The new logic of global businesses

Tags: Op-ed
The new logic of global businesses
PLAN OF ACTION: In order to match international standards, Indian companies will have to shun xenophobia and start concurrent programmes for bringing about rapid improvement in their innovation rate
The $19 billion acquisition of WhatsApp by Facebook defies logic. To put the amount in perspective, it is about Rs 115,000 crore at current exchange rates — the capital that can fund 2,000 universities in India, or create 10 super-thermal power plants each with 2,500 mw of power generation capacity! And by the way, what is WhatsApp? It is a relatively recent start-up exploiting the ‘over the top’ social media wave with just about 50 employees but with a 450 million user base spread across the globe!

Is this the power of technology, globalisation or is it sheer craziness? Or is something else going on in this world that cannot be explained yet? It is no longer a question of either-or. Technology is feeding globalisation, and vice versa. The result of this self-reinforcing cycle is a train whose speed is continuously and ever-increasing with erratic movements, resulting in a new art and science of boarding and exiting the non-stopping machine. Those who get it right are bound to enjoy the riches, and those who cannot either fall by the wayside due to heavy centripetal forces, or simply become ‘roadkills’.

The new logic of competition forces companies to go beyond enhancing corporate productivity into the realm of becoming ever-more innovative! This means that Indian companies will have to systematically establish systems and processes for encouraging and rewarding innovation especially at the customer end! The starting point would be for the leadership to see globalisation as a reality and opportunity. This of course would require tremendous courage, learning, and determination to develop combative mindsets and devising strategies for taking on the world. It also requires a collaborative approach with key stakeholders and capability complementors.

Structurally, Indian companies will have to create wall-less organisations where employees can share their ideas and refine them through discussion platforms. Systems-wise, a reward and incentive support mechanism has to be in place that encourages employees to compete and collaborate within the company. This is easier said than done because it requires doing things in a flipped, non-hierarchical manner — something Indian companies are not too comfortable with.

Ability to work with global companies ought to be taken as a learning opportunity. Think of the Indian IT sector which in many ways has grown leaps and bounds over the years and brought huge respect to Indian talent the world over. The presence of companies like HP, Oracle, IBM, Adobe, Cadence, ST Microelectronics and Microsoft, among others, has had a great positive effect on the entire ecosystem of IT industry in India. In many ways, the MNCs and Indian IT companies are complementary to each other. Indian IT companies have a huge workforce to execute a project, but lack the R&D skills required for new product development which the MNCs have. The former are usually attuned to looking at short-term and project-to-project profitability and hence lack the wherewithal to create long-term winners. The latter have mastered the art of creating great products through relentless innovation and clear marketing roadmaps! They are much less risk averse and can go for quick acquisitions for competitive advantage.

As part of the ecosystem, the presence of MNCs has also helped upgrade the skills and content of our technical education system. Many institutes and companies are into partnerships for student internships who get the necessary exposure and skills leading to ready-for-job effect. Campus connect progra­mmes have fostered an environment for innovation and product development at universities and college levels. For the Indian companies working on onshore and offshore programmes, interaction with clients working on the latest technologies such as big data, cloud computing, and pattern recognition, among others has led to a simultaneous rubbing effect in India.

Many years ago, companies were discussing ways and means to promote corporate entrepreneurship (entrepreneurs within the company). There were few examples one could talk about. But one sees a new phenomenon called corporate venturing being actively pursued by companies irrespective of the industry they belong to. For example, a retail firm has funded a start-up within its own boundaries that provides e-commerce services to the entire company. Another company has started a web-analytics programme funded through internal resources, which it plans later to spin-off as a totally independent subsidiary.

In nutshell, Indian companies will have to shun xenophobia and start concurrent programmes for bringing about rapid improvement in their innovation rate. The following points can help them decide the course of action:

(1) Simultaneous technology development within and outside the company (in-sourcing and outsourcing); (2) Development skills for forging strategic alliances and seeking collaboration partners; (3) Focus on few projects that can lead to some radical innovation while promoting process innovations; (4) Develop a ‘fluid organisational culture’ that promotes agility and flexibility in operations leading to quick remedial actions and course corrections; (5) Corporate venturing whereby the companies create a dedicated venture fund to promote and develop in-house innovations, spin-offs, and even acquisitions; and (6) Development of a programme for exploration-experimentation-exploitation.

Global opportunities beckon us if we can get our act and actions right.

arunkumar@mydigitalfc.com

(The writer is a professor of strategy and corporate governance, IIM-Lucknow)

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