Monday, May 29, 2006

Products from India: Myth or Reality ?

For quiet some time I was thinking of what does it take to build companies out of India I am passionate about this I thought about this and observed some of the happenings around me and I found the following:

Questions in my mind:

1. To get a feel of what does it take to build a company in India.
2. To get a feeling about how to attract domestic customers ?
3. To know more about what sort of products that sell in domestic markets?
4. All these days we have been doing good amount of 'Services' work from India. What about products? What does it take to build a another 'Product building' Infosys from India ?
5. What does it take to create a eco-system by which we can attract India's best talent and create shared wealth.
6. Contribute back to the society from the wealth we generate out of the business.

Here is what I found:

From the product angle:

1. The consumer market in India has got a very limited purchasing power. Whatever we see in cities like Bangalore is a very few % of the population. If you go to a place like my native place Erode even today people think to buy anything say Rs.100. So the only way to do anything in India is to do in it in 'Scale'. A typical example I would say the model what Reliance does in India. Especially if you take how they grow in the mobile space, they laid a fibre optic cable throughout India and then gave connection at a very less cost. In order to operate in a such a huge scale you need very high amount of money to initially invest in. If you price it high and try to go to the rural or semi-urban Indian he is less likely to buy the product.

2. Whereas if we see in the West, especially in the US people have got huge amount of purchasing power and they don't mind taking it in loan/dept. HP sells 45% of its digital cameras in Christmas time in the US. We can't even think of doing such things in domestic market in India.

3. One of the companies which tried out this 'Build-inside-sell-inside' is Texas Networks. They build optical fiber routers which is used in Indian railways website, BSNL etc. Event's they reached their 'Break-even' couple of years back, because of the less margin (Say in order of 5 croers) they are not able to make such a huge impact in the society in terms of wealth creation and employment creation.

4. According to me the best thing is 'Build-inside-sell-everywhere' model. We can very well 'build' a product in India with our engineering capabilities but the problem comes when we come to the 'selling' part. Now in order to sell the product we need someone sitting in the west or in very fast moving markets like Japan, Singapore who can 'Define' what needs to be done and do product promotion, marketing, sales etc.

From the services angle:

1. Yes. Services still a easily doable business in India. I am not talking about the typical "Bug" fixing services like what we do in Indian services companies but something what is called as 'Component ownership model' based services.

2. For example you can operate in a small segment of a product life-cycle and attach value added services along with that. For example companies like Sundaram fasteners, TVS group are doing the similar kind of work where they completely design a 'Component' right from definition, R & D, Engineering and then they sell that to Japanese automobile manufactures. Also Mindtree consulting has designed a small chip which will get into mobile phones. We can do such things which are pretty niche and have a pretty good potential instead of trying to build a whole car or mobile phone.

3. This kind of services will generate lot of employment (Because of the services nature) and also requires less capital to start with.

Now going forward:

Based on my experiences following are the ingredients which we require in order to build any business in India.

1. Raise our aspirations: This is the first and foremost important factor that is required. If we always have the 'Slavery' mentality we are never going to get anywhere. We should believe that we can build something on our own and raise our aspirations beyond Individuals. I think the email exchanges what we have itself shows we are there.

2. Access to venture capital: In order to start any company in a 'big' way we require idlest 4-5 Million dollars in India. I know couple of people running their company in Bangalore who are of our age finding very difficult to get funds because they lack 'Expertise & Experience' in their domain. Eventhough you have a very good idea with you, even in the west people have become very conservative to fund the company after the DOTCOM bubble. SO when we are good in both then funds will start flowing in. I always keep couple of companies as my role-models:

a. Mindtree consulting: This is started by all 'senior management' (Ashok Soota & co) people in Wipro. All these people worked in Wipro for 15 years and they came out and got the funding and built what I call as "Second generation services company" from India.
b. ITTIAM system: This is started again by "senior management" (Srini Rajam & co) from TI India. Their aim is to buid another TI from India. Again these people have spent 15+ years in TI Bangalore they they understand marketing to operations.
3. Like minded team: I don't have to say anything more in this regard :-)

Final note:

A famous poet in Tamil (Bharathiyar) wrote the following lines during our fight for Independece:

"Aggni kunjondru kanden Adhai kandadhum katrinil kondithai vaithen Vendhu thanindhadhu kaadu Kazhal verathil appendrum kunjendrum undo"

Which means "All that requires to put a whole forst into fire is a small spark. DO WE HAVE THAT SPARK IN US? "

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