“Chaos is a source of creativity”
Dr. Frank-Jürgen Richter in an exclusive interview on India as a new growth market and as a major investor
SHInsight: Dr. Richter, when did you first perceive India as a country of steeply growing importance, economically, politically and culturally, beyond the mantra-like classification as an exotic country?
Dr. Frank-Jürgen Richter: I’ve always loved India. Already as a student I have travelled the northern regions and mountains. 20 years ago, India was not as economically important as it is today. But its importance was always evident by its size, culture and history. Professionally, I came in contact with India during my time at the World Economic Forum, where I was also responsible for the great “Indian Summit”. In 2005, I have founded the Horasis organization that initially focussed on China. Four years later, India was on the agenda for the first time – at the “India Meeting” in Munich that was organized in cooperation with the Bavarian state government. It was a resounding success from the start.
What is your impression of the image India has in the world today?
The European view of India is still dominated by traditional prejudices: caste system, Sati or suttee (an obsolete Hindu funeral custom where a widow immolates herself on her husband’s pyre or commits suicide in another fashion shortly after her husband’s death), poverty, the usual clichés. Hardly anyone sees the modern India, the vibrant cities, the economic growth, the highly qualified people. This image must be corrected, such as by more interaction at political and economic levels, or events, such as ours. The German Chancellor has visited India, the Indian Prime Minister attended the “Hannover Messe” in 2015 with the initiative “Make in India”. Such things help to change this image. And lately, it has changed dramatically – for the better. Why? Over the past 20 years, China has always been the driving force of globalization, with India only second best. Meanwhile, India is not only known as the new growth market that could slowly replace China, but also as a major investor. Just look at the number of Indian companies operating in England. Tata is the largest industrial employer in that country. Tata Steel and Jaguar employ over 100,000 people. Let’s see how things develop after the Brexit. Indian companies are increasingly investing in Germany too, especially in German SMEs. To the automotive sector, India is not only a market but also an investor. It all adds up to a very positive picture.
Three years ago, Narendra Modi was elected prime minister with a big lead. The expectations of him are hard to meet. Are there any visible signs of even minor progress?
No question, you have to be patient. The excessive bureaucracy that has been developed over the decades still exists at all levels and the transport infrastructure is inadequate. Modi’s campaign proclaimed him as a change maker that was to change all this with profound reforms. He himself is the best ambassador for a modern India, considering the number of countries he has travelled in the last three years alone – the US, Japan, European countries, including Germany. He drives Indian investments and promotes foreign investment in India. He not only targets IT and outsourcing. “Make in India” is explicitly directed at production, “Industry 4.0” is an important issue. Still, many investors complain about investment conditions. Just think of the retroactive tax as in the case of Vodafone. Yet, much has since been done, which is why more and more companies from all over the world come to India. The lower costs no longer play a big role, but the well-trained workforce does, for example. There are many excellent universities, and many young Indians who have studied in the UK, the US or Germany, return and invest. And not only the sons and daughters of the big companies, but also those of the new middle class.
In addition to quite legitimate criticism, the Western world stubbornly maintains a diffuse reservation that centres on appearances. Lack of structures are defined by German people as “chaos” without considering that there might be well-functioning Indian structures he isn’t even aware about. Is that some form of Western arrogance?
Actually, the Western arrogance exists with respect to all countries, be it China, Russia, Latin America or Africa. Not for nothing is it said that Western people want to plan everything meticulously and leave nothing to chance. In contrast, improvisation is not our strength. For example, I believe the alleged “chaos” is a source of creativity. Often enough, Indians are involved in innovations. Just look at Silicon Valley, which downright depends on Indians. Many of the large American corporations are run by Indians. Today, Indians actually represent a mix of creativity and Western planning. It’s the West that will have to change. I am convinced that the great thrust of globalization, namely that Indian and Chinese companies are buying European companies, is still to come. The Chinese are already busily at it and the Indians are about to follow. Africa, for example, is gaining importance as an emerging market only because large Indian companies are already in place, especially in Mozambique, Kenya, South Africa, with some of them already in the second and third generation. That’s the future. Whoever wants to get involved is well advised to invest in cross-cultural management.
India is competing for investment with other emerging markets. What advantages does it have when compared to other countries?
The advantages are obvious: the English language, the English legal system, and democracy. And very important: the large number of non-resident Indians, the NRIs, who live all over the world and thus help India create a comprehensive global presence. Just for comparison, let’ look at the actually quite artificial BRICS construct: Russia is out, Brazil is out, and South Africa currently has its problems too. Naturally, China is still in but goes through a consolidation phase with no longer 10 to 15 percent, but rather 6 to 7 percent growth. So in BRICS, currently only the “I” and “C” play a role, and the “I” is moving more and more ahead of the “C”.
Anyone traveling in India quickly gets the impression that marketing is part of the lifeblood of the country – so many colourful and glaring billboards even in the smallest village, and a number of TV spots you may not even find in America. Facing inwards, Indians are great marketers. Facing outwards creates a different picture. Anyone who has gotten a glimpse of the often poor quality paper brochures with blurred images and very simple layouts or seen the unprofessionally prepared PowerPoint presentations at fairs or other occasions might not exactly get encouraged in relying on efficient business partners. The weak point is self-marketing. Do you share this view?
Much has changed in this regard too, as there are lot of ambassadors in addition to professional ambassadors, namely cultural ambassadors: such as the mainstream culture, music and the arts. A kind of Indian wave is increasingly spilling across the globe, however, with little focus. There was a huge billboard campaign a few years ago – “Incredible India”. That was quite a big thing. Naturally the question arises whether that money was well spent when it’s done with posters only. But there is a learning process going on even in this respect, especially on the part of many young people who have been educated in Europe or America. Unfortunately, the Indian school system still favours memorization and not so much creative thinking. And the examination pressure, the selection process and the incredibly tough competition due to the sheer number of people does not make things easier. But when you “unchain” the Indians who were educated in the West, the full creativity comes to light.
And their admirable talent for improvisation, combined with flexibility. Indians are problem-solvers.
My thesis: Place an Indian into the jungle, on a high mountain or on a boat at high sea – he will always survive and build his own business. The Germans need structures, or they can’t handle it. Indians get along anywhere and that’s quite incredible.
What are your top five tips to German or European entrepreneurs for successfully entering the Indian market?
First of all: Endurance and patience. Europeans quickly quit if it does not work immediately. Secondly: Do not make the mistake and speak of that India, as if it was a monolithic country. India is many countries, but controlled by a central government in New Delhi, but each state is nevertheless completely independent, has other investment plans, a different mentality, different opportunities and different challenges. Being successful in Maharashtra does not automatically mean you will be successful in West Bengal or Tamil Nadu. Thirdly, you must get involved with cultural differences and not necessarily try enforcing Western management structures. Much of India is running via personal relationships and personalities, and less via regulated processes and structures, as is the case in Europe. As an entrepreneur, you have to build Indian staff, i.e. invest early in the training of key personnel, purposefully delegate responsibilities and not only engage with experts. Point 4 is the realization that India is perfectly suited as a hub for Asia and all emerging markets. You cannot only produce for the Indian market, because “Made in India” is gradually gaining in importance. China has led the way and its reputation is not nearly as bad as it was before. Unfortunately, India hasn’t come that far yet, because many still do not realize that India is ready for high-tech. Bosch very successful shows how it’s been done in cooperation with Micro. They develop and produce in Bangalore and export from there to other countries. And Fifth: You have to integrate Indian high-potential individuals and young talents into the company, including in the German headquarter. This is an asset on both sides, which ultimately is reflected in Euro and Rupee too.
Dr. Frank-Jürgen Richter was Director of the World Economic Forum from 2001 to 2004. In 2005, he founded the organization “Horasi” (www.horasis.org), which organizes, among other things, the “India Meeting”, where all big names in Indian business meet every year. The next event will be held in Interlaken from 25 to 26 June 2017.