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Innovation: 10x in 4 years
Wipro Infrastructure Engineering grew its business by 10x in four years
to FY08, a cagr of 86%. The stupendous growth was aided by the take-off
of the India infrastructure story. But the company also became the
market leader globally from being the No 20th. The growth story reflects
how simple business innovation can drive growth and lessons companies
in one sector can draw from another. In our interview with Anurag Behar,
ex-CEO of Wipro Infra, we discuss the journey to being the No 1 player as
well as the constraints India faces in its quest for innovation. Anurag also
discusses GEs reverse innovation strategy and the key reasons for its
success, since as a board member of Wipro GE Healthcare he had a
ringside view of the then developments.
What does Wipro Infra do?
q Wipro Infrastructure Engineering (Wipro Infra) designs and manufactures precisionengineered
hydraulic cylinders, components and solutions and truck hydraulics
components to OEMs globally in the infrastructure and related industries.
q This line of business was started by Wipro in 1976, and pre-dates Wipro’s entry into
IT services. In fact, it is the first diversification by Wipro. Over 1976-2004, the
turnover of this unit grew to US$25m.
2004-2008: The journey to become a global leader
q Wipro Infra was the no 1 player in India, when Anurag became its CEO, but it was a
small player globally. Components being manufactured are difficult to engineer and
are mission critical for OEMs.
q The market as fragmented with the top 5 players having less than 10% global
market share. This was a massive opportunity, as Anurag saw it. Being critical
components, engineering at the OEs was reluctant to outsource and whatever
outsourcing happened was to local vendors in every country.
q Wipro Infra drew its lessons from the auto industry, where vendors go along with
the OEMs. It gave a value proposition to the OEMs that it would establish a
manufacturing presence in countries where the OEMs wanted along with customer
interfacing engineers, and do the back-end engineering in India, where costs are
lower.
q It won over its customers. Being part of a well respected large corporation like
Wipro helped. By 2008, Wipro Infra became the No 1 player globally and now it has
manufacturing presence in India, China, Sweden, Finland and Brazil.
q This is not breakthrough innovation, but drawing lessons from another sector to
implement changes in one’s sector.
Competitors’ reaction and challenges
q Every competitor wanted to set up a similar structure. But for the developed
economy companies this meant hollowing out the business in their home market,
which proved to be a major challenge.
q For Wipro Infra, the major challenge was pricing. It had to convince customers that
just because it was an Indian company, it would not be cheap although it would be
able to offer more value for money.
q According to Anurag, the challenges for India in general are the poor quality of
education, poor infrastructure and corruption.
Anurag Behar, co-CEO, Azim Premji Foundation
Anurag Behar is the co-CEO of Azim Premji Foundation. He had earlier led
Wipro Infrastructure Engineering to a remarkable growth trajectory - the
business has grown from US$30m to more than US$300m in four years. Over
the past year Anurag led investments in two strategic diversifications - in the
water and clean energy sectors. This is to consult (on), design, engineer and
execute high purity water management solutions and clean energy solutions.
Anurag is a Director on the board of Wipro GE Healthcare. He is also a
member of the board of the TERI University. Anurag has an MBA in marketing
and finance from XLRI, Jamshedpur and has a degree in electrical engineering
from REC, Trichy. He has been honored by the World Economic Forum, by
being recognised as a ‘Young Global Leader’.
Given that you have worked with Wipro-GE Medical Systems and later
with Wipro Infrastructure Engineering, I would like you to talk about
your experience, with particular reference to innovation. What was
the driving innovation in the medical-equipment division?
I will give you a historical narrative. What happens is that by the time things
catch media attention, there is perhaps 10 years of work that has already
gone into it. When we formed the joint venture, it was a sales and distribution
joint venture with some idea of localisation of product. Soon there was
recognition that this market is different. This market has low reimbursement
rates, there is no insurance, and therefore a basic product is far more
important than fancy functionalities and so on.
And GE came from a world where their products were very heavily loaded in
terms of features and functions. To my mind the real seminal event was the
decision to make something called the Logic Alpha 100 in India. This was in
1993-94, 17 years ago. This was not a product which was being done
anywhere else in the world. There was another product called RT 3200,
similar kind of a thing. But basically, we stripped it down significantly and we
made a product which was actually for the Indian market.
So the stripped down happened here or it happened back home in the
USA?
Here. I shouldn’t have used the phrase strip down, it was actually not a strip
down; it was a new product. It is just that some of the basic technologies we
used from that product. But it was not a strip down at all and it was a
completely new product which was specifically for the Indian market. And that
was a seminal thing in 1993-94. It was hugely successful in India and then
GE also started selling it outside in similar kind of markets. I think that is one
defining sort of a moment.
The next defining period was when Immelt was CEO of Medical Systems. I
think his experience in India and China shaped two dramatic things. One was
- the rumour mill would have it that the first one I am going to describe to
you had a significant role in his getting the chairmanship - he conceptualised
what was called the Global Production Company (GPC). It has had many
avatars. Now it is become like the norm, if you see it in 2011.
When you say a global production company, you mean there is a
product and it could be manufactured anywhere in the world?
Exactly, in fact it is more complicated than that. If you have a product, then
one component is being made in Mexico, another in China, something in India
and some sub-assemblies happening in Poland, the product is finally getting
assembled near the market somewhere. Now to be able to pull that off in a
product supply chain which is obviously very high tech, very regulatory driven
(you need to get FDA approvals), extremely engineering intensive, very
software intensive, was an extraordinary achievement.
Jeff Immelt gained the confidence about GPC from his initial experience in
India and China. I would say significantly India because as Jack Welch used to
say ‘India is a developing company with a developed mindset.’ Immelt had
the real sense of this opportunity. And we were incredibly successful in
establishing the global production company. This gave a very significant
confidence to the entire system in GE about the technical engineering,
execution capability, both from a stand point of creativity and a stand point of
quality that these guys are brilliant, they can do wonderful stuff and so on
and so forth.
Immelt has always been a very market-focused guy and in that sense he is
significantly different form Jack Welch. Immelt took the success of Logic
Alpha 100 in his mind, and he said this is it. We have to do the same
elsewhere. It has become a big thing now, but the credit of this goes
significantly to Immelt. Of course nothing happens alone but the vision I
would say is significantly Immelt’s. I still remember those days when he used
to call it ICFC (In country, for country).
In the country where there are big markets, you design, engineer,
manufacture and sell in that country, only then will you be successful. This is
what ICFC was all about. And this is specifically to do with the large markets
like India and China where the economics of healthcare are fundamentally
different. And therefore, market demands a different kind of tailor-made
product. I remember he was telling everyone in those times that we have to
push ICFC. And the stuff that I had described to you before had given the
confidence. So I think the history goes back at that point and those are really
the germs. So let’s say when you hear of the ultrasound that we have made
or the ECG that we have made, most of us who have been working in there,
this is one in a list of many things that has happened and a logical
progression of things.
At that point in time, what was the kind of resistance that Immelt
was facing internally? Were there things he had to navigate through
at Connecticut to get his way about when Logic Alpha 100 was
developed?
I would say he had much more resistance from within the engineering team
rather then from Connecticut. Jack was sold on India anyway. Jack said this is
it. So Immelt and Jack were sold on India. The bigger issue was actually the
engineering teams. Even in engineering teams, I won’t say in the top
management, it was more in the operating engineering teams. One can
imagine these are the fears of things going away and things of that nature.
I have worked for the company for so many years and even today I have only
admiration for that place. That company is incredible at execution. They said
we will do it, so this is it. We know how to deal with resistance. It’s not some
brutal thing, but they just know how to get things done. And of course we in
India were not resisting; for us it was only glory; so we did not have any
problems. So this was the second defining phase.
The third defining phase was, when Immelt was Med Systems CEO and Welch
was the chairman & CEO and they decided to set up the first R&D centre
outside the USA, in Bangalore. That was a stunning decision. For 100-110
years of its existence, GE did not have a single R&D centre outside New York.
And then to go to Bangalore and set it up and say look we will ramp it up with
3,000 PhDs and engineers, we will do aircraft engineering R&D also and we
will do this also and everything. It was completely stunning.
They did it. The other historical narrative from the business point is that if
you look at GE, GE’s only truly successful venture in India has been
healthcare. So Immelt was sort of the India champion and between the two
of them they pushed this R&D centre in Bangalore. This was the third
defining event.
So when the stunning decision to have an additional R&D centre in
India was taken, were there other countries in the running that you
know of?
I think they were sold on India. And I have heard Jack tell this story to a
bunch of customers when he had come down here. He said that look when I
walk in the lab in New York, every third person is an Indian, or something like
that. Basically I can see only Indians. So he thought why not get these guys
to work for GE in India? It is going to be good for everybody. See it is good
for GE, costs will be down, it is good for GE because you can tap into a vaster
pool in India instead of just waiting for these guys to come to the USA; it’s
good for people whom we are willing to shift back from the USA because they
will get the same world-class research facility and they will get a home
environment. I don’t recollect, but they set up one in China also
subsequently, but when the first one happened, I don’t think any other
country was in the running for it.
There is a person called Omar Ishraq, who has recently left GE to join
Medtronic as CEO. In this story, Omar Ishraq played an absolutely pivotal
role. Ishraq is a Bangladeshi, who moved to the USA many years ago, but
his roots are here. He also had some family connection in Hyderabad, he is
a sub-continental guy. And therefore because of this connect, he had a deep
understanding of these markets and a deep intuitive resonance with this
place. And Med Systems hired him as the Head of Ultrasound business at
that time.
His professional expertise was engineering although he was a business head.
Now he is the real operational champion of India. Immelt’s vision and Omar’s
operational understanding, excellence and business leadership drove the
success of the ultrasound business in India. He was a deeply committed guy
to head this region.
Therefore, what happened was that the vision got translated because of this
heavy operational leadership of Omar Ishraq, who is an outstanding leader,
an outstanding engineer. With his deep connection and understanding he
knew that if the med business was to succeed in a country like India, then
local product development for the market was the only way Take the MRI
business - Magnetic Resonance Imaging. The business didn’t understand the
point of going into India and trying to develop products here, when the
market was so small. But Ishraq knew that this is the only way to crack this
kind of market. So Jack’s sponsorship, Immelt’s vision and Ishraq’s
operational business leadership is what made it work.
Of course what has happened over the past two to three years is that Immelt
has put more resources into this. When he became chairman, for the first two
to three years he was struggling with the global slowdown and all kind of
things. But after that he said look I know this works, I have done it myself,
and so I will resource it even more. And he took the same story out to other
businesses, the whole ICFC thing. And one of my pet beliefs in life is that
nothing happens overnight. People should understand that GE has worked for
10-12 years to achieve all this that is being talked about now.
It never happens overnight. If you want to build a business you have
to work on it.
It’s a lesson for me and most of the operating people like me would resonate
with that. Innovation also does not happen overnight; Innovation is a lot of
hard work, in some parts it is about creativity and you know all those stuff.
But innovation is hard, painstaking work, you keep going at it, try this, try
that, put the systems behind it, and make the organisation tick, all this kind
of grunt work. It’s not necessary the sexy, glamour thing. GE is not able to do
it because it has got a few brilliant people, or a few outstanding Nobel
laureates. But it is able to do it because of the organisational excellence. They
put the organisation’s might behind it and that’s how it is happening.
So did you see something similar happening with the infrastructure
engineering business and how was that experience?
That business is much older than IT for Wipro. It started in 1974, but it didn’t
grow at all. The reason why we invested into it is a very sound one. Anything
that requires heavy mechanical power with some precision control needs
hydraulics. If I can make hydraulic cylinders, then given that India is a
developing market it will grow. Now what happened was unfortunately the
India infrastructure story didn’t happen for 25-30 years so there was not
much growth
So when I took over the business in 2004, the business had grown from 0 to
about Rs100 crores (about US$25m) over 1974–2004. Although we had
become No.1 in India, we were still relatively small. After I took over I was
incredibly fortunate that the India infrastructure story took off. So without my
doing anything there was a secular tide in my favour, of the businesses and
the India business grew very significantly, some five to sevenfold from 100
crores. And then of course I saw a massive opportunity globally in it, because
that market is strangely fragmented. It’s a very difficult product to engineer
and is one of the mission critical component for original equipment
manufacturers (OEMs) like Caterpillar. In fact Caterpillar has a significant
amount of in-sourcing for this in Chicago.
You are manufacturing hydraulic cylinders? And all the manufacturing
was initially based in India?
Hydraulic cylinders and a little bit of pumps and valves. All the manufacturing
initially was in Bangalore
Originally was there a technological supplier or was it all indigenous?
No, all we developed, everything was ours and that is the most powerful thing
we have. Continuity is the most powerful thing that we have. Engineering
design, development is entirely ours. Despite the mission critical nature of the
component where if the hydraulic doesn’t function the equipment doesn’t
function, funnily enough it was a highly fragmented market. The top-five
players in the market would have under 10% market share globally.
I tried to investigate this fragmentation. It happened because the engineering
department controlled this completely, they didn’t want to outsource. They
wanted everything inside. But the business and the sourcing guys/purchase
people would want to outsource. So what happened is that they started
outsourcing it to local people whom they could control completely.
Across the world, everyone has two suppliers. For example, if Cat’s factory is
in Russia, two suppliers will be there, if it’s in China, then two suppliers will
be there. This way the vendors could be controlled fully. That’s why there is
this extreme absolute fragmentation. Now this is a historical trend. When I
took over the business, I spoke to all these guys because they were all our
customers in India. I asked them that wherever Toyota goes, Toyota’s main
suppliers go, wherever Ford goes, Ford suppliers go, then why is the
hydraulics business any different?
Part of the story we discovered together. They were also surprised that this
was such a fragmented market. Finally we started telling our customers that
we are a credible organisation from any viewpoint whether it is about
engineering design which is a technical capability, financial stability, ethical or
governance track record, and we are a company you can partner with
globally. We will have a manufacturing presence wherever you are present.
Simple story. This is what was being done in all other businesses, so there
was nothing new in what I was doing. But it was a total novelty in that
industry. Long and short of it is because of that we became even more
successful and from number 17 or 20 in that market globally, we are No.1
today. So now we have presence in China, Brazil, manufacturing and
engineering operations.
Are you doing manufacturing in each of these countries?
Yes, China, Brazil and Europe. We don’t have in America but America we don’t
have right now because most of the big OE customers have captive sites. But
it will be there too. So for that industry what we did was highly innovative.
You know when I said look why are you spending so much money on
engineering, when I can have an engineering centre where you will have a
customer interfacing engineer sitting right in Europe, and the back-end is
done mostly by 20 engineers we have in Bangalore. Now this is a story which
is done in other industries, so there is no big deal about it. But in that
industry it was a dramatic thing.
So in that business, all the engineering and design work is being
handled out of India?
No, I feel application engineering, which is a customer facing application, has
to be handled close to where the customer is. But most of the other stuff
which can be done without customer interface, is done here in India.
So how did the competitors react? They must have been of a similar
size in different countries.
Everyone of them, barring our key Japanese competitor, wanted to set up a
similar kind of a structure. I don’t think anybody has been able to do it
because they are facing a sort of death spiral in that. Because if you are a
US$100m company, first of all the ability to handle something in India is very
difficult. It’s not that you are a GE then you can do something. So it is difficult
and it is a practical problem.
Let us assume you are a highly respected European company and you say
look I am getting hammered by this strange new model that Wipro has
created. So I will go and build a factory in India. Now assume you can
manage the investments, you can manage the operational challenges, but
then the European customers will tell you that since you are now doing this in
India, please start supplying us from India. This would hurt them terribly in
their home markets.
On the other hand our challenge was pricing, which was how to make sure
they can understand that just because we are an Indian company, we will not
be cheap. We might be more value for money, so we might be 5% cheaper,
1% cheaper something like that. We may have better quality, we may be
sometimes more expensive also. But we will be clearly higher value for
money. That is a struggle for us.
Was that an India image or what was that?
India image. Total India. You are supplying from India, so it should at least be
20% less. See for us the challenge was building the business, for them the
challenge was hollowing out the business. So it was slightly different.
Competitors reacted but this was the issue that they faced and very severely.
Did it help that you were a part of a larger company called Wipro?
Absolutely. But it’s not sufficient because one of our key competitors in the
USA or couple of other competitors are part of large conglomerates. But it
certainly helped me dramatically. Let’s say when I would go into the Volvo
boardroom, if I would go as an independent company and asked for US$100m
business, what is my credibility? And when I go there as part of Wipro, a
US$6bn conglomerate, whose chairman is a well-known figure, I am part of
the senior management team of that company, etc, etc. then it’s a completely
different ball game. So it helped me enormously - it’s not so much the money
part of it, but the credibility of being a part of large respected successful
organisation with certain values.
Is there something you would like to see in terms of policy changes
or some government support so that innovation gets a fillip in the
country?
I don’t think the government can do anything. Government is not needed.
This is not only about Wipro Infrastructure, but it’s a general thing. What I
understand about government is that they should first improve the
fundamentals. They should improve or correct the infrastructure first.
Secondly they should stop corruption. What happens is peoples mind, and
energy are distracted. So instead of innovating on product and value, you are
trying to innovate on how to get the next license or to do something of that
nature. So the corruption, governance overload that is there, eliminate that.
The third thing is that don’t create obstacles to start or close down a
business. You don’t have to do anything else in the matter of innovation. Let
people drive, it will happen, that’s at one level.
The next level is not an entirely government issue; government can play a
role in this, in fact government should play a role in this. Let’s call them
enablers. The first thing is the education system that you refer to. It is just
incredible, how little we are doing and talking about this issue and our socalled
engineering mind is so shallow. In engineering schools and colleges,
nobody learns how to think, how to solve problems. Everybody learns
subsequently. So how can you create a great country? By having a higher
education and a school education system, which is producing rote memory
robots?
To my mind that is a crucial issue. We have to fix the issue of our education
system, and this rote-driven education system that we have. If you ask me
what’s the single biggest obstacle for us to become big innovation hub, it is
our education system. Because you can always tout a few success stories, but
are those successes in the scale and proportion of the size of the country?
That is the question to ask. And it is not so because our education system is
horrible in this particular context.
The last part is that I feel we should discover our own thing - what drives
innovation for us. I will give you an example. The fact is we have a certain
context in our country and that context is the context of scarcity. There is
nothing, there is no money, no healthcare, no roads, etc. When things are not
there, then how do we work? Or how do things work? Or what things work?
To my mind that is the great innovation strength that we have. Why did we
make the Logic Alpha 100? We made it because there was no solution in this
country, we needed a mobile ultrasound. I mean there is scarcity in this
country and we can do wonderful things to address that. We somehow have
to harness that fire, not somebody else’s fire.
And this “fire” from a corporate stand point is obviously a large
market, so there is a business case for it.
Absolutely correct. So you harness that fire and there is a business case, and
the interesting part is that is what GE discovered or what we discovered.
Eventually if you harness this fire and you innovate on this basis, then the
same stuff you can sell outside also, not only in developing countries, but you
can sell it in developed countries also. So I feel very strongly that instead of
chasing unnecessary goals, harness the opportunities that are here.
Note: Read more such interviews in our latest thematic report The next six
billion
Key
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Innovation: 10x in 4 years
Wipro Infrastructure Engineering grew its business by 10x in four years
to FY08, a cagr of 86%. The stupendous growth was aided by the take-off
of the India infrastructure story. But the company also became the
market leader globally from being the No 20th. The growth story reflects
how simple business innovation can drive growth and lessons companies
in one sector can draw from another. In our interview with Anurag Behar,
ex-CEO of Wipro Infra, we discuss the journey to being the No 1 player as
well as the constraints India faces in its quest for innovation. Anurag also
discusses GEs reverse innovation strategy and the key reasons for its
success, since as a board member of Wipro GE Healthcare he had a
ringside view of the then developments.
What does Wipro Infra do?
q Wipro Infrastructure Engineering (Wipro Infra) designs and manufactures precisionengineered
hydraulic cylinders, components and solutions and truck hydraulics
components to OEMs globally in the infrastructure and related industries.
q This line of business was started by Wipro in 1976, and pre-dates Wipro’s entry into
IT services. In fact, it is the first diversification by Wipro. Over 1976-2004, the
turnover of this unit grew to US$25m.
2004-2008: The journey to become a global leader
q Wipro Infra was the no 1 player in India, when Anurag became its CEO, but it was a
small player globally. Components being manufactured are difficult to engineer and
are mission critical for OEMs.
q The market as fragmented with the top 5 players having less than 10% global
market share. This was a massive opportunity, as Anurag saw it. Being critical
components, engineering at the OEs was reluctant to outsource and whatever
outsourcing happened was to local vendors in every country.
q Wipro Infra drew its lessons from the auto industry, where vendors go along with
the OEMs. It gave a value proposition to the OEMs that it would establish a
manufacturing presence in countries where the OEMs wanted along with customer
interfacing engineers, and do the back-end engineering in India, where costs are
lower.
q It won over its customers. Being part of a well respected large corporation like
Wipro helped. By 2008, Wipro Infra became the No 1 player globally and now it has
manufacturing presence in India, China, Sweden, Finland and Brazil.
q This is not breakthrough innovation, but drawing lessons from another sector to
implement changes in one’s sector.
Competitors’ reaction and challenges
q Every competitor wanted to set up a similar structure. But for the developed
economy companies this meant hollowing out the business in their home market,
which proved to be a major challenge.
q For Wipro Infra, the major challenge was pricing. It had to convince customers that
just because it was an Indian company, it would not be cheap although it would be
able to offer more value for money.
q According to Anurag, the challenges for India in general are the poor quality of
education, poor infrastructure and corruption.
Anurag Behar, co-CEO, Azim Premji Foundation
Anurag Behar is the co-CEO of Azim Premji Foundation. He had earlier led
Wipro Infrastructure Engineering to a remarkable growth trajectory - the
business has grown from US$30m to more than US$300m in four years. Over
the past year Anurag led investments in two strategic diversifications - in the
water and clean energy sectors. This is to consult (on), design, engineer and
execute high purity water management solutions and clean energy solutions.
Anurag is a Director on the board of Wipro GE Healthcare. He is also a
member of the board of the TERI University. Anurag has an MBA in marketing
and finance from XLRI, Jamshedpur and has a degree in electrical engineering
from REC, Trichy. He has been honored by the World Economic Forum, by
being recognised as a ‘Young Global Leader’.
Given that you have worked with Wipro-GE Medical Systems and later
with Wipro Infrastructure Engineering, I would like you to talk about
your experience, with particular reference to innovation. What was
the driving innovation in the medical-equipment division?
I will give you a historical narrative. What happens is that by the time things
catch media attention, there is perhaps 10 years of work that has already
gone into it. When we formed the joint venture, it was a sales and distribution
joint venture with some idea of localisation of product. Soon there was
recognition that this market is different. This market has low reimbursement
rates, there is no insurance, and therefore a basic product is far more
important than fancy functionalities and so on.
And GE came from a world where their products were very heavily loaded in
terms of features and functions. To my mind the real seminal event was the
decision to make something called the Logic Alpha 100 in India. This was in
1993-94, 17 years ago. This was not a product which was being done
anywhere else in the world. There was another product called RT 3200,
similar kind of a thing. But basically, we stripped it down significantly and we
made a product which was actually for the Indian market.
So the stripped down happened here or it happened back home in the
USA?
Here. I shouldn’t have used the phrase strip down, it was actually not a strip
down; it was a new product. It is just that some of the basic technologies we
used from that product. But it was not a strip down at all and it was a
completely new product which was specifically for the Indian market. And that
was a seminal thing in 1993-94. It was hugely successful in India and then
GE also started selling it outside in similar kind of markets. I think that is one
defining sort of a moment.
The next defining period was when Immelt was CEO of Medical Systems. I
think his experience in India and China shaped two dramatic things. One was
- the rumour mill would have it that the first one I am going to describe to
you had a significant role in his getting the chairmanship - he conceptualised
what was called the Global Production Company (GPC). It has had many
avatars. Now it is become like the norm, if you see it in 2011.
When you say a global production company, you mean there is a
product and it could be manufactured anywhere in the world?
Exactly, in fact it is more complicated than that. If you have a product, then
one component is being made in Mexico, another in China, something in India
and some sub-assemblies happening in Poland, the product is finally getting
assembled near the market somewhere. Now to be able to pull that off in a
product supply chain which is obviously very high tech, very regulatory driven
(you need to get FDA approvals), extremely engineering intensive, very
software intensive, was an extraordinary achievement.
Jeff Immelt gained the confidence about GPC from his initial experience in
India and China. I would say significantly India because as Jack Welch used to
say ‘India is a developing company with a developed mindset.’ Immelt had
the real sense of this opportunity. And we were incredibly successful in
establishing the global production company. This gave a very significant
confidence to the entire system in GE about the technical engineering,
execution capability, both from a stand point of creativity and a stand point of
quality that these guys are brilliant, they can do wonderful stuff and so on
and so forth.
Immelt has always been a very market-focused guy and in that sense he is
significantly different form Jack Welch. Immelt took the success of Logic
Alpha 100 in his mind, and he said this is it. We have to do the same
elsewhere. It has become a big thing now, but the credit of this goes
significantly to Immelt. Of course nothing happens alone but the vision I
would say is significantly Immelt’s. I still remember those days when he used
to call it ICFC (In country, for country).
In the country where there are big markets, you design, engineer,
manufacture and sell in that country, only then will you be successful. This is
what ICFC was all about. And this is specifically to do with the large markets
like India and China where the economics of healthcare are fundamentally
different. And therefore, market demands a different kind of tailor-made
product. I remember he was telling everyone in those times that we have to
push ICFC. And the stuff that I had described to you before had given the
confidence. So I think the history goes back at that point and those are really
the germs. So let’s say when you hear of the ultrasound that we have made
or the ECG that we have made, most of us who have been working in there,
this is one in a list of many things that has happened and a logical
progression of things.
At that point in time, what was the kind of resistance that Immelt
was facing internally? Were there things he had to navigate through
at Connecticut to get his way about when Logic Alpha 100 was
developed?
I would say he had much more resistance from within the engineering team
rather then from Connecticut. Jack was sold on India anyway. Jack said this is
it. So Immelt and Jack were sold on India. The bigger issue was actually the
engineering teams. Even in engineering teams, I won’t say in the top
management, it was more in the operating engineering teams. One can
imagine these are the fears of things going away and things of that nature.
I have worked for the company for so many years and even today I have only
admiration for that place. That company is incredible at execution. They said
we will do it, so this is it. We know how to deal with resistance. It’s not some
brutal thing, but they just know how to get things done. And of course we in
India were not resisting; for us it was only glory; so we did not have any
problems. So this was the second defining phase.
The third defining phase was, when Immelt was Med Systems CEO and Welch
was the chairman & CEO and they decided to set up the first R&D centre
outside the USA, in Bangalore. That was a stunning decision. For 100-110
years of its existence, GE did not have a single R&D centre outside New York.
And then to go to Bangalore and set it up and say look we will ramp it up with
3,000 PhDs and engineers, we will do aircraft engineering R&D also and we
will do this also and everything. It was completely stunning.
They did it. The other historical narrative from the business point is that if
you look at GE, GE’s only truly successful venture in India has been
healthcare. So Immelt was sort of the India champion and between the two
of them they pushed this R&D centre in Bangalore. This was the third
defining event.
So when the stunning decision to have an additional R&D centre in
India was taken, were there other countries in the running that you
know of?
I think they were sold on India. And I have heard Jack tell this story to a
bunch of customers when he had come down here. He said that look when I
walk in the lab in New York, every third person is an Indian, or something like
that. Basically I can see only Indians. So he thought why not get these guys
to work for GE in India? It is going to be good for everybody. See it is good
for GE, costs will be down, it is good for GE because you can tap into a vaster
pool in India instead of just waiting for these guys to come to the USA; it’s
good for people whom we are willing to shift back from the USA because they
will get the same world-class research facility and they will get a home
environment. I don’t recollect, but they set up one in China also
subsequently, but when the first one happened, I don’t think any other
country was in the running for it.
There is a person called Omar Ishraq, who has recently left GE to join
Medtronic as CEO. In this story, Omar Ishraq played an absolutely pivotal
role. Ishraq is a Bangladeshi, who moved to the USA many years ago, but
his roots are here. He also had some family connection in Hyderabad, he is
a sub-continental guy. And therefore because of this connect, he had a deep
understanding of these markets and a deep intuitive resonance with this
place. And Med Systems hired him as the Head of Ultrasound business at
that time.
His professional expertise was engineering although he was a business head.
Now he is the real operational champion of India. Immelt’s vision and Omar’s
operational understanding, excellence and business leadership drove the
success of the ultrasound business in India. He was a deeply committed guy
to head this region.
Therefore, what happened was that the vision got translated because of this
heavy operational leadership of Omar Ishraq, who is an outstanding leader,
an outstanding engineer. With his deep connection and understanding he
knew that if the med business was to succeed in a country like India, then
local product development for the market was the only way Take the MRI
business - Magnetic Resonance Imaging. The business didn’t understand the
point of going into India and trying to develop products here, when the
market was so small. But Ishraq knew that this is the only way to crack this
kind of market. So Jack’s sponsorship, Immelt’s vision and Ishraq’s
operational business leadership is what made it work.
Of course what has happened over the past two to three years is that Immelt
has put more resources into this. When he became chairman, for the first two
to three years he was struggling with the global slowdown and all kind of
things. But after that he said look I know this works, I have done it myself,
and so I will resource it even more. And he took the same story out to other
businesses, the whole ICFC thing. And one of my pet beliefs in life is that
nothing happens overnight. People should understand that GE has worked for
10-12 years to achieve all this that is being talked about now.
It never happens overnight. If you want to build a business you have
to work on it.
It’s a lesson for me and most of the operating people like me would resonate
with that. Innovation also does not happen overnight; Innovation is a lot of
hard work, in some parts it is about creativity and you know all those stuff.
But innovation is hard, painstaking work, you keep going at it, try this, try
that, put the systems behind it, and make the organisation tick, all this kind
of grunt work. It’s not necessary the sexy, glamour thing. GE is not able to do
it because it has got a few brilliant people, or a few outstanding Nobel
laureates. But it is able to do it because of the organisational excellence. They
put the organisation’s might behind it and that’s how it is happening.
So did you see something similar happening with the infrastructure
engineering business and how was that experience?
That business is much older than IT for Wipro. It started in 1974, but it didn’t
grow at all. The reason why we invested into it is a very sound one. Anything
that requires heavy mechanical power with some precision control needs
hydraulics. If I can make hydraulic cylinders, then given that India is a
developing market it will grow. Now what happened was unfortunately the
India infrastructure story didn’t happen for 25-30 years so there was not
much growth
So when I took over the business in 2004, the business had grown from 0 to
about Rs100 crores (about US$25m) over 1974–2004. Although we had
become No.1 in India, we were still relatively small. After I took over I was
incredibly fortunate that the India infrastructure story took off. So without my
doing anything there was a secular tide in my favour, of the businesses and
the India business grew very significantly, some five to sevenfold from 100
crores. And then of course I saw a massive opportunity globally in it, because
that market is strangely fragmented. It’s a very difficult product to engineer
and is one of the mission critical component for original equipment
manufacturers (OEMs) like Caterpillar. In fact Caterpillar has a significant
amount of in-sourcing for this in Chicago.
You are manufacturing hydraulic cylinders? And all the manufacturing
was initially based in India?
Hydraulic cylinders and a little bit of pumps and valves. All the manufacturing
initially was in Bangalore
Originally was there a technological supplier or was it all indigenous?
No, all we developed, everything was ours and that is the most powerful thing
we have. Continuity is the most powerful thing that we have. Engineering
design, development is entirely ours. Despite the mission critical nature of the
component where if the hydraulic doesn’t function the equipment doesn’t
function, funnily enough it was a highly fragmented market. The top-five
players in the market would have under 10% market share globally.
I tried to investigate this fragmentation. It happened because the engineering
department controlled this completely, they didn’t want to outsource. They
wanted everything inside. But the business and the sourcing guys/purchase
people would want to outsource. So what happened is that they started
outsourcing it to local people whom they could control completely.
Across the world, everyone has two suppliers. For example, if Cat’s factory is
in Russia, two suppliers will be there, if it’s in China, then two suppliers will
be there. This way the vendors could be controlled fully. That’s why there is
this extreme absolute fragmentation. Now this is a historical trend. When I
took over the business, I spoke to all these guys because they were all our
customers in India. I asked them that wherever Toyota goes, Toyota’s main
suppliers go, wherever Ford goes, Ford suppliers go, then why is the
hydraulics business any different?
Part of the story we discovered together. They were also surprised that this
was such a fragmented market. Finally we started telling our customers that
we are a credible organisation from any viewpoint whether it is about
engineering design which is a technical capability, financial stability, ethical or
governance track record, and we are a company you can partner with
globally. We will have a manufacturing presence wherever you are present.
Simple story. This is what was being done in all other businesses, so there
was nothing new in what I was doing. But it was a total novelty in that
industry. Long and short of it is because of that we became even more
successful and from number 17 or 20 in that market globally, we are No.1
today. So now we have presence in China, Brazil, manufacturing and
engineering operations.
Are you doing manufacturing in each of these countries?
Yes, China, Brazil and Europe. We don’t have in America but America we don’t
have right now because most of the big OE customers have captive sites. But
it will be there too. So for that industry what we did was highly innovative.
You know when I said look why are you spending so much money on
engineering, when I can have an engineering centre where you will have a
customer interfacing engineer sitting right in Europe, and the back-end is
done mostly by 20 engineers we have in Bangalore. Now this is a story which
is done in other industries, so there is no big deal about it. But in that
industry it was a dramatic thing.
So in that business, all the engineering and design work is being
handled out of India?
No, I feel application engineering, which is a customer facing application, has
to be handled close to where the customer is. But most of the other stuff
which can be done without customer interface, is done here in India.
So how did the competitors react? They must have been of a similar
size in different countries.
Everyone of them, barring our key Japanese competitor, wanted to set up a
similar kind of a structure. I don’t think anybody has been able to do it
because they are facing a sort of death spiral in that. Because if you are a
US$100m company, first of all the ability to handle something in India is very
difficult. It’s not that you are a GE then you can do something. So it is difficult
and it is a practical problem.
Let us assume you are a highly respected European company and you say
look I am getting hammered by this strange new model that Wipro has
created. So I will go and build a factory in India. Now assume you can
manage the investments, you can manage the operational challenges, but
then the European customers will tell you that since you are now doing this in
India, please start supplying us from India. This would hurt them terribly in
their home markets.
On the other hand our challenge was pricing, which was how to make sure
they can understand that just because we are an Indian company, we will not
be cheap. We might be more value for money, so we might be 5% cheaper,
1% cheaper something like that. We may have better quality, we may be
sometimes more expensive also. But we will be clearly higher value for
money. That is a struggle for us.
Was that an India image or what was that?
India image. Total India. You are supplying from India, so it should at least be
20% less. See for us the challenge was building the business, for them the
challenge was hollowing out the business. So it was slightly different.
Competitors reacted but this was the issue that they faced and very severely.
Did it help that you were a part of a larger company called Wipro?
Absolutely. But it’s not sufficient because one of our key competitors in the
USA or couple of other competitors are part of large conglomerates. But it
certainly helped me dramatically. Let’s say when I would go into the Volvo
boardroom, if I would go as an independent company and asked for US$100m
business, what is my credibility? And when I go there as part of Wipro, a
US$6bn conglomerate, whose chairman is a well-known figure, I am part of
the senior management team of that company, etc, etc. then it’s a completely
different ball game. So it helped me enormously - it’s not so much the money
part of it, but the credibility of being a part of large respected successful
organisation with certain values.
Is there something you would like to see in terms of policy changes
or some government support so that innovation gets a fillip in the
country?
I don’t think the government can do anything. Government is not needed.
This is not only about Wipro Infrastructure, but it’s a general thing. What I
understand about government is that they should first improve the
fundamentals. They should improve or correct the infrastructure first.
Secondly they should stop corruption. What happens is peoples mind, and
energy are distracted. So instead of innovating on product and value, you are
trying to innovate on how to get the next license or to do something of that
nature. So the corruption, governance overload that is there, eliminate that.
The third thing is that don’t create obstacles to start or close down a
business. You don’t have to do anything else in the matter of innovation. Let
people drive, it will happen, that’s at one level.
The next level is not an entirely government issue; government can play a
role in this, in fact government should play a role in this. Let’s call them
enablers. The first thing is the education system that you refer to. It is just
incredible, how little we are doing and talking about this issue and our socalled
engineering mind is so shallow. In engineering schools and colleges,
nobody learns how to think, how to solve problems. Everybody learns
subsequently. So how can you create a great country? By having a higher
education and a school education system, which is producing rote memory
robots?
To my mind that is a crucial issue. We have to fix the issue of our education
system, and this rote-driven education system that we have. If you ask me
what’s the single biggest obstacle for us to become big innovation hub, it is
our education system. Because you can always tout a few success stories, but
are those successes in the scale and proportion of the size of the country?
That is the question to ask. And it is not so because our education system is
horrible in this particular context.
The last part is that I feel we should discover our own thing - what drives
innovation for us. I will give you an example. The fact is we have a certain
context in our country and that context is the context of scarcity. There is
nothing, there is no money, no healthcare, no roads, etc. When things are not
there, then how do we work? Or how do things work? Or what things work?
To my mind that is the great innovation strength that we have. Why did we
make the Logic Alpha 100? We made it because there was no solution in this
country, we needed a mobile ultrasound. I mean there is scarcity in this
country and we can do wonderful things to address that. We somehow have
to harness that fire, not somebody else’s fire.
And this “fire” from a corporate stand point is obviously a large
market, so there is a business case for it.
Absolutely correct. So you harness that fire and there is a business case, and
the interesting part is that is what GE discovered or what we discovered.
Eventually if you harness this fire and you innovate on this basis, then the
same stuff you can sell outside also, not only in developing countries, but you
can sell it in developed countries also. So I feel very strongly that instead of
chasing unnecessary goals, harness the opportunities that are here.
Note: Read more such interviews in our latest thematic report The next six
billion
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