In

di
a
 Special
report
India

52 Indian think
Stuart Crainer and Des Dearlove chart and
celebrate the new generation of Indian thought
leaders.

57 Profile: Arun Sinha

Arun Sinha, chief marketing officer of Pitney
Bowes, talks to Georgina Peters about how his
Indian upbringing informs his thoroughly modern
marketing.

59 VCs curry favour with Indian entrepreneurs

India’s rapid growth is creating a slew of
investment opportunities but, warn Hugh
MacArthur and Ashish Singh, investors need to be
patient and follow some basic rules.

62 Instep with Infosys

Manjari Singh and Sandeep K Krishnan report that
Infosys has a unique approach towards its global
internship programme.

65 A passage from India

CK Prahalad wants the poor of the world to have
real power in the marketplace. He tells Des
Dearlove about his thoughtful journey from
competing for the future to uncovering the fortune
at the bottom of the pyramid.
Special report

Special report: India Winter 2005 Business Strategy Review 51


think
T
he rarified world of business
thinking has been largely
American terrain over the last
hundred years. From Frederick Taylor
with his stopwatch at the beginning
of the twentieth century to the
modern generation of gurus,
Americans have monopolised
business wisdom. Even the brief love
affair with Japanese business
practices in the early 1980s was
intellectually colonised by American
thinkers such as W. Edwards Deming
and Richard Pascale.
Now, change is in the air. A new
generation of thinkers and ideas is
emerging from India. Superstars in
the business guru firmament include
CK Prahalad, co-author of the
bestselling Competing for the Future;
itinerant executive coach, Ram
Charan; Nobel laureate in
economics, Amartya Sen; Vijay
Special report
Govindarajan, professor of
international business at Dartmouth
College’s Tuck School of Business;
and would also have included
London Business School’s Sumantra
Ghoshal who tragically died in 2004.
52 Business Strategy Review
Indian
The best thinking in business is increasingly
Indian in origin and inspiration. Stuart Crainer and
Des Dearlove chart the rise of a new generation
of Indian thought leaders.
“The thinkers are often first
generation immigrants to the West.
Almost all have had first hand
experience working in typically
chaotic Indian businesses,” says Dr.
Gita Piramal, founder and managing
editor of the Indian management
magazine, The Smart Manager.
“Some, like Sumantra, worked in
the public sector. CK’s first job was
in Union Carbide’s battery factory
in Chennai, and he also worked in a
company making pistons. Ram
Charan was born and brought up as
part of an extended family of 13
that ran a shoe shop. All pulled
themselves out of India and many
have a Harvard link.”
Just below the established
luminaries, too, is a group of up-and-
coming stars. The faculty lists of the
world’s most prestigious business
schools contain an increasing
number of academics with Indian
roots. They include Rakesh Khurana,
Nitin Nohria and Krishna Palepu at
Harvard Business School; Jagdish
Bhagawati at Columbia; Deepak Jain
and Mohanbir Sawhney at
Winter 2005
Northwestern’s Kellogg School; and
Raj Reddy at Carnegie Mellon.
More will undoubtedly follow. The
world’s MBA programmes have a
growing number of Indian students.
This is not just an American
phenomenon. For the first time this
year, the biggest national contingent
at France’s business school,
INSEAD, is Indian. At the Swiss
school IMD numbers of Indians on
its MBA programme are up 133 per
cent since 2001.
“God does not discriminate across
countries on intelligence. So, if you
say that 20 per cent of people are
smart that means 200 million smart
Indians and that’s a lot of human
capital,” notes Tuck’s Vijay
Govindarajan. “At the same time,
there is no doubt that Indians have
had a disproportionate influence on
management thinking and practice.
As a percentage of the US
population they are miniscule – less
than a single per cent – but then
look at their representation in
business schools. I remember when
I got my job at Tuck 20 years ago,
Special report: India
I was the first Indian faculty
member. Now, it’s not unusual to
see 20 per cent of faculty with
Indian roots and connections. This
year alone we welcomed 40 Indians
onto our MBA programme.”
Indians also hold an array of
senior executive positions at the
A very different management philosophy is arising and will
become dominant – the purpose, process, people philosophy.
world’s top corporations. Consider
Arun Sarin at Vodafone; Pepsico
president, Indra Nooyi; and the
influence of Indian entrepreneurs
in Silicon Valley – Vinod Khosla,
founding CEO of Sun Microsystems
and now a leading venture capitalist
with Kleiner, Perkins, Caufield &
Byers; Ram Sriram, vice president
of sales for Netscape; Desh
Deshpande, founder and chairman
of Sycamore Networks; Kanwal
Rekhi, entrepreneur and the main
Vijay Govindarajan: No safety net
Special report: India
force behind Indus Entrepreneurs
(TiE) a Silicon Valley organisation
which promotes entrepreneurship
among young people; and Romesh
Wadhwani, serial entrepreneur and
founder and managing partner of
the Symphony Technology Group
and president of the Wadhwani
Foundation. And then there are
people such as Rajat Gupta, former
managing director of McKinsey &
Company, and Raghuram Rajan, the
IMF’s chief economist.
And then there’s the business
media. There are a growing number
of business journalists and
commentators with Indian
backgrounds, including a number of
reporters on CNN and the writers for
the opinion-forming newspapers and
journals such as Tunku Varadarajan,
Winter 2005
op-ed editor for the Wall Street
Journal. Parminder Bahra, now at
The Times, is another rising Indian
commentator, and was influential in
creating the methodology for the
Financial Times’ business school
rankings. The fact is that among the
people who influence business
thinking there is an increasingly
Indian presence.
Rising to the top
The reasons for the rise of Indian
thinkers into positions of influence
are explained by Vijay Govindarajan:
“Like other first generation
immigrants we had a tremendous
hunger to succeed. For us, there
was no safety net. But, there are
other elements to this. Indians have
a strong work ethic, speak English,
and have been traditionally
influenced by American education
and educational institutions.
Indians are good at conceptual
thinking and analysis. Another very
important quality is that we tend to
be very patient – a great virtue in
teaching.” Govindarajan originally
trained as a chartered accountant in
India, won a Ford Foundation
scholarship to Harvard, and is now
one of the highest charging
executive coaches and a prolific
author – his latest book is Ten Rules
for Strategic Innovators (with Chris
Trimble, Harvard Business School
Press, 2005).
Another perspective comes from
Professor Nirmalya Kumar of
London Business School. “Business
is well respected in India, as it was
the only way to make a decent living
besides being a doctor until India
reformed in 1990. Thus the talent
pool that went into business PhDs
in the United States from India was
Special report
excellent. It became a preferred
option to escape India after
finishing at the country’s top
technology schools. Some of these
PhDs, of course, then became the
gurus of today.” ¡
Business Strategy Review 53
 ¡ Personal ambition is a powerful
driver. But what it doesn’t explain is
why Indian thinkers have become so
influential with Western business
audiences. It is one thing to become
a Harvard professor, quite another to
have the ear of Fortune 100 CEOs.
Ram Charan, for example, was a
confidant to Jack Welch when he
was running GE, and co-author with
To conquer markets like India requires sophisticated thinking.
Larry Bossidy of Execution: The
Discipline of Getting Things Done.
Sumantra Ghoshal, with co-author
Chris Bartlett of Harvard, wrote
Managing Across Borders: The
Transnational Solution – named by
the Financial Times as one of the 50
most influential business books of
the century. Rakesh Khurana was
recently listed among the world’s
leading business gurus by the
French magazine L’Expansion. The
list goes on.
So, what does this hill of ideas
amount to?
An Indian school of
management?
One obvious conclusion is that it
signifies the development of a
distinctively Indian school of
management. But this tends to be
played down by Indian thinkers.
Special report
Sumantra Ghoshal: Trailblazing intellect
54 Business Strategy Review
There appears to be no definitive
Indian Way.
However, the increasing influence
of Indian thinkers coincides with a
period of introspection into the
nature and purpose of Western
capitalism. Post-Enron, there is a
disillusionment with the
individualistic model, a sense that
corporate America has been a
breeding ground for executives
whose personal greed and egos
eclipsed their sense of public duty.
Indian thinking taps into this
debate. India’s collectivist culture
offers a foil to America’s rampant
individualism. Among the Indian
thinkers there is a keen sense of
capitalism’s ethical and societal
obligations – witness CK Prahalad’s
most recent book, The Fortune at
the Bottom of the Pyramid, which
advocates a new approach to
business to take account of micro
markets among the world’s poor.
The Future of Competition, the
bestseller Prahalad co-authored in
2004, also examines how the
balance of power is changing
between the rich and the poor.
Prahalad addresses deep-rooted
issues previously neglected by
Western business thinkers.
Winter 2005
“Many Indians growing up in the
US detect an inconsistency or
incoherence about modern life,
which for Indian-born people like
my parents is very, very difficult,”
says Harvard Business School’s
Rakesh Khurana. “Somehow you
are supposed to be moral and
generous in your private life but
that doesn’t apply when you go to
work – you don’t have to be the
same person. That kind of role
fragmentation or inconsistency was
really seen as profane. One must
find a way that synthesises both
who you are in private and who you
are in public life and work. One has
to find a role that creates integrity.
In India they are also dealing with
the issue of how do you reconcile
traditionalism, where there’s a lot of
meaning and symbolism imbued in
everyday life and family and
community, with making sure you
get the benefits and individual
spark of modern society.”
Khurana points to the fusion
seen in Indian Bhangra music – a
synthesis of modern dance and
traditional music – and the
questions raised in literature by
Indian authors such as Nobel
laureate V.S. Naipaul and Arundhati
Roy. “People are trying to find a
synthesis between the benefits of
modernity without losing the
meaning associated with traditional
structures such as family. A growing
number of people are uncomfortable
with the winner-take-all markets
as they currently exist and that
the indicator of one’s worth in the
world is perfectly correlated to
the size of their bank accounts.
Another key question for them is
how do we enjoy the advantages of
modernity – but without a 50 per
cent divorce rate?”
Raising such questions lies at the
heart of much of Indian business
thinking and practice. It is not that
Indian thinkers are negative about
the American business world.
Indeed, they tend to be wholesome
in their praise of the opportunities
Special report: India
on offer. But, they offer a unique
viewpoint; the best of both worlds.
Two-way learning
India itself is also going through a
critical transformation. It is an
emergent nation. Increasing Indian
economic prosperity has posed new
questions for accepted Western
business best practices. The
abundance of fresh material from
India is challenging and reshaping
existing thinking. Business thinkers
with Indian experience and
sensibilities are readily placed to
make sense of this.
It is clear that the flow of
knowledge has changed. Indian
business people traditionally learned
from American business schools. The
flow of knowledge is now two-way.
The assumption in the past was that
other emerging markets could learn
from India. Now, it is recognised that
Western companies and executives
can also learn from India.
“India is an extremely interesting
laboratory right now,” says Gita
Paramal. “Customers do not know
how to be customers, and hence
react in completely unexpected
ways. The heavy use of SMS (short
messaging services) by mobile users
is one illustration. Putting
automobile tires on typical Indian
carts is a rural example. Managers in
People are trying to find a synthesis between the benefits of
modernity without losing the meaning associated with traditional
structures.
India have to be able to deal with
the unexpected and be flexible to a
far greater degree than in developed
countries. This may be why so many
Indian managers from Hindustan
Lever (Unilever’s subsidiary in
India), have risen to senior levels in
Unilever. For the Ram Charans of the
world, this laboratory acts as a
refresher. The Indian business
thinkers who are making their mark
in the West keep the pulse of India
and what is happening here.”
A number of the leading Indian
thinkers remain in close contact with
their home country. The late
Special report: India
Sumantra Ghoshal, for example, was
the founding dean of the Indian
School of Business in Hyderabad.
C.K. Prahalad also remains acutely
aware of his Indian roots. Prahalad
has drawn attention to the world’s
four billion poorest consumers who
earn less than $1,500 a year, but
who are aspiring to a better life and
demanding more goods and services
(260 million of them are Indian).
“This situation represents a huge
opportunity for companies to change
their mind-sets and their business
models (e.g., ‘the poor can’t afford
or have no use for consumer
products’, or ‘we can’t make money
in this market’),” he says.
In 1995, for example, Hindustan
Lever (HLL) drastically altered the
management of its value chain so it
could sell a detergent, called Wheel,
to the poor. HLL decentralised its
production, marketing, and
distribution and quickly established
sales channels through thousands of
small storefronts. HLL adjusted the
cost structure of its detergent
business so it could sell Wheel at a
very low price point and still make
money. It subsequently achieved
gross margins and a return on
capital as good as, or better than,
HLL’s higher-end cleaning products.
Unilever has used this business
model to create a new detergent
market in Brazil.
Such imaginative business
practice is where the real lessons
from India appear to lie. Indian
thinking challenges existing business
practice and received wisdom.
“Many American companies say they
have globalised but they are really
international rather than global. They
are beginning to realise that the
centre of gravity cannot simply be
the United States. They have
traditionally developed products for
the US market and then try to export
them to other markets. That is
increasingly obsolete. To conquer
Winter 2005
markets like India requires
sophisticated thinking,” says Vijay
Govindarajan who takes a group of
50 American executives to India
every year.
He cites a meeting between a
group of US executives and an
Infosys executive. One of the
Americans asked: “Aren’t you afraid
that IBM or Accenture who you
compete against might acquire your
company?” The Indian looked
thoughtful. “But, perhaps Infosys
could acquire IBM or Accenture,”
came the reply. “In the past, people
stood up at the very name of IBM
and you certainly wouldn’t have
mentioned an Indian company in the
same sentence,” says Professor
Govindarajan, “Now anything is
possible. The Infosys executive
wasn’t being arrogant – after all
when he spoke Infosys’ market
capitalisation was some $21 billion
against Accenture’s $22 billion and
IBM’s $85 billion. Given that Infosys
has a PE (price to earnings) multiple
much greater than IBM’s it is not
impossible that this could happen.
Infosys has IBM on its radar screen.
Is the opposite true?”
India calling
Some US companies appear to have
recognised the shifting intellectual
tide. A number now regularly second
people to India, reversing the
traditional flow of corporate
knowledge. Infosys, for example,
runs an intern programme in which
Americans go to work in India. US
companies are also becoming more
attuned to Indian culture.
Nowhere is the growing influence
of Indian thinking and attitudes felt
more keenly than Silicon Valley.
Special report
With an estimated 400,000 Indian
nationals working in the Valley – and
roughly a third of the 65,000 new
H-1B visa issued by the United
States in 2004 going to Indians,
America’s high-tech sector now ¡
Business Strategy Review 55
 ¡ relies on Indian intellectual
capital. It has been said that the
Valley would grind to a halt if the
Indians pulled out. Such is the
Indian influence that Intel now
offers its employees an optional
training course in Indian cultural
nuances. Entitled “Working With
India”, participants on the course,
run by the training firm Charis
The US and Europe are congested and highly contested markets.
In China and India there is still virgin territory. As markets and
sources of ideas and innovation they need to be taken seriously.
Intercultural, study the subtle
dietary differences between
Hinduism and Jainism, Indian
political history and the cinematic
delights of Bollywood movies.
Intel is not alone. Other high-tech
firms including Adaptec, AMD,
Intuit, and Rockwell Automation also
offer Indian cultural lessons to their
employees. Unlike some diversity
training, which is aimed at avoiding
law suits, Indian cultural
programmes are specifically aimed at
boosting performance. Some
companies, like chipmaker AMD,
have gone further. For its Indian
Global Immersion Programme, the
firm flew teams of Indian workers –
at $17,000 per person – to
Sunnyvale, California, and Austin,
Texas, for a month of cultural
training with US managers.
Two eyes in India
Such initiatives suggest Western
eyes are being opened to India and
its role in the global economy.
The new generation of Indian
thinkers offers a challenge to the
conventional view of globalisation.
Globalisation was previously seen
as the triad of US-Europe-Asia
(meaning mainly Japan). India was
Special report
Stuart Crainer (scrainer@london.edu) is the editor of Business Strategy Review.
Des Dearlove (des.dearlove@suntopmedia.com) is co-founder of Suntop Media and editor of The Financial
Handbook of Management.
56 Business Strategy Review
usually overlooked as a hapless
economic pygmy, filed under
emerging – slowly. Now, the Indian
thinkers are helping executives see
globalisation in its totality.
“There’s a much greater sensitivity
and sense that the centres of the
economic future may be more than
simply the traditional Western
European and North American
nexus,” observes Rakesh Khurana.
Adds Vijay Govindarajan: “The US
and Europe are congested and highly
contested markets. In China and
India there is still virgin territory. As
markets and sources of ideas and
innovation they need to be taken
seriously.” Thirty years ago he took
his first plane journey from Madras
to Boston. Now, it is Autumn in New
Hampshire. “My market value is
going up. India is on the radar
screen,” he says.
The fact that the radar screen now
extends beyond America’s borders is
itself an important development.
Perhaps the true appeal of the
Indian gurus is that they do not
automatically regard the US as the
center of the commercial universe.
They offer a different lens through
which to look at issues such as
globalisation and shareholder value –
and even the purpose of business
itself. In doing so they pose
questions that Americans are often
blind to.
As the late Sumantra Ghoshal
observed: “A very different
management philosophy is arising
and will become dominant – the
purpose, process, people philosophy.
We are moving beyond strategy to
Winter 2005
purpose; beyond structure to
process; and beyond systems to
people. This will shift the basic
doctrine of shareholder capitalism,
and moderate it so that if people are
adding the most value then people
will increasingly have to be seen as
investors not as employees.
Shareholders invest money and
expect a return on their money and
expect capital growth. People will be
seen in the same way. So they will
invest their human capital in the
company, will expect a return on it,
and expect growth of that capital.”
Ghoshal’s legacy lives on. He
mentored and then extensively co-
authored with Nitin Nohria, and
inspired his students toward a more
holistic view of management and
leadership and how it is linked to
broader society. “Nitin and I have
been co-authoring papers and cases
on management as a profession”,
says Khurana. “A profession, not
simply in a technical sense, but in a
normative sense which considers
thinks like responsibility, mutual
respect for the various constituents
in a business enterprise, such as
employees and customers, and
accountability. Ideas which were
catalysed through discussions with
Sumantra. Indeed, my current
research and forthcoming book
project is on management as a
profession as developed through a
sociological analysis of elite, US
business schools.”
In the increasingly global world of
business thinking, an American
Spring could be followed by an
Indian Summer. I
Special report: India
Profile: Arun
Sinha
A generation of Indian-born executives
are making inroads into corporate America.
Arun Sinha, chief marketing officer of
Pitney Bowes, talks to Georgina Peters about
how his Indian upbringing informs his
thoroughly modern marketing.

A
fter a day Powerpointing his
way through his company’s
marketing strategies, Arun
Sinha, chief marketing officer of
Pitney Bowes, should be at home
celebrating his wife’s birthday. But
he has excused himself for an hour.
A former journalist, he wants the
story to be clear and so sits in
Stamford’s La Fontanella Ristorante
talking marketing and how being
Indian has shaped his leadership
and management styles. Of course,
the conversation also takes in
cricket; all with characteristically
infectious enthusiasm.
“The thing you’ve got to
understand is that the Indian
education system emphasises
learning the basics,” says Sinha.
“It is the left brain rather than the
right brain. You learn to be
analytical. Western education brings
Since then, he has helped revitalise
Colgate’s oral care brands and
launched the Mercury Sable. He
spent ten years at Philip Morris USA
and then founded and led Agorux, a
software solutions company.
He joined Pitney Bowes in 2002,
moving from business-to-consumer
(B2C) to business-to-business (B2B)
marketing. Pitney Bowes, a $5
billion company, best known for its
franking machines, resides in
classic B2B territory. This is, Sinha
believes, a potentially fruitful area
for marketers. “In entire business
areas marketing is astonishingly
neglected,” he laments pointing to
the lack of interest in B2B
marketing. According to Sinha,
almost half of direct marketing sales
(46 per cent of $2.34 trillion)
comes from B2B companies. Yet,
while huge amounts of dollars and
companies. This is not because
business-to-business does not
require marketing but because the
companies think very narrowly that
marketing can be taken care of
through the sales force and
distribution channels. They do not
try to leverage other aspects of
marketing.”
At Pitney Bowes, Sinha has
brought his B2C marketing skills
to work in the B2B world. Sinha
instigated the first branding
exercise in the company’s history.
His approach, he suggests, was
quintessentially Indian. “Young
managers come to me every day.
They have a great idea and want to
get on with it to grow the business
and make millions. I ask where are
the analytics. Usually there are
none.” Rebranding Pitney Bowes,
Sinha began by talking to 2000
Special report

specialisation. Then if you add the
hunger of a first generation
immigrant that’s a great recipe for
success and is difficult to beat.”
Sinha’s career began with the
launch of an Indian newspaper.
attention are lavished on trying to
reach consumers, very little
marketing is devoted to B2B
companies. Says Sinha: “There are
very few marketers who devote any
time or resources marketing to other
customers in eight countries and
then to employees, sales people,
executives, and customers.
“When we first embarked on
transforming Pitney Bowes image,
we created a strategic ¡

Special report: India Winter 2005 Business Strategy Review 57


Arun Sinha: At home with diversity
¡ architecture starting with the
objective by audience and then
measurement system to assess if we
were moving the needle. I had to get
in front of the senior management,
CEO and the board to convince them
the value of marketing and how we
will show the improvements. The
strategic architecture outlined what
we will expect in the year 2007 and
the improvements that will be made
Special report
year over year. Without a
Georgina Peters (georgina.peters@suntopmedia.com) is a business writer who contributes to publications worldwide.
58 Business Strategy Review
good metrics and measurement
system of the marketing
effectiveness we would not be
able to show the progress,” says
Sinha, moving the pepper for
emphasis. “It wasn’t about the
conventional wisdom of how to
re-brand a company but about
analysis. And that’s how marketing
has changed. It used to be more
downstream – warm and fuzzy – now
it is upstream analysis and
relationships. Companies that
succeed do these things well.”
It is not simply analysis which
Arun Sinha traces back to his Indian
roots. He cites differentiation and
diversity as key elements to the
Indian experience. “Every state is
very different with a different
culture, language, food and
government. You grow up speaking
two or three languages. There is a
diversity of people and of ideas. In
the US diversity is about people,
Indians add in comfort with the
diversity of ideas,” says Sinha.
“Then the sheer number of people in
India means you have to learn to
differentiate yourself. Me-too
doesn’t work. You learn to survive. In
India it really is the survival of the
fittest. Then you come to America
and you enter the corporate jungle.”
Does all of this add up to a
unique Indian take on business?
Arun Sinha pauses for breath. “We
believe in being competitive but
also compassionate. Respect for
people is central and that’s what I
try and bring to my job and the
people I work with.”
Sinha’s view of marketing is also
strikingly different. “Marketing is
dead if it’s not building the business.
The importance of marketing is huge
in an organisation and the board as
well as the CEO demands a good
return on marketing investments. If
the marketing programme is not
helping the bottom-line, the very
survival of the programme is in
question,” he boldly states. “If you’re
Winter 2005
still thinking like a marketing
communications person, then you’re
dead. After all, the average life
expectancy of a CMO is 23 months
according to Spencer Stuart. Why?
Because most get sucked into
marketing communications. The
average tenure of a CEO is four years.
So most CEOs will see two CMOs
come and go.”
For this cycle to be changed, Arun
Sinha argues that marketing needs
to be on the boardroom agenda
and marketers must adopt more
rigorous, analytical approaches to
their activities. “Gone are the days
when you create marketing materials
for the sole purpose of winning
awards! Marketing is no longer warm
and fuzzy exercise for some
intellectuals in an organisation. It is
a demonstrable business approach
that can be measured very effectively.
I remember, when I first started in an
advertising agency about 20 years
ago, we were very concerned about
building our creative portfolio and
secondarily on the market results.
Things have changed for the industry
and now we are obsessed about how
to get the return on investments from
our marketing programmes.”
For Sinha, marketing circa 2005
has become an intellectually and
commercially stimulating
combination of art and science
where marketing effectiveness is
measured by Return on Investment
(ROI), Customer Lifetime Value
(CLV), customer loyalty, brand
awareness, campaign response rate,
media effectiveness and a host of
other measurements. He talks of a
company’s “sweet spot”: “A place,
time or experience where a
company’s brands, products and
services, finances, leaders and
marketers are in tune and in time
with consumer needs, aspirations
and budgets. Repeatedly finding
these sweet spots is the key to
growth in increasingly competitive
times”. I
Special report: India
 VCs curry favour

Indian
with

entrepreneurs
India has long enticed adventurous outsiders and the
latest explorers are private equity funds. India’s rapid growth
is creating a slew of investment opportunities but, warn
Hugh MacArthur and Ashish Singh, investors need to be
patient and follow some basic rules.

T
hough it accounts for just 12
per cent of the total Asian
private equity market, India is
the region’s fastest growing, with a
51 per cent annual growth rate
compounded since 1998. During the
first half of 2005, private-equity
investors poured $733 million into
81 transactions, surpassing the total
number of deals for all of 2004 and
on track to reach a record $1.5
billion for the full year.
There is little mystery about why
US and European private-equity fund
India’s state-owned companies are
spinning off non-core assets as they
pare down to meet global
competition, creating a large pool of
potential acquisitions for deal-hungry
offshore buyers. And South Asia
offers private investors advantages
China cannot match, including: the
world’s second largest English-
speaking population; a transparent
system of commercial law; a bustling
entrepreneurial culture; and, by
comparison to other emerging
economies, a robust equities market
peers have scored in recent months.
In the first half of 2005 alone, a
dozen high-profile sales netted
private-equity players some $1.1
billion. Leading the charge was
Warburg Pincus, which parlayed a
$300 million investment it made in
1999 in Bharti, India’s leading
mobile telecom provider, into a profit
of some $560 million through the
partial sale of its stake in the
company. In so doing it reaped a
bounteous internal rate of return in
excess of 40 per cent.
Special report

managers find India so appealing.
With GDP growth averaging some 7
per cent annually for the past five
years, the subcontinent rivals China
as Asia’s most dynamic economy.
that now tops $450 billion in total
capitalisation.
Even more beguiling for private-
equity portfolio managers are the
eye-popping returns their pioneering
Riding on these winds of
opportunity, a monsoon of cash is
descending on India. Today, some 50
funds with some 250 billion Indian
rupees to invest are scouring the ¡

Special report: India Winter 2005 Business Strategy Review 59

 ¡ country for deals. Among the
newcomers are some of the most
prominent names in global private-
equity finance. The Blackstone
Group, for example, is earmarking up
to $1 billion for Indian acquisitions,
and the Carlyle Group has launched
three new Asian funds totaling $1
billion, and dispatched a team to
scout for promising prospects in the
subcontinent.
While India’s economic boom is helping to train a talented
generation of engineers and mid-level managers, there is still a
dearth of seasoned managers with track records building
world-class companies.
The sector certainly has head room
to grow. Using the benchmark of
private equity deal value as a per
cent of GDP, Bain & Company
estimates that India has the potential
to expand deal value fourfold. Yet, for
all of its undeniable appeal, India is
anything but a sure bet. For one
thing, the sheer size of those capital
inflows risks driving up bid prices
and quickly exhausting the supply of
attractive acquisition targets.
To avoid disappointment,
international private-equity investors
will have to exercise rigorous deal
discipline. They will need to select
target companies with an eye to
capitalising on global growth trends
that complement the other holdings
in their portfolios. They will ally
themselves with innovative managers
and partners, who understand the
local rules for navigating this fast-
changing market. And they will
develop flexible exit strategies that
help cushion them from the volatility
of India’s still-immature capital
markets.
So, where should private equity
firms place their bets? Some of the
best opportunities lie with India’s
already established and fast-growing
sectors. Based on our knowledge
Special report
of the market, our recommendations
are:
Buy a private stake in the global
economy’s back office.
The educated labour force, high-
60 Business Strategy Review
bandwidth telecommunications, and
technological savvy that have
transformed India into the global
economy’s back office present
especially attractive opportunities
for private-equity investors. PE
funds can win twofold by targeting
the business-process outsourcing
and IT-enabled service centres that
have sprung up in suburban office
parks ringing every major Indian
city. For one thing, the sector is sure
to grow, as leading multinationals
continue to relocate their call
centres, data processing,
accounting, and IT-customer
support functions in low-cost
offshore service centres. For
another, PE funds can use such
holdings to streamline business
operations of other companies in
their portfolios.
That’s the bet that US private-
equity firms General Atlantic and
Oak Hill Capital Partners made when
they teamed up last year to pay
$500 million for a 60 per cent stake
in General Electric Capital
International Services (Gecis). GE
established Gecis in 1997 as a
captive offshore business and
technology centre to support its own
back-office processes. From an
initial site outside Delhi that
employed 350 people, Gecis
blossomed into a 17,000-employee
globe-spanning enterprise, serving
more than 1,000 GE operations
worldwide.
GE benefited from the efficiencies
and cost savings Gecis helped it
achieve. But the unit’s value to GE
as an asset was reaching its limits,
with the burden of managing the
non-core holding. By selling a
controlling stake in Gecis to General
Atlantic and Oak Hill Capital, GE
could continue to outsource
business and IT processes under
contract and harvest the appreciated
Winter 2005
value it had built in the company.
For their part, the new private-equity
owners hope to fuel Gecis’s
continued expansion by marketing
its services to companies wanting to
offshore their own work to a state-of-
the-art service provider in India but
reluctant to entrust critical business
processes and proprietary data to a
captive GE unit. Since acquiring
Gecis, the new owners have locked
in long-term contracts with a wide
range of banking, insurance,
healthcare, and manufacturing
companies that are expected to
boost the company’s revenues by
some 25 per cent this year.
Meanwhile, General Atlantic can
use its stake in an Indian outsourcer
to boost the performance of the 50
other companies in its portfolio. By
enabling all of the companies it
owns to tap into the services
available through its offshore
business process and IT facilities,
the private-equity owner is growing
economies of scale and squeezing
overhead costs out its other
holdings. With the profit lift from
such savings General Atlantic is in a
better position to bid more
aggressively than its competitors
when attractive new investment
opportunities come along.
Look for depth in the local
management pool.
Creating the right management team
has always been a key to success for
private-equity funds. But while
India’s economic boom is helping to
train a talented generation of
engineers and mid-level managers,
there is still a dearth of seasoned
managers with track records
building world-class companies.
Finding and motivating senior
managers who can move easily
within the informal local networks
that bind India’s business culture
Special report: India
and are equally at home in the fast-
paced global deal-making
environment is a major challenge.
But it can be met. Warburg Pincus
found both a world class opportunity
and managers with the skill and will
to seize it at Radhakrishna Group, a
wholesale and retail distribution
system. The private-equity partners
are also collaborating with Sheté
and his team to combine their in-
depth local knowledge and global
connections to open doors that will
enable Radhakrishna Group to
recently discovered the importance
of patience when it was forced to
postpone a plan to sell off a 36 per
cent stake in Mphasis, a business
process outsourcing firm it
purchased in 1999. A dip in
Mphasis’ performance in 2004 had

For all of its undeniable appeal, India is anything but a sure bet.
privately held food distribution and
logistics services company. The
company was established in 1966
and is headquartered near Mumbai.
CEO Raju Sheté, who took command
at age 17 after the death of his
father, the company’s founder, grew
Radhakrishna from a start-up that
provisioned ships into India’s largest
food conglomerate with interests in
wholesaling, distribution,
supermarkets, catering, and, as the
operator of a chain of McDonald’s
restaurants, fast-food franchising.
With its investment of $50 million
for a 25 per cent stake in
Radhakrishna in mid 2003, Warburg
Pincus teamed up with Sheté, now
just 40 years old, for what the
Indian media dubbed the “business
opportunity of the new millennium”.
Providing technical and financial
advice as minority shareholders,
Warburg Pincus will work with Sheté
to implement a farm-to-plate
reorganisation of the food supply
chain. Their aim is to overcome the
fragmentation and public health
barriers that have stood in the way
of India’s development of a modern
food harvesting, processing, and
expand its commercial food service
and distribution network into
southern Africa and the Middle East.
Plot a flexible path to the exits.
US-based private-equity firms
usually think in terms of a three-to-
five year holding period for the
companies in their portfolios. But as
anyone who has experienced the
Asian currency crisis in 1997, the
popping of the tech bubble in 2000,
and any number of local financial
rumbles in between, can attest the
still-immature Indian markets do not
lend themselves to even that coarse-
grained calibration. A crude “buy,
bleed, and bail” approach that relies
on lots of leverage and the luck of
market timing is not a sustainable
route to profits in this environment.
Private equity investors who target
their acquisitions in India’s most
promising sectors and work from a
blueprint that allows them to identify
and unlock value, by contrast, are
likely to be rewarded with both
buoyant business growth and superb
market returns.
Barings Private Equity Partners,
the London-based buyout firm,
forced the company to lower its
earnings forecast for 2005,
weakening interest among a group of
other private investment firms that
Barings was looking to as
prospective buyers. Having to pull
the sale was a setback for Barings
general goal of unwinding its
positions in companies it owns
within a four-to-seven year time
frame. But Barings’ investment
approach in India rests in equal
measure on finding companies that
have strong and sustainable growth
prospects. And with both Barings
and Mphasis’ management sticking
to their forecast that the company’s
revenues and earnings will increase
25 per cent and 30 per cent,
respectively, in the 2005-2006
fiscal year, the investment firm’s
overarching strategy looks to be
intact.
Barings Private Equity’s portfolio
managers might take heart from the
experience of their peers at Warburg
Pincus. Less than a year before
Warburg cashed in on its $700
million investment in Bharti, the
cellular telecommunications firm in
had been underwater. I

Hugh MacArthur (hugh.macarthur@bain.com), a Boston-based partner with Bain & Company, directs the firm’s
North American Private Equity Practice.

Ashish Singh (ashish.singh@bain.com) is a Bain partner and head of the firm’s New Delhi office. Research support
was provided by Shailendra Singh (shailendra.singh@bain.com), a consultant in Bain’s New York office.
Special report

Special report: India Winter 2005 Business Strategy Review 61

 Instep with

Infosys
A growing number of Western students are going to
India as interns at top information technology
services firms and to participate in tours that allow
them to network with the country’s corporate elite.
One of the star attractions is Infosys which, as
Manjari Singh and Sandeep K Krishnan report, has
a unique approach towards its global internship
programme, InStep.

S
tarted in 1981 with capital of
$250, Infosys crossed the
billion-dollar mark in revenue
in the 2004 financial year. The
Special report
In 1999, Infosys launched InStep and enhances goodwill for the
to give undergraduates, graduates people of India”. The company’s
and doctoral students from the best aim was to make India one of the
institutes across the globe the favourite destinations for interns all

company now has 31 global
development centres around the
world of which only 18 are in India.
In addition, it has twelve proximity
development centres and more than
32,000 employees worldwide.
opportunity to work and spend time
with Infosys. Narayana Murthy, the
company’s chairman and chief
mentor, calls it “a new experiment
that changes the image of India,
creates a positive image of India,
over the world. It wanted serious
and sincere professionals to
appreciate the project work done
in India rather than treating the
internship programme as an
opportunity to tour India.

62 Business Strategy Review Winter 2005 Special report: India

 The interns spend a period of eight
to 24 weeks on the projects
allocated to them. In 1999 there
were 14 projects on offer and around
300 applications for internships.
For 2004-2005, there were 70
selected projects on offer, and 8,500
applications from across the globe
and associations with 42 academic
institutes worldwide.
The interning point
The major objectives of the
internship programme are:
Brand building: The programme aims
to establish a direct link with the
best academic institutions where
Infosys has business interests. The
presentations of the organisation in
these institutions and the publicity
achieved through regular visits for
recruitment makes Infosys a well-
known organisation. As the
organisation is planning to expand its
operations in different countries, it is
important that it gets a sizeable
number of employees from these
countries. The programme generates
publicity and creates ambassadors
for the company.
Future talent pool: The programme
helps build the brands of the
organisations in the associated
academic institutions. This helps in
InStep provides an opportunity to work in a multi-cultural setting
and for participants to experience the diverse cultural climate
of India.
recruitment from their campuses.
The interns who successfully
complete the programme may also
be recruited by Infosys in the future.
Multi-cultural learning: As the
majority of clients of Infosys are from
foreign cultural settings, it is
important that the company has
enough multi-cultural expertise. The
interns help the company’s
employees learn about working in
multi-cultural settings first hand.
Expertise for projects: Infosys
provides interns with organisationally
Special report: India
relevant internship projects and is
able to utilise their expertise. The
interns are selected on their relevant
experience and educational
background.
The power of attraction
In return, the main attractions of
InStep for the interns are:
Global experience: In today’s
context, global experience has
become a key element in career
prospects. InStep provides an
opportunity to work in a multi-
cultural setting and for participants
to experience the diverse cultural
climate of India.
Professional learning: The Indian IT
industry is a high growth knowledge-
driven industry with great future
potential. InStep provides an
opportunity to work with a major
player in IT services in India. Live
projects are given to interns where
they have a great deal of scope to
develop their expertise.
Interaction with business leaders:
This internship also provides an
opportunity to interact with well-
known senior business leaders in
India. Special effort is made by
Infosys to provide such
opportunities.
The process
Within Infosys, projects that are
suitable for the interns are collated
from different business units. They
are screened for their relevance and
suitability. Interns work on a wide
range of projects that are expected to
have an impact on the company’s
core processes. During the selection
of interns their academic
achievements and relevant
experience are matched with the
projects available.
There are project mentors to guide
interns in their project work. The
Winter 2005
project mentors and the programme
manager are kept informed on
progress. There is also a buddy
system. Buddies have a more
informal relationship with the intern
and guide them throughout their stay
in India. Interns are given access to
all the facilities on the Infosys
campus with organised lunches and
dinners to increase interaction
between Infosys employees and
interns.
On finishing the project, feedback
is collected from interns. Infosys
keeps in constant touch with the
alumni by arranging talks at various
institutes and updating them on the
latest developments at the company.
People and strategy
Around one-third of Infosys
employees directly deal with clients.
The company’s HR department
requires employees to be
comfortable with clients of different
nationalities. This can be done by
recruiting in the clients’ countries or
by sensitising employees to different
cultures. According to Hema
Ravichander, head of the company’s
HR department, InStep has a major
role to play in creating a “globally
diverse Infoscion base”.
Internally, however, InStep is run
under the corporate planning
department. It is regarded as a
strategic tool, initiated at the very
top of the organisation, and this
has considerably enhanced its
internal importance. Its strategic
implications are twofold.
First, it offers access to the global
talent pool. Infosys’ strategy is
based on a global delivery model
which intends to leverage global
capacity, global resources and
Special report
global strengths. According to the
company’s head of corporate
planning, Sanjay Purohit, the global
strategy is to “look for product
markets which have a demand for
services and look for labour ¡
Business Strategy Review 63
 The global few

¡ markets which have the talent
pool for the services demanded”.
Accordingly, intern selection is driven
by business trends. For example, in
view of organisational plans for
European expansion, special thrust
was given in 2003-04 to including
more German institutions.
Second, InStep is designed to
make a major contribution in building
the corporate brand image outside
India. In the long-term the interns’
understanding of Infosys could be
very helpful in future business
dealings. InStep tries to ensure that
they form a positive image and
have a better understanding of the
country and the organisation. Global
delivery is all about managing global
competencies, global processes
and global aspirations and the
organisation that can build its image
of a global player obtains a definite
competitive edge.
Innovation step-by-step
InStep is the only systemised global
internship programme in India. One
of the toughest challenges is to
convey to aspiring students that
there is a global internship
programme in an Indian organisation
that they may find interesting.
Information sessions are given in top
academic institutes across the world
to establish direct contact with the
students. The presentations focus on
providing information regarding the
organisation and its uniqueness in
terms of brand and processes.
The career aspirations of foreign
students also have to be considered.
American interns tend to have much
more work experience and have
worked at much higher levels of
hierarchy than their European
counterparts. There is also a wide
variation in the age of students.
There are students as young as
17-years old while some are 35.
Expectations must also be managed.
The expectation of interns about
he learning and facilities on offer
differs.
InStep clearly shows how an
internship programme can be
structured for marketing an
organisation at a global level and
showcasing its uniqueness for
clients and future employees. Its
success can be attributed to in-
depth planning, and substantial
effort and resources. InStep enjoys
critical top management support and
substantial resources. It now has a
feeling of permanence. I

Manjari Singh (manjari@iimahd.ernet.in) is an assistant professor at the Indian Institute of Management,

Ahmedabad, India. She teaches and consults in human resource management. Her areas of research interest
include strategic human resource management, human resource information systems and performance
management systems.

Sandeep K. Krishnan (sandeepk@iimahd.ernet.in) is a doctoral student in the personnel and industrial relations
area at the Indian Institute of Management, Ahmedabad, India. His primary area of research is related to human
Special report

resources in the Indian IT industry. He has published widely in the field of human resource management.

64 Business Strategy Review Winter 2005 Special report: India

C
A passage
CK Prahalad’s intellectual focus has returned homeward.
He tells Des Dearlove about his thoughtful journey from
competing for the future to uncovering the fortune at the
bottom of the pyramid.
oimbatore Krishnao – CK –
Prahalad was born in the
town of Coimbatore in Tamil
Nadu. He studied physics at the
University of Madras (now Chennai),
followed by work as a manager in a
branch of the Union Carbide battery
company. He continued his
education in the United States,
earning a PhD from Harvard. He
taught both in India and America,
eventually joining the faculty of the
University of Michigan’s Business
School, where he holds the Harvey C.
Fruehauf Chair of Business
Administration.
At Ann Arbor, Prahalad met Gary
Hamel, then a young international
business student. Their collaboration
ultimately resulted in the bestselling,
Competing for the Future (1994).
The book provided a launch pad for
the second phase of his intellectual
career. In his recent book (written
with Venkat Ramaswamy), The
Future of Competition (2004),
Prahalad argues that companies have
not made enough use of the
opportunities provided by
Special report: India
from
India
globalisation. There is an inability to
realise that not only have the rules of
the game changed but the role of the
players has been transformed too.
The “customer” is a more powerful
and pro-active figure. Customers are
no longer abstractions that have to
be satisfied. Thanks to the internet,
they are agents creating and
participating in transactions. The
concept of value has also changed. It
is not inherent in products or
services. It can’t be instilled by
producers or providers. It has to be
co-created with consumers. They
build this by experiencing it. The
only way companies can compete
successfully is through building new
strategic capital.
Alongside this work, Prahalad has
been wrestling with the perplexingly
complex and political issue of
poverty. This led him to write The
Fortune at the Bottom of the
Pyramid (2004) in which he
identifies the world’s poor (the
“bottom of the pyramid”) as a
potential untapped market for
companies, worth anything up to
Winter 2005
$13 trillion a year. “The real source
of market promise is not the wealthy
few in the developing world, or even
the emerging middle-income
consumers. It is the billions of
aspiring poor who are joining the
market economy for the first time,”
he explains. A market at the bottom
of the pyramid could be co-created
by multi-national and domestic
industry, non-governmental
organisations and, most importantly,
the poor themselves. They would
then have choice over their lives and
the products they use. He points to
Hindustan Lever’s success in
marketing soap-powder and
detergents in smaller, cheaper units.
This created prosperity downstream
through new distribution
mechanisms. Too often poor people
are patronised, Prahalad wants them
to have real power in the
Special report
marketplace.
Is India still an emerging nation?
Where would you say it is on that
journey?
There is an old saying, I think ¡
Business Strategy Review 65
 ¡ originally in India and now
everywhere around the world, it’s like
five blind men touching an elephant,
and having different perspectives.
India is very similar. If you ask me
whether it is world class and an
emerged country already, I would
say, yes if you go to Infosys, if you go
to Wipro, if you go to PTS. Their
technology, their governance
principles, their global reach, their
ability to attract talent, their
capacity for innovation, make them
as good as any in the world. At the
other extreme, there is so much
deprivation and poverty for at least
150 million people that it looks like
the worst part of the world. So, if
you take all of India and put one
label on it, irrespective of what the
label is, it is likely to be wrong.
But what I would say is that in
the last ten years, India has done
three things very well. One, it
has built some global capabilities,
first locally and then leveraging it
globally, and that is where you find
the IT industry, the pharmaceutical
industry, the automobile components
industry, the diamond cutting
industry, and so on.
Second, it has created an
extremely high level of aspiration for
all of its people, both the poor and
the rich. The rich and the educated
can aspire to be world class, and the
poor can aspire to have an education
for their children to allow them to
escape poverty. So there is a deep
focus on education, not because of
The real source of market promise is not the wealthy few in the
developing world, or even the emerging middle-income
consumers. It is the billions of aspiring poor who are joining the
market economy for the first time.
government policies, but because of
the aspirations of individual families,
and that, I think, is going to do well
for India. The government sector
Special report
does not function very well, but
there is a huge private sector with
private tutoring, private schools and
private colleges blossoming all
across the country.
And the third thing is that the
66 Business Strategy Review
government fundamentally accepts,
even though it’s very hard to
implement, that India has to become
an integral part of global trade. It
cannot be isolationist like it is today.
So those three, I think, are going
to put India on the right trajectory.
In a very complex coalition, with the
government at the centre, India will
take one step forward, half a step
backward, a quarter step sideways. It
is never going to be a smooth
transition and we should not expect
it. But directionally, I am extremely
positive on where India is going.
Obviously people think of India and
associate it with the offshoring
boom. Is that still being driven by
lower costs or is it now driven by
competence, as it were? Will India
become and remain the offshoring
centre, the call centre haven for the
rest of the world, or is this just a
transitional phase?
I think, first, cost arbitrage will be
an integral part of it for a long time.
It may be that costs will go up a
little bit, but it’s not going to reach
American and European costs for a
long time because it’s a huge
supplier. So cost arbitrage is at the
base of the capability, but India has
built extremely high levels of quality.
They’ve adopted TQM as an integral
part of software development.
They’ve developed new
methodologies and tools. There is
innovation in work processes and in
the tools themselves, so there are
four or five layers of advantage,
including speed, worldwide project
management, common platforms
around the world, and expatriate
management. To continue to believe
that cost is the only building block
misses the point.
The second thing that has
happened is from low level testing
and maintenance, increasingly
Winter 2005
companies are moving very, very
rapidly into engineering, to design,
to the development of whole
components and sub-systems. This
trend will continue significantly. I
also do not rule out India emerging
as a major manufacturing centre.
People assume that in India it is all
going to be just software, and
knowledge-based, and it’s not going
to be manufacturing-based. I believe
that India will invent a different kind
of manufacturing which is very high
quality, design-centred and software
embedded. This will be very
different to the traditional shoot and
ship approach of saying you give me
the spec and I will do it. Now, it’s
more you design, you develop, you
manufacture, you ship. I think this is
emerging. It’s still in its infancy, but
I expect it to grow as rapidly as the
software side.
In the 1980s we witnessed the
Japanese economic miracle and the
rise of companies like Toyota. More
recently, we’ve seen the emergence
of Samsung from being a domestic
champion to becoming a serious
global company. Are we going to see
Indian companies of that kind of
calibre?
Without any doubt. Even in IT and
IT services, you have at least three
or four companies which are already
known around the world – Infosys
obviously, Wipro, Tata Consulting
Services, Sapient. The top three
companies are at a US$2 billion
sales level, and anywhere between
US$15 and US$20 billion in
market cap. That’s larger than EDS.
And there’s a market here. Infosys
grew from $1 to $2 billion in about
two years. And so, if they get to be
$4 or $5 billion, they are a global
sized company, not only a global
brand name, and with a global reach
because they operate in 50
Special report: India
countries. So, will that happen? The
answer is, yes. I see the emergence
of ICICI as a bank with the same
characteristics. I expect to see
acquisitions by companies in
manufacturing. Tata’s first big
You are going to find Indian companies sharpening their
competitive skills, getting world class quality, becoming very
profitable, building market cap, and using it as currency to make
acquisitions, and expand rapidly overseas.
acquisition was Tetley and now Tata
Tetley is a global player. Taj Hotels
is making acquisitions abroad. Tisco
is making acquisitions and Tata
Motors is making acquisitions. So I
think you are going to find Indian
companies sharpening their
competitive skills, getting world
class quality, becoming very
profitable, building market cap, and
using it as currency to make
acquisitions, and expand rapidly
overseas. I expect to see 20 to 25
companies in the next two to three
years spreading their wings and
getting out of India.
Does this mark a new phase in
globalisation?
Absolutely! In fact, as early as 1989
I raised the question in India of
which countries could be like the
United States, Germany and Japan
C K Prahalad: Pyramid thinker
Special report: India
with world scale domestic markets
and world class global companies.
There was a big difference between
the United States, Germany and
Japan at that time and Finland,
Switzerland, and the Netherlands,
which had world class companies
but not world scale domestic
markets. Now, the domestic markets
in China and India are reaching
world scale. Look at the two wheeler
industry in India and there are three
companies which are world scale
domestically. They make a million
plus two wheelers. You can very,
very rapidly achieve scale in India
and, if you get the right quality of
management, you can also become
global. So I expect to see China
and India in that club soon. Already
both China’s and India’s finance
ministers are invited for lunch or
dinner at G8 meetings. That’s a
good sign. I believe that China and
India will be the second and the
third largest economies next to the
United States within my lifetime,
certainly by 2015.
Is there a sense, too, that until very
recently globalisation was widely
viewed as an American or Western
game and now there’s a risk that
globalisation could bite back as far
as the West is concerned because, as
these companies rise, presumably
they have to take somebody’s place
and somebody’s customers?
First we are creating more customers
because a significant portion of the
five billion poor who have been
below the radar screen will be new
customers. So, we are increasing the
size of the pie. Will there be
asymmetric benefits to large
companies, established players? The
answer is yes. Will the pain be totally
felt by poor countries? The answer is
no. Will some of the pain be felt by
Europe, Japan and the United
Winter 2005
States? The answer is yes. That is
the essential game of globalisation.
And to some extent, we are seeing
that with the backlash against
offshoring particularly in America.
Sure, and I think protectionism is
not the answer. Re-thinking where
do we get our competitive advantage
compared to these new players? That
is the game. So we have to re-frame
the question. It’s not exporting good
jobs, but it is importing
competitiveness, and the companies
which know how to leverage global
talent and import competitiveness
are the innovators and they are going
to be ahead of the curve.
There was one case which gained
a lot of media attention where
financial information was sold or
leaked from an Indian call centre.
Is that going to undermine some
of this?
I think the thing that I find so
interesting is if one person out of
300,000 or 400,000 call centre
operators can be bribed to give some
information, it makes the headlines.
I can do the same thing in the UK, I
can do the same thing in the United
States. Now I cannot believe if you
have 300,000 people working in an
industry, one person cannot be
bribed! So I think we have to put this
in perspective. Can this happen? Yes.
Can this take place in the UK and
the United States? The answer is, it
takes place all the time. So, I think, I
look at it and say, could security
be better? Should it be better? The
answer to this is yes, and in fact, I
am going to the other extreme.
Because the Indian BPO business
Special report
depends on security and privacy,
Indian companies are going to
develop methodologies ahead of the
West on how to secure information
and how to create privacy, how to
make sure that people protect the ¡
Business Strategy Review 67
 ¡ interests of their customers. And
the reason is very simple, if you can’t
do it, you don’t have a business. And
therefore, the good news is stories
like this are going to push Indian
operators to greater innovativeness
rather than less.
Stepping back to some of your other
work, in terms of value creation, is
there a new place that we should be
looking for wealth creation? Is there
a new way of understanding it?
With 1.5 billion people now
connected through wireless or
through PCs or some combination of
the above for the first time in our
history, the power that used to exist
between consumers and corporations
is getting re-balanced. Individuals
want to decide for themselves how
they want to be served. Therefore co-
creation is going to take place,
the manager? How do you go beyond think that’s attainable? Are you as
customisation in the traditional optimistic as that quote perhaps
sense? How do you get back the suggests?
bespoke world? Yes. People ask me how come that
I’m a preacher for competition
What are the implications for the and in the same year you get The
people at the top of the pyramid? Bottom of the Pyramid ? It’s because
I’m thinking of CEOs, business I think that the future of competition
leaders, what does that mean for can be read as if it’s only talking
them? Does that mean a different about the developed markets. That’s
way of leading? Is it a culture why I had to write a companion
change?
It is a huge culture change. It is
mostly mental models that you have
to change. Competing for the Future
was a pre-internet book. We saw
some of that happening, but not
really. It’s still very firm centric. The
Future of Competition is based on
a big reflection on what the internet
means for companies, customers,
how they work with each other. The
big change for companies is to ask

How do you get back the bespoke world?

whether it’s making your own pizza,
or managing your own musical
archive, or designing your own
clothes. It’s going to take place. So
the question is: How do we as
companies and managers prepare?
The thing that I find so interesting is
when we put on the hat of a
consumer, we like all the choices.
Then we come into the factory and
the company, and put on the hat of a
manager, and we don’t like it very
much. So the real question is: How
do I seamlessly understand the
convergence of the consumer and
yourself, how do you influence
without ownership? What happens
to the boundaries of the firm?
How do you establish dialogue with
the consumers? How do you create
a level of transparency and access
that allows people to work with
each other?
An interesting strand to this is this
notion of the democratisation of
business, creating an economy that’s
of the people, by the people, for the
people. That’s a very optimistic view
of the future of capitalism. Do you
piece which says a similar thing
is happening at the bottom of the
pyramid. In fact there is no
difference. The next book I’m
writing is to look at the fragmentation
of the value chain worldwide, and
how people will search for talent
and the developed countries may
depend on developing countries
for innovation. I

Des Dearlove (des.dearlove@suntopmedia.com) is co-founder of the training and consulting company, Suntop Media.
Special report

London Business School

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68 Business Strategy Review Winter 2005 Special report: India