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India is a litmus test for a company’s success in emerging markets: Former Chairman of Microsoft India

A Conversation With: Ravi Venkatesan, Former Chairman of Microsoft India

Ravi Venkatesan.Anindito Mukherjee/European Pressphoto AgencyRavi Venkatesan.
It would be hard to find a more passionate advocate for doing business in India than Ravi Venkatesan, the former chairman of Microsoft India. When Mr. Venkatesan moved to India in 1996 from the United States, he was so sure he wouldn’t be here long that he put his belongings in storage.
Instead, he spent an eight year stint as the head of Cummins India, growing the company’s engine and generator set business here, and helping Cummins open the country’s first engineering college for women in Pune. Then he took the top job at Microsoft in India in 2004, despite knowing so little about information technology that he used to have someone print out his e-mails for him. He left in 2011, after helping expand the company’s business in India seven-fold to nearly $1 billion. 
Mr. Venkatesan has written a book about how essential India is for multinational companies, and why some do “pathetically” here, as he puts it. “Conquering the Chaos: Win in India, Win Everywhere” will be published in mid-June in the United States by Harvard Business Review Press.
He recently spoke to India Ink about why multinational companies have no choice but to come to India, and what some are getting wrong.
Q.
Several multinational companies have tried, and by some measures, failed in India in recent years: Vodafone is bleeding money, Reebok had to pull out after a massive fraud, the big Wall Street banks that ramped up here have quietly ramped down. If I’m a big company that doesn’t have a presence in India, why come now?
A.
India is important not just because it is a big market. India is important because it is a litmus test for your company’s success in emerging markets.
Most emerging markets look like India – they have uncertainty, corruption, poor infrastructure and chaos. It could be Brazil, Indonesia or Nigeria.  But few have the same potential, so India is in many ways a lead case for emerging markets.
Right now, multinational corporations have two choices. They can either not grow, or they can embrace the chaos of emerging markets. Europe is not going to sort itself out anytime soon – they need to learn to deal with these situations. If you think you can escape chaos, you’re sadly mistaken.
Q.
But to get that emerging markets experience, why not start somewhere small, instead of one of the biggest and messiest markets in the world?
A.
For each recent decade in India, there have been three or four good years, sandwiched in between bad years. Companies that have come and stayed through the good and the bad have prospered.
Look at JCB, which makes construction machines. They have 55 or 60 percent of the market in India, while Caterpillar, the global leader, is tiny. Apple is nowhere in India, because they’ve said they’ll come when distribution improves. But Samsung isn’t waiting. Samsung is thriving and has run away with the smartphone market.
If you stick with India, there are four important things you can learn:
A lean cost structure: I.B.M. has more employees in India than anywhere else. Honeywell has 20,000 people here. John Deere a third of its engineers in Pune. That’s adding several hundred basis points to the bottom line for them.
Second, Indian products are good for other markets: While I was with Cummins, we made a small generator here for India. Now I can go to Home Depot and buy their generator set, made in Pune. As southern Europe gets poorer, consumer products tailored for India are selling there – smaller size sachets of shampoo, for example. The Spanish and Greeks can no longer afford to buy what they could buy before.
Number three, you’ll find excellent talent:  a lot of Unilever or Procter & Gamble’s African business executives are from India, for example.
And fourth: Having operations in India will fundamentally change most overseas companies. For instance, in 1996, I came here to a troubled joint venture that Cummins had with the Tatas. Instead, we turned it around and now, Cummins has 55 joint ventures worldwide, and almost all of them are making money.  In many ways, Cummins learned how to manage difficult joint ventures in India.
In all these wonderful ways, India will teach you to be successful in emerging markets. Experimenting in a smaller market won’t allow you to achieve the same scale.

http://india.blogs.nytimes.com/2013/04/12/a-conversation-with-ravi-venkatesan-former-chairman-of-microsoft-india/

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