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How can the private sector best serve the unmet needs
of India’s people in a sustainable way?
 
   
Changing India, Venture by Venture  
   
An essay by Palash Kusumwal, University of Pennsylvania, USA  
   
Having become a chic topic of debate in opinion columns and media courts, corporate social responsibility is today an established motif in business school parlance. Firms identify their social initiatives as a mine of goodwill, and find it favorable to market such initiatives to potential recruits and society at large. While financial support to NGOs or even a day of community service from a for-profit entity is appreciable, the underlying issue remains not one of intent, but that of impact.

According to Bain & Company, donations in India during 2009 amounted to 0.6% of the national GDP, of which a measly 10% was contributed by individuals and corporations. One explanation could be that the donation environment in India fails to provide an atmosphere of credibility and transparency, causing apprehension among donors as to how their endowment is being utilized. But perhaps the root rationale is that the social objectives of private companies aren’t directly aligned with the maximization of profits. There are hardly any incentives available to corporate social engagements beyond certain tax benefits, making it challenging to justify such projects to stakeholders with financial expectations.

Limited partaking and token commitment from the private sector cannot create a sizeable impression in the lives of India’s people. Thus we are in need of a game-changing approach, one which enables companies to transfer the tools of economic change into the hands of society itself. Rather than uphold the sympathetic rupee as a means to alleviate social problems, the private sector needs to provide an educated and discerning rupee capable of empowering individuals to pivot a sustainable change around them.

In order for this approach to be sustainable, its benefits need to be mutual. These new initiatives by private companies must warrant creation of tangible value for their shareholders as well.

The solution calls for Indian high-tech companies to follow a three-pronged strategy with technology entrepreneurship at its heart and inclusive wealth creation as its credo. To begin with, they must create a venture acceleration program under their extended umbrella to cultivate next generation high-tech enterprises in domains such as healthcare technology, electronics, energy, manufacturing, infrastructure and telecom.

India possesses some distinctive traits that could propel her ability to present the world with pioneering technology in form and function. A largely meritocratic education system and an optimally timed demographic dividend, in combination with a people’s knack for creative improvisation form some of these embryonic drivers of innovation. But creating the blueprints for a Silicon Valley culture entails enabling entrepreneurs to overcome the typical challenges involved in founding technology startups. New high-tech ventures are capital-intensive and require a significant knowledge threshold to make their offerings valuable. This necessitates timely availability of funds and resources like infrastructure, industry contacts and research expertise.  Add to this the need to navigate India’s neanderthal bureaucracy, and one begins to see the complete picture.

In the role of a mentor, the community of Indian technology entrepreneurs-turned-corporate could help ambitious founders conquer these hurdles by providing capital and vital resources to them in return for equity in their companies. By way of the venture acceleration program, companies would invest in an innovation portfolio of startups in their industry with an emphasis on facilitating their business success. Independent functioning of the startups would be ensured, with the objective of fostering an open thought process, unbounded by the organizational constraints of hierarchy.

This manner of personal involvement would allow the Indian tech sector to construct its own innovation funnel, guaranteeing joint ownership of the greatest ideas. It would enable companies to obtain an external definition to their innovation philosophy, free from the risks of harboring an intra-organizational entrepreneurship model. Most importantly, the program would make financial sense beyond mere profit sharing. The portfolio companies could provide a strategic fit by addressing gaps in new or existing markets with the nimbleness that large corporations often lack. Given the right level of trust, the portfolio could facilitate cross-learning between technical faculties and even attract acquisition intent from other companies. And in the worst case event of financial failure, the portfolio would still provide a window for acquiring highly skilled talent.

The growth of society is rooted in the fulfillment of its unmet aspirations. First generation entrepreneurs like Dhirubhai Ambani and Narayana Murthy have transformed the Indian middle-class thought process by bringing economic opportunity to the doorstep of India’s youth. A robust startup environment thus provides incentives for people to acquire skill and scale up the employment pyramid, from traditionally laggard sectors like agriculture and PSUs to high-income services and industries.

However, looking beyond this obvious prism of the trickledown effect, tech startups are capable of bridging the proverbial gap between growth and development. Technology could serve as a critical enabler in catering to the needs of the underprivileged in the spheres that matter most – education, healthcare, communication, power and agriculture. It overcomes the barriers posed by the shortage of skilled human capital and, to some extent, a rampant governance deficit.

The challenge in achieving inclusive growth stems from the difficulty in customizing both products and service offerings for the 70% of India residing in over 550,000 Indian villages. While companies realize the lucrative business prospects presented by this largely untapped segment, they find the complexity of such a specialized value delivery to be a prohibitive constraint. Smaller startups focused on the rural sector can better tailor their business models to take advantage of this opportunity through cost and access based innovation. Creative technology based solutions can thus demolish the problem of consumption asymmetry even in underdeveloped environments that are characterized by income disparity, restricted credit access and debt traps.

And many of these solutions are likely to be apt for other developing nations as well. Domestic demand apart, a beehive of new ventures would lay the groundwork for the emergence of India as a global linchpin: This can be achieved by creating an export niche for products that compete not only on price, but also on world class innovation.

The next logical step in the strategy is to make this new technology innovation ecosystem a talent magnet for India’s promising engineering and science graduates.

Over the last decade or so, the diminishing appeal of high-tech jobs among India’s college crowd has begun to show. Today, the crème de la crème of young Indian engineers consider a career in finance or management consulting as a golden apple, and are eager to make use of an MBA early in their work life to make the shift. Whereas late night hostel debaters instinctively blame an uninspiring education and substandard teaching for this flight, the private sector needs to examine it from the perspective of personal incentive.

The motivation for joining a tech career goes deeper than monetary compensation. The stimulus is usually ingrained in the desire to be a part of something novel. It is this climate of innovation and constant learning that large firms often fail to create.

And while high-tech startups can house and sustain this glamorous ambience at an optimum, they must strive to obtain an early introduction to campus geniuses. Private companies could facilitate these engagements for their portfolio ventures by leveraging their university relations to popularize startup fellowship programs. Designed as an early orientation for students, such internships and research programs could provide a real industry context to a Bachelors degree, and help generate an internal demand for Masters and PhD level candidates.

An additional method to connect with entrepreneurial college talent would be by associating with college incubators like the government funded TBIs and STEPs, and providing them with a much needed industrial network. New ventures could also benefit from forging a partnership with incubators for running effective vocational training programs to develop skilled and semi skilled labor, the lack of which constitutes a common resource bottleneck for high growth Indian firms.

However, to compete on a global pedestal, India’s new companies would require a more rounded character: Inspired sales and marketing efforts would be needed to back their value proposition. The products of an education channel built on a doctrine of analytical rigor and rote learning cannot fulfill the necessity for this creative capital. It needs to be supplied by systems which encourage pluralist thought and artistic expression.

Thus the third and final leg of the plan calls for seeding an industry interface where it is conspicuously absent – India’s liberal arts colleges. The scarcity of direct employment opportunities available at arts universities enforces their public image as a refuge of the mediocre. But the participation of arts graduates is crucial to India’s growth story. They could serve as an effective force multiplier for new businesses by complementing the skills of engineers and scientists with their own.

A globally competitive tech industry operates as a value mesh of complementary businesses pertaining to diverse academic fields. For instance, in the US telecom sector, telcos and equipment vendors gain from providing an infrastructure on which many interactive media firms, content creators and syndicators, and mobile services companies are based. Inter-disciplinary founder and employee teams are best equipped to envisage and capitalize on such an ecosystem of mutual advantage.

To this effect, private companies could invest in jointly starting industry-tailored programs at the nation’s top arts colleges and subsequently employ the graduates where their contribution matters significantly. Perhaps Anand Mahindra’s recent $10 million donation to the Harvard Humanities program is merely an acknowledgement of the importance of an open door HR policy that welcomes imaginative mavericks with open arms.

The private sector’s solution to meeting the unmet needs of Indians would be to encourage India’s people to design and deploy custom solutions in microenvironments that they are well acquainted with. From a water-carrying jacket for Rajasthani water-bearers to a low cost mobile x-ray machine for remote villages, technology holds the key to social inclusion.

The venture acceleration program discussed earlier is sustainable in the long-term since the effectiveness of its outcome is directly measurable and tied with the success of the participating firm. While it is imperative to give teeth to the future of India’s high-tech sector, conceiving the next Intel, 3M or Facebook would require a transformation of the societal perception of entrepreneurship through equitable participation across the spectrum of India’s youth.

To truly shock the system, the private sector needs to think big. It must give its CEOs a fair reason to think and act like visionary statesmen.
 
   
The essay posted here represents the views of the author only and not of INDIA Future of Change.
This is one of the winning essays from the INDIA Future of Change Essay-Writing Contest 2010-11
as evaluated by Financial Times, the knowledge partner for the contest.
 
   
   
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