A Must Read - Speech by Mr. Mahindra

I have never heard a speech like this, where Mr. Mahindra brings an interesting reference of the current India IT industry to an old India Mythology at the recent NASSCOM leadership Forum. This is the first occasion where I have been a part of a speech that relates market situation to mythology. Its great. 

Defeating its own Hiranyakashyaps (Courtesy - NASSCOM) 

Reinvention, regrouping and re-thinking its ways out of challenges is the way to go for the IT-BPO industry.Innovation was the theme that laced the keynote by Anand Mahindra, vice chairman and managing director of Mahindra & Mahindra, who, in an interesting twist, led the discussion on “Building a Knowledge Economy for Growth,” with references to Indian mythology instead of technology!

In this article, we capture some of the innovative ideas that Mahindra presented at the Conclave, for the IT-BPO industry to combat its Hiranyakashyaps.

“I think there are some urgent pressures and imperatives the industry has to deal with at this point, which need different answers. Therefore, I'm going to talk about something completely different: I will talk about the Trimurti.

Most Indians will know the Trimurti–the trinity in Indian mythology including Brahma the creator, Vishnu the sustainer and Shiva the destroyer. There is a wonderful depiction of this in stone, just ten kilometers across the bay, at Elephanta. Both as a businessman, and as someone who tends to see life in visual images, the Trimurti reminds me of India's IT industry. Think of it.

The Indian IT industry has gone through a stage, where like Brahma, it created something out of nothing. It created a new and global industry. It created a service sector that is today, a major pillar of our GDP. But most importantly, it created a perception of a new India, both in the world and in Indian hearts and minds.

But creation is only the first phase. The industry has to move on to the next phase of sustaining that creation—move to the realm of Vishnu the preserver. Creation is a one-time affair. Sustaining that creation is obviously a longer haul, subject to many attacks and crises. Perhaps that is why Vishnu comes not in one, but in ten incarnations.

Every time there is a new danger, he changes his avatar to a form best suited to meet that danger. At various times he has come as a fish, as a tortoise, as a dwarf. But his most interesting avatar came when he had to fight the demon Hiranyakashyap. Hiranyakashyap was a bad guy, who had obtained an amazing boon from the gods. Neither man nor beast could kill him; he could not be killed by daylight or at night-time, within his home or outside it, on the ground or in the sky. All this made him pretty invincible–he went on a rampage, and only Vishnu could tackle him.

The IT industry today faces challenges every bit as complex as those Hiranyakashyap posed for Vishnu. It is hit by a macroeconomic tsunami of adverse currency changes, rapidly escalating costs in both salaries and infrastructure and inadequate talent pools below the Tier 1 and 2 institutions.

At the Company level, firms are begin to feel the penalties of poor differentiation and lack of focus (trying to be all things to all people); and an over-emphasis on high volumes and price competition. Suddenly, the industry seems to have fallen off its pedestal; You are facing your very own Hiranyakashyap.

It's interesting to see how Vishnu dealt with him. The demon pretty much had all bases covered. So Vishnu took on the avatar of Narasimha to bypass the boon. Narasimha was a hybrid creature, half man half lion, and therefore neither man nor beast.

He killed Hiranyakashyap at twilight, which is neither day nor night. He killed him in the courtyard, which is neither inside a house nor outside it. And he killed the demon by placing him across his knee and tearing him apart, thus circumventing the terms of the boon that he could not be killed either on the ground or in the sky. Now that's what I call an innovative algorithm!

So what are the lessons for the IT industry in this story? Well, the first thing Vishnu did was to reinvent himself. It was not the gentle and contemplative Vishnu who fought Hiranyakashyap–it was the fearsome Narasimha avatar. Vishnu reinvented himself to suit the circumstances. The circumstances have changed drastically. The IT industry must reinvent itself.

Do I have all the answers on the modes of re-invention? No, obviously not, otherwise I'd be out there filing patents, although I can suggest two broad approaches.

First, why don't we design business models that challenge traditional industry approaches and then transform our organizations, people and processes to execute. If we simply keep knocking on the doors of clients with our traditional offshoring options, we'll meet the fate of hearing aid salespersons: our best customers won't hear the doobell!

A few weeks ago, an Indian car company made a game-changing move. Maybe the Nano will ultimately not retail for a hundred thousand rupees. Maybe it won't have great margins, or replace as many motorcycles as it would like to, but it was a game changing move; it fired a shot that was heard around the world. Can the IT world make any such claim?

There was an old saying, apparently adopted by the IT industry, that the secret of success is to jump every time opportunity knocks. And how do you know when opportunity knocks? You don't, you just keep jumping!

So when are we going to stop simply jumping every time a client seems to sneeze, and actually create products and IP that become their own opportunities?

Let's look at new areas where India may have natural advantage. I remember C.K Prahlad telling us that we didn't realize how important it was to leverage emerging innovation ecosystems in our country. He gave us the example of how, due to a fortunate coincidence, India's IT and automotive industries were situated in roughly the same geographic clusters. So why wasn't, according to Michael Porter's competitive theories, a world beating automotive telematics industry taking shape here.

Why aren't IT companies using the massive potential of India's soft power, the film and TV business to exploit technological dominance of what Telcos call the “last mile” but is actually the “first mile” in the brave new interactive world?

Secondly, why don't we try to focus on a vertical industry (e.g., telecom) or horizontal domain (e.g., supply chain management) selecting the key dimensions of competitive differentiation–product versus service, breadth versus depth, speed of delivery, customer service responsiveness, fixed or outcome-based pricing, proprietary technology or intellectual property, and so on.

And let's be prepared to make hard decisions along the way–change people who don't fit, walk away from businesses that doesn't fit.

Along with re-invention, during the course of reinventing himself, Vishnu figured out the loopholes in the boon, and regrouped his physical and mental aspects to take advantage of these loopholes. That's something the IT industry can do as well. It has often been pointed out that the Chinese word for crisis is also the Chinese word for opportunity I love that mindset. I truly believe that the adverse rate of the dollar can be viewed as the glass half empty or the glass half full. Sure it affects margins. But it's also a chance to take advantage of the loophole and buy the IT industry what it doesn’t have, so it can regroup its structure to meet the challenge.

To me, the fact that our currency is more valuable and our price earnings ratios are still higher than average, means that we can acquire the front-ends and the large IT businesses that we never thought we could before. And the bigger the better. If people are egging us on to leapfrog, then they should also cheer the IT companies bidding for organizations bigger than themselves. It's happening all the time today in the manufacturing sector—Tata Corus being the stellar example—and we at Mahindra, while starting from scratch, have inorganically compiled together a portfolio of acquisitions that make us the fourth largest steel forging company in the world today.

This is not without historical precedent. If you look at Japan and South Korea, both of them went through a phase of enduring the worlds' skepticism, then painstakingly building strong and competent domestic businesses, and then on the back of global liquidity support and strong price earnings ratios, compressing time by acquiring global firms and their customer credibility.

In effect, by acquiring the strengths and skill sets needed, the IT-BPO industry can regroup its profile and create a new entity, which can vanquish challenges as effectively as Vishnu vanquished Hiranyakashyap.

And finally, while reinventing itself, the industry will have to bring in some of the aspects of the third element of the Trimurti–that of Shiva the destroyer.

Destroy for example the premise that cost arbitrage is the way to go. Recognize that the low cost, high volume offshore outsourcing battle has already been fought and won. Often, when strategic frames grow rigid, companies, like countries, tend to keep fighting the LAST war. If the industry I not already on the winners list, it needs to think of other ways to compete on value and differentiation, rather than price and scale.

Destroy the premise that success comes only from size, and desist from comparisons with other Indian companies. There are still many IT companies in India who define success as "we want to be one of the top ten Indian IT companies." Why not, for example, "we want to be the world's #1 banking back office solutions provider?"

And lastly, perhaps the time has come to destroy the notion that the world may be its oyster but India is not. There is a huge domestic market in middle class and corporate India that has not been plumbed. Even selling to the bottom of the pyramid is profitable today. But it needs a creative destruction of the current mindset and a re-think on many of the assumptions we hold dear.

Therefore, in conclusion, it can be said that perhaps there really isn't that much distance between avatars in the mythological sense and avatars in the technology sense. Perhaps they are both symbolic expressions of the same reality. In their different ways, they both underline the same message–that it is necessary in any situation to reinvent, regroup and re-think our way out of whatever challenges confront us. It’s time then for the Indian IT-BPO industry to wake up and make the world different.”