Interview with author & former chairman, Microsoft India
It takes a very courageous CEO to see past the challenges of doing business in India and bet on the people and vibrancy of our country, Venkatesan tells Alokananda Chakraborty
Why do you say that if an MNC can win over the Indian market, it can win everywhere else in the world? Surely you say that based on your research but that's really a very big statement
What I mean is that India is like the Olympics… if a company can succeed here, it can succeed in many other markets, especially other emerging markets like Indonesia or Nigeria. Competing in India builds capabilities, talent, products and business models that work in many other parts of the world. Take a company like Deere. For decades, it never had a competitive small tractor and lost share to companies like Mahindra. Finally, it got determined to succeed in India and it is making good progress. Its small tractor is now exported from Pune to 65 markets. India has been a breeding ground for top talent, including its global CFO Raj Kalathur. This is true for many companies - Schneider Electric, Unilever, Cummins and Volvo. Cummins really learned how to run big joint ventures in India. Now it has 50 successful JVs around the world - it is a distinctive capability of the company.
You believe that doing business in most emerging markets is tough. When you studied the MNCs that have been successful in India, did you identify any common factors that have been key to their success?
The most common and important success factor is simply long-term commitment to the market. One CEO says it succinctly, "We're all in". Standard Chartered has a company slogan that captures it: "Here for good". Companies that take a long-term view, invest with a long-term horizon, stay in the market through the gut-wrenching ups and downs like the present moment, do well. Winners also focus on getting down to the large but difficult middle-market which means they become much more local - in products, in distribution, branding and management.
Companies that are ultra cautious - dip their toes in the water, retreat when the going gets tough, simply replicate their global model - never make it. The choice of a country manager is also critical. You need someone who is trusted back home, who is entrepreneurial, tenacious and has courage. You need someone who can think and operate like a general manager not just as a sales head. You need someone who is willing to stick around for 5-10 years, not someone who wants to move every three years because that is how long it takes to build a great foundation for success.
Many multinationals have shied away from Indian markets or only entered them in a limited way. Why?
Because India has a poor image. CEOs of multinationals get the demographic dividend and democracy argument but they are very concerned by the bureaucracy, volatility, uncertainty and corruption of India. Incidents like the Vodafone episode do not help instill confidence. Our infrastructure is also spectacularly bad and that draws unfavourable comparisons with China. So it takes a very courageous CEO to see past the challenges of doing business here and bet on the people and vibrancy of our country. It is very sad because so many companies are dying to come to India …we really don't have to do a lot to 'attract investment"-we simply have to stop scaring companies away.
Then there are a host of multinationals that seem to be floundering or have had to beat a hasty retreat after trying to break in. What could companies waiting in the wings learn from their mistakes?
See past the chaos… bet on the people. Unlike China, India is a not a top-down story, it is a bottom-up growth story. Take a long-term view of the market-there are very few large markets left-and try to establish a leadership position quickly. Commitment is critical: ride out the tough patches and run hard during the growth spurts. Localise the management team and invest in growing leaders from within. Run India as a geographic profit centre, trust your local team and empower them to make more and more of the operating decisions. Use India as a base to help you succeed in other markets-take products, talent, management methods from here to other similar markets.
Many global CEOs talk about 'voids' in emerging markets like India: things like the absence of or unreliable sources of market information, an uncertain regulatory environment etc. Which is the easiest to tackle?
By definition emerging markets will have voids. Corruption, uncertainty, crony capitalism, weak institutions, bureaucratic red tape-these are not unique to India. They are features of most if not every emerging market. Companies have to learn to deal with these things-they can't be wished away. You can't say, "I don't like these things, let's look at Myanmar or Nigeria instead." Companies that want to succeed in emerging markets simply have to learn to cope with these challenges-they have to embrace the chaos. It is not easy, it can be incredibly frustrating. But look around; in the same challenging environment some companies are doing spectacularly well. So it isn't easy but it is possible to succeed.
What's the best way to succeed in India if you are a company looking to set foot in India? Joint ventures or going alone?
It depends. If you can find a good partner, a JV can be fantastic in building scale and localising quickly. There are examples of great success - like Wipro-GE, Tata-Cummins and Volvo-Eicher. Even Hero Honda was a fantastic success for both partners, until their interests diverged. That's natural; JVs are transitional structures and eventually one partner will buy out the other. JVs fail because companies overlook some important points. For instance, is there cultural and values compatibility? The lack of due diligence on this is where most breakdown. Take Telenor's JV with Unitech for instance. Do the two partners have congruent or conflicting objectives? Two car companies tying up will eventually result in conflicting objectives. Do the two partners bring different and complimentary capabilities? Eicher brought brand, distribution, frugal engineering capabilities while Volvo brought technology and global reach to their joint venture. Managing a joint venture is also a skill; most companies lack this skill and like Cummins, have to painstakingly develop it.
Overall, if you can find the right partner, you should consider a JV. If not, go it alone.
Source: Business Standard