The Boston Consulting Group's global CEO shrugs off worries about India's reforms future and explains why he's here for a week with 426 colleagues. He first studied China and India's development strategy while working on his MA thesis three decades ago, began coming to India four-five times a year in the mid-90s after the reforms took root, and is now here with 426 partners from 36 countries across the world, to help them get a feel of the changes taking place in the country, so they, in turn, can help clients flesh out an India strategy. Since it was founded in 1963, BCG partners meet only in Boston every November, while in May they hold the meeting in various other locations. India's a "bit hot" in May, and since they didn't want to serve the partners for lunch, BCG's President and CEO, Dr Hans-Paul Bürkner decided to break tradition, writes Sunil Jain.
The week ahead is packed, from seven in the morning till midnight, with Finance Minister P Chidambaram and local business stars such as Sunil Mittal addressing the partners, internal presentations and even business trips for partners from different practices "" some will go to Gurgaon and Bangalore to see BPOs and retail, others to Mumbai for financial services, and the usual Taj and places around it. So, tea it is, on the day Bürkner lands in India, at his suite in Delhi's Taj Palace, which is fully booked with BCG partners (since it's 420-odd rooms can't take all of them, a few have spilt over to the neighbouring ITC Maurya Sheraton).
Bürkner, like everyone else coming to India, talks of the stunning turnaround in Indian industry, its confidence as demonstrated by the Tata takeover of Corus, the consumerism, and so on "" after all, that's what he and his colleagues are here to soak in. Unlike the others, however, Bürkner isn't turned off by the red-tape, the crippling infrastructure or the plethora of surveys that rank India below Cameroon and Zambia. He cites the example of a survey that just came out last week in Germany "" "Despite having the kind of welfare benefits we have, we were ranked just above Poland on this ... I don't trust surveys, there is usually some motive to many of them," he says dismissively. His tea cold by now, a new set is ordered. Bürkner doesn't sip it regularly, but takes large gulps after he's made a few points, not so much because he wants it but because it's there.
Since economist Surjit Bhalla's just given a presentation (at the India International Centre, on Saturday) on how too much is being made of India's infrastructure shortage, that China built its infrastructure only after the existing one burst at the seams, that institutions like the bureaucracy haven't slowed down growth, I put this across to Bürkner. Not being as blase, he's a bit hesitant, but he endorses much of this, especially the infrastructure getting built up later. Just the other day, he was with an industrialist who found the land he was expanding his factory on in China was allotted to someone else! In any case, he says, China still has big infrastructural bottlenecks even today. Indian courts, he counters, may take a very long time to deliver justice, but at least there are courts "" the Chinese system is hardly as well developed. While results vary across industries, and firms, on balance, making profits in India has been easier than in China "" typically profits in India accrue within five years as compared to 10 in China. "I've prepared a lot of entry strategies," he gets back to my question of the lack of progress on labour policies being a big bottleneck, "but never in my life have I prepared an exit strategy!" Market capitalisation, he gives an example, is driven by future prospects, not current profits.
"You need to think in decades, not in quarters or a few years," he says. No, he's not too disappointed by the reforms slowing down, as if you move too fast, there's a backlash. I feel as if P Chidambaram is in the room already, or maybe Bürkner's just preparing for Monday's talk with him. Businessmen, Bürkner insists, are not looking at the day-to-day back and forth in reforms, that happens everywhere, what they're looking at is a sense of whether the overall movement is forward, and there is no doubt that is the case in India. "I don't think politicians say one thing to us, and do another when they go out," he dismisses my contention that the finance minister will say the usual good things to the BCG family. "Having backed the process, they are also judged by its results, so they do deliver." He sounds sincere and talks of the status quoists in the US and Europe. Given his European background and the delicate coalitions run by Angela Merkel and Romano Prodi, it's easy to see where he's coming from. Bürkner admits that while European investors have a larger timeframe, the Americans are in more of a hurry.
Will we see more protectionism of the sort we saw when Indian BPOs were grabbing a lot of business some years ago? I cite former US Treasury Secretary Larry Summers' latest piece in Business Standard (courtesy, Financial Times) which gives details of how average earnings in middle America have stagnated. Once again, the answer is the same. There will be some back and forth on the issue, and it will coincide with election cycles, but on balance, the movement will be forward. The developed world, he explains, also needs to come to terms with a Tata buying a Corus or a Mittal (even though it's not an Indian company) buying an Arcelor. Indeed, he insists, one of the reasons why OECD firms have been slow to move business, not just to India but also to China, is that they lack the bandwidth to be able to manage so much change.
More often than not, Bürkner cautions while winding up our conversation, firms underestimate the challenges of a new market, particularly the manpower ones. BCG itself, he admits, felt it would stabilise operations within three years, but it took six (having five partners was Bürkner's idea of stabilising, the firm now has eight, and a ninth will join by the end of the week).
