‘If We Resolve The Basics, Manufacturing Will Grow’

He’s a regular at the Pravasi Bharatiya Divas and a disciple of the recently deceased management guru, C.K. Prahalad. But there’s more to Gautam Ahuja, named by Businessweek as one of the most popular and influential exponents of management. Ahuja, the Harvey C. Fruehauf professor of business administration and professor of strategy at the University of Michigan’s Ross School of Business, has done award-winning research on innovation and technology strategy. In an interview with Ashish Kumar Sen, Ahuja discusses the various challenges before India—and India Inc. Excerpts:

A darker side of India’s remarkable economic growth has been the widening economic disparity in Indian society. How can this be addressed?

Most importantly, and underwriting all other solutions, India’s institutions of law, enforcement, education and healthcare need to become more effective. Without a transparent and effective administration, any plans to make the lot of the poor better is unlikely to be effective because any resources committed to effecting this improvement will see the usual “leakage” and the intended beneficiaries will never see the benefits of these efforts. To accomplish this, increased transparency through the press, internet, etc, are key.

The second component is to improve access to healthcare to children and expectant mothers. Our child malnutrition and maternal mortality rates are simply unacceptable and in some respects comparable to some of the poorest countries in the world, not a nation that is heading to become an economic superpower.

The third component is to improve primary education. The rapid growth of private schools even in rural areas is suggestive. If a free product is available (state-provided education), why would people pay for a substitute? The growth of the paid substitute suggests that the quality of education provided at the primary level is weak, the increased enrolment in public schools notwithstanding. These are also “long-fuse” problems. The negative effects of malnutrition and poor primary education stay for the life of the individual.

The fourth component is infrastructure development, which will in turn make it possible to address the fifth issue—the need for large-scale manufacturing sector growth. Without the growth of manufacturing, absorbing the masses of young workers with limited skills in high productivity positions will be difficult. Finally, to make some of this possible, the tax base needs to be broadened and deepened.

India is increasingly being seen as a “difficult” place to do business. To what extent is India losing out to countries like China, for example, due to corruption, red tape and inefficiencies in the system?

I believe that India is losing out for these factors fairly significantly. I think the relative lack of manufacturing investment in India is at least one sign of this problem. If India was as convenient to do business in, and had the appropriate infrastructure in place and efficiency in the process, it is possible that many companies that have gone to China or other emerging markets may actually have preferred to come to India. India’s democratic system and safeguards for investments would be big advantages for India in securing investment relative to these other countries if we could resolve these issues.

As Indian firms head overseas, Indian owners are still grappling with the challenges of owning and running firms overseas. What’s your management strategy advice for them?

I am not sure that I have too many lessons for them myself. What I have seen of the management of foreign businesses by Indian companies has actually been quite impressive and progressive. That said, some of the important lessons that I draw from the more successful ones have been a willingness to combine their own legacy of frugality with an open-mindedness to learn from the process focus of the foreign entities (especially when they are located in developed countries). These processes are often born out of a need for compliance or consistency with local environments and it is important to understand the processes in place before assuming that what has worked well in India will work well elsewhere.

A second lesson is to recognise that even cultural tenets and work behaviour differ significantly across countries, and these differences are not necessarily reflective of a negative attitude to work or a lack of professionalism. Sometimes I will hear people say that some of their American colleagues are reluctant to work on the weekend. That as a statement is usually inaccurate. It is not that they don’t work on weekends, they do. But in addition to the work they do in the workplace on the weekend. they have to do work around the house. The yard has to be mowed, the house cleaned, the car repaired, the kids taken to soccer games, the basic carpentry is to be done. In India, because of the availability of cheap labour, many in the executive class do not have to do these jobs themselves—a chauffeur does the driving, a maid and a gardener tend the house and so on. So, in general, for most people I know the weekend is when they work even harder.

A third principle to keep in mind is what we call the Pygmalion effect. People rise to the level of expectations you have of them. If we go into a foreign country and expect the locals to be less hard-working, this attitude shows through in our behaviour in subtle ways and the people who are subjected to this expectation start conforming to it. In other words, it can become a self-fulfilling prophecy.

You recently observed that “jugaad” is viewed as a “new management fad” in the West and is something India can teach the rest of the world....

I think there are two aspects to the term jugaad. The first is its connotation of “frugal innovation”, or making the most of a given situation or solving a problem in a cost-effective and creative way. This is indeed a strength of Indian firms. Facing significantly smaller budgets and resource availability, Indian firms have responded with innovative products. For instance, the Scorpio, the Tata Ace were designed with product-development budgets that were a fraction of the budgets used by most established carmakers for developing a new platform. I see these approaches of frugal innovation as being a key source of competitive advantage for Indian firms and an arena of learning for Western companies. Indeed, you could argue that Western firms are already trying to absorb these lessons as they expand their research and product development activity in India.

The second aspect is of its use as a “quickfix” to do an end—run around an administrative or bureaucratic hurdle and that aspect is more ambivalent in its implications.

My Five Mantras For Wannabe Managers

1. Always keep learning. And to do that, remember there are almost always two sides to everything. Almost nothing in the world is universally good or bad. A student who learns more than their fellow students will usually remember that. So whenever everybody else is praising something as wonderful, they will ask the question, when will this practice or process not be good. When everybody else is condemning an idea, they will ask, what are the circumstances in which this could be a good idea.
2. Humility is the secret to continuous learning. The day that you start believing that you are the smartest person in the room and everybody else is less smart is the day you stop learning.
3. Recognise your privilege. If you are in an MBA classroom, you are already one of life’s winners. But with that right comes a responsibility. The responsibility of recognising that there are many in the world who are not as privileged as you but will be affected by the decisions you make. So before you make a decision, consider all aspects of it, especially its human implications. If it doesn’t feel right, don’t do it.
4. Recognise that in the organisational pyramid it is natural to look above you and to see how high you can rise. It is, however, equally critical to look below you—what are you doing for the people that are below you and how much, if at all, they will miss you if you are gone. Paradoxically, the way to rise in an organisational pyramid may not come from looking above you but from looking below you. Organisations do not need rocket scientists to run them, they need leaders. And leaders are people who have followers.
5. Recognise that sometimes your greatest achievements in life are the things you did not do. The subprime mortgages you did not sell. The fraudulent bonuses you did not claim. The colleagues you did not step over in the rush for the corner office. Don’t just keep a resume which lists your achievements as things you did. Think also of a second resume that lists your achievements as those things that temptation thrust your way but which you did not accept.

(These are not necessarily my own created wisdom but are some of the things I have learnt—with apologies and thanks to those that made this possible.)