The Hindu : Exploit poverty to improve quality

Online edition of India's National Newspaper
Friday, May 02, 2003

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Exploit poverty to improve quality — Prahalad

By Our Special Correspondent

CHENNAI MAY 1. Programmes for improvement of labour productivity will be resisted by the workforce unless individual industries grow at a faster rate than the rise in productivity to reduce redundancy and the national economy also registers a growth rate adequate to absorb surplus labour, C. K. Prahalad, international consultant from Michigan University, warned on Wednesday.

In his response to questions from industrialists and professionals following a nation-wide teleconference organised by the Confederation of Indian Industry (CII), Prof. Prahalad said companies achieving higher productivity should retrain surplus staff.

However, there was no escape from increasing labour productivity, because failure to raise productivity would in any case lead to job losses as a result of competition.

In his observations during the morning session of the televiewing conference devoted to the theme "Manufacturing Excellence in India — Developing a National Agenda,'' Prof. Prahalad dwelt at length on points that he has been emphasising during his periodic visits to India since the launch of economic reform — that the poverty of large sections of the country is an opportunity for Indian manufacturers to reduce costs and improve quality to broaden the market, that India can combine world-class quality and low costs as demonstrated by the Jaipur Foot and the Arvind Eye Hospital, that the largest number of CMM Level IV achievers are from the Indian software industry testifying to the skill capabilities of India, and that the scale of operations of Hero Honda and Reliance Petrochemicals show how world-class scale is not new to India.

The reputation for quality achieved globally by the TVS group companies in Tamil Nadu, he emphasised, was another evidence of the Indian potential for meeting the challenge of quality though, he made it clear that this was not a soft option. As for product development capabilities, he cited the success of Indica (Telco) and Scorpio (M & M). Emerging economies like India had an advantage over mature market economies because in the former there was not much to "unlearn'' and these could adopt the latest technologies and management tools without much pain of transition.

Portraying entrepreneurship as meeting the challenges within the given constraints (namely, the external environment outside the control of the enterprise) by making the most of the factors within the enterprise, Prof. Prahalad said the right approach to SMEs would be to develop a symbiotic relationship between them and the larger units and considering the SME suppliers and their buyers as one "manufacturing eco system" in competition with similar eco systems in other countries. Clusters of excellence and competitiveness that had naturally developed like Tirupur or Aligarh or the gem and jewellery business should be nourished but clusters could not be artificially promoted.

He said the telecom industry and regulatory bodies everywhere in the world were in a state of confusion because of the fast changes in and convergence of technologies. The main task for the industry and policy-makers/regulators would be to reject the "projection of private agendas as the agenda for the industry and the nation.'' Once this was done, India might even give a lead to the world in clarifying telecom sector issues.

Of course, there was Prof. Prahalad's clarification to doubts voiced about his theory of core competence. He made it clear that the issue was not whether to abstain from diversification but whether any new venture could leverage the skills and knowledge base built over a period in any enterprise or business. In times of "discontinuous change", some core competences, like those relating to managing a highly regulated environment, could become "core rigidities" in a deregulated environment. Core competences need not be manifest on surface, and could even lie in project management, which could be exploited in setting up projects in unrelated sectors.

Prof. Prahalad wanted organisations such as the CII to disseminate information about success stories in Indian manufacturing industries. He also appealed achievers in manufacturing to share with their compatriots their experiences and lessons learnt in implementing cost, quality and human resource development programmes.

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Exploit poverty to improve quality — Prahalad