• In Conversation

Entrepreneur (E): What do you plan to achieve for the industry?
Arun Maira (AM): India needs to have better industrial growth. An industry has three dimensions. One dimension has to do with it generating greater employment within the country. The second dimension has to do with manufacturing more products that address the needs of Indians—affordable products that are designed to suit the requirements of our people, as well as build environmental sustainability. The third dimension has to do with the depth of industry in certain areas; this is particularly true for defense and sectors that have a strategic interest for the country. The overall growth of the industry must be achieved through these qualities.

E: How far has the depth of industry seeped into the Indian landscape? What needs to be improved?
AM: The depth of industry within the country has gone very far. We make our own rockets, we have a solid nuclear program, and we design our own cars. But while do have depths in many parts of our industry, it does not go uniformly across. In areas like telecom equipment, for example, we do not have strategic depth. In the case of power equipment, we do have some depth, but it is not large enough to support our programs. More work needs to be done in such areas.

E: Is the government playing the best possible role it can in this?
AM: India is going through a stage of reformulating its philosophies and theories about the role of governance and the private sector as well as the role of foreign services, money and Indian capabilities. A new, integrated idea and philosophy is required. Until that is clear, one cannot claim that the government is doing enough. It starts with the question, ‘Should the government do anything at all?’. The next question would be, ‘What should the government do to enable depth in the industry?’. We cannot go back to saying that it should only protect domestic manufacturers.

E: How important is innovation? Are we seeing enough of it among Indian entrepreneurs?
AM: Innovation is very important—at all times and for industries everywhere. And it is especially important for us, for the three-dimensional growth of our industry. We need to have innovations in enterprise models, business processes, production processes and in services.

There is an ideology that says that labor is a nuisance. The implication of having such an ideology is that you should be able to hire and fire people at will; if you cannot do that, you employ capital. In India, you have many
people to hire, which can be a competitive advantage. But you do not know how to handle them, so you put in more capital and end up with a problem.
Therefore, we need to develop innovative business models—for instance, one in which you allow people to be owners of their businesses. These can be small businesses, too. In this model, people are not your employees, but run smaller units where large-scale unionization won’t be an issue. An enterprise that connects all of these units will be very competitive.

E: How unique is the Indian market compared to the rest of the world?
AM: We are told that China will be as large an economy as the U.S. in the next 20 years; India will reach that scale within the next 30-40 years. So we will have three countries that would be two to three times the size of the next largest economy. However, there is something missing in this picture. It talks about the aggregate; in a country, this is the combination of many units. So far in history, every country that has grown its GDP has simultaneously grown its GDP per capita. So, countries with the highest GDP have also had the highest GDP per capita. But for the first time in history, there will be two countries—India and China—whose GDP would have ballooned, but the GDP per capita would not have grown as fast.

So what are the implications of this? Many people come to India and say that it’s a big market, because the GDP is a big indicator. But con-sumers in this market can be very poor people. So, the products that used to satisfy customers while the GDP was growing will not find a market in the new setting. If you are tempted to address this huge market, the economic proposition of your product will be very different—the cost will be much less than it used to be.

There is also a big market for different pro-ducts that are produced in different ways. It costs a lot to make a car; if I have to make a car at one fifth of the price, it will be tough. The answer lies in the fact that if incomes are low, wages are lower. So, if you can get people to design and develop products within the country itself, you can break this conundrum.

E: So, in future, will we be looking more at the bottom of the pyramid? What does this mean for entrepreneurs and startups?
AM: There are profits to be made at the bottom of the pyramid. As C.K. Prahalad has interpreted and presented it, companies can redesign and repackage products to sell them at the bottom of the pyramid and increase profits. For instance, you can put shampoo in a sachet instead of in a bottle to make it more affordable. Who makes the profit, though? The company does. But we want people at the bottom of the pyramid to make profits, too. If you employ them, they would earn an income—not make profits. However, if they were entrepreneurs and were part of the enterprise where they own units, where they produce and innovate and sell to the bigger companies, profit will also be made at the bottom of the pyramid. You will then have many entrepreneurs in the enterprise, not many employees.

E: Will the government have a role to play in this?
AM: Yes. At the end of the day, we want an economy and an industry where many innovations are taking place, where we are able to nurture smaller units. We have to let them be entrepreneurs and not be spoon-fed. Building capabilities is very important.

If there are clusters—such as the leather units in Tamil Nadu—common facilities can be provided by the government. Or, somebody else can see that there is a business in this, start up there, and get paid for the services. But these units may be too small to train people on their own.

E: What are the potential problems, and what have we done well so far in the SME sector?
AM: Building capabilities to have good pro-cesses, good people and a good market is the key. So the agenda has to be capability building, rather than subsidy. We previously had a long list of sectors reserved for the small scale sector; this causes us to build weak people. Today, we have reserved a short list of sectors, and SMEs have managed to swim in the big ocean. There has been a shift in government thinking; it is moving into a mode of figuring out how to enable these smaller units to perform.

E: What is the role of startups and entrepreneurs in the space of tourism?
AM: It is a sector with a huge scope and a lot of potential. If you look at the money spent by people for tourism, any entrepreneur would say that there are a zillion things to take advantage of. The possibilities for entrepreneurial activities in this space are infinite.

E: The possibilities are endless here, but what would the Planning Commission be looking at?
AM: There are some problems to overcome. In some cases, people who have started up do not get government help; the government, at times, thinks that entrepreneurs are a nuisance to the grand scheme of things. What we intend to do—along with the Secretary of Tourism—is to develop a vision on the outcome of a successful tourism industry in the country. Unless you have this vision, you can not start aligning people and have cooperation among different stakeholders. Many schemes and local efforts do not add up to make any impact. So, we have to describe the bigger picture to them first. They will then see what is missing and what they will get out of doing things differently, together.

©Entrepreneur February 2010

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Arun Maira, business model, culture, industry, new, Planning Commission, tourism, urbanization