Transformational Business Models: Making the Benefits of Growth Accessible to Every Indian

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Naresh Wadhwa, President and Country Manager
Cisco India & SAARC

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The world economy is now in its biggest growth slump probably since the Great Depression. Few predicted the scale and the impact of the current downturn after the sub-prime mortgage market in the United States collapsed banks both in the US and elsewhere, and left millions unemployed, globally. The G20 meet in London a few months ago was definitely the most important meeting of world leaders since World War II. Our leaders pledged USD 1 trillion to the International Monetary Fund - this historic and groundbreaking attempt was probably a first-of-its-kind, intended to drive global economic recovery.

The slowdown has created a competitive landscape among corporations and nations calling for a change in business models. Most business leaders and analysts talk about future growth prospects, but not many corporations have moved beyond existing conventions while addressing customers and market needs. Pundits predict that an innovative approach to products, services and business models will assuage, if not reverse, this trend of negative growth.

So what does innovation in business mean? An organization's Innovativeness can be assessed by its drive to challenge existing market conditions and explore developmental initiatives that grow to become transformational business models. The importance of transformational business models stems from the very nature of innovation, which frequently challenges existing interests, norms, values, social practices, and relationships. These models are also a means to fill certain 'need' gaps in society and thereby cater to markets with hitherto untapped potential. For instance, there is a need to foster inclusive growth in rural and semi-urban India by providing access to some of the benefits we take for granted, such as basic utilities, consumer products and banking services. Inclusive growth should therefore be a key priority for businesses and governments, essentially in developing nations like India. Investments in infrastructure projects, power sector and education , therefore, needs to be high on our government's agenda.

Typically, the cost of adopting innovation to spur inclusive growth is high because adopters have to topple existing conventions while identifying new growth areas. Government initiatives in 2009, along with market efforts, will catalyze massive IT investments and industry growth focused on economic recovery, streamlining, and improving economic stability, and transparency.

While the robustness of demand and the availability of profitable opportunities for corporations largely determine their success, corporate India is waking up to the fact that a closer association with the very communities within which they operate, in itself nurtures a transformed business model.

A case in point is the LifeLines India Project, initiated by OneWorld in collaboration with British Telecom, a technology-based helpline service that provides information through Internet and telephony, and presents critical and timely information to 4600 villages on a range of livelihood related issues. The model demonstrates that large corporations can play a major role in transforming businesses in ways that benefit local communities as well as shareholders.

Also, we can see the key role of information technology in enabling rural transformation. Access to several basic services is limited in the rural Indian household. For a while now, marketers are unanimous that this presents huge market opportunities in almost every sector - telecom, auto, consumer goods and banking, to mention a few. Rural India is a major part of India's domestic consumption story not just because it has 70% of India's population, but also because it has 56% of India's income and enormous consumption power.

The triumph of modern India is driven by profound technological change driven by ideas that have broken traditional barriers. The personal computer, mobile and internet industry have broken such barriers and reinforced broad cultural and economic changes. The telecom industry in India has viewed the Indian hinterland as a great opportunity and wooed these consumers with not only bundled low-cost handsets, but also innovative value added services (VAS) such as education through Internet connectivity on mobile phones. Early this year, BSNL announced wireless broadband at 29,000 rural centres throughout the country including educational institutions. Broadband networks offer a unique, cost-effective opportunity to enhance competitiveness and rise above physical and geographical constraints. According to a recent INSEAD and World Economic Forum study, India is one of the 32 countries out of a total of 157 countries surveyed that have Internet usage rates between 5% and 15%. This suggests that Internet use is not rare, but a large majority of the population, and in our case, it is India's rural masses, is yet to experience the Internet directly. The BSNL program is a step in addressing this urban-rural digital divide and the government hopes to reach 20 million broadband subscribers by 2010.

The telecom industry is an apt example of government reform and business model innovations that has spurred growth and development. In some cases, innovation has been driven by the government itself- The Indian Railways have successfully implemented an online ticketing system that has increased efficiency and improved the ticketing experience for customers. Corporations and government organizations each have a role to play in driving innovation. However, one cannot wait for government reforms or actions in every sector to drive innovation. This is why I believe that Indian corporations need to steer this effort, by thinking and acting differently when approaching current market challenges. The Tata Nano is a more recent example of a corporation thinking differently, and addressing a market need innovatively. In every sector, you see or hear of companies exploring uncharted territory. The State Bank of India's (SBI) reach within the country is unparalleled. With a network of more than 14,000 branches and more than 5,500 ATMs spread across the country, SBI has a long and distinguished history of providing financial services, contributing to the economic development of rural India, and enabling the concept of Internet self-service. It is important to understand that these technologies have existed earlier, but what sets this apart is how various elements have been used to create an innovative service.

The world is clearly looking at emerging markets for growth. And companies in India, China and other emerging countries, could, by thinking and acting differently, open new opportunities in existing markets. Consumption and spending are at an all-time low, bringing several new challenges. The telecom industry will consolidate - and expand - in 2009 driven by the need for market share in countries like India. Healthcare and IT is projected to be an important growth area in African markets due to government development initiatives and foreign investments. IDC predicts that the number of people on the Internet will exceed 1.5 billion for the first time in 2009 - about one-quarter of the world's population. Almost half of these Internet users will also be online buyers in 2009, creating opportunities for online commerce, entertainment and social networking.

India must emerge as a nation that capitalizes on driving reforms and innovation by providing access to information and technology to its citizens. Making the network as a platform and Internet our backbone to provide world-class infrastructure, town-planning, power, education and healthcare facilities will lay the foundation for long-term development strategies that will improve the quality of life for many.

There is a lesson for us all: Opportunity exists, but only for those who are willing to question existing convention. The onus is on corporations today to create technology innovations that initiate social change, and that can eventually play a critical role in reshaping markets. This path will help industries, especially in emerging markets like India, to rightly position themselves for even greater success in the future.

Naresh Wadhwa

Naresh Wadhwa
President and Country Manager
Cisco, India & SAARC


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