Nitin Nohria says the country needs better infrastructure and easier regulations to encourage new business models and entrepreneurship
Mumbai: The government’s Make In India campaign is a good initiative but India should focus on advanced manufacturing rather than trying to compete in an overcrowded low-end manufacturing market, says Nitin Nohria, dean of Harvard Business School.
Speaking at a discussion in Mumbai, Nohria said while there is a lot of excitement about new economy companies in India, the country needs better infrastructure and easier regulations to encourage entrepreneurship and new business models.
Responding to a question on recent claims of India’s scientific achievements in ancient times, Nohria said India must strive to be great nation tomorrow, rather than staying obsessed with the glory days of the past.
We are seeing the government focus on manufacturing while the buzz on the ground is in e-commerce, mobile commerce. Do you see a dichotomy there?
I think for a country that has a lot of talent, and we are a large country, we don’t have to be an economy that’s centred on one thing. So, I do think that the Make In India campaign is a good campaign particularly if we can focus on advanced manufacturing. And we are opening up sectors like defence, which are largely about advanced manufacturing.
It is not the same as producing low-cost products. Because I don’t think we can have sustained competitive advantage at the low end of manufacturing value chain. There are too many competitors around the world—we always talk about China, but now you have Cambodia, Vietnam, Bangladesh; there’s no limit to the number of people who will enter the lower end of manufacturing.
I think defence is a huge opportunity. It is a real need for the country, there is a lot of import that already occurs.
But on the other hand there’s excitement about new economy companies. The only disappointment I have is that... I have been carrying around this phone; now the world is moving to data, voice is getting replaced by data ...who wants to have an actual conversation with anybody? But on data, we are really falling behind. You need 3G, 4G, LTE (long term evolution); high bandwidth sources. So, I worry.
Will the growth of these new economy companies in some way be constrained because they are not creating the database infrastructure that’s necessary?
Data is pathetically slow.
Are regulations hampering entrepreneurship and innovation? We have seen tax regulation issues with online marketplaces and payment issues with Uber. And are enough education institutes in India fostering entrepreneurship?
Sometimes my feeling is that entrepreneurs in India succeed despite the system not because of the system. There is very little that is being done that is fundamentally supportive of innovation. You cannot be among the lowest ranked countries in the ease of doing business and say you are entrepreneur friendly. Chasing permits is not the greatest use of an entrepreneur’s time.
We need to think on many dimensions on how to support entrepreneurship, and I don’t think there is any dimension in India that is developed today.
There’s still very little venture capital, still very little support for creativity in schools, we are still a test taking, test obsessed, score taking country. And if that’s the only way that you are going to succeed, then it is no surprise that you would be. By the way, I was like that. It is very important for us to think about. Government policy is a very small part of it. We keep hoping that there will be some magic policy that will liberate entrepreneurship in this country.
I actually worry that we think about that on too many counts.
What’s your perspective on the discourse on scientific achievements of India in ancient times, something we are seeing at the Indian Science Congress?
If we can take any inspiration from our glorious past to move into the future, I am happy for us to take that inspiration. But we are not going to go live 10,000 years ago. We have to live now, in the 21st century. I am agnostic about where the inspiration comes from, from history or mythology or any of these things.
But if we just stay obsessed with trying to find glory, patting ourselves on the back that at one time we were a great nation.... I don’t care if we were a great nation one point in time; we need to be a great nation tomorrow. The next person cannot go back and live in that history. The young people of today want to live in a great nation of tomorrow, one that can take pride in the scientific accomplishments of the 21st century, not of the past.
At the Harvard Business School, you’ve pushed for fostering a diverse culture, with special focus on inclusion of women. What’s been your learning?
We have been admitting students at Harvard Business School for 50 years but only five years ago, did we stop to ask a question: how well are our women performing relative to men in our own classrooms?
We just took comfort that we are admitting more women. We have first year honours, second year honours, we have people become Baker scholars and when we looked at that data we saw that representation of women was about half of what it should be.
So if 30% of the class was women, then 30% of high honours should be women, right? What’s shocking to me is how few companies actually know this data in their companies. How well do women perform? Very few people have looked at the data to see if they are earning the same, getting promoted the same, succeeding at the same rate, at what level are they getting into senior management positions. So it is almost like you take comfort in the fact that at the entry level you have no bias, but then you don’t ask the question, are they succeeding at the same rate?
In India, the new Companies Act mandates companies to have at least one woman on the board…
So this has been a very interesting global phenomenon. The mandate itself is a controversial idea. Some people say you can’t do these things by force and so forth. Statistically speaking, once you have enacted the legislation, you will find the women; there are plenty of talented women.
The second part of the evidence is are these boards better as a result of having women. My understanding of the research is that at the very least they are no worse, in which case you might as well have them. You are being more representative and they are no worse. Why should the standard be that it should be better? Why shouldn’t the standard be that it is no worse, because it is already better by being more inclusive?
What’s your perspective on boards in India in general?
Boards are inherently difficult institutions. So it is very hard for boards to do everything that we hope boards will do. Everywhere in the world, not just in India. Why? Board members have limited time to devote to these companies. They rely on the information provided by the management.
So for boards to really influence the strategic direction of the company or even to early on recognize problems in the company, it is not as easy as most people think it might be. A healthy debate, a constructive conversation, that is the first step. But I, in general, worry that whenever there is a failure in the company, people seem to say the board must have been weak. The combination of limitation of time and asymmetry of information just makes it very difficult.
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