Building Business, The India Way

By Michael Useem

Indian and Western business leaders preside over demanding worlds that require strategic thinking, persuasive communication, and timely decision-making.  At the same time, they have evolved distinct styles for leading their enterprises, and the distinct way of doing business in India has helped many companies push annual growth rates well into the upper double digits.

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The ‘India Way’ is an approach based on nimbleness and constantly adapting to an evolving environment.

India is a vast economy with a wide variety of practices and arrangements across its hundreds of thousands of companies.  To characterize the Indian way of management, we have focused on the country’s largest firms – those that have played a leading role in India’s rapid development and have come to serve as models of business enterprise for entrepreneurs and managers across the country.

Our approach has been to interview those at the top of the pyramid where the critical decisions of the nation’s most important firms are made, particularly those strategic choices that have helped define India’s distinctive approach to business.  We approached 150 of the largest publicly listed companies by market capitalization, and we interviewed more than 100 of their leaders.

Among those we interviewed are Reliance Industries Chief Executive Mukesh Ambani, Bajaj Auto Chairman Rahul Bajaj, and Infosys Technologies Chairman Narayana Murthy. We have sought to let Indian business leaders speak for themselves, to characterize their leadership experience in their own words. All are immersed in the phenomenon in ways that outside observers can never be.

We also surveyed the companies and we draw on a host of academic and industry studies of Indian and Western business leadership. From all these sources we have identified a distinctive approach to business problems that we have termed “The India Way.”

Exceptions can be found of course: the owners of Satyam Computer Services corrupted their enterprise; executives of American companies like Google work in ways akin to what we find in India.  Appreciating the exceptions but in search of common cloth, we have found four consistent threads.

First, Indian executives see their most important goal as serving a social mission, not maximizing shareholder value, as in the U.S.  They take pride in enterprise success – but also in family prosperity, regional advancement, and national renaissance. When asked about their priorities, Indian executives ranked investor interests below strategy, culture, or employees, much the inverse of what we usually hear from Western executives.

Second, Indian executives measure and manage almost every aspect of human resource practices and effectiveness, significantly more so than in the U.S. firms.  Four-fifths of the firms in India, for instance, affirmed that they deemed employee learning to be of strategic value for the firm’s competitive edge; just one in twenty of the U.S. firms so confirmed.

Third, Indian executives banged away at hard problems with a trial-and-error approach that is deeply rooted in a culture of scarcity and constraints.  In the words of one executive, “The animal I like to compare ourselves with is more like a crab rather than a tiger or a leopard that moves quickly towards a very pre-specified destination. We move sideways because the environment is too uncertain; it evolves too rapidly.”

And fourth, Indian companies are less interested in acquiring competencies through mergers and acquisitions, joint ventures, or other externally oriented approaches compared to American firms.  And given the large and intensely competitive domestic market with discerning and value-conscious customers, most of modest means, Indian business leaders have of necessity invented ways of delivering their products with extreme efficiency, whether mobile phone service for a penny per minute or a four-door automobile for $2,500.

With the India way of operating, many Indian firms have achieved rapid growth for most of the decade. Infosys employed 10,700 and generated $545 million in revenue in 2002 – but nine times those figures just seven years later.

A tail wind helped. India’s Gross Domestic Product has annually expanded at just short of 9% in many recent years, more than double that of the U.S. Still, India remains one of the most challenging major economies in the world.  A World Bank ranking of the ease of doing business placed the U.S. second but India 122. In ranking countries on their competitiveness, the World Economic Forum placed the U.S. first but India 50th.

Despite the challenges, many Indian firms have grown at rates far exceeding their American counterparts.  And we believe that the difference can be traced in part to a management model that contrasts with combinations found in other countries, especially the U.S., where company operations have been more disciplined around investor returns.

In the words of R. Gopalakrishnan, the executive director of Tata Sons, presiding over a diverse business group with more than 350,000 employees, “We think in English and act in Indian.”

–Michael Useem is co-author with Peter Cappelli, Harbir Singh, and Jitendra Singh of The India Way: How India’s Top Business Leaders Are Revolutionizing Management (Harvard Business Press, 2010).  He is Professor of Management and Director of the Center for Leadership and Changes at the Wharton School, University of Pennsylvania, USA.