In search of the buccaneer in corporate India

July 17, 2013 4:15 pm

In search of the buccaneer in corporate India

Review by Avantika Chilkoti

Conquering the Chaos: Win in India, win everywhere, by Ravi Venkatesan,Harvard Business Review Press, $30/£20

Any company looking to expand into India needs a “Clive figure”, Ravi Ven­katesan recently told the Financial Times. It was a contentious reference to Robert Clive, the British army officer who led the East India Company to assume power in India. Controversy aside, Venkatesan’s point is an astute one: multinationals mov­ing into India need a buccaneer to head the bus­iness, an energetic lead­er who believes zealously in Asia’s third-largest economy. Venkatesan was just this sort of country manager at Microsoft India and Cummins India, the engine maker, so his views are pertinent.With a combination of personal experience and an impressive Rolodex, he has an unparalleled string of case studies to hand in Conquering the Chaos. At times his advice sounds hackneyed but sometimes it is worth being reminded of the basics.

The crux of the book lies in one piece of data. India is a large and growing economy that no business can ig­nore, but the 25 biggest locally listed divisions of multinationals by revenue con­tributed an average 2 per cent to their parent groups’ global revenues and profits in 2011. “Akin to a rounding-off error,” he writes.

For Venkatesan, a business has succeeded if it has ach­ieved one of three things: India delivers 10-20 per cent of global revenues and profits; India is used as a hub to support business in other markets; or a company is in the top three in an industry by market share.

The usual, low-risk plan is to target the top of the consumer pyramid in In­dia. But that means this segment is already full of multinationals. For real growth, businesses must move down the pyramid to less affluent markets and that requires investment.

Venkatesan says that when he joined Microsoft in 2004, the company was targeting the top. Between 2005 and 2009 revenues rose by up to 50 per cent every year. That has now slowed and the company must tackle the mid-market. This will inv­olve at­tracting consumers outside the big cities, where affordability, software piracy and broadband connectivity pose challenges.

Succeeding in India is important for two reasons beyond direct profit. First, as the subtitle says, “win in India, win everywhere”. Venkatesan says the next wave of globalisation will centre on the growth of the middle class in developing economies; success in India will provide a model that can be replicated as businesses seek out that growth.

Second, challenge catalyses innovation. To succeed in India, a business must offer almost the same quality as elsewhere but at a fraction of the price. Venkatesan points to John Deere, the Illinois-based agricultural equipment maker, which developed a compact, af­ford­able tractor for India that it now exports widely.

McDonald’s also innovated. Venkatesan says the US burger chain should have flopped in a country where cows are sacred and disposable inc­omes low. But McDonald’s and its partners took five years developing the business model. They created a menu in which even the mayonnaise is eggless, suitable for vegetarian customers. Equipment was simplified to cut costs and the company spent $90m and six years developing its supply network.

Venkatesan does not ig­nore complications caused by corruption and political uncertainty either. He cites myriad examples of crony capitalism and policy flip-flops, from the 2G telecoms scandal to Vodafone’s $2bn tax dispute.

One personal anecdote involves a local politician threatening to start labour troubles at a factory owned by a company for which the auth­or worked.

Venkatesan candidly admits that refusing to bribe the troublemaker was not a straightforward decision, with employee safety at risk.

The lesson: a buccaneering “Clive” may succeed in expanding a business into India but there are risks particular to the country that can undo the best-laid plans.