Thursday, September 25, 2008

Would India be hit by Global Economic Crisis?

This has been the dinner table topic for most of my week, with everyone asking about it. It is interesting, because for most Indians, this economic crisis is still a distant thing. Well, most, except the workers in BPO, who got hit first.

I was telling someone that this is like an impending Tsunami. It is instructive that when the devastating Indian Ocean Tsunami took place, the ocean water actually receded in some places and people flocked the shores wondering what's happening: And, then it came.

I see the same confidence on many Indians, especially those investing in real estate. Someone told me that in fact this crisis will eventually result in global economic leadership shifting to India and China. Not an unusual opinion. Another opined that India will not have a mortgage crisis, as lots of black money is actually sunk into property and there is little reason to default for Indian borrowers. Yet another said that India has real demand - as opposed to speculative demand which drove up prices in the West - and hence, it is unlikely that Indian prices will fall.

Unfortunately, such confidence is possibly misplaced. For a variety of reasons, but principally owing to the very unequal nature of India's economic development. The prosperity was not shared - among classes as well as geographically. In fact, more people are worse of in India than they were twenty years back. So, India may lack the 'real' demand to go on at the face of recession.

Also, India is not China, and what we have got is a very dependent economy. Our success story is inextricable from America, whereas China has a broader basket of partners and trade. The Chinese public finances are far stronger than India's, though there are many rumours about the health of the Chinese banks. India's trading patterns are highly skewed towards Europe and North America, but China enjoys far higher trade with ASEAN, Africa, Middle East and Africa as well.

Besides, India's recent economic success story is, as seen by the media, manifested in stock market. However, the stock market indices got a lift mainly because of Wall Street dollars flowing into it, dollars that have already started leaving the country, leaving the stock market quite low and the currency in tatters. Here also, a significant difference with China - the Foreign Direct Investment in India is yet to go anywhere close to Chinese levels, the investment in economic activities like manufacturing and services, investments which are harder to pull than its stock market counterpart.

It seems that Indian Real Estate and Stock Market will take the hit, as will the poster boys of the New India - the IT and Offshore Service companies. One reprieve - I think the wage growth has slowed and the labour market has slackened a bit. But inflation is obstinately standing at 12.34%, creating further pressure on the currency and leaving people significantly worse off. It is great that the business confidence continues to be high, but that's no cause to cheer - irrational exuberance does not always end well.

As I now travel to Manila, I leave India with a concern - the new-found confidence is only too fragile, and the impact of a sustained downturn is unknown. Indians, in general, have never experienced a global economic crisis from close quarters; this time, it seems, they will have to endure the winter together with everyone else.

Travelling in India - Delhi

We have finally left Mumbai and come to Delhi. New Delhi, more precisely, and put up at the Le Meridien, on Janpath. So, I can look into the Rastrapati Bhaban out of my window, and can take a morning stroll on the Rajpath.

The contrast between Delhi and Mumbai is so prominent that one of the fellow mission members could not stop pondering, in the bus, why we went to Mumbai at all. I am sure she was doing a mental comparison with the stream of humanity outside the Lower Parel station, and tree-lined streets and roundabouts on Janpath. There were comparisons made of the roundabouts on Delhi streets and the roundabouts in Craigavon. Delhi appeared calm, well-composed, planned and beautiful, a different world from the frenzy of Mumbai.

The difference was even more pronounced in the evening. The reception was hosted in a farmhouse in Basant Kunj, instead of a city hotel. While the road to the farmhouse seemed leading to nowhere, and we covered miles of unlit road to turn into a mud-road eventually leading to the place, inside the gate, it was just unreal. I could not stop making the comparison with the garden in the movie Meet Joe Black, the one in the closing scene where Anthony Hopkins finally depart the earth with Brad Pitt. It was a social evening, and while we got only snacks in Mumbai and closed by 9:30, an elaborate dinner was served and guests were still arriving when I left the venue finally at 11:30p. As we were forewarned, the Delhi event was much more social and formal than Mumbai, most of the invitees coming with their spouses, and by late evening, the place was filled with ladies in glam dresses than suited businessmen.

Interestingly, I had a couple of Mumbaikars with me, as our partners from Mumbai decided to come to Delhi. They looked distinctly out of place, with their strictly matter of fact outlook, vegetarian dining habits and 'no alcohol' policy. In fact, one of them commented that Delhi-ites have this particular penchant for parties, and people will not leave till midnight, because they get easy money by signing papers while the Mumbaikars have to toil for it.

The other difference in Delhi, I noted, that everyone knows someone. Prime Minister features into our discussion often, so does Senior Bureaucrats and Judges. As it will be an offence not to know the names of latest Bollywood stars in Mumbai, it will be as out of place in Delhi not to know who the Cabinet Secretary is, and who is controlling the power in Foreign Ministry. It is a very different world, drunk with its own power, the nerve-centre of the republic.

I had another feeling while in Delhi. Everywhere else in India today, the government seems like an irrelevant entity. You hear the people on the street, and speakers in the conference circuit, you hear the same message : India will attain its goals despite the government. Not in Delhi - not on Rajpath - where the Government of India is present in all its colonial glory. This is one place where India does not seem independent, despite the flags and pomp. As I stroll around the streets, hear people talk, I know we are a nation governed, by Indians, who are Indian by birth and colour, but distinct and different in taste, beliefs and thoughts. I look at Nehru's creation in wonder - an Indian colonial state, with its attendant power, glory and failings. Without coming to Delhi after all these years, I would not have felt this so clearly.

I have worked hard for last few days, and feeling that I deserve a holiday today. I am planning to go to Old Delhi tomorrow, if possible, go and see Red Fort actually. I want to see and feel India, which, in my opinion, isn't in the early colonial cities like Mumbai or Calcutta, or late Colonial cities like New Delhi; but, which resides in the old Indian cities like Old Delhi and Old Hyderabad, and the new post-independence towns like Chadigarh, Bhubaneswar, Durgapur and all.

Tuesday, September 23, 2008

Travelling in India - Mumbai

I am in the middle of a tour around India - with a Northern Irish trade mission first, but then by myself - wherein I shall cover six to ten Indian cities over next two weeks. With a break, of course, I shall be in Manila the next week, but this is possibly the longest exposure of India I shall have after a real long time.

As I said, I am already there in Mumbai. I am staying in Le Royal Meridien, which is a fine hotel just by the International Airport, and within a close range of Andheri, which I presume is a sort of a commercial hub. This hotel is styled for colonial luxury, with Mahogany desks and beds, and dining and wining facilities in the style and tradition of the raj. I am here with other Northern Irish business executives, and for most of them, this is the first time to India. I am certain they will find this hotel a bit alien, but thoroughly enjoyable. I confess - I haven't asked them; I just guessed.

However, I have noted the most common question Indians ask their foreign guests: Do you like India? This is possibly usual, but may be not - not many people asked me whether I like Philippines or Dubai, and people I know in London would usually ask whether I miss India rather than whether I like England. Travelling around with the other members of the trade mission, I made a mental note every time such a question was asked within earshot, and soon lost count. It almost felt that the Indians are the most self-conscious nation around the world, always keen to impress the guests and almost embarrassed with their short-comings.

However, despite every guest stating that they find India 'fascinating' in perfect Irish politeness [and doublespeak], Mumbai outside was quite fascinating indeed. We chartered a bus to Lower Parel, where a reception was hosted for the trade mission in ITC Grand Central, another fine hotel. I was sitting next to another Indian executive who represents a Northern Irish mining equipments company, and both of us were watching, in quiet amazement, the traffic and the crowd on the streets around us, and the quietness inside the bus full of Northern Irish business executive. One of them could not resist mentioning that they find it completely different - especially coming from Ireland, where hardly you see anyone on the street - and to prove the point, the bus had to stop in traffic for a while right in front of the Lower parel station, and we observed the stream of people continuously coming out of the station. That was about 6pm, and one could see the office-returnees of all gender, age and style, rushing to varied destinations with the unfailing urgency.

From this, the ball room of ITC Grand Central was a world removed. Luxury, slow and deliberate, the politeness of the attendants and the traditional dress of hostesses were almost unreal. The PR company, which arranged the show, lined up a couple of pretty hostesses on Sari at the reception, with flower petal-filled plates to receive the guests with a tilak and 'baran'. They performed their duties in sacred seriousness, explaining to each incredulous guest what the ceremony is, but breaking into giggles when they had to do this to me or Jaideep, the other Indian-born executive. That was the other India on showcase, a bit of tradition plucked from nowhere and put in display in the middle of a luxury hotel and European guests. It was an India distant from Lower Parel station and even I found it unreal.

Back in Le Meridien, I found this solemn note in the pocket of my bathrobe: "This bathrobe has enjoyed considerable success among our guests, to the extent that some particularly enthusiastic customers have become 'collectors of le meridien bathrobes'. While we recognise that this initiative helps spread the reputation of our establishment, we nevertheless urge our most fervent supporters to make an effort to separate themselves from this admittedly endearing garment when they leave." No, I am no collector of bathrobes, but think for a moment, this is also India, an urbane India dripped in the finest of dry British humour, seasoned over two centuries.
I am also sobered, the next morning, by reading a note on our breakfast table. It talked about how ' the perfect blend of Illy coffee would provide every guest an unique experience, because this unique blend is designed for a perfect taste'. In the new Indian English, a meaningless sequence of words put together. I secretly wondered whether the writer is trying to do a bit of NLP, but possibly not, as I became confused and felt ridiculous rather than 'perfect' and 'unique' after reading this piece. The point is that this isn't careless writing; this is representative writing, typical of the modern Indian English, which is peculiarly adjective-laden and more sound than content. I have now become used to words like 'fantabulous', don't know where it came from but know that most Indian business executives love that word. Jug Suraiya commented that our language must grow up - I shall repeat this here. Indian English continues to be its glorious adolescent self, despite the odd dry humour in the pocket of a bathrobe!

The day ended with an young Indian executive telling me how he scored 6 out of 6 in the latest job appraisal in his company as if that was life-and-death for him, and another person observing that he has found that the Indian labour market has taken a turn for the worse, and it is hard to find a committed, sincere professional anymore.

So, what did I want to say? Nothing, perhaps, than I watched India in all its variety and colours through Mumbai. Yes, I could title this post - The Wonder that was India - or, Unity in Diversity [or should it be the other way round?]. But, India is too many colours, too much sound. And, I thought keeping it a bit simple is appropriate here.

A Party for Bengal

It clearly seems end of the road for Tata's in Singur, as Mamta Banerjee continues her intransigence and Bengal Government continues to fiddle. Ratan Tata was fairly clear when he warned that he would not mind shifting, if the safety of his employees is not guaranteed. He also has a deadline to catch and a commitment about cost to honour. With every passing day, he is getting better and better offers from other State governments, all of whom want an iconic investor like Tata come to their state with a path-breaking project like the Nano. All it will take now is a single incidence of violence for Tata to pull the plug.

In a democracy, protests like this are allowable, but have their own place. Democratic countries are still to be governed, and unreasonableness can not be tolerated. With all due regards to democratic rights, this was one situation where a firm administrative hand was needed. And, in this regard, the government of West Bengal failed its people. The Government failed to communicate, and clearly demonstrated that they have lost both the will, and the power, to govern.

However, it is not just the Chief Minister, who surely have to take the lion's share of the blame for not communicating well, but also the Governor of the State, Gopal Krishna Gandhi, who meddled in this affair and complicated matters. Mr. Gandhi is a fine man, mild mannered and all. But he seems to miss the point - he tried to appease Mamta Banerjee and give her undue importance in this whole affair. He should have noted the unreasonableness of her demands in the first place and stayed away. He should have realised that the opposition does not want the factory to happen simply because it will bolster the Government, so no amount of concession will let them stand down.

It is well known that the politicians want people to remain poor - if they are working, they won't vote. It is equally true, in this particular affair, for both parties in the dispute. The political thinking in the CPIM is unlikely to be different from Ms. Banerjee's, though the latter may have a more ruinous approach. CPIM continues to display that attitude at the national level and in every state they are in opposition. It can be stated, for certain, that for Singur, the Party and the Government pulled to different directions - while the government may have wanted the project, party men wanted the confusion to continue.

It is almost time to think, however, what happens to Bengal after the Tata project leaves. The consequences may actually be worse than one can think. It is not just one project, which is yet to happen, not happening. It is not even about scaring out the industrialists who could have come. If anyone thought that the status quo will be maintained even if the project does not happen, they are wrong. The failure of the project will surely destabilize Bengal, not just politically, which it surely will, but also economically, and in the middle of a global downturn, that is not good news.

This is why I see this. I have noted, to my dismay, that the Kolkata property prices are way out of range. One almost knows that they are speculative, and yet one notes the level of construction activities going on. In real estate market, perception is reality. Tata leaving will impact the sentiment in other businesses in Kolkata, but will decimate its real estate market, which is actually the most visible indicator of progress and wealth for the modern city dweller.

The other problem is that it will accelerate the brain-drain from West Bengal. In a world where talent is power, the communities should wake up to the impact of reckless political action on their brain-trust. Tata being such an iconic investor, their departure will tell the brightest in the state to look elsewhere. And, they will be offered no less lucrative terms than the Tata by the schools and the employers in other states.

One must also note that we are just about entering the post-post-independence phase, where the configuration of our society will be redrawn. This is a zero-sum time, when each competing entity will scramble for resources and investments. Losing this race will seriously dwarf Bengal, and the damage will be far more permanent than anyone likes to think.

In the face of this monstrous possibility, the note is one of despair. Clearly, this is time for a party for Bengal - one that has the state's interests in mind, above all. This one does not need to be separatist, as none of the other state parties are. But, in this crunch time for resources, people in Bengal can not afford to remain aloof to their self-interest, and be either a pawn to some distant global struggle against American imperialism, or be held hostage to a failed politician's megalomania.

India faces an election in 2009. This election is bound to be different - one that will be dominated by the agenda of individual states rather than any national issue. Inflation, Terrorism, Caste balance and Nuclear Power all are important issues, but none more than the daily bread, good governance, decent roads and secure jobs. This election will display a mad scramble for seats, and will produce coalitions of interest, mostly dominated by state's agenda.

In the middle of all this, people in West Bengal are left without a representation. Clearly, the CPIM, though they ride on their success in West Bengal, does not care about State's interests, because if they did, remaining aligned to the government in Delhi and winning resources for the state would have been more important to them than fighting against the 123 agreement and winning brownie points from their political masters in Beijing.

Also, the state needs visionary leadership - beyond aping the other state government's efforts to invite industrial investment. Post-Tata, this will be more in need - a clear vision regarding the post-industrial, entrepreneurial society. The state will need a clearer talent management policy, not just to retain its own best talent, but also to attract the best from other states and countries. The state will also need to realize its self-interest, both in the context of domestic politics - by securing projects and investments from the central government - and in the international context, by building shared prosperity with its neighbours and securing its borders. This needs to happen, and needs to happen fast.

The question, however, is if anyone is listening.

Sunday, September 14, 2008

The Great Indian Middle Class

I have been reading a number of books on marketing in India, and noticed a consistent theme in the analysis. I am referring to a body of published and unpublished literature, research reports commissioned for specific purposes and sociological studies. While these agree/ disagree on a number of issues, all these research agree on the peculiar position of brands in the Indian marketplace.

India is supposed to be an attractive marketplace. Supposed to be, as the numbers are huge and a bit of money is supposed to be floating around. So, there is talk about an Indian middle class, the size of which is hotly debated and put anywhere in between 40 to 400 million. The variance is based on what one will call the middle class. The bottom three-fourth of this populace will not qualify as middle class by any rich country standards; but, of course, the new fortune-at-the-bottom-of-the-pyramid thinking has certainly brought them into the party. This is the figure which George Bush famously quoted when he was in India, and one would assume that this is what most policy-makers will see when they see India from outside.

I remember saying this when I first joined Rutledge and was asked to brief the managers on how big the opportunity in India is. I paraphrased James Kynge [from his award-winning China Shakes The World] to say that, from outside, India looks huge, a market for one billion people; but from inside, India is a million country itself, differentiated by language, culture, history, religion and education - an uniquely diverse country within a political union. I urged a balanced view of the challenges as well as the opportunities.

Interestingly, that is the key point made in an excellent recent book - The Indian Consumer : One Billion Myths, One Billion Realities, by Alam Srinivas - wherein he looks at the emerging consuming class of the Indians. While attempts have been made to classify the Indian middle-class as one segment, Mr. Srinivas maintains, the consumption pattern and preferences are hugely diverse within this segment. Of course, he talks about different economies, as did Rama Bijapurkar, in her Winning in The Indian Market: Understanding the transformation of consumer India, and classifies the middle class on the basis of its origin - the bureaucracy of state and union level, the railways, the public sector, the private sector, the self-employed, etc [Ms. Bijapurkar talked about a 'government economy', comprising of the first three segments] and asserts how the spending pattern and consumption preferences actually vary between these different 'middle classes'.

I think this is a very interesting point, one that can be of crucial importance to all marketers approaching the Indian market. It is not good enough to think about a huge Indian consuming class. It is important to take this sociological perspective into the account, and decide whether the market is big enough and if there is enough incentive built into the product to attract the target segment.

I shall give an example from our own experience. We are trying to sell English language training to India. Our broad definition of the target market was those who 'has English locked inside', roughly meaning those people who have received tertiary education but can not speak in English. However, what we did not take into account is the sociological root of this segment - these people will mostly come from 'government' families, where the main breadwinner of the family would have been employed in a government job.

I say this because such families actually sustained the private education sector in India for last two decades. These are the families where getting a job is important, but with the decline in intake in the government jobs, the known routes of employability are all closed. While it is far more likely for a Private sector employee to open doors for his/her children through networking, this has increasingly become difficult for a government employee, due to various restrictions and affirmative action programmes in the government sector. So, this generation flocked the Engineering/ Medical entrance examinations and later in the private training schools.

The peculiarity of this segment will be in terms of (a) price sensitivity, even if they can afford, they would not want to spend more; (b) outcome orientation, they would want a certificate, a proof of credentials; (c) product-over-brand mentality, wherein the actual product features and deliverable will matter more than the brand perception.

Since we, and our partners, so far looked at a straight-forward Indian middle class segmentation, we ended up building a posh centre in a big city offering a premium English course, without a certification. We got what we did not ask for - expats trying to learn English, companies trying to educate their employees and rich housewives preparing for next trip abroad - but did not get the 'mass' that we hoped for.

My takeaway from this new set of research is the perspective I mentioned here. What's needed is a product for the 'government' middle class - value-for-money, outcome orientated and easily accessible - and our future business strategies will surely be deeply influenced by this thinking.

Saturday, September 13, 2008

How bad is the economy really

As we are trying to restructure our business, but also launch in the new countries at the same time, the key question that we need to answer is - by our best estimates, how bad is the economy and how long this crunch time is going to last?

This week had its share of bad news. Lehman Brothers, an Wall Street institution but now a struggling bank, is on the verge of collapse. Since it announced bigger than expected losses last week, most of its market value has been wiped out already. The executives at the Lehman Brothers are trying to find a buyer - Bank of America is in the reckoning as well as Barclay's - and they must do this by tomorrow evening. If they can't do it before the Asian markets open on Monday, we are possibly looking at a full collapse - of the bank, but this will possibly affect banks elsewhere and may be countries.

The housing market news isn't any better. It continued its downward trend in the United States, and in Britain, the house prices are down 15% from their last September peak. Firms continue to fail - the latest high profile collapse was of XL, Britain's third largest Holiday Travel company, and they left thousands of tourists stranded in different locations in the middle of this holiday season.

There are other significant developments, like the recent rescue of American mortgage guarantors, Fannie Mae and Freddie Mac, and the bankruptcy of Al Italia, Italy's national airlines. The economic gloom continues to create political uncertainty, Gordon Brown is all set to become its most celebrated casualty, though Bush administration is hardly showing any more inventiveness or resolve to drive out of trouble. The only change is that there is a swing to good old fiscal solutions - Bush announced a stimulus and Brown flirted with the idea of waiving stamp duty - from the favoured monetary solutions, which dominated economic management for last two decades.

Given this broad background, we must answer the question - with a limited perspective - how long this trouble is going to last, how it is going to affect us and what we should do about it.

To start with, our business has two parts - training and recruitment. Training is a recession-proof business, and certain kinds of training businesses actually do better in recession. However, recruitment is bound to be hit. Being a small business, we have never benchmarked ourselves well and therefore, do not have an estimate is what to expect without the buoyant market conditions.

The other factor to consider is that we are a globally diversified business. While the Northern Ireland recruitment may be hit by the downturn, our business may be sustained by the boom in Dubai. Or, may be not - as in my opinion, Dubai is too much of a bubble, and we haven't diversified ourselves enough in the Gulf. I am increasingly of the opinion that we are better off focusing on Abu Dhabi and Kuwait, the original oil-rich economies, rather than Dubai, which is an offshoot of Western wealth and therefore, will be strung along the western recession.

Similarly, India is no longer an exception. While I expected Indian real estate markets to remain firm - given the black money sunk into it, credit crisis should not have much effect - it is already showing signs of weakness and Indian service sector is reeling under the US recession. That affects everything - the newly emergent Indian consumption class already taking the hit. The stock market has been decimated, from the previously unknown heights only a few months back to a deep downturn, and the economy is battered by a 12% inflation. The Indian banks are clueless, the interests are already too high at 14% and it is hurting the expanding economy.

So, this downturn is global, all pervasive and affecting everyone. Given the sheer scale, it seems it will last, it isn't easy to correct such global trends by a few policy twists. World's governments are not known to be good at cooperating with each other. The banks, which unleashed the problems on us by reckless lending in the first place, is still grappling with the problem, and no end is in sight for their woes. By a BusinessWeek estimate, for every $1 loss, the banks must claw back $15 in credit; given that the combined loss of banks will exceed $100 billion or more in next three years, we are talking about $1500 billion credit claw-back over this period. That will destroy businesses, governments, countries and lives.

My fear is that this is surely going to affect highly leveraged businesses. Ours is one by some definition, as some of the real estate interests of the main shareholders are backed by credit. My initial business plan was also based on significant credit-backed expansion. In fact, while I was despondent that the credit crunch hit us as we were just starting off, at the hindsight, the timing was a blessing rather than a problem - committing ourselves to a credit-backed expansion would have made us go down by now.

So what do we do now? I think the answer is in boot-strapping. This is what I am going to share with all my colleagues - we need to change gears and behave that we are absolute start-ups. I did stop taking money from our Head Office funds in April, partly for an emotional reason, but it seems to have turned out to be good strategy. This has put pressure on individual units to generate their money and become more sensitive about expenses. But, above all, this has put HQ at ease, in the middle of financially trying times. However, I haven't spoken about boot-strapping yet, which I would do so now.

The final question is - do I call this boot-strapping or a return to Noah? Do I say that we have an eternal, exciting future, if we see through a few trying months. My instincts tell me that it is going to be a return to Noah - an exercise in survival when the world falls apart. However, the salesman in me is prompting me to talk about boot-strapping, so that we keep on dreaming to be out of trouble soon, at least for the moment.

Restructuring Our business

I came back from India with a rather expected discovery - that we need to fix our business model somewhat. There is this thing about business models, they are easy to get wrong. We have got it wrong because we haven't done all the thinking beforehand. However, the good news is that it is still not beyond redemption, and it can still be fixed.

I realized that I could blame no one but myself for getting this wrong. Not just this was my responsibility, no one else was looking. So they would not have known. They wont still know if I don't tell them. But I have now decided to live my life differently, and vowed not to run away from trouble, but to stand up and face it. I am not sure this courage thing will pay off. I am not even sure that this is an intelligent strategy, given that the job market is turning south and i haven't saved much money to see myself through. However, I have not done the 'right' thing too many times in life - when I faced a difficulty and even if I knew the answer, I did not go the extra mile to convince everyone else to follow my solution. That's my nature - I do not like confrontations. But this time around, I have decided to stand my ground, remain committed and fail if I must - this is going to be the test of my enterprise, more than anything else.

So, what have I found out - what have we got wrong?

I think the first thing we got wrong is our reading of Indian consumer and how to market our courses to them. Direct English is an excellent English training product, with its unique pedagogy, extensive coverage of usage and cultural issues, multimedia material and interesting course content. But this isn't an ordinary English course, which everyone seems to expect. This needs an erudite audience, who is culturally matured and emotionally open.

Besides, the course does not come cheap, and as one of the senior managers in Aptech, the big Indian training company, puts it - in India, financial ability and requirement of English language training is inversely related. So, our plans to spread this course across India through franchising have its own limitations - first from the product side and secondly from the price point.

The third issue on the table is why the Indian consumers buy. I am convinced that the Indian consumers in general are 'brand sceptical' - the product attributes and the price matter such more than the brand. So, for training too, a 'value for money' model is what the market demands, whereas we have created an elaborate 'added value' model - where one pays extra to get a 'global' experience.

So, in short, I have my job cut out. Over the next few weeks, at the same time that I try to bridge the culture gap between my Head Office in Ireland and the offices in Hyderabad and Manila, I must also come out with a final, firm business model for franchising. A model which will put the Direct English product in its place, but will create a balanced, multi-product offering available. I have felt this before, and know now for sure, that we are in the wrong business ourselves - of teaching English rather than in franchising as we should be. However, I have come to realize the business of teaching English isn't that bad a thing, and we should be able to do a lot there.

Therefore, what we are going to have in the next eight weeks is the model ready to teach India English - a two-tier model offering a complete English Learning/ Business Communication course for the companies, and an Everyman's English model, cheap, easy and accessible, which we shall roll out through franchising and take everywhere. It will be an interesting exercise to sort out the branding exercise - do we use one consistent brand or two brands at two levels - and also to handle the transition from one centre entity to a multi-location business. However, this is what I do expect from this business - a real life strategic exposure - and it seems that I shall get this in abundance over next few days. I am sure I am going to have the time of my life!

Friday, September 12, 2008

Should Britain Apologise?

Italy recently apologised to Libya for its occupation of the country between 1911 and the Second Word War and offered an investment deal of $5 Billion over next 25 years towards reparation. This is largely symbolic, and investment deals could have been done without adding this moral halo. But the apology itself is an important step. The key question is one of principle, indeed. It is about whether the occupying countries do accept that their colonial exploits did enormous harm to the occupied, and whether they are ready to accept the responsibility.

As the world becomes more sensitive towards the wrongness of occupation [even George Bush was heard saying that occupation of Georgia by Russia is unthinkable in the 21st century!!], and the world justice system gears up to try the leaders causing genocide and violence, paying for past crimes - including occupation - becomes ever more relevant and important. There are several issues which are still hotly debated - slavery, for example, wherein the European colonialists displaced and dehumanized millions of Africans, needs to be answered for. Japanese have denied an apology to 'comfort women', thousands of Chinese and Korean women forced into prostitution under the Japanese occupation during the war, and Pakistan never acknowledged their genocidal practises unleashed on pre-liberation Bangladesh. However, such apologies are needed - to remind the current generations of the wrongness and futility of such practises.

On the same note, one can ask whether it is appropriate to expect Britain to apologise to India for its two hundred year long colonial rule. Given that colonial occupation is wrong, and British occupation caused untold miseries to Indians, and destroyed its economic and social structures, an apology is clearly due. However, it seems that the British believe that such apology is not necessary, because British occupation actually helped India, helped it to do away with its social evils. They further argue that the twin gifts of the empire - English Language and Democracy - are what is powering India to prosperity and prominence today.

Some of this is actually true. English Language and Democracy are both helpful, and some British colonialists played their part in reforming India's social practises and ushering in modern thinking. In all fairness, the interactions with the British changed Indians - or at least a section of India's population - and this, so far, played a prominent role in post-independence India.

However, the assertion that the effect of empire was beneficial is naive, one-sided and clearly not true. First of all, British empire destroyed India's economy. It is hilarious that some of empire's apologists claim that it is because of the British empire, India has started becoming prosperous today. India was a prosperous country - one of richest in the world - when the British set up their trading posts. The empire ruined India - of not just its jewels, but also of its industry and enterprise. The empire systematically destroyed India's village system and its agriculture. It created an unequal, unfair, favour-based system to buy off the urban gentry. While India's raw materials powered Britain's industrial revolution, India itself was left devoid of industry, through a clever mixture of trade laws, tariffs and local administrative policies.

Second, the British empire destroyed India's system of education. Elsewhere, I wrote about Lord Macaulay, and talked about his role in spreading English education. I maintained that he did Indians a favour by introducing English, though his intent was to create a subservient class of government servants, and not universal education. In the process, indeed, he destroyed universal education. Thinking on his lines, subsequent generations of Indian administrators even gave up thinking of the possibility of universal education, and channelled limited government resources towards funding expensive tertiary education. However, Indian languages, knowledge and tradition were irretrievably lost in the process. The British empire is largely responsible for limiting the scope of education in India, and creating a 'babu' class taught in the Master's language. Any effect that may have on our prosperity is purely accidental, but the damage it has caused to India is beyond doubt and limitless.

Third, though some of the leading British thinkers played a significant part in creating modern India, they were not representatives of the empire. In fact, they had to confront the empire in achieving their liberal, humanitarian goals. The overall legacy of the empire itself, on the Indian society, was one of division, strife and violence. One must not forget the most visible sign of the empire was observed in its parting - they entered the land of a mighty, unified empire and left a land divided, with millions of refugees, in the middle of the most violent communal strife in modern history. Empire's social effects must be observed with this in perspective.

Fourth, while it is true that Indian administrators learnt the art of Parliamentary democracy from the British, it isn't a gift from the empire, but an invention of the post-independence Indian leaders. They demonstrated courage and determination in allowing universal suffrage from the word go. At that time in history, the coloured did not have a vote in the United States. The Indian democracy was an act of imagination from Nehru and co., it was not a 'gift' the empire wanted to leave behind.

In summary, it is time that the British come in term with the truth - that the empire was an ugly, exploitative and unfair burden they had put on other peoples. They need to apologise and they should pay a reparation. Hiding behind the united voices of English language textbooks and biased media stories have gone on for too long. A true apology will hurt no one; but the absence of one will leave Britain a country in denial, unable to come in terms with the modern world, and surely, one day, history will overtake its vanity and it will fail its moral claim of attempting to create a better world.

Thursday, September 11, 2008

On My Way Back

Finally, I am back in Dubai, after an almost three week long visit to India. My longest till date, most involved, and most frustrating at the same time - but I learnt my lessons and going back with enough food for thought.

I spent most of my time in Hyderabad, where our business is primarily based. My time was productive - we signed half a dozen outlets in Mumbai, as well as started an interesting conversation, which may actually lead to a few big orders. More importantly, I got significant strategic insights - not something completely new, but something which I have been thinking about and needed proof to take action. The insight is, as I actually wrote earlier, that we got our business definition wrong - we are not in the English training business, we are in the franchising business. We got this wrong since day one - trying to run the courses ourselves and creating a tried-and-tested model. But the truth is, while we learnt important lessons by doing training ourselves, financially it does not make sense - given the investor expectations - and what we got to do now is to franchise, aggressively and nationally.

I have also learnt how some of our competitors franchise. Some of the models appeared too good to be true. Guaranteed returns, for example, is common, and license fee is actually uncommon. While I am not too agreeable on the guaranteed return part, I think there is merit in fee-free franchising, where the franchise pumps in the money to the market and create high visibility. It may be difficult in our model, where we have actually paid quite a hefty fee to get the license in the first place and we must recover part of the fee by selling franchisees. Food for thought, and I have to come back with an answer on this soon.

Our corporate training part is also doing well. It shows that the common belief that English training isn't that relevant in corporate market is not necessarily correct. Agreed, most of the corporate training hasn't been in the classical Direct English format, but then corporate training is hardly ever in a standard format. It is tempting to think that we can build a business model on corporate training, but I am not yet saying so - we need to be more prepared for that market and there needs to be a business model change before we can compete effectively.

My frustrations primarily relate to the state of business ethics and integrity at the workplace. I was rather amazed by the lack of basic work ethic among even senior managers, across organizations. Punctuality, integrity in terms of expense claims, commitment to work, professionalism at the place of work - basic attributes that one will expect in the workplace - were found wanting. I was left wondering whether this indeed is the nature of modern Indian workforce, but in the end, skipped the generalization but could not stop feeling bitter about what I saw.

It does not of course mean that I am praising the western work ethic any higher than what we see in India. Over last few weeks, I have seen two relatively large organizations behaving almost childishly, with the usual western arrogance and short-sightedness. As an Indian, I fail to appreciate the western love affair with contracts, mostly drawn up in a zero-sum way and hardly a productive arrangement can be built around such instruments. However, last few days, I have observed, altogether bemused, two companies dancing around an useless contract in the hope of an order which does not exist, only to reaffirm in my mind that the western business culture has certain fundamental flaws hidden in its underbelly.

However, the highlight of my visit was, of course, none of those. It is that I met a very interesting person. Yes, yet again, someone you can almost write a whole story about. Someone who wish to be ordinary and keep the potential unknown; someone who is aspirational but uncommitted, involved but disconnected, who hides in the comfort zone lest the big world disrupt the journey. This is really interesting - I thought - because not only this story can be told, this story can be created. And, this story can be created not just on paper - possibly never on paper - but in the real life. And, I thought, while I try to create the story, the story will create, change, me. In between work, over last three weeks, I was thinking about this - so my visit was never boring.

And, sitting now in the airport lounge in Dubai, I understood what this story is. Unmistakably, this is about India. Yes, India. I can now feel it - India is everywhere. You can't escape it, you will meet it everywhere, every moment. And, the lure of this story is to get involved, in India, with India, and be a part of its story. This is probably my big take-away, and one which I am likely to follow up.

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"Far better it is to dare mighty things, to win glorious triumphs even though checkered by failure, than to rank with those poor spirits who neither enjoy nor suffer much because they live in the grey twilight that knows neither victory nor defeat."

- Theodore Roosevelt

Last Words

We shall not cease from exploration
And the end of all our exploring
Will be to arrive where we started
And know the place for the first time.

- T S Eliot

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