difficult or impossible to do business with the Koreans. 2. Personal relations and contacts, combined with a high sense of honour and trust are the primary foundations of Korean business ethics. Written contracts among Koreans are rare. Most business arrangements are based on verbal agreements. As a result of this system, Koreans spend a significant amount of time expanding and nurturing their personal contacts because their business depends on maintaining these relationships. Executives wanting to succeed with the Koreans must adapt to this system to a substantial degree.


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It is essential that our business people programme this kind of activity (and expenditure) into the time frame of their plans and expectations. The more foreigners try to rush a decision or activity, particularly before the correct personal relationships have been established, the slower the process will be and it is more likely their efforts will fail. 4. I have talked to many Indian businessmen who believe that the right product and price is all they need and that they can easily sell to or buy from any Korean company. This is a wrong attitude. You are not going to get anywhere in Korea until you establish the necessary human relations. This includes approaching the company in the ‘correct manner’, that is through an acceptable introduction and on the appropriate level. 5. In India, if you have the ear of the top man of a company, everything will be honky-dory. The first mistake many foreign business people make in their approach while doing business in Korea is believing that meeting the president of a company and getting the president’s approval and co-operation means smooth sailing from then on. In most cases, the managers—lower, middle and upper, who actually run the company will resent being bypassed and will be less than co-operative, sometimes to the extent that the foreign proposal never gets off the ground. 6. If you have a direct introduction, of course it is all right to meet the president, but you must also meet and establish a satisfactory relationship with the various managers, treating them with the same respect and concern that you extend to the president. This also applies to companies that are still in the hands of founders who appear to make all the decisions. 7. Because human relations are so important in doing business with Korean companies, it is vital that you keep up to date on personnel and personal changes within companies. The character personality of a Korean company is as changeable as the ties and emotions of the people who make up the organisation. It is therefore necessary to treat the relationship as a personal one, requiring regular maintenance. 8. To deal with a Korean company, it is essential to understand the personal relationships between managers on all levels, especially the relationships between individual managers and directors, or the president. Personal ties such as kinship, the same school, the same birthplace, or marriage often take precedence over job seniority, rank, or other factors and may have a significant influence on who actually runs a company and how it is run. A clear understanding of these ties is often necessary to identify the real decision maker in a Korean company. 9. Getting all this information may sound difficult but it is really not so. Remember, the Koreans want to do business and they have departments to facilitate the dealings with foreigners. 10. Although Koreans now readily sign contracts with foreign companies, the contracts are invariably interpreted personally rather than in the legal sense and they are no better than the personal relationship that exists between the two parties. If the relationship is not constantly renewed and reinforced, the contract becomes just a piece of paper. It is therefore very important for the Indian

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business owner going to conduct business in Korea to be personally involved in all stages of the process of setting up the operation. 11. If you are dealing with the Government, the bureaucrats in Korea are perhaps even more sensitive to the social and business status of people who approach them. It is especially important that the foreign company dealing with them be aware of this. Sending in a young, low status person is definitely not the way to go.

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17 Understanding the Japanese

In my previous chapters on the Chinese and the Koreans, I have addressed the question of why I am talking in great length about these people in a book on entrepreneurial skills. After having discussed the Chinese and the Koreans, we now go on to the third: The Japanese. I seek to establish that the Japanese are the most difficult and at the same time the most promising people for the Indians to deal with. True, considerations of price and quality do not come into the picture if they do not wish to buy. Yet, to keep their industries competitive, they are scouring the world for cheaper inputs of raw materials, components and offshore manufacturing. More importantly, they only go in for long-term relations. It does take time to get in, but once in, it is for life and you find yourself being upgraded constantly.

Of all the people I have lived and worked with, I would place the Japanese right at the top for being intensely proud and nationalistic. For them, everything that is Japanese is sacred. So, just after their humiliating defeat in the war, the first thing they wanted to do was to teach the Americans a lesson. They took great pains to understand the American mindset and business culture. They went deep into the American psyche and understood how they lived and worked, how they built organisations and their attitude to entrepreneurship. They learnt the American style of marketing from them and hit them with what they had learnt and ever since, have been conquering their markets. Sure, the Americans wanted to do the same. They went to Japan and learnt their highly innovative manufacturing and management techniques, but, they had to stop there as the latter would not let them take a peek into their traditions, culture and attitudes. Japan is as closed a society as the Americans are open.

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It is only after China and Korea came onto the scene that the Western people started understanding and writing about the teachings of Confucius upon which these nations are built. Even today, there is no inward effect of globalisation on the Japanese economy and the market remains completely impervious to all types of finished products: They only import raw materials. I have often noticed that one can deal with the Japanese for years and yet understand nothing about them. I have met a number of Indian businessmen who have been to Japan umpteen times and claim to be authorities on how the Japanese think and work. Yet, they are stunned when suddenly, for no apparent reason, the supplier shifts his agency to someone else. Our people find that if they play the fool with one supplier in Japan, no competing supplier will deal with them, but on their part, they change agents and dealers without batting an eyelid. No one can understand how they do this or why.

They are a Different People There may be many reasons for this. According to me, they keep doing their homework and know things about you that you thought nobody knew. But on your part, you know nothing about them. They are not like us or like anyone else in the world! Before talking about understanding the Japanese, I will talk about some of my own experiences which would form the backdrop of what comes later. The Japanese attitude towards self discipline never ceases to amaze me. z

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I was in a friend’s office late on a Friday evening. This is rare as outsiders are never permitted inside an office: They are required to wait in a small conference room and the executive comes out to meet them. But my case was different as I was a member of their team. There were a couple of desks in the large office but many people were not at their desks. I saw an old lady going from desk to desk, pulling open the top drawer, putting an envelop there, taking some sort of a seal from the drawer, stamping a sheet of paper she was carrying and moving off to the next desk. My friend saw a questioning look on my face and explained that she was putting the wage packet with cash in it, in the drawers. Everyone has a distinctive ivory seal which she was using for stamping the receipt. Even if the person was nearby, she would not wait for him. Amazing! I do not think this can happen anywhere else in the world! You can be visiting Japan and your hosts are walking you to your hotel, after a night out on the town, at 3:00 am. The streets are completely deserted but they never cross the street against the traffic light. I have seen many Japanese friends of mine coming home from a long trip overseas and instead of going straight home to their families, they check into a hotel

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for sleeping off the jet lag in order to be fresh and ready for office the next day. They go home the following day.

Another Personal Experience When a new factory is being set-up, the overseas firm that supplies the equipment generally sends engineers and/or technicians to help install the machinery. There are a lot of jobs, such as plumbing, electrification, foundation and so on which have to be carried out by local contractors as per specifications provided, supervised by the overseas people. It has been my experience of many projects in Asia and Africa that people sent by European and Australian firms generally tell you what needs to be done or corrected but actually work only on the installation and commissioning aspects which require their specialised skills. True, they work with their own hands too, but only where needed. I have found that they do have a thorough knowledge of the working of the whole plant and can indeed be of help in various situations. Indian engineers are far more hardworking and work with all the local contractors but have a very narrow spectrum of knowledge. A technician sent to commission and run a machine generally is very good at running the machine but is of no help in the installation of the electrical or the hydraulic system. He makes it clear that he is a machine operator and for anything else, one should ask the head office. The Japanese are unique. They treat the functionality of the Japanese equipment as if their life depended on it. They seem to know the answers to every problem and get deeply involved in all aspects of the installation. One point of contrast here is the paper work the Japanese bring with them. It is more detailed than what the others bring. A huge amount of reference sheets, charts and manuals. My experience of the Indians is particularly bad as we tend to not have too much of paperwork to carry. A follow-through of this is that the Japanese make meticulous records of everything, but everything. I have not seen anybody else, least of all the Indians, making notes of everything that happened. Without doubt, these records add to their knowledge when installing a similar machine in another location. Now to the example I was talking about. We were setting up a project to manufacture super enamelled copper wires in Malaysia. The plant was second-hand Japanese. There were two technicians sent to commission the plant. The plant was designed for continuous non-stop operation but since we were having problems, during the trial we were not even running a single shift. I would pick up the technicians from their hotel at 6:30 every morning and took them back, after work, in the evening. Gradually they got the plant running longer hours and one fine day I was suddenly told that we will try to run non-stop, three shifts. I quickly made arrangements for the workers to reorganise themselves and waited for the technicians to go back to the hotel, but they kept on working till late at night. We all got very tired and it was only around midnight that I dropped them to the hotel. I was thoroughly exhausted. I had hardly hit the bed when I got a call from the factory.

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‘The Japanese are already back at work!’ It seems they simply took a long hot shower, had something to eat and took a taxi back to work! I was stunned. They had started work at 6:30 am yesterday and now it was about 3:00 am! True, I have seen others working non-stop in an emergency, but this was hardly an emergency! It was a normal routine start-up of a plant! In all my working life, I have not come across dedication of this sort.

Japan and Korea These two countries, located on the eastern side of Asia are societies who have had countless interactions over thousands of years. Both Japan and South Korea are close to each other in location, yet they are markedly different in terms of lifestyle and business culture. They are both hard working and ambitious people who continually seek to compete in the world economy. Both are amazing countries each with a fascinating and interesting way of life. The cultural heritages of each of the two lands have given the people in those places a rich and interesting way of life, but here the similarity ends. Entrepreneurial activities are a way of life and highly encouraged in South Korean society. It is the exact opposite form of encouragement that the cultural surroundings in Japan use to educate their youth. These differences in the education process are what have set South Korea far ahead in the level of entrepreneurship as compared to Japan. As I said at the beginning of this chapter, a question may well be asked: Why bother about comparing these two nations? Well, by far the largest group of manufacturing and trading firms that have entered India during the last decade or so are from these nations and they offer the best potential for our budding entrepreneurs to set up high-tech manufacturing facilities to feed them. At first glance these nations may appear to be similar: Both are Buddhist and also live on the teachings of the Chinese sage Confucius, but there the similarity ends. It would be disastrous for our youngsters to lump them together when planning out strategies for dealing with them.

Total Entrepreneurial Activity and Annual Economic Growth There are major differences between the two countries in the level of entrepreneurial activity that goes on there. We need to understand what this means, because it may come as a shock to many of my readers that Japan is quite at the bottom of Total Entrepreneurial Activity (TEA) amongst the world’s leading nations. TEA index is based on a number of factors, but is mainly the percentage of working population employed by new enterprises.


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According to the Global Entrepreneurship Monitor, (see Appendix 5) the levels of entrepreneurship vary sharply between major countries and account for significant differences in economic growth. The study revealed that, among the many factors that contribute to entrepreneurship, perhaps the most critical is a set of social and cultural values, along with appropriate social, economic and political institutions that legitimatise and encourage the pursuit of entrepreneurial opportunity. You will see in Appendix 5 that in 2000–2001, Japan recorded one of the lowest rates of Total Entrepreneurial Activity (TEA). Japan was 1.9 per cent against the world average of 9.6 per cent and the Asian average of 3.4 per cent (for the same period, India was 19.4 per cent). This simply means that there are few new enterprises in Japan. The slow growth of new venture creation in Japan can be attributed to numerous variables including the conventional Japanese business culture, lifetime employment, the seniority system, labour unions inside companies, tight regulatory policies of the government and the group-oriented, risk-adverse orientation of the population. Piecemeal changes occurring in Japan have made only limited improvements in the infrastructure to support entrepreneurship. The Japanese government’s monetary changes designed to support new start-up companies have not succeeded. In Japan, entrepreneurs face many difficulties when starting their own ventures. Some of these difficulties include receiving loans from banks, the pressures of deflation, weak domestic demand and tough competition within the country. In Japan, personal guarantees are required for small business loans. There is a high rate of suicide among Japanese men who fail to repay personal guarantees. The reasons for these suicides are the humiliation when business fails and the need to use life insurance funds to pay off debts so that the banks do not harass friends and relatives who have given their guarantees for the loans/debts. This shows their cultural desire to ‘save face’. Most Japanese entrepreneurs belong to the immediate post-war era. The newer generation has not at all fully adapted to the idea of entrepreneurship. Another problem that stunts the growth of entrepreneurs is the lack of knowledge. Many Japanese entrepreneurs do not have the knowledge, training or motivation to start their own businesses. Classes are being started where those interested in entrepreneurial activity may enrol. These classes have given rise to the idea of what is known as ‘weekend entrepreneurship’, when people with regular, salaried jobs use their talents and hobbies for profitable ventures on weekends. Japan is a country that at first glance, may appear to be similar to South Korea, but has a very different culture and this is the reason it is listed as one with the lowest entrepreneurial activity in the world. I will seek to establish that key differences in education, family culture and government infrastructure have created the divide in the level of entrepreneurial activity within the two countries.

Education The difference between the two societies and the resultant lack of entrepreneurial activity level that goes on in Japan is also a direct reflection of the culture instilled in the Japanese through their education process.

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The Japanese youth are taught that they must follow the rigorous education process till the end of high school. After high school they must pass a series of tests to determine whether they will be welcomed into the college of their choice—more likely their parent’s choice. The high school graduate of the Japanese scholastic system reach a level of knowledge that is comparable with a college undergraduate in the United States. Should the student enter college, he will be there for the next four years and spend what the Japanese refer to as the party years. What usually took place, prior to the Japanese economic crash of the early 1990’s was that the entire graduating class of a particular college would each join a particular company as the class of that year. The graduates specialised in that particular field and were employed by large corporations like Honda, Sony and Toyota amongst many others. Each company guaranteed a lifetime employment and the executives countered this by putting in long hours. The entire focus of the executives would be on building up their company over their years of service. However, after the economic troubles Japan experienced, the lifetime employment scheme was not feasible for the large corporations. There are only a few very new educational programmes in Japan focusing on entrepreneurship and from what I have seen, the programmes are very text bookish and formulaic. They teach entrepreneurship but are not doing a very good job at promoting entrepreneurial spirit. Compare this to South Korea where universities are dedicated to teaching entrepreneurship and promoting the entrepreneurial spirit for students of any age. South Korea struggled with the same economic crisis and labour issues at its large corporations as the Japanese, so they chose to provide entrepreneurial education to talented displaced workers. There are two more concerns. The first is about the supply side. When I give a talk in Japan to 300 plus students, I often ask how many students are interested in forming their own company. Only one or two students raise their hands. The lack of interest is confirmed by many labour force surveys which find that not more than 1 per cent of the population is interested in forming a company of their own. The second concern is about the demand side. With a technical degree you can get a job but with an entrepreneurship degree you cannot. The educational programmes are teaching entrepreneurs but not preparing the market to accept start-up companies.

Family Culture It is evident that the South Korean society was keenly interested in creating a new environment. They already had a culture and society that encouraged people to break away from large corporations and build their own businesses. So they took advantage of the growth opportunities in the country after the Asian Currency crisis that gripped much of Asia beginning July 1997. (Indonesia, South Korea and Thailand were the countries most affected by the crisis.) Due to the deep rooted Japanese diligence in not diverting from the education system and still trusting in the system of working for these corporations, Japan’s culture still does not encourage its youth to work towards building an individual self-sufficient


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business from scratch. I have personally seen many examples of this in Japan. One of my friends tells a story about how he tried to hire a 45-year-old Japanese man into his company and was turned down because the man’s father did not trust him with working for a small company. Japan still relies on what works. For now the system is not completely broken, so their logic is: Why change it?

Indian and Japanese Value Systems The very fact that Japanese culture and work environments are typically Japanese and the Indian culture and work environments are Indian with a strong Western influence, makes a comparison of Japanese and Indian value systems very interesting. Even though the two countries are Asian, their historical backgrounds, cultures and people are certainly very different. The idea is to identify and appreciate these differences and to work towards developing one’s own strategies of dealing with the Japanese. 1. Comparing Management Education Systems Reading the above, one realises that we need to make some changes to our organisation system and our work ethic. However, change cannot be initiated in the system from the time of entry in a commercial organisation. It has to start much earlier: Through the management education system. Let us try to appreciate the sharp difference between the Japanese and the Indian management education system. In Japan, students use basically Japanese books which help them understand their own management styles and their own work environment; secondary to this is information about other management styles, mainly that of America. The situation is just the reverse in India, where the education system is American and/or European in content and methodology. The basic books are about American or European management styles. Of course this is changing now, but still very few education centres have detailed studies or information about anything Indian. In short, in the Indian context, a truly Indian system never got the opportunity to emerge and grow. 2. Comparing Childhood Influences Japanese understand the power and benefit of being group-oriented very early in life. The rigorous way in which Japanese society deals with nonconformity starts in early childhood. Rather than encouraging expressions of individuality, Japanese parents and teachers reinforce the primacy of the group and chastise those who stand out. While they might not literally use the hammer, they enforce a web-centred social order where the individual needs are subsumed by the groups with extensive moral and social obligations recognised up and down the hierarchy. The ideal is individual self-sacrifice and conformity with the group. If we take a closer look at the average Japanese and her/his beliefs, we also find that

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from early childhood, the Japanese are taught to be socially correct. There is also an emphasis on building and maintaining relationships over long periods of time. The stress laid on being socially correct leads to respect for the elderly and for seniors. The relationship of sempai (senior) and cohai (junior) is further strengthened in school and the university. Most of the activities at this stage are group activities. Sometimes the seniors, after graduating from the university, assist their juniors during the most demanding of times in a Japanese student’s life—job hunting. What makes as Indian’s situation different from that of the Japanese? In India also there is an immense emphasis on the sanctity of social relationships. However, lessons of social correctness are received only at home from parents and family members. Outside the home, an individual fails to appreciate the advantages of social correctness because, for example, there are no constructive, meaningful and prominent senior–junior relationships visible in the student’s life. There are very few group activities where a student would be exposed to working in a group. Also, due to the huge population and the ever increasing competition in every field of life, the average Indian cannot but become individualistic. When it comes to making a decision, an Indian normally takes an individualistic decision rather than conform to the wishes of the group. 3. Comparing Company Politics In Indian organisations, there is an atmosphere of high internal competitiveness and there is always the possibility of the status quo being disturbed for the least reason. This is what I would call internal politics. The lack of senior–junior relationships also means that there is no reason why an individual should not eye a senior’s position once he/she is capable enough. There are no sentiments attached to the senior as in the case of the Japanese. Insensitivity or lack of concern toward others often leads to tensions avoidable in a group-oriented system like that of the Japanese. Thus, situations in Indian organisations are more volatile. This is further aggravated by the arrival of the new generation of educated, competitive, career conscious managers proficient in using the new technological tools. They are also aware of their rights as industrial workers. Being individualistic in approach, they are not shy in demanding what they think is due to them. Under similar circumstances, the Japanese would not demand their rights as it would be socially incorrect behaviour. For an Indian, however, there is no way out. As most companies are not sensitive enough, individuals are forced to protect their interests and fight for their rights. Job security in organisations also becomes a right which, once ensured, acts as a demotivator. It is tragic but true that not all senior–junior relationships in Indian organisations remain positive and conducive to work. More often than not, this relationship degenerates into manipulation and ingratiation with politics everywhere. 4. Comparing the Status of Engineers It is a fact that most organisations in India have a tendency to seek out management graduates and place them above electrical, mechanical, civil or chemical engineers. In India, except for the IT professionals, engineers are ‘second class


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citizens’ in an organisation, comparatively poorly paid and neglected. In such an environment most engineers turn to management schools for ensuring better living standards and higher status in the organisation and in society. The Indian system produces managers who only believe in ‘managing people’ and not in ‘assisting’ them. Organisations in India have so far failed to give engineers the place due to them in the hierarchy and treating them on par with the managers. This has resulted in the deterioration and degradation of the technical base as engineers have either left the country or turned into managers. This does not happen in Japan. An engineer is the most respected person in organisation and the society. Managers as such are an invisible class. Everyone is a manager whose job is to assist fellow workers. A detailed study in Business Week, (October 1994) found that their workforce is smarter than anywhere else in the world. They have been masters of innovation, even though the West tends to call them ‘imitators’, and still continue to be the leaders. This is partly because of their investment in technicians and engineers. The success of Japan has been due to heavy investment in technical and vocational education and in courses in engineering. Only selected universities offer MBA courses, and the investment in ‘making’ a manager is low.

Dealing with the Japanese If you are looking forward to dealing with the Japanese both in India and Japan, and want to have better relations, you first need a better understanding of how the Japanese think and perceive you. There are a lot of key items you should be aware of. Some you may like and others you may not. That of course, is fine—you are entitled to your own views, no matter what anybody says. But like it or not, you will have to deal with some of the cultural and behavioural aspects. If you can recognise and deal with the differences in Japanese attitudes, you will adapt faster, do better business and have a more positive experience working with them. Here are a few basic characteristics of Japanese culture and behaviour that our people will encounter. There are many reactions and attitudes that Japanese give off — many of them we would ordinarily not pick up on. Japan has a lot of positive traits; also a lot of negative ones. You’ll find Japan captivating, bewildering, enchanting, enraging, humorous and also frustrating, ruthless, uptight, uncooperative—sometimes all at the same time. I will try to centre more on the negative aspects than the positive ones since these are what make it more difficult for our people. The idea is to show you something of what is meant by ‘culture shock’. I wish to make it clear that I am not counting the number of good traits vs. the bad ones. 1. Uchi-Soto (‘Us and Them’) This is one of the first things you will notice about the Japanese. The Japanese have been raised to think of themselves as part of a group and their group is

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always dealing with other groups. This has many aspects—internationally it is ‘We Japanese’ vs. everyone else (more on that later), but in schools, companies, sections of companies and so on, there are many groups and subgroups—and not always in perfect harmony and co-operation as it may look on the surface. Dealing with the Japanese on a one-to-one basis usually comes very easy to us Indians, but dealing with them as a group can be a different matter altogether. And no matter how nice you are, or how good your Japanese is, you will always be treated as an outsider. In fact the literal meaning of gaijin is outsider. Many Westerners see the Japanese as aloof, shy and always walking on eggshells. There is a lot of truth in that—Japanese are extremely sensitive to what others might think of them and are very hesitant to do something new, different or independent. Being ostracised is one of the worst things that can happen to a Japanese, who is raised to be part of a group and depends on others. Therefore, when making requests, it often takes more time since the person asked usually consults others in the group to reach a consensus. It also might interfere with what your goals are. While typically we start so many sentences with ‘I’, the Japanese ‘I’ usually means ‘with the approval of the group’. Uchi-soto has another important trait—there are hardly any strikes in Japan ever. Is it because Japanese labour management relations are better? Partly, yes. But in Japan there are almost no major political unions. Each large corporation has its own union and they feel no bond with other company unions even if they are doing the same work. In one sense, the company union is almost a puppet, led by a management executive. But in another, everyone in a Japanese company knows that in order to succeed they need to act together and being profitable in the long run is the only way to guarantee employment. You do not see a lot of friction between labour and management in Japanese firms—one reason is that the workers often cave in since they know a profitable company eventually benefits them. 2. The Gaijin Complex How Japanese view the non-Japanese is always a subject of debate. Often there is a mixture of admiration, suspicion and most often a lot of nervousness about dealing with someone who does not look or act like them. The term ‘gaijin’ according to the dictionary means foreigner or alien. In practice however, it always means ‘white person’. Japanese use a lot of discrimination—Chinese and Koreans are usually referred to by their nationality, not as ‘gaijin’, unless speaking in legal terms. The term ‘gaijin’ is not in itself pejorative (though it can be used that way), but when one Japanese tells another he is doing something like a foreigner it is a strong put-down. Many Japanese expats who have lived abroad are viewed supiciously. If one’s English is ‘too good’, he might be ostracised. Japanese children who have spent time abroad and can speak English fluently (kikoku shijo), can be bullied by classmates often. 3. Honne and Tatemae If one has to understand and deal with the Japanese, it would help if one understands two very important and not too difficult concepts—Honne and


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Tatemae. Honne is the way things are and Tatemae is the way we would like them to be; or, the reality and the façade; or, the real reason and the pretext; or the substance and the form; or being direct and being diplomatic. And so on. Since avoiding conflict and trouble is extremely important in Japan, using diplomatic language is often used rather than the direct approach. It is said that in formal situations a direct ‘no’ is avoided and there are a thousand nicer alternatives—which can be true, but it depends a lot on the situation and the social status of the parties involved. In the Japanese language, there are 19 different ways to say ‘no’. Even in a world increasingly dominated by international, multinational and transnational corporations, culture still plays an important role in Japanese negotiation.

The Japanese Business Culture The most difficult nation to sell to is undoubtedly Japan. The Japanese consumer, till recently, had an intense dislike for anything non-Japanese. Very surprisingly this also includes foreign words in Japanese language: They have a separate script for writing foreign words which never get assimilated in the local language. They export everything to the whole world but buy only what they must: mainly raw materials. Globalisation has been a boon to them as their ruthless export orientation has created an enormous trade imbalance with everybody including the most powerful nation on earth, the Americans. The Americans have been shouting and screaming for ages with no effect. Japan is said to have lost the World War II to America but they seem to be winning ever since. Take the grossly lopsided situation of cars. Japan simply does not want to buy American cars or spare parts. What the Americans do not seem to realise is that if a Japanese is seen driving an American car, he would be socially looked down upon. If one has to try to export to Japan, one has to first understand the Japanese mindset. I have already discussed this, but now let us take a quick peek at it’s past. Remember I said above that the Japanese have an intense dislike for anything nonJapanese. This has not always been so. They avidly imported the ideas of Confucius from China; Buddhism came to them from India, via China. There is indeed an underlying message in what I have said above. Japan has always been different from the rest of the world and continues, for a variety of reasons, to be so into the late 20th century. The rest of the world keeps changing, Japan does not. The past has gone on for too long. The native religion of the Japanese people, Shinto has always put great value on the loyalty that members of a family owe to each other. So are the ideas of Confucius. The Japanese soon Shintoised the non-family minded Buddhism too. All this provided a powerful underpinning for the rules of feudal loyalty that grew up in Japan as in other countries, during the time when warrior leaders commanded and protected their peasant followers. Few dispute that the Japanese have performed an economic miracle since World War II. In a relatively short time, they have achieved global market leadership in industries thought to be dominated by impregnable giants from the West. The Japanese today

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lead the world in autos, motorcycles, watches, cameras, optical instruments, steel, shipbuilding, pianos, zippers, radios, television, video recorders, hand calculators and so on. Japanese firms are currently moving into the number two position in computers and construction equipment and are making strong inroads into the chemical, pharmaceutical and machine tool industries. Many theories have been offered to explain Japan’s global success. Some point to their unique business practices, such as lifetime employment, quality circles, consensus management and the just-in-time delivery by them. Others point to the participative supportive role of government policies and subsidies, the existence of powerful trading companies, and businesses’ easy access to bank financing. Still others view Japan’s success as based on low wage rates and unfair dumping policies. One of the main keys to Japan’s performance is its skill in marketing-strategy formulation and implementation. z

It is indeed a unique situation that the Japanese government and private companies remarkably work together to identify attractive global markets.

They favour industries that require high skills, high labour intensity and only small quantities of natural resources: candidates include consumer electronics, cameras, watches, motorcycles and pharmaceuticals. They prefer product markets that are in a state of technological evolution and they look for industries where the market leaders are complacent or under-financed. The large trading houses make huge investments in sending study teams into the target country to spend several months evaluating the market and figuring out a strategy. The teams search for niches to enter that are not satisfied by any current offering. Sometimes they establish their beachhead with a low-price stripped-down version of a product, sometimes with a product exhibiting higher quality or new features or designs. The Japanese proceed to line up good distribution in order to provide quick service to their customers. A key characteristic of their entry strategy is to build market share rather than early profits. The Japanese are patient capitalists who are willing to wait a long time before realising their profits. Once Japanese firms gain a market foothold, they direct their energies towards expanding their market share. They rely on product-development and marketdevelopment strategies. They spot new opportunities through market segmentation and sequence market-development across a number of countries, pushing towards building a network of world markets and production locations. z

Say, if the Japanese are in the market to buy many things, they will not wait around for you to come selling to them. They have their own trading firms all over the world, efficiently on the lookout for products and services Japan needs. If you have something they can be interested in, they will find ways of contacting you before you can even think of it.

When you call a Japanese organisation asking for export trade information, you are already branded as an uninterested person, wanting to waste their time. People who are seriously keen to do business do not go around asking for addresses.


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The Japanese will deal with you through a Japanese trading house or through an Indian organisation they have been dealing with for some time. So, the first step is to introduce yourself to someone near your location. You start by giving them information about yourself which they will check and verify. Then if they come back and suggest a meeting, you have crossed the first barrier. As I said, if you have a product or a service which is competitive enough to be of their interest, most likely they will know about you and make the first contact.

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Preamble

Part 4 New Opportunities in Tourism

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18 What Part 4 is All About

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Please note the title of Part 4. The subject of discussion is new entrepreneurial opportunities in the tourism sector. So, whatever discussion is there on tourism, the Indian economy, handicrafts, our Heritage and so on, is in the context of the emerging opportunities for our young entrepreneurs. The focus of the discussion remains entrepreneurship and not tourism by itself. I always hear a lot of discussion putting all shortcomings in our performance squarely on the shoulders of the government. I will seek to establish that the problem does not have anything to do with the government. On the contrary, when I compare our bureaucrats with those in many other nations, I find that our fellows are doing a better job. In any case my talking about this is meaningless. I am sure that the problem is also not with our travel agents, our hoteliers, our trade associations and chambers of commerce but with how they work in isolation and refuse to work with each other. Though they have made themselves quite ineffective in promoting tourism, I will not talk about them either. The idea is not to talk about changing the system but for the youngsters, our future entrepreneurs, to understand how to do their jobs better. There is no question of criticising anybody because we are talking management and not politics. Indeed, we do need to take a hard look at ourselves, at what we are doing and then carefully observe and analyse what others have done in similar situations, but this cannot be called criticism. How else are we going to learn?

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A Suggested Strategy It is a fact that we, the second-biggest nation with the finest brain pool in the world, are nowhere near the top in the list of preferred destinations as listed in most of the reputed travel industry surveys. We are being left behind by many newly emerging countries which are a fraction of our size. They get more tourists and are showing better rates of increase. z

Our young entrepreneurs need to understand why this is so.

I will use a two pronged strategy that is aimed squarely at young entrepreneurs—our qualified professionals in tourism and related sectors. What I say is based on what I have seen of the highly innovative approaches many small countries have taken to rake in the tourist dollar. The strategies I will discuss here in this part of the book are: 1. It is not a good idea to plan for more tourists, either foreign or domestic. It will be a long time before we have the infrastructure to keep pace with any sizeable growth. Instead, we need to work out strategies to, one, attract a better class of visitors and have both the foreign and domestic tourists spend more by enjoying themselves more, and two, to suit the tastes and requirements of a new breed of young professional tourists that were not there even a decade ago. The visitors want to do this not merely by looking but also participating. In the chapters that follow, I will discuss some new and surprising ideas for our budding entrepreneurs. 2. It is also not a good idea to let the visitors roam around aimlessly. One, it does not bring in any more money and two, it gives us a bad image. The bulk of the tourists that come here—and this applies to domestic tourists even going to other parts of the country, do not travel in organised groups. It is indeed a tragedy that the people with whom the free roaming visitors come in contact with—the small hotelier, the auto rickshaw driver or the roadside shopkeeper have an open attitude of ‘here is my chance for quick money’; not caring at all about what the visitor will go home and talk about. As I said, it is bad for our image. The solution is to do what other small nations have done. Have more and more tourists taken care of the minute they land at the airport till the time they check in for their return flight. The idea is to make more and more visitors go back thoroughly exhausted but exhilarated and deliriously happy. As I said, I have seen many small countries do this and this is the only way the visitors will come back again and make their friends come here too. Read on. I have some new ideas for our budding entrepreneurs. If we can overlap tourism, preservation, heritage and culture, we can get dividends. In this part of the book, I will talk about how other countries have done this and see if we can do it too.

What Part 4 is All About

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When done correctly, cultural heritage tourism provides the motivation and the resources to help preserve the irreplaceable heritage that a community treasures. That is why quality and authenticity are more important than ever before. High expectations and increasing competition for the visitors’ time also mean that you have to make whatever you offer to the visitor come alive. All too often, our people think that getting involved in tourism means publishing a brochure or launching a new website. In actual fact, promotion is the final step. I will explain that before getting to that final step, it is important for our entrepreneurs to clearly understand exactly what it is that we have and what is it that we want to share with visitors. Next, it is time to match what you have with what potential visitors may be looking for and then make the necessary changes to be sure that you are offering the best visitor experience possible. Only when you are truly ready is the time to look at marketing. Cultural heritage tourism is all about the true story of your area. You decide if it is worth telling. The story of the authentic contributions previous generations have made to the history, culture, cuisine and archaeology of where you live is the one that will interest visitors because that is what distinguishes your area from every other place on earth. It’s authenticity that adds real value and appeal. It is only when you yourself are convinced that your area is unique and that its special charm is what will draw visitors, should you give your area the edge. Another point I will emphasise is that, for doing all this, collaboration is essential in today’s highly competitive tourism market. Tourists are ready to fly off to another destination at the drop of a hat. With increasing pressures on local resources, it is critical to find the fit between the community and tourism to ensure that tourism efforts are sustainable for the long-term. In India, what I find heartbreaking is the loss of traditions which are manifested in the ways we celebrate holidays or feast on ethnic cuisine. The preservation and perpetuation of traditions is important in telling the story of our people. It is only by protecting the buildings, landscape or special places and qualities that attract visitors, can we safeguard our own future.

Who Cannot Do This for US? This looks like a silly question. You will understand what I mean when I tell you who cannot take us forward: The very people that are at the forefront of promoting our tourism. Tragic but true. These are: 1. The tourism industry, the travel agents, the hotels and the tour operators—while being very good at what they are doing, see their primary role as marketing ready products. They do not go beyond booking hotel rooms, arranging sightseeing tours and local travel arrangements. 2. The state, and in some cases, non-governmental organizations (NGOs), look after the development and maintenance of our major tourist attractions, our

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historic, cultural, ethnic and natural resources. In most cases, they manage these too. 3. The cultural community, the people who can also give the visitors their money’s worth, is on its own, is grossly underfunded and keeps looking for ways to attract new audiences. Data and information on the websites notwithstanding, tourists rarely get to know in advance about cultural events and performances when planning their trips to a specific region of India. 4. Our trade associations and chambers of commerce, who arrange regular meetings, workshops and conferences to discuss the problem and suggest measures, but that is that. I must stress that each of the above group is world class by itself and is doing a commendable job. No denying that. But the result is just like our sports teams. Each player is outstanding but the team does not win any international competition. One of the reasons is that each of the four groups work in isolation and there is no mechanism for them to co-operate and work with the other groups. z

I need to make it clear that I am not talking of teamwork or mutual co-operation. I am talking of networking integration where a number of independent entities join hands and work together for economic benefit with no one being in charge. I have explained the concept fully in the first three parts of this book and we will talk about it some more here.

It is a pity that the Indian travel agents in India and overseas prefer to offer superbly planned fun packages for trips to other nations. Of course, I do not blame them. They are retailers and can only sell the product that has been given to them. Also, horror of horrors, when overseas, I have personally been advised by some of our travel agents there not to visit India during our festival seasons. You think I am joking? Do read Chapter 23 here and you will share my sense of dejection. We are brilliant and each of us is doing a superb job, yet we are losing visitors to other nations. Let us talk about this.

A New Breed of Tourists I have often met young professional couples, both in India and overseas, when travelling on my assignments. The strong feedback I get when they talk about their trips to India as tourists is that the market here is changing far too rapidly for our tourism people to keep pace. The driving force behind the creation of an enormous new demand for new type of tourist facilities is a new breed of tourists: young professional couples. These are mostly young married couples but many middle aged people too. In India, today’s professionals are far more affluent than were the earlier generations. Now both husband and wife are working, they invariably live in a big city like Bangalore or


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Hyderabad, and mostly live away from their parents and families. Their lifestyle is very different from what the earlier generation had and they are creating an incredible demand for some highly innovative tourist facilities. The Internet is full of academic and marketing studies that show that the attitudes and aspirations of today’s young Indians resemble those of Americans a few decades ago. For Indian tourism trade, the changes in young people’s outlook on life are revolutionary. The country’s younger generation is shedding submissive attitudes and longs for the good life. While they know that they will have to work hard, they also want to play hard, so they need everything that goes into making a good life. Multimedia gizmos and other high end products apart, I will show in the subsequent chapters that there are a number of new fun ideas that the Indian tourism operators are ignoring. z

Because today’s young people, with different attitudes, bulging pockets and limited time off from work, are the key consumers for holiday tourism tomorrow, these shifts have big implications for the young tourism entrepreneurs entering the field.

If I have not made myself clear, here is an example. (You will read about this in the chapters that follow.) Say you are a middle-aged professional couple resident of USA or anywhere in the West, planning to come here for a short holiday: You are educated and cultured people, have money, want to enjoy yourselves, but are short of time. Before coming here you need to carefully plan your trip and do not want to waste time in experimenting and searching around. They may have some queries: ‘we are coming to India in the last week of next month, where can we see Ravi Shankar perform?’, ‘where can we get some special designs of typically Indian handmade paper invitations cards with dried flower decorations for our son’s wedding?’, ‘can we get some terracotta lampshades made to our designs?’, ‘where can we have some real home taste traditional Iddli and dosas with typical chutneys?’, ‘where can we see some good performances of Manipuri Dances?’ If you are living in India, sure you know someone, whose brother-in-law knows someone, who can tell you, but if you are out of India, you will surf the net and then call up a few Indian travel agents and then try the India Tourism office. You will, of course, draw a blank. Talking of the Internet, each State Tourism Department has exceptionally welldesigned sites, full of superb photographs and detailed write-ups about what the state has to offer. All the sites across the country have references to hundreds of package tours by tour agents. All are almost identical except for the names of the monuments to be visited. ‘Morning visit to monument A, afternoon relaxing by the poolside, evening free for going to the local markets, cultural performance after dinner in the hotel, morning trip to monument B, afternoon relaxing at the beach’, and so on. At the airport, you are met by a youngster with a clip pad. You are merely a name on the list. He quickly ticks you off on his clip pad and hands you over to the limousine driver. He does the same on his clip pad and you are delivered to the hotel, to be met by another youngster with a clip pad the next morning for a tour of the city.

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After one such trip should we expect the visitors, the new breed of visitors, to come back? Again and again, huh? Where was the chance for you as the visitor to do something, participate in what the locals were doing, get a feel of the country, enjoy yourselves and get the sense that you are welcome?

New Breed of Entrepreneurs Now, back to where I started: What can we do about this? And who can take us forward? In this part of the book, I will address the issue of how our young professionals can take our tourism sector forward from a number of angles, with a number of examples of how other small nations have successfully done this. We will also discuss the same thought from the point of view of the mindset and the work attitude, needed to succeed in the highly competitive tourism and hospitality sectors, and I will show that in the new world, you can succeed only by working with each other. And I am not talking about teamwork. I have repeatedly said it in the earlier chapters of this book that in the past, teamwork meant, ‘Together everyone achieves more.’ In the fast changing business and corporate environment of today, this term has taken on a completely different meaning. The very concept of teamwork has changed and has become complex. Teamwork simply meant a group of people working together as one body and under one leader: a sports team; a debating team or a sales team on a special task. All are people working as one. This has changed. Now, teamwork means relationship—relationship between people and relationship between companies. So, we will take a look at first the new breed of entrepreneurs that I am talking about and then some special skills that they need. The new breed of youngsters coming out of our professional institutions is nothing like the youngsters of our earlier generations. As recent as 15 to 20 years ago, when I used to come to India and interact with the management, engineering and tourism graduates of our prestigious institutions, I found they were overwhelmingly concerned with getting a good job. Their questions were all centred around their concern for what sort of a job is waiting for them in the outside world. Nobody talked of being on their own and no one was interested in being an entrepreneur. Today, I find that the concern for getting a good job has disappeared. Our professional graduates take it for granted that they will have a good job and will never need to worry about where the next meal is coming from. A part of their credo is that they no longer have to make safe bets with big firms to protect their career. So now, a growing number of young professionals in the tourism trade are rebelling against big travel and tour operators. They object to the degree of economic and political power that these corporations wield without making any appreciable contribution to increasing the tourist potential of our nation. And on a personal level, they are increasingly choosing not to work for large firms with strong corporate cultures that do not suit their political beliefs or their character.


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Professionals from other fields are attracted to tourism too and they are pushing the traditional travel firms to change for the better. Hence, attractive alternatives in the tourist trade are coming up even faster. Thanks to the technology boom that puts tourism customers just a click away, the opportunities to work for a young enterprise, or start one yourself have multiplied. As such young entrepreneurial firms grow in number and the pressure for established firms to encourage their own youth movements gets stronger. We are in the middle of a changing of the guard. The young are moving from the shadows to the spotlight in the workplace, thanks to a convergence of forces that play to the youth’s strength—technology, the pace of change and the tearing down of the traditional corporate order. Now, as I promised at the beginning of this section, I will talk of some special skills our professionals need. You will see that these are not the type of skills that come out of any text books, nor are they taught in any college or institution.

Five Mantras for Personal Success For the benefit of those who are reading this part without having read the entire book, I will quickly explain some very essential personal skills or mantras that are particularly useful for our entrepreneurs venturing into tourism. It would be a good idea to go back and take a quick look at chapters 2 and 3 of this book, where I have discussed at length some of the personal attitudes and soft skills that I have noticed in the young entrepreneurs, particularly in the East. I will explain the six mantras with the easily remembered acronym: P.R.A.I.S.E. z z

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P stands for Pride. Pride in yourself, in your work, in your profession and in your country, in that order. R stands for Relentless drive for upgradation. By relentless I mean non-stop, unremitting and without mercy. By upgradation I mean trying to do better rather than merely improving. A stands for Ask, Ask, Ask. Getting feedback for whatever you do should be your obsession. I stands for Innovation. Think and try out new ideas. S stands for Sharpness or Smartness. Be alert and look, observe and analyse—all the time and everywhere, no matter what you are doing at the moment. E stands for Each other. Stop being a lone ranger and learn to work with each other.

P—Pride in Yourself While giving you a run through on the six mantras, a thought came to me. One thing that I noticed in all the developing countries that have been particularly successful in attracting more and more tourists is the attitude of the local people about

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where they live, what they do and how they do it. They make it abundantly clear that if you are not proud of yourself, no one will respect you—as simple as that. Well, it may be simple, but do we do this? Walk into the office of any travel agent in India. Forget about the small towns of India. Even in big cities, look at how clean, neat and tidy the office is, how are the people dressed, did the owner/manager shave this morning? Does he come out of his cabin and greet you? Do you get what I mean? Then tell the counter staff what you would like to do during your trip. See the manner in which you get the response, and you will really understand what I mean. Remember, the tourist who is walking into your office is used to a very different attitude and standards back home. Of course, from the point of view of the travel agent, he is not likely to see the person who walks into his office ever again: It is a one time deal, so why bother? That is exactly my point. This is equally true of the offices of our travel agents overseas. We do not respect ourselves and our nation and do not bother about what others think of us. This attitude is in stark contrast to that of the offices of other foreign travel agents right next door that are spanking clean and reek of friendly efficiency. z

I need to explain as to why I am telling all this to our young entrepreneurs. Well, I am upset by the wrong image that the people in the forefront of our tourism industry are creating in the minds of the visitors. We are not a nation of shabby and scruffy people. The homes of our people even in the smallest village are cleaner and aesthetically appealing than the homes of similar people in many other countries.

It is all a matter of pride; in yourself, in what you do and in your nation. Talking of our national pride, I find that all visitors to the famous temple town of Rameswaram in South Tamil Nadu are told and taken with pride by the autorickshaw fellow to the family home of our former President, Dr. A.P.J. Abdul Kalam who is one of the best presidents we have had and enjoys immense popularity. But any Indian taken to see his home cannot but hang his head down in shame. I cannot get myself to describe the place. Is this one of our national monuments? What do others think of us when they see it? Either the visitors should not be permitted there or, for heaven’s sake, let us find someone who has the rudiments of national pride to do something about the place! z

Before going to the next point, let me conclude by saying that we cannot put up a front for the tourists unless we, deep in our hearts, really feel proud of ourselves and our nation.

I will talk some more about this in the last portion of this chapter where I list five common habits which the overseas people intensely dislike. To us, these are routine and commonplace, but they have a lot to do with personal dignity and self-respect that I mentioned above.


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R—Relentless Drive for Upgradation By relentless I mean non-stop, unremitting and without mercy. By upgradation I mean trying to do better rather than merely improving. Upgradation does not mean simply improvement. The same as the difference between improving your employment prospects or upgrading them. Improving means you have more chances of getting a job, but upgrading makes you aim for a better job. So, what I am talking about here is pushing yourself in an unremitting and ruthless manner for doing things better and better: All the time and everywhere. How does one do this? You are your own teacher. Keep your eyes and ears open and look around you. Observe things and then analyse. Why is this being done like this? Can I do it better? And then, if the activity directly concerns you, go ahead and change it for the better. This is what I have noticed in the small countries that have been successful in attracting more tourists than us. If I go with the same tour package to the same destination after a couple of years, I find changes, improvements and tangible efforts having been made to upgrade whatever was on offer. z

Tourists bother less about how much money you spent on upgradation but notice and comment upon how much effort you made.

I have noticed this attitude of relentless upgradation particularly in the executives of the East. These people are trying all the time to do everything better, and it shows in the products they make and in everything they do. People who regularly do business in Singapore have noticed that if you go to someone’s office, home or study room after some months, you find changes. As I said above, the changes by themselves are not important; the attitude is. We, in India, are not like that at all. The older generations, even when rich, believe in simple living and have always been happy with the way things are. Well, simple living is one thing, not wanting to change is quite another. Why bother to change? My father did it this way and I will do it the same way. We do not want to change. I repeat. We are happy with the way things are, and do not want to change. We have plenty of shops and stores doing excellent business, but over the years, the get-up remains the same. And we have factories producing what they were making 10 or 20 years ago. z

That was fine for my generation. But if you youngsters do this, you are sunk.

A—Ask, Ask, Ask It is very typical of us that we consider asking for help, advice, comments and suggestions below our dignity. We decide to do something, go ahead and do it, and rarely go looking for feedback actively.

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Instead, getting feedback for whatever you do should be your obsession. It is crucial that you find out what people really think, what they have liked, what they have not liked and what improvements people think you should make. There is no other way of upgrading yourself. Without grassroots and marketplace feedback to make changes in whatever you are doing, you are working in the dark. Do not mistake what I am saying. Remember, listening to feedback is one thing, doing something about it is quite another. Listen to everyone, get ideas and only then do what you think is best. There should be no question of trying to please everybody. This is, I think, the most critical and difficult of the mantras. Young student volunteers carrying five page questionnaires and talking to visitors when they are leaving will not do. This is a mere waste of time. Sure you will get statistics but nothing concrete on which you can modify and base your future strategy. The idea is to get people to talk freely in a relaxed and comfortable ambience and that is not at all easy. I have had junior executives of travel firms and even chambers of commerce in many small countries approach me on the last day of my trip and request a few minutes of my time over a coffee. Invariably, the executive does not want to know what I liked. He or she wants to know what I did not like and what I think should be done about it. This is never done in India. It is impossible for our tour operators to get any feedback from the clipboard carrying youngsters that meet us at the airport where, as I said above, the visitor is merely number 163 on his list till he leads him/her to the limousine driver.

I—Innovation This mantra is almost an extension of what I said above. Go out and actively look for new ideas. Here again, if you look around you, you will see that we do not innovate; we do not easily change and are happy doing the things we have been doing. We live in a country that has been producing the same ambassador car for many decades. Innovation as an attitude for us is, as I said, not easy. Now, go and read the chapters that follow. You will see that what I am talking about is innovation and nothing but innovation. People in different countries have tried and succeeded using highly innovative ideas, but this certainly does not mean that we can duplicate any of these ideas here. You must have the guts to try something new and be prepared for failure too. But, as I have said repeatedly, if you do your homework meticulously; look at all the options carefully; seek advice, suggestions and guidance from anyone you can think of; you indeed reduce the risk of failure. I have said above that there is an enormous demand for new and innovative ideas in tourism and the driving force behind its creation is a new breed of consumers: young professional couples. They are creating an incredible demand for some upmarket tour packages that were undreamt of even a decade ago. Young consumers, both Indian and foreign, now demand that you use the latest technologies and features when planning fun filled holidays for them.


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Because today’s professional people, both in India and overseas, and both young and middle-aged, are the key tourism market of tomorrow, these shifts should have had big implications for tourism marketing companies and they should have offered interesting new opportunities to exploit. But are we paying attention? Look at what various countries have tried successfully.

S—Sharpness or Smartness Be alert and look, observe and analyse all the time and everywhere, no matter what you are doing at the moment. Many of you may have liked the concept of upgrading yourself but would want to know how to do it. My answer is: The only person who can show you new avenues to upgrade yourself is yourself. You have to be sharp, alert and observant—all the time and everywhere. See things others miss. z

My mantra for doing this is to ‘Look, Observe, Analyse and then shut up.’

Wait, this is not a misprint. The shut up part is crucial, but before I explain that, I will mention two things I have noticed in all successful executives of the East. The first is that these people are very sharp, alert and observant. They notice things others do not and they do this all the time—no matter where they are; at home, in the workplace or travelling. The other thing is that they keep what they notice to themselves. They offer advice, help and ideas only when asked. This does not mean they are selfish because they are often involved in social activities and help out where needed. The point is that they participate but do not interfere. To you, as future tourism executives, the ‘shut up’ part is also crucial. You will meet many sharp, alert and observant executives visiting your office or the facilities you offer. Sure they will notice things. But they do not go around telling you what they have noticed. No one will ever tell you: ‘Hey! Why are you doing it like this? Why don’t you try it another way?’ No, never. An executive who goes around poking his nose into other people’s business, is asking for trouble. People do not take kindly to being corrected, no matter how well meaning the other person may be.

E—Each Other My strong message is ‘Stop being a lone ranger and learn to work with each other’. The days when large companies could afford to have separate departments, each handling various aspects of tourist activities are gone. Now, small independent firms, each specialising in a particular part of the job, have to work together as a network. Sure, I have given many examples in the subsequent chapters, but in India, this is easier said than done. We are possibly the only country where our internal rifts and bickering is a trademark. Every family, firm, institution and political party splits and splits again. We do not work well with each other. Have you ever heard of a company or a party splitting in Japan, or England, or USA?

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Do read what I said at the beginning of the section ‘New breed of entrepreneurs’ earlier. I had discussed this from the point of view of the mindset and the work attitude needed to succeed in the highly competitive tourism and hospitality sectors, and I said that in the new world, you can succeed by working with each other and only by working with each other. I had explained that I was not talking about teamwork. You will find a lot of interesting comments regarding this in Chapter 15.

Interacting with Foreigners Now I come to the last section. I would like to talk about five things, five very common habits which overseas people intensely dislike when we interact with them. We do not notice these things since for us, these are routine and commonplace. We do them all the time. These points have a lot to do with personal dignity and self-respect that I mentioned before. I have noticed these things because, in the past, I used to come to India often as part of overseas delegations. So I had ample opportunity to look at our executives through the eyes of the others and I have also heard others talk about this. The first point concerns what we talk about in the presence of overseas visitors. Say there are one or two people from overseas and there are a couple of people from the Indian host company. Just think about what it is that we talk to each other within the hearing range of the foreigners. You will notice that the conversation is rarely directed at getting the foreigners to talk about themselves. We make little efforts to get casual and informal and to become friendly with them. We do not make them talk about their families, companies or countries. Next time this happens please notice carefully. It is my experience that we would rather talk about our own problems: water problems; electricity shortages; about the sales tax and excise inspectors who come to our factories, hotels or resorts and harass us. Please remember, no customer or supplier is happy dealing with a firm that has nothing but problems. He may not go to your local competitor. He may simply take the next flight to Malaysia. After a few drinks, we criticise our roads, our politicians, the corruption and so on. We run down our own country. Now remember what I told you above. The Asians who come here consider their own nations sacred and worship their countries. They are intensely nationalistic. You cannot criticise Japan in front of the Japanese; you cannot criticise Korea in front of the Koreans. So, when Indians loudly condemn their own country they are being critical of our own mother! The foreigners detest this. We have no business talking ill of ourselves, talking ill of our people, talking ill of our country in front of the outsiders. The second point: Try and notice how we talk to our overseas customers, or suppliers about our local competitors. We make less effort in talking about our own hotels, about our own companies than in running down the competition. Our entire PR effort


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often seems to be gossip. Gossip about the personal habits of the owners and the managers of our competitors and the problems they have had. This creates a very poor impression in the minds of foreigners. The third point: We in India have invented a term called ‘export quality’. We take pride in telling our overseas customers that we will make special efforts to produce special quality of goods for them, or we will make special arrangements for their clients. We tell them that what we offer to them will be superior to our normal running quality. This is ridiculous since nobody is convinced. I have noticed that goods of no other country in the world, even African nations, carry the label ‘export quality’. The term export quality to me means that this batch is made with special attention and I automatically assume that the rest of the production of the factory is third class or junk. This is just like a hotel advertising ‘clean towels and clean bed sheets’ in the deluxe rooms. What they are really saying is that the towels and bed sheets in the other rooms are dirty. The point I am making is that you need to convince your customers that you have a tradition of rigorous quality control at all times and that quality is a way of life with you. The fourth point is that in our interaction with foreigners, our executives generally do not take any notes. We think that carrying a small notebook and jotting down points is a menial task which is better left to the secretaries. We do take notes but only when we sit down for a meeting. If you notice carefully, you will see that the Japanese and the Korean visitors take notes all the time. I have talked about this at some length in chapter 4. The point to note here is that while talking to visitors, a lot of casual remarks and comments form an important basis for future information and personal goodwill. Here is an example: I know a leading businessman from Singapore who has been to India with me many a times. He has a peculiar habit of drinking whisky with the Seven-Up soft drink and no ice. He did not like whisky with water; he did not like whisky with soda, only Seven-Up. I had a sad experience while visiting a particular company in Delhi for the third time. We were asked out for dinner. Before dinner, the same executive would invariably ask, ‘What will you have to drink Sir? Can I offer you a whisky soda? Do you take ice?’ After the third visit just mentioned, my friend blew up, ‘You bloody idiot, look at the size of the business we give you. How is it that you do not remember my personal preferences? Obviously, as a person, I mean nothing to you’. I have seen this happen time and time again. Please understand when I tell you that this habit of not taking notes is something the foreigners find extremely distasteful. You give the impression of being casual, or not being serious. I have seen Indians visiting establishments overseas, strolling around with their hands in their pockets. If the fellow wanted to make a note of a particular machine or something, he would ask for the visiting card from his host and make a jotting at the back of the card! This is silly. The last point concerns an extremely distasteful habit. It is a tragedy that a couple of times, the Indian company loses business because of a simple and yet a routine habit of ours. Say, for example, we have received visitors at the Chennai airport and are driving with them to Pondicherry. It is a three-hour drive. There may be three

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of us in the car maybe one to two foreigners and the driver. Between Chennai and Pondicherry, as it is on the highways all over India, there are no public toilets or clean facilities available. We are comfortable with answering the call of nature, in the open, on the roadside by going behind bushes or trees. Nothing wrong with that! But after that we come back into the car and simply sit down without washing our hands. It is always so that there are bottles of mineral water in the car. It is very simple to ask each other to pour some water and wash our hands. The worst part is that the driver does the same. I have often noticed that at the end of the journey, when our Indian friends want to shake hands with the foreigners, the foreigners pull their hands back with an unmasked distaste and prefer to fold hands in our normal ‘Namaste’ fashion.

Preamble

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19 New Face of Tourism

In this chapter, we talk about where our Tourism and Hospitality sector stands in the eyes of the world and where it easily can be. What we think of ourselves, what we read in our own press does not matter a jot; it is what others think that makes it crucial. Remember, we are now living in an increasingly competitive world and India is not the only destination people would be thinking about. I can say with some pride that our performance in this sector has indeed been remarkable, but our success does not matter if many others are doing far better. It is a fact that we, with the finest brain pool in the world, are nowhere near the top of the list of preferred destinations as listed in most of the reputed travel industry surveys. We are being left behind by many newly emerging countries that are a fraction of our size. Visions of the future and innovative ideas are of course a good starting point, but at some stage, we need to convert all that into more and more customers who will pay. This constitutes the target market, and I would say that an almost textbook definition of what constitutes a tourism market is: [a] set of actual or potential customers for a given set of destinations and activities, who have a common set of needs or wants, and who reference each other when making a buying decision.

The last line above is very important and something we never bother about. I can say without any fear of contradiction that anyone a tourist comes in contact with in our tourism industry has the attitude that this is a one time contact. ‘I will never see these people again.’ So, why bother?

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Now-a-days, promotion of tourism does not merely comprise beautiful brochures and well-designed web pages. I have seen superb brochures and colourful write-ups in travel magazines on awful resorts in West Africa. So, remember the last point of what I just said. To me, the most important thing about promoting tourism is a group of friends or a family, in India or overseas, talking to their friends and asking about their experiences, when planning their next holiday trip. Tourists (individuals as well as groups) invariably talk to others before making a holiday decision. This is very critical. If we try to understand what people like, give it to them, talk to them, ask them how we can improve further, they will tell others about it. Advertising can only get people once to a website or to a destination. It is the word-of-mouth element and its forcefulness that will get them back again and again.

Every tourism textbook says that tourism is a powerful economic development tool. It creates jobs, provides new business opportunities and strengthens local economies. And, the textbooks go on to detail how tourism should be promoted. It is my contention that promoting tourism on more or less a textbook pattern will no longer be enough. The market has remarkably changed and so also the profile of the potential visitors. If our budding entrepreneurs in tourism have to take themselves and their careers in new directions of growth, they have to take a hard look at what some of the newly emerging nations around the world are doing. It remains a fact that many nations a fraction of our size are now attracting many times the number of tourists we get. The new mantra is cultural heritage tourism. Some of the developing nations have caught on to the fact that when cultural heritage tourism development is done right, while helping to protect a nation’s natural and cultural treasures and improving the quality of life for residents, it also adds immensely to the enjoyment of the visitors. If people come and get the feeling of enjoying themselves by participating in something, they will go home and talk to their friends and the growth-spiral will move relentlessly upwards. There is ample reference material that shows that linking tourism with heritage and culture in developing nations can do more for local economies than promoting them separately. That is the core idea in cultural heritage tourism: save your heritage and your culture, share them with visitors and reap the economic benefits of tourism.

We Have to Look East While researching for this book, I must have read something like a hundred books, journals, and write-ups on all aspects of tourism. If I leave out the leaflets and flyers promoting India as a destination, I notice three things:

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One, I find that there is an enormous amount of superb text book stuff concerned with the technical and managerial aspects of the tourist and hospitality trade: How to manage hotels and resorts, how to organise more tourists, and how to make them feel comfortable, and so on. But there is no discussion specific to India on why more and more tourists prefer going to tourist locations in tiny nations like Malaysia, Singapore and of course in Bali (Indonesia) and now Indo-China and Vietnam. If, in physical terms, India has huge dollops of everything these nations have, plus a lot more, what is it that our young entrepreneurs need to do to correct the situation? Two, while the tourist trade associations and others in India are already doing a superb job, I have not read any discussion about the role of non-tourist trade associations and chambers of commerce. I will show that these bodies have played a major role in promoting tourism in all the newly emerging nations in the East. And three, (as I have commented elsewhere in this book), everything I read was overwhelmingly slanted towards the West and it was mainly the western people that wrote the books and were speaking on the subject. Sure, our tourist industry is heavily dependent upon the West, Australia and so on and that is where the money comes from, but the West has nothing to teach our young entrepreneurs on how to compete with the Eastern countries that are winning away our tourists.

Here, I think it would be a good idea for the reader to be helped in probing a little deeper into the mindsets of the tourism entrepreneurs in the East. I am convinced that for our young entrepreneurs to compete and win in the increasingly tough world, we have to Look East. There are many lessons that our youngsters have to learn from the successful people in the East. Those fellows are using an ideology of working with and trusting each other that is doing wonders. I suggest that you go back and read what I said earlier in chapter 15 on Guanxi.

Let Us Go on a Holiday Before going on to some serious discussion, let us go on a short holiday to the Caribbean. Long ago, in early 1970s, I was visiting Barbados. It is a small island–nation that forms a part of the seven-member Organisation of Eastern Caribbean States in the West Indies. It is a beautiful sun-drenched tropical island and the tourist arrival in Barbados is many times its total population. This is the only country I know of where a legendary cricketer is featured on a currency note. Sir Gary Sobers rose to be the Governor of this tiny island–nation but the $5 currency note that bears his photograph honours him only as a cricketer. A small incident has made me a life-long salesman for this tiny nation. It was my first visit to the island and this was long before the days of the Internet. I went through the tourist brochures they had in my hotel room and was fascinated by some deep underground caves they had. It seems there was also a subterranean river, and the place was open to tourists on certain days of the week. The brochures mentioned special guided tours at certain times.

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I called the number printed on the leaflet but it was no longer in service, so I called the directory enquiry. This was the start of a number of surprises. My first surprise was when the girl on the other end found that I was a visitor to Barbados asked me to hold on. My next surprise was when a male voice came on the line and engaged me in a long conversation about where I was from, how I wanted to spend my free time and what sort of places I wanted to visit in their country. He told me about the days of the week when the caves were open to public, the timings of the conducted tours and the charges. He said the price included a pick up and drop from my hotel. There was no end to my surprises when he asked me to hold on and told me that the tour for that afternoon was fully booked and that he could get me a place on the tour the following day. Of course, I could not help asking if this was all part of the telephone company’s services. I got yet another surprise when I was informed that all the calls from visitors were re-routed to the local chamber of commerce and there was someone on call duty throughout the day. The first thing I did the next day was to visit the chamber and was amazed at the degree of organisation they had. Unlike the picture of the usual chambers of commerce or trade associations I had in my mind, it was a fully functional corporate office. I found that the chamber handled the entire spectrum of tourism activities and the Government did not even have a tourist information bureau. One of the executives there explained that it was the trading community that had a vested interest in the tourist dollar and so it was left to them to handle all aspects of tourism in the country. I do not know why we in India cannot work like this. In this book, I have used a phrase repeatedly: ‘Where we are and where we easily can be.’ In this chapter, I would particularly like to talk to those of you who are looking forward to starting your own organisations in the tourism and hospitality sectors. In chapter 13, while delineating three faces of entrepreneurial mindsets, I have contrasted the Western, Asian and Indian entrepreneurial mindsets. In that chapter, I have discussed the Lone-Ranger-Indian mindset where we just do not want to work with each other and everyone wants to be the boss. The reader would already have detected that throughout this book runs an undercurrent of a single thought: we Indians are not good at working with each other. We tend not to build strong commercial, professional, political or cultural institutions. Rather, we are good at splitting them, as each of us wants to be the leader.

First We Go to Goa Some years ago, I was living in Malaysia and was in Bombay with a small Malaysian trade delegation. I was the only Indian in the group. Some of the delegates had their wives with them and, on the spur of the moment, we all decided to go to Goa for a long weekend. We took the first flight and landed there in the evening without any hotel-booking.

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This was before the era of the Internet and as was my experience in other tourist destinations, we were all sure there would be a hotel–booking counter at the airport where we would be able to pick and choose the hotel that suited us best. We were keen to avoid the five star resorts and wanted more of local colour. After all, we were to be there only for two days. Well, I do not know how the airport is now, but in those days Goa did not have much of an airport. There was no hotel-booking counter but there were a number of stalls, each run by a different hotel group and having particulars of their own resorts only. There was no tourist information counter either. Each person we spoke to had different advice to give us and in the end we decided to hire a small van, there being seven of us, and go round to the different locations and see if we could find something that suited us. Goa is a very spread-out place, plus the van driver took us first to places where he obviously had ‘contacts’. So, finding a good place was a tiresome exercise and it was well past midnight when we could settle in dog-tired and quite fed up. The next day, we hired another van to take us around. We could not get our hands on any tourist literature and so had very little information to go on. Those days, the best and possibly the only source of detailed information on Goa was the Lonely Planet Guide published from USA, but we had not bothered to buy a copy. I am not proud of the fact that we needed an American guide to tell us where to go and what to do in the most popular Indian holiday destination. I understand that it is still the case. For everybody in our group, this was the first trip to India. It was a quick business trip but we still had two free days at Goa and my colleagues were keen on seeing something of the Indian culture. It so happened that while we were walking on a beach one of the ladies in our group saw a poster of a performance by some Indian classical percussion group that evening. We were all interested but the poster was half torn and we could not see the location. That was the only poster we could find on the beach so we made enquiries with the shop-owners around but nobody knew anything. Then we went to a nearby five star resort. We were told clearly that the resort would have information of cultural performances on their premises only and that too for their own guests. We went to another resort and got the same answer. Sure, the staff there were very friendly and helpful and made a few phone calls but got nowhere. Nobody really knew whom to call to find out what was going on in Goa. Well, we did not get to see the performance.

Now We Go to Phuket Let me tell you about my experience of a place called Phuket in Southern Thailand a couple of months later. It is a beautiful resort town, much smaller than Goa, but very much upmarket. When I landed at the small airport, I immediately saw a tourist information counter managed by one of the local chambers of commerce. I repeat that it was managed by a local chamber of commerce and not by any government tourist organisation, tourist resort, hotel or travel group.

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I was immediately reminded of what I had seen in Barbados. In chapter 12, when I discussed the new face of tourism, I have spoken about the local chamber of commerce handling tourists. I was amazed at how well-organised they were. They had brochures and schedules for everything. While I was going through the list of sea-side hotels, I noticed that the chamber also had a list of private homes that had been approved for accepting guests on a daily basis. I decided to stay at a small farmhouse on the side of a hill. Then I noticed a schedule of day-trips to a nearby island of Koh Samui by luxury boats. There was a brochure that told me all about the place and what to expect on the trip, so I chose a trip that included lunch at the island. I made my booking and also booked a seat at a performance of Thai classical dance that evening. I did all this at the airport, and it took just 15 minutes. I was asked to pay in full for everything, got proper receipts and tickets and there was no surcharge. I am sure the chamber got a commission out of what I paid, but I did not mind that. For me, it was a one-stop payment and no haggling or hassles were needed. My stay there was one of the most delightful experiences I have had for a long time. Everything was superbly organised. I would not have commented on this if I had been in Europe or the US, but this was Asia. But wait, the best is yet to come. As students of management and tourism, there is something for you to learn here. You know how we do these things in India. Now see how others do it. I found that the tourist boats that ply between Phuket and Koh Samui are something like our share taxis that ply between major towns in India: There are a number of points from where the vehicles leave, each vehicle leaving as it fills up. In India, I have found this very irritating as there is no way I can go for an advance-booking when travelling by share taxi, say, from Delhi to Dehra Dun. Often I wait for a vehicle at one point and I have no means of knowing if a vehicle is waiting for one more passenger at another. There is no co-ordination or co-operation of any sort, and everything is grossly disorganised. In Phuket, the boats do leave from various piers but in a surprisingly organised manner and passengers hold confirmed seats. Since I was holding a ticket that had already been issued according to the boats available, I directly boarded the boat, as I got to the pier. I was impressed and wanted to know the name of the organisation that ran these cruises. I found that there was none. No large firm was involved at all. I asked some questions and realised what an incredible feat of organisation it was and how many different entities were working together. z

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There are a number of independent cruise–operators that offer different options. They organise the schedules and the activities but they have neither their own boats nor any restaurants where we were to have lunch. The boats and the restaurants are owned by different people. The tickets and the booking are co-ordinated by yet another party. A passenger like me has the free option of the trip he likes, can buy the ticket at any hotel or entry point like the airport and be sure of the departure time, the schedule and the details of what to expect.

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But wait; there is more to come. As we were going up the ramp to get on board the vessel, I noticed a photographer standing at the head of the ramp, clicking away and taking pictures of all the passengers. Some of the passengers smiled and waved at him. I took no notice of this as I am quite used to being harassed by photographers at all tourist destinations. They all offer to take your pictures for exorbitant amounts. But what surprised me was that there was a lone photographer and he did not approach anyone, asked no one’s permission and did no bargaining. When our boat returned in the evening, we landed at a different pier. I was surprised to be greeted by a young fellow as I was coming down the ramp. I saw other passengers being similarly greeted by other boys. Then I noticed that the fellow was showing me a beautiful picture of myself coming up the ramp, framed in a very nice ceramic frame. He did not push it on me. He merely said that if I wanted it, I could have it for the equivalent of Rs 200. It was an offer I just could not refuse. On the way back to the farmhouse where I was staying, I sat back and thought about the immense amount of organisation and co-operation that must have gone into this simple idea. And, looking at the thousands of tourists who take this trip daily, the returns from this activity by itself would be mind-boggling. There had been no jostling and pushing of photographers eager to take our pictures; only one fellow taking the pictures at each jetty; no one had bothered the passengers as we boarded; no one had forced anyone to buy the pictures and no one was there to give a me a dirty look if I had just said ‘sorry’ and walked off.

The World Can but We Cannot? Huh? When I compare this with the unruly pushing and jostling that the tour guides and the photographers do at our temples, monuments, resorts and other tourist destinations, and when I compare the pittance our people earn at the end of the day, I repeat what I said in the beginning about where our tourism and hospitality sector stands in the eyes of the world and where it easily can be. I would suggest that you go back and go through chapter 15 of this book, where I introduced you to Guanxi, the social philosophy of Confucius detailing how a society must organise itself and work together for economic benefit. Well, what you read above was Guanxi in action. The chambers of commerce and various associations provide the organisational aspects. They get into the act and the informal network that results is not only amazing but also highly profitable for everybody. After all, at the end of the day; it is the trading community that is the ultimate beneficiary of tourism. So it should be up to them, and not to the government, to see that the tourists keep on coming again and again.

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20 Handicraft Tourism

Tourism means business and business means entrepreneurship. If our young entrepreneurs have to make a mark for themselves (and for our nation), they have to consider some of the highly innovative ideas that some of the developing nations are using to draw tourists. One of the most original ideas that has impressed me a lot is to use the traditional production of handicrafts to make tourists enjoy themselves more and, of course, spend more. I have noticed a strong shift from ‘look and see’ towards ‘touch, feel and do’, whereby handicrafts are used to enable the visitor to come into closer contact with locals and their way of life. People do look forward to interacting authentically with the cultural and creative landscape, and then go home and talk about it. The last part of the above para is very important: ‘and then go home and talk about it.’ That is what will bring dividends in the form of more and more tourists. I am not talking about merely selling handicrafts to tourists. Rather, I am talking about using handicrafts to promote tourism in enabling the tourists to see and experience the actual production of crafts. Closely coupled with this is a new approach to cultural heritage tourism, where the tourists actually see and experience the culture, history and archaeology of local people; plus village-based tourism, in which tourists share in village life. I have seen that different nations have tried out different ideas that have had different effects on the local economy and environment. I am particularly fascinated by the experiments several nations have undertaken on blending handicrafts and tourism development as an excellent way of simultaneously preserving tradition and poverty alleviation in rural areas. I will talk about some very interesting and innovative ideas I have seen, in the next chapter.

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Though visitors are fascinated by the artisans, I do not think the artisans always welcome it. They’re busy with their occupation, and they don’t have time to let people come through and disturb them. The trick for our budding entrepreneurs is to somehow create a mechanism that would enable visitors to come and see and you would end up creating customers for life. Of course, everybody is realising that while the aim is to draw on traditional lifestyle and culture to increase the value added, sustainability has become the order of the day, both culturally and with respect to the physical environment. Increasing attention is now being paid to conservational issues and there is also increasing public awareness of developing craft villages in harmony with environmental hygiene. While a discussion on promotion of handicrafts is not my objective, I will seek to establish that the rural communities do indeed gain economic and other benefits from such tourist related activities. One of the major problems that every developing country has faced is the role of handicraft traders who serve as middlemen. Invariably, these are the people that derive the maximum benefit by lending money and getting the handicraft producers in their clutches for life. The craftsman leads a life of abject penury and destitution, which leads him to discourage his children to take up the generations—old craft, taking the spiral downwards towards poorer and poorer quality. One of the ways of decreasing the influence of the middlemen and increasing the income of the craftsman is to encourage the handicrafts producers to come in direct contact with the actual customers: by taking the tourists to them. Three things happen. 1. Quality improves The producer understands first hand what the customer needs; gets new ideas and inputs by talking to the tourists; plus he gets higher prices for custom made items. 2. Goodwill improves Tourists get a feeling of personal involvement; participate rather than just watch; enjoy themselves immensely and talk about their experience when they get back home. 3. Revenue improves Tourists spend more as they have more to do. In this chapter I will be talking about some of my own experiences in some of the more successful developing nations. Contrast this with what we are doing in India and the lessons we can draw from these.

Malawi Let’s go to Malawi first. Here is a superb example of an entrepreneur using traditional village-based handicrafts to boost the tourist trade as well as his own fortunes.

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Local entrepreneurs in Malawi joined in very enthusiastically. The Government of Malawi just sat back and watched and apart from an occasional pat-on-the-back, had no role to play. I have lived and worked in Africa for many years and have been a frequent visitor to Central Africa. Malawi is a beautiful, land-locked, semi mountainous country in south-eastern Africa, formerly the British protectorate of Nyasaland. Bounded on the north by Tanzania, on the east by Lake Nyasa, on the south-east and south by Mozambique, and on the west by Zambia, it is one of the better-developed countries of Central Africa. The capital of Malawi is Lilongwe, which lies to the north. The largest city and the commercial hub is Blantyre, almost at the southern tip. The parliament sits up in the mountains in a place called Zomba, in the west. Unlike almost all the countries in that part of the world, Malawi has been strife-free and generations of Malawians have grown used to a stable government and a peaceful lifestyle. I have always found it a very fascinating country. The first time I went to Malawi was in the early 1970s. It was an attractive destination for tourists, particularly from the neighbouring countries. Though Malawi really had nothing to offer that its neighbours did not have in plenty, it was by far the most peaceful and tranquil country in the region. There were many beautiful holiday resorts around Lake Nyasa, the world’s largest inland body of water. There are sandy beaches but no tides. People came just to lie in the sun and do nothing: in any case there was nothing to do. There was almost nothing to shop for except for some really superb Ebony woodcarvings. Ebony is an exceptionally hard, beautiful and expensive wood found mainly in the sub-Saharan desert regions of Africa. Its exceptional density makes it not only very heavy, but also gives it an incomparable and permanent sheen when carved and polished. The carvings sometimes come as a beautiful mixture of black and brown but mostly as pure black that is most well known. Each piece has its own special texture, colour and beauty. Traditionally, it was West Africa that was home to master carvers of Ebony, but many tribes all over West and Central Africa also have their own particular tradition of Ebony carving. People do it mostly as a pastime, using simple hand-tools to produce some highly traditional but incredible works of art. Over the years, Malawi developed a solid reputation for some of the best Ebony carvings in Africa. Walking on the streets in Malawi, I was surprised to see that the carvings that were world class in design and finish were being sold for peanuts on the footpath of the big towns. The problem is that Malawi is a land-locked country deep in the heart of Central Africa and its inaccessibility makes the overseas marketing of the handicrafts difficult and expensive. Well, that was the early 1970s. I was there again about 20 years later. I found the country just about the same but the change I found in the handicraft market was astonishing. Instead of the footpath sellers, there were regular stores and, in addition to a far better selection of Ebony carvings, there were Soapstone, Ivory and other types of wood-carvings. There was not only a quantum leap in the quality and the finish of the work on sale but the prices had taken a leap too. The range of items now included small home furniture items.

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Of course I was curious and I checked. I was told that some years earlier an Englishman who was in the travel business in London had married a girl from Malawi. The wedding took place in Malawi and the bride’s family had gifted the young couple a fabulous dining set made entirely of dark brown Ebony. Back home, the groom noticed how much of a craze this set became with his friends and everybody wanted something like it. He got the idea of organising a holiday tour of Malawi for his friends to go and see where the furniture had been made and to try to get their own items custom–made. The bride’s family turned out to be even more enterprising, and they arranged for the initial group to be accommodated in a tribal village with tribal dances and cultural shows in the evening. Out of nothing, a remarkably new approach to cultural tourism or village-based tourism emerged; the tourists actually saw and experienced the culture, history and lifestyle of the tribal people. They felt that they were sharing in village life. I am told that the first group had planned to be in Malawi for five days, but they stayed there for three weeks! The group went home and talked about it and surely it was the start of something highly lucrative for everybody. Slowly, many travel agents started organising such tours that catered almost exclusively to retired British or European people who took their friends along for an opportunity of a unique holiday plus getting small furnishing or decorative items of exceptional value custom–made to their own ideas. I do not know how this particular tourist activity is doing in Malawi nowadays, but I see from the published statistics that the tourist profile of Malawi has changed dramatically during the last few decades. Let me summarise the lessons for India in this. 1. This is the best example I can give from my own experience where a group of entrepreneurs have joined hands to cash in on a traditional lifestyle and culture. 2. It is a spontaneous getting together of disparate entities, from travel agents to hoteliers to village headmen to craftsmen, plus the local chambers of commerce, in an informal sort of a network. Nobody was really the leader, the owner, or the boss, but everyone profited. 3. Value added has been increased, without any substantial investment in infrastructure. 4. Again, value added has been increased, without any substantial increase in the number of tourists. Almost the same number of tourists came, but they enjoyed themselves more, stayed longer and spent more. It is one thing to see a cultural performance arranged by the tourism department or a five star hotel in Lilongwe or Blantyre and quite another to see the school children perform for visitors in a tribal village. 5. This is sustainable tourism, with a positive impact both on traditional values, culture and the physical environment. 6. The Government of Malawi had no role to play in this. They merely sat back and watched. It was an entrepreneurial effort through and through.

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Bali For the budding entrepreneur looking for new avenues of growth in tourism, the richest source of ideas, experience, caution and inspiration is Southern Bali. Everything that is worth trying in India has been tried there. The story of the island of Bali, Indonesia, had a magnificent start but quickly plunged into ecological and environmental disaster. Bali has always been an enchanting place for foreigners. Images of rice paddies, beautiful beaches and temples and a fascinating culture draw tourists from all around the world. The industry did bring many benefits to the island, but the development occurred too quickly and without proper planning, causing some serious damage to the island’s environment. Further, as has been seen in every country, tourism will inevitably have some influence on the cultural traditions of any host community, and this has also happened in Bali, even when its culture is considered its strongest asset. We will talk about how the enterprising Balinese have faced this. Now the trend is for sustainable tourism, which is a combination of ecotourism and socially responsible travel. Sustainable tourism has admirable goals, but it is not always easy to achieve them. This alternative to mass tourism requires managing all resources so that social, economic and aesthetic needs are met while simultaneously maintaining cultural integrity and well-being, fundamental ecological processes, biological diversity and life-support systems. Social scientists, travel–writers, art specialists, in short an entire spectrum of academicians have written books after books and have published papers after research papers on sustainable tourism or ecotourism in Bali. But even more than the environment, most of the research that has been done on the impact of tourism on Bali has been on the cultural effects. The Balinese consider themselves a distinct ethnic group within Indonesia. In Bali, Hindus make up over 90 per cent of the population, but they are only 2 per cent of the Indonesian population. Additionally, Hinduism as practiced in Bali is unique. It is deeply intertwined with art and nature, and is less involved with scripture, law and belief. It is a blend of Hinduism, Animism, and Chinese ancestor-worship, and thus it is more concerned with local and ancestral spirits than with the traditional cycles of rebirth and reincarnation. Temples are associated with a family–house–compound, ricefields or geographical sites, and each Balinese belongs to a temple through descent, residence, or ‘some mystical revelation of affiliation’. Culture has always been the island’s strongest attraction, ranging from the beautiful Hindu temples to the dances and traditional arts. The Balinese are also changing. They have accepted new forms and styles of arts introduced by foreigners. Even though some crafts and ancient dances are dying out, like tortoise–shell work, bone and horn carvings, and terracotta figures, new arts are being adopted, such as batik from Java, furniture styles, wood-carvings and masks. These developments of course tend to offend many purists, but in addition to the large research work done on the aspects of culture and ecotourism, the Internet is full of papers on the huge success of the close relationship between handicrafts and tourism in Bali. In Bali, crafts and tourism have promoted each other.

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However, one aspect that is not talked about much is the Balinese artwork and tourism clusters story. I do not think the Balinese villagers have ever heard of Michael Porter, the strategy–guru from Harvard, but I am sure they can teach him a thing or two. Michael Porter became famous by suggesting that industry clusters, in which firms compete against each other locally, tend to be more successful when they compete abroad. The advantages of being located near each other are that firms include better information on their competitors and positive externalities such as specialised labour pools. He cites several famous examples on California Wine Clusters, Silicon Valley IT cluster, Houston Oil and Gas Cluster and the Boston area biopharmaceuticals clusters. Getting back to what I called the Balinese artwork and tourism clusters story, the clusters have long been the backbone of both the tourism and art and craft industry in southern Bali. There are many tourism clusters where a number of hotels, resorts, restaurants and shops are located in a close proximity to each other, but there are also a handful of Balinese villages that are traditionally the centres of production and marketing and can be called clusters. 1. Tihingan is an industry cluster for the production of Gamelan. Gamelan, which is almost an orchestra by itself, is the main element of the Indonesian traditional music. The instruments in a Gamelan are composed of sets of tuned bronze gongs, gong-chimes, metallophones, drums, one or more flute and bowed and plucked string instruments. In some village Gamelan, bronze is sometimes replaced by iron, wood or bamboo. 2. Balinese have made Kapal famous for Sanggah (temple statues). Balinese have been working for generations to develop handicrafts on the lines that they do not remain mere commodities, artistic works or the treasures of the country. They have relentlessly upgraded by close interaction with their customers—the tourists. And most importantly, they understand the motivations and tastes of the tourists in order to ensure that product design and development are demand–driven; to develop new items that the people would actually use in their homes, all the while keeping the precious authenticity of traditional values in mind. The existence of local rivalry, specialised labour pools and availability of supplies within clusters have boosted the competitive advantages of firms. Clusters also tend to gain specific brand equity as tourists and buyers recognise the quality and price levels of goods offered by firms in the clusters. The Balinese saw the potential of using handicrafts to promote ecotourism because of the cost-effective role that local handicrafts have in the promotion of a destination. The result is that rural to urban migration has been considerably reduced, the binding of communities for common economic benefits has increased, plus this has helped to foster the continuity of local traditions and to preserve cultural heritage and diversity. Let me again summarise the lessons we have for India in this: 1. This is also an example where a group of entrepreneurs joined hands to cash in on an opportunity. The local government of Bali had little role to play in this. It was completely an entrepreneurial effort.

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2. In Malawi it was a spontaneous getting together of disparate entities, from travel agents to hoteliers to village headmen to craftsmen, plus the local chambers of commerce, in an informal sort of a network. In Bali, this was driven by the desperate need to save the dollar earning tourism from its own devastating effects. 3. Again, just like in Malawi, value added increased, without any substantial investment in infrastructure. 4. I would strongly emphasise three points. z

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One, that the Balinese have developed their own version of sustainable tourism, and have assimilated new forms and styles of arts introduced by foreigners without moving away from the strong base of their own traditional values, culture and the physical environment. The second point, which is also a remarkable aspect of the entire exercise, is the complete absence of internal bickering and petty rivalry among the local travel agents, hotels and the craft producers. Sure there are many competing commercial entities involved, and local rivalry is there too, but there is no jostling, no undercutting and no touts trying to entice the tourists away from one producer to another. The third point is that the producers knew that the customer, the tourist, was there for a limited stay only and once anyone committed a delivery day and time, competing firms got in the act to see that the customer was not let down. This is an enormous boost to the goodwill.

Handicraft Tourism in India I am now going to take you on a delightful journey of discovery through a little known crafts world of India. While researching for this book, I was keen to see for myself the handicrafts manufacturing scene in my country, particularly the not very commonly known or talked about items. I did indeed find a host of highly traditional items that have very rich cultural history behind them but are not commonly available in most handicraft emporia. The range of items I could have talked about here is quite wide but my focus here is not handicrafts but what I am calling handicraft tourism as a new opportunity for our entrepreneurs, so I am only going to talk of production activities that can generate an interest in both the domestic and foreign tourists going to and meeting the artisans. So, I am going to leave out the handicraft or cottage industry activity at village level which is there in almost every state in India. Taking tourists to see this is village or rural tourism, and that is outside the scope of my discussion. I wish to be clearly understood that, as I have explained through the examples above, handicraft tourism develops and pays dividends only where tourists are keen

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to have items custom–made for their homes and have an interest in going and meeting the actual artisan at work. This is a shift from ‘look and see’ towards ‘touch, feel and do’, whereby handicrafts are used to get the visitor not merely to come in closer contact with locals and their way of life, but also enabling the visitor to look forward to taking back a part of the local culture that would become a part of his own home. So, going back to my research, I had no problem locating the artisans, as there are ample published references in academic texts. Moreover, I was travelling to all parts of the country interacting with MBA and postgraduate engineering students and I easily made detours whenever possible to wherever these items were made. I went and met the artisans and got the feel of their lifestyle. In this journey of a lifetime, on the one hand I was thrilled at the richness of our cultural wealth, and on the other I was sad at the slow demise of these arts. Wherever I went, I found almost all the craftsmen revealing that they saw no future for their children learning their ancestral skills. Most of the children of the artisans are moving away, taking the spiral of quality, creativity and productivity relentlessly downwards. I am sorry if I am getting a little emotional here but this is where I look up to our budding tourism entrepreneurs to step in. I will show that there are endless opportunities for them to do something new. I will also show that our bureaucracy has no role to play in whatever direction we go from here. In this journey, the first stop is our handicraft emporia—you find these in every big city across the nation. In range and aesthetic appeal, traditional crafts produced in India are unmatched anywhere and so the emporia selling nothing but handicrafts are understandably some of the largest in the world. These are invariably a must-visit item in the itinerary of almost every domestic or foreign tourist. There are two points I do not think many people are aware of: 1. There is nothing unusual in tourists asking if it is possible to talk directly to the artisan: It happens all the time. I have had many overseas visitors with me who have seen an item in a shop and have asked if it is possible to have the item custom–made to a slightly different size or design. I have also heard many tourists make the same request. Placing an order with the shop is of no use as there are some changes that are possible to be made and some cannot and it is only the artisan who can discuss this. Invariably the shopkeeper shrugs his shoulders and walks off to attend to the next customer. 2. The entire handicrafts industry is under a very major threat from China. China is flooding the Indian market with superb quality religious icons, statuettes and figurines. The entire country now uses Diwali diyas made in China. Illuminated and framed pictures of the entire spectrum of deities with beautiful background animation have replaced the crude versions our artisans were making. Not only that, China is also selling fake Indian cottage industry craft products that are impossible to distinguish from the original, at half the price. The range of fake items is mind-boggling. Everything from Murshidabad carpets, to Moradabad brass items to Rajasthani bidri work is available. I would have said that

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Indian traders merrily sell these for a greater profit, but this would be partly true. I know handicraft importers in the US and Europe who have endless problems getting their supplies from small disorganised producers in India. So China has jumped in and merely seized the opportunity. But yes, there is a possible solution to both the aforementioned points. If you have read what I said about Malawi and Bali, you will be able to guess what I am going to say next—arrange for the tourists to see the handicraft producers in action and get double benefit. In India, however, this is easier said than done. I will start by looking at by far the most promising example in the country— Pondicherry.

Pondicherry Pondicherry is unique. It is at the same time a very successful tourist destination both for domestic and international tourists, and by far the best of the emerging centres for crafts in India. World-class crafts, some of which did not exist a few decades ago, are being produced in and around Pondicherry. There are items being produced here that are not made or even sold elsewhere in India. I am talking about the connection between handicrafts and tourism in Pondicherry because I live here now and can speak from personal experience. I have plenty of visitors coming here as my guests and one always keeps on meeting people who have been here earlier. I am amazed when I find how little the people who have been here many times know about the immense wealth of creativity that is to be found here. All that the visitors see is what is sold in the Ashram shops and the handicraft shops. The latter mostly sell stuff from other states. What amazes me even more is the interest my visitors show once I take them to meet the artisans; the way they go and talk to their friends back home; and the way their friends come here particularly looking forward to getting things made here for their homes. Everybody wants something made just so. Let me talk about what is made here.

Papier-Mâché Items Not many people would be able to locate a generations-old unit, a few kilometres from the proper town that boasts of a 150 year-old history. The family currently running the show are still living and working in the ancient house, using techniques that clearly have been handed down from generation to generation and are possibly unknown anywhere else in India. I say this because I have never seen any papiermâché items in any emporia with anything remotely approaching the intricacy of design and the delicacy of finish this family produces, plus the range of items seems to be

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endless. I am surprised why these items are not available in the shops in Pondicherry. Whatever the shops do sell are only a few designs of purely religious icons and figures. There are two problems with taking visitors there. One, every time I go there they hardly ever have anything in ready stock. They are always making something different against specific orders. And two, the charm of visiting a family living and working in an ancient house disappears as soon as one enters the house and sees the condition of extreme dilapidation.

Handmade Paper I see references on the net telling me that the history of handmade paper dates back to 100 AD, with its origin in China. Other references claim that Indians hold the credit of having used paper from cellulose fibres much earlier, during 3rd century BC. The handmade paper industry that had flourished in India during the Mughal era gradually declined with the establishment of paper mills during the 18th and 19th centuries. I am told that the art of handmade paper-making in India was revived under the inspiration of Mahatma Gandhi. Sri Aurobindo was keen to have this ancient art revived in Pondicherry and encouraged some French artisans to help set up a unit on modern lines. Today, while the handmade paper industry has over 150 units all over the country, by far the best is the Aurobindo Handmade Paper Factory at Pondicherry. Paper made here not only has an elegant appeal and exquisite textures and tints of small dried flowers, leaves, coloured fibre, and so on, it has excellent tensile, bursting, tearing and double fold strength as compared to mill paper and does not turn brittle due to aging. The factory freely encourages visitors to take a look around, but with prior notice.

Handmade Paper Crafts Closely connected with the Handmade paper industry in Pondicherry, some French entrepreneurs set up craft units in nearby Auroville where a superb range of items based entirely on handmade paper are produced. Here pioneering work has also been done by using dried and pressed natural flowers and leaves to produce unique and attractive items like greetings cards, lampshades, table mats, coasters, serving trays and gift boxes. The list and the range of designs also seem to be endless and one sees new items every day. Over time, as the popularity of these items grew, some of the artisans who got their initial training in Auroville set up small units in and around Pondicherry. One thing that I have noticed in these units is that, unlike other copy-cat units in the rest of the country, the standards of quality and creativity has been very consistently maintained because of the benchmark standards of the nearby Auroville unit.

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Marbling on Textiles The art of marble printing, where oil based tints, dyes and paints are floated on water and the resulting marble-like design picked up on paper or textiles is ages old, and many countries produce handicrafts using variations of this technique. However, under the patronage of Sri Aurobindo and The Mother, some French artisans set up a unit in the city long ago, using highly original materials and methods to produce marbled sarees, scarves, neckties and handkerchiefs, and so on the like of which are available nowhere in the world. The marbling works of the Aurobindo Ashram maintains its exclusivity and makes it a practice not to permit the sale of any items except at its own showroom in Pondicherry. I have found that the goodwill this unit enjoys all over the world is immense. I have gifted neckties, or scarves to my friends overseas and during my next visit to them I find they have kept the items in their original packing. I am told that if one takes the item out and starts using it, it becomes a nice piece of cloth, but in the packing with the brand of the Ashram, it remains a proud possession, the value of which grows over time.

Miniature Terracotta Figurines Within walking distance of the papier-mâché unit that I have mentioned is one of India’s best terracotta figure–maker. Terracotta work is done across the country and the base relief art work panels of eastern India have a generations-old tradition. I will be talking of the artisans in Kumartuli in Calcutta below, but the delicacy of design and the attention to detail here is unique. This unit, and now many others like it all around Pondicherry, specialise in producing miniature figurines of about two to five inches of stunning beauty. True, they produce larger items too, but their forte seems to be an enormous range of highly original and intricately designed miniature religious icons and figures. I would add elephants, horses, goats and a range of animal figures to the list. Here again, I have a problem taking visitors there, since they hardly ever have anything in ready stock. Like the case of papier-mâché items, I am surprised why the shops in and around Pondicherry sell only a very limited range of designs and that too of purely religious icons and figures. Let us now go to eastern India and meet some clay modellers.

The Clay-Idol-Makers of Kumartuli in Kolkata I will talk about the Durga Puja festival in another context later on, but here I will talk about clay-idol-makers who play a central role in this remarkable festival. There is something in the Bengali ethos that brings much of an economic bonanza, enlightenment, and faith during Durga Puja to the city of Kolkata every autumn.

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I am told that to understand this, one has to be there much before the pujas begin; witness the artisan at work in Kumartuli and then experience the spirit of the puja about a fortnight before the drums fade away and the images immersed in the muddy waters of the river Hooghly, melt into oblivion. There is a frenzy of last minute activity at Kumartuli just about 20 days before the drums (dhaaks) rend the air and the festival begins. Kumartuli, the nerve-centre of the clay idol-makers of West Bengal, is home and workshop to more than 150 clay-model-makers. Criss-crossed by a maze of narrow gullies men, women and children alike have to find their way out through these dingy lanes. Kumartuli, is said to be older than Kolkata. The term ‘Kumar’ means a potter and ‘tuli’ a locality. Just where history ends and legend begins no one is quite sure. Kumartuli’s clay-model-makers claim their descent from people who made images of Durga for Maharaja Krishna Chandra of Krishnanagar. The power of legend still overwhelms the ordinary visitor. Densely populated, Kumartuli is a hive of activity from June to the end of January as artisans get busy making scores of images for the annual autumn festival. A potters’ colony ever since its inception and a model-makers haven now, it is the home of the finest clay-artisans in India. Nearly 80 per cent of the community puja images in Kolkata are made at Kumartuli, some by well-known but the majority by lesser known artisans, who strive to make something new and innovative every year.

Stone Carving in Orissa While travelling in Orissa, I spoke to a number of people whom a visiting tourist is likely to come in direct contact with—people in the hotel trade; travel agents; tourist taxi operators and touts pretending to be tourist guides at various temples in eastern India. Everybody talks their head off about the history and geography of the famous temples we have in Orissa, but I am surprised at how little our people know about the progeny of the artisans who built the magnificent temples of ‘Parsurameswar’ ‘Mukteswar’ ‘Lingaraja’ ‘Jagannatha’ and that wonder in stone, the temple chariot of the Sun God at Konark. The direct descendents of these great artisans are working hard even today to keep alive the sculptural traditions of their forefathers. Their deft hands chisel and carve exact replicas of the original temple sculptures besides producing a variety of other items. Unlike sculptors of other places, the Mohapatras of Orissa are at home with a variety of materials—they handle with equal facility the ultra soft white soapstone, or the slightly harder greenish chlorite or the still harder pinkish Khandolite. The trade mark figures they make are the Konark wheel and the Konark horse, along with the ubiquitous indolent damsels, the lady under the bough of a sal tree, heavenly beauties playing on different musical instruments copied from the top-most tier of the Konark temple and the nine deities representing the nine planets. Of course there are many other purely religious motifs. In recent times many decorative and utilitarian articles like ashtrays, paperweights, candle stands and book rests are also made.

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When I was posted overseas, every time I visited India, I loved taking a break and spending some time with these artisans in their rural homes. I felt I was going back to the times of my ancestors. I remember that I once had a Swedish doctor couple with me when I was visiting India and we all went to a place called Behrampur in Orissa. The lady fell in love with the soapstone carvings she saw and wanted to have a set of three matching dancing figures made to specific sizes, to suit a corner she had in her home. She wanted the middle one two inches taller than the other two. It would have been impossible for her to find these in any emporia. We met a number of artisans and they all had the surname Mohapatra. Since the time was short, three fellows got together and each made one item of the matching set. The result was remarkable and I believe that for this couple, and for some of their friends, there is no other place for a holiday. Stone carving has always been a major craft of Orissa. As is evident from the innumerable archaeological monuments, rock-cut sculptures, caves and temples built for centuries and embellished with most beautiful and intricately carved statues and other adornments, the art of carving in stone must have reached distinctive heights of excellence and got perfected through centuries of disciplined efforts of generations of artisans. It is tragic that the traditions that have been proudly carried on from generation to generation are now dying out. I will talk more about this later.

Shantiniketan Paintings on Moga Silk Nandalal Bose was a contemporary of Rabindranath Tagore and was responsible for developing the teaching of fine arts at the Rabindra Bharati University at Shantiniketan. He developed a unique style of painting on various media and Mukti Bannerjee took this further and commercialised the painting on Moga silk as a mass-produced handicraft. Today, it would be hard to find a Bengali household in Kokata that does not have a Shantiniketan style painting on Moga silk. There are a number of artisans in and around Kolkata who have learnt their craft from Mukti Bannerjee and are producing unique and attractive items like greetings cards, lampshades, table mats, coasters, serving trays and gift boxes. I have often met tourists in shops in Kolkata who see the miniature Moga silk paintings and ask if they can order custom designed greetings cards, table mats and such other things. Invariably, the salesman turns away to attend to other customers. What a pity! Let me summarise the lessons for our entrepreneurs in this: z

Before saying anything else, let me say once again that no government body has any role to play in the promotion of tourism by arranging for tourists to visit handicraft producers. This must be by and large an entrepreneurial effort.

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I have said earlier in this chapter that I have seen in every country where handicraft tourism has paid dividends that it is purely an entrepreneurial effort, but in our case I have noticed a complete lack of linkages between tour operators, hotel owners, handicraft villages, trade associations and chambers of commerce. Everyone is a lone ranger, ‘I do this and I am not responsible for what the next fellow does’, making the entire set-up fragmented and dependent heavily on individual effort. This is causing us a great damage and I have talked about this at some length in chapter 13. Our entrepreneurs have to understand that much more can be accomplished by working together rather than by working alone. Read what I have said before. Learn from the successful handicraft tourism programmes where partners who may not have worked together in the past participated profitably. This may not take the form of a partnership or even a teamwork. Rather it should be more of a network as I have explained in Parts 1 and 2 of this book. But working together is essential, not just because it helps develop local support, but also because handicraft tourism demands resources that no single organisation can supply. Its success depends on the active participation of business leaders, chambers of commerce, trade associations, operators of tourist sites, artists and craftspeople, hotel and motel operators and many other people and groups. It will be seen that everyone profits. However, in our case, people care less for how much they benefit. They care more for what someone else is getting. This destroys the entrepreneurial spirit. Development of handicraft tourism destination plans must include visitor management strategies in handicraft villages. What is the maximum number of cars or buses the area can handle? On roads? In parking lots? Can the place accommodate group tours? Do sites accommodate a group of people at once with amenities such as restrooms, snacks and a seating area? It is essential that the entrepreneurs make all stackholders aware of a handicraft village’s tourism products and potential. You may need to design specialised tours for tourists who are particularly interested in handicrafts and traditional methods of production (such as artists, fine art students and academicians, both domestic and international). Many countries have arranged local entertainments (dance, music, street plays, festivals) as well as local cuisines. These promote local culture and help in income generation. It is important that our entrepreneurs understand that local priorities vary. So do local capabilities. In other words, local circumstances determine what your area needs to do and can do in cultural heritage tourism. Programmes that succeed in other countries succeeded because they have had widespread local acceptance and met recognised local needs. They were also realistic, based on the talents of specific people as well as on specific attractions, accommodations, and sources of support and enthusiasm.

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21 Heritage Tourism

The Focus The target tourist market I had in mind when I was talking about handicraft tourism above was mainly foreigners or non-Indians visiting India. Now, I will talk about what we call Persons of Indian Origin (PIOs) or the Indian Diaspora. These are people who left India some generations ago and are now living all across the globe, from Fiji in the South Pacific to Malaysia and Singapore in Southeast Asia to Africa and on to the West Indies and South America. They now number about 25 million, and form a sizeable proportion of the local population in many countries. To many of them, visiting India is the dream of a lifetime and because they have no emotional attachments to any relatives living here, all they want to do is to visit the land of their forefathers’ birth, go to places, stories about which they have heard, and then visit as many temples and monuments as possible. To this list, I would add the millions of Buddhists from all over Asia who have strong emotional attachment to the land of Lord Buddha’s birth and in particular, the Japanese who can be by far the most attractive source of revenue. Before I talk of heritage tourism, I must make a distinction between pilgrimage, heritage tourism and festival tourism. People who come to India on a pilgrimage generally come only for that. They perform their pujas; do the rituals and visit some specific temples and holy sites. They are not on a holiday and generally are not out to enjoy themselves. They accept any hardships

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they encounter, do not look around, do not notice things, and when they go back home do not talk about anything else they saw. They are not tourists in any sense. While researching for this chapter, I saw that there is almost no textbook definition of the term heritage tourism. There is something called cultural heritage tourism that the textbooks and sites on the Internet define as ‘travelling to experience the places and activities that authentically represent the stories and people of the past and present. It includes historic, cultural and natural resources.’ I call this festival tourism and we will talk about this in the next chapter. A heritage trip is quite another thing. People have heard about and read about the immensely rich heritage we have and they come here to experience it. For these people, India was a great nation and they come here convinced that it still is. I call this heritage tourism. These are the people who are here on a different kind of a holiday. They are, of course, out to get the best out of the trip, but will look at, notice and experience everything and then go back home and talk about it. Visitors (individuals, families or groups) always talk to others about the trip. As I have repeatedly said in the earlier chapters, this word-of-mouth element is very critical. These are the people who are of interest to our budding entrepreneurs in the tourist trade. Heritage tourism is the story of the authentic contributions made to the history and culture of our nation starting from our ancestors in the ancient times and continuing down to our previous generations in recent past. This is what heritage tourism is all about and what interests visitors. But we also need to understand exactly what it is that adds real value and appeal to the trip and what distinguishes India from every other place on earth. We need to remind ourselves that today’s heritage tourists, mostly professional couples, are better travelled and better educated than previous generations of travellers, and they ex-pect more from their travel experiences—making quality and authenticity more important than ever before. Also, because the visitors have plenty of everything except time, these same higher expectations mean increasing competition for the visitors’ time.

Sure, our nation is unique, and its special charm is what will draw visitors, but what is it that they are going to talk about when they get back home? I will show that other nations are using heritage tourism to help preserve the irreplaceable resources that the tourist of today treasures. What about us? z

I have something to say below that comes from the heart. I am sure it will not offend you but it will certainly hurt you, as I was deeply hurt when I went through the experience. And, it will make you think.

After reading what I have to say, you will agree that not every community in India can have a successful heritage tourism programme. Communities that have lost too much of their heritage, or not nurtured whatever they had, may not have the appeal to attract heritage visitors. Having rich cultural or religious heritage is one thing, treasuring it and nurturing it with pride and effort bordering on devotion is quite another. When your historic and/or religious assets are at the heart of your plans to develop tourism, it’s essential to protect them for the long-term. Hearts break when

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centuries old, irreplaceable structures are destroyed or damaged beyond repair by sheer carelessness.

My Chinese Buddhist Friend Living outside India, I started looking at my country from a new angle and have been noticing things I would not have if I was living here. I now have some very strong views about what we in India are doing to our immense heritage. I will talk about how this was brought home to me with a shock when I visited India with a Chinese Buddhist friend of mine. I have known Wong for over 20 years. I was posted to Kuala Lumpur on an assignment from one of the UN bodies and he lived in the next flat. He was a Malaysian Chinese, a Buddhist and an architect by profession. Though our families were very close and we spent a lot of time together, what brought me emotionally even closer to him was his overwhelming passion for Hindu Temple architecture in south India. Two things struck me about his attitude. One, there was nothing even remotely religious about his passion. He was not a Hindu, was not interested in any of the Hindu temples in Malaysia, some of which are indeed magnificent and I doubt he even knew the names of the deities that were worshipped there. For prayers, his family went to the Buddhist temples only. Two, his attitude went way beyond the interest an architect would take in an ancient structure. His attitude bordered on reverence for the design and the workmanship. He had a superb collection of anything that had ever been published on the subject, and though he had never been to India, he would always say he was jealous of the people that lived in our great temple towns as they could always go and see and touch the greatest creation of man. Long ago, I have myself been to some of the great temples we have in south India, not for any religious reason but to admire the handiwork of our ancestors. Today we wax eloquent about the wonders of technology and its applications in different areas of life, but look at our temples that were built thousands of years ago. We cannot help wondering at the marvels created with the most fundamental tools at the disposal of our ancestors. Today we are left wondering at the artistry, engineering and creative skills that were pooled to create these awesome spiritual abodes. I have travelled all over the world and have seen many splendid places of worship. Every race has built them over the centuries. I compare these to our ancient temples and I notice a remarkable difference. I notice that, in their case, the grandeur is in the design, construction and in the sheer scale. In our temples, we have these too, but there is something else. One is stunned by the incredibly intricate carvings and designs woven into the structure. Every meticulously hand-crafted stone tells the story of a lifetime of the love, dedication and devotion of the individual craftsmen. The light-filled interiors make the worshippers feel uplifted and create a mystical ambience. One does not simply walk out of a temple saying one monument over, rather its experience lingers to create a mental serenity and aspiring for another experience.

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Well, to come back to what I was saying about my friend Wong. Sorry, if I got a little carried away just now, but working and living outside one’s own nation makes one look at things back home with a different eye. Last year, I was coming to India for some work and persuaded Wong to come with me. I had never been to the southern part of my country and not only did I look forward to the experience, but also was proud to be bringing Wong on what promised to be a trip of a lifetime for him. It was touching to see him brimming with enthusiasm all the way on the four-hour flight to Chennai then the long drive by road to one of the largest temples. Wong had no interest in the fantastic countryside we were passing through, but kept rattling off details of the figures and the carvings of the particular temple we were going to see. But I was in for a shock. I was stunned when we reached the temple. The area immediately surrounding one of our greatest temples was incredibly filthy. We were uncomfortable when our driver asked us to leave behind our shoes, and as we entered the courtyard barefooted I felt sick. I could see that plenty of dogs, cats and cattle had free access everywhere, and the stone courtyard within the temple had never ever been cleaned. The entire complex was crowded. There were people sitting around all over the place and there were three or four long queues of people waiting their turn to enter the inner sanctum. I saw Wong walk up to the huge main door to the inner courtyard. It must have been a magnificent wooden and brass carving at one time, but had not been used or cleaned for ages and was now covered with muck and cobwebs. Wong took out his handkerchief and he lovingly tried to clean a small portion as if he was cleaning one of his most precious possessions. I saw that his attitude bordered on reverence! The cruelest blow was the large number of cheap and crude plastic signboards with commercial advertisements that were defacing the main structure of the temple. Moreover, all over the place we could see that not only have the local artisans done quite a shabby and sloppy job of making additional sheds, addition and alteration of the walls and some of the statues etc., but also they have shamelessly left their names and phone numbers! Sorry, I take back what I said above. I do not know if Wong noticed this, but for me, the cruelest blow was yet to come. What really hurt me was looking at a family of six or seven reasonably decent people, the lady wearing a very nice and expensive looking red sari and three small children playing around, all squatting on the dirty stone floor of the outer ‘Prakaram’, eating something. I know that they were eating the prashadam, the laddoos, the offering they made to the deity that was then blessed by the Lord. Everybody was oblivious to the filthy floor they were sitting on because they were obviously enjoying themselves talking and eating the ‘prashadam’. What hurt me was that, to me, the ‘prashadam’ is something immensely sacred; something blessed by the Lord and has to be respected. But I could see the children and some of the adults carelessly spilling the crumbs all over the place and then trampling them under the feet! We walked around some more, but I could see that Wong’s heart was no longer in it. He looked casually at the intricately carved ceilings that he knew so well but could hardly be seen for the soot, the cobwebs and the electric wires loosely strung up.

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We did not stay long and, on the way back, we were quiet. We did not have anything to say. I felt sorry for bringing Wong to my country without first checking about the state of our great temples. Then, my mind went back to only a month earlier in Kuala Lumpur when Wong had said that he was going to a local temple to offer prayers on his grandfather’s birthday, and my wife and I had joined him. We had never been to a Buddhist temple. It was a simple structure on a hill on the outskirts of Kuala Lumpur. It was not very old and built in Thai style. It was simple and yet elegant. What had immediately struck us was the pristine cleanliness of the large complex. Everything was immaculate. The wood and aluminium railings on the wide staircases, the glass panes on the doors and windows, and even the stone floor and drains on the outer courtyard, everything. We had to leave our shoes outside, but walking on the spotlessly clean polished stone floors, right into the temple was a pleasure. When we entered the main building, I was surprised to note that Wong did not go up the main steps, into the main temple, to offer prayers and pay homage to Lord Buddha. He looked around and started walking to an office in the basement of the building. As I was wondering what was going on, we were pleasantly surprised by what followed. It was a surprise that we would remember for the rest of our lives. In the office in the basement, an old man was seated at a small table. He was presumably the clerk. Behind him there was a large blackboard that had a long list of tasks scheduled for the day. The tasks included clean the drain on the west side; paint the wall on a particular side; remove the debris on the east side; wash utensils in the kitchen, and so on. There was a long list of tasks and requests for donations for specific needs. Wong stood in front of the board, scratched his head, selected ‘cleaning the drains on the west side’. I was immensely touched by this. Here was a multimillionaire, who could pay an army of workers to do the job for him, volunteering to do the cleaning himself! We also felt this was one of the most sacred tasks we could do, so I nudged him and he happily added our names in the register. Wong told the clerk that we would all accept that as the task and perform it for an hour. The clerk got up and showed us where to go to pick up the brooms, the buckets and other cleaning stuff. Sure, every inch of the temple around us spoke of the love, devotion and humility of the thousands of its devotees. We, in India, are no less pious, humble and devoted. Then what is wrong? It took a foreigner to show me how great we Indians were and how we very easily can be once again!

The Biggest Market? Huh? Talking of heritage tourism, I said above that the Japanese are by far the most attractive source of revenue for us. I should add that they are at the same time the most attractive and the riskiest group. Moreover, they do not go anywhere for purely religious or heritage reasons. Let me explain.

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Everyone knows that Japan is almost entirely Buddhist and they are very devout people. By rights, India, the land of Lord Buddha’s birth, should have been their most preferred tourist destination, but instead, as per the published statistics, their current favourite destinations are South Korea, Taiwan, Thailand, Bali and Hong Kong. India figures way down in the list. Sure, Bodh Gaya does get some Japanese tourists and I am told that there are more than a dozen Japanese speaking tourist guides there, but that is not what the Japanese come all the way for. Invariably they combine the religious or spiritual aspects of the trip with other aspects and the way we organise these trips. These ‘other aspects’ are what is missing. You will understand what I mean in a minute. Once I was in Taiwan and was at Taipei’s famous Hsing-tian Temple. In the basement there was an underground mall and it hosted an odd collection of closet-sized rooms. Inside, under sterile fluorescent lights, perched several young, mostly Japanese, women on low wooden stools, patiently queuing up and waiting to have their fortunes told. Each spents $50–150 for a session lasting less than half an hour but they insist that the predictions and advice—details on marriage, future, children and career advancement—are worth every penny. ‘These Chinese fortune-tellers are incredibly accurate,’ I have heard the wives and daughters of many of my Japanese friends say, and the Chinese fortune-tellers say that ‘that’s a reputation worth cultivating, so of course, most of us speak Japanese. How else do we explain the fortune to our customers?’ A ‘fortune to be made’ is what most people in the travel industry in Asia have in mind when talking about Japanese tourists. I have spoken about this to many of my friends in the tourist trade in India and received only a blank look. Even with Japan’s lingering economic malaise, a record number of Japanese travellers—over 25 million in 2006—head abroad. Any reshuffling of midweek public holidays means an additional eight three-day breaks—and many of these will be spent on short package trips to elsewhere in Asia. As I said, current favourite destinations are South Korea, Taiwan, Thailand, Bali in Indonesia and Hong Kong. Every major hotel there has someone assigned specifically to provide service to the Japanese. They are a very big market and a completely focused one. Most Japanese travellers dispense quickly and dutifully with the sights, religious, spiritual, heritage or simply historical, before heading for the main event— shopping. They just want to see, not study. However brief the visit, the spending orgies are legendary. I have seen in Seoul, backstreet stores in Itaewon selling fake designer clothes and accessories exclusively to Japanese groups, often from back rooms hidden behind sliding screens and false walls. The same happens in Patpong in Bangkok and Petaling Street in Kuala Lumpur. All over Asia, Japanese tourists are big customers. They come in groups, and they buy a lot. For them, there’s not much to see in Korea, or in Taiwan, or Hong Kong for that matter. They are there for shopping or fortune telling. While Westerners may be outraged to be charged anything but local prices, Japanese are overjoyed to find that costs, however inflated, are still lower than at home. I have often read in local travel magazines that while most Western tourists, and Indians, would be pretty horrified if they were herded into specific shops and pushed to buy

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things, the Japanese actually demand it. I have seen it, particularly in Hong Kong that as soon as the Japanese arrive, we Indians or other hard-bargaining people are herded out. Sure, when it comes to cheating, scamming and overcharging, the Japanese really get creamed. Japanese always travel in groups, and expect their tours to be efficiently and rigidly organised. They are short of time and want to see and do as much as they can before heading back home. Now, a quick look at India. We have no shortage of superb fortune-tellers and astrologers or, of an incredible variety of roadside shopping areas. Given the fact that all Japanese coming to Bodh Gaya, have to land at either Kolkata or Delhi, has anyone seen large groups of Japanese there? Why are they herded straight off to the pilgrimage areas and quickly shunted out again? I do not have the answer to that. I am not an expert on travel or tourism and am merely talking of opportunities for our young entrepreneurs that the bulk of the travel trade is ignoring. I need to add a word of warning here too. As profitable as Japanese tourists may prove to local economies, people who know them have a word of warning—the Japanese travel market moves in concert, and the tour operators back home are exceptionally well informed. One or two unpleasant incidents are all that need to turn them away.

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22 Gastronomic Tourism

What do you have when you combine tourism with food?—A growing trend, according to the international travel experts. But try asking this to someone in the travel trade in India; you would get a blank look, a shrug of the shoulders and a change of topic. Do people go anywhere just for the food? What a silly question! Silly or not, international tourism statistics show a distinct trend. There is ample evidence that an increasing number of emerging economies are featured on the tourist map for the quality and authenticity of their traditional food and wine, sometimes even more so than their scenic delights. Local people in an increasing number of countries are realising the value of their gastronomic heritage. The common question, particularly after a holiday anywhere is evidently ‘how was the food?’ Of course there are exceptions. In the past, there were tourists, particularly from India, for whom a holiday could be anywhere, but the food must be the same as at home. When I was posted in South-east Asia, I had many relatives, friends, and business associates who visited me from India. For these people, who were of the less adventurous type, the strange flavours and smells of foreign cuisine were usually enough to have them pining for home food and hankering for familiar tastes. These people went everywhere and saw and did everything but for food, it was only to an Indian restaurant or else back to our home cooking. Even in India, things are now changing. The younger generation, the new emerging generation of well-heeled, professional couples, is developing a well-trained palate, and is not satisfied if it isn’t treated to some gastronomic discoveries. And, here is an emerging opportunity for our young entrepreneurs. Whether or not the travel tales are tainted by explicit accounts of ‘Delhi-belly’ or the tantalising memories of exquisite feasts, there’s a common thread. Food has started

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playing an important part in the holiday experience of almost everyone, consciously or unconsciously. One look at the Internet would tell you that globally, gastronomic tourism is emerging as a form of special interest tourism in which food and wine are the primary motivating factors for travel to a particular destination. More and more tours are aimed at appreciating the peculiarities of a country’s cuisine. One need not look far to see the barrage of marketing campaigns utilising food and wine to entice the highyielding gourmet tourist dollar. Look at it another way. I have said it earlier and I am repeating it here. People do want to interact authentically with the landscape and one of the best ways of doing that is through authentic local food. Tourists are looking for a more participatory style of holiday experience, and catering to their interest in exotic food contributes to their feel of personal development. They feel they have done something their friends back home have no idea about. So, back home they show off when talking about this and feel they have earned social status or ‘cultural capital’. I see on the various websites that most food and wine tourism marketing shots are taken with exquisite landscapes as the backdrop. Superb photographs of elaborate picnics being enjoyed beside picturesque lakes or glasses of chardonnay are sipped as the sun sets over the vineyard. Like tourism, food is branded by ‘place’ as a marker of authenticity, not only of the product but also the region’s ‘cultural’ landscape. While people in the tourism trade around the globe are recognising the potential of gastronomic tourism as a powerful tool to identify and promote places, regions or entire countries, in India, the same depth of culinary history does not exist. I will talk about some of my own experiences and show that there is good potential of using authentic traditional food and not wine but exotic local non-alcoholic drinks being used to identify and promote destinations for tourism.

Let Us Go on a ‘Foodie’ Holiday I will be taking you on a short trip to rural France, to Malaysia and then back to south India. But before that, I want you to meet the fellow who is said to have ‘invented’ the term ‘foodie’. If you look at the 30th Anniversary issue of India Today, dated 3 July 2006, you will find a very interesting guest column by Paul Levy on page 106. He is the author of the highly successful Official Foodie Handbook series and is internationally respected as one of the world’s best-known food journalists. Here is an extract of what he has to say about gastronomic tourism in India in this guest column as well as in many of his books. He is a frequent visitor to India and particularly loves South Indian and Gujarati food. If you ask me the potential for gastronomic tourism in India, I will say it is excellent. But if you ask me if you can ever have this type of tourism, I will not hurt your feelings and will try to change the topic.

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The real problem of visiting India as a food tourist is that it’s almost impossible to taste the variety of its cuisine-unless you know somebody who will take you to eat in a private home. I know the difficulties with which this is fraught. There are barriers of social class to be surmounted, and countless religious and cultural obstacles not just to enjoying your meal but to be invited to eat at a private home in the first place. If restaurants in the Indian hotels started serving authentic local dishes of the place they belong to, India could become one of the hottest destinations for a growing band of food tourists across the globe. But here we come smack up against the Indian food paradox: that it is almost impossible for the traveller to sample the best of Indian regional cuisine in its own region. The real reason? Restaurants rarely provide the food of the region in which they are located. Tourists in, for example, Kolkata may want to savor and learn about Bengali food; but tourists do not come to Kolkata in sufficient numbers to make it possible for any hotel to run a specialised Bengali restaurant just for them. To keep a hotel restaurant full the year around, there to be a regular, dependable clientele, and this clientele is just not there. Indian families as a rule do not eat out for the sake of trying good food: Eating out is for a wedding, a birthday or an office party. In short, one goes out for an occasion, not just to eat out. I better not talk about the food I have had when on the rare occasions I have been invited. To name just one example of a highly successful chain of ethnic restaurants, The Masala World Company, which owns half a dozen restaurants in London is run by a very enterprising Indian lady, Camellia Punjabi. Her restaurants, named after different regions in India, serve the best of the food of their area, using good and genuine recipes that she had researched herself. Camellia’s restaurants have the atmosphere that makes the tourist feel two things. One that he was having an authentic food experience, and second and more important, that the standard of hygiene was impeccable. It is worries about the latter point that confine most tourists in India to their star hotel dining rooms and so-called western food. I have always felt that one’s own traditional recipes, the time honored cooking methods, and the organisation of the ethic menu to be served at specific occasions and at specific times, the manner in which the courses are arranged and served, are a part of one’s precious heritage, a part of one’s own link with one’s ancestors, a part of one’s own wealth. If only visitors to India have the opportunity to share in and relish this heritage, like the experiences one has in the Masala World Company restaurants, India would surely be the world’s favourite tourist destination. But I think this is easier said than done.

Meet a French Chef A long time ago, during one of my first trips out of India, one of my American colleagues and I were travelling by bus in the southern part of France. Our bus broke down and the passengers were accommodated for an overnight stay in a wayside inn in a small village. My friend and I decided not to have the hastily arranged buffet dinner and to go and try our luck in some other small restaurant in the village. We found a quaint, little family restaurant where the family lived upstairs. I was not really familiar with European food, so ordered chicken with some kind of sauce.

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When my dish was served, it looked very appetising but I made the mistake of asking for some mustard. An old man, obviously the owner and the chef, came to our table. By then I had already started eating the superbly prepared item, but I still felt that a bit of mustard would add some zing to it. The old man looked at me when I again asked for mustard, gave me a small bow and politely took away my plate. All this happened very fast, and all that I noticed was the grim expression on his face. My friend quickly explained that the owner was obviously very angry. This was a very traditional part of France, what I had ordered must have been a traditional recipe, and the owner was understandably proud of his authentic sauces. My friend pointed to the huge number of visiting cards and picture postcards stuck to the walls next to our table, and I realised that this tiny restaurant in a small village did indeed have had an extensive clientele. I looked and found that people from all over the world had come here and enjoyed the food and left their cards behind. While I reminiscensed of reading somewhere that leaving cards behind to show your appreciation was a quaint custom mostly in Europe, the owner was back in a few minutes with a plate of ordinary hamburger with plenty of mustard on the side. My apologies were of no use and the final humiliation was when we were given the bill only for what my friend had. The old man showed me how intensely proud he was of his traditions and the recipes of his ancestors, and taught me a lesson I would not quickly forget. The same thing can happen if you are in a small family restaurant in Italy and ask for mustard with your pasta or pizza, or, for that matter, ask for tomato ketchup in a Japanese or Korean family restaurant. I repeat what I have said many times earlier: The respect that people have for their own traditional values gets noticed by visitors. The visitors talk about this when they get back home, adding immensely to the goodwill of the place visited.

Indian Chefs in Malaysia Before we go back to India, we would meet some Indians in Malaysia. I remember when I was living in Malaysia some years ago, the best treat my children used to look forward to was a visit to one of the Chettiar messes. I need to explain that Malaysia has a substantial population of Tamilians that migrated long ago from India. Of these, the Chettiars are the traditional moneylending class. It is a custom for these men to leave their families behind in India, bring their own cooks from there, and have a sort of community living in what are called small Chettiar messes or hostels. These are generally double-storied shop-houses where the members have their businesses on the ground floor front, eat in the back and have living-quarters upstairs. The cooks the Chettiars brought from India were a class apart and were some of the best available. In course of time, some of these messes have earned a wide reputation for their cuisine and have become popular with the common public, even with non-Tamilians

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and serve superb traditional food prepared to time-honoured recipes. I need to explain that these places are not proper restaurants, have only rudimentary sitting arrangements, and are more like co-operative set-ups owned and managed by a group of cooks. Though no one has ever advertised these places and there is no mention in the tourist literature, the reputation keeps spreading purely by word of mouth. One evening, my wife happened to ask the waiter about a particularly delicious thick chutney we were having with our dosas, and hesitantly asked for the recipe. Much to our surprise, three or four cooks from the kitchen next door who heard the request, immediately mobbed us: they were thrilled by what my wife was asking for. Their obvious pride in someone taking an interest in their heritage was, indeed, touching. They invited us to come to the kitchen the next morning and see them actually making the chutney. This has been an unforgettable experience. These were simple people. There was no salesmanship or showing off or anything of the sort. They were people living in a foreign land, but were immensely proud of their roots, their traditions, and heritage and anybody taking an interest did them an honour. People like me just cannot stop talking about them.

Back to South India I must confess that though I am a north Indian, my stay in Malaysia made me partial to south Indian food. One of the reasons I decided to retire and settle down in the South was because of the taste of the iddli, sambhar, dosa, vadai and chutneys we had at the Chettair messes in Malaysia. This was something we looked forward to in greater measure back home in India. We were in for a colossal disappointment. Indians who left India long ago are jealously guarding their traditions and heritage. We, in India, have got ‘modernised’. This is tragic. In India, there are many distinctly identifiable regions and every region has its own traditional food. Realising that it is not possible to generalise and talk about the entire country with regard to the opportunities for gastronomic tourism, I am going to confine my discussion to the South. The southern part of our country is a major cultural and religious attraction both for the domestic and international tourists. This is where you not only find the richest cultural and religious heritage of the country, but also more common people meticulously following the ancient traditions, rituals and customs in their everyday lives than possibly in any other region. But there is a problem here. As Paul Levy said above, it is one thing for the common people to meticulously follow the ancient traditions, rituals and customs, including recipes inherited from our ancestors. A visitor getting a chance to get exposed to this incredible wealth of the nation is quite another thing. An immense opportunity for the domestic and international tourists to come here, participate in, share and enjoy something unique, is going waste.

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Undoubtedly, I have had good south Indian food in some of the bigger hotels and restaurants in some of the bigger cities in the South. But the domestic and international tourists I am talking about here do not spend too much time in the big cities. The fact remains that almost all the major tourist attractions in the South are in the smaller towns and cities: Pondicherry, Chidambaram, Madhurai, Tanjavur, Thiruvananthapuram, Rameswaram and so on. The list goes on and on. Tourists have no choice but to eat in the smaller hotels and restaurants all over south India and the quality and variety of food served in these places is atrocious. All thought of tradition and pride in one’s heritage is abandoned. I thought that the food one normally gets in the restaurants is routine and so may not be anything special. But I have attended a number of functions and parties in these hotels where in spite of the food being specially ordered, was worse. One gets far better quality, variety and cleanliness in the comparable smaller hotels and restaurants all over Northern and Western India. I am neither eulogising the north or the west nor am I pulling down the south. But I feel deeply hurt after having spoken to many of the hotel and restaurant owners here. Reading this you might detect a trace of bitterness. Darn right I am bitter. Remember, I told you that I decided to settle down in the South as I am particularly proud of this part of our country. I have repeatedly said that this is where you not only find our richest cultural and religious heritage, but you see common people meticulously following the ancient traditions, rituals and customs of our forefathers in their everyday lives. But, the very people, the hotel and restaurant owners, who are admirably meticulous in everything in their everyday lives, are heartlessly callous when it comes to the food they serve to their customers—the food that is the source of their livelihood. I spoke to some of the owners of the smaller hotels in the South. Where I expected some vestiges of the same pride that I saw in the Chettiar cooks of Kuala Lumpur or the owner-chef of France, I found arrogance, conceit and smugness of the successful small time businessman. I was clearly told that no one had complained about the food, which meant that I should mind my own business. On the brighter side, I have noticed that the menus of all the smaller hotels in south India have become much modernised and now routinely include many items from other parts of India, and even from outside India: items like pav-bhaji, pooribhaji, chana-masala and even gobi-manchurian. Excellent. This is to be appreciated as it would have shown steps being taken towards giving the customers what they want, except for four points I can detail below. I would be forgiven if I, in my comments below, also talk about food items from across the country. Four points: 1. Throughout India we have an incredible variety of traditional soft drinks. Every community has its own trademark soft drink, all superb and delicious—varieties of mooru modified to be served as soft drinks in the South; lassi and jaljira in the North; mango panna from the West; not forgetting the large varieties of the ubiquitous nimboo pani with salt, sugar, spices and/or soda. When I was living

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overseas, I used to look forward to visiting India specially to try these soft drinks in people’s homes. Now, the dozens of times I have attended private functions and family dinners in the smaller hotels all over the South, the only soft drink all the hotels serve is Coke, Pepsi and so on, and sometimes a mixture of bottled cordials as fruit punch. 2. Again, all over India there is a large variety of traditional chutneys. Every mouthwatering snack item has its own unique chutney. Since there is no end to the range of snack items there is no end to the variety of chutneys. Now the sad part. I have had snacks before dinner at many functions all over the South and all that I was served with was tomato sauce. Not even the traditional tomato chutney that we make in different parts of the country, mind you, but a peculiar version of very bland tomato sauce. I must add that, sometimes I have had coconut chutney served with vadai that is not even remotely like the one I have had in peoples’ homes. I am sure the time will come when our hotels will get modernised even more and start serving iddli, dosas and vadai with tomato sauce. 3. As I said above, India is unique and the range and variety of sweets, desserts, traditional ice-creams and kulfis is incredible. I have had far greater variety of sweets and desserts in people’s homes in India than I have had in any other part of the world. True, other countries do have their cakes and cookies, but nobody has anything like the traditional sweets and desserts like we have. Here again, I apologise. All the hotels, and I mean all, invariably serve plain Vanilla or Strawberry flavoured ice-creams. Sometimes we do get some gulab jamun or gajar halva with this so-called ice-cream. Even when some of the hotels have special biryani or Chettiyar food festivals, the dessert is invariably the ubiquitous Vanilla ice-cream. I am amazed when a self-respecting hotelier considers plain ice-cream as a good combination with gulab jamun. Next we may be having payasam-ice-cream float. 4. The fourth point concerns what we commonly call roti. Here again, the variety is endless, and every part of India has its own particular version. I would assume any Indian would know what a naan is, but all that I have had throughout the South is a unique version that is still called a naan. The irony is that, for functions and birthday parties and so on, the hotel owners know that they are serving a buffet and in most cases the guests would stand around and eat. This means we balance the plate in our left hand, eat with the right, and there is no possibility of using a knife. I, for one and most of my friends make it a practice of only taking the rice preparation and ignoring the so-called naans, because the thin rubbery strip that we are served cold in these hotels is impossible to tear apart with only two fingers of one hand. These four points are not criticism. They are bitterness that comes from the depth of my being. Can I take the liberty of repeating what I had said above? I am sad that the very people, the hotel and restaurant owners, who are admirably traditional in everything in their everyday lives, are heartlessly callous, and full of could-not-careless attitude when it comes to the food they serve to the visitors to their cities.

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Conclusion I have said that this is not a discussion on tourism and the small hotel owners I talked about here are really not my concern. I want some of my bitterness to rub off on to the young entrepreneurs in the tourism trade. They are the people that have to do something about improving our image in the eyes of the visitors and in doing this, make a better living for themselves. Interest in this kind of tourism in India is in its infancy and we are some distance away from organising any purely gastronomic tours to any part of India. Acquaintance with, and enjoyment of, different types of our traditional cuisine can happen only when tourists visit the hotels and restaurants in the smaller cities where traditions of preparing, serving and consuming food are cherished and valued. Only then our young entrepreneurs may start thinking about including elements of gastronomic tourism in regular tour programmes. Obviously, time is coming that good food would no longer be simply part of a holiday. As has happened in many countries across the world, it would become the main reason for travel. The challenge is also to marry food, heritage and landscape into a total tourism experience that would be authentic and truly reflecting the local and unique flavours of India. Our tourism entrepreneurs must also realise the importance of making a promise and delivering on it, so as not to leave a sour taste in the mouth of the visitor. True, occasionally I have been to an event or a region where people did things so well, with such attention to detail and authenticity, that it took my breath away. I don’t have that experience every day, but that is what our youngsters have to aim for. I will say right out that if you youngsters do not have pride in yourselves, your heritage and your traditions, then the tourists will keep on preferring to go to countries where the people have.

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23 Festival Tourism

As I have explained in the earlier chapters, the focus of this discussion is on new entrepreneurial opportunities for our young professionals in various tourist segments, and not on the subject of tourism itself. Therefore, I am going to talk about only those aspects of festival tourism that have a potential for our budding entrepreneurs. It would helpful to begin by defining what tourism textbooks call ‘festival tourism’. This can encompass an entire spectrum of events. On the one extreme we can have classical or modern music or dance concerts and on the other we can have purely religious festivals—and plenty of other types of festivals in between. The same text books define a holiday as a consumer product, which has increased in quality, value and variety as the system that delivers it has become more efficient. Like the entertainment industry, tourism sells an experience, a way for people to enjoy their free time. The difference is that the entertainment industry delivers an experience to its customers, whereas the travel industry delivers its customers to an experience. All this has one thing in common. The festivals are gaining increasing importance as marketing tools for tourist entrepreneurs worldwide and in this religious tourism has arguably played a significant part. I am not calling these tourists pilgrims because an increasing number of travel agents overseas now offer religious tourism, pilgrimages, temple and church tours as a part of global culture tours where people seek more unusual holidays or more varieties within a trip. While there is no denying that Buddhists and Hindus living outside India consider India to be the most spiritual country on earth, Saudi Arabia is home to two of the holiest sites in Islam and Israel and the Palestinian Territories comprise the Holy Land, important to Christians, Jews and Muslims throughout the world, there are now emerging a number of forces, alongside faith itself, that are driving the growth of religious and pilgrimage tourism. There is a strong drive from the new generation of

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prosperous consumers for more authentic experience, such as immersing themselves in the spiritual and cultural traditions associated with specific religions and pilgrimage sites. z

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In the days gone by, there were plenty of people who lacked the necessary confidence and experience but had the desire and the means to see and participate in special events in exotic places. Tour operators across the world could easily exploit them by laying out elaborate itineraries. Those days are gone. The good news is that this is very much a growing market, but the tough part is that the tourists are becoming more well-travelled, sophisticated and far better informed. People are getting increasingly adept at self-packaging their visits around the international events calendar. The new breed of tourists knows exactly what to expect at a particular event on the other side of the world. For our budding entrepreneurs in the tourist trade who want to take an increasing interest in special events tourism, the only thing you can do is to genuinely deliver value for money. If your clients go back home and talk about you, you will be amazed at the results.

Songkran in Southern Thailand I have lived and worked in many developing nations across the world, and have seen how many emerging economies are very successfully promoting all sorts of festivals as major tourist draws. They manage to have flights and hotels booked months in advance. I will give some illustrations here and will explain that the success has not so much to do with Government planning and is the result of the efforts of entrepreneurs and entrepreneurial organisations. There are lessons to be learnt here, as I will contrast this with what we do in India and how we are squandering away an opportunity to use our delightful festivals to bring in the money-spending tourists. I do not know how many of my Indian friends are aware of it, but Europeans, Americans and most other foreigners are advised by their travel agents to avoid India during our festival days. This is tragic but true. Of course, the incoming flights are often full, but this is also the season for hordes of our own overseas Indians visiting relatives in India. I do not call these people tourists. I will take you to the East first, then to India and then on to South America. A few years ago, when I was based in Singapore I needed to go to a place called Hatyai in Southern Thailand for an urgent meeting. Hatyai is an important tourist destination, there are many flights from Singapore and I never had a problem getting a seat. I was surprised, however, when I was told that all the flights were full and the waiting list was closed. My agent added that there was no possibility of getting a hotel room there. I was told that this was the time of Songkran, the Thai New Year. I could not believe what I was hearing. How could there be such a massive influx of tourists that all the flights and hotels are chockablock full for a mere New Year celebration?

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I took the trip by road and arranged to put up with a friend at the University. What I saw during the three-day festivities turned out to be one of the most memorable experiences I have had. My friend had a beautifully printed leaflet distributed by one of the chambers of commerce, detailing what was happening where. I could see that, without losing any of the solemnity associated with a major social and religious occasion, the entrepreneurial people of Thailand have converted this traditional celebration in mid-April that should have been for a day, into a major tourist draw, stretching out into three or four days. The leaflet put out by a chamber of commerce, rather than by their tourist promotion boards, made sense, as, one, the private sector always does a better job and two, this was obviously the better option to maximise the benefit their members would get. It is actually a traditional Buddhist new-year celebration and I am told that the Burmese Buddhists also celebrate the same festival. They call it the Thingyan festival. It should be noted that Songkran is nothing like what the north Indians call ‘Shangrand’ or ‘Makar Sankaranti’ or in the South the Brahmins call Shankaranti. The Thai festival marks the New Year and falls in mid-April. The Indian ones mean ‘transition’ and mark the transition of the sun from the house of Cancer to the Capricorn, and come in the middle of January. The Thai festival roughly coincides with the Punjabi New Year, Baisakhi. Thailand is Buddhist and a lot of their traditions are Indian in origin. This Thai festival, in style of celebration, is somewhat similar to our celebration of Holi in north India, but only in origin, tradition and concept. But the similarity ends there. During Songkran, the entire nation puts on a festive mantle. An important part of the festivities is the spraying of clean perfumed water on each other, an act that is considered auspicious. Thailand is a warm tropical country and being sprayed on and getting drenched is fun. During the day, everybody seems to be out on the streets. I saw cars, open vans and pick-up trucks in which entire families drove around spraying water on anybody they could find. Old and infirm people were sitting on chairs in open vans with spray pumps in hand. The water was clean and perfumed. I looked at the people, the hordes of tourists on the streets, and saw that if anybody got sprayed, they followed the Thai custom of bowing down, gracefully folding their hands, smiling and nodding thanks—something like our namaste in India, but far more deferential and respectful. In response, the older people raised their arms in blessing. Initially, foreigners like us, and especially me, merely smiled and waved, but quickly got the hang of it. The entire ambience was delightful. Everyday, the festivities would start mid-afternoon and go on late into the night. In the evenings, there was a carnival atmosphere. There were street marches, bands and floats. All the roadside shops were open but there was no one doing any business. I am told that keeping the doors of the shops and homes open during Songkran was auspicious. And, there were immensely enjoyable roadside concerts of all sorts and country fairs. Everywhere one went, one found clean and hassle-free fun and merrymaking. The logistics and the organisational skills that went into the effort were mindboggling. I now realise that the Thais, starting from the local chambers of commerce

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and trade associations, to their overseas tourist offices, have aggressively promoted, not only this but I am sure many other similar cultural and social festivals. And they have done this all over the world. The result is hordes of tourists and immense commercial and economic benefit. No wonder I could not get seats on any flights.

Festivals in India Now, contrast this with what sort of economic benefit we draw from our festivals. Please remember that I am talking here only of opportunities that our entrepreneurs can use as a tourist promotion activity. First, Holi in north India, the other side of the coin, our Durga Puja in Bengal and Ganapati festival in western India. As my focus is on festivals that the tourists can come and join and enjoy I am not going to talk about Diwali and many other similar festivals that are essentially family ones. True, the entire country puts on a mantle of fun and gaiety, but it is rather difficult for our entrepreneurs to use these as a tourist promotion activity. Old literature tells us that Holi is an important Hindu spring festival and, in northern and western India it is a harvest festival. It is celebrated on the full moon day of the Hindu month of Phalguna (February–March) with a great deal of boisterousness and colour. There are many legends that account for this festival. On this day all the usual restrictions of colour, caste, creed and age, should be cast aside in the general fun and merrymaking. Holi is also a time of goodwill when people pay or forgive debts, make up quarrels, and wish each other good luck. The celebration of Holi today is nothing of the sort. I can say, without the fear of contradiction, that Holi is one of the nastiest festivals we have in India. Never mind the origins of Holi or how our ancestors really celebrated it, today our youth competes in thinking of the foulest stuff to spray or rub on others. People of other religions and people in mourning and so on are made special targets for the misery it causes. Even in decent households, the colours used are indelible textile dyes that leave the skin red or blue or green for days after the festival. Of course, tourists who know about what is going to happen, keep away. We have the other side of the coin too. Like many other festivals in India, both the Durga Puja celebrations in Bengal and the Ganapati festival in Maharashtra are powerful social events that mobilise entire communities. The religious fervour, the social participation, and the solid wholesome family fun cannot be described in words. Both the festivals have many things in common. They present an immense showcase of everything that is good in our culture. India’s best talents in art, music, dance and drama jostle with each other for a chance to perform on street corners for free. It is impossible for any foreigner to be visiting India at the time not to be overwhelmed by the ambience. Tourists that are lucky to be here at the time come back again and again. Now let us talk of how and what sort of economic benefits we draw from these festivals. There is no question of our Holi benefiting anyone economically, but the Puja

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and Ganapati festivals, do indeed result in considerable commercial and economic benefits. The point to be noted here is that both the Puja and Ganapati festivals are entirely organised by hundreds of private set-ups and are funded only by local residents. The common but unfortunate aspect is that each puja pandal is an independent entity funded, managed and organised all by itself and only for itself. There is no effort by any chambers of commerce, trade association or any citizens group to get any sort of an organisation or system in place such that people can know what is happening where. No one has ever seen a flyer or a leaflet or even a mention in the daily newspapers where a visitor can know who is performing where and at what time. True, there are immense commercial and economic benefits that do accrue mainly because of good business the local traders get. The shopkeepers do nothing but merely sit back and enjoy the results without actually promoting anything. What is surprising is that at festival times the offices of the local chambers of commerce and trade associations, that should have been a hive of activity, are closed. The officials are away to be with their families. So, as I said, it remains a sad fact that far from our promoting this immense opportunity, travel agents overseas warn non-Indians against visiting India at this time, because of the inevitable crowds, traffic jams and the general breakdown of public services. The immense potential of bringing in hordes of money-spending tourists is just going waste.

Mardi Gras Now, let us go to see Mardi Gras. Mardi Gras (French, meaning ‘fat Tuesday’), is the pre-Lenten festival celebrated in Roman Catholic countries and communities. In a strict sense, Mardi Gras is celebrated by the French as the last of the three days of Shrovetide and is a time of preparation immediately before Ash Wednesday and the start of the fast of Lent. It is thus the last opportunity for merrymaking and indulgence in food and drink. In practice, Mardi Gras is generally celebrated for a full week before Lent. It is marked by spectacular parades featuring floats, pageants, elaborate costumes, masked balls and dancing in the streets. The most famous modern Mardi Gras festivities are those held in New Orleans, Louisiana and in Rio de Janeiro, Brazil, but the entrepreneurs in many small countries of the West Indies have taken this up also and made it a fantastic tourist draw. It is said that the one-week festival of Mardi Gras has transformed the entire economy of the city of Rio de Janeiro, a large city in southeastern Brazil. During the weeks that precede the Carnival, the city receives thousands of tourists. Events include spontaneous street dancing behind popular bands (marching bands comprised of brass and percussion instruments), formal Carnival balls for nearly every income level, and several days of Sambadrome parades where the best samba schools

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compete in marathon musical and dance presentations along a specially designed street where thousands of spectators gather to watch the events unfold. Tourism and entertainment have been made the key aspects of the city’s economic life and the city is the nation’s top tourist attraction for both Brazilians and foreigners. That was the good part. I have spoken in a very positive manner about Brazil and the city of Rio. But everything is far from hunky-dory there. Internationally, it is still the nation’s best-known city. Though the city has a stunning natural setting between the mountains and the sea, and although Rio may be Brazil’s most beautiful city, it is also one of its most troubled with an exceptionally high crime rate. The shanty towns which house approximately 20 per cent of the city’s residents and are dangerous, unsanitary and lacking in basic services such as water, sewerage, and, to a lesser extent, electricity. Police corruption is widespread. There are hazards like environmental pollution, and the waters of Guanabara Bay are considered too polluted for safe bathing. The point I am trying to make is that it is not always the best cities that bring in the money-spending tourists. People come for good fun and the Mardi Gras carnival offers it in plenty. This success would not have been possible but for the immense amount of organisation and promotion, purely by the private entrepreneurs. It is a spontaneous getting together of disparate entities, from travel agents to hoteliers to dance bands to event organisers with the local chambers of commerce, in an informal sort of network. Nobody was really the leader, the owner or the boss, but everyone profited. Detailed literature on the happenings at the Carnival, list of hotels and incidental travel facilities are available with travel agents all over the world months in advance.

Preamble

Part 5 And Finally, the Project Plan

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24 Do Your Homework First

Homework and Attitude I have said repeatedly throughout this book that you can never do enough homework before you commence anything. As a budding entrepreneur, you greatly increase your chances for success—and reduce the chances of falling flat on your face—by analysing your idea, your market place and your management team before beginning. We will talk some more about this, but now that we are talking business and you are ready to go to the critical stage of taking your idea to the marketplace, you need one more thing—the correct attitude. In this book, I have been asking you to start by entertaining several new ideas, some of which you might even find silly or wrong. I call it brainstorming. This is the reverse of being secretive and playing with all the cards held close to your chest. Talk to everybody who knows anything about what you want to do, get the feedback and get all sorts of suggestions and ideas. But just keep an open mind and do not reject anything on sight. Think them through. Do whatever homework you need to do and weed out the really unworkable ideas. You need not apply them all. Choose the ones that apply best to your situation, and test them with enthusiasm and conviction, but direct all your actions towards your specific concrete goal. Then, in your mind, try them out. If an idea works in your mind, it will work for you. Here, your positive, go-getting attitude is more important than hard facts. It is more important than the past, education, money, circumstances, failures, successes and what other people think, say or do. It will make or break your project. The remarkable

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thing is you have a choice regarding the attitude you will embrace. Of course, you cannot change the past. You cannot change the fact that people will act in a certain way. The only thing you can do is play on the one string you have, and that is your attitude. There are many management anecdotes and quotes on the Internet that say that life is 10 per cent what happens to you and 90 per cent how you react to it. It simply means that you are in charge of your attitudes. Another thing. We all think in pictures. Check it out. If you have not been to a city for a while, you might say, ‘I did not recognise your house’. Why is this? It is because the streets and the neighbourhood changed and we formed our beliefs based on pictures or images we had in our mind. When things do not conform to this picture, we cannot recognise them. We have this blindness which handicaps us in everything we do. But the people getting the results have measurably less of this blindness than most of us. Of course, you must first form a picture of your project in your mind. As I said above, if an idea works in your mind, it will work for you. If your picture does not conform to what you expect of it, you are sure to reject it. I read a very interesting quote on the Internet the other day. It illustrates how we do certain things based on the picture we form in our minds. Let us say a plank of wood 10 metres long but only 36 centimetres (about 14 inches) wide is placed on the ground and you were told a reward would be yours if you walk along its length with your eyes closed without falling off. You would take this as a relatively simple challenge. If, however, you were asked to do the same thing with the plank placed between two structures 100 metres off the ground with nothing in between you would most likely refuse to even try. Why? Well, the penalty for failure is higher (probable death rather than hurt pride). Yet, the task has not changed at all; only the picture of the risk in your mind has.

Factors of the Feasibility Analysis Whether you plan to expand an existing business for your firm, acquire an existing business or start a new one on your own, you need to perform some basic economic feasibility analysis—a preliminary evaluation of your business idea to see if it is worth pursuing. This is before you go to the next chapter and read the basics of the stages of a project plan. Characteristics of all successful entrepreneurial projects show that the personalities and individual characteristics of the entrepreneurs who start new businesses is the most important factor of success.

An Individual’s Management Skills Management skills have become so important that people financing your idea have begun to revise the way they look at potential new venture deals. Rather than betting on the ‘horse’ (that is the business idea and the actual business plan), they are now

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much more likely to bet on the ‘jockey’ and look for someone who has a history of successful past entrepreneurial efforts. These investors have come to realise that a good business plan does not necessarily make a good project, but a good entrepreneur can, whether the business plan is optimal or not.

Your Management Team Your management team, or the one you will assemble, is also extremely important. Compare the key players in your potential business to the ideals described in your text books on management and see how many of these characteristics they possess. Obviously, no one will display all of the qualities, but you need to prepare a worksheet that can still help you assess your potential for success as an entrepreneur.

Market Assessment Assessing the market size for a new business is tricky. I will rephrase this to say that it is very very tough, but is a critical part of your project plan or feasibility analysis. For a business idea to work, you must be able to show on paper that enough customers are willing to spend money on your product or service to provide sales revenue that covers your expenses and, hopefully, earns you a profit. Accordingly, determining how many potential customers exist might be an essential part of discovering whether your business idea is going to work. It is a simple truism that every text book talks about that the first thing consumers usually do when they hear of a new product or service is compare it to existing alternatives. Customers will buy from a new business only if they perceive the value provided by that new business to be greater than the value provided by existing competitors.

Perceived Value is a Judgement This is again marketing textbook stuff. Consumers compare what they think they are going to get from your new business to what they think they are getting from existing businesses. To attract them, you must convince them that you are providing something better, more convenient, healthier, more durable, cheaper or of a higher quality at the same price. In short, you must be able to show on paper that you can create a perception that you have a competitive advantage. This advantage can be based on many different characteristics—location, a specific product line, technology or exclusive access to some supplier. No matter what it is, there must be something about your business that makes it distinctive, different and competitively superior to the businesses your customers will compare you to. The last point, which is actually the summation of all that I said above, is that you must be able to communicate your competitive advantage simply and believably in your project papers.

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It is not enough just to be better—you have to convince potential investors that you are better. One of my former colleagues, an Indian from Malaysia, who went back home to take his family’s traditional business in a new direction of growth always said, ‘It took me five years to become an overnight success.’

Focus and Frugality It is almost an axiom that every student of entrepreneurship is taught—any entrepreneur embarking on a new project must understand the meaning of ‘focus’ and ‘frugality’ in order to succeed. I would reword it to read, ‘focus on frugality’. Though this has frequently been repeated, I find in India, this advice often seems to fall on deaf ears. Ignoring this advice will almost certainly lead to a company’s failure because India is now a highly competitive market and successful new projects are all about efficiently managing scarce resources to create extraordinary value for investors and customers. Managing scarcity is what new projects are all about. Not only must a start-up manage scarce capital, it must also efficiently manage scarce talent, human resources, knowledge, creativity, and time, to name just a few. It is this scarcity of resources that mandates the business requirement for ‘focus on.’ I would like to differentiate here between the serious entrepreneur and the hordes of pseudo-entrepreneurs who, as I said in the introduction, are mostly the children of politicians or their close friends. Attempts to successfully teach ‘focus on frugality’ to such an ‘entrepreneur’ who has just raised that critical first round investment would always be futile. After that round of financing is completed, it seems that the typical (doomed) entrepreneur forgets that capital is a scarce resource, and there is not necessarily more where the last round came from. Add to that, the ‘loan melas’ of the popularity stunts of our politicians, when loan capital was momentarily flowing freely to anyone with a business plan (or sometimes even less than a plan), the message sent to the entrepreneur by the banking community was loud but confusing and misleading. The free flow of capital misled entrepreneurs into believing that successful entrepreneurship was about raising capital and then spending it, rather than managing it. Sure, as it turns out, those who heard and believed this ‘waste now, there’s more where that came from later’ message, were the ones who failed. I repeat that managing scares cash, technology, hard assets, customers, personnel, highly skilled talent are all the hurdles that a successful start-up must overcome. It is this right of passage, living with scarcity, that often dictates whether the start-up business will, by definition, be viable. A start-up that develops a ‘high fat’ diet of cash and other resources; will find it almost impossible to get through the inevitable lean times that every developing business must invariably face.

Do Your Homework First

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If the secret to a successful start-up were not managing scarce resources, there would rarely be any successful start-ups. Is it possible to have too little cash? Obviously the answer is ‘yes’. Many young entrepreneurs intentionally underestimate their initial cash needs because, if the cash is coming in as shareholding, they fear they will have to give away too much of the company too soon. This is the most common mistake new entrepreneurs make, because if too much money can cause a business coronary for a start-up, too little money can starve it. Once you run short of money before you reach break-even, you will have to borrow it at the most outrageous terms and conditions. The lender or the future shareholder knows that you are in no position to bargain. So, what is an early stage start-up to do? The answer is, get as much start-up investment as you can, but manage its spending like it is all you are going to get for a long time. So, whether you are starting a business or already running one, learn from the most common mistakes of others. Manage all of your resources as if they are scarce, and create the maximum value with them.

Do Get a Move On Don’t wait to start your planning programme. If you hold back until you are meticulously prepared in every detail for the establishment of magnificent objectives, let us face it, you will never get started! The important thing is to get your goals and get the planning machinery under way. You must, of course, be impatient with your plans and their progress. But you won’t have anything to refine and improve if you don’t make a beginning. I will repeat what I said above. Remember, you need to condition your planning heavily with a thoroughly fortified knowledge of your consumer. Time and again I have seen that Indian companies have built a product line and then—and only then— determined who wanted it and how to distribute it. No doubt, this is asking for disaster. Base all your plans directly or indirectly on a well-researched fund of data about who the consumer is and what, where, when and how he wants a product, and, above all, why he wants it. One last point. Many people react warmly and positively to counsel and just the opposite to advice. What’s the difference? I have worked with lawyers in India who didn’t know this.They gave advice when counsel was needed and then wondered why the client relationship did not blossom as anticipated. Distinguishing between the two terms is easy, but carrying out the concept in practice requires some doing. Advising is telling the other person what he should do. Counselling is enabling him to see what he should do, how, and why; it also requires that he feels motivated to use the counsel. You as the leader must have insight, empathy, perception, warmth, and wisdom. The adviser needs only intelligence. When seasoned counsel is provided within a context of consideration for the growth and benefit of the counselee, candour can seldom be overdone.

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You may advise your installation supervisor that a work simplification programme should be in operation three months from now when the equipment should be ready for operation. The results of this advice may be uncertain. You may counsel him by requesting his best thinking on the need for such a programme, getting him to tell you how and why it should be done as well because you can still modify his proposed date in light of your greater knowledge of overall requirements. You gain much, however, both by benefiting from his specialised knowledge and experience and by letting him identify himself with end results and commitments.

Preamble

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25 Stages of a Project Plan

The entire focus of everything an entrepreneur does boils down to money. While in this part, we will discuss the nitty gritty of preparing an initial project plan, the final objective is the preparation of simple financial projections.

Why Financial Projections? One may well ask, why should a non-financial executive, a shop floor manager or a sales executive, bother about learning financial projections? The bigger firms have financial people and the smaller ones have external accountants, so why bother?

Today, even in the smaller firms, top managers are becoming much more democratic. The days when only the boss thought about new ideas and executives merely carried them out are gone. Managers now know that they do not have time to think of all the new ideas or be aware of everything happening in the marketplace. They are leaving all this thinking to junior executives. Moreover, there is an entirely new breed of junior executives who are filled with a new energy and nervous expectancy. Be it a marketing executive, a shop floor supervisor, or a young man wanting to do something on his own, rapid economic development has not only made India’s youth impatient to acquire a better way of life, but is also helping them shed the burdens of the past. There is almost an outrageous ambition and they now want to think in new directions.

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However, for a junior executive, to be able to think in new directions is not enough. They have to think out all the implications of their new ideas. They need to understand the meaning of business risks and have good business sense so that they can safely take the firms in new directions of growth. In other words, they have to think like entrepreneurs, and the first step is to start putting your ideas on paper. Further, once an executive puts up a new proposal for consideration, be it an idea for a new product line, a new department, a branch at a new location, or whatever, the top management would, at some stage or the other, need to commit funds and manpower to the new idea. So, first they have a million questions and want to see the bottom line: How much will it cost and over what period of time? How long for the break-even? And what is the amount they will lose if the idea does not work out? It is only after the executive clears the first hurdle of answering the million questions that the investigation of financial viability, profitability, rate of return and payback period and so on can follow. All this means homework. But if the executive is not thinking like an entrepreneur, and does not understand the basics of financial projections, how will he know what questions to ask himself? Here, no financial expert or accountant can help him. I will say it straight out that if an executive needs the help of an accountant to start work on getting the answers, he better not start.

The Approach As I have explained above, the main objective of this part of the book is to make you aware of the nitty gritty of financial projections. I will take you step by step of an actual study to make you understand what is involved in taking the very important first step of an investment decision. Please note that there are many gross oversimplifications in the discussion here as the idea is to help a complete novice in matters of finance to understand how to do his own homework. In many cases, we need to put the cart before the horse. It is not a good idea to go out in the market and do your investigations and then start translating your findings into financial data. If you do not know what sort of data, information and technical inputs would be needed, how do you go out to do your research in the first place? So as I said here, first you sit down and work out your own tables on the lines of the example I am giving here. I am sure you would need to grossly modify these tables to suit your proposal. It is important that you should not blindly fill-in-the-blanks of some tables an accountant gives you and say this is your plan. Even if you start with a set of blank tables your accountant has given you, you should know enough about the subject to be able to customise these for your project idea. I will try to give you as much basic knowledge as possible of what is needed so that you are able to make your own tables. The tables here are your templates.

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What is a Project Plan? After having discussed entrepreneurship from all possible angles, you should by now be ready to start thinking about unleashing your potential on the world at large. The end objective of every entrepreneurial effort, be it the beginning of a new project or the taking of an existing business in a new direction of growth, is to see something on the ground, and the only way of doing this without burning your fingers is to first develop a detailed project plan. Sure, the actual project when it starts may not be anything like this plan, but this would be the foundation of whatever comes next. Some text books call this the implementation scheme and most of the world bodies like the UN would call it the final action plan. Remember, this is not a feasibility study. A detailed feasibility study is only a part of the plan. I will show you that there are a lot of other things too. Before an investment decision can be made and the project idea starts taking shape on the ground, your idea has to travel many possible stages. We will talk about these here. Whatever the nomenclature, the idea is to meticulously investigate and evaluate all aspects of the project from conception till the stage of actual output. z

Here we will part company from the service industry. Hotel projects, tourism promotion plans or the setting up of service organisations, as the development of these entrepreneurial activities is a vastly different subject and needs specialised planning and evaluation techniques that have been specially designed for these sectors.

Scope of Discussion 1. From here onwards, in this last part of the book, we will confine our discussion only to manufacturing projects. 2. This chapter is designed not only to introduce the reader to the skills of making one’s own basic financial tables, but also as a starting point for doing one’s own homework for a project proposal. 3. I wish to have it clearly understood that the subject of ‘preparation and evaluation of feasibility studies’ which overlaps the disciplines of finance, marketing and industrial engineering, is a topic by itself and is outside the scope of this book. 4. The idea is that a budding entrepreneur should understand the basics of doing his own homework and be able to assess the merits of his own idea without the help of an accountant. 5. It is only when you have a dummy set of financial tables in front of you that you can start making a check list of the items you need to think about, investigate and get detailed data on. Then, of course, you start modifying the tables to suit your own project idea and start getting specific.

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Stages of a Project Plan Very broadly speaking, a project development cycle comprises the concept, the preinvestment, the investment and the operational phases. Each of these four major phases is again divisible into stages, most of which constitute important but very diverse activities. While a detailed discussion on these is very much outside the scope of this book, I will make an attempt to give a better understanding of the problems encountered in carrying out the various tasks under the concept and the preinvestment phase of industrial projects. As I said above, we would be making some gross oversimplifications and generalisations as no single pattern can be defined— industrial activities can take innumerable forms. Depending on your own academic background, and whether it is a new project idea or the expansion of an existing commercial enterprise, and, your own mindset in seeking help and advice from others around you, a project plan would have these stages. Sure there would be considerable overlap but the stages have to be there in a strict chronological order. 1. 2. 3. 4. 5. 6. 7.

Brain-storming √ Opportunity study √ Pre-feasibility study √ Feasibility study Pre-investment study Financial plan And then you will go on to the project implementation stages where an entire spectrum of specialists from marketing to finance to engineering and on to the specific technology fields may need to be brought in.

As explained, we are concerned only with the first three marked stages above, and these are discussed at some length in the chapters that follow. Once the project idea clears the pre-feasibility stage and there are fairly dependable indications of a viable project, the role of the young entrepreneur would get minimised, the investors would step in and the entire scenario would change. z

It is the investors who would then decide on the nature and extent of participation by the promoting entrepreneur, and there is an entire spectrum of options he may be offered. At the one extreme is the option of the investors negotiating the rights to the entire promotional effort and at the other is the option that the promoting entrepreneur be handed complete charge of the project.

Then, several parallel activities will take place and even overlap into the succeeding investment phase. Also, the activities of the various phases would usually be carried out separately, the reason being that the main person made responsible for carrying out the feasibility study may not have the qualified manpower at his disposal or the expertise to conduct studies in all the areas concerned.

Stages of a Project Plan

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Once it has been decided to invest, the project idea is no longer a proposal and becomes a project, and would enter the implementation phase. This would include a pre-investment study; a detailed financial plan; and the project implementation stage. For all these an entire spectrum of specialists from marketing to finance to engineering and to the specific technology fields may need to be brought in. These are all costly and time-consuming tasks. This phase embraces the entire period from the decision to invest to the start of commercial production. It also includes a number of stages including negotiation and contracting, project design, construction and start-up. Remember the overheads have started and if not planned properly, this phase may extend over enough time to endanger the potential profitability of the project. The primary objective of implementation planning is therefore to determine the financial implications of the implementation phase with a view to securing sufficient finance to float the project until and beyond the start of production.

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26 Opportunity Study

Brain-storming Now we enter the stage where the entrepreneur takes his idea to the first stage of implementation. This is the stage where he takes the first step of putting his ideas on paper. z

Remember, this is the most important aspect of development of entrepreneurial skills. I have repeatedly said it earlier and I say it again—you need to get into the habit of putting every thing down on paper. And, by everything, I mean everything. It will often happen that you will need to go back, sometime later, and check on what you did and why you did it.

So, as the first step, put all your random ideas down on paper, in a random manner. If you are sure of only a rough range of items you are going to make and have not zeroed in on a specific item, do put down all the items you can think of—this is brain-storming. Then talk to anyone and everyone, pick their brains and collect all the wildest ideas. Put these down too. Brain-storming again. Remember we have already discussed that trying to keep your new idea a secret and doing all the thinking by yourself would be self defeating. Talk freely to as many people as you can find, anyone who knows something about a particular aspect and get as much input as you can. No one is going to steal your idea. The next step. As a trained professional, you have learnt to think and act analytically. So take all the stuff you have written down and start analysing. Do rough homework

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and weed out the bad thoughts. Prune and fine-tune the list and the ideas till you have a workable product mix. I have been in this line for 35 years and believe me, there is no other way of doing this. Put it all on paper You will not be able to get the required response from your potential investors unless you spell out your thinking on the strategies you would like to use while developing your project. And, spelling out means putting every idea you have on paper. Crazy ideas and half baked theories, everything. Remember, you are at a stage where you do not yet have the budget needed to go into detailed investigations. Neither can you call in specific experts to contribute to and to analyse your findings. What you have up to this stage are your ideas and your initial thinking. It would help if these were spelled out in detail. As I said, on paper. Remember, your making a study of success stories in similar projects is a good idea, but a far better idea is to study the failures. If you understand who failed and why, you are already half way to convincing the investors. Keep a record of everything you have found and keep it as your precious archive.

What is an Opportunity Study? This is the stage where you feel you have an opportunity of doing something and want to explore the pros and cons of taking this to the next stage of a pre-feasibility study. There are many definitions of an opportunity study. Do not confuse this with the opportunity studies routinely put out by government bodies in developing countries wanting to attract development to various regions or to specific industrial sectors by highlighting potential investment opportunities that exist. In developing countries, where the private business sector is not strong, mere publication of such lists or studies, however, does not prove sufficient and it always requires more precise data before specific business interest can be evoked. For the purpose of our discussion here, I would define an opportunity study as the study that takes the first step in transforming a project idea into a broad investment proposition. Since the objective is generally to stimulate investor response, a project opportunity study must include certain basic information; the mere listing of products that may have potential for domestic or export manufacture is not sufficient. Unlike the situation in developed countries, the identification of industrial opportunities that can be developed into viable investment projects is a tough job, particularly in countries like India that have opened up to the world and anything made here would have to compete with imported products almost without any protections. Therefore opportunity studies would be rather sketchy in nature and would rely more on aggregate estimates than on detailed analysis. Cost data would usually be taken

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from comparable existing projects and not from quotations of equipment suppliers and the like. Such a list, derived from general economic indicators such as past imports, growing consumer demand or from one of the general opportunity studies relating to areas, sectors or resources, can serve as a starting point. It is, however, necessary first to be selective as to the products identified, and second, to incorporate the rough data relating to each product so that a potential investor can consider whether the possibilities are attractive enough to proceed to the next stage of project preparation. Such data and information should always be supplemented with information on basic policies and procedures that may be relevant to the production of a particular product. The end result would be the emergence of a broad investment or project profile that would be adequate for the purpose of stimulating investor response.

Project Background You have to briefly describe the project idea in the project/executive summary, and inasmuch detail as possible in the body of the report. Then you go on to listing the major project parameters that served you as the guiding principles during the preparation of this study—product and product mix; plant capacity; location analysis; market; raw materials; the source of know-how; the type of manpower needed and its availability, and/or the rough cost estimates of training the work force, and so on. You will need to outline the economic, industrial, financial, social and other related policies that are likely to have an impact on your project idea.

Demand Analysis The first step you have to take here is to have some basis for your ideas of the size, structure, and demand characteristics of the product to be manufactured. In almost all cases a certain amount of primary data would have to be generated since secondary data in the required detail would not exist or are not yet available. You will not get much help here and it is only your ingenuity that you have to bank upon. Other producers of the same or similar products naturally would be reluctant to divulge information on operational aspects of industry and present consumers would be reluctant to reveal information on family budgets, personal incomes, buying habits and preferences. This reluctance plus the rapid changes in socio-economic living patterns in all parts of India would render the available historical data irrelevant for your programming.

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Many products and projects are exceptions to the general rule of always starting your homework with estimates and analysis of domestic demand. This is particularly the case with import substitution projects. This means you are trying to introduce a product that is not domestically produced but imported in large quantities. In this case, at least at the beginning, the market and demand analysis is easier because the amount of imports can easily be established from published statistics. This constitutes a good indicative parameter. It is even easier if, as is often the case, the first entrepreneurs are people who are already importers of such products and so are fairly well acquainted with existing market conditions. On the other end of the spectrum, are new projects based on an abundantly available natural resource. You only have to show that international markets exist and prices can be competitive.

Product Pricing One of the most important and at the same time difficult items to estimate in advance is an optimum selling price you are going to use for your projections. It is often, but not always, the case that the market may have to be developed through initially low prices because of the existence of a lower-priced substitute or because of the element of competition in the same product. In these cases there may be an initial period when product pricing would not be able either to provide a profit element or to cover even total production cost. Of course, such product pricing must be limited to a specific period. The reaction from competitors producing the same product, or a similar or substitute product is pertinent. A new manufacturing enterprise is naturally resisted, generally through a reduction in product pricing by competitors. Current product prices would not then provide an adequate basis for projecting sales income and the marketing strategy must take into account the nature of the competition and its likely responses. The likely consumer response should also be assessed. A substitute product would probably command a lower price than an imported item because of consumer preference for imported items or particular brand names. In such cases, if there is no possibility of protection against imports, a lower product price may have to be assessed, and the subsequent losses in the initial period provided for. There is the other side of the coin too. Product pricing may also be considered in the context of a monopoly or semi-monopoly. In such cases also the implications of charging unduly high prices need to be assessed. Despite various degrees of control on industrial production in many developing countries, new projects are inevitably attracted to production sectors where high profits are being made except in fields where technology cannot be obtained. Where there are such controls, a monopoly, or semi-monopoly may not be allowed to develop and, if it occurred, would be shortlived.

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It may, in any case, be more prudent to price a new product at a level that allows only a reasonable profit to the initial enterprise. The price in these cases must be kept low enough to discourage other entrants. Too high a price and quick profit, no matter what the justification, would certainly be inviting more competition.

Preamble

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27 Pre-feasibility Study

The Story so Far Let us summarise where we stand in our discussions. I have explained that we are concerned only with the first three stages of the project. These are: z z z

Brain-storming Opportunity study Pre-feasibility study

I have explained these stages earlier and I am calling the pre-feasibility study as the last step in the discussions because after this, if your proposal again gets a green signal, it would go on to the stage of the formulation of a techno-economic study, or what you may call a full-fledged feasibility study. This would include a pre-investment study, a detailed financial plan, and then the project implementation stage. This stage is an interdisciplinary task requiring a team of engineers, economists, social scientists, businessmen with different educational backgrounds and professional experiences. An entire spectrum of specialists from marketing to finance to engineering and on to the specific technology fields may need to be brought in. A promoting entrepreneur may not have the skills or the resources to carry out all these tasks, as these are all costly and very time consuming.

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During the implementation phase a series of simultaneous and interacting investment activities take place with different financial implications. To measure them, an optimum implementation programme and time schedule should have been prepared and included in the pre-feasibility study.

The Preliminary Assessment The budding entrepreneur should by now not only have the basic tools needed to take his project idea to the next stage, but would also have had a positive indication from the investors after they have seen his opportunity study. Remember, this would at best be an indication saying that it looks like a good idea and now you will have to show that your idea would be financially feasible. The investors could be your own family members, an outside investor, or, in the case of an executive exploring new avenues, the management of his company. In any case, the more work done while the project is still on paper, the better the chances of success. I have explained in the earlier chapters that a pre-feasibility study should be viewed as an intermediate stage between a project opportunity study and a detailed feasibility study, the difference being primarily the detail of the information obtained. The principal objectives of the pre-feasibility study are to determine the following: 1. On the basis of the information elaborated at the pre-feasibility stage, is the investment opportunity promising enough for an investment decision to be taken? Do the parameters suit the requirements of the particular investor or investor group? 2. Does the project concept justify the cost of preparation of a detailed project implementation plan by a group of experts? 3. Maybe there are some aspects of the project that are critical to its feasibility that would necessitate in-depth investigation through functional or support studies such as market surveys, laboratory tests and pilot plant tests. 4. Would this project lead to other projects being set up? This is important because in countries like India that are increasingly relying on industrial development planning, investment studies are not only a tool for investment decisions and project implementation but also often assist in the identification and selection of projects in other sectors of the economy. Often broad indicators would emerge from the planning process and these can form a base on which pre-investment studies can be undertaken for other specific projects. 5. Did the study undertaken by the entrepreneur take full account of government policy framework? In countries like India, policy framework always influences prices and material inputs and outputs, wages and foreign exchange availability.

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In other words, it is crucial, particularly at the pre-feasibility stage, to examine, perhaps broadly, the economic alternatives of market and plant capacity, demand and market study, sales and marketing strategies, production programme and optimum plant capacity. Pre-investment activities, including market surveys have to be carried out accordingly.

Some Pitfalls I have worked with Indian organisations and investors all across the world and I have seen that invariably the quality of pre-investment studies prepared by them have not kept pace with the increasingly more elaborate demands made on them. Developing countries vary considerably as to their stage of industrial growth and if the studies follow a standard format, the depth and relevance of the studies would never be of a sufficiently high level to ensure rational decision making at the successive stages of the pre-investment process. Homework and More Homework Let me put this very simply: You can never do enough homework. If enough homework had not been done before the project idea was taken up for implementation, it would certainly lead to misallocation of resources, long gestation periods, investment cost over-runs, high rates of industrial mortality and/or lopsided growth. In simple words, you will fail. And, the most crucial homework is the one that is done at the pre-feasibility stage.

Now that India is globalising and our young entrepreneurs are venturing out across the seas, they will find that many developing countries have very poor or inadequate planning. It should be remembered that, in these countries, the need for care and diligence in such studies is even greater. The inter-relationships between various inputs and production aspects need to be more specifically defined than in those where the planning mechanism itself provides adequate information. My own experience of pre-feasibility studies prepared in developing countries has not been good. z

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I have seen that such studies were frequently motivated and often funded by equipment sellers or were a part of a turn-key project and the specific problems and difficulties that were likely to be encountered in the project were not sufficiently addressed. In other cases, such studies were largely based on earlier experience with similar projects in other countries, and then proved inadequate in the prevailing local conditions. The costs of some studies have tended to be disproportionately high compared with the investment for the projects because there has been over-dependence

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on foreign consultants. This has always left gaps in knowledge and experience of the prevailing local conditions. Despite the increase in industrial activities and projects, the structure and format of pre-feasibility studies tend to be conceptually similar and a single format and set of blank forms and tables is often applied to a wide spectrum of industrial projects. Although the determination of viability of a plastic factory producing household items would be substantially different to that of a plant to produce packaged food products, or a unit designed to produce simple cosmetics and detergents, the format of information and data used seems quite similar. One of the points rarely, if ever, addressed in any detail in the pre-feasibility study is clearly to understand how the project idea fits into the framework of the economic conditions and the general and industrial development of the country. Another point that is rarely addressed in the pre-feasibility study is the identity of the sponsors together with the reasons for their interest in the project.

Some General Principles You have to begin with estimates of the sales or revenue that your proposal will generate. Use these three general principles:

Do not Count on Promises Many people begin their market survey by asking potential customers, ‘If I made this, would you buy from me?’ The responses are then used as the basis for generating an estimate of potential sales. Here lies a problem: It is much easier for consumers to answer ‘yes’ to a hypothetical question than it is to actually change their behaviour and buy a new product from a new business or entrepreneur. You have asked a casual question and have got a casual answer and if you estimate your future sales on the promises and assurances in a questionnaire, you will frequently discover that the market is much smaller or not there at all.

Be Conservative Underestimate your potential sales. It is always easier to live with a higher-thanexpected level of sales than it is to control and cut down your costs when your sales estimate has proven to be too optimistic.

Make a Range of Sales Estimates Estimate your potential sales in a number of ways and compare the figures. Try two or more of the following methods and see how different the results are. You can decide


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to be conservative and pick the smallest estimate of the group, or be aggressive and take an average.

Sales Estimation Methods This is at the same time the most crucial and the most difficult aspect of the study. Except for the case where you are setting up a project to feed the requirements of some specific customers, the more effort you put into this, the better your chances of success. Market Survey is an Art that Cannot be Taught Let no one tell you that there are any hard and fast rules, methods or guidelines for doing your market survey. Of course, textbooks on marketing are full of advice and suggestions, but in actual life, I have seen very few of these set formulae work in developing countries. Instead, I have seen different people get excellent results by completely different methods. Everything depends upon your mindset, your attitude and your contacts. Of course, the one thing that is common in all the surveys I have seen is the amount of sheer backbreaking hard work that had been put in. There are no short cuts for that.

The critical factor in demand and market analysis is an estimate of the demand for a specific product during the life span of a proposed project keeping in mind that the viability of the project is dependent, among other things, on the projected sales or income. The size of demand, at any given time, is a function of several variable factors such as the composition of the market, the competition from other sources of supply of the same product and substitutes, income and price elasticity of demand, market responses to socio-economic patterns, distributive channels and consumption. z

Again, there is no denying the fact that all the cost elements and projected output levels should be estimated as accurately as possible, the cost and time involved in obtaining data are not always justified and it may therefore sometimes be necessary for the entrepreneur to rely on assumptions. When this is the case, it should be so stated in the study.

It is may be a good idea to start with the associations of retailers, wholesalers and other businesses in your product category, because these bodies often keep good industry-specific statistics on the performance of individual outlets. This data is not secret and it is not difficult to get rough indications if you can convince the official about how serious you are about your project. You cannot write or make a phone call. This can only be done at a personal level. Then there is always the friendly, person-to-person approach to people in businesses similar to yours. Questionnaires do not help and are often counter-productive. Next, calculate your share of the market. To begin with, estimate your share as less than that of your smallest competitor. No matter how confident you are of yourself

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and your project, be sure not to assume you will take over the market, particularly in the short run. Since we are talking in general terms, there can be many viable items that would have only a handful of customers. So, another method of estimating sales for a new business is based on the number of customers you can attract. Calculate the total number of customers in your product range, identify how many you think you can attract, and multiply that number by what you think their average purchases per year would be. Obviously, the difficult part is determining how many of those customers would actually shift their business to you. Look at your competitors in the marketplace and estimate their sales. I have met many budding entrepreneurs who feel their idea is unique and there have been and will be no competitors. This has never been true. If you think in a rational manner and accept that customers did manage somehow before your genius came on the picture, you need to find out where the customers are getting their present requirements. This might serve as a reasonable estimate for your own business.

Break-even Analysis When an entrepreneur works out an idea for a project and puts it before a prospective investor, the most pertinent questions would be about the break-even point. Every investor is concerned about this as the project drains out money till this point. The initial losses do not form part of the manufacturing costs and can only be written off later on. The picture changes once more money starts coming in than is needed for the day to day running. I have explained that this is neither a book on accounting procedures, nor on financial analysis. Every text book on accounts and costing has chapter after chapter on sophisticated techniques of doing break-even analysis, so I will explain only the basics in simple nonacademic language. My purpose of discussing this here is for the entrepreneur to prepare himself for the questions he is going to be asked before he gets a green signal to go ahead to the implementation stage.

There are many ways of describing a break-even point. It is in general the point at which the gains start equalling the losses, or where revenues become equal to expenses. Here onwards, an investment starts generating a positive return. In simple words, there is no profit made or loss incurred at the break-even point. It is important to understand that reaching break-even does not mean the start of earning back the losses occurred in the past, it does not build up any reserve for future losses and it does not provide a return on your investment. It simply means that you stop losing money.


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Evaluation under Uncertainty Break-even analysis is not only an excellent tool for the evaluation of your risk under uncertainty, but also a convenient format where you can spell out these risks in specific terms for the benefit of the investors. Uncertainty will always be there. It will always happen that you are not sure of one variable or the other and so, for an opportunity study and for the pre-feasibility study, you may have to look at break-even from many angles. In accounting text books you will read that this sort of uncertainty analysis can be undertaken in three steps—break-even analysis, sensitivity analysis and probability analysis. Since this discussion is only concerned with preparation of an opportunity study and then the pre-feasibility study, we will treat financial analysis only in a complementary way and combine the discussion on break-even analysis and sensitivity analysis. Before going into details, let me give you an idea of some of the angles you may have to look at for your break-even analysis:

Selling Prices For a project where the proposed selling price cannot be estimated with reasonable accuracy, you may have to compute a break-even selling price. Break-even price analysis calculates the price necessary at a given level of production to cover all costs.

Dealer Discounts You may sometimes have to fine-tune the above to compute a break-even discount you can give to your dealers.

Production Volumes Often you have to do the reverse and do a break-even analysis to calculate the minimum volume of output at a given price.

Raw Material Prices Again, you cannot often be sure of your raw material prices and you may have to compute a break-even cost of raw materials. As I said above, on the one hand your forecasts and estimates of demand, production and sales are not likely to be exact because of many uncertainties. On the other,

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for the same reasons, your assumptions about the production and investment costs, prices or the lifetime of the project will also not always be correct. The investors understand this and the more you are specific in detailing the uncertainties, the more confidence the investor will have in your proposal. It is a part of the homework. An entrepreneur must clearly identify the variables that could have a decisive influence on the profitability of the project. The common reasons for uncertainty are inflation, changes in technology, false estimation of the rated capacity and the length of the construction and running–in periods. Not only that, the investment decisions depend upon many political and social developments, as well as changes in competitive prices and your own productivity. It is clear that, whichever form the final project proposal takes, its numerous components will have to be scrutinised with a view to increasing the precision of the proposal. When dealing with an investment under conditions of uncertainty, three variables should particularly be examined—sales revenue, production and investment costs. A host of individual items enter into these variables, all of which are composed of a price and a quantity. All these elements have to be taken into account in the form of foreseeable risks. The project proposal can carry some of these, but there may be others that it cannot. z

This is probably the most difficult decision to be made during the entire process of project preparation. The size of allowance provided for this purpose will have a decisive impact on the profitability of the project and may, in the case of a marginal proposal, tip the balance against the implementation of the project.

Preamble

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28 Explaining the Financial Tables for Non-financial Executives (or, Everything You Wanted to Know about Doing Your Own Projections but were Afraid to Ask!)

Notes 1. This part of the book is designed only to be used as a starting point for nonfinancial people to understand the basics of doing one’s own financial projections and it is hoped that the reader would go on to doing further reading in appropriate text books. 2. I wish to make it clear that I am explaining these tables in terms of how I, as a non-financial professional, do my own analysis of an idea. These tables and my notes should form a backdrop for a budding entrepreneur to do his own homework to first satisfy himself on the merits of his idea and to prepare himself for the initial questions he is going to face. 3. I have explained it earlier and wish to have it clearly understood that the subject of ‘Preparation and Evaluation of Feasibility Studies,’ where the financial tables

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form an integral part, is a topic by itself and there are many excellent text books on the subject. A detailed discussion is outside the scope of this book. 4. I give a lot of importance to the estimation of the break-even point and so I am also explaining the basics of working this out. It is essential that you pay attention to this too as this allows you to determine how much minimum turnover you must achieve, in terms of sales, to stop losing money. It is till this point that you have to keep pumping in money. Then you can compare that with realistic estimates of the sales you might expect. Knowing what it takes to break-even by itself can give you an idea of whether or not you have a potentially feasible business idea. 5. The whole idea is that a budding entrepreneur should understand the basics of doing his own homework and be able to assess the merits of his own idea without the help of an accountant. 6. Every project is unique and so are every set of projections. And of course, the question of your blindly copying the format of the projections to do your own homework does not arise. Do study the format and the manner in which I made my assumptions and use this as a set of ‘dummy tables’. When you take the first steps of doing your homework, you generally would not know what questions to ask yourself and where to begin. The tables would give you some idea of what sort of ‘blanks’ you would need to ‘fill in’.

Background Note The financial tables enclosed here are extracts of an actual feasibility study for the manufacture of mosquito coils in Malawi (Central Africa). I did this study in 1989 on an assignment from the Industrial Development Unit of the Commonwealth Fund for Technical Co-operation of the Commonwealth Secretariat, London. The Secretariat made it a practice to present the financial projections in two parts. The first, extracted here, was in a simple format that could be understood and used by not-very-educated entrepreneurs. This part was called the ‘Action Plan for Project Implementation.’ Then came the other part, the detailed financial analysis for use of the Banks and others. It is important to note that the report was prepared in Malawi in 1989, long before the days of modern computers and printers. I have presented the tables here in their original format. The currency used is not important, as the figures are illustrative only. However, the rate of exchange at that time was Kwacha 2.8=US$1.00 If anybody is interested to have a copy of the complete feasibility study, or of other similar studies, they can contact me via my publishers.

The Focus: Pre-production The focus of the homework that a budding entrepreneur should do is not how much profit the project will make or what sort of rate of return is expected, and so on.

Explaining the Financial Tables for Non-financial Executives

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This is not a misprint. I mean what I say. Working out the profit or the rate of return would be left to the financial people if and when your proposal clears the first hurdle. From my experience, the most crucial period in the life of a project is the initial period. This means the pre-production period and then the period when you are in production but not yet breaking even. You should be intensely concerned with what happens till the stage of break-even, because it is till this point that you have to keep pumping in money. And, if anything happens and the project collapses, no matter when, it is this money that is irretrievably lost. It follows that this should be your focus because this is the question uppermost on the mind of the investor too. So, in preparing your own projections, the matters of your more immediate concerns are: z

Remember, you need investment basically in three stages. 1. Till you start production; 2. Till you reach break-even; and 3. After the break-even to reach full capacity.

z

z

z

z

And, if I may make an oversimplification, there are two types of expenses—One, the money that goes into fixed and moveable assets. This can, to some extent, be recovered. Two, the money spent in the pre-production stage and then till the break-even. These are expenses, and cannot be recovered except by the accounting procedures of writing off against future profits. I have explained above that the break-even is important because you may not be actually making a profit, but at least you stop losing money. This is the point where your ‘expenses’ stop. The investor is less concerned with how much total cash is needed than the schedule of cash input. He wants to know how much cash is needed in the first two stages. Money needed upfront, before you reach break-even, is far harder to find.

Have Enough Money or Do Not Start Please take serious note of what I said above. The most critical aspect of any project planning is the pre-production cost schedule—in other words, knowing how much money you will need and for what, before you start. Do not be casual about this and do not make rough, random guesses based on your gut feeling. Running short of money just as you are ready to start is disastrous. I have seen many projects come to a standstill for want of small amounts of money needed just at that time. This money will be very expensive to find and would only be available at exorbitant terms.

The Tables When preparing your own tables, the more details you put in the better, as you will know what assumptions you made and would be able to check, correct, adjust and fine tune the estimates as time goes on.

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No matter how much of an authority you are on the subject and how diligently you did your homework, estimates would always go wrong. Making tight estimates will work only if you have not only been meticulous down to the finest detail, but have recorded the basis of your estimates. You will note in the tables that there is considerable emphasis on the pre-production period and on the first year of production. Most of the financial projections I have seen are five- to 10-year projections that start with the first year, and all the pre-production expenses are analysed and lumped together. This is fine when the project is already on stream but in the planning and implementation stages, fine-tuning is essential. You will notice that the first year of production is again analysed on a quarterly basis. Remember that averaging out the money that you estimate to be coming in during a particular period against the expenses for the period can again be disastrous as the money would most likely be needed during the first two quarters and the cash may start coming in at the end of the period.

Potential Pitfalls If you have come this far and are prepared to start your small project, it is clear that you are prepared to work harder for less money but you would certainly be happier than your counterparts who merely work for someone else. It is all the more essential that you thoroughly and objectively analyse the financial feasibility of your idea. Failure to do so can have a tremendous personal cost on finances, relationships, family ties and/or your status as an executive. Do not hesitate to get all the help you need and use it. If your market assessment has lead you to believe that your new business idea has potential, and you are now going to sit down and start doing your financial tables, you need to understand and avoid the pitfalls that frequently capture the unwary young entrepreneur. Often the most serious involve an incomplete understanding of the financial implications of your idea. People often underestimate the amount of money needed to begin, and they do not understand how to allow for working capital. Your working capital is the money you need to finance your inventory and maybe your finished product between the time you buy it as raw materials, pay the labourers to assemble it, ship it to the destination and finally get paid. Most people try to borrow the minimum amount of money possible and grossly underestimate the working capital. If you borrow shortterm, you may eliminate your ability to generate working capital. Do see the enclosed tables and see how I have worked out the increasing needs for working capital. As your output increases, you need more and more working capital and you need money for this. As simple as that. Unless you can finance the increase in your working capital, you cannot finance the increase in your production. The second major pitfall is not sticking to the plan. I have repeatedly shown you how to anticipate and plan for every aspect of your project but still you will have to make many tough decisions as you go along. Personnel and sales do not materialise

Explaining the Financial Tables for Non-financial Executives

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as expected, the market changes in some unexpected way, or something else happens that makes your fundamental scenario infeasible. You need to be flexible and carefully plan ahead, particularly in terms of cash management. If sales change, you need the courage to change your cost structure to keep pace. It is better to have your cost chasing your revenue than your revenue chasing your costs. Young business people frequently underestimate the impact of taxes, benefits and annual increments for employees. People are going to cost you a lot more than the actual salary you pay them at end of the month. The longer they work for you, the more increments they get. I have seen hundreds of projections made by the financial specialists that provide for a standard wage scale for say, the first five years of the project. And, mind you, this has nothing to do with inflation, it is merely a reflection of a company getting old. Finally, and most significantly and more horrifyingly, a business can fail because the market was much greater than anticipated. Management of growth is often a serious problem. Unless you can find the money to finance the increase in your working capital, you cannot finance the increase in your production. Never ever think that increasing business beyond expectations immediately brings in more cash. There is a very crucial time lag that would need to be funded. A Smashing Start is Good? Huh? It is good only if you are not careful, but very very careful with your cash budgeting before you start. Small businesses with unexpectedly high growth rates at the start have tremendous cash flow problems. If your business doubles in one year, most people think that would be the best thing to happen. But the truth is, if you have just started up and your business has a small profit margin, you will discover you are not generating enough money from the doubled sales to maintain the necessary inventory, both of raw materials and finished products for that high level of sales.

This can lead to serious problems, inability to meet payroll, sloppy production and service, plus a variety of the problems that can ultimately destroy your business. Borrowing money at this stage is enormously expensive and often it comes with crippling terms. You must carefully manage growth. If possible, grow slowly, or make sure that you can finance growth so that it will not harm your business.

Pre-production Phase When estimating manpower requirements, a distinction should be made between the pre-production and the operational phases. During the pre-production phase, it may be assumed that manpower requirements occur mainly in conjunction with all preparatory measures needed to start the operational phase. Thus, the managerial staff, supervisors, and some foremen and

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specialised machine operators have to be recruited in advance, not only to be trained but also to attend to the construction of buildings and the installation of equipment that they will later be operating. Estimates should be made by category of staff and workers, as well as by function, applying standard cost estimates to arrive at the labour costs that need to be capitalised. The persons required at this phase should be kept to a minimum to maintain pre-production costs as low as possible. During the implementation phase a series of simultaneous and interacting investment activities take place with different financial implications. To measure them, an optimum implementation programme and time schedule should be prepared and shown in the feasibility study.

Preamble

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325

29 Sample Financial Tables∗

Table 29.1 Project Implementation Schedule Implementation Stages Months Corporate Aspects Project evaluation Company formation Managerial staff selection Bank finance application Licences, Exemptions and so on

(Activities are shown as lines, and Events as circles) Pre-production Trial Marketing

Promotion 1

2

3

4

∗

∗ O ∗

∗

∗

∗

∗

∗

∗

∗

5

6

7

8

9

10 11 12

13 14 15 16 17 18

∗

(Table 29.1 continued) ∗The variations are very minor and are the result of the computer rounding off to the first place of decimal. The problem here is that any corrections to any figure would result in ALL the figures in ALL the subsequent tables needing to be corrected as the closing figure of one column is the opening one for the next one. I think this would seriously effect your schedules. In any case the tables are only dummy models. I suggest that we leave the tables as they are and modify the text on page 320 as follows: It is important to note that the report was prepared in Malawi in 1989, long before the days modern computers and printers became commonly available. Though I have presented the tables here in their original format with the figures rounded off to the first place of decimal, you need to treat these as no more than rough templates for you to design own homework. The currency used is also not important, as the figures are illustrative only. However, if you are interested, the rate of exchange at that time was Kwacha 2.8 = US$1.00.

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(Table 29.1 continued)

Implementation Stages Months

(Activities are shown as lines, and Events as circles) Pre-production Trial Marketing

Promotion 1

2

Planning Aspects Sampling/test marketing Selection of plant Layout and blueprints Selection of ancillaries Overseas training Sourcing of imported materials Sourcing of local materials

3

4

5

6

∗ O

∗ ∗

9

∗

∗

∗

∗

∗

∗

∗

∗

∗

O

O O

∗ ∗ ∗

O ∗

8

∗

∗

Implementation Aspects Equity contribution Expatriates arrive Selection of local staff Electricals/Civil works Plant installation Local ancillaries

7

∗

∗

10 11 12

13 14 15 16 17 18

O ∗

∗

∗ ∗

Pre-Production Aspects Local materials purchase Trial production Test/full marketing

∗ ∗ ∗

∗ ∗ ∗

∗

∗ ∗

∗

∗

∗

∗

∗

Table 29.2 Sales and Output Analysis Year 1, Single Shift

Operation/Shifts Years/Quarters

Q1

Q2

1. Sales Computation: Sales in Quantity (1,000 Cases of 120 Boxes Each) (a) Local sales 0.5 1.0 (b) Exports 0.0 0.0 TOTAL 0.5 1.0

Q3

1.2 0.0 1.2

Double Shift Q4

Year 2

Year 3

2.0 0.0 2.0

8.0 2.0 10.0

10.0 5.0 15.0

Year 4 Year 5

10.0 8.0 18.0

10.0 8.0 18.0

Sales in Value (Kwacha 1000)

(a) Local sales (b) Exports

Selling prices @ K per Box 0.83 0.78 TOTAL

2. Output Computation: Output in Quantity (1,000 Cases) Total sales less Opening stocks add Closing stocks TOTAL OUTPUT

50 0 50

100 0 100

120 0 120

199 0 199

797 187 984

996 468 1,464

996 749 1,745

996 749 1,745

0.5 0.0 0.2

1.0 0.2 0.3

1.2 0.3 0.4

2.0 0.4 0.7

10.0 0.7 0.8

15.0 0.8 1.3

18.0 1.3 1.5

18.0 1.5 1.5

0.7

1.2

1.3

2.3

10.2

15.4

18.3

18.0

Esbiothrin 80EC Sodium Benzoate Perfume Malachite Green

0.18 0.26 0.10 0.52 TOTAL:

TOTAL:

Consumption Per Box (in gms) (e) Alpha Starch 6.50 (f) Burning Aids 95.00 (g) Wood Fillers 17.44 TOTAL: 2. Value Computation: (Kwacha 1,000) Landed Cost (a) Esbiothrin 80EC @K 326.0 per (b) Sodium Benzoate @K 8.4 per (c) Perfume @K 45.0 per (d) Malachite Green @K 36.0 per (e) Alpha Starch @K 2.7 per (f) Burning Aids @K 2.5 per (g) Wood Fillers @K 2.0 per

Local Raw Materials (in tonnes)

(a) (b) (c) (d)

Operation/Shifts Years/Quarters 1. Quantity Computation: Imported Raw Materials (in kgs) Consumption Per Box (in gms)

Table 29.3 Raw Material Consumption Analysis

kg kg kg kg kg kg kg

8 0 1 3 2 33 5 52

30

1 13 2 17

25 36 14 73 148

Q2

5 0 0 1 1 19 3

1 8 1 10

14 21 8 42 84

Q1

57

9 0 1 3 3 36 5

1 14 3 18

27 40 15 79 160

Q3

Year 1, Single Shift

101

16 1 1 5 5 65 9

2 26 5 32

48 71 27 141 287

Q4

454

70 3 5 23 21 290 43

8 116 21 145

214 317 122 634 1,287

Year 2

689

106 4 8 35 32 439 65

12 176 32 220

324 481 185 962 1,952

Year 3

816

125 5 10 41 38 520 76

14 208 38 260

383 569 219 1,139 2,310

Year 4

Double Shift

804

123 5 10 40 38 513 75

14 205 38 257

378 562 216 1,123 2,279

Year 5

– In Quantity (× Tonnes) And Value (× Kwacha 1,000)

Preamble z

327

Supervisory staff Factory Manager Shift Foreman Maintenence Mechanic Direct Labour Machine Operators Helpers/Packers Administrative Staff Storekeeper Accounts Clerk TOTAL WAGE BILL

Manpower (in Numbers) Factory Manager Shift Foreman Maintenence Mechanic Machine Operators Helpers/Packers Storekeeper Accounts Clerk TOTAL EMPLOYED Wage Bill × Kwacha 1,000


150 125

K K

0.0 0.0 7.5

0.0 0.0 8.0

0.5 0.0

150 75

K K

0.0 0.0

6.0 0.0 1.5

1 – 1 1 – – – 3

Q0

Starting wages (per month) K 2,000 6.0 K 500 0.0 K 500 1.5

1 – 1 – – – – 2

Q0

Installation & Pre-production

0.5 0.4 10.1

0.9 0.9

6.0 0.0 1.5

1 – 1 2 4 1 1 10

Q1

0.5 0.4 10.6

0.9 1.4

6.0 0.0 1.5

1 – 1 2 6 1 1 12

Q2

0.5 0.4 11.5

1.4 1.8

6.0 0.0 1.5

1 – 1 3 8 1 1 15

Q3

Single Shift Year 1

0.5 0.4 11.9

1.4 2.3

6.0 0.0 1.5

1 – 1 3 10 1 1 17

Q4

1.8 1.5 60.6

9.0 10.8

25.2 6.0 6.3

1 1 1 5 12 1 1 22

Year 2

1.9 1.6 74.1

11.3 14.0

26.5 12.3 6.6

1 2 1 6 15 1 1 27

Year 3

2.0 1.7 77.8

11.8 14.7

27.8 12.9 6.9

1 2 1 6 15 1 1 27

Year 4

Double Shift

2.1 1.7 81.7

12.4 15.5

29.2 13.6 7.3

1 2 1 6 15 1 1 27

Year 5

(Inclusive of a 5% annual increment)

z

Table 29.4 Recruitment Schedule and Manpower Costs

328 Unleashing Your Entrepreneurial Potential

Sample Financial Tables

z

329

Table 29.5 Working Capital Estimates (All figures in Kwacha 1,000) Year 1, Single Shift

Operation/Shifts Years/Quarters Items

Double Shift

Q1

Q2

Q3

Q4

17 20 25 17

17 20 25 33

25 29 38 40

40 47 60 66

Year 2

Year 3

Year 4

Year 5

50 59 75 82

76 89 113 122

76 89 113 145

76 89 113 145

Norms Inventory Imported Items Local Items Packing Materials Finished Goods

(Days) 180 60 180 30

Debtors Contingency Cash

30

17 3

33 10

40 10

40 10

66 10

83 10

83 10

83 10

30

8

14

15

26

29

45

53

52

90 90

124 34

167 43

237 70

313 76

448 135

464 15

464 1

Deduct: Bills Payable Net Working Capital: Increase in Working Capital:

Table 29.6 Schedule of Fixed Assets Purchase Operation/Shifts Years/Quarters

Installation & Pre-production Q0

Fixed Assets Purchased 40.0 (a) Building (b) Civil Works 0.0 (c) Plant and 200.0 Equipment (d) Dryers and 0.0 Conveyors (e) Electricals 5.0 (f) Racks and 0.0 Trolleys, etc. 245.0 TOTAL

Single Shift Year 1

Double Shift

Q0

Q1

Q2

Q3

Q4

Year 2

Year 3

Year 4

Year 5

40.0

0.0

0.0

0.0

0.0

47.0

30.0

0.0

0.0

5.0 188.0

0.0 0.0

0.0 0.0

0.0 0.0

0.0 0.0

0.0 21.0

0.0 0.0

0.0 0.0

0.0 0.0

7.0

0.0

0.0

0.0

0.0

7.0

0.0

0.0

0.0

5.0 6.0

0.0 0.0

0.0 2.0

0.0 0.0

0.0 1.0

0.0 14.0

0.0 14.0

0.0 0.0

0.0 0.0

251.0

0.0

2.0

0.0

1.0

89.0

44.0

0.0

0.0

Table 29.7 Profitability Projections (Kwacha 1,000 ) Operation/Shifts Years/Quarters

Year 1, Single Shift Q1

Q2

Q3

Double Shift Q4

Year 2 Year 3

Year 4

Year 5

Revenue Local Sales Export Sales TOTAL :

50.0 0.0 50.0

100.0 0.0 100.0

120.0 0.0 120.0

199.0 0.0 199.0

797.0 996.0 996.0 996.0 187.0 468.0 749.0 749.0 984.0 1,464.0 1,745.0 1,745.0

Expenditure Main Raw Materials Packing Materials,etc.

30.0 8.0

52.0 15.0

57.0 18.0

101.0 30.0

454.0 150.0

689.0 225.0

816.0 270.0

804.0 270.0

(Table 29.7 continued)

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(Table 29.7 continued) Operation/Shifts Years/Quarters Fuel Oil Power Direct Labour Wages Repairs and Maintenence SUB-TOTAL : ADD: Opening Stock Finished Goods LESS: Closing Stock Finished Goods Inventory-adjusted Cost Supervisory Wages Administrative Wages Sales Promotion & Advertising Rental & Rates Administrative Overheads TOTAL OPERATING COST Accounting Depreciation Interest Charges TOTAL COST OF PRODUCTION PROFIT BEFORE TAX

Year 1, Single Shift

Double Shift

Q1 1.0 1.0 2.0 0.0 41.0 0.0

Q2 2.0 1.0 2.0 0.0 72.0 17.0

Q3 2.0 1.0 3.0 0.0 81.0 33.0

Q4 2.0 1.0 4.0 0.0 138.0 40.0

Year 2 Year 3 Year 4 Year 5 8.0 10.0 10.0 10.0 5.0 6.0 6.0 6.0 20.0 25.0 27.0 28.0 2.0 2.0 3.0 4.0 639.0 957.0 1,131.0 1,122.0 66.0 82.0 122.0 145.0

–17.0

–33.0

–40.0

–66.0

–82.0

24.0 8.0 1.0 5.0 2.0 2.0

56.0 8.0 1.0 5.0 2.0 2.0

74.0 8.0 1.0 5.0 2.0 2.0

111.0 8.0 1.0 5.0 2.0 2.0

624.0 38.0 3.0 20.0 8.0 10.0

42.0 11.0 23.0 – 76.0 –26.0

73.0 11.0 25.0 – 109.0 –9.0

91.0 11.0 27.0 – 129.0 –10.0

129.0 11.0 28.0 – 168.0 31.0

702.0 1,004.0 1,187.0 1,199.0 54.0 58.0 58.0 58.0 111.0 88.0 45.0 32.0 – – – – 868.0 1,150.0 1,291.0 1,290.0 116.0 314.0 454.0 455.0

–122.0

–145.0

–145.0

917.0 1,108.0 1,122.0 45.0 48.0 50.0 3.0 4.0 4.0 20.0 10.0 5.0 8.0 8.0 8.0 10.0 10.0 10.0

0.0 0.0

0.0 0.0

3. Surplus/Deficit for the Period: 4. Closing Cash Balance:

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 28.0 0.0 0.0 0.0 0.0 28.0

80.0 5.0 388.0 7.0 10.0 6.0 10.0 26.0 5.0 61.0 10.0 0.0 0.0 0.0 608.0

2. Disposition of Funds: Land and Building Civil Works Plant and Equipment Dryers and Conveyors Electricals Racks and Trolleys, etc. Installation and Start-up Pre-operation Expenses Promotional Expenses Working Capital Increase Contingency Repayment: Term Loan Repayment: Overdraft Taxation TOTAL:

–26.0 11.0 0.0 0.0 44.0 29.0

Q1

– – 150.0 350.0 108.0 608.0

Q0

Preproduction

1. Sources of Funds: Operational Profit Accounting Depreciation Equity Funds Term Loan Overdraft TOTAL:


Table 29.8 Cash Flow

0.0 0.0

0.0 0.0 0.0 0.0 0.0 2.0 0.0 0.0 0.0 34.0 0.0 0.0 0.0 0.0 36.0

–9.0 11.0 0.0 0.0 35.0 37.0

Q2

0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 43.0 0.0 0.0 0.0 0.0 43.0

–10.0 11.0 0.0 0.0 41.0 42.0

Q3

Single Shift Year 1

0.0 0.0

0.0 0.0 0.0 0.0 0.0 1.0 0.0 0.0 0.0 70.0 0.0 0.0 0.0 0.0 71.0

31.0 11.0 0.0 0.0 29.0 71.0

Q4

1.0 0.0

47.0 0.0 21.0 7.0 0.0 14.0 0.0 0.0 0.0 76.0 0.0 0.0 5.0 0.0 170.0

116.0 54.0 0.0 0.0 0.0 170.0

Year 2

0.0 0.0

30.0 0.0 0.0 0.0 0.0 14.0 0.0 0.0 0.0 135.0 0.0 35.0 94.0 65.0 373.0

314.0 58.0 0.0 0.0 0.0 372.0

Year 3

27.0 27.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 15.0 0.0 70.0 158.0 243.0 486.0

454.0 58.0 0.0 0.0 0.0 513.0

Year 4

Double Shift

197.0 224.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.0 0.0 70.0 0.0 245.0 316.0

455.0 58.0 0.0 0.0 0.0 513.0

Year 5

(All figures in Kwacha 1,000)

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Appendix 1 Can India Overtake China?

Harvard Business School: Working Knowledge for Business Leaders Authors: Yasheng Huang and Tarun Khanna Dr Yasheng Huang is an associate professor at the Sloan School of Management at the Massachusetts Institute of Technology. Dr Tarun Khanna is a professor at Harvard Business School. Publication: Foreign Policy Date: July–August 2003 URL: http://www.foreignpolicy.com/story/story.php?storyID=13774 What is the fastest route to economic development? Welcome foreign direct investment (FDI), says China, and most policy experts agree. But a comparison with longtime laggard India suggests that FDI is not the only path to prosperity. Indeed, India’s homegrown entrepreneurs may give it a long-term advantage over a China hamstrung by inefficient banks and capital markets. Walk into any Wal-Mart and you won’t be surprised to see the shelves sagging with Chinese-made goods—everything from shoes and garments to toys and electronics. But the ubiquitous ‘Made in China’ label obscures an important point—few of these products are made by indigenous Chinese companies. In fact, you would be hardpressed to find a single homegrown Chinese firm that operates on a global scale and markets its own products abroad. That is because China’s export-led manufacturing boom is largely a creation of foreign direct investment (FDI), which effectively serves as a substitute for domestic entrepreneurship. During the last 20 years, the Chinese economy has taken off, but few local firms have followed, leaving the country’s private sector with no world-class companies to rival the big multinationals. India has not attracted anywhere near the amount of FDI that China has. In part, this disparity reflects the confidence international investors have in China’s prospects and their scepticism about India’s commitment to free-market reforms. But the FDI

Can India Overtake China?

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gap is also a tale of two Diasporas. China has a large and wealthy Diaspora that has long been eager to help the motherland, and its money has been warmly received. By contrast, the Indian Diaspora was, at least until recently, resented for its success and much less willing to invest back home. New Delhi took a dim view of Indians who had gone abroad, and of foreign investment generally and instead provided a more nurturing environment for domestic entrepreneurs. In the process, India has managed to spawn a number of companies that now compete internationally with the best that Europe and the United States have to offer. Moreover, many of these firms are in the most cutting-edge, knowledge-based industries—software giants Infosys and Wipro and pharmaceutical and biotechnology powerhouses Ranbaxy and Dr Reddy’s Labs, to name just a few. Last year, the Forbes 200, an annual ranking of the world’s best small companies, included 13 Indian firms but just four from mainland China. India has also developed much stronger infrastructure to support private enterprise. Its capital markets operate with greater efficiency and transparency than do China’s. Its legal system, while not without substantial flaws, is considerably more advanced. China and India are the world’s next major powers. They also offer competing models of development. It has long been an article of faith that China is on the faster track, and the economic data bear this out. The ‘Hindu rate of growth’, a pejorative phrase referring to India’s inability to match its economic growth with its population growth, may be a thing of the past, but when it comes to gross domestic product (GDP) figures and other headline numbers, India is still no match for China (Table A.1.1). However, the statistics tell only part of the story—the macroeconomic story. At the micro level, things look quite different. There, India displays every bit as much dynamism as China. Indeed, by relying primarily on organic growth, India is making fuller use of its resources and has chosen a path that may well deliver more sustainable progress than China’s FDI-driven approach. ‘Can India surpass China?’ is no longer a silly question, and, if it turns out that India has indeed made the wiser bet, the implications—for China’s future growth and for how policy experts think about economic development generally—could be enormous.

The Stifling State The fact that India is increasingly building from the ground up while China is still pursuing a top-down approach reflects their contrasting political systems—India is a democracy, and China is not. But the different strategies are also a function of history. China’s Communist Party came to power in 1949 intent on eradicating private ownership, which it quickly did. Although the country is now in its third decade of free-market reforms, it continues to struggle with the legacy of that period—witness the controversy surrounding the recent decision to officially allow capitalists to join the Communist Party. India, on the other hand, developed a softer brand of socialism, Fabian socialism, which aimed not to destroy capitalism but merely to mitigate the social ills it caused. It was considered essential that the public sector occupy the economy’s ‘commanding

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Table A.1.1 Competing Giants China Population (2002) Population growth rate per cent (2002) Infant mortality per 1,000 live births (2002) Average annual real GDP growth rate per cent (1990–2000) Foreign direct investment (2001) Population in poverty (2002) Labour force (1999) Fixed line and mobile phones per 1,000 people (2001) Size of diaspora

1.28 billion 0.87 27 9.6 $44.2 billion 10 per cent 706 million 247.7 55 million

India 1.05 billion 1.51 61 5.5 $3.4 billion 25 per cent 406 million 43.8 20 million

Sources: CIA World Factbook 2002, The Economist Pocket World in Figures, World Development Indicators CD-ROM Financial Times.

heights,’ to use a phrase coined by Russian revolutionary Vladimir Lenin but popularised by India’s first prime minister, Jawaharlal Nehru. However, that did not prevent entrepreneurship from flourishing where the long arm of the state could not reach. Developments at the microeconomic level in China reflect these historical and ideological differences. China has been far bolder with external reforms but has imposed substantial legal and regulatory constraints on indigenous, private firms. In fact, only four years ago, domestic companies were finally granted the same constitutional protections that foreign businesses have enjoyed since the early 1980s. As of the late 1990s, according to the International Finance Corporation, more than two dozen industries, including some of the most important and lucrative sectors of the economy—banking, telecommunications, highways and railroads—were still off-limits to private local companies. These restrictions were designed not to keep Chinese entrepreneurs from competing with foreigners but to prevent private domestic businesses from challenging China’s state-owned enterprises (SOEs). Some progress has been made in reforming the bloated, inefficient SOEs during the last 20 years, but Beijing is still not willing to relinquish its control over the largest ones, such as China Telecom. Instead, the government has ferociously protected them from competition. In the 1990s, numerous Chinese entrepreneurs tried, and failed, to circumvent the restrictions placed on their activities. Some registered their firms as nominal SOEs (all the capital came from private sources, and the companies were privately managed), only to find themselves ensnared in title disputes when financially strapped government agencies sought to seize their assets. More than a few promising businesses have been destroyed this way. This bias against homegrown firms is widely acknowledged. A report issued in 2000 by the Chinese Academy of Social Sciences concluded that, ‘Because of long-standing prejudices and mistaken beliefs, private and individual enterprises have a lower political status and are discriminated against in numerous policies and regulations. The legal, policy and market environment is unfair and inconsistent.’ Foreign investors have been among the biggest beneficiaries of the constraints placed on local private businesses. One indication of the large payoffs they have reaped on the back of China’s phenomenal growth. In 1992, the income accruing to foreign investors with equity stakes in Chinese firms was only $5.3 billion; today it totals more than $22 billion. (This money does not necessarily leave the country; it is often reinvested in China.)


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The Mogul is the Hero For democratic, postcolonial India, allowing foreign investors huge profits at the expense of indigenous firms is simply unfeasible. Recall, for instance, the controversy that erupted a decade ago when the Enron Corporation made a deal with the state of Maharashtra to build a $2.9 billion power plant there. The project proceeded, but only after several years of acrimonious debate over foreign investment and its role in India’s development. While China has created obstacles for its entrepreneurs, India has been making life easier for local businesses. During the last decade, New Delhi has backed away from micromanaging the economy. True, privatisation is proceeding at a glacial pace, but the government has ceded its monopoly over long-distance phone service; some tariffs have been cut; bureaucracy has been trimmed a bit; and a number of industries have been opened to private investment, including investment from abroad. As a consequence, entrepreneurship and free enterprise are flourishing. A measure of the progress—in a recent survey of leading Asian companies by the Far Eastern Economic Review (FEER), India registered a higher average score than any other country in the region, including China (the survey polled over 2,500 executives and professionals in a dozen countries; respondents were asked to rate companies on a scale of one to seven for overall leadership performance). Indeed, only two Chinese firms had scores high enough to qualify for India’s top 10 list. Tellingly, all of the Indian firms were wholly private initiatives, while most of the Chinese companies had significant state involvement. Some of the leading Indian firms are true start-ups, notably Infosys, which topped FEER’s survey. Others are offshoots of old-line companies. Sundaram Motors, for instance, a leading manufacturer of automotive components and a principal supplier to General Motors, is part of the T.V. Sundaram group, a century-old south Indian business group. Not only is entrepreneurship thriving in India; entrepreneurs there have become folk heroes. Nehru would surely be appalled at the adulation the Indian public now showers on captains of industry. For instance, Narayana Murthy, the 56-year-old founder of Infosys, is often compared to Microsoft’s Bill Gates and has become a revered figure. These success stories never would have happened if India lacked the infrastructure needed to support Murthy and other would-be moguls. But democracy, a tradition of entrepreneurship, and a decent legal system have given India the underpinnings necessary for free enterprise to flourish. Although India’s courts are notoriously inefficient, they at least comprise a functioning independent judiciary. Property rights are not fully secure, but the protection of private ownership is certainly far stronger than in China. The rule of law, a legacy of British rule, generally prevails. These traditions and institutions have proved an excellent springboard for the emergence and evolution of India’s capital markets. Distortions are still commonplace, but the stock and bond markets generally allow firms with solid prospects and reputations to obtain the capital they need to grow. In a World Bank study published last year, only 52 per cent of the Indian firms surveyed reported problems obtaining capital, versus 80 per cent of the Chinese companies polled. As a result, the Indian firms

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relied much less on internally generated finances—only 27 per cent of their funding came through operating profits, versus 57 per cent for the Chinese firms. Corporate governance has improved dramatically, thanks in no small part to Murthy, who has made Infosys a paragon of honest accounting and an example for other firms. In a survey of 25 emerging market economies conducted in 2000 by Credit Lyonnais Securities Asia, India ranked sixth in corporate governance, China 19th. The advent of an investor class, coupled with the fact that capital providers, such as development banks, are themselves increasingly subject to market forces, has only bolstered the efficiency and credibility of India’s markets. Apart from providing the regulatory framework, the Indian government has taken a back seat to the private sector. In China, by contrast, bureaucrats remain the gatekeepers, tightly controlling capital allocation and severely restricting the ability of private companies to obtain stock market listings and access the money they need to grow. Indeed, Beijing has used the financial markets mainly as a way of keeping the SOEs afloat. These policies have produced enormous distortions while preventing China’s markets from gaining depth and maturity. (It is widely claimed that China’s stock markets have a total capitalisation in excess of $400 billion, but factoring out non-tradeable shares owned by the government or by government-owned companies reduces the valuation to just around $150 billion.) Compounding the problem are poor corporate governance and the absence of an independent judiciary.

Dollars and Diasporas If India has so clearly surpassed China at the grassroots level, why is India’s superiority not reflected in the numbers? Why is the gap in GDP and other benchmarks still so wide? It is worth recalling that India’s economic reforms only began in earnest in 1991, more than a decade after China began liberalising. In addition to the late start, India has had to make do with a national savings rate half that of China’s and 90 per cent less FDI. Moreover, India is a sprawling, messy democracy driven by ethnic and religious tensions, and it has also had a longstanding, volatile dispute with Pakistan over Kashmir. China, on the other hand, has enjoyed two decades of relative tranquility; apart from Tiananmen Square, it has been able to focus almost exclusively on economic development. That India’s annual growth rate is only around 20 per cent lower than China’s is, then, a remarkable achievement. And, of course, whether the data for China are accurate is an open question. The speed with which India is catching up is due to its own efficient deployment of capital and China’s inefficiency, symbolised by all the money that has been frittered away on SOEs. And China’s misallocation of resources is likely to become a big drag on the economy in the years ahead. In the early 1990s, when China was registering double-digit growth rates, Beijing invested massively in the state sector. Most of the investments were not commercially viable, leaving the banking sector with a huge number of nonperforming loans—possibly totalling as much as 50 per cent of bank assets. At some point, the capitalisation costs of these loans will have to be absorbed, either through write-downs (which means depositors bear the cost) or recapitalisation of the banks by the government, which


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diverts money from other, more productive uses. This could well limit China’s future growth trajectory. India’s banks may not be models of financial probity, but they have not made mistakes on nearly the same scale. According to a recent study by the management consulting firm Ernst & Young, about 15 per cent of banking assets in India were nonperforming as of 2001. India’s economy is thus anchored on more solid footing. The real issue, of course, is not where China and India are today but where they will be tomorrow. The answer will be determined in large measure by how well both countries utilise their resources, and on this score, India is doing a superior job. Is it pursuing a better road to development than China? We won’t know the answer for many years. However, some evidence indicates that India’s ground-up approach may indeed be wiser and the evidence, ironically, comes from within China itself. Consider the contrasting strategies of Jiangsu and Zhejiang, two coastal provinces that were at similar levels of economic development when China’s reforms began. Jiangsu has relied largely on FDI to fuel its growth. Zhejiang, by contrast, has placed heavier emphasis on indigenous entrepreneurs and organic development. During the last two decades, Zhejiang’s economy has grown at an annual rate of about 1 per cent faster than Jiangsu’s. Twenty years ago, Zhejiang was the poorer of the two provinces; now it is unquestionably more prosperous. India may soon have the best of both worlds—it looks poised to reap significantly more FDI in the coming years than it has attracted to date. After decades of keeping the Indian Diaspora at arm’s length, New Delhi is now embracing it. In some circles, it used to be jokingly said that NRI, an acronym applied to members of the Diaspora, stood for ‘not required Indians’. Now, the term is back to meaning just ‘non-resident Indian’. The change in attitude was officially signalled earlier this year when the government held a conference on the Diaspora that a number of prominent NRIs attended. China’s success in attracting FDI is partly a historical accident—it has a wealthy Diaspora. During the 1990s, more than half of China’s FDI came from overseas Chinese sources. The money appears to have had at least one unintended consequence—The billions of dollars that came from Hong Kong, Macao and Taiwan may have inadvertently helped Beijing postpone politically difficult internal reforms. For instance, because foreign investors were acquiring assets from loss-making companies, the government was able to drag its feet on privatisation. Until now, the Indian Diaspora has accounted for less than 10 per cent of the foreign money flowing to India. With the welcome mat now laid out, direct investment from Non-Resident-Indians is likely to increase. And while the Indian Diaspora may not be able to match the Chinese Diaspora as ‘hard’ capital goes, Indians abroad have substantially more intellectual capital to contribute, which could prove even more valuable. The Indian Diaspora has famously distinguished itself in knowledge-based industries, nowhere more so than in Silicon Valley. Now, India’s brightening prospects, as well as the changing attitude vis-à-vis those who have gone abroad, are luring many Non-Resident-Indian engineers and scientists home and are enticing many expatriate business people to open their wallets. With the help of its Diaspora, China has won the race to be the world’s factory. With the help of its Diaspora, India could become the world’s technology lab.

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China and India have pursued radically different development strategies. India is not outperforming China overall, but it is doing better in certain key areas. That success may enable it to catch up with and perhaps even overtake China. Should that prove to be the case, it will not only demonstrate the importance of homegrown entrepreneurship to long-term economic development; it will also show the limits of the FDI-dependent approach China is pursuing.

Appendix 2 Who’s Got Performance?

Investor Alert: India’s Companies Beat China’s BUSINESS WEEK, (A McGraw-Hill Publication) 22/29 August 2005, By James Mehring When it comes to economic growth between these two up–and–coming powerhouses, China is outpacing India by a mile. But take a look at how Chinese companies perform relative to Indian businesses and the results look quite different. A Business Week analysis of financial data from Standard & Poor’s Compustat shows Indian corporations are getting more bang for their rupee. A look at over 340 publicly listed companies from 1999 through 2003 (many Indian companies have yet to release their complete 2004 reports) reveals that Indian businesses have, with a few exceptions, outperformed their Chinese counterparts on return on equity (ROE) and return on invested capital (ROIC). Indian companies perform better across various industry groups because they face greater market pressures. Despite plenty of government regulation, India is by and large a well-functioning market economy. This leads businesses to focus more on profits and performance. When it comes to free markets, China is a work in progress. China’s government has big stakes in most publicly listed companies, so managers must be mindful of government agendas, such as employment, says Joydeep Mukherji, a director, in the Sovereign Ratings Group at Standard & Poor’s. The two countries also differ greatly when it comes to financing. ‘It is quite difficult to get capital in India,’ says Marcus Rosgen, regional head of equity research at Citigroup (C) in Hong Kong. In India, firms raise a larger share of capital in equity markets, so private investors play a key role in allocating capital and place an emphasis on ROE. In China, the financing situation is quite the opposite. A notoriously high savings rate and large sums of foreign direct investment are keeping the cost of financing low for businesses. The glut of capital in China is fuelling excess capacity. A low-cost of capital reduces the financial hurdle to start a new business or open a factory. The problem is compounded by the fact that Chinese manufacturing is concentrated in low-end production. The resulting price competition reduces profitability. And since most of China’s major banks are state-owned, there is little emphasis on maximising returns.

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Progress is being made in China. There is a noticeable difference in ROE and ROIC between companies listed in the more internationally exposed Hong Kong stock market—the so-called Red Chips—and those listed solely on mainland exchanges. In 2003, the 25 Red Chip stocks had a ROE of 14.8 per cent, versus 12.9 per cent for mainland listed companies. In terms of ROIC, Red Chips produced an 11.6 per cent return, compared with 9.7 per cent for mainland outfits. What is more, China is moving faster than India to improve its infrastructure. Unless India quickens the pace to improve energy production and distribution, as well as its transportation systems, the country risks stunting the growth potential of the economy and its own companies.

Appendix 3 Indian Business vs. Chinese

Return On Equity (%) 2003 Autos and Components China India Capital Goods China India Consumer Durables and Apparel China India Energy China India Food, Beverage and Tobacco China India Materials China India Pharmaceuticals and Biotech China India Software and Services China India Telecommunication Services China India

2002

Return On Investment (%)

1999–2001

2003

2002

1999–2001

17.4 20.6

–2.1 21.9

6.6 13.0

14.2 12.8

–1.9 14.8

5.6 8.6

8.1 17.2

6.0 10.6

3.8 7.0

6.3 12.4

4.6 6.9

2.9 4.3

7.2 6.9

1.4 11.1

1.9 6.7

5.9 3.7

1.3 6.2

1.8 3.6

17.6 21.4

13.7 23.6

15.7 15.2

13.9 15.3

10.3 16.0

11.3 10.0

10.6 26.6

8.7 21.2

5.9 22.5

8.8 23.6

7.0 16.1

4.7 17.4

13.5 22.2

4.8 7.2

3.1 2.6

10.5 11.9

3.7 3.1

2.5 1.2

9.8 29.1

9.0 24.6

8.5 18.8

8.2 23.9

8.3 21.0

7.6 15.6

6.5 27.3

12.3 16.8

4.9 24.9

6.4 25.9

12.0 16.2

4.8 23.0

15.2 9.7

14.0 10.8

15.6 19.4

10.9 9.7

10.2 10.8

11.5 16.1

Source: Business Week, Standard and Poor’s Compustat.

Appendix 4 Global Entrepreneurship Monitor 2005 (http://www.gemconsortium.org/)

‘Entrepreneurs in middle income countries are beginning to catch up to their counterparts in richer economies by tapping into technologies unavailable to them just a year ago,’ according to the Seventh Annual Global Entrepreneurship Monitor (GEM) 2005. This study of entrepreneurship and economic growth has been conducted every year since 1998 by Babson College, London, The London Business School, The Kauffman Center for Entrepreneurial Leadership and Ernst & Young (UK), and is the largest annual measure of entrepreneurial activity worldwide, compiled by more than 150 scholars from 35 countries. Total Entrepreneurial Activity (TEA) index is based on a number of factors, but is mainly expressed as the percentage of the working population engaged in new firms, (firms less than 42 months old). GEM 2005 also found that entrepreneurs with ‘innovative’ businesses drive higher growth rates of GDP per capita. Additionally, middle income countries tend to start more businesses than high income countries. Yet ‘quantity’ of start-ups does not necessarily translate into ‘established’ businesses. ‘This year’s GEM report gives us a clear understanding of the importance of free markets to the livelihood of an entrepreneurial society,’ said Maria Minniti, Associate Professor of Economics and Entrepreneurship, Babson College, and GEM Research Director. ‘In all countries, regardless of living standards, governments need to remove barriers to competition, promote fiscal responsibility and ensure transparency of the law and a clear legal framework for property rights and regulatory oversights.’ ‘Open global markets are also vital to continued entrepreneurial growth,’ said Professor Michael Hay, Deputy Dean of London Business School. ‘Trade restrictions tend to penalise entrepreneurs more than other groups due to the nature of their enterprises. Liberalised world markets also allow for the free flow between nations of previously unavailable financial capital.’ Middle income countries are tapping into new technologies. Both early-stage and established business owners in middle-income countries are using technologies unavailable to them a year ago. Starting at a lower level, they have more room and opportunities to upgrade than entrepreneurs in high-income countries. ‘Innovative’ entrepreneurs drive economic growth. Middle income countries with higher levels

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of innovative entrepreneurship demonstrate higher growth rates of GDP per capita. Early-stage entrepreneurs claim more often to offer innovative products than established entrepreneurs. Still, findings show that innovation is relatively rare in all countries. Middle income countries tend to start more businesses than high income countries. For the first time, GEM 2005 divides 35 countries into middle and high income clusters; findings show a strong variation across clusters both in frequency and quality of entrepreneurial activity. Middle income nations such as Venezuela (25 per cent) and Thailand (20.7 per cent) outperformed high income countries like Japan (2.2 per cent) and Belgium (3.9 per cent) in early-stage entrepreneurial activity. High rates of early-stage entrepreneurship do not necessarily translate into high rates of established business ownership. Japan for example scores very low in early-stage entrepreneurial activity but ranks in the middle group of countries for established businesses. Early-stage entrepreneurs in high income countries are more likely to become established business owners than the more numerous early-stage entrepreneurs in middle income countries. Success is best among ‘opportunity-driven entrepreneurs’, who have lower failure rates among early-stage businesses. In general, countries with healthy and diversified labour markets or stronger safety nets in terms of social welfare provisions can be more selective in the kinds of businesses they choose to start …. and have higher ratios of opportunity to necessitydriven motivation.

An Extract from the Global Entrepreneurship Monitor Report Entrepreneurship in India: 1. Indian Total Entrepreneurial Activity for 2003 = 17.9% (Table A.4.1) 2. World Average TEA = 9.6% 3. Asian Average TEA = 3.4% India is the fifth largest economy in the world and has the third largest GDP in the entire continent of Asia. It is also the second largest among emerging nations. The liberalisation of the economy in the 1990s has paved the way for a huge number of people to become entrepreneurs. Over the years India and China have followed opposing strategies for development. While China’s growth has been fuelled by the heavy dose of foreign direct investment, India has followed a much more organic method and has concentrated more on the development of the institutions that support private enterprise by building a stronger infrastructure to support it. Its corporate and legal systems operate with greater efficiency and transparency than do China’s. The Government has encouraged entrepreneurship by providing training and also the facilities to succeed, particularly in the rural areas.

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One style of innovation that really works in a country as large and diverse as India, is grassroots innovation: this includes inventions for a milieu that is quintessentially Indian. Moreover, in India, the post-liberalisation and globalisation era has brought with it a growing middle class—roughly estimated to be 250 million—and rising disposable incomes. This presents a huge potential, which if tapped can be a veritable gold mine. Entrepreneurs can make the best of this by catering to various demands of this segment. India, with its abundant supply of talent in IT, management and R&D, has become the hot bed of outsourcing of services from all parts of the globe where companies can reduce their costs, but not their quality (if the foreign company chooses the right Indian partner). Table A.4.1 Total Entrepreneurial Activity (TEA) Ranked By Country Country Peru Uganda Venezuela Ecuador Thailand Jordan Jamaica India Chile New Zealand South Korea Iceland Brazil Australia Argentina Mexico China United States Canada Poland Ireland Switzerland

Average (percentage) 40.3 31.6 26.2 27.2 19.8 18.3 17.0 17.9 13.7 16.2 14.5 13.6 12.4 12.2 11.2 9.2 12.9 11.9 9.1 8.8 7.7 6.7

Country Norway Latvia Israel United Kingdom France Greece Singapore South Africa Denmark Spain Netherlands Germany Finland Italy Hungary Taiwan Portugal Sweden Austria Belgium Hong Kong Japan

Average (percentage) 8.1 6.6 6.6 6.3 5.7 6.2 6.5 5.3 5.1 5.5 4.8 5.0 4.7 4.3 3.1 4.3 4.0 3.9 5.3 3.7 3.0 1.9

Appendix 5 The Global Competitiveness Report 2006–2007 (Released by the World Economic Forum on 26 September 2006)

(http://www.weforum.org/en/initiatives/index.htm) http://www.weforum.org/en/initiatives/gcp/Buy online/ index.htm

This annual study is a valuable tool for shaping economic policy and guiding investment decisions. It is one of the leading monitors of the competitive condition of economies worldwide. Produced in collaboration with leading academics and a global network of 122 Partner Institutes, The Global Competitiveness Report has expanded its coverage and now assesses 125 economies. The report is unique in that the methodology combines publicly available data with survey data that captures the perceptions and observations of business leaders in a given country. Switzerland, Finland and Sweden are the world’s most competitive economies, and Denmark, Singapore, the United States, Japan, Germany, the Netherlands and the United Kingdom complete the top 10 list, but the United States shows the most pronounced drop, falling from first to sixth. The rankings are drawn from a combination of publicly available hard data and the results of the Executive Opinion Survey, a comprehensive annual survey conducted by the World Economic Forum, together with its network of Partner Institutes (leading research institutes and business organisations) in the countries covered by the Report. This year, over 11,000 business leaders were polled in a record 125 economies worldwide. The top rankings of Switzerland and the Nordic countries show that good institutions and competent macroeconomic management, coupled with world-class educational

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attainment and a focus on technology and innovation, are a successful strategy for boosting competitiveness in an increasingly complex global economy. Augusto Lopez-Claros, Chief Economist; Director, Global Competitiveness Network The world economy is not a zero-sum game. Many nations can improve their prosperity if they can improve productivity. The central challenge in economic development, then, is how to create the conditions for rapid and sustained productivity growth. Michael E. Porter, Bishop William Lawrence University Professor, Harvard Business School The process of growth is complex. The Growth Competitiveness Index is an attempt to capture this complexity by modelling growth as a complicated combination of factors that matter differently for different countries. Xavier Sala-í-Martin, Professor, Economics Department, Columbia University

Extract from the Preface By Professor Schwab It is against a backdrop of burgeoning global imbalances, the collapse of the Doha Round of trade negotiations and the revival of protectionist tendencies which are combining to create an atmosphere that highlights the precariousness of global economic growth prospects, that the World Economic Forum is bringing the latest edition of The Global Competitiveness Report. With the growing complexity of the global economy, the Report is a contribution to enhancing our understanding of the key factors which determine economic growth, and explain why some countries are much more successful than others in raising income levels and opportunities for their respective populations. By providing detailed assessments of the economic conditions of nations worldwide, the Report offers policymakers and business leaders an important tool in the formulation of improved economic policies and institutional reforms. Table A.5.1 Global Competitiveness Index 2006 and 2005 (Listing of Top 50 Nations Only) Country/Economy Switzerland Finland Sweden Denmark Singapore United States Japan Germany Netherlands United Kingdom Hong Kong SAR Norway Taiwan, China Iceland

2006 Rank

2005 Rank

Change

1 2 3 4 5 6 7 8 9 10 11 12 13 14

4 2 7 3 5 1 10 6 11 9 14 17 8 16

3 0 4 –1 0 –5 3 –2 2 –1 3 5 –5 2

Country/Economy Estonia Malaysia Chile Spain Czech Republic Tunisia Barbados United Arab Emirates Slovenia Portugal Thailand Latvia Slovak Republic Qatar

2006 Rank

2005 Rank

Change

25 26 27 28 29 30 31 32 33 34 35 36 37 38

26 25 27 28 29 37 – 32 30 31 33 39 36 46

1 –1 0 0 0 7 – 0 –3 –3 –2 3 –1 8

(Table A.5.1 continued)

The Global Competitiveness Report 2006–2007

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(Table A.5.1 continued) Country/Economy Israel Canada Austria France Australia Belgium Ireland Luxembourg New Zealand Korea, Rep. India

2006 Rank

2005 Rank

Change

15 16 17 18 19 20 21 22 23 24 43

23 13 15 12 18 20 21 24 22 19 45

8 –3 –2 –6 –1 0 0 2 –1 –5 –2

Source: Global Competitiveness Report, 2006–2007.

Country/Economy Malta Lithuania Hungary Italy Kuwait South Africa Cyprus Greece Poland Bahrain Indonesia

2006 Rank

2005 Rank

39 40 41 42 44 45 46 47 48 49 50

44 34 35 38 49 40 41 47 43 50 69

Change 5 –6 –6 –4 5 –5 –5 0 –5 1 19

Appendix 6 International Trade Statistics 2000

WORLD TRADE ORGANIZATION

(http://www.wto.org/english/res_e/statis_e/statis_e.htm)

This report provides comprehensive, comparable and up-to-date statistics on trade in merchandise and commercial services for an assessment of world trade flows by country, region and main product groups or service categories. It is produced every year by a team of statisticians from the Statistics Division of the WTO in collaboration with the Economic Research and Analysis Division. The following table (Table A.6.1) is an extract showing the merchandise trade of the top 40 trading nations of the world. India is at 32nd position as an exporter and at 26th as an importer. We are the world’s second biggest nation but our share of the world’s imports is only 0.8 per cent and we export only 0.6 per cent of what the world exports. Sure, it is not that we are not doing well, but others are doing far better! Table A.6.1 Top 40 Importers and Exporters in the World Merchandise Trade Billion Dollars and Percentages Exporters Value Share % Change

Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14

United States Germany Japan France United Kingdom Canada Italy Netherlands China Belgium Hong Kong Korea, Rep. of Mexico Taipei, Chinese

695.2 541.5 419.4 300.4 269.0 238.4 230.6 200.4 195.2 176.3 174.4 144.7 136.7 121.6

12.4 9.6 7.5 5.3 4.8 4.2 4.1 3.6 3.5 3.1 3.1 2.6 2.4 2.2

2 –0 8 –2 –1 11 –6 –0 6 – –0 9 16 10

Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14

Importers Value Share % Change United States 1,059.0 Germany 472.5 United Kingdom 320.3 Japan 311.3 France 290.1 Canada 220.2 Italy 216.9 Netherlands 187.6 Hong Kong 180.7 China 165.8 Belgium 160.9 Mexico 148.7 Spain 144.8 Korea, Rep. of 119.8

18.0 8.0 5.4 5.3 4.9 3.7 3.7 3.2 3.1 2.8 2.7 2.5 2.5 2.0

12 0 2 11 0 7 –1 0 –3 –21 – 14 9 28

(Table A.6.1 continued )

International Trade Statistics 2000

z

349

(Table A.6.1 continued ) Exporters Value Share % Change

Rank 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

Singapore Spain Sweden Malaysia Switzerland Russian Fed. Ireland Austria Thailand Australia Saudi Arabia Denmark Indonesia Brazil Norway Finland Philippines India UAE Poland Czech Rep. South Africa Turkey Israel Hungary Portugal

114.7 110.1 84.9 84.5 80.4 74.3 70.4 63.5 58.4 56.1 50.5 49.0 48.7 48.0 44.9 41.7 36.7 36.6 29.5 27.4 26.9 26.7 26.0 25.8 25.0 23.9

2.0 2.0 1.5 1.5 1.4 1.3 1.3 1.1 1.0 1.0 0.9 0.9 0.9 0.9 0.8 0.7 0.7 0.6 0.5 0.5 0.5 0.5 0.5 0.5 0.4 0.4

Source: International Trade Statistics 2000.

4 1 0 15 2 0 9 1 7 0 27 2 –0 –6 13 –3 24 9 15 –3 2 1 –4 12 9 –4

Importers Value Share % Change

Rank 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

Singapore Taipei, Chinese Switzerland Australia Austria Sweden Malaysia Brazil Thailand Ireland Poland India Denmark Russian Fed. Turkey Portugal Norway Israel Philippines Finland Greece UAE Czech Rep. Saudi Arabia Hungary South Africa

111.1 110.7 79.9 69.1 68.8 68.5 65.0 51.7 50.3 46.4 45.9 44.6 44.3 41.1 40.4 38.6 34.0 33.2 32.5 31.5 30.2 28.9 28.8 28.0 28.0 26.7

1.9 1.9 1.4 1.2 1.2 1.2 1.1 0.9 0.9 0.8 0.8 0.8 0.8 0.7 0.7 0.7 0.6 0.6 0.6 0.5 0.5 0.5 0.5 0.5 0.5 0.5

9 18 5 –0 7 1 – 11 –15 17 4 –2 4 –4 –30 –12 1 –6 13 3 –3 5 6 0 –7 9

236

z


Index

z

351

Index

American MNCs, 144 Asian countries, government in, 127 Asian entrepreneurs, mindset of, 24–28, 165–66 Korean entrepreneurs, mindset of, 26–28 Malaysian entrepreneurs, mindset of, 24–26 attitude, 73. See also Professional life, attitude towards. Aurobindo Handmade Paper Factory (Pondicherry), 267 banking sector, in China, 112 brainstorming, of entrepreneur, 306–07 business culture, 141 of Chinese people, 201 of Japanese people, 231–33 business idea, preliminary evaluation of assessment of market, 297 management skills, of individual, 296–97 career(s) changing of, 45–46 management of, 46–47 Chaebols, 215 China, globalisation in, 145–47 Chinese diaspora, 200–01 Chinese immigrants, hold over local economy, 199 Chinese origin, people of, 7 Clay idol maker, in Kolkata, 268–69. See also Handicraft tourism, in India Coconut water idea, in India, 114 Confucianism, 7 emphasis of, 215 teachings of, 75 consumer items manufacturing, mindset for, 106–09 ‘contest-based’ resource allocation, 159 corporate culture, 74 in India, 217–18 in Korea, 217–18 origin of, 141 corporate scenario, in India, 95 cultural heritage tourism, 239, 273 customers, from overseas, 119

Diaspora, 179 origin of, 181 dilemma, of young professionals, over behaviour in workplace, 47 domestic consumption, in India, 147 East Indians, 182 economic liberalisation, 143 elegance, stages of, 129 emerging entity(ies) international media on, 4 employment scenario, change in, 52 entrepreneurial skill(s) impact of West on Indian, 15 mantras for learning, 57–66 entrepreneur(s), 19–21, 225, 242–43 break-even analysis by, 316 change in Indian, 15–16 evaluation under uncertainty by, 317–18 financial projection, of plan, 301–02 in India, 1 change in attitude of, 177 mindset of, 14–15 meaning of, 12, 13 need of, 9, 12. See also presentation skills, for entrepreneurs. stagnation of careers of, 73–74. See also writing skills, for entrepreneurs. entrepreneurship, 3, 11 definition in India, 12 mantras for, 34–37 ethics, in workplace, 48 Ethnic Chinese, 200 characteristics of, 206–07 in Indonesia, 205 Ethnic Indians, 179, 200 executives, in new India, 153 ECCI (Export Credit Corporation of India), 178 export of Chinese electronic items, in India, 209–10 Familism, 203–04 FMCG (fast moving consumer goods) sector, 148 fellowship, 41

352

z


festivals, in India, 290–91 Festival tourism, 287–92 Fiji, Indian community in, 188–89 folk culture, of Korean community, 215–16 FDI (Foreign Direct Investment), 135, 173, 177 meaning of, 137 foreign firm(s), strategy, 174–75 foreign importer(s) problem, in India, 96

See Vertical integration. intrapreneurship, 110–11 Indian intrapreneurial company, benchmarking for, 87 definition of, 81 see Partnership approach and intrapreneurship, 84 use of young, 83–84

Gastronomic tourism, 279–86 GDP, in India, 9, 147 globalisation in China (see China, globalisation in) definition of, 137 India, globalisation in, 145 Korea and globalisation, 212 global mindset, of Indian people, 167–76 global services trading, growth in, 144 GNP (Gross National Product), 214 Guanxi, 119–20, 202–03

Japanese, 227–29 attitude towards self discipline, 222–23 business culture, 231–33 dealing with, 229–31 economy, impact of globalisation on, 222 MNCs, 144

Handicraft tourism, 258–59 in India, 264–68 handmade paper crafts, in Pondicherry, 267 heritage tourism, 273–78 home market protectionism, 174 Hong Kong, development of, 160 horizontal integration, in firms, 104–05 immigrant capital and labour, role of, 22 India corporate culture in, 142 economic challenges for, 158–59 globalisation in, 145–47 and Korea, 213–14 tourism trade associations in, 253 IIC (India International Centre), 179 Indian chefs, in Malaysia, 282–83 Indian companies, essential feature for, 172–73 Indian community, in Malaysia, 185–87 Indian diaspora, 180, 181, 183–84 future of, 194–98 status of, 189–90 Indian economy, 9 IITs (Indian Institutes of Technology), 23 Indian intrapreneurial company, benchmarking for, 87–88 Indian Ocean trading system, 183 Indian origin, people of, 185 Indonesian people, comparison with Indian and Chinese people, 205–06 Integration, in firms, types of, 104–06 See Horizontal integration. See Networking integration.

Korea, 211–20 see Corporate culture, in Korea effect of internet, on social values of, 215 firms in India, 218–19 see Folk culture, of Korean community, 215 and globalisation, 212 Korean entrepreneurs, mindset of, 26–28 Lala company, 14, 137 leadership skill(s), 91 new face of, 92 long-term employability, in Indian companies, 96 loyalty, 98 definition of, 94 new face in India, 95 Malaysian entrepreneurs, mindset of, 24–26 MIC (Malaysian Indian Congress), 187 management style, of Chinese people, 207–09 managerial competence, of India, 122 managers, in India, 93 manufacturing entrepreneurship, 100–01 manufacturing sector importance, 157 success in India, 9, 10 manufacturing strategy, of small enterprise, 111–14 marbling on textiles, in Pondicherry, 268 marketing Japanese expertise on, 8 menial job(s) vs. skilled job(s), 9 MIC. See MIC (Malaysian Indian Congress) MNCs (Multinational Companies), 14, 85–87, 137 business culture and, 142 in India, 10, 92 contribution of, 157–58 and Indian firms

Index FMCG (fast moving consumer goods), 149 new economic and commercial scenario, 148–49 working for MNCs, 147–48 negotiating skill(s), new face in India, 93–94 networking integration, in firms, 105, 240 NGOs (non-governmental organizations), 239 NRIs (Non-Resident-Indians ), 72, 182 Opportunity study, 307–08 analysis of demand, 308–09 background of project, 308 pricing of product, 309–10 OECD (Organisation for Economic Co-operation and Development), 214 our talks, with Indian people, characteristics, 116 Overseas Indians future of, 180, 194 immigrant communities, isolation of, 193–94 and India, 190–91 meaning of, 181 and overseas Chinese, 191–92 Overseas people, interaction with, 248–50 Paki-bashing, in Britain, 189 partnership approach and intrapreneurship, 84 personal success, 243–48 PIOs (Persons of Indian Origin), 272 petty trader(s), 172 pre-feasibility study, of project by an entrepreneur, 311–13 presentation skills, for entrepreneurs, 55–56 professional life, attitude towards, 74–77 professional women, in India, 102 Project plan, 303 stages of, 304–05 public research institutes, in Taiwan, 159 PSUs (Public Sector Undertakings), 145 ROADS, 28–33 sales estimation, methods for, 315–16 service economy, 143 Shantiniketan paintings, on Moga silk, 270–71. See also Handicraft tourism, in India shoddiness as policy, 123–24 attitude towards, 67 Silicon Valley immigrant engineers from, 22 role of, 24

z

353

SLURP, 57–61 Social fabric, of competitiveness, origin of, 145 Socialism, 127 social skill(s) learning of, 43–45 meaning of, 39–40 social stigma, power of, 5–6 for mind boggling, 7 Songkran, in Southern Thailand, 288–90 Southern Bali, tourism in, 262–64 South Korea education process in, 224–26 family culture in, 226–27 on world market, 214–15 Soviet model of development, 123 Stone carving, in Orissa, 269–70. See also Handicraft tourism, in India sustainable tourism, 261 TEA, 61–66 team spirit, new face of, 92 teamwork, meaning of, 91, 203 Thailand Indian community in, 187–88 comparison with Thailand people, 205–06 tourism meaning of, 258 promotion of, 251 in Southern Bali (see Southern Bali, tourism in) trade, in India, 241 TEA (Total Entrepreneurial Activity), 224–25 traders, from Indian origin, 178 UNIDO (United Nations Industrial Development Organization), 123 urbanisation, 9 vertical integration, in firms, 105 Western countries, new markets in, 99–100 Western entrepreneurial, mindset, 163–65 world economy, changes in, 143 writing skills, for entrepreneurs, 54–55 young entrepreneur(s), 28 in India, 238 big companies, rebelling against, 18–19 demand for new technology, 101

236

z


350

z


About the Author

Raghu Nandan is a specialist consultant on Industrial Development. He has done a number of assignments with the Commonwealth Fund for Technical Co-operation (CFTC) of the Commonwealth Secretariat, London, for projects all over the developing world. He was an industrial development advisor to the seven-member Organisation of Eastern Caribbean Countries, West Indies. He was the Regional Representative for Asia for Government of Malta. Presently, the author is one of the founding Directors of Specialised Projects International (UK) Ltd., a multinational consultancy organisation operating out of Great Britain. Raghu Nandan has been visiting faculty for professional courses in several universities in South-east Asia, Africa and South Pacific.

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