The longest day is about to begin

January 10th, 2012 by

Our day began with a visit to the biggest slum in the world—the Dharvarti in Mumbai.  Over one million people live in an area that is 1.75 km; the businesses there total $1 b.  The tour there is itself one of the businesses of the slum—at $20 a person, it is pretty steep, especially when we were told that the starting salaries in one of the shops there is about 150-200 rupees a day—that is 3-4$, though that includes room (in the shop or above), and board (there are fully functioning bakeries and restaurants in the slum).  Slumdog Millionaire was (in part) filmed there, which is not a surprise given Bombay’s prominence in the film industry. If you’ve been anywhere near an Indian family, you know about Bollywood—which is even more prolific than Hollywood.  And it is partly the attraction of Bollywood that draws new people to Dharvarti—as the big cities in the United States drew immigrants, and for the same reason; it was an improvement over the countryside, with a dream chance of making it out of the slum.   Our guide, for example, grew up there (as did his father, when his grandfather moved there).

The businesses are, as you might imagine, labor intensive, and surprisingly, contribute to the “green movement “ in India.  We were astonished at the amount (and variety) of recycling there; the tins that contain cooking oil are cleaned of residue (which grease becomes soap), the cans repainted, and reused.  Electronic goods get recycled, too, with copper stripped out and sold.    There were piles of straws, the kind of small packets for ketchup—you name it, and it was probably there.  One of the shops was a batik factory, making under contract for a larger firm. There was also a school, temples and mosques, and houses.

The challenge that the slum represents encompasses one of India’s many challenges.  The slum sits on some of the most valuable property in Mumbai (which is itself  one of the most expensive cities in the world). Trying to get locals to move requires, in this democracy, persuasion.  Our guide, who I mentioned grew up there,  pointed to the strong sense of community that one could not get in a high rise, and affirmed that if put to a vote, most of the residents would vote down a move to newer apartments.

Part of this trip has been in preparation for my May Term visit to India and China, and the conversation took me back to my early trips to the hutongs in China.  These century-old relics of the Manchu period (pre 1911) occupied major stretches of Beijing.   I thought (as a tourist) they were quaint—with a central courtyard and individual apartments surrounding it, housing, usually, several generations.  Unlike the Bombay slums, the hutongs usually had no private bathrooms, and sometimes neither central heat nor electricity.  The government provided the solution in China, moving residents into new housing elsewhere, turning the hutong areas into commercial districts, and leaving some for the tourist trade. One of my Chinese guides lamented many of the same changes as our guide here, but it happened in China because an autocratic government said it had to.  Indians are rightfully proud of their democracy, but this is one instance where more central authority (the Indians we’ve met are appalled at the inability of their government to effect change, although political paralysis does not seem to be confined to India!)

Our guide (and our national guide, a very articulate man from Delhi, with whom I hope to travel in May—I called him “guru”, or teacher—said that part of the problem with the plans to eliminate the slums so far is not only the reluctance of the slum dwellers—but the patent greed on the part of the developers.  Hence, the current stalemate.

At our second visit on a rather busy day (several of our number left yesterday, and I had a car whisk me to the airport when we finished our second visit; I’m writing while waiting for the flight to Delhi at the Mumbai airport), we were at the Welspun group, a conglomerate like many Indian companies, in many industries.  This one started in textiles, which is still bread-and-butter, making towels for major retailers such as Wal-mart (a sign told employees they could purchase Wimbleton towels for $5), but has diversified into energy (it owns a coal mine in Australia!), infrastructure (roads, ports and airports), and pipelines.  It is a $3 b global company with 24,000 employees in foreign countries such as Arkansas, and is looking to undertake projects in the southern Sudan.

During his talk, another “aha” thought struck me about the comparison and contrasts with China.  One of the faculty had asked about corporate social responsibility, and his targets were familiar—education (supporting schools in the areas it has factories),and training the underprivileged—and providing education to employees’ wives.  In the other factories, and even in the slums, most of the workers we saw were men. Even the sewing shop in the slums.  Any comparable factory in China would most likely have young women from the countryside manning—as it were—the factories.  Another challenge for India—tapping the talent of the other half of the population!

One very entrepreneurial business our guide did point out reminded me that I’d been equally intrigued 15 years ago.  It seems a local village realized that, as the industry dispersed, and men spent a long time commuting to a job, they could not have a “home cooked meal.” The village developed a logistic system (I wish  the airlines would let them arrange airline schedules) where they picked up a cooked meal at 9:30 or so, and delivered all the meals to the right workplace at 1 o’clock, pick up the used dishes at 2, and return them to the employee’s house.  Think of the advantages; mom could sleep in; dad could survive the train ride (he’d have at least one hand to grab onto a pole or strap, a lifesaver from what I’ve seen on the Mumbai commuter trains); and he’d get a hot meal made by his favorite cook.  The distribution channel goes down to bicycles for the last mile, ending the delivery process.   Our guide noted that it’s mostly the older generation.  Young people, he noted, prefer (or are willing to accept) McDonald’s.

Give me a roti anytime.  But I’ll have to come back to resolve at least one puzzle: if I eat something Indian and different every day for breakfast, how many years would it take before I had to repeat.  On the other hand, maybe I’ll just stick to my dosa masala.  Go get one (a rice pancake with a spicy potato filling), and you’ll understand why I’ll miss India.

Now if only the departure time would be sooner!

See you soon.

What does it mean to be a world class company?

January 9th, 2012 by

When we got to Siemens for our first site visit, I asked the managing director, “What does it mean to be a German-based company in India, as opposed to an American-based one?”  He assured me that in the next two hours, he’d answer the question.

And he did.  As it turned out, I had asked the wrong question.  The right question, I think, was one I should have been asking everywhere we went—because it has been the one our host companies have been answering—“what does it mean to be a world class company operating in India?”  The short answer, for those of you who might not have the patience to labor to the end, is simple: world class quality at affordable prices.  In fact, Siemens has an acronym that summed up much of what we had heard: SMART.  S stands for simple, basic; m for maintenance free; a for affordable; r for robust; and t for timely.  Much of the acronym comes from what he believes are the lessons of the Indian market, where the effort to reach the top 2% has not been a sustainable strategy for most companies.  The goal is now to reach the bottom of the pyramid, the 70% of the Indian population (and at least that in emerging countries) that are not yet middle class (defined in India as making more than $6,000, which, he assured us, buys a lot more than $6,000 would in the United States.

He took as an example of the SMART philosophy the Tata Nano, the car designed to cost under $2,000.  The goal was not cost reduction as much as it was cost management—the Tata company identified a niche between the cheapest 4 wheeler ($4,000) and the average  2 wheeler ($1,700), and worked backward from the target price to design the car.  When the director talked with VW executives on a trip to Siemens headquarters in Germany, the VW executives said they would never build a car without airbags; the Siemens manager point out that studies indicated Indians felt they did not need airbags.  There’s been a lot of discussion in the press about the Nano, because the car show is going on in Delhi right now.   The problem has been low sales (you need volume to keep the costs low) partly because of the politics of a democracy.  The farmers in the original factory site blocked Tata from building the plant; the state of Gujarat has a pro-business governor who welcomed the company.  In addition, Ratan Tata admitted that the company’s marketing had positioned the car as a car for the poor, rather than as an affordable car. I saw one today, and it is a reasonably attractive model;  a version is being upgraded to meet US.. standards for export to the United States.  My own jaundiced guess is that you can put more people on a two wheeler than in a small car, but the principle of basic, affordable and quality is a theme not just from Tata and Siemens and Caterpillar, but from consumer goods companies as well.  There’s an advertisement for a $35 dollar tablet.  It has not yet debuted in retail, but you can preorder online, which we discovered when we went to a store to try to buy one.

We learned a lot about the Indian economy and Siemens.  Salaries are 1/3 those of China for skilled labor, and 1/24th those in the United States, for instance, and engineer salaries a third those in China and 1/12th those in the United States.  Siemens has designed its Indian strategy around 4 perceived market megatrends: infrastructure in cities (logistics and transportation), aging demographics plus longer life expectancy (healthcare), climate change (an environmental portfolio to reduce carbon footprint—20 of the company’s 85 billion in revenue is from renewable resources; Siemens wants to double that in 4 years ), and globalization (moving production closer to customers).

The answer to what is a German company came when he described the slow process of decision-making and the conversion to a SMART philosophy.  Part of the challenge of this company is the size of its German component and the nature of German unions.  115,000 employees in Germany; 100,000 in the rest of Europe (some of them in factories ”outsourced” from Germany to the lower cost Eastern European countries, over the strenuous objections of German unions, which sit on the board of directors of Siemens); 81,000 in the U.S. and 60,000 in Asia.

It is an interesting company in its emphasis on research as well, spending 5.3% of its revenue on R&D, with almost 28,000 researchers in 30 countries.  It holds over 50,000 patents, the most in Europe, third most in Germany, and ninth most in the United States. As the director pointed out, though, if you can survive in India—with its variety of language, ethnic groups, chaotic democracy, religions, languages, size, poor infrastructure, etc., you can survive anywhere.   It is certainly a different challenge than China, but part of the challenges in India, as Indians remind you, are from the inefficiency of democracy!

The other company we visited was GlaxoSmithKlein, another company with a long history in India (Siemens helped build the London-Calcutta telegraph line in 1867); its headquarters are in London, but one form or another entered India in 1919, and began manufacturing in 1947.  The managing director had things to say that resembled most of what we’d heard elsewhere: the opportunity in India (in the pharmaceutical industry), and the challenges—advertising is illegal for drugs (wonder who sponsors the evening news), 67% of the population lives in villages or rural areas with less than 10,000 people, with only .59 doctors per thousand people, versus the 2.25 world average, and only 60% of India’s population having access to modern medicine.  Indian companies are competitive in branded generics—with 89 variants of the Lipitor model, and with price less than 5% of the costs in the United States.  He described the market as value driven (i.e., price).  The Indian subsidiary manufactures about half of its own, and outsources the rest.  It does no R&D, with width (185 products) rather than depth, “selling” to doctors (getting them to prescribe) rather than to the ultimate customers.  Ethically, the company follows either the GSK code, or local codes, whichever is the more stringent.  What I found most interesting (and it is part of the India Way, I believe), the company plows 20% of profits to build local health care facilities!

And to think, I’d spent all these years marveling at China’s growth, which is indeed a sight to behold.  But I do agree Western corporations can learn from South Asia, as well as East Asia—especially if they want to maintain status as world class.

Incidentally, I discovered one of those connections between China and India at the Prince of Wales museum.  In the Bombay dockyards, the British built the HMS Minden, which in 1842 received the Chinese plenipotentiaries who negotiated the end of the Opium War in the Treaty of Nanking.  That treaty, which opened five treaty ports to British economic penetration, including Shanghai, has been denounced by the Chinese as the beginning of the “century of humiliation.”  It was one of Bombay’s famous sons, Mr. Sassoon, who went through that open door to build an empire based on opium.  One monument to his wealth is known today as the Peace Hotel, but in the glory days of the Foreign Settlement in Shanghai, it was the Sassoon Hotel on the bund.

A free day in Mumbai-Bombay

January 8th, 2012 by

Our touring today demonstrated in several ways main themes in Indian history.

The contrast between the old and the new:  In Bangalore, we passed Dr. Jain’s Cow Urine Medical Shop.  That was the old.  It is now an Ayurvedic Clinic (maybe using the old herbal formulation, but substantially updated).

Major parts of its European colonial history:  We took a one-hour boat ride to an island, and on the way, got an abbreviated history of the island.  It houses what was once (2ndcentury AD) a Hindu temple dedicated to the Lord Shiva, one of the trinity of major gods (there are supposedly 3,000 or more, a total magnified by the different forms a god can take; Shiva, for example, is the Destroyer of Evil, but in one incarnation, is a yogi, and in another is a master dancer).  The one-time temple has major sculpted stones depicting stories about Shiva, and picturing his well-known son, Ganesha, the god with the elephant head.  By the time the Portuguese reached Bombay, the temple had been abandoned, so the Portugese used the cave, in part, for target practice. The Portuguese connection was part of Portugal’s quest for spices under Henry the Navigator, which for a time created far flung trading ports that included Goa in India and Macau in China.  Claiming what was then seven islands, the Portuguese claim became part of a dowry of the Portuguese princess who married Charles II of England; hence, Bombay passed into the arms of the British East India Trading Company.

Much of what we saw today dated from the British period (which lasted until 1947) and is close to the area around the Taj Mahal Palace Hotel. The Victoria Train Terminal, built, like so many of the late 19th century buildings (such as the High Court and the sumptuous University of Mumbai (the city was originally Mumbai, but the Portuguese gave it the name Bombay because, I believe, of a local god) in the Indo-Saracen architectural style, was the biggest building project in 19th century Asia.  Even today, it services 7 million riders a day (scale in the East, in China and India, is somewhat mind boggling for Americans.  Bombay has the population of Australia!).

The new and the old is reflected, as well, in the local dobi ghat we visited.  A dobi ghat (the name of a train station in Singapore, is an outdoor laundry (dobi is a washerman; at least all the workers in the ghat, which is a riverbank, were men), and constitute one of the largest slums in the city.  There are four of these areas, and I understand that workers in the slum earn about $200 a month, which is enough to send money home to families left behind.

Within sight of the dobis, is Marine Drive and the Malabar Hill, which have the highest priced real estate in India.  There are a number of wealthy families who have made Mumbai home, including many businessmen. One of the newest homes is an 18 story edifice built for Mr. Ambani, whose story I just bought in the bookstore in the Taj (books are a real bargain in India—priced for sale only in India, Bangladesh, Bhutan, and Nepal); Mr. Ambani, the CEO of Reliance, one of India’s major conglomerates, has 400 servants for his family, which consists of him, his wife, and their child.  Who says the maharajahs are gone (though most of the maharajas — the Indian rulers under the princely states which were subsumed in 1947 — had their political power stripped, some still have palaces.  Several of the palaces have been converted into hotels, so you can sleep in a palace, as Mrs. Hoyt and I did in Jaipur).

We saw the former home of the Tata family, India’s largest group, who also call Mumbai their headquarters.  They represent an interesting theme in Indian history, too, being Parsis—Persians who emigrated centuries ago and found a home in Bombay.  The Parsis worship fire, and you may know them as Zoroasters.  We were supposed to go to a Parsi temple, but it was closed; we did go to a Parsi restaurant for a “wedding feast.”  One memorable feature was eating the meal on a banana leaf.

The final place we visited brings us up to “modern India”.  Mahatma Gandhi, the father of modern India, lived here from 1917 until 1934, and the home where he stayed is one of a dozen Gandhi museums in India.  The story of his life, documented in Richard Attenborough’s film several years ago, was retold in the home: sent to London to become a barrister (promising his mum, as the British would say, he would have neither wine nor women), he eventually went to help the Indian community in South Africa.  He even got a medal in the Boer War for being part of a hospital corps. Evicted from his first class compartment because he was “colored,” Gandhi turned to non-violence and for the next almost fifty years, using a simple but powerful lifestyle, helped mobilize Indian and world opinion to get the British to leave India in 1947.

Tomorrow, we’ve visiting two more companies to learn how India has gone from 1947, and one of the world’s poorest countries, to one that still has 30% below the poverty line, yet has shown enough progress to merit the statue of progress that is on top of the Victoria Terminal (130 years later!), and the focus of the book I mentioned yesterday, the India Way, published by Harvard Business School press.

Namaste.

Good night.                                                              

In the lap of luxury

January 7th, 2012 by

I’m sitting in Mumbai (Bombay), about 500 miles North of Bangalore in a hotel that you may have heard of—the 1903 Taj Mahal, which was the subject of a terrorist attack in 2008 that made the news around the world.  The legacy of that attack was a complete renovation of the hotel.  When I was here in 1997 (around the same time of year), I remember the crowds as affluent (we were the only non-sheik or drug dealers, I commented at the time), and the rooms in the heritage wing as “dated” and spare at best.  Florida International’s CIBER trip at the time was the first group that was admitted to the reopened hotel, so the Taj welcomed us with peach lemonade in the “club lounge,” and garlands, and with the news that we had been upgraded to the heritage wing (there’s a rather spare new wing built in the 1970s).  I think I could get used to being upgraded, especially into the luxurious part of the hotel; it is world class, as I realized when Preejesh escorted me from the elevator, gave me his card (as the team leader for palace services).  I’m reading “The India Way,” which I picked up at the airport—it’s a new Harvard Press book which distills the interviews four Wharton professors had with the heads of major Indian firms to postulate an India way for Multinational Corporations to conduct business.  I think my students will be reading excerpts.

One of the companies, and one you have to discuss as a global powerhouse, is the Tata Group; the Tata group five years ago unveiled the Tata Nano, a real “Volkswagen” (people’s car) with a base price of under $2,000.  It also owns the Taj hotel chain, Jaguar and Landrover,  steel companies, etc.

I should note that the service at the hotel in Bangalore, also a Taj chain member, was also immaculate. Both hotels, however, have tighter security than most hotels.  My cab in Bangalore, when permitted into the parking lot, had to have the trunk and the underbody examined.  I guess it’s a measure of India’s neighbors….

Bombay is the commercial capital of India, with headquarters for most Indian companies (and Multinationals doing business here).  It’s on the ocean (the Arabian Sea) and I remember reading early Clancy novels involving the Indian Navy headquartered here.  It’s about 20 million population, but the traffic, while heavy, flows here.  We’re getting a tour tomorrow, so maybe I will have a report then.

It’s far different than Bangalore, where we toured earlier today.  Bangalore is a city of almost 9 million people, but less than a decade ago, it had 2 million people.  That may explain the congestion and the state of the infrastructure.  Interestingly, the city seems to be building monorails, rather than expressways, which has torn up the streets, but may be a more sensible first step toward controlling pollution.

Among the sites was a garden, which was a cross section of Bangalore’s history.  The founder of the city created the first part of the garden in 1537, along with a tower that marked the first boundary of the city.  Tipu Sultan, whose history I discussed in my blog post on Mysore, expanded it.  But it was the British who turned a 40-acre garden into a 240-acre one, and built a replica of the Crystal Palace, where there will be a flower show in a few weeks to celebrate one of the major national holidays.  The British, I should point out, recreated a lot of England in their far-flung empire, and it’s relatively easy to spot the old British military establishments in Bangalore.  They now house the Indian military establishment.  The colonial churches are also still in use, many of them in pastel colors. One of the names for Bangalore is “retirement city” because it had and has a relatively benign climate for India, without the extreme heat of Delhi or the cold of the foothills of the Himalayas.  It seems to have been an important center for the British for that reason.

The founder of the city started a Nandi temple—around the statue of the bull, which I believe is the carrier of Lord Shiva.  The huge bull, carved from a single block of granite, was one of our stops on the city tour as well.

Talk to you tomorrow.

Namaste.

Almost like being in Peoria

January 6th, 2012 by

From Bloomington-Normal, Caterpillar’s headquarters is about 45 miles away—and 45 minutes (unless, of course, you go faster than 60 miles an hour on the Interstate). Here, Caterpillar has a plant we visited that’s closer to 2 hours away—and probably not much further than 45 miles away. The difference is partly attributable to the state of infrastructure (i.e. inadequate roads, too many cars), and partly due to the existence of a whirlpool effect in the sea of commerce. To get to the Power Division of Caterpillar (which has become the global source for two engines that Cat moved to Hosur, the town it is in, from plants in Japan and Indiana, which needed the capacity to produce more) meant crossing state lines. There are 28 in India, sort of arranged along ethnic lines (remember those 14 or so official languages!), with chief ministers who seem to have more power than American governors, including the power to attract industry (which is why Cat is in Tamil Nadu, the next state over), rather than Karnataka, where is Bangalore. Another power the states have is to set commerce standards, and that’s where the whirlpool in the commercial sea occurred that interrupted our journey and probably sinks a lot of business boats. We were pulled out, along with every commercial vehicle, to pay a tax on whatever goods (and that includes people) who are moving from one state to another. The taxes vary greatly, our guide stated. It’s as though if you distributed goods from Illinois to Indiana, you would have to stop at the state line and pay a duty on those goods. The CAT managers we spoke to said the parliament is probably going to pass a general sales tax that will end the state taxation of commerce that seems to be, as I suggested earlier, one of the drawbacks to doing business in a sea of chaos.

When we turned off the main road to the entrance way to Caterpillar—through a small town—and into the campus, we were again in an Island of Excellence. Caterpillar is the biggest Illinois exporter, and over 60% of its revenue comes from overseas sales. As I wrote from Beijing in May, those sales in Asia have been problematic because Caterpillar has positioned itself on the dimensions of quality and durability, while Chinese buyers (and also Indian ones) are more concerned about price, and are willing to forego features that might be standard on equipment for Americans (such as air conditioning, the Cat managers noted). In shifting the manufacturing overseas, Cat has attempted to address its costliness while still keeping up its quality. The effort has resulted in a plant that for all intents and purposes could be in Mossville as easily as in Hosur—at a fraction of the cost. For example, the plant employs several hundred employees, but, though the shop is union, only about 30% belong to the union. The remainder are temporary help, and the pay differential is significant; a union employee with substantial experience can earn up to $8,000 a year, if I understood correctly, while temporaries earn $1,200 a year. The challenge to standardize the quality involves standardizing the quality of the work force, which has meant a cultural transformation; the trinity seems to be quality, safety, and conservation. Each employee (I would guess tenure track) will have to come up with 6 ideas for improvements (the Japanese pioneered this; it is called kaizen)—but the average is 30. In addition, the concepts of working in a safe environment have spread away from work and into the home; workers now wear seat belts we were assured, and the whole family is enlisted in the creating of safety slogans, for examples. The plant is run on Caterpiller production standards to obtain high performance (quality, safety, production—over 2,000 days with no time lost due to accident), and everywhere charts measuring the things Cat has established as critical, with input from the plant. The other task, they told us, was to bring the suppliers onboard as well, because getting the cost of the units down depends not just on Cat’s employees, but its suppliers as well. The plant still uses a lot of foreign parts (I think he said 60%), but the goal is to shrink that to 20-40% eventually. The market leader is Cummings, which has 95% of its engine parts coming from Indian manufacturers. Ironically, I recall the reluctance of Cummings to outsource, but the Indiana-based company felt it had no choice—because its chief rival, Caterpillar, had done so! The main seaport for export is Chennai, still four hours away—but a few years ago, it was eight.

The common theme of the businesses we’ve visited is the importance of hiring and retaining qualified personnel. Cat says it hires a lot of vocational school graduates, who train for 8 weeks in the classroom, and then spend a day on a simulated assembly line. Apart from the free transportation and free meals Cat provides, we could have been in Peoria (and of course, the lower wages). The plant is an example of Cat’s response to the pressures of global competition, and how it is playing the quality/price game—in a division whose products mostly go to build other Caterpillar products. It was almost like visiting a Japanese company in the early 1990s, when the performance attracted both fear and emulation, and management gurus wrote books about Theory J on how to compete with the Japanese. Ironically, we went to a Japanese company afterwards, or rather a Japanese-Indian joint venture that was a really small operation by comparison; the Japanese company has only 1,000 employees in its Japanese plants. It makes hydraulic machines, and while we saw labor-intensive operations, it resembled a small machine shop more than the kind of world class operation we saw at Caterpillar. One takeaway, though, was the presence of a rain harvesting program, which is an effort the plant makes to reduce cost by capturing water during the monsoon season, storing it, and using it the rest of the year.

We’re leaving Bangalore for Bombay (Mumbai), with part of tomorrow being a tour of the important sights of the city, which was founded early in the 17th century. For business purposes, I’m glad we came here, and appreciate the variety of the businesses we’ve seen—first class Western and Indian companies. Interestingly, Harvard Business School thinks so too. In addition to a number of cases on companies here, including the not-for-profit we visited, Harvard Business School students are also in our hotel, visiting some of the same places we have.

Enjoy the weekend.

Namaste.

Islands of Excellence in a Sea of Chaos

January 5th, 2012 by

One of today’s speakers described India as “islands of excellence in a sea of chaos,” and that certainly applies to our site visits on Thursday.  We went to two IT companies, which is I think what the world pictures when you mention Bangalore, the “Silicon Valley” of India.

The first was Infosys, one of the largest of the IT providers.  It sits in a “campus” (which is euphemism for a service ‘factory’; service factories rather resemble campuses, and in the IT environment (which I saw 2 years ago in Hangzhou, China, at Alibaba) is frequently populated with students scarcely removed from the college campuses.  The average age is probably 24, with a standard deviation of +1.  The staffing of these companies keeps the average low—and the costs accordingly down.  Even hiring 38,000 people a year, Infosys loses about 20% of its staff due to attrition.  The entry salary for a college graduate (mostly engineer and business students—the quantitative skills are a requisite) is $500 a month.  Compare that with starting salaries in the U.S., and you’ll understand why much of the Business Processing operations (customer service, computer operations, systems) has gravitated to these companies.

The company is a classic case in successful entrepreneurship. 7 young college grads pooled $250 each in the late 70s to start it up; revenues this year were over $6 billion.  Two of the founders didn’t like the business model and left before the company started; I wonder what they are doing.  Part of the reason the company is so well known is that one of the founders, who was president of the company for a long time, was friends with Tom Friedman of the NY Times.  In the CEO’s office, he and Friedman discussed the idea of The World is Flat, a story documented in the first chapter of the book—as an “Aha!” moment.  I can well understand it.  The campus is modern, with 50 acres, lakes, a gym, seven restaurants (we had lunch at one, and Sodexo might well study the model), great classrooms (President Wilson might have the IWU architects visit), an island in a sea of chaos. To get to this island of excellence, we had to travel on a road system that makes most American cities look progressive (and explains some of the problems of the Indian economy—especially distribution.  Half of the crops never make it to market; they rot first.

Infosys is big on training.  One of its strengths is a “foundations” course, that gives six months of training in Mysore to 10,000 recruits at a time; ironic, Infosys hires probably a big chunk of the graduates from the best Indian universities (and the top ones are really good; the Indian Institute of Technology–I think there are several campuses–takes the top 2,000 of the 200,000 students who sit for the college boards; as I understand it, the colleges take students based either on their scores on the one day exam—with no reference to Eagle Scout, football captain (though they might make an exception for cricket)—or a certain number based on a reverse discrimination.  To combat the effects of the caste system, which rendered people permanently in a caste, the government requires hiring the former untouchables in the civil service and reserves a number of seats at the universities.  It’s not at all uncommon in the Asian societies to emphasize education as the ticket out of poverty and/or caste, not unlike the United States, but someone told us that Indians spend up to 60% of their income on education.  Where this paragraph was going, though, was to note the irony of spending 6 months on training the graduates of those good schools in the skills they need to do the job Infosys hired them to do!

Like most businesses, the Indian IT industry is mature,  which is to say, the companies have a hard time differentiating themselves since they provide pretty much the same service.  Infosys gave us one indication of the direction it is moving—consulting. One of the leaders of the consulting group gave us an example of the kind of workshop he will lead with a company (Infosys customers are mainly but not entirely Fortune 500 companies). It rather resembled the professional bureaucracy I talk about in my strategy classes—the application of 21 dimensions (for the 21Century), such as the digital customer, whose demands include self service, meeting one’s own needs, and the cocreation of value.  We discussed what the application of these 21 dimensions might mean to a university.

We then drove across town to a second IT company, Mphasis, which gave a nice case study of a small business (only 1b$, but up triple from when it was purchased by EDS and then Hewlett Packard three or four years ago; HP has a majority share, but the Indian government would not let a foreign country buy 100% of an Indian company until recently). It started in California as the dream of Jerry Rao, who then moved it back to India.  His return is symbolic of something that is happening more frequently, as the Indian government and many companies looking for talent have encouraged Non Resident Indians (NRI) to return home to work and live.

We had one speaker, in charge of the mergers and acquisitions of a cash rich company (which he said was rather typical of the IT firms), who was an NRI who told us about the Mphasis effort to put emphasis (had to say that) on developing niches (I thought it was interesting that the company, which does consulting, itself used an American consulting firm McKinsey and Company to help identify the strategy.) Mphasis went geographical—India, western Europe, and the United States—and narrowed its industries to primarily Banking and Insurance (probably does something with State Farm, though I didn’t ask. Like every business, especially service businesses, they told us, “The race for talent is becoming bloodier.”  They hired 15,000 new employees last year, some to man divisions in the United States, because for Indians, a posting in the United States is no longer as desirable as it once was; our speaker said that his son was acclimated in 2 weeks, having joined the football (i.e., soccer) and cricket teams (sponsors are paying more than superbowl rates for advertising during the match going on between India and Australia).  In addition, the Economic Times today featured an article reporting a decline in the issuing of work visas for Indian nationals hoping to emigrate to the United States.

One of the most interesting features of the talk was from the Corporate Responsibility  Officer, who indicated that there is a real gap between the islands and the sea of chaos.  Like Infosys, and, indeed, most companies today, Mphasis has social goals as part of its culture.  It has chosen to put money into education, start up entrepreneurship, education, and the disadvantaged.  For example, after serious flooding last year, the company decided to support the building of toilets in three villages that had no toilets.  It paid for fifty of them, and that prodded the government to put up money for another hundred.

No more than a hundred miles from our “Islands of Excellence” are villages which until now, never had bathrooms.  The officer also told us about the campaigns necessary to change behavior so that the villagers would USE the toilets, which included a pledge to do so.

I was reminded of my visit years ago to Korea. When I met with a Scout group, they asked me what my troop did for a good turn.  I replied proudly that we had just assisted the Methodist women in their big fundraiser—an attic sale.  I was startled when they told me they worked at a leper colony.

I’m thankful that we don’t need to do a good turn for lepers or to build toilets for villages that never had them in the sea of chaos.

Have a Namaste

More from Bangalore

January 4th, 2012 by

The Professional Development in International Business, hosted in Bangalore and Bombay by Florida International University, formally began this morning as the faculty participants—from around the world (most from the US.., but there is a management professor from Budapest here, and two faculty from the University of the Virgin Islands)—arrived yesterday.  I knew two of them from previous FDIB trips, so it wasn’t like everyone in Bangalore was a foreigner to me!

A few months ago, the Wall Street Journal ran a series on India under the heading “Flawed Miracle.”  The theme it explored—the contrast between the highly developed, highly literate, and wealthy Indians, and the persistence of poverty and illiteracy, became graphically clear in our two site visits today.

The first was with the VP for Human Resources at IBM India, a very articulate Ph.D. in Economics (I think, continuing the British connection I mentioned yesterday, from a school in the UK).  He was quite learned, and confessed to us that he would probably have enjoyed teaching had the pay even remotely resembled the remuneration in the business world.  He talked about his own background, which began before 1990, the period of the license raj, when the Indian government, bereft of most resources, including its ability to feed the then 600 million Indians, regulated most of the economy  to husband its development, employing a socialism in the economy to complement its democracy in the hope as well of providing a “third way” between communism and capitalism that almost outlasted the Cold War that gave it birth—not to mention its usefulness!

At IBM India he manages to hire, train, and retain a world class engineering group despite the challenges of the Indian market.  He described the high attrition because of a shortage of educated folks (not college graduates, but college graduates with marketable skills; he estimates only about 25% of the engineers who graduated college know enough to use those skills, complaining that too many know only theory).  The challenges he outlined—attrition is 15% In manufacturing, 25% in IT, and 50% in back room operations.  In hiring, he says the younger generation is interested in 4 things—compensation (for a few hundred rupees, he said, people will change jobs—though the Economic Times warned yesterday that Business School graduates were being warned to downsize their expectations, especially at second tier institutions), career growth and opportunities, and “care”=the social dimension, which he says is more important in India than in most other countries because of the close family ties.  Parenthetically, he mentioned that his daughter called her mom—from LA, to get recipe information as she was cooking! Two elements he thought distinctive to India were that employees are frequently “no shows”—that is, they don’t show up to begin work despite a commitment to join a company, and sometimes just “abscond,” leave without notice, sometimes taking computers as a souvenir.   He said the big companies are now requiring letters from a previous employer (though in critically short areas, they poach talent from one another).  In a company like IBM, which values uniformity in procedures, he says that he will emphasize career growth and opportunity and compensation at the expense of “care” (no group cricket matches, for example).  We’re going to Infosys tomorrow and he suggested we’d see quite a different approach, but Infosys is an information company that is locally-based, not a western multicultural.

He spoke as well about Indian labor in general, and in particular the 2% of the population that has benefited from the miracle—especially the IT sector.

Our second business visit highlighted that “other” India, a nongovernment operation that was providing the social services government can’t entirely afford to do.  It was an organization set up by a Hari Krishna Hindu (yes, the Krishna movement survived the 1960s in San Francisco) who sought to do the good works that will earn him Nirvana.  He started a business, partnering with business sponsors and government, to provide hot meals to many of India’s needy school children.  In the miracle city of Bangalore, the company feeds over 200,000 Bangalore children—of the nearly 800,000 who would  go to school or have a meal without the program (variable government programs supply the rest). The organization feeds 1.5 million students around the country and would like to have enough money to feed nearly 5 million.  We saw the cauldrons which are big enough to make enough rice to feed 1,000  or make 10,000 chappati, to go on the trucks that deliver lunches….one can only wonder what about the families of the children getting the meals….Quite a distribution operation.

Speaking about food, we were hard pressed to squeeze in a lunch, so we sandwiched in a lunch visit to McDonalds, which despite its emphasis on operational efficiency and standardization, is a great case study in globalocalization; the Oakbrook chain, which has centralized its manual into an 800 page “thou shalt”, faced a situation in India where the Hindu majority (60 percent or more) eats no beef, and the Muslim minority eats no pork. That being the case, I had to eat at a McDonalds to see what the company  would serve.  Not surprisingly, the choices were either fish or chicken—with a few Indian dishes.  I chose an interesting (to me, anyway) spicy paneer wrap, not available in the U.S., with a thumbs up cola (a local brand Coke purchased).  The wrap was tasty, consisting of chicken, cheese, tomatoes, lettuce, and a crunchy batter—nothing moved, so I think it was ok—every ingredient was wholesome, which makes me wonder what the nutritional information was…. I atoned for my food gaffe by our welcome visit to a north Indian restaurant that featured naan—the bread, and tandoor dishes.

As I’ve mentioned many times in my blog, food is indeed cultural, and I really ought to have an international food fair for my international business class.  I wonder who else would welcome chicken feet?

I have a yoga mat in my room

January 3rd, 2012 by

Associate Professor of Business Administration Fred Hoyt traveled to India for a Faculty Development in International Business program.

Mysore in Bangalore

I am pretty sure I am in India because:

a)      My GPS says I’m 8000 miles from home, at 12 degrees north, 70 some degrees west, or something like that.

b)      My body feels like it’s been in the air for about 26 hours.  I know it will get here sometime to join me.  Hopefully soon.

c)       It’s 32 degrees outside, but that’s Celsius, not Fahrenheit.

d)      The main crops are coconuts and sugar cane, with evidence of rice fields.

e)      Traffic is developing country level—I spent 4 hours getting from Mysore to Bangalore (about 100 miles), and that wasn’t entirely due to the presence of 4 legged animals—no elephants or camels, though a few goats, waterbuffalo, Brahmins (the cow kind)—and a 4 lane road that despite reminders that people should “follow traffic discipline” expanded to 6 to 8 lanes to accommodate taxis, overloaded trucks and busses, motorcycles, bicycles, and the occasional hiker.

f)       I had masala dosa for breakfast (spicy potatoes in a rice pancake), eschewing roasted   and baked beans—the hallmarks of a former British colony (and I’ve always suspected one of the reasons the British sought an empire—for the food).

g)      There’s a yoga mat in the closet, and two do it yourself yoga channels on the TV.

h)      I am having a hard time reading any of the official 14 languages except for English.  The local one is Kanada, or something like that, but I’ve not heard anyone say “ya betcha”.

 

I was thinking back to my first impressions of India, formed 15 years ago, when my family and I arrived on January 1, 1997, and I wanted to know the football scores.  I rushed for the Times of India (there’s that London connection again!) and found the football scores—Manchester United 1, Arsenal 0—at that time, pre internet, it took 2 weeks to find out who won the NFL playoff games (I think it was the Packers with that quarterback Aaron Favre), but it was a reminder that for the better part of two centuries, India was part of the British empire.

Today’s visits reinforced that heritage for me.  For one thing, I visited the Mysore Palace.  Mysore stayed under the thumb of the British resident, who assisted the Maharajah (a Hindu ruler is a Maharajah) until Indian independence in 1947, when the new state forced all the principalities to unify—I think it was the first time in Indian history that the subcontinent was under one ruler.  The Maharajah, whom the British restored in 1799, built a splendid palace on the grounds of the original one that the dynasty’s founder had erected around 1400.  When that burned down after 1900, he commissioned the same architect who built the Indo-Saracen buildings in Kuala Lumpur and Bombay to spare no expense in building him something similar in Mysore.  Anyone who has seen those other trappings of the raj (me, in other words) would recognize the paternity—with Bohemia crystal, Venetian cut glass, and Italian marble.  It owes a lot to the Moghul influence on regal architecture, but in this part of the world—the Indian subcontinent—that was the gold standard, even though the Moghuls never came this far south.

A few years ago, I read a fascinating history of the East India company, which is how the British originally became involved with India.  The company had its own army (in the 1790s, the governor was Lord Cornwallis, fresh from his starring role at Yorktown), and its own government until after the Sepoy mutiny (the Indians call it the first war for independence), when it became part of the British realm and Victoria added Empress of India to her titles.

Part of the company history occurred in this area when the Maharajah of Mysore brought in a warrior named Hyder Ali, who helped the Maharajah defeat the Company; Ali’s son, in fact, deposed the Maharajah and became Tipu Sultan (sultan being one title the Muslim rulers took).  The British, led by the man who later became the Duke of Wellington, aided by one of Tipu’s assistants, captured Tipu and killed him.  We saw his tomb and the summer palace he built, where, surprising to me, the British kept intact his paintings depicting his victories over them.  They did destroy his palace, however, and restore the ruling dynasty—and the guidance of a British resident.

I guess I didn’t think about it, but India was the target of a number of European empires at the time the Company was making its moves.  The Portuguese were early in the game, and got ousted from Goa long after Independence. The Dutch were in the area, and before the Napoleonic Wars, had Sri Lanka.  And of course, the French were here as well, and French troops helped Hyder Ali defeat the English in the 1760s as part of what the Europeans called the 7 years war, but Americans—even not knowing of the battles in India between the French and British—call the French and Indian War.  Now you know why!

 

Note: this last paragraph history lesson is inspired by the Grimm’s fractured fairy tales on Bullwinkle!  Goodnite.