The raw material mindset

The raw material mindset
India has the golden chance to present itself as designer of monuments, not supplier of granite
Subroto Bagchi
The author is COO and president (US operations), MindTree Consulting
It happened to me many years back on a visit to Washington, DC, home to the most-visited monument in the US, the Vietnam Veterans Memorial: "A place to remember those who served during a turbulent time in US history... a place for the nation to heal its wounds." The memorial lists 58,226 names, in the order they died or were reported missing. At the end of all those names, there is a line that says: "This granite was imported from Bangalore, India."We have been a nation that supplied to the world raw materials, rather than finished products - granites, rather than the monument's design. The world discovered us for spices in the 1st century A.D. Since then, we have been spice-sellers to the world. Meanwhile, McCormick dominates the bottled spice business, and has pride of place in supermarkets. While we export spices, who leads the food business? The best chefs keep coming from Italy.After spices, it was the turn of Indian silk. The world discovered that one in similar antiquity - with the advent of the Silk Route. For centuries we bred silkworms and spun silk, but who calls the shots on the ramp? Versace, Giorgio Armani, Chanel, Yves St Laurent. Then came software services. For decades, most Indian companies have focussed on supplying grey matter that is equivalent to quarried granite and raw silk. This behaviour is driven by a desire to live off the land, to do what has the least risk and low value-add. Not stopping there, the whole pharmaceutical industry came up on the strength of the bulk drug business. As a nation, we need to break that mould. Proponents of continuity would argue that the raw material mindset was critical to establish our presence in the world market and that now we will automatically go up the value chain. By itself, that assumption is severely flawed.Yves Doz is a world-renowned professor at INSEAD, France. He explains that by doing something well, you do not automatically graduate to the next level. He argues that there are three layers of value someone can add, and each of the three require a different mindset. The lowest layer of value-add is the technical, adaptive layer. Raw granite, frozen shrimp, cotton bales and manpower: all fall into this category. You have least risk, least value-add, and lowest margins and highest susceptibility here.Then comes the experiential layer. Here, you do not play on your ability to intermediate between the access to raw material and the end user of it. You 'step into the shoes' of the customer, and create valuable products and services. Confronted with the challenge of introducing a new car in Europe, Nissan flew in its car designers to Frankfurt. They rented different makes of cars and drove 2,500 km all over the continent to get a sense of what it takes to be a motorist in Europe. Then they went back to design a car for Europe. It is not about a car. It is about stepping into the shoes of a motorist to experientially feel the need.At the highest level is what Doz calls the existential layer. This is where Sony or Mercedes Benz, or Swatch operates. They not only know how to get into the shoes of the customer, but as Doz says, "they creep into the mind of the customer." When a teenager in the Bronx or Mumbai or Tokyo walks with a sway in his step after putting on a pair of earphones, Sony knows what is going on in his mind and works backward from there to create products and services. Each layer we talked about is separated from the other by a glass ceiling. If these layers represent the so-called value chain, the conclusion is that you do not go up the value chain. You decide where you want to be on the value chain, and perch yourself there.India is on the cusp of interesting new times. It appears that finally the butterfly will emerge from the cocoon. In that emergence, we have the golden opportunity to present ourselves as designers of monuments, not suppliers of granite. I sense that the break from the past is coming from very unusual new directions. More about that next time.