Can India Inc make it to 21st century?

When interviewed, the head of one of the medium-sized firms studied by Kearney in India, in fact, complained that this resulted in a situation where, even when they hired professional managers, they didn’t get honest advise. "I asked a manager about his ad-strategy, and he said: you tell me what I should do", the owner told Kearney. Not co-incidentally, the group which has expanded aggressively, is now coming a cropper in several of the new areas. The group’s challenge, and future, the owner admitted, lay in finding ways to empower top managers, since that was the only way they’d be able to attract and retain talent. The problem, however, is that most family-heads still want to run their businesses on a day-to-day basis, and have not been able to let go. More important, the large size of families have forced them to start sub-optimal sized businesses for each member — apart from the other problems of sub-optimal capacities, this very often doesn’t leave enough work, or scope, for professional managers. The decline of large sections of traditional business families like the Modis and the Bharat Rams can, in fact, be traced back to this problem.

Another trait common to the firms surveyed by Alex Liu and his team at Kearney was that just half these firms had any formal corporate plan or strategic planning — and if this is the state of the top firms, imagine the state of those lower down the line. Equally important, while most of the firms studied felt that IT was very important, only 10 per cent of them had effective systems in place — those which enabled the firm to be transparent, to track important information which could be accessed by all senior managers and analysts.

A recent study of Asian businesses by the Hong Kong based Political & Economic Risk Consultancy also confirms this. It asked investors to rank the business environment of Asian countries against benchmarks such as the US. After Vietnam, India is the least transparent. And since you can’t have transparency without effective use of IT, it reaffirms Kearney’s findings on IT in India.

Apart from the fact that big institutional investors — and increasingly Indian firms are looking to them to raise funds — demand complete transparency, this is also critical from the point of investment strategies and efficient running of firms. So while it may still be possible to run an automobile company, for example, in a protected economy without extensive on-line computer networks, it is next to impossible to do this in an economy where imports compete freely. Nor, in fact, is any kind of global trading possible without such information systems.

Faced with a situation like this, can Indian industry change quickly enough — according to Liu, given the rapid pace of change in the world, Indian corporates have, at best, a couple of years to make this transition. The one ray of hope, says Liu, is that, compared to several of their counterparts in Asia, India’s top corporates are a lot more open to the idea of change, to benchmark themselves against the best internationally. The problem, however, and this was demonstrated most vividly at the World Economic Forum meet, is the tendency to dwell on past achievements, rather than concentrate on where we stand. This complacence, in fact, gets worse as the firms get smaller — the belief is that since they cater to the lower segment of the market, they will not be hit by globalisation. Nothing can be further from the truth. Once the automobile industry gets truly world-class, for example, it will demand world-class suppliers.

At this time, few of the country’s 5,000-odd component suppliers will survive unless they completely re-engineer themselves. This is neither good nor bad, it’s just the inexorable logic of globalisation. The question now is whether India Inc is upto it.