The Hindu Business Line : The power of context in tapping global talent

WHAT is common to Hewlett-Packard, Microsoft and IBM? All three `Fortune 50' corporations now have R&D centres located in India and China that are specifically targeted at developing IT solutions for domestic consumers.

Spurred by a common belief that emerging economies will generate the next wave of growth, a large number of international firms have set up centres of excellence in these markets to tap the relatively low-cost, highly-skilled available talent pool.

However, a large share of the innovation developed in these countries is focused on Western needs, ignoring the tremendous potential in markets closer home.

Indian labour, Western agenda

In a Wall Street Journal editorial titled `The next great wave of growth', Wharton professor, Jeremy J. Siegel, projects that by 2050, China will have about 1.5 billion people, nearly four times the projected population of the US.

If China were to achieve one-half the per capita income of the US by the middle of this century, the Chinese economy would be almost twice that of the US. This, he claims, is proved by the historical experience of other countries.

"Over the last 40 years, Japan went from 20 per cent of the US per capita income to 96 per cent, Hong Kong from 16 per cent to 70 per cent, and South Korea from 11 per cent to nearly 50 per cent."

Despite this prognosis, the Indian off-shoring revolution has largely centred on cost-saving opportunities targeted at relatively low margin activities for Western corporations.

While this strategy has benefited the Indian IT industry — creating a steep annual revenue curve as well as generating significant employment opportunities, the sobering reality is that we are missing out on a much larger opportunity closer home.

Besides affordability, a key reason for the low PC penetration and diffusion statistics is the lack of relevant, end user-oriented solutions.

Clearly, IT firms need to look closer home for the appropriate customer base. Rising per capita incomes, greater technological affinity and increasing purchasing power, as validated by the mobile phone revolution, have prima facie have proved that a large domestic market exists for technological products. The key to tapping this market lies in contextual relevance.

Indian subsidiaries of foreign FMCG firms have been remarkably successful in this regard — think of HLL's Surf sachets or Pepsi Food's Lehar Kurkure.

On the other hand, IT firms have been unable to cross the chasm — preferring to sell expensive and context-independent products to an elite few.

The focus is on realising higher margins on the existing product portfolio instead of exploding the market with innovative offerings.

The tipping point

The difference lies in adopting a multi-disciplinary approach to address customer preferences. Too often in the past — and especially in the West — research in knowledge-intensive industries was technology-driven, with business models and user requirements playing a role only at the commercialisation stage.

However, a number of companies have begun to re-orient their thought processes. IDEO, the renowned international design firm, uses the `3-circles approach' to drive its innovation — closely coupling user desirability and business model viability with technical feasibility.

This methodology necessitates a fundamental shift in the dominant mindset of the firm, and requires executives to suspend disbelief and go out to the field with an open attitude that allows for collaborative and free-spirited innovation.

An excellent example on the Indian stage is the PCO revolution in the late 1980s. When Sam Pitroda returned from the US, he realised the need for inventing an indigenous telephone switching system that would function in the hot and dusty environment of India's villages.

He understood that the key to success lay as much in deploying the right technology as in the ability to attract PCO owners via attractive commissions rates (business viability) as well as employing someone to man the booths to aid the illiterate (user desirability).

Similarly, in the IT industry, technology per se is often secondary to satisfying an inherent user need — and the context can provide important cues to drive the success of a particular solution.Malcolm Gladwell's international bestseller The Tipping Point makes a compelling case in favour of the power of the context.

He argues that we are powerfully influenced by our surroundings, our immediate context, and the personalities of those around us. R&D organisations that are looking at capitalising on domestic opportunities need to leverage their internal capabilities as well as exploit the inherent strengths of the environment.

In conjunction with innovating for the West, they need to indulge in a series of brain-storming exercises coupled with on-field efforts in order to embed the context within the products.

MNCs, in particular, are in a unique position to leverage their global talent pool and knowledge base to address the creation and growth of new opportunities in these markets while simultaneously reconfiguring their resources to address relevant trends.

In the future, we are likely to see more technologists, business executives and designers `immersing' themselves in the Indian milieu, in a bid to create innovative and locally relevant products.

Equally important, one can expect an IT revolution in adapting Western technologies to the Indian environment. The context is the key and it is here to stay.

The author is a Rhodes Scholar at Oxford University and is currently with Hewlett-Packard Research Labs India.

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