 "We want to become the Chinese competitor: Jim Bujold")
For Jim Bujold, President, Honeywell India, Year 2012 was a challenging one with a flat topline sales of around $1.3bilion, equal contribution coming from domestic business and exports. However with a headcount of 13,000, five product development centers and five manufacturing facilities in the country, the US-based $37biliion-technology major would not stop investing for the future, Bujold tells Sudipto Dey. Excerpts:
Do you see any positive impact of the recent Jet-Etihad deal and the Tata-Air Asia join venture on your aerospace business in India?
The investments coming in are great news. These help build infrastructure from airline ownership perspective. However, lot of work has to be done for modernisation of infrastructure of the industry.
GBAS is satellite based aircraft approach and landing system that enhances an airport’s capacity to handle more planes by providing multiple approaches and helps airline save fuel cost). This drastically improves efficiency of an airport and better use of the facility.
The combination of investment coming into airports, along with investment coming into airlines, and now in technology will ensure airports are used more efficiently and safely.
So, you see more opportunities for Honeywell coming up in the technology space for airports?
Absolutely, whether in the air or on the ground we have great technology that will help grow the industry. We also see huge opportunities on the airline side, and with the airline manufacturers certainly.
Honeywell is right in the middle of building the Indian (aerospace) industry. We have 2,700 aerospace engineers based in India who are working on India and global platforms. We are very positive about the commercial airline industry growth in India.
Any initial reaction to the government’s just-announced new defence procurement policy?
We would all like to see things move more quickly on the defence side. The procurement process here can be complex to work through. But the long term trend is defence spend has been going up year-on-year and we don’t see that stopping any time soon. We are very involved in pursuing lot of opportunities in the defence space now.
From a business performance perspective how did you cope with a challenging year like 2012?
All the four of our operating businesses globally - aerospace, automation and control solutions , performance materials and technologies (PMT), and transportation systems (TS) - are active in India. In 2011, we clocked revenues of around $1.3billion in domestic sales and exports (out of India). For 2012, the figure would roughly be the same. Year 2012 was much tougher than 2011.
The aerospace and transportation verticals are very active here. We have a manufacturing facility in Pune that manufactures 1 million turbochargers both for domestic market and exports.
Our biggest business in India however is the automation and control solutions (ACS) based out of Pune that involves technologies associated with energy, safety, security that goes into residential, commercial and industrial facilities. From a domestic perspective the ACS and PMT verticals contribute around 70-75% of the business.
The remaining - 20-25% - comes from the aerospace and transportation systems.
How is the topline (around $1.3b) divided between domestic business and exports?
It is roughly 50-50, though it may slightly vary year-to-year. If you look over a two-three year period then domestic business is growing faster, but last year our exports grew faster.
What is the road map like for the next two-three years?
The road map is very clear. Our core strategy - not only in India but in all the high growth regions in the world - is to become the Chinese competitor. When I say that I don’t mean to bring people from China to build our business.
The entrepreneur in China has a reputation of being fast and aggressive in understanding the local markets and having local resources that are capable of delivering to the local market at a price point that are accepted by the local market with the right features. We are very much localising the business, and moving the decision-making process closer and closer to the customer. That means we need people on the ground that can take decisions and are empowered to take those decisions.
There are several factors to becoming the Chinese competitor. You need to have great marketing talent to understand the local market. You need to have great engineering to apply it to products to meet the local demand. You need to have the great supply chain, channels to market, along with rights sales approach and fantastic customer relationship.
Our road forward is to continue to develop our people, move more decision-making process into the country, on the ground, closer to the customer.
This strategy is true of all our high growth countries. But we started off with this strategy first in China and India around 2005. Firstly, the lion’s share of our growth is going to come from China and India. Secondly, we wanted to get in right before going to a bunch of different countries.
We matured this strategy till around 2011, and introduced it in 2012 to new set of eight countries and regions such as Middle East, Russia, Brazil, Mexico, Indonesia, Turkey, South Africa, and Vietnam. Being the Chinese competitor is about being a competitor in the local market in all these countries.
That is our over-arching strategy. Underneath that is our product development strategy which is – East for East. This is - understanding the markets in the East, understanding the customers in the East, developing products in the East, to be sold in the East, at the right price points with right features that you need locally.
Interestingly, this East for East strategy leads to East to West. When you apply technology to solve problems in the East, then you can take that technology and innovate it to the West. When we do product development in the East we do it in the same way as we do in the West. But the inputs are different as the markets are different. We still bring our global capability into play but with local strength.
Have there been instances of products developed for India that were taken to other global markets?
We have taken the learnings abroad. For instance the turbochargers we produced for Tata Nano. Clearly the price points had to be very different from a turbocharger developed for a German high-performance car.
We had to learn a lot about material science, applied lot of learning from our aerospace business, and applied it to our turbocharge business to do something on a smaller scale, at different price point that we never had to do before.
Every time you are forced to drive innovation to solve a problem you learn a lot. We capture that learning and share it across the organisation. The application of technology is so faster in many of these emerging markets that it is causing us to look differently how we do things.
How much has Honeywell invested in India so far?
I can tell you what we have on the ground. We have five product development centers in India – Bangalore (2), Hyderabad, Madurai and Gurgaon - employing around 7,500 engineers. We also have five manufacturing facilities – Dehradun, Gurgaon and Chennai, two in Pune.
People have been our biggest investment. Around 10% of our total global employee base is in India, while the country accounts for 3% of our (global) revenue. We have around 13,000 employees in India, of which 7,500 are in technology development.
Between 2002 and 2012 our headcount grew from around 1,000 to 13,000. We over “10xed” our people over 10 years.
If you look at our business performance on a quarterly or annual basis you will see lot of volatility. There will be quarters or years of high growth or quarters or years of negative or flat growth. It is kind of like a saw-tooth. But if you look at from three-year, five-year, seven-year, or nine-year time horizons, then we have seen around 15% growth in those time horizons.
I tend to look at things from end-market perspective. If you look at end market not only is India growing faster than global GDP at large, but the sectors we focus on in India are growing faster than India at large. We focus on growth rates in the segments that we are in.
Because of our portfolio we tend to grow faster than economy at large. It gives us a higher bar to shoot for. So if you look at energy production, energy efficiency, safety, security, customer productivity, those things do not go out of fashion.
In a tougher economy people need to save energy. Customer productivity may be a bigger drive in a difficult economy. Safety and security do not go out of fashion because things are difficult. India may have a 5 or 5.5% GDP, but that may equate for us 12-13% growth for us.
Heartbeat of our business is new product introduction, its technology. New product introduction becomes more important in a difficult economy. We have not stopped investing for the future.
Do you see any positive impact of the recent Jet-Etihad deal and the Tata-Air Asia join venture on your aerospace business in India?
The investments coming in are great news. These help build infrastructure from airline ownership perspective. However, lot of work has to be done for modernisation of infrastructure of the industry.
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That includes building up the new airports, investment in technology to help existing airports be lot more efficient in allowing more traffic. Our recent win in Chennai with our ground based Augmentation System (GBAS) is a big deal for us. (Airport Authority of India signed a contract with Honeywell for installing GBAS in Chennai airport.
GBAS is satellite based aircraft approach and landing system that enhances an airport’s capacity to handle more planes by providing multiple approaches and helps airline save fuel cost). This drastically improves efficiency of an airport and better use of the facility.
The combination of investment coming into airports, along with investment coming into airlines, and now in technology will ensure airports are used more efficiently and safely.
So, you see more opportunities for Honeywell coming up in the technology space for airports?
Absolutely, whether in the air or on the ground we have great technology that will help grow the industry. We also see huge opportunities on the airline side, and with the airline manufacturers certainly.
Honeywell is right in the middle of building the Indian (aerospace) industry. We have 2,700 aerospace engineers based in India who are working on India and global platforms. We are very positive about the commercial airline industry growth in India.
Any initial reaction to the government’s just-announced new defence procurement policy?
We would all like to see things move more quickly on the defence side. The procurement process here can be complex to work through. But the long term trend is defence spend has been going up year-on-year and we don’t see that stopping any time soon. We are very involved in pursuing lot of opportunities in the defence space now.
From a business performance perspective how did you cope with a challenging year like 2012?
All the four of our operating businesses globally - aerospace, automation and control solutions , performance materials and technologies (PMT), and transportation systems (TS) - are active in India. In 2011, we clocked revenues of around $1.3billion in domestic sales and exports (out of India). For 2012, the figure would roughly be the same. Year 2012 was much tougher than 2011.
The aerospace and transportation verticals are very active here. We have a manufacturing facility in Pune that manufactures 1 million turbochargers both for domestic market and exports.
Our biggest business in India however is the automation and control solutions (ACS) based out of Pune that involves technologies associated with energy, safety, security that goes into residential, commercial and industrial facilities. From a domestic perspective the ACS and PMT verticals contribute around 70-75% of the business.
The remaining - 20-25% - comes from the aerospace and transportation systems.
How is the topline (around $1.3b) divided between domestic business and exports?
It is roughly 50-50, though it may slightly vary year-to-year. If you look over a two-three year period then domestic business is growing faster, but last year our exports grew faster.
What is the road map like for the next two-three years?
The road map is very clear. Our core strategy - not only in India but in all the high growth regions in the world - is to become the Chinese competitor. When I say that I don’t mean to bring people from China to build our business.
The entrepreneur in China has a reputation of being fast and aggressive in understanding the local markets and having local resources that are capable of delivering to the local market at a price point that are accepted by the local market with the right features. We are very much localising the business, and moving the decision-making process closer and closer to the customer. That means we need people on the ground that can take decisions and are empowered to take those decisions.
There are several factors to becoming the Chinese competitor. You need to have great marketing talent to understand the local market. You need to have great engineering to apply it to products to meet the local demand. You need to have the great supply chain, channels to market, along with rights sales approach and fantastic customer relationship.
Our road forward is to continue to develop our people, move more decision-making process into the country, on the ground, closer to the customer.
This strategy is true of all our high growth countries. But we started off with this strategy first in China and India around 2005. Firstly, the lion’s share of our growth is going to come from China and India. Secondly, we wanted to get in right before going to a bunch of different countries.
We matured this strategy till around 2011, and introduced it in 2012 to new set of eight countries and regions such as Middle East, Russia, Brazil, Mexico, Indonesia, Turkey, South Africa, and Vietnam. Being the Chinese competitor is about being a competitor in the local market in all these countries.
That is our over-arching strategy. Underneath that is our product development strategy which is – East for East. This is - understanding the markets in the East, understanding the customers in the East, developing products in the East, to be sold in the East, at the right price points with right features that you need locally.
Interestingly, this East for East strategy leads to East to West. When you apply technology to solve problems in the East, then you can take that technology and innovate it to the West. When we do product development in the East we do it in the same way as we do in the West. But the inputs are different as the markets are different. We still bring our global capability into play but with local strength.
Have there been instances of products developed for India that were taken to other global markets?
We have taken the learnings abroad. For instance the turbochargers we produced for Tata Nano. Clearly the price points had to be very different from a turbocharger developed for a German high-performance car.
We had to learn a lot about material science, applied lot of learning from our aerospace business, and applied it to our turbocharge business to do something on a smaller scale, at different price point that we never had to do before.
Every time you are forced to drive innovation to solve a problem you learn a lot. We capture that learning and share it across the organisation. The application of technology is so faster in many of these emerging markets that it is causing us to look differently how we do things.
How much has Honeywell invested in India so far?
I can tell you what we have on the ground. We have five product development centers in India – Bangalore (2), Hyderabad, Madurai and Gurgaon - employing around 7,500 engineers. We also have five manufacturing facilities – Dehradun, Gurgaon and Chennai, two in Pune.
People have been our biggest investment. Around 10% of our total global employee base is in India, while the country accounts for 3% of our (global) revenue. We have around 13,000 employees in India, of which 7,500 are in technology development.
Between 2002 and 2012 our headcount grew from around 1,000 to 13,000. We over “10xed” our people over 10 years.
If you look at our business performance on a quarterly or annual basis you will see lot of volatility. There will be quarters or years of high growth or quarters or years of negative or flat growth. It is kind of like a saw-tooth. But if you look at from three-year, five-year, seven-year, or nine-year time horizons, then we have seen around 15% growth in those time horizons.
I tend to look at things from end-market perspective. If you look at end market not only is India growing faster than global GDP at large, but the sectors we focus on in India are growing faster than India at large. We focus on growth rates in the segments that we are in.
Because of our portfolio we tend to grow faster than economy at large. It gives us a higher bar to shoot for. So if you look at energy production, energy efficiency, safety, security, customer productivity, those things do not go out of fashion.
In a tougher economy people need to save energy. Customer productivity may be a bigger drive in a difficult economy. Safety and security do not go out of fashion because things are difficult. India may have a 5 or 5.5% GDP, but that may equate for us 12-13% growth for us.
Heartbeat of our business is new product introduction, its technology. New product introduction becomes more important in a difficult economy. We have not stopped investing for the future.