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What the next Silicon Valley CEO traveling to India must read to avoid a dusty downfall

India is a market like no other; here lies seemingly endless opportunity

Written by Bhaskar Chakravorti |
Updated: June 2, 2016 9:02:10 am
Vinod Khosla, founder of Khosla Ventures, ranks 381 among 400 richest people in the US by Forbes. (AP) Vinod Khosla, founder of Sun Microsystems (AP)

“Macbeth does not make my priority list,” admitted Sun Microsystems founder and Silicon Valley eminence grise, Vinod Khosla, in a recent takedown of the liberal arts and humanities. Khosla should know better. A tutorial on even a selection of the babblings of the bard’s many protagonists, with a dash of political economy, history and sociology may not be such a bad thing for the scions of Silicon Valley, who are so steeped in big data that they often miss the big picture. Nowhere does this gap hurt more than in the world’s most exciting, and confounding, tech market: India.

In case you had any doubts that the Valley sees India as its next Valhalla, witness the parade of tech titans coming through. Apple’s Tim Cook was only the latest, following in the footsteps of Messrs Bezos, Ma and Zuckerberg, among so many others, along with the homegrown lads, Nadella and Pichai. India is a market like no other; here lies seemingly endless opportunity.

Consider some of the data being tossed around by the many consultants and analysts: the world’s second-largest smartphone market; a demographic primed for digital, with an average age of 29 by 2020; online spending to reach $75 billion by 2020; a billion users online by 2030. The country is also abuzz with tech startups. With $9 billion of venture capital pouring in over 2015, India is home to four “unicorns” — privately held ventures valued in excess of a billion dollars. A 2015 Compass study found Bangalore to be the fastest-growing VC and seed investments destination, blowing past Singapore and Tel Aviv. It also helps that there are legions of Indian techies, including Indian-origin CEOs of major players. With the industrialised world maturing and the other mega-market — China — difficult to penetrate, India stands out as a digital opportunity without parallel.

So why would Macbeth matter in the midst of what appears to be a stage set for growth and opportunity? The reality beyond the data is that India also happens to be a market where “context” eats opportunity for breakfast. In other words, the political backdrop, the collective and varied opinions, the rich and wretched state of the human condition, along with the heat and the dust make a difference in how one approaches this market. Silicon Valley has plenty of coding intelligence; it has resources to afford good consulting intelligence; but contextual intelligence will determine whether it can realise the Indian opportunity.

Cook, of course, took his contextual education quite seriously, making time for his first IPL match, going through a Siddhivinayak Temple visit, and gamely smiling through selfies with Shah Rukh Khan. Even if his view of the “real” India was through car windows, it will have given him some sense as to why Apple has under 3 per cent share in the world’s second largest smartphone market.

The Indian market is not for the faint of heart. The mightiest Nawabs of the Net have learnt this the hard way. Facebook had launched its Free Basics initiative. The idea of the service is to offer a limited number of websites to consumers in collaboration with a telco, and to offer it for free to users. Amazon found a way around myriad regulatory barriers that prevent foreign retailers from selling from their own inventories of goods by owning no inventory and structuring its operations as a pure market maker between consumers and retailers. Apple sought ways to lower the price points to appeal to the price-conscious Indian consumer.

Each has struggled with the larger political and socio-cultural reality. Facebook’s fumble in India is now for the history books; the country’s net neutralistas mounted a vigorous campaign against Free Basics. Facebook’s response indicated a clear tone-deafness and lack of awareness of the context. The outcome: regulators have blocked Free Basics.

Amazon faced its own regulatory demons despite its creative organisational model. While Indian regulators confirmed that online marketplaces may be considered legal, they also decreed that no single seller could account for more than 25 per cent of sales. If enforced, such a requirement would eliminate Cloudtail, the largest seller on Amazon India, effectively making its “creative” solution illegal.

Apple has attempted to bring a lower-priced phone by selling used iPhones in India. Local businesses have protested, warning that it would create unfair competition for local manufacturers, and undermine PM Modi’s “Make in India” campaign. Apart from the potential consumer sensitivity to being offered hand-me-downs from the West, going up against a major political priority would be a bad move for Apple.

Why are these contextually insensitive moves such a hazard for Silicon Valley players? One of the biggest challenges for these companies is that, unlike, say, companies such as Unilever or Pepsi, the techies work in places insulated from the market and the local context. Usually, the product developers and their managers are focused on writing code and building stuff in famously

comfortable offices. The sales process does not necessitate organising campaigns in small towns and rural areas and dealing with broken infrastructure or cranky local groups. The messiness of the context is far removed.

Some of this is changing. Companies such as Amazon are taking steps that follow in the footsteps of the Unilevers. For example, its Chai Cart programme travelled through various cities on three-wheeled mobile carts connecting with small business owners.

While nothing is a substitute for spending time on the ground, it is a costly and time-consuming exercise. Besides, you need a framework to put all this contextual insight in, um, context. This is where a liberal arts education can, in fact, help build awareness, grasp the bigger picture and sharpen contextual intelligence. I would ask Vinod Khosla to reconsider his dismissal and his tech colleagues to expand their reading lists.

So, while you are at it, Macbeth may not be required reading to win in the Indian market, but I don’t think it would hurt. After all, where else does one get the timeless warning that “All our yesterdays have lighted fools the way to dusty death”. Rather appropriate advice — especially the dusty part — for the next global CEO planning to set foot in India.

(This article first appeared in the print edition under the headline ‘Macbeth and Market’)

The writer is senior associate dean of international business & finance at the Fletcher School at Tufts University and author of ‘The Slow Pace of Fast Change’

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