New Delhi: Lord Kumar Bhattacharyya has spent at least 30 years advising companies on their manufacturing processes. Warwick Manufacturing Group (WMG), which he founded in 1980, has built a formidable reputation among companies and governments in Europe and Asia.
On a recent visit to India, Lord Bhattacharyya addressed chief executives at a Confederation of Indian Industry forum and pointed out how the gap between India and China is widening rather rapidly.
He spoke to Mint about how the downturn has affected manufacturing and the significant innovations that have taken place as a result of it. Edited excerpts:
Technology focus: Lord Kumar Bhattacharyya says that while the slowdown and the resulting credit crunch have caused several problems, the upside is that companies have become more design-oriented. Rajkumar / Mint
The ongoing slowdown has resulted in a lot of manufacturing being hit. What are the changes that companies have made to tide over this downturn? What are the smart innovations they’ve made?
One of the big things is that although there have been a lot of problems because of the credit crunch, there’s a tremendous amount of opportunities as well. The whole area of low carbon is a huge area in the world, then, new industries are setting up, new types of technologies are coming on stream. It will be much more science and technology oriented.
When (US President Barack) Obama came to power, he said that the only way the Americans can come back again is by having the ecology of innovation in science and technology. Those were his famous words. So when he came, the first thing he did was to empower science and technology organizations to bring out new products and bring America back again to the forefront. Now, he might have articulated it, but most people are thinking about it anyway.
That’s one. Then, there are many things—by fiscal measures, by deregulation, a country can become more competitive. Just look at China, their economy is huge. A lot of my Chinese ex-students are billionaires.
What are the major innovations that have taken place as a result of the slowdown?
The major innovation that has taken place is that companies have become far, far more design-oriented because competition (has gone up). Take a simple thing like a car. Everybody in the world is making a car. How do you survive? Companies have realized that you cannot survive only on the basis of low-cost manufacture any more. You have to have certain things in a car that make it attractive, and people are prepared to pay. And that’s where the major changes have taken place.
There are only two or three things that companies can do. They can...improve their technology and make themselves more competitive that way. By and large, companies do not have any major slush in them any more. Over a period of 10-15 years, they’ve become so competitive in that area, it is now entirely technology-driven.
Look at the airliners these days. You have the Airbus A380 come in with all new technologies, and boom, Boeing comes in with the Dreamliner with 50% of composites.
So, it is the technology that drives it.
In the UK, you’ve argued for government aid to Jaguar Land Rover, (JLR) saying it would be catastrophic if JLR were to fail. Now, given that the Tatas have managed to sort out their funding and there is some sort of pick-up in sales, would you say that the scenario has changed?
The scenario has changed, and it is changing quite fast. In Tata’s case, they have purchased a very, very good company. JLR is very good value for money, and the technology is second to none. And at that time, when the credit crunch was there, it was at a very low point. And when there’s a crunch, you cannot have a crunch in the spending of R&D (research and development) for new products. That’s very important because if you don’t do that, you won’t be competitive again.
Whoever owns it, has to ensure that the product line-up is there to ensure that it remains competitive. In the meantime, the economy has improved and there’s no requirement for government guarantees.
In the last decade or so, Indian manufacturing has made some strides, but it still has a long way to go to catch up. How would you compare India with other countries with manufacturing prowess such as China, Korea and even Japan?
India doesn’t have a product base. India is not moving very fast on products made in India but predominantly for the domestic market. There aren’t any products which are made by India. Unlike China, whose main aim is not to depend on overseas companies for their product base... So, when you look at new cars and new products that are coming out, they (Chinese manufacturers) make them world-class right from Day 1. And so, the combination of a low-cost base and a new product is lethal. They then grab that market.
India has got all the attributes of being a great manufacturing nation. It has got the skill base, its regulation is pretty benign and becoming more and more benign but, unfortunately, India hasn’t yet made the stride... A lot of products are made in India for the domestic market, unlike China. China is very proud, and their ambition and aspiration of having products made by China is their main driver. If you look at the top 20 people who rule China, 18 of them have a science and technology background. And so, they understand the power of a product base. What China wants the international community to know is that they are class A in their product base. That’s the only way they can become competitive because low-cost manufacture can keep you competitive for a very short period. After that, you have to have your product base.
You’ve mentioned that the UK has significant prowess only in two types of research and development—biotechnology and pharma…
No, no, sometimes they misquote me. What I’m saying is, if you look at engineering products, take Rolls-Royce, they are second to none. Sixty per cent of the world’s aeroplane engines are made by Rolls-Royce. Take British Aerospace. Take JLR, which has produced the XJ—the world’s best car. They’re making other things—medical technologies, for instance, in which Britain is doing quite well. You can’t do well in everything, but Britain still produces more cars today than in 1981. Effectively, what I was saying is that when you look at the world economies and pharmaceuticals, Britain is No. 1. If you look at the whole area of biotechnology, (it) came up very quickly because of the research base in biological technologies and research universities. The link between British universities, where innovating takes place, and their transfer, where companies take it over and make money, is very good now.
India’s National Manufacturing Competitiveness Council is now around five years old. Has it fulfilled its mission?
They’ve been doing a lot of good work. I’ve met (council chairman) V. Krishnamurthy a lot of times. We define manufacturing in a much broader way. Manufacturing means companies that design, produce and market. Manufacturing is only a minor part of the totality. Making it is an incidental part. The intellectual property comes out in the design process—and it is that which one has got to concentrate on. Because the process of making it is very similar across the world. Tomorrow, if you want to put in more automation, you can bring it from somewhere else in the world. It isn’t a big deal. The world defines manufacturing in a bigger way. It is companies that design, manufacture and sell.
Let me give you an example. Now you have a regulation which is to do with end of life of products. So, a very simple legislation has a huge impact on areas of sustainability. The days of when you manufactured and sold, it is gone. Take the case of televisions, Panasonic is responsible for disposing (of) television sets.