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KV Kamath | Innovation, productivity to play major role

KV Kamath | Innovation, productivity to play major role
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First Published: Sun, Aug 21 2011. 10 04 PM IST

Guiding hand: Kamath says strategy decisions have already been taken and only course correction is required. pHOTO BY Aniruddha Chowdhury/Mint.
Guiding hand: Kamath says strategy decisions have already been taken and only course correction is required. pHOTO BY Aniruddha Chowdhury/Mint.
Updated: Sun, Aug 21 2011. 10 04 PM IST
Bangalore: Veteran banker and ICICI Bank Ltd non-executive chairman K.V. Kamath takes over on Monday from N.R. Narayana Murthy as chairman of Infosys Ltd. He spoke in an interview about Infosys’ blue ocean strategy (entering an uncontested market), and what it will need to do, including making acquisitions, to stay ahead at a time when revenues and margins may come under more pressure, both because of intensifying competition as well as turbulence in the Western economies. Edited excerpts:
One theme that kept coming up at Murthy’s farewell event was this idea of setting “stretch goals”, which you said was right up your alley…
Guiding hand: Kamath says strategy decisions have already been taken and only course correction is required. pHOTO BY Aniruddha Chowdhury/Mint.
If you have to be successful, “stretch” becomes an imperative, even more so when hit by constraints. You have to look at them as opportunities. Murthy saying it and my articulating it has a purpose—we have already set goals, made strategic changes in the structure (around verticals, service offerings and leadership) and they are being implemented over the last few months. But you know the global situation, which makes it necessary to look at stretch goals, and make an opportunity of this crisis. Somebody threw me a nice softball, and I responded, not by hitting it out of the park, but by batting it into the arena, so that it is heard.
A sort of “strategic intent creating its own resources” kind of approach?
I would paraphrase C.K. Prahalad: companies tend to grow at a pace which is not expected when aspirations exceed resources. That gap creates an opportunity spectrum. Today, the challenges that are there for all, in every business in the developed world, should be an opportunity for the developing world. That is how India and Infosys should look at the world.
Especially with pressure on revenue, on pricing and on margins?
Very important. Murthy has thought of that, which is why he talked about digging deep into productivity gains, and innovation. This is a listening organization. Everyone heard that. Infosys has amazing depth in terms of leadership and field talent, both client-facing and support. I believe they will respond in a dramatic fashion.
Murthy also talked about reviving the fast-track leadership system, based on meritocracy.
My entire career has been based on meritocracy, in which Murthy was my mentor. I learnt from him, and now he has given me the ball at the chair level. I don’t think Infosys lost focus on that, but heightened attention needs to be paid to it. I thought it was an excellent suggestion, towards building this meritocracy to even higher standards.
Given this pressure on revenue, do you have to make more investments, acquisitions, maybe adjust margins?
All that you articulated needs to be done. I will explain why. Demand for technology and technology products and services will continue. Companies cannot avoid it. Growth being muted, bottom lines are under pressure in the West. You could see a situation where people will ask for margin adjustments, so you are right, that will happen. So you will see a response of squeezing operating expenditure. But the major response has to come through innovation and productivity gain, not just op-ex slashing, and also look at those businesses, verticals, where we are not doing as much. Healthcare is low, government is low, so to that extent, that we can recast. Next, we have to look at geographies where we are not present or are under-represented. Executive management will ask these questions, and make sure course correction will be very quick. That will happen. The role of the board will be to see that these constraints become opportunities.
And this whole question of the need now to make acquisitions?
Infosys has been criticized, probably a little unfairly, as being averse to acquisitions. I don’t think so. Infosys had a very nice growth model, giving it the growth and profits it set for itself. Today, a lot more (in terms of targets for acquisitions) is available on the plate to look at, and Infosys will look at that. But I am in sync with Murthy that it should not be for acquisitions’ sake. It has to make sense. I think with a larger number of companies on the table, clearly there will be some which will make sense, and I am sure those will be the ones Infosys will consider.
In terms of geographies and verticals, or maybe in terms of new technologies?
Geographies and verticals in any case we need to go into, in an organic way. But there could be some opportunities which could be supplemented through acquisitions. As for technologies, technology is a slow migration, you don’t see things happening suddenly. Ultimately, what you are saying should move you up the value chain. There will be a mixture of opportunities to choose from.
Will we see you, in some ways, “remake” Infosys?
My own view is that in my two-year association with Infosys (as a member of the board), I don’t think there is anything to tear apart and put together again. Strategy is not about knee-jerk reactions. What was strategically important has already been rolled out. It is only the events of the last two months that we need to look at for course correction and see opportunities. We are on that now.
Your competitive landscape has to be a component of your strategy. How do you read it?
Each of our competition has taken a slightly different path. We have to remind ourselves that the path we took has served us very well till just recently. In that context we have to look at what is our competitive response. But what I said earlier actually addresses the competition question as well.
Cognizant is now in the rear-view mirror. Will that change anything?
No. I’ll be disappointed if something changes. Strategy is done over time, you play to a plan. No need to be blinded by something in the rear-view.
Are we seeing a “red ocean” vs “blue ocean” strategy situation, with the competition getting intense and, therefore, pushing you to look further beyond?
The situation in the global context is clearly a blue ocean situation. Having said that, I look back at three decades, and it has always been a blue ocean. When has it not been one? The rapidity of technological change and the discontinuities it has caused necessarily makes us a blue ocean strategy company. Always “out yonder” because that “out yonder” is not known.
But with competition intensifying, isn’t it getting “redder”?
No, no. In the past, we were significantly more vulnerable than we are today. We did not have the strong foundation that Infosys has now been built on, the cash reserves, the whole set of equations, the brand equity, the ability to attract good talent, and so on. I can reel out points. So it is still a blue ocean.
In what way will we see your famed “positive aggression”?
I think a company that has grown at the compounded rate that Infosys has clearly has aggressive growth genes. What is required at best is to do a check on various instruments that make up this DNA.
Can you share ideas you are playing with as you take up this role?
My strategy as a non-executive chair in ICICI Bank and here is to actually step back and make sure that executive management executes on what they have articulated as strategy, which articulation would have been done through a board process. Sometimes, like now, there are events (around the global economy) which take place, which call for a response, so that is what we are now talking about. That is not what happens every other day in the life of a company. This point in time attention is required, they are on their feet, they will respond, and then we will come back and chat at the board level.
sridhar.c@livemint.com
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First Published: Sun, Aug 21 2011. 10 04 PM IST