2 min read.Updated: 16 Jul 2020, 09:42 PM ISTLivemint
Reliance’s shift to the internet with Jio resembles its industrial expansion strategy of yore, but there’s a key difference that could determine how far it is able to fulfil its web ambitions
How Mukesh Ambani’s Reliance uses Jio Platforms as a fulcrum to pivot from the industrial era to the information age promises to become a B-school case study. In the past few months, Jio has had business circles agog with huge investments from the US. With Facebook and Google signed on as strategic partners, with stakes in Jio of 10% and 7.7% respectively, Ambani’s ambition has the backing of two of the world’s most successful internet businesses. If Facebook’s WhatsApp network is expected to aid Jio’s e-commerce venture in various ways, Google’s Android software for smartphones could help deepen Jio’s telecom penetration and enrich millions of Indian lives with the wonders of cyberspace, thanks partly to Reliance’s own 5G technology. Jio’s online proposals for the consumer have already begun to proliferate. While this may simply look like an industrial house going digital, a broad strategy seems discernible in its flurry of plans, one that echoes its expansion of the previous century. Indeed, it is this that lends the company’s internet embrace its global uniqueness.
Under its founder Dhirubhai Ambani, Reliance opted for vertical integration. It was a maker of polyester fabric that moved backward into synthetic yarn, and then further back into the source of its chief raw material, crude oil, even as it fanned forth into markets for refined fuel, bulk plastics and other polymers derived from oil. This way, it had the entire petrochem chain profitably covered, from a sludgy natural resource pumped out of the earth all the way to polyfill pillows. Under Mukesh Ambani, the founder’s son, Jio also began in the middle—with telecom services. Today, Jio is evidently keen to operate everything that keeps people’s digital devices running, such as wireless connectivity, even as it fans out with assorted digital offerings for the country’s multitudes. Now that India has opened up its space sector to private participation, communication satellites might be the company’s next move at the back-end. As for the front-end, Jio’s latest ally Google’s expertise in operating systems could help it acquire a “gateway" advantage. It could potentially gain control of the very interface between a mobile phone and its user, the opening screen of which is valuable real estate for every app striving to reach out. Mass success with entry-level handsets could then grant Jio command of myriad sub-markets, from entertainment and news to online huddles and shopping expeditions. Given the cost structures involved, this digital suffusion could spin big money for the business in the decades ahead.
There is a key difference, though, between Reliance’s old industrial project and Jio’s current internet sprawl. While the former relied on one major resource, oil, the company’s new thrust would rely on several. With large sums of capital, airwave spectrum and databases are easily acquired. But new-age businesses call for resources that are even more intangible. Globally, specific apps or online ventures are seen to succeed on the back of unique ideas. Since innovations could pop up anywhere, no company can hope to suffuse the web beyond a point. Also, core competence gurus would argue that no company can be the best at everything; especially not if it tries to be all things to all people. These factors could limit Jio’s prospects somewhat, though the company may well adopt a policy of buying out every new online gig out there that catches a new market’s fancy. If this were to happen, it could spur internet entrepreneurship, with all manner of whizkid startups vying for Jio’s attention. Perhaps they already are.