India and the key to diversification

Rana Sarkar, president and chief executive officer of the Canada-India Business Council, has had a front-row seat for the past few years from which to watch the wins, losses and struggles of Canadian companies seeking to expand in India. It has allowed him to note common threads and to develop advice for those who are contemplating the move. Mr. Sarkar himself has learned lessons first-hand. In the late 1990s he helped establish a New Delhi office for Roland Berger Strategy Consultants, a European-based consultancy. He was based in India for more than a year, working with both global and Indian corporations. He has also co-founded two businesses: Content Partners, a media promotion agency in Europe, and Rawlings Atlantic Ltd., a cross border advisory firm.

Rana Sarkar, Rresident and Chief Executive Officer – Canada-India Business Council

What is the appeal of the Indian market to Canadian businesses?

There are two drivers of interest in India – market access and innovation. It’s becoming clear that, despite how well we’ve done relative to our OECD peers coming out of the great recession, the key to Canada’s 21st century prosperity is diversification. Not because we’re betting against the U.S., but we recognize the rise of the rest. The big markets of scale and the ones offering stable growth in our lifetimes will be in India, China, Brazil, with a number of other high-growth emerging countries not far behind. These countries are adding millions to the middle class every month and will bring billions of people into cities and into the global economy in the next decade. They’re building infrastructure in years that it took centuries to build elsewhere. India is particularly interesting for Canadians because it’s growing at 8 to 10 per cent a year largely off the back of domestic consumer demand – not government.

Many people, when they consider India, think of sending back-office functions offshore, or using low-cost labour or supplies.

The second reason Canadian companies are looking at India is low-cost innovation, but in my view the India story has evolved well past the back-office outsourcing. It’s now about the Tata Nano, the $100 iPad equivalent, medical devices at 10 per cent of cost. Canadian companies are following this story closely and are starting to get involved with Indian companies if just not to be left out. Our mindset with India is also starting to change. A decade ago, a Canadian CEO would step off a plane in Delhi and see problems; now they see opportunity, and often an international competitor at the check-in desk. India has also gotten a bit easier for us. Its government and business class is more global in outlook and it stands out amongst the big emerging players as a democratic, English-speaking, common-law-based market where we can drop in and do business without a translator.

So you are seeing more interest from Canadian businesses that want to expand there?

Definitely. A decade ago India was far from front-of-mind for Canadian business leaders, for a bunch of good reasons; India wasn’t there yet, and, more importantly, you could get fatter returns in less complex markets closer to home. Even then there were trailblazers – Sun Life, Bombardier, Scotiabank and the EDC have been established in India for decades. Law firms like Bennett Jones, Torys and Heenan Blaikie have spent years building A-grade networks and are now key connectors. But in recent months, we’re seeing a dramatic uptick in interest. Cameco, AECL and the rest of the nuclear supply chain are moving into the market now that we have the nuclear agreement in place. In technology, RIM and Open Text are becoming key players. Brookfield, the CPP and CDP have all made investments, and BMO has established a strong India practice. Like in any big market, seeding relationships and building granular market understanding takes years of effort, and the bulk of corporate Canada is at the beginning stages, but if they stick to the strategy this will pay dividends in the high-growth years ahead.

What mistakes do you often see repeated?

The common mistakes come from having the wrong game plan, people, partners or timeline. Some companies in their initial planning run into trouble by thinking India will be like some other market they’ve been in, or by getting seduced by the 100,000-foot view or headline numbers without doing enough homework on their particular market or region. Some try to do too much on their own too early, avoiding advice and local partnerships. They often have unrealistic time horizons on their investment and get disappointed early by avoidable setbacks and lose interest in the market. Another common mistake is trying to do too much remotely from Canada. India is booming and its business culture is fast paced and operates on an out-of-sight-out-of-mind mentality. Canada is not on their global radar – you have to be there consistently and have ground presence to make the most of deals.

For some people, India conjures up images of poverty, poor infrastructure and overcrowding. Do these issues present obstacles for businesses entering the market?

It’s true the scale of India and all of its contradictions can still sometimes overwhelm us. Billionaires and beggars, space programs and ancient infrastructure – India’s challenges are real and not going away tomorrow, but I suspect within a generation we will have a very different view of India. That said, the dominant frame, at least amongst the top companies in global business, has changed dramatically in recent years. Travel, exposure to India, Indian talent and companies plus the breathtaking speed of change have forced this. The smartest global organizations are looking past the crowds and chaos and seeing India and other emerging markets in granular demographic and regional detail.

India can also bring to mind stories of large government, and even bribery and corruption. Are those real issues today?

Red tape and corruption are still big issues in the developing world. However for India, the trend line is good. Its liberalization drive, which started 20 years ago, has dramatically changed India. Importantly, the success of competition, growth and betterment has set new public standards and changed minds about tolerating bad bureaucracies and corruption. The incentive is now toward greater transparency where 30 years ago the dominant local firms were happy with the status quo. Also, India’s millions of aspiring entrepreneurs who can taste the next level and big business that are trying to compete globally are equally incentivised to fight overweening bureaucracy. Successive governments have got this and are taking the cue.

So what are the keys to succeeding in India?

The key is to understand the terrain and your strengths as a company. In the end, India is a collection of regions and cities which all have very different operating environments and cultures, and it’s important for new entrants to really examine where they best fit. Indian business is very value-conscious, and companies without a strong sense of their own value proposition will get lost. As companies enter, they need the right talent on the ground with strong head-office supporters at the highest level. Partnering well and enlisting the right advisers can dramatically reduce the learning curve on local market sensitivities and dealing with government. Getting over there with some consistency, particularly for the senior leaders, is important. It builds both trust and fine market understanding. Perhaps most important is setting the right expectations. India for most companies is a long game, not a quick turn. But the windfall from getting it right as India booms can be spectacular.