Tarun Khanna is the Jorge Paulo Lemann professor at Harvard Business School, where he has studied and worked with multinational and indigenous companies and investors in emerging markets worldwide. He is also Harvard University’s director of South Asia Institute. Khanna has led several courses on strategy, corporate governance, and international business over the years. He currently teaches in Harvard College’s General Education on entrepreneurship in South Asia.
Apart from teaching, Khanna is also actively involved in the start-up ecosystem. In November, Khanna co-founded a Bengaluru-based business incubator, Axilor Ventures. Khanna is also co-founder at Chaipoint, a chain of 70 tea stalls in Delhi and Bengaluru that he started with students about 18 months ago. On the third day of the Jaipur Literature Festival (JLF), Khanna spoke in an interview about the Narendra Modi government’s engagement with scholars and about incubating start-ups in India. Edited excerpts:
You’ve been voicing concerns about India’s economic progress prior to the new government’s formation. Have your views changed after six months of the Modi government?
There is already a much more concerted attempt (by the new government) to solicit inputs from different people than I ever saw from the previous government, in a much more systematic way. My interpretation from the outside (I’m not part of this government in any way) is that policymakers are reaching out for thoughts from other people and trying to get diversity of views expressed as inputs of their policymaking process.
I would have personally been dismayed if they had come up with some grand pronouncements right off the bat because it would have indicated some degree of thoughtlessness. So I’m quite happy with the idea that they need a few months to think about the right direction and when to announce it. I agree that you will know more in 12-18 months. We are still in the honeymoon period and at some point the honeymoon expires and the results will be seen, but for the moment they appear to be taking a very systematic approach to soliciting inputs and it’s very encouraging.
Have you been approached to pool in ideas for the new government?
Yes, that’s how I know about it. Presumably, and here I’m extrapolating from my conversations with people who are working with the government and in the government, that they are soliciting inputs on topics that supposedly I would know something about. Mine being entrepreneurship and how to re-shape and nudge the fabric of society, the ecosystems in a way that predisposes more young people to starting enterprises of sorts and that’s a game-changer for the country. I don’t see any other way to generate the tens of millions of jobs that we will need over the decades.
Considering there were plenty of bottlenecks carried forward from the previous government, have any of those been corrected so far?
There are, in almost any policy arena, some lower hanging fruits that can be addressed in a year or two and there are some longer-term systemic things that you need to start addressing that take multiple years or even a decade to show results. So, I think it’s a bit early...you should absolutely hold Mr Modi’s feet to the fire in 12-18 months. It’s a bit too soon to declare that there is nothing to be seen as yet, that’s my view at least for now.
So there is a sentimental shift?
Oh yes for sure, there has been a huge sentiment improvement. I think just an expectation of a “can-do” attitude as opposed to a “we can’t do it” attitude, can help the country move forward in a variety of ways. I’m enthused by the motion towards trying to get good policy articulated. There are some good people in the government, technocratic people in the government, and that’s quite reassuring, that’s not always been the case. Certainly watching some of the new appointments, it’s quite reassuring. I won’t agree with them on many things, but that’s not the point, the point is that they are professionally qualified, honest, hard-working people, with a point of view and that’s what we need.
A historic visit is due, with US President Barack Obama visiting India this weekend. What are your thoughts on diplomatic and economic relationships between the two countries?
It is a great sign, there are so many opportunities for joint problem solving that the two countries have. I have fairly extreme views on it, but for instance, a lot of the healthcare experiments that we are running in this country, like mobile healthcare or mobile diagnostics, those things, or things like Devi-Shetty’s hospital in Bangalore, I think those lessons are directly applicable to the US healthcare mess. Similarly, mobile-money and the experiments in the sector, not just in India but other poor countries, are very relevant to some of the areas to the US where we are technologically behind. And the best way to uncover these opportunities is to really open the floodgates and let people interact, engage and have people come up with all sorts of things. So I’m quite excited by the extent to which both administrations are going to signal focus not just on the geo-political issues of the countries, not just Afghanistan-Pakistan and China, because those have to be addressed, but more traction will come if we have economic engagement on the ground.
While you speak of policy changes and your specialization being skill development, what are your thoughts on foreign direct investment (FDI) in retail?
There is no question that a big change in the country, like allowing FDI in retail, will trigger a fair amount of economic surplus and redistribution. Some of the traditional trading communities will, on occasion, be out-competed, but what the society and government need to realize is that the surplus created from organized retail, will be I think in order of magnitude—much greater, than any pain caused by this stress, so I’m hugely in favour of allowing FDI in retail. If you look at the history of any of the countries, a lot of modernization of infrastructure has happened as a result of modernization of the wholesale retail channel and we have tried to skip that step in some ways and that’s been a detriment to everybody other than the trading community. So it’s a challenge for this government.
What are the gaps that need to be plugged in skill development in the country?
There is a lot. I think of them as being three buckets, talent: capital and other enablers of entrepreneurs. In each of these gaps, I see some lower hanging fruit that can address within a year or so, we just need to have a streamlined approach to address these gaps. There are a lot of people in the country who are trying to think and do something this, there are a lot of industrial bodies, no shortage of people who are thinking of bits and pieces in the same things, but the government needs to somehow embrace this collective wisdom and channel it to this streamlined approach.
The place where the government is making some progress is the skill development, and they did a good job with the NSDC (National Skill Development Corporation).
But there are lots of other areas such as provision of debt capital, rationalization of intellectual property, there need to be exit and bankruptcy norms for failed start-ups—it’s very difficult to shut things down. The government should be looking at these issues too. Currently the problem is that different people are taking different shots at these bits and pieces, so we need someone to take a holistic approach of this.
Tell us more about your start-up Chaipoint. How has the journey from teaching entrepreneurship to being an entrepreneur been?
It’s early days, two years old and we’ve opened 70 stores in Bangalore and Delhi and we are opening in Pune soon. We hope to build about a 1,000 stores. It’s the most everyday business we have. We have decided we will use technology and streamline business processes to make it hygienic.
The first year was a year of experimenting, so we actually started small store in Bangalore in Koramangala and one in Pune. The Pune one we shut down pretty quickly because we made some basic mistakes. My student who runs it on a day to day basis, Amuleek Singh Bijral, originally from Patiala, had a career in technology and he and I and another student decided to start this. The experiment took 18 months and we got it angel funded through some colleagues of mine. Now it has some VC (venture capital) fund behind it and it’s scaling pretty nicely. It’s an example of how you can take the most mundane thing and soup it up.
I’ve also opened an incubator in Bangalore—Axilor Ventures—with four colleagues including two co-founders from Infosys. That is just started and it is going to start soliciting applications for students to be residents. We will do 3-4 different types of funds like zero start-ups, for college kids—we will give them small grants. We are also doing investments—decent size, large angel rounds. So right now we are approaching it like an entrepreneurial venture, we are going to struggle and iterate our way to the right model of an incubator. Axilor is my attempt to scale up what I’m doing with some like minded colleagues.
Another attempt by me is Aspiring Minds, which is an aspiring tech-software driven, talent assessment enterprise that started in Delhi (in Gurgaon) and now is the nation’s best talent assessment by far. It is used by 1,000 corporates now, we do a sweep of about 3000 colleges, we are in 6-7 countries, we just entered US and will enter China. It helps companies find talent they normally wouldn’t find and helps people with not-so-fancy degrees but who are smart, to find jobs.
What are your thoughts on liberal arts education?
I think it’s fabulous. People at HBS (Harvard Business School), lots of them who get in are from humanities, along with a mix of scientists, engineers and people from conventional economic backgrounds. I am a big fan of liberal arts education. I was to go to IIT (Indian Institute of Technology) Madras, but I chose to go to Princeton partly because I thought it would be much more intellectually stimulating.