Category Archives: India

You Can’t Learn India in 12 Easy Steps

Despite what a recent article in Sourcing Magazine may imply. You can’t even truly learn India in 12 hard steps … in fact, if you weren’t born there, you might not be able to truly learn it at all. Just like anyone who wasn’t born there will always be gaijin in Japan, anyone who wasn’t born in India will always be videshi, even though she will always be welcomed if she respects her hosts and host country. In an effort to explain why, we’ll attempt to convey some of the hidden complexities behind the “12 easy steps”.

  • Religion, Caste, & Language Play a Dominating RoleWhile there are only a handful of major religions, there are over a dozen minor religions with more followers than the entire population of many countries. While Hindi may be the official language, there are over forty languages commonly spoken in the various provinces, and India has four languages in the top twenty. In the rural areas and the older population, caste is of pre-eminent importance, but among the younger generation in the urban populations, it plays less of a role. And some of the modern global consulting organizations, like Wipro, have officially adopted a “no caste” policy in hiring and promotion (but it may still play an unofficial role among the executives and “old-timers”).
  • Festivals and Beliefs are ComplexAnd they vary depending on province, religion, and even family. You can’t know them all, or their importance.
  • Joint families are the normThis goes not only in the home, but at social events outside the home.
  • NamasteOne word, a thousand meanings.
  • Uncertainties and Poor Infrastructure are CommonAnd even the most impressive modern facility can go down without warning as much of the infrastructure it depends on (water, power, etc.) is poor and at the brink of failure.
  • Flamboyancy is Frowned UponJust because they wear brightly coloured clothing doesn’t mean they are outgoing. It’s what is normal and reserved for them.
  • Schedules are Guides, Not TimelinesIndians don’t work by the clock. And even though those that conduct international business tend to be more reliable than those who don’t, the uncertainty of India makes keeping schedules on a regular basis almost impossible.
  • Emotional Turmoil Affects BusinessBusiness is not separated from daily life in India.
  • Family FirstEven the CEO of a multi-national must cave into the wishes of his elders at thome.
  • “Face” is Very Important Everything has to be dished up with a spoonful of sugar.
  • Visitations aren’t always scheduled… and it works both ways.
  • Harmony Must be MaintainedBut if multiple harmonies are in balance, which one takes precedence?

Maybe that’s easy for you, but all I see is fractal complexity.

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There’s Opportunity in Global R&D …

… but there’s also risk as well. In fact, I’d say the risk is as big as the opportunity presented in this Global Services article on the “globalization of R&D and Product Development” which claims that there is a tremendous opportunity for growth based on the fact that only 5% of current R&D spend is based on outsourced partnerships.

While it is true that the average small to mid-sized software product company will continue to be faced with cost pressures and increased revenue expectations, that headcount in other economies like China, India, Poland, and Russia are considerably cheaper, and that a few of these countries are as likely to produce as least as many software geniuses as North America, it’s also true that there are disadvantages and risks to outsourcing. The first is market risk. Does the outsourced R&D provider’s team truly understand the market needs? The second is education. The educational systems in these countries traditionally pump out some of the world’s greatest mathematicians, but mathematicians (and pure mathematicians in particular) are often the world’s worst coders. They can come up with the most brilliant algorithms on the planet, and maybe even code an initial version of them, but good luck integrating and maintaining their code as part of your code base — because no one but them will be able to understand it, ever.

Then there’s the ever-present culture risk. Will your North American or Western European or Australian team be able to work with them to produce great results, or will they continually misunderstand each other? Then there’s the performance risk. You might get the hardest, best trained worker, or you might get the ultimate slacker who’s there because his father, brother, or uncle is in management or has a strong say over who is hired. Arun Krishnan of Cutting Chai didn’t address outsourcing and how to threaten your outsourced employees, by telling them “I will single out every one of you and kill you”, in Hindi in his first “Learn Hindi from Bollywood Movies” podcast just to be humorous. If you’re unlucky with your hires, you really will want to yell that!

Finally, there’s the cost risk. The only way to insure success is to build a relationship and understanding with the outsourced team, work closely with them, and manage the integrated team on a regular basis. This will require regular trips to their location to find the team, train the team, and manage the team, and then multiple trips for your employees who will have to take turns visiting each location to build the camaraderie required for them to truly work as a team. Early on, this will likely cost a lot more than you budget for.

Now, I’m not against the globalization of R&D, and, especially if you’re a multi-national, I think it’s a great idea, but it has to be done right, and you have to move slow at first. Otherwise, like many companies that don’t properly plan and rush right in, you’ll see nothing for your efforts but huge losses.

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Should Your Supply Chain Be Frugal?

After reading “first break all the rules” in the special report on innovation in emerging markets in the April 17th edition of The Economist, I have to wonder if the charms of frugal innovation will be the salvation for supply chain leaders who have hit a brick wall in supply chain optimization.

According to the article, the future lies in “reverse” or “constraint-based” innovation, which is being relabelled as “frugal” innovation. In frugal innovation, product companies take the needs of the poor consumer as a starting point and work backwards. Instead of adding ever more bells and whistles, the products are stripped down to their bare essentials. This goes beyond simply cutting costs to the bone as frugal products need to be tough, easy to use, and have a low environmental impact. In short, frugal does not mean second rate.

Frugal innovation involves rethinking the entire production process and business model. Companies need to compress costs to reach more customers and accept thinner profit margins to increase volume. Under the frugal innovation mindset, three ways of reducing costs are proving quite successful:

  1. Increase Contracted-Out WorkBharthi Airtel, a 30B Indian mobile company with some of the lowest fees in the business, contracts out everything but its core business of selling phone calls. Ericsson handles network operations, IBM handles business support, and an independent company manages transmission towers.
  2. Use Existing Technology in Imaginative New WaysTCS wants to use mobile phones to connect TVs to the internet through a set-top box because PCs are rare in India while TVs are ubiquitous.
  3. Apply Mass-Production Techniques in New and Unexpected AreasDevi Shetty, India’s most celebrated heart-surgeon, is attempting to make the industry more efficient through application of Henry Ford’s management principles to create a combination of economics of scale and specialization that can radically reduce the cost of heart surgery. His flagship Narayana Hrudayalaya Hospital in Bangalore has 1,000 beds (compared to an average of 160 in American Heart Hospitals), a team of 40+ cardiologists who perform about 600 operations a week, and generous backup facilities that allow the surgeons to concentrate on their speciality and not administrivia. The hospital charges an average of $2,000 for open heart surgery compared with $20,000 to $100,000 in America and has success rates that rival the best American hospitals.

And all three ways are appropriate to your supply chain. For example, an efficient operation focusses on its core strengths and contracts out support operations a partner can do better, faster and cheaper; a forward thinking operation will realize that RFID is sometimes more useful when applied within your four walls to automate tracking of all of your assets (as asset tracking and inventory is one of the most time-wasting administrative practices your people will need to engage in); and will automate repeated RFX and Auction events on a massive scale to reduce the amount of tactical data collection efforts that their buyers will need to engage in (which will allow them to focus on strategic efforts).

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Is the West Going to Lose the Talent War?

I have to say that I’m worried after reading “grow, grow, grow” in the special report on innovation and emerging markets in the April 17th edition of The Economist. Near the end of the article we are told, point blank, that the best companies in emerging markets treat “talent” as a supply chain that needs to be relentlessly managed, not an isolated problem that can be solved on a piecemeal basis and that firms invest heavily in creating “educational ecosystems”.

While the first thing we do is slash the training budget every time money gets tight, companies in eastern emerging countries dispatch managers to give speeches at Universities. For example, GE has charged its top ten managers in China with cultivating relations with a particular university where they can spot bright youngsters and treat them to campus tours and scholarships (that will grow the brand and attract these future superstars).

While we expect unreasonable exceptional performance for a meager base salary and verbally lash out at anyone who doesn’t exceed her performance metrics by at least 10%, eastern emerging companies celebrate good performers. Haier prominently displays photographs of good performing managers, celebrates outstanding innovators in public ceremonies, and names new products and business innovations after their creators.

While we still assign undue praise to the University you attended instead of the degree you earned, your GPA, or, more importantly, what you actually learned, Infosys has adopted the mantra of “no caste, no creed, only merit” for its modern campus in Mysore. Furthermore, to ensure its employees had a better chance of not only climbing the ladder but becoming a millionaire than if they worked for a foreign multinational, Infosys was one of the first Indian companies to issue stock options.

And while we are the first to walk our best talent out the door every time the market dips, even though we just told them they were our most valuable asset the day before (as we, obviously, lied through our teeth), companies in emerging countries, who are experiencing much more rapid turnover than we need to deal with, will stick by their talent through thick and thin — cutting staff is the absolute last resort, not the first.

All told, it looks to me like we’re going to lose the talent war, which means that we’re also going to lose the innovation war, which we were supposed to win by outsourcing all of the manufacturing and back office to focus on our “core strengths” which, apparently, is middle management, junior art directorship and telephone cleaning, as that’s all we will be able to do if we don’t start focussing on talent, the true producer of innovation.

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Overcoming Cultural Differences in International Trade with India

Today’s post, which is partially based on materials from Dick Locke’s seminars on International Purchasing, is edited by Dick Locke, Sourcing Innovation contributor and President of Global Procurement Group and Global Supply Training.

This post is going to examine some of the cultural differences that you may encounter (as an American or Canadian Sourcing / Procurement Professional) if you are doing business with India. We start by discussing each of the eight key cultural considerations outlined in our introductory post and highlight a few other points that you should be aware of.

As per our initial post, this discussion is high-level and general in nature and, as Dick Locke points out in his classic text on Global Supply Management, while it is too easy to stereotype a country, individuals in each country will vary from the stereotype. You need to take time to get to know the people you will be dealing with because their behavior may be nothing like the usual behavior of the country in which they reside and there is always a chance that you might run into people who are trained to act like you … while in your presence.

India is the 7th largest nation by area and the 2nd largest by population, with over 1.1 Billion residents. Furthermore, its population is growing rapidly and it is expected to be the most populous nation by 2030. It’s middle class is constantly growing, and, at over 300 Million, roughly matches the entire population of the United States.

It also has a long cultural history, like China, with roots that go all the way back to the Indus Valley civilizations in 3,000 BC. However, unlike China, where Mandarin (standard Chinese) is spoken by over half the population, India, with its dozens of languages, and hundreds of dialects, has five languages in the top 20 (Hindu, Bengali, Telugu, Marathi, and Tamil) compared to China’s three (Mandarin, Wu, and Yue [Cantonese]). It makes for a bit of a fractured society. However, thanks to its colonial history (the British Raj), a large percentage of the upper class, and a growing percentage of the middle class, speak English. Over 10% of its population speaks English as a first, second, or third language … so there is a very good chance you will be able to conduct your business entirely in English.

  • Power Distance
    India is based on the caste system (which you should never discuss) and its values are still strongly held. They accept a hierarchy of responsibility and duty and, as such, they have a large power distance.
  • Uncertainty Avoidance
    Many Indians are risk-takers and experimenters. Overall, they have a moderate tolerance for uncertainty.
  • Individualism
    Despite the caste system, and the fact that tasks are a collective exercise in India, I’ve always found them to be very individualistic, once you get to know them. But there is a duality at work between the harmonious culture prescribed by the caste system and the major religions of Hinduism, Buddhism, Jainism, and Sikhism and what I see as a fundamental need to be themselves, especially after the colonization by Britain in 1858.
  • Polychronic vs. Monochronic Time
    While there is a strong tendency towards monocrhonic time in their business dealings with the west, they are historically a polychronic culture that does not work by the clock.
  • Personal / Impersonal
    They tend to be personal and open, probably because privacy is rarely indulged in or sought. That being said, within India at least, personal relationships may be dictated by the caste they belong to.
  • Buyer / Seller Rank
    Equality, more or less. In India, relationships are more important than they appear and the deal, if any, will ultimately depend on whether or not you build a relationship. (But remember that in negotiations, price comes last. When you agree on a price, the negotiation is done. All terms and conditions that you require must be agreed on first.)
  • Importance of Harmony
    Harmony underlies many of their major religions, and is important. Tasks, and decisions, will normally be group efforts. In addition, you may find them reluctant to criticize as they believe that business failure can be attributed to bad karma.
  • Importance of Face
    Always give them face. Although they may make little attempt to conceal their true feelings, face is very important to them.

Finally, as I strongly recommended in my first post, if you plan to start doing business with any new international country, including India, you should do a thorough job on your homework. You can start with:

  • Dick Locke’s course on the Basics of Smart International Procurement (which is offered through Next Level Purchasing and counts towards the SPSM2 certification or ISM Continuing Education Hours), or
  • a customized seminar from Dick Locke’s Global Procurement Group. Dick Locke and his associates each have decades of experience doing business with over two dozen countries, including the fifteen biggest importers and exporters to and from the United States, and India. A single day with an expert like Dick Locke could save you months of headaches.

Again, a big thank you to Dick Locke for serving as editor for this special series of posts and providing some up-to-date materials and information for the purpose of this series.

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