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Monday, March 12, 2012

Indian entrepreneurial ideal-more Ambani/Mittal/Adani than Steve Jobs

A classmate at IIM-A and a friend, Sandip Dev, wrote(http://itsallpartoftheplan.wordpress.com/2012/03/11/manufacturing-steve-jobs/) an inspired piece explaining why he did not expect an Indian Steve Jobs anytime soon- Certainly not before 2020. May  be 2030 or 2040. The article, written against TOI forum posters inspired by Rancho in 3idiots, tried to explain why USA produced Gates/Jobs but others did not. It  covered points like support ecosystem/climate in the region where Gates/Jobs lived(what if they had lived in Montana?), funding, culturally acceptance of failure, IPR laws etc. An interesting point he made was that despite UK/Germany's advanced education/research, they have not produced any major tech breakthroughs, thus highlighting the importance of having a full ecosystem.

I have a slightly different take on the subject. In my view, the 'old economy' industries needing execution skills, cost management, and eventual vertically integration focus, are where Indians can add the maximum value given their constraints. This is as opposed to 'tech' industries, where creativity and ideas can be then funded by VCs/angel investors.
  1. Less of resources makes Indians more resourceful-this is not true just of India but also of Taiwan Japan, and Singapore, which have scarce natural resources but which have leveraged their human capital and location to become trading hubs and commercial centres. And resourceful does not mean something new, it can mean adapting an existing model for example Snapdeal, Flipkart and Redbus are adaptations of Groupon/Amazon and other portals.
  2. Private sector has not done great R&D without Government funding-Be it USA or Japan, government funded R&D has been the secret for pharma and the internet itself. It is not as if companies there cracked the secret sauce of innovating well.
  3. Confusing education with entrepreneurship-Barring IITs/IIMs and some others(IIsc/IIIT/BITS/AIIMS etc), the higher education in India(and even primary education for that matter) needs improvement, and has led to brain drain. Since higher education is needed to be a tech entreprenuer, Indians have lagged in that, but when it comes to creativity and spotting gaps(these DO NOT need any specific education), India has produced many entrepreneurs 
  4. Operating on a shoe string budget/operating leverage:-A reason why Indian entrepreneurs have managed high ROEs is the cost efficiency(be it banks or trading companies like Olam or Reliance Industries itself) they bring to focus. Even before the ICWAI was existing, the famous partha system of accounting among the Marwadi community did ensure cost efficiency in groups like Birlas. That slowly percolated down to India Inc(except maybe Kingfisher), and helped the companies scale up without going broke. While some companies are losing that focus(like a certain industrial goods major which thought of buying a jet), others are thankfully returning to basics. Non Asian countries struggle to lower the 'standard' of working/living which is needed to control costs, and therefore Indian entrepreneurs/executives succeed in highly operating levered industries like auto, steel, generic pharma, retail banking,telecom but not in low leverage industries like fashion, education
  5. We are inherently savers and spend less:-That mentality helps in some industries but not necessarily in tech. 
 While the series of Indian tech startups like flipkart/snapdeal/infibeam/redbus/inkfruit may seem to prove me wrong, even they play the cost card i.e 'value retail' rather than any higher end service or so, thereby leveraging a core competence of the Indian psyche.

1 comment:

  1. Valid points dude.. totally agree

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