‘Adapt to India, don’t wait for it to catch up with your model’

India Economic Summit 2009
Ravi Venkatesan is the former Chairman of Microsoft India and Cummins India. He is currently a director on the boards of Infosys and AB Volvo. Most recently he has authored Win in India, Win Everywhere – Conquering the Chaos (Harvard Business Review Press, Rs 895). In the book he makes a case for multi-national companies (MNCs) not to ignore India, despite the country being a VUCCA market (i.e. operating in an environment characterised by volatility, uncertainty, complexity, corruption and ambiguity). In this interview he speaks to Vivek Kaul.
The first thing I felt after reading your book was that given the current scenario in our country, its a tad too optimistic….
The reality of the Indian economy is very grim. But in spite of that companies need to find a way to break through. India is one of those extraordinarily fortunate countries which has to do nothing to attract foreign direct investment (FDI). People are dying to come here. We just have to stop scaring them away. Unfortunately we have done a pretty good job of scaring them away to the point where they are really losing interest.

Why have only a few MNCs succeeded in India?
Because only a handful of them have taken the country seriously. It takes three things to succeed in a market like India. Number one is the mindset. Companies need to realise that India is strategically important. It may not have their act together now, but a country of billion people cannot be ignored without consequences. So lets take a long term view. Lets be a leader. That is the mindset needed.
The second thing you need is to get the leadership right. You need a stable leadership team you can trust. You empower them overtime to take most of the decisions. But very few companies have succeeded in doing that. For most of them it is a fast moving sales outfit with no imagination.
The third thing you have to get right is that you have to realise you have to adapt to the country rather than wait for the country to catch up to your business model. 

In India the business model may never catch up with you….
Yes. So if you are Apple and you say listen I am going to wait till the distribution system is more efficient and more Indians can afford the iPhone as is. Fine yaar.

Meanwhile the Indians will buy a Samsung...
Yeah. They will buy a little Samsung. A little HTC. A little Nokia. And you are going to be wiped out. When you look at it, this doesn’t sound to be much. But it is an extraordinary one in a hundred who actually gets these three elements right.

So the mindset is very important?
Yes. The global headquarters might say oh my God if they come up with something it will cannibalise my rich product. Imagine an iPhone that is half the price and almost everything that an iPhone is. That would not be good news. It would mean cheapening the brand and destroying the profitability of the company because the Americans will ask why can’t I have that phone as well. And so usually companies decide that do nothing is a good strategy.

Can you give us an example of a company which came to India, tried establishing its business model which did not work and then adapted it with success…
Microsoft came to India with its arrogance and established a certain presence. Then Bill Gates woke up and he realised, hey listen we have a $100 million business and 1000 people in a country of a billion people. What is going on? This was 2003. So they hired me in all their wisdom, even though I did not know anything about IT.
What was one of the main issues facing the company? Back then the piracy rate was 75%. Bill said this is okay. We will get them using it, one day we will collect. Steve Ballmer said, time has come to collect. “You are the country head, you collect,” he told me.

What did you do?
I went around enforcement, ye wo kiya, par kuch nahi hua (did this and that, but nothing happened). Then one minister, who shall remained unnamed, called me, and spoke to me in Tamil, and said “listen, you seem like a good guy, but maybe a little stupid. So let me give you some advise. Copyright in India means right to copy. So you change your business model because India is not going to change for you guys.” So we changed our business model in 2006-07. We changed our pricing. We came up with local language versions. Changed distribution and took the piracy rate down from 75% to 64% and saw dramatic growth.

You cut prices dramatically…
Office used to be $300. We came up with Office Home and Student which is $60. We came up with a version of Office for government schools which was $2. So if somebody said what is the price of Office in India? The answer was I don’t know. It’s free if you are an NGO. It’s two dollars if you are a school, and its $300 if you are Infosys. So that is adapting your business model for the reality of a country.

Any other examples?
JCB is a beautiful example. Everyone else came with an excavator. These guys came with a backhoe Bakchoes was 1960s technology, but India needed a backhoe. The country needed something low tech, very versatile and very inexpensive. They also localised to get the price point right. Also everybody optimises a machine for productivity i.e. how much mud can you dig in one hour. These guys optimised it for fuel efficiency i.e. how much mud can I dig per litre of diesel. Every point they made a different decision based on the market. How do you adapt your equipment so that it can run on adulterated diesel and abuse? You can’t find operators to run the machines. So lets start schools for backhoe operators across the countries.

The other companies did not do these things?
Everybody else was saying when the market comes up, then we will do it. These guys created the market and so they own it. Do you have a microwave oven from Samsung?

It doesn’t say time setting. It says dal. It figures out the time and setting on its own.

That is a great innovation…
And it is so simple. And it will also in certain models say dal in Hindi. Is this rocket science or genius? No it is paying attention to your customer. That is all it is.

The interview originally appeared in Daily News and Analysis on July 27, 2013
(Vivek Kaul is a writer. He tweets @kaul_vivek)