Executive Thought Leadership

Redefining Globalization

Innovation by Indian firms is helping to shape the future of the connected world

Naresh Wadhwa

Our connected world has dramatically broadened the horizon of available resources and new markets for individuals and organizations large and small. Until now, India’s contribution to globalization has been the emergence of the knowledge outsourcing sector fuelled by multinational and Indian firms tapping our country’s massive, English-speaking workforce, including the newly minted skills of the hundreds of thousands of university graduates in engineering and IT that we produce every year. Knowledge outsourcing has been a huge growth factor in India’s economy over the past decade, accounting for one-third of the 53.8% of GDP attributed to services overall. Businesses in developed nations have benefited tremendously from this initial wave of globalization, gaining significant cost and process efficiencies by partnering with Indian services firms.

India is now redefining globalization. Today, Indian companies across several industries are expanding their vision and presence beyond their own borders to open new markets and deliver new and innovative strategies, processes, and business models to fellow developing nations and already mature markets alike. And India is not alone. Collectively, emerging countries are poised to have an unprecedented impact on the global economy. In fact, their combined output reached an important milestone in 2005, accounting for more than half of global GDP (at purchase power parity), according to The Economist.

India Inc. On The Rise

Indian-led mergers and acquisitions are on the rise, leading to dramatic growth and improved competitive position. According to Dealogic, Indian firms have already announced over 30 foreign takeovers this year, worth more than $10.7B in all – and last year’s tally added up to $23B. Witness the acquisition of Arcelor Steel by Mittal Steel in late 2006 for $38 billion, followed shortly by Tata Steel’s successful bid for U.K.-based Corus Steel, vaulting Arcelor-Mittal to No. 1 in the global steel industry and Tata Steel into the top five globally. Arcelor-Mittal alone is expected to produce 10% of the world’s steel in 2007 and is more than three times the size of its nearest rival, Nippon Steel, in terms of both production and revenue. We are making our presence felt by taking lead positions in industries previously dominated by firms in developed nations.

More importantly, India is driving innovation tailored for emerging economies with limited infrastructure to other nations like itself, rather than attempting to adapt existing processes or business models born in an entirely different context. For example, Tata Motors -- part of Tata Group, India’s largest conglomerate – decided in the early 1990s to diversify from its heritage as India’s largest commercial vehicle maker into the passenger car market, building the first completely indigenous Indian car. Tata Motors is now completely redefining the cost structure, production and distribution models for car manufacturing in order to design and deliver the world’s most affordable car, with a target price of Rs. 1 lakh, or approximately $2,500 bringing car ownership within the reach of a large percentage of Indian citizens—and other people like them across the developing world— for the first time (the current ratio in India is only seven cars per 1,000 people). Innovative new materials and production processes will enable the company to “outsource” the assembly of the vehicles to small local franchises and roadside garages, providing new business opportunities to eager entrepreneurs throughout the country. The local Tata franchise won’t just service the vehicles—they will actually build them as well.

Reinventing The Value Chain

Globalization in the connected world has other facets. The ability to communicate and collaborate across great distances means that businesses can acquire and serve new, previously unreachable customers. Firms in India, and elsewhere in emerging countries are establishing new partnerships and value chains that bridge great distances and allow businesses to innovate in new ways. The traditional notion of a vertically integrated firm is being dismantled and re-shaped, bringing greater value to both the participants and their customers along the way. The State Bank of India, India’s largest bank with more than 14,000 networked branches, serves citizens across India and in several other countries across the globe, both directly and through a state-of-the-art Internet portal tailored to deliver the most valuable user experience. Bharti Tele-Ventures reinvented how mobile cellular services are delivered by outsourcing its entire network to its global equipment suppliers and passing the cost savings on to its customers. The ITC Group has brought transparency and predictability to its business partnerships establishing a direct connection with millions of farmers across India. They installed networked kiosks in villages across several states to communicate current market prices, share farming best practices, and provide weather forecasts, using innovation to create value for both the company and the communities it serves. Today, these farmers are empowered to compete in the global market.

The Network As The Platform for Growth

All of these companies are expanding their presence on the world stage, and a critical component of their ability to do so is the connected world we all share today. The Networked Readiness Index, published annually in the Global Information Technology Report by INSEAD and the World Economic Forum, has proven a consistent measurable correlation between the level of adoption of information and communication technology—and networking in particular—and annual GDP growth within each country. Networks enable the timely and targeted acquisition and application of knowledge, resulting in businesses that are responsive and agile, learning and adapting to new opportunities and new customer requirements in near-real time.

The network provides the foundation to build close and transparent relationships with partners around the world. Personalized communication and media-rich collaboration capabilities, enabled by a flexible, resilient, intelligent network, offer Indian businesses the platform from which to connect their brightest minds to each other and to the rest of the world, for even greater global impact. India, even with its telecommunications infrastructure in its infancy, is already growing at an astonishing pace. It is projected to be the world’s third-largest economy by 2020, according to the Foresight 2020 report published by the Economist Intelligence Unit.

There is no doubt that India will continue to innovate with technology, and leapfrog technology where required. One can only imagine India’s contributions to the world—and the world economy—in the coming years as its networks continue to mature.