India needs a new password to success
May 20 2014
The believer of these postulates should carefully look at facts and data. The challenge to these beliefs comes from the same source, which are new technology startups in China. They seem to have turned their English language “disadvantage” on its head by developing products and services for the vast Mandarin-speaking Chinese market where English language players find it difficult to penetrate.
Alibaba and the 40 thieves is a tale from the Arabian Nights. Alibaba is a poor woodcutter, who, almost by accident, learns the password of the cave of the 40 thieves: Open Sesame. By using the password, he gains access to the den of thieves. He helps himself to handfuls of gold coins. In the end, the thieves try to get even but get killed. Alibaba is the only one left who knows the password to the cave of great wealth.
The new Alibaba is not a poor woodcutter. It is China’s largest online retailer with volumes second only to WalMart worldwide. The e-commerce company has opted for a stock sale. Analysts believe that the sale will rival Facebook’s $16 billion offering two years ago. Its owner is neither a nerd nor a mathematician. His name is Jack Ma, 49, and was an English teacher. Ma owns 8.9 per cent of the company. He will join the ranks of IT billionaires Mark Zuckerberg, Bill Gates and Jeff Bezos without either incubating his company in the Silicon Valley or chasing venture capitalists at Sandhill Road, in Menlo Park, California. His investors were hardnosed investment bankers such as Goldman Sachs and Japan’s Softbank. Although an English teacher himself, a vast majority of his employees speak only Mandarin.
Ma is not a technologist. His key strength lies in his vision, business acumen and rockstar-like quality to attract and inspire people. He did not even start in Beijing or Shanghai. Ma formed his first internet company called China Pages in his hometown, Hangzhou .The internet portal was roughly like the Yellow Pages in Mandarin.
Indeed, Ma stands apart from the crowd. He has been consistently and routinely granting stocks to his employees — an act unheard of in Chinese business circles. Last month, Alibaba announced that it would donate 2 per cent of its stocks worth several billion dollars to charitable trusts for education, healthcare and environment. With the exception of Azim Premji of India, no other IT entrepreneur in the emerging countries has practised philanthropy on this scale.
The two words that aptly describe Jack Ma are maverick and flamboyant. The New York Times has reported: “At a 2009 stadium rally to celebrate the anniversary of Alibaba, he emerged onstage wearing a waist-length blond wig, a black leather jacket with red flame and metal stud accents, sunglasses and lipstick. Raising a microphone, he ripped into a stilted rendition of Can You Feel the Love Tonight? eliciting cheers from the crowd of 16,000 employees.” That, for you, is Jack Ma — chief inspirer and cheerleader at Alibaba.
The rise of Alibaba shakes the foundation of the twin myths of Silicon Valley ecology and English proficiency of Indians. There are many other examples. Baidu is a Chinese search company. Its market share in China is greater than that of Google, Bing and all other search engines combined. Its revenue share is about 80 per cent and it is the first Chinese company to rise to the Nasdaq-100 list.
Another such example is Tencent. It is the fifth largest internet company in the world after Google, Amazon, Ebay and Facebook. While Facebook is ahead of Tencent in market capitalisation, Tencent’s revenues are greater than Facebook by nearly $2 billion. The market capitalisation of Tencent is about $150 billion. Both Baidoo and Tencent have built a Chinese wall of Mandarin around its huge and expanding customer base.
Critics of my argument may say that all the Chinese companies I have cited are fuelled by money from US capital market or financial institutions. But in a global economy, money is fungible and has no nationality. The Chinese, Japanese and Arabs are also shoring up the US treasury by buying bonds. Their sovereign funds are investing in US listed companies.
Let us then turn to a different and more controversial company. Ren Zhenfei was an engineer in the People’s Liberation Army (PLA) which he left to establish his company Huawei in 1987. He has around 84,000 employees worldwide, of which, 3,000 are software engineers based in India. Unlike Alibaba, Tencent and Baidu, Ren has no intentions of going public. He believes that chasing shareholder value makes a technology company myopic. To him, only the pursuit of a long-term vision and an unwavering investment in research will make Huawei a leader in its chosen market. It is already third in the smartphone market and second to Ericsson in the network equipment and services market.
Ren is a calm and patient man. Because the US has accused Huawei of being a Chinese PLA outfit and expressed concerns about national security, Ren is investing and focusing in markets that welcome his company. He has famously said, “It might take 10 or 20 years for the US to know that Huwaei is a company with integrity. We shall wait.”
The proficiency in English language and the cost arbitrage of labour have assisted India to vault to the top of the IT services league. But with the exception of I-Flex Solutions, India has not been able to create another $1 billion products company. It is time that India harnesses its rural and vernacular market to spawn domestic products and services giants as China has succeeded in doing. That will be the future password to market leadership.
(The writer is managing director of Deloitte Consulting, India. These are his personal views)