Is Education India’s next gold rush?

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About twelve years ago, I was sitting in a seminar listening to the Israeli management guru, Dr Eli Goldratt, expound forth on his seminal Theory of Constraints (TOC).  Dr Goldratt shared something very basic but something we often forget - that a chain is as strong as its weakest link.  This thought has stayed with me and it brings me to the theme of this week’s blog – higher education in India. While statistics in the Indian context are astounding, the one’s relating to education are mind-boggling.

• 5: The multiplier by which the budget for education has increased in the 11th Five Year Plan (2007-12), compared to the 10th;
• 14%: Current enrolment rate in higher education; targeted to increase to 30% by 2020;
• 18,000+: Number of universities and colleges in India;
• 600,000: Shortage of doctors;
• 1,000,000: Shortage of nurses;
• 15 million: Annual increase in labour pool by 2015;
• 240-250 million: Estimated skilled workers required over the next 12 years to cater to the incremental skilled workforce demand in 20 high-growth sectors as well as the unorganised sector;  and
• 600 million:  Indians under 25 years of age.

The strain of inadequate educational infrastructure is beginning to take its toll.  A few weeks ago, the World Economic Forum released its Business Competitiveness Report 2010-11.  India had dropped two places to rank 59.  Poorer rankings on education were identified as one of the major speed-breakers.  

Sensing the opportunity, a number of players – new and old - have jumped on to the bandwagon.  Exponential growth in stock prices of educational companies over the past decade bears testimony to the demand-supply dynamics.

Leading international universities have not been impervious to India’s hunger for quality education. Last week, Duke University announced its intent to set up a campus for its business school in India. Like Yale, Brown and Massachusetts Institute of Technology (MIT), it is also in talks with India’s Ministry for Human Resource Development for partnering the upcoming 14 innovation universities. 

As institutions jostle for market share, the resulting frenzy has prompted the Advertising Standards Council of India (ASCI) to introduce a new set of guidelines prohibiting educational institutions and programmes from claiming recognition, authorisation, accreditation, or affiliations without proper evidence.   

To my mind, and borrowing from Dr Goldratt’s TOC, embedded in the education opportunity is one more nugget – that of standards and certification.  Indeed, attention to this could easily apply to India’s preparation for the Commonwealth Games.  After all, success in India is not only about what you do but how.

If you would like to increase the growth for your organisation by deepening its engagement with India, do write in at ratika.jain@whiteowladvisory.com .

Of Land, Marx and Landmark judgements

Till the 1980s, private enterprise was somewhat of a social pariah in India.  Economic liberalisation in the 1990s reconfigured the equation.  As the Indian corporate sector became the ‘poster boy’ for the India growth story, a number of policies were drawn up to support corporate growth.   Recent announcements are signalling an interesting directional shift in Indian policymaking towards industry, investment and its interaction with society at large. 

1)   Environment matters. In a landmark decision to safeguard the environment while implementing industrial projects, India’s Environment and Forests Minister, Jairam Ramesh, announced that the bauxite mining clearance given to Vedanta Resources and the Orissa Mining Corporation in Orissa had been withdrawn. He also said an initial approval for a six-fold expansion to Vedanta’s aluminium refinery in the state was being suspended.  According to a source, the Saxena Report on the matter had said that allowing mining operations would mean a loss of 121,000 trees, affect the region’s water supply and will shake the “faith of tribal people in the laws of the land”. The Ministry has also barred the Vedanta refinery from buying bauxite — the main raw material needed to make aluminium — from 11 other mines in the state of Jharkhand, pointing out that these were illegal.

2)   Property rights. Anyone who has heard of Singur or Nandigram will know just how sensitive the issue of land, and its acquisition, can be in India.  As the race for economic growth is intensifying across states in India, so are the pulls and pressures on land.   

The Indian Government’s ambitious road-building programme aimed at laying 18,637 km of expressways by 2022 has hit a road-block as well on this count. According to some estimates, delays in land acquisition are hampering 70% of the projects under this programme.  Towards addressing this issue, the Congress President, Sonia Gandhi has intervened and sought annuity benefits for displaced farmers.  These are likely to be woven into in the Land Acquisition (Amendment) Bill, 2010 and the Resettlement and Rehabilitation Bill, 2010.  Individual states, such are Haryana and Uttar Pradesh, are experimenting with compensation formulae blending cash, annuities and equity.

Towards addressing concerns regarding fair compensation in the mining sector, the Indian Government is likely to make it mandatory for mining companies to hand over a part of their revenues and make annual payments to those displaced.  The revenue sharing model combined with annual payments is likely to find its way into a proposed legislation - the Mines and Mineral (Development and Regulation) Bill - setting the rules for investment in minerals.

3)   CSR = compulsory social responsibility.  According to news reports, the new Companies Bill will make it mandatory for large companies to earmark at least 2 per cent of their net profit for corporate social responsibility (CSR) activities in the new Companies Bill. The new provisions are expected to apply to companies having a net worth of `500 crores (approximately US$109 million) or more, or a turnover of `1,000 crores (US$ 218 million) or more, or a net profit of `5 crores (US$ 1.1 million) or more, during a year.  The revised Bill is expected to be presented in Parliament for passage in the Winter Session. 

That the intention exists to foster social contribution is commendable.  Whether this is the appropriate intervention is moot.

These shifting sands reflect India’s desire for inclusive growth.  How these, and similar policy shifts, will play out in a company’s calculus remains to be seen. 

If you would like deeper insights to India and what it means for your company, do write in at ratika.jain@whiteowladvisory.com.

Is your company growing as fast as it can?

. . . or only as fast as it needs to?

In a world where ‘double-dip’ is the chasm to avoid, growth has seemingly become the Holy Grail - for continents, countries and corporations.   I say seemingly because, while common sense would dictate that this is a no-brainer, I also know that the problem with common sense is that it isn’t always common.

At a corporate level, how much growth is ‘sufficient’ to satisfy your corporate appetite?  That some companies are doing better than others is apparent.   Why is it that some companies have been able to achieve high growth rates while others haven’t?

Fundamentally, I attribute this to the level of aspiration – something which differentiates the leaders from the pack. Much of this difference is not about what they are doing but how.

When talking to companies around the world on prospects in India, this gets further highlighted.  For those companies who are still contemplating whether they should engage with India or not, hearing of consistent double-digit growth rates seems to sound like a mirage which will disappear if they attempt to grasp it. 

For those who are already in India, many are of the view that they are doing exceptionally well. Compared to their home markets, undoubtedly.  Compared to the local industry, a dipstick survey by White Owl Advisory reveals that international small-and medium-sized companies invariably under-perform the industry average on a host of performance indicators.  

I am currently reading ‘Employees First, Customers Second’ by Vineet Nayar,  CEO of HCL Technologies – one of India’s leading information technology services companies.   Early in the book, Mr Nayar puts in perspective the crossroads the company was at earlier this decade.  He refers to the fact that the company had started slowing down between 2000 and 2005.   This slow pace was 30 percent annual growth.  The journey is what the book details.  For those of you who are thinking this could have been owing to a low base, consolidated revenues at HCL Technologies were US$ 2.6 billion in March 2010. The underlying tenet of Mr Nayar’s book is that if you look after your employees, they will look after your customers who in turn look after the business.

In contrast, the Financial Times ran an article last week on the ever-elusive ‘work-life’ balance dilemma.  They asked some very eminent ‘experts’ whether the Blackberry should be switched off while on vacation.  All but one said yes. The contradicter in the pack was, incidentally, Sir Martin Sorrell, CEO of WPP, the world's largest marketing and communications group, who quipped that ‘clients’ businesses do not stop for holidays’.

HCL Technologies is not unique. A slew of corporates – Indian and multinational - have recorded trail-blazing growth rates in India over the last 15 years.  Given the title of Mr Nayar’s book, I can only assume they managed to give their employees a life as well.