Thursday, April 14, 2011

Another Indian takes over as CEO of a large global corporation. Why Indians CEOs are becoming popular worldwide.....

It was reported today that Rakesh Kapoor would take over as Global CEO of Reckitt Benckiser (some $14 billion in size) in a few months time. He is one more CEO of Indian descent after Vikram Pandit, Indra Nooyi, Vindi and Ajay Banga, Sara Mathews and so many more who have reached the absolute pinnacle of the corporate world. Today it’s difficult to even list all of them down. Begs the question: Why are so many Indian managers succeeding globally?

There are several reasons for this. One is obviously the shift in the global economic order towards the developing countries; especially the BRICS (Brazil, Russia, India, China, South Africa) countries. The skill-sets required in running Ops in these countries are totally different from those required in running businesses in the developed world. Even 15 years back, nearly 80% of global consumption took place in the US and Western Europe. In a time like that, it was obvious that you needed managers who understood that environment. Hence the Americans and Europeans dominated the world scene. Today, when global consumption is shifting towards the BRICS nations, it is obvious that the skill sets required are going to be available with managers in this region.

But what skill sets are we really talking about here? In my mind, there are 2-3 strong skill sets that Indians have that is driving their career success:

1)      Sensitivity to pricing: Indians have been raised in an environment where every rupee counts. I remember when I used to work in Frito Lay nearly 15 years back.....the pack of Ruffles (now Lays) was priced at Rs 10. Isn’t it amazing that even today, it’s priced at Rs 10! Of course, the quantity of chips contained in a pack has reduced from 50 gms to some 35 gms now. But what’s important in India is the absolute price point (the money that you shell out), not the quantity of benefits contained. Take another example. I used to work in Revlon till 10 years back and we used to sell the global hot-selling Revlon Nail Enamel in India. It was priced at Rs 90 a pack ($2) and the American parent company thought we were pricing it too low. It sold globally for $4.5. They could never understand why we couldn’t sell much more than we actually did. Revlon had a premium imagery but people simply could not afford to pay that much to buy that “luxury”. The big daddy in this business in India was Lakme which was pricing its product at Rs 35 or so (<1$). In an environment like this, it was tough going for Revlon.....till the time it launched a “mini pack”......half the volume; nearly 40% lower price; and guaranteed 100% premiumness of a global brand! This pack worked wonders. Sales of Revlon Nail Enamel packs went up from some 200K units a year to a couple of million units a year! In fact, I am told that this India-designed pack has now been taken to several other developing countries around the world. Or take the sachet American cannot even start to understand this concept. It’s not like Americans are not price sensitive. They are; but their price sensitivity is of a very different nature. They compare on a price/ml basis.....and are willing to buy large pack sizes if that brings the price/ml down. The biggest selling shampoo unit in the US is the 1 litre pack if I remember right. Almost everything that sells in a discount store is in large or extra large size! At that size, the price/ml is the lowest.....the American does not mind the absolute price point being higher (he can afford it); he wants the price/ml to be low! In India on the other hand, the absolute price point is important; even if the price/ml is higher (the sachet costs more on a price/ml basis than even a 100 ml bottle of shampoo)! Growing up in such a competitive becoming increasingly relevant as the global consumption shifts towards price sensitive developing countries around the world. This is one of the strongest learnings that an Indian upbringing gives you!
2)      Jugaad: The operative word of this great philosophy that Indians live by (!) is “adjust”. Indians are known to adjust to anything.....4 people will adjust and sit on a scooter meant for two! Eight people will adjust and cram into a home meant for four! A Merc will adjust on the road next to a bullock cart! And so on an so forth. The spirit of adjustments is very critical when it comes to managing the impact of low prices. To reduce prices, product designs need to be changed. Adjustments need to be made. So the shampoo that Levers puts out in India is far better than anything available locally; but it is made up of cheaper ingredients than the same product available in the western world. In fact, products like Wheel and Fair and Lovely would probably fail the stringent product tests that Unilever worldwide would have. P&G refused to adjust their product design specially for India; and preferred to maintain global prices in India; its relatively small size is proof that that strategy doesn’t work. Take the Tata the Western world, people might shudder to even call it a car (!)....but in the emerging markets, it’s a dream come true! This ability to adjust downwards.....while still retaining the premium imagery not something that managers in the western world are comfortable with. And Indians are stepping in to occupy such emerging opportunities.
3)      The education system: Lower pricing needs jugaad to make adjustments. And jugaad needs a strong R&D orientation to design products that fit the requirements.....the strong academic credentials of most Indians abroad helps them in this regard. Developing new products with new product designs to cater to specific price points needs an ability to think out of the box. Not in the conventional R&D that the western world excels in.....but in some form of native ingenuity. This is where Indians score. With a strong emphasis on academics in general and science and engineering in particular, Indians tend to be good in giving shape to their “adjusted” requirements. The sachet could only have been designed in India! The Nano likewise!

The real truth is that Indians are ideally suited for the new world order. There will be many more Indians who will make it to the top worldwide as economic activity shifts to the developing countries. In fact, I expect many global corps to base their headquarters in India.....after all, headquarters should be in the midst of the action!


  1. Thinking local and acting global

  2. "he real truth is that Indians are ideally suited for the new world order" - and that is so true. The concept of affordibility is very relevant - Indians buy what they can afford and the large packs do not really suit third world countries. And the word "Jugaad" is the key - very well written article and keep it up - 'twill help the world to understand the ethos of the country and its populace ..