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Photo: S. Kumar/Mint
Photo: S. Kumar/Mint

It takes time for reality to catch up with rhetoric: Tarun Khanna

Harvard's Khanna speaks on the current business environment, Make In India, contextual management, and lessons from it for Indian firms

Tarun Khanna was appointed by the NITI Aayog in April to lead the committee on innovation and entrepreneurship. Khanna is the Jorge Paulo Lemann professor at the Harvard Business School. He is also a director at Harvard University’s South Asia Institute.

Over the years, Khanna has led several courses on entrepreneurship, strategy and corporate governance. While he has consulted with various multinational companies, Khanna is also active in the start-up scene in India. In an interview, Khanna speaks about the current business environment, Make In India campaign, contextual management, and lessons from it, for Indian firms looking to grow in other markets. Edited excerpts:

Are we seeing a heady optimism (in the West) about India?

There is no doubt about it. And there are two or three structural factors. One is we had a period of political and regulator disengagement in the past few years, for reasons that I can’t really understand. Now with the arrival of a new administration, which at least says many of the right things, in terms of economic policy reforms, I think people in the West have been waiting to hear positive news.

There is capital waiting on the sidelines and they want to invest. But they need to be convinced the rhetoric is matched with reality. In all fairness, it takes time for reality to catch up with rhetoric.

Meanwhile, the other countries in the world are slowing down. It has boosted India’s profile. We are a reasonable game in town.

Has anything changed?

There are two or three things which I can point out as positives. One, the absolute explosion in start-up activity. A lot of money was allocated to this. It needs to be seen whether this money ends up being used productively or not. But at least rhetorically, it is in the right direction to say that the government wants to support new small enterprises. That is one very bright spot.

Another is Jan-Dhan Yojana and the number of accounts opened under it. It seems pretty significant. Even if 5% transact, there is suddenly a boost.

The third thing—the promise of some of the earlier experiments, particularly (Nandan) Nilekani’s Aadhaar.

I think it is going to pay dividends because it is increasingly used in different settings. Even though each of these settings in its own way has been contentious because there are local bodies that might have conflicting agenda.

Ultimately, those have been side-stepped in many instances. Once the nation sees the economic surpluses created by transparency, my hope is that it will have a cascading effect over time.

What is your view on Make In India?

Look, my immediate reaction when I heard about Make In India was if this induces the government to do something about the grotesque lack of public goods in the country, then it is a great thing. And my worry was that if it ever ended up being protectionist, then that would be catastrophic. So those were my initial reactions.

You’ve done extensive work with a lot of companies globally; what’s the sense you get from Indian companies? Where are they in terms of growth, maturity?

They are certainly maturing. By and large, I don’t think they are very different from companies in Brazil, Turkey and Chile. I don’t think Indian companies have any issues about going overseas. One thing that we can learn from some well-run companies is the capability to compete in different contextual circumstances—it takes a while to develop. To me, Samsung is the company that has gone down the path that Indian companies want to go down now. Except that it started 20 years ago.

So it has gone from being worth a few billion dollars to $200 billion-plus. Underlying all that is a commitment to building global talent.

When I work with Indian companies, I see a degree of impatience about how quickly we should see results. And I think some of that impatience is unreasonable.

This is something you’ve talked about in your paper on contextual intelligence.

That paper was solicited by the Harvard Business Review. It talks about the limitations of transferring knowledge across boundaries. In India, Bharti is a good example. Where it admitted that it had overestimated the extent to which its business model would transfer to Africa. And since then it has recalibrated. I think what entrepreneurs should do before undertaking global expansion is ask themselves a simple question: what are five plausible reasons why we succeeded wherever we did. And then try and think through whether any of those reasons can be transferred to a different market.

Does the contextual circumstance change in an acquisition?

No. But it is one way to deal with contextual reality. There should not be a presumption of ground-level uniformity. The thing which is uniform is access to information about all viable models. Which piece of information you choose to leverage will differ from circumstance to circumstance.

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