Why Indian companies perform so well in uncertain times
Since the major economic reforms that were launched in 1991, India has truly evolved in an exponential manner. It currently ranks fifth in the list of world’s richest countries with a nominal GDP of $3.8 trillion in 2022 and is expected to have a projected GDP growth of over 6% until 2030. Its rank in patent filling is seventh globally while it is fifth in trademark registration. Its digital economy is expected to reach $800 billion by 2030. India also became the world’s third-largest start-up economy and crossed the 100-unicorn mark in 2022. In that aspect, it only ranks behind the US (661 unicorns) and China (312 unicorns).
Perhaps more importantly, since 2005, 415 million Indians were able to exit multidimensional poverty in the country, according to the United Nations. Poverty dropped from 55.1% in 2005-06 to 16.4% in 2019.
Apart from being such an inspirational and fast evolving society, India has such a rich culture and unique (business) perspective that we can learn a lot from its entrepreneurs, especially in these volatile, uncertain and financially difficult times.
These are some of the most important lessons India can teach us about business :
- Relationships are key
- Diversity drives innovation
- Aim for building great societies first
- Be comfortable with uncertainty and adapt
- Challenges offer opportunities for innovation, especially with limited budgets
- Understand the power of small margins and scale
- Talent is everything. Invest init.
- Nurture a diverse ecosystem of government, large (foreign and local) companies, startups and foreign investment.
- Invest in technology, with a strong focus on AI.
A relationship market
Very much like China, in India, collectivism, as opposed to individualism, is a key aspect of the general and business culture. That’s because Indians perceive success and excellence not as:
“one person moving a thousand steps forward but as a thousand people moving one step forward”
to quote performance coach Shayamal Vallabhjee.
Ratan Tata, former chairman of the Tata Group, India's largest conglomerate, beautifully explained this philosophy:
“What I have done is establish growth mechanisms, play down individuals and play up the team that has made the companies what they are. I, for one, am not the kind who loves dwelling on the ‘I’. If history remembers me at all, I hope it will be for this transformation.”
This deeply embedded natural sense of belonging to a group, family or community is why Indian entrepreneurs attach a lot of importance to the cultivation of personal connections in business, especially with a long term perspective. So it is not uncommon that they invite business contacts to the family home for dinner. Not to speak of business, but to really develop a relationship with the family. Perhaps not surprising that up to 70% of business in India is controlled by family-owned organizations.
Contrary to the norm in many Western countries, where personal relationships are often considered to be casual, relationships in India are the pillars of business transaction, and highly based on trust and continual cultivation. In the current volatile business and geopolitical environment in a highly interconnected world, understanding group dynamics and how relationships work, will only grow in importance.
In contrast with the other Asian powers like China, Japan and South-Korea which are said to be much more mono-culture societies, there is not really ‘one’ India. It has 28 states with many cultural differences, 21 distinct modern languages and 9 major religions. Every few hundred miles, there is a shift in language, customary practices and traditions. As the economist Joan Robinson once observed:
“Whatever you can rightly say about India, the opposite is also true.”
This diversity in terms of culture, language, religion, and geography results in a variety of perspectives, talent, skills and experiences which can drive innovation in many ways. Seeing that Indian business men are used to this abundance of different mindsets and voices, it probably explains why it’s so proficient at cherishing international relations
Building great societies
Indian entrepreneurs also have a uniquely value-driven approach to business, which makes a lot of their companies ESG-driven from the core. And this can be traced back to the concept of “Sewa” which means service, as I learned from Shayamal Vallabhjee. As he explained:
“Sewa is in the blood of every single Indian. Even if a person doesn't have something, they'll share whatever little they have. Rather than focusing on building great businesses, India’s unicorns want to build great societies first. That's what makes India amazing. In the US, entrepreneurs are trying to build great companies. In China, they're trying to make the government stronger. India sits in the middle of two massive economies, but it's invested in building great societies. The businesses give back.”
Indian Tata Steel, for instance, invests 60% of its earnings in its educational, developmental, medical and charitable trust funds. Unilever in India gives 25% of every single cent it earns back into a community. But it goes beyond charity, this Sewa-principle is also embedded into the DNA of many business models. Like subscription-based educational platform company Unacademy which wants to democratize education by making it accessible to all. Or Ninjacart which wants to make sure that farmers get better prices and consistent demand, by cutting out the middle men. And the Aravind Eye Hospitals with its mission to ‘eliminate needless blindness’ and which has a unique business model where about 50% of its patients receive services that are either free of cost or at steeply subsidized rate.
Tata Group’s Ratan Tata explains that attitude this way:
“Some foreign investors accuse us of being unfair to shareholders by using our resources for community development. Yes, this is money that could have made for dividend payouts, but it also is money that’s uplifting and improving the quality of life of people in the rural areas where we operate and work.”
According to Minister Shri Goyal, innovation in India has been a catalytic force for the economy and social and public good.
“Innovation in today’s world goes beyond achieving mere economic objectives as it also considers societal inclusion and environment sustainability”,
Comfortable with uncertainty
Most Western countries like Belgium, Spain and Germany score high on Hofstede Insights’ pillar of “uncertainty avoidance” (Hofstede Insights measures and compares national cultures along 6 different pillars). India, however, scores 40 on this dimension and thus has a medium low preference for avoiding uncertainty:
In India, there is acceptance of imperfection; nothing has to be perfect nor has to go exactly as planned. India is traditionally a patient country where tolerance for the unexpected is high; even welcomed as a break from monotony. People generally do not feel driven and compelled to take action-initiatives and comfortably settle into established rolls and routines without questioning. Rules are often in place just to be circumvented and one relies on innovative methods to “bypass the system”. A word used often is “adjust” and means a wide range of things, from turning a blind eye to rules being flouted to finding a unique and inventive solution to a seemingly insurmountable problem. It is this attitude that is both the cause of misery as well as the most empowering aspect of the country. There is a saying that “nothing is impossible” in India, so long as one knows how to “adjust”.
While many western countries often fear of things going wrong, in India it is accepted. The Indian born Lakshmi Mittal, head of Arcelor Mittal explains it like this:
“Everyone experiences tough times, it is a measure of your determination and dedication how you deal with them and how you can come through them.”
Suffices to say that in the current volatile and uncertain economic environment, the Indian entrepreneurial acceptance of uncertainty and problem-solving mindset is a definitive advantage.
Jugaad or frugal innovation
According to Navi Radjou, an Indian born innovation and leadership advisor based in Silicon Valley, entrepreneurs that grow up in a developing country like India, instinctively learn to acquire more value from limited resources:
When external resources are scarce, you have to tap into the most abundant resource, human ingenuity, and use that to find clever ways to solve problems. In India, we call this Jugaaḍ, a Hindi word that means an improvised fix, a clever solution born in adversity. Jugaaḍ solutions are not sophisticated or perfect, but they create more value at lower cost. The entrepreneurs who create Jugaaḍ solutions can transform adversity into opportunity and turn something of less value into something of high value. In other words, they mastered the art of doing more with less, which is the essence of frugal innovation.
In these troubling economic times where many companies need to keep reinventing themselves with smaller budgets, the frugal innovation or jugaad mindset is no longer only relevant in emerging countries. It’s highly useful too for western countries that are struggling under the current economic pressure.
The power of small margins and scale
A very important reason why India’s socially-driven entrepreneurship and frugal innovation mindset still make for financially viable business models, has everything to do with scale, of course. India is the second largest country in the world by population and it is expected to become the largest by 2050. So its market potential is huge.
Indian entrepreneurs fully understand the power of small margins and scale. The way European business puts a margin on a product is very different, as we know. Now you might think that you can’t help it if you do business in a small country where the market is in no way comparable to that of India, but you might also try to think a little bit bigger. If you find a relevant global problem to solve, you might be able to reach a much bigger scale, which in turn will allow for smaller margins. This approach will definitely put you in the lead when times are tough.
An abundance of talent
India is expected to become the talent factory of the world as it will hold 20% of the globe’s working population by 2047. According to a survey by Amazon Web Services (2021), India is expected to have nine times more digitally skilled workers by 2025.
Even today, India’s biggest strength is its workforce, with an enormous talent pool of 1.5 million post-graduate degree holders. It also has been heavily investing in this domain. Only recently Satya Nadella explained how India is spending two times more on upskilling people than any other country in the world. This has definitely been stimulated by large-scale development initiatives such as "Digital India" and "Make in India," inspiring its population to adopt digital technology, drive entrepreneurship and pursue upskilling. And thanks to its booming tech industry, India churns out tens of thousands of management and engineering graduates each year, cultivating a young, highly-skilled workforce.
An optimal business ecosystem
In order for a market to thrive, it needs the ideal conditions of a powerful ecosystem. India possesses that successful mix of government support, agile startups, unicorns, foreign investment, large corporates and foreign investments.
In 2021, for instance, the Indian government inaugurated five National Institute of Electronics & Information Technology (NIELIT) Centres in three North-Eastern states to boost availability of training centres and employment opportunities. Its Startup20 project, then, aims to develop a global narrative for supporting startups and facilitating synergies among startups, corporations, investors, innovation agencies, and other key ecosystem stakeholders. Another example is how the Ministry of Heavy Industries and Public Enterprises launched six technology innovation platforms to develop technologies for globally competitive manufacturing in India.
And as Pascal Coppens described in his piece ‘The Purple Ocean of India’:
“The outreach and openness to the West is probably the single biggest advantage to India’s masterplan to become a superpower.”
“Not only is their advantage to speak English well a definite plus, but the West’s perception of India as alike in terms of values, governance and purpose is a un unfair advantage towards China.”
No wonder that it has attracted significant investment from major countries and companies:
Just to give some examples, end of 2022, Amazon Web Services announced the launch of its second AWS infrastructure region in India. Google established a partnership with local gaming startup SuperGaming through its Google Cloud division. In August 2022, PwC India announced that it was planning to hire 10,000 employees in the cloud and digital technologies space over the next five years. GE Healthcare opened it’s a 5G innovation lab in Bengaluru. Medtronic opened a surgical robotics center in the Asia-Pacific in Gurugram last year. Walmart Global Technology entered into a research partnership with IIT-Madras and will conduct R&D in the IIT Madras Research Park, along with the pharmaceutical titan and vaccine manufacturer Pfizer.
But it’s not just about large foreign and local companies, there are over 75,000 startups in the country. Of all the recognized startups, about 12% cater to IT, whereas 9% work in Life Sciences & Healthcare, about 7% in Education, 5% in Agriculture, and 5% in Commercial Services and Business. All of these players together make up for a very powerful and fertile ecosystem.
Booming tech industry
India’s Prime Minister Narendra Modi loves to use the concept "techade" to describe this current decade being dominated by technologies and India making most of it. And indeed, India’s tech industry is one of its top 5 and fastest growing sectors. Intensive government support has had an important role to play here., of course. Apart from policies and incentives, Indian governments at various levels are also active consumers of the sector as they contribute by actively integrating technology into governance.
The Indian IT industry which contributed roughly 0.4% to the country’s GDP in 1991 now contributes about 8% and is expected to contribute 10% by 2025. The Indian software product industry is expected to reach US$ 100 billion by 2025. Early 2022, the Indian IT sector showed an amazing growth of 15.5% which is almost double the speed of the country’s economy. Over 12% of all the recognized startups worldwide are Indian.
Among several factors driving India’s Industrial Revolution 4.0, Artificial Intelligence is considered to be the most powerful. According to AIMResearch’s report titled, The State of AI in India in 2022, AI generated a total revenue of $12.3 billion in the year and is projected to grow to $71 billion by 2027. India is also taking over the chair for the Global Partnership on AI for 2022–23. Last year, its first artificial intelligence and robotics park was launched in Bengaluru, which also launched a $100 million venture fund for pushing innovations in AI and robotics from India.
If we’ve learned one thing from these uncertain and troubling times, it is that mindset, relational thinking, agility, diversity of perspective, talent and emerging technologies are essential. Eastern cultures, like that of India, are exceptionally adept at these and Western entrepreneurs and leaders can stand to learn a lot from them. So why not join our “Solving Radical Change Tour” in India in October 2023?