Times of India: What Indian IT can learn from Japan, Korea

Japan and Korea were at the top of the world in the ’80s and ’90s, rising from war-ravaged economies to the ranks of the “developed” nations. Their companies became global powerhouses, and corporate executives became confident and assertive. And then they were humbled by economic stagnation.

I have found the CEOs of Japanese and Korean companies today to be the most attentive and determined of any of the hundreds of executives I have taught all over the world. They are acutely aware of what the World Economic Forum calls the fourth industrial revolution, and are eager to learn about technologies that will enable them to leap into the future and rebuild their competitive advantage.

And what about Indian executives? If they were my students, I would call them “duffers”. This is not because of their intelligence and skill — they are amongst the smartest in the world — but because of their overconfidence and insularity. Indian industry achieved extraordinary success in the past three decades as the economy opened up and markets grew. But its business leaders are about to have the rug pulled away from under their feet by changes in the global economy as the Japanese and Koreans did in the 2000s.

This is so because a wide range of technologies, including artificial intelligence (AI), computing, genomics, robotics, and sensors, are advancing at exponential rates and converging. They are making it possible to build robots that assemble circuit boards; to create AI that can drive cars; to edit genes to eliminate hereditary diseases and create drought-resistant plants; and to replace fossil fuels with inexpensive clean energy. Never before has such a broad range of technologies moved at such a pace — and made it possible to disrupt entire industries.

Take the example of Amazon, which started as an online bookstore. It now rakes in 43% of all online retail sales in the US. With its acquisition of Whole Foods, it is expanding beyond the digital realm, into brick and mortar. Having gained permission to enter the Indian grocery market, it could also become a dominant player in India. Amazon has also staked claims on cloud services, AI bots and other electronics goods, home goods, and small-business lending. It will disrupt several industries on a global scale.

Such disruptions are happening everywhere now, and incumbents are being caught off-guard. The taxi industry was, with the arrival of Uber and Ola. The entertainment industry was, by Netflix and Apple (which makes billions through music distribution). And a single technology company, Tesla, is shaking up the automobile industry with its electric cars and the energy industry with its batteries and solar panels. I’m sure Google and Microsoft never imagined that an online retailer, Amazon, would dominate the cloud services market and become their strongest competitor. This ability of a company in one industry to dominate another industry is the nature of the new threat.

The problem for the incumbent market leaders is that they are not ready for this disruption; many are in denial. Look at the shockwaves that the retrenchments in the Indian IT industry are generating. The writing has been on the wall for several years to indicate that the Western markets are changing and that large IT outsourcing contracts are disappearing along with the mainframe computers they supported; yet IT executives failed to turn their ships around. They are now in a state of panic because they wasted years in transforming their companies.

Corporate executives tend to believe that their past successes mean they can succeed in the future; that old business models can support new products.

Large companies are usually organised into divisions and functional silos, each with its own product development, sales, marketing, customer-support, and finance functions. Each division acts in self-interest and focuses on its own success; it is a fortress that protects its ideas, and it has its own leadership and culture. Too often, the divisions of a company consider their competitors to be other divisions; they can’t envisage new industries or see the threat that may be imminent from other industries.

This is why the majority of today’s leading companies are likely to go the way of Blockbuster, Motorola, and Kodak, all of which were at the top of their game until their markets were disrupted, sending them toward oblivion.

With disruption comes opportunity. The advancing technologies are creating opportunities in everything from improving decision-making with AI, to using sensors to create smart cities and medical devices, to creating robotic manufacturing plants, to fine-tuning agriculture with data and sensors. If Indian executives were to start pursuing these opportunities, they could create new billion-dollar industries and lead the world. I worry that they are instead remaining as complacent as the Japanese and Koreans were at their peak.

Link to article on Times of India’s website