Opportunties in Turbulent Times

What emerging realities do you see in light of the emerging economies? Which among these new economies do you feel would outpace the others? Quote examples and facts to support your argument.

The world is changing faster than the speed of light. Banks are getting Lehman-ized, global markets are crumbling, vibrant cities are turning gloomy and many dreams turning into nightmares. To be honest, nobody knows what lies ahead of the current influx point.

Perhaps the two most critical changes which will impact the tomorrow more than any other changes are: the implications of the financial crisis and the future of emerging markets. The crisis that began with downturn in US housing sector has led the largest downturn in the global financial markets. North America and Western Europe account for about two-third of the global wealth in 2007. The remaining third is spread across emerging economies. However, the financial sector turmoil is like to propel significantly higher growth rate in emerging economies and eventually will change the world map in more ways than what we can imagine.

The biggest changing reality and opportunities is the vast untapped demand in challenging markets across Asia-Pacific, Latin America, Eastern Europe, and the Middle East. The right product markets, technology, and geography are critical components of long-term economic performance. Companies that ride the currents succeed; those that swim against them usually struggle. Identifying these currents and developing strategies to navigate them are vital to corporate success. Some of the emerging realities which will fundamentally change how we live and work:

Macro Economics Changes

1. As a consequence of capital market developments, economic liberalization, technological advances and demographic shifts, the world has embarked on a massive realignment of economic activity. Centers of economic activity are shifting profoundly- Asia will overtake Europe economically. China and India will continue to outpace the growth of developed nations.

2. Aging populations are creating demand for public services, which in turn will increase taxes. The unprecedented aging of populations across the developed world will call for new levels of efficiency and creativity from the public sector. Public infrastructure will be witness significant amount of investment in many emerging markets

3. Consumer spending power in emerging economies is growing. Almost a billion new consumers will enter the global marketplace in the next decade. Existing business models to serve customers in developed nations will fail and new distribution system, products and promotion strategies will evolve to cater to this new large consumer segment.

4. Disintegration of global markets while keeping an open border policy will change the way financial world functions. More stringent regulations and governing bodies will be formed to check the power of the large institutions.

Social & Cultural Changes

1. Decline in joint family system in many emerging economies will force the governments to improve the level of social services to provide to citizens who increasingly demand state-provided protections such as health care and retirement security. Insurance and healthcare industry will witness considerable untapped opportunities in emerging markets

2. For perhaps the first time in history, geography is not the primary constraint on the limits of social and economic organization. Technological connectivity will transform the way people live and interact. New developments in fields such as biotechnology, laser technology, and nanotechnology are moving well beyond the realm of products and services.

3. As the market and demand shifts to emerging economies, the domination of Europe and US in technology development will decrease and emerging markets are likely to play larger role in evolution of new technology.

4. Chinese languages (Mandarin and Cantonese) might emerge as the most spoken language after English. Every day more than a billion Google searches are evoked, more than half in languages other than English.

5. A global labor market is opening up. The shift to knowledge-intensive industries to emerging markets highlights the importance and scarcity of well-trained talent. Chinese government has proactively started nurturing the talent realizing that China’s progress might get hindered because of talent shortage in next few decades. For many companies, talent retention will became the source of competitive advantage

6. Environment and human right related regulations (Global warming and changing climate) are likely to force many companies to rethink their success strategies. will post threat

7. Water shortages will be the key constraint to growth in many countries. World might witness “war for water” unless corporate and government start tackling this issue now.

The more interesting debate is which economy will emerge as winner by tapping the wealth of opportunities in the current turbulent time.

Developed economies like US and Europe will continue to grow but unlikely to witness any significant growth in next few decades. One of the Indian democrat said recently that one line summary of changing economies and power is “Europe was yesterday, USA was (note “was”) today and Asia will be tomorrow”.

Japan is the wealthiest market in Asia. However, it is highly locally oriented and also highly regulated. In addition, demographics also against Japan as the average age in Japan will be alarming 53 years in few years. Eroding domestic savings and mounting pension needs might cripple Japanese growth.

Chinese economy has been growing at more than 10% in past and is likely to witness similar growth in future. Chinese government has taken appropriate measures to mitigate any risk which can hinder the growth. They have invested significantly in the talent development and education system. In addition, they have utilized the Chinese sovereign funds to buy real asset across the globe. Perhaps, one day we all will wake up to realize that Chinese own the world. The only dark side of the glory story is the tensed social fabric of China. The sex ratio has been highly skewed will can unstablize the social capital quickly. In addition, lack of transparency and freedom has created resentment in many Chinese societies.

India has been growing at a stable rate of 7-8%. Government is focused on economic growth and liberalization while trying to maintain the social fabric. However, India also faces significant challenge in terms of wealth divide and poverty. According to latest report of World Bank, more than 70% of the Indian population is below (or just above) the poverty lines. We are talking about 700 million people (US population is 300 million, entire Europe combined is 450 million).

Latin America will also continue to grow at a steady pace over the next many years. Unfortunately, poverty is a critical issue for them as well. In addition, the society is also very cynical about foreign brands.

It is not easy to predict how the world will look in next few years. But decline is west and rise of east will be the common theme which will emerge in the coming decade. Companies need to understand the implications of these trends alongside customer needs and competitive developments. Reflecting on these trends will be time well spent.

Are management graduates meant to be corporate servants or corporate masters? As a responsible member of the student community, what steps would you take to promote entrepreneurship among B-school students? Suggest implementable solutions.

The whole question of whether management graduates should act as corporate servants or corporate masters is misplaced and depends solely on how one perceive the job. At a cosmic level, each human being (corporate tycoon or government clerk) is a very small part of a big ecological system. He acts as master to some and servant to many others. In many ways, only way to be a master is by serving others stakeholders of the system. Being master or servant is of no consequence to any responsible human being as long as he is adding value to social capital and overall economy of the nation.

Can we make entrepreneur in Business School? Perhaps not!

Entrepreneurship is about having guts - something formal education cannot teach. Many acclaimed business builders say success depends as much on temperament as on teaching. "An entrepreneur is a kind of genius who is born, not made," says Ann Winblad, partner at Hummer Winblad Venture Partners. Besides, ultimately building a successful business is about passion. Consider three of today's great entrepreneurs: Michael Dell, Bill Gates, Steve Jobs. Not one credits the classroom for their success.

I cofounded, Jamboree, a high-tech venture in a 3G communication vertical. Based on my personal experience as an entrepreneur, I can vouch that the steps one have to take, the risks one have to take cant taught it in a classroom in a million years. Starting a business is not about some framework or management theories. Just to realize that “business is business and has no space for emotion” can be impossible to learn for majority of us without real life field experience. My own venture did not succeed because our team lacked the persistence and vision. These words look easy to talk and write about but difficult to practice.

That said, I do believe that MBA schools can provide a simulated learning environment which can be leveraged by aspiring entrepreneurs. In fact during my stay at IIT Bombay, I founded ‘The Entrepreneurship Cell’ which aims at promoting the spirit of entrepreneurship among young engineers. Since then, the cell has grown to become the India’s largest student run platform and has facilitated many start-ups during incubation. Clearly, school can help budding entrepreneurs if not teach students how to be entrepreneurs.

Taking an entrepreneurship class isn't likely to turn a student into an opportunity-spotting, moneymaking genius. But exposure to various aspects of entrepreneurship can definitely speed the learning curve for those with the right attitude. Some of the programs which Business school can incorporate to provide the richer experience to student are:

Firstly, Entrepreneurship is about attitude and passion. Unfortunately, many Indian student and schools lack the respect for entrepreneurship. Everyone admires Bill Gates and Steve Jobs but only few admire the failed ventures. It is critical to build an environment where students respect and admire entrepreneurship as a profession.

Secondly, all MBA students should be encouraged to take an entrepreneurship course in their first semester. To teach new-venture development, schools should use its classic case-study format with a twist: CEOs of the companies under discussion should be invited to participate.

Thirdly, school should support budding entrepreneurs by offering office space, technology and access to advisors at its business incubator. The school should also hosts business-plan competition offering both financial and advisory support to viable business plans.

Fourthly, all incoming students must participate in Entrepreneur's Boot Camp during orientation. The boot camp should focus on financial self-discipline and the history of both successful and failed business ventures.

Fifthly, collaboration and exchange programs should be established with other emerging market business schools. Just the exposure of what sells in China and Brazil can the single most important success factor for an entrepreneur.

Finally, the lack of financial safety net is perhaps the biggest challenge faced any budding entrepreneurs. School should set up processes to help failed entrepreneurs with corporate placements. In addition, school should create VC corpse which can provide seed funding and buy equity stake in the venture.

I guess the first step to implement any of these changes is the completely change in the mindset of administrative and governing body of the school.

Road to ....

The world is changing faster than the speed of light. Banks are getting Lehman-ized, global markets are crumbling, vibrant cities are turning gloomy and many dreams turning into nightmares. To be honest, nobody knows what lies ahead of the current influx point.

Suddenly, we realize the strange possibility of a new world - a nightmare to some, a paradise to others. Unfortunately, when times are changing everything looks impossible. We feel pessimistic because we are forced to make tough choices. Most decisions are not easy to make and often accompany the feeling of uncertainty that continues to make us question our decision. Perhaps this uncertainty and discomfort is the key to the process of human evolution and learning (economic, social & political).

Interesting thought: 'The road to success is dotted with many tempting parking places. The one who continues on the journey will attain success; others will be in a parking spot'