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Now, it is time to compete

Kanika Datta

Bajaj Auto's turnaround has been a much talked of event. Before that there was Tata Steel. Before that there was the A V Birla group. Before that there was Ballarpur Industries.

These are the big guns who suffered spectacularly when the barriers to competition were lowered, which is why their recoveries attracted so much attention.

Down the line, however, there are scores of less-known turnaround stories - in chemicals, paper, cement, even small scale units that learnt the values of lean and mean in the hardest way possible.

Overall, therefore, the picture of corporate India isn't quite as disheartening as it looked 11 years ago when Manmohan Singh read out his seminal Budget.

At that time, every company that creamed the Indian market courtesy the artificial shortages imposed by the licence- permit raj - including public sector giants and established multinationals - looked shaky.

Certainly, there have been casualties big and small. But equally, many corporations have proved their detractors wrong.

No one can dispute the fact that, whatever the imperfections that afflict India Inc, this is a commendable achievement. But in some ways, Indian corporations are making a virtue out of necessity.

To be sure, it is difficult for the outside observer to fully appreciate the internal traumas, the collective insecurities, the heartburn of hard choices and the trepidation that accompanies the radical restructuring that many of these companies were forced to suffer.

Nor should anything be taken away from the managements who have had to implement this transition so rapidly - reversing 50 years of protection in less than a decade.

But put aside the turmoil of the nineties and look at the results of the transition in stark terms. It is clear that much of the activity really consisted of corporations turning themselves into enterprises that resembled those of the rest of the world in terms of productivity, management practices et al.

In other words, all the down-sizing, right-sizing, cut-backs, sell-outs, mergers and acquisitions were moves that corporations had to make just to qualify for the starting line in the global race. It is the equivalent of, say, a Ranji Trophy champion making it to the national Test team.

For instance, from being among the most expensive makers of steel in the world, Tata Steel now figures among the lowest. From being an unwieldy, diversified conglomerate, Grasim is now sharply focused on textiles and cement. The point is that these companies now more or less resemble the kind of organisations they may have been, had they not operated in protected or restrictive environments.

But survival is not the same as competing, so, in some ways, the real challenges for India Inc begin now.

Shrewd generalship needs to replace survival strategies in the boardroom. This has started and it can be seen in the acquisitions of small overseas firms by a range of Indian corporations.

But the impulses are still weak. That is mostly because managements have not yet summoned up the courage to think radically, a point Sumantra Ghoshal, Gita Piramal and Chris Bartlett made in their book World Class in India.

About a year ago, at a CNBC discussion series entitled "Managing India Brainstorm" (which was serialised in The Strategist), Anji Reddy recalled how people thought he was touched in the head when he started focusing on molecular research way back in the eighties. Remember, this was when domestic drug companies were revelling in profitable reverse engineering thanks to friendly patent laws.

His comments deserve reproduction in full.

"In 1984, when everybody said that a small company like ours can't discover drugs, I went ahead. And in March 1997, I proved my point by licensing an anti-diabetic molecule to a world leader in diabetes, Novartis. As if to prove that this was not a fluke, in June 1998, I licensed a second molecule. If that is not sufficient evidence, just about a month back I licensed a third molecule for $55 million to Novartis."

Reddy is what ornithologists would call rara avis (a rare bird). Few managements share his confidence or convictions to develop a deeper strategic vision. That partly explains why in market after market, it has been the new multinationals that have proved catalysts for change.

In automobiles, it was Hyundai that played a pivotal role in transforming the market from a price-driven one to one that focuses on service - superlative after-sales service and extended warranties are the chaebol's principal contribution.

In refrigerators and air-conditioners, it was the Koreans who changed the paradigm from price to features. If Bajaj has started revving up on motorcycle sales, it is only because it was Hero Honda that tilted the two-wheeler market away from scooters.

Only in televisions do the Indian companies still strongly hold their own, and barring the Akai price-off blitz, they've been able to compete on the toughest of terms: quality.

But though Indian manufacturers produce TVs that are easily world class, they choose to hide their light (or should that be TV screens?) under a bushel in global markets.

Sundram Fasteners set new standards in defect-free manufacture, but it chooses to stay primarily an original equipment manufacturer for General Motors, although the global after-market is clearly where the margins lie in the auto-components industry.

The CEO of an engineering company once said he doesn't sell his products abroad under an Indian brandname because the association doesn't spell quality. Surely, after all this, India is in a position to change now.

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