There is No Fate But What We Make: India: SWOT Analysis

Saturday, October 29, 2005

India: SWOT Analysis

For Indians who have access to western education and possess english speaking skills, times couldn’t have been better. A generation ago, no one could have imagined the plethora of job options available today – IT, BPO, media, finance, insurance. Even traditional professions like journalism provide many more opportunities than they did a couple of decades ago. Economic upliftment can be seen clearly in most parts of urban India. Perhaps, the concept of middle class values is changing. Urban middle class people are coming out of the older “scarcity mentality”. Materialism is no longer a dirty word. Whether this is good or bad, or whether the benefits should be more broad-based is the subject of different discussion. But assuming that this is indeed a good thing, what are we doing to maximize the gains ? India is being seen as the “service” destination, much in the same way China has been the world’s manufacturing destination. Can this be our Great Chance to become a first world nation ? Here’s a SWOT analysis:

Service, defined Business processes and knowledge management suits well with the Indian temperament. We wrote treatises on various kinds of wisdom long before people in many parts of the world stopped wearing goat-skin for clothes. Knowledge management has been around here for a long time. Indians have never been renowned for military prowess. We never invaded foreign countries or made colonies abroad (OK, Tibbet campaigns of Mohd Bin Tughlaq or Ranjit Singh don’t count). This just hasn’t been our strength. Our skills have been on the “soft” side like service and knowledge management. Hence the current role India is taking upon is a well-suited one. This is our natural strength. It’s not a coincidence that India is nowhere in the computer hardware industry but has become a powerhouse in the software industry. It doesn’t mean we can’t become a hardware power, just that it hasn’t come to us naturally. Following processes has been an age old tradition for Indians (almost to the detriment of ourselves). Business processes outsourcing, once the processes are established, suits us a lot. This alignment of the nature of work with our natural temperament is our primary strength.

Our attitude of not questioning a tradition is our biggest weakness. See how Indian society is full of wrong and unfair traditions (read “discriminations”). There can be no innovation unless people question tradition or refuse to believe blindly. A typical Indian upbringing doesn’t encourage questioning authority and the existing conditions. We accept way too much and accommodate way too much.
In the new knowledge intensive era of Intellectual Property, the innovative will win. One can’t be innovative unless he questions the status quo. This is not to say that there aren’t bright people around. There are. But our institutions are not as much geared toward innovation, as they should be. How many path-breaking new technologies are coming out of premier Indian technical institutes ? A miniscule. Yet the same students after migrating abroad, are able to unlearn their “accepting” attitude and create innovative things. So it’s not that we lack talent. We need to realign our attitude. For far too long Indians have not had a say in their life – which explains the lack of innovation. But aren’t we independent today ?
The building block of the knowledge era is the intellectual property. Never accept the low hanging fruit. Create intellectual property. It took Infosys 24 years and an employee base of 40,000 to reach a billion dollar revenue. Google reached the same mark in less than 7 years with much higher profit margin and an employee base of one-tenth of Infosys. This is the difference between going after the low hanging fruit and path breaking innovation. (My apologies to Infosys, a company I respect a lot; the comments above are more about India in general rather than Infosys per se. And yes, this is not about the age old dichotomy of products vs. services. This is about path breaking innovation)
Yet, I am afraid that the current glut of jobs will also lead to people going after the low hanging fruit. Potential entrepreneurs who could have started the next Reliance or Microsoft will have cushy jobs and will have too much to lose when starting companies. Most of the successful businesses are started by people who give the business their best shot, because they have nothing to fall back on. With easy jobs around, we may not see too many Dhirubhais in the future.
If today’s good condition is merely due to the labour cost arbitrage, this will go away. Make no mistake about – no economic arbitrage is forever. We cannot ride on it for long. We must go up the value chain and create innovation and more deeper business values.

We are a young nation – more than 65% of Indian population is under thirty. This is a huge opportunity. More than 650 million people available as resource pool for industries ! No nation, other than China, has this advantage. Historically, this kind of “youth bulge” is associated with higher economic output and general progress. This is India’s moment. We must strike as the iron is hot !
India’s youth bulge has been accompanied by a reversal in the western countries. The young population is reducing in those countries. They need to induce people to migrate and work so industries can run and taxes can be collected. Also, they need to send jobs out as much as possible. This is why business process outsourcing is irreversible. This is not due to cost cutting alone. This is happening due to the fundamental reason – lack of people available locally !

Our biggest threat is that we may fail to move up the value chain by the time the cost arbitrage disappears. We have got a good headstart. The only we can sustain this is by businesses and people moving up the value chain. For example, the IT companies need a broader relation with the entire board of the client rather than just the CTO. Indian companies need to become more of a partner rather than just a replaceable service provider. On the other hand, tremendous thrust towards innovation is needed. This is the task for the education system. While we need a focus on primary education, we also need a more innovative higher education system. We just can’t rely on the Nehru era model forever. Similarly, employees need to move higher up on the value chain. Instead of just doing the assigned job, employees need a deeper understanding of the nature of business and come up with path breaking innovations. Unfortunately, here again the glut of jobs will hamper. Many employees are hopping from job to job, industry to industry. While this is necessary and even good to an extent, a good number of employees should try to find a niche and create a big value in that niche. Innovation needs deep understanding of the subject at hand and this can’t be developed if one meanders from subject to subject.


At Sunday, October 30, 2005 6:28:00 PM, Blogger observer said...

Nice article.

Personally I would say that another strength is the democracy which ensures that
1. We voice out our views.
2. We learn to live with multiplicity of views.

In that light, going too much into the democracy route (too much debate, no focussed action) is a threat:-)



At Wednesday, November 02, 2005 4:14:00 AM, Anonymous Orion said...

hmm. so, u a finance student? Nice anal. cheers

At Wednesday, November 02, 2005 4:33:00 AM, Blogger Charu Majumdar said...

i read books on finance...
but have no academic background in
economics or finance... something i
hope to fix soon...

At Wednesday, November 01, 2006 10:36:00 PM, Blogger multisubj yb said...

This can serve as a pep talk to employees in IT Sector. It is good that IT Sector employees become competitive globally.

1.05 billion Indians (less infants and extremely old) have to search for something else.

This post writer has to think for more ways, than what is discussed by Management books and finance media which is dominated by western thought. A Nation cannot, in the name of Services Sector Expansion, become servile to the West.

At Monday, October 22, 2007 11:16:00 AM, Anonymous Anonymous said...

Nice article charu..
One other Weakness we have is our political system. We need more youth and progressive minded people in power

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