How to be a Catalyst for Your Industry's Ecosystem?

TRANSCRIPT

Rajshree Shukla: 0:04

When you’re at the cusp of starting something new and trying to carve a niche space for your industry, what can be the contributing factors for its long-term growth? Can competing and collaborating really go hand in hand?

Hello, I am Rajshree Shukla representing ISB’s Management ReThink – an online management practice journal, published bi-monthly by the Centre for Learning and Management Practice. In today’s session, we at Management Rethink are excited to have Mr. Harish Mehta with us. Harish Mehta is the driving force behind galvanising the IT industry in India by co-founding NASSCOM and is the author of ‘The Maverick Effect'.

Building upon the far-reaching lessons in the aftermath of this ‘movement’ as some call it, our conversation today is about how a single association, supported by unshakeable values has the power to become a trusted catalyst in fostering an ecosystem. Whether you’re in politics, bureaucracy or aiming to bring momentous change via new-age industries, there is something for everyone here.

Welcome to the podcast, Mr. Mehta! It's a pleasure to have you here.
 

Harish Mehta: 1:16

Thank you, Rajshree. Looking forward to having an interesting conversation.
 

Rajshree Shukla: 1:21

Thank you. Yes. So given your experience, Mr. Mehta with NASSCOM, I wanted to actually begin by talking about that. What do you think are the unique characteristics of an organisation like NASSCOM that can drive change at an ecosystem level and ensure exponential industry growth in your opinion?
 

Harish Mehta: 1:43

Let me explain first what NASSCOM is. NASSCOM is a nonprofit, volunteering, peer-to-peer organisation. There is no binding force for anyone to be a member of the NASSCOM. But over the time, it has indirectly become a self-regulatory body for the industry. At least, all 80% of the top line of the industry is being represented by NASSCOM. So, in some sense you can say it is a self-regulatory body because everyone is a part of that group and jointly, they take the decisions. Now, the NASSCOM is a very unique organisation compared to any association anywhere in the world in my view, not only within India but outside India also. Because we started taking couple of decisions in the beginning, which laid the foundation for the industry to grow. So, to talk about some of these differentiators or values, when we started NASSCOM, we decided to focus on building the ecosystem for the software business. Now, it's a tall order to build a healthy software business. When we were young, we didn't even have an idea, we were so small, frankly. But we were very clear that we need to build an ecosystem, because at that time, what we could see was, the total market was US$300 billion. But what was accessible to us was only US$10 billion. So, we had a great potential to grow from 10 to 300, provided we all work together. And all these problems which we were seeing, let's say 100 regulations strangulating the intangible software industry where hardware rules were applied, 100 regulations were strangulating us. Now how do you work at it? And if you remove those regulations, we could see that 10 billion can become 40 billion. Similarly, when we work with the customers and the receiving country, there were certain changes they had to make. If they make, it becomes bigger, so the pie gets bigger, provided we all work together. Now, how do you work at it to make that happen? So, the first thing is, we needed a number of policy changes. There was a major trust deficit between the policymakers and the industry. And that is true in India, that is true anywhere in the world. By and large, the bureaucrats or the policymakers don't trust the businesspeople. And there's a lot of history behind it. But we believed differently, we need to build the trust. Because once you have trust, I mean, you don't require any control, any mechanisms to watch you from 15 different places, you don't need 25 compliances to follow. So, your board meetings are more focussed on business, rather than compliance. So, there’s a huge gain, if you can remove these regulations by building trust with the bureaucrats. So, that was the one thing we did by which we did a number of things to build trust between the government and us. So, we built an open, transparent, independent, neutral platform where they could also participate and join us. So, they could see very healthy debate, discussion going on every issue. They were getting educated, and they started becoming helpful to take it forward. And one example I can give is with Mr. Vittal (former Central Vigilance Commissioner), when he said, “I'm giving you software export income tax benefit for one year, provided you do US$400 million, not provided, but you should do 400 million dollars in one year. Now, we were at maybe US$150 million at that point in time. So, we did our own analysis, we found we can do only 200. So, we went back to him saying, “sir, we cannot do it.” He says, “you don't want the benefit?” “No,” we said, “we want the benefit, but not by committing to something which we can't do.” He was surprised at our honesty and sincerity. That these people I can trust. And of course, we talked to him about how, what changes were to be brought in by which we can reach 400 million, which he has to work on. And as a result, very few, in four-five years, we could cross US$400 million. And not only four, we crossed a billion dollars very quickly. So, that is the benefit of having trust between the policymaker and industry. Apart from the soft values that we have brought in, we have planted the seeds of corporate transparency, or meritocracy, or recruiting, gender balancing. If required, we'll get into some of those issues. But that's the achievement of the industry.
 

Rajshree Shukla: 6:21

Absolutely, thank you for those insights, Mr. Mehta. So, I understand that there was this single-focussed lobbying that happened, and you know, you people were representing the industry, I wanted to understand how was it universal then, like, do you think other industries could also gain something from that? How did those shared values probably that the co-founders had, helped drive that change and growth? So, if you could elaborate a little bit on the significance of shared values in that sense, and, and what made people trust you people? So that is another thing.
 

Harish Mehta: 6:59

Okay. Let's talk about the trust first. So again, when we started NASSCOM, it was very clear, there was a major trust deficit between policymakers and the industry. First of all, they didn't understand what is software, they had no idea about the potential of software services business. They were all, some of them at least, the educationists and scientists, knew about software product business. To them, software services was a low-end business, which was nowhere in the priority to provide the thrust to it. Those of us who were in the business, some of us had lost big money in a product game, and we realised India is not ready for the product game, the potential for us is software services, the labour arbitrage benefit was very apparent. And there were 40-50 companies who were in this business at that point in time in the services. But in the 80s, we found something like a 100+ regulations strangulating us. So that was the number one task for NASSCOM, as to how do we work… in this bureaucratic machinery to bring in this change? So, we decided the first thing was, and that was our collective wisdom, that we will not bribe for any policy change that we need. So sometimes we waited for five years, for certain policy change to happen. Now how do you build trust? So first, we realised we have to build trust amongst each other before we get the bureaucrats in. Now, in our meetings in the early years, everyone was competing with each other, even though, and it's a very small market. So, people were scared to open up in terms of talking about their problems. They were worried that the competitors will go and tell the customer about their problems. Or by mistake, by slip of tongue, if the customer’s name comes out, everybody will go after that customer tomorrow. So, there's lots of such fears in everyone's mind, so they were not opening up. So, we were not having real discussions. And then we decided collectively, we'll invite for any or all our meetings, every bureaucrat who is connected with our industry, and he or she doesn't need an invitation. They're just most welcome to come in. Other industries were not allowing, by and large, to visit the company's premises. So, in our case, it was a very open, trusted environment that we started creating. So, like that we started building trust.
 

Rajshree Shukla: 9:44

That’s really interesting, you know. I’m sure this kind of openness and transparency helped build that credibility for NASSCOM. And it took it off the ground, I would say. Would you agree about its universality? I mean if other industries were to follow in the steps of NASSCOM?
 

Harish Mehta: 10:01

I mean, to me, every industry should follow, frankly, the NASSCOM model. When we could deliver 30% compounded growth over 30 years, and with all other benefits of job creation, earning foreign exchange, cultural seeds, and we are hardly at $2,000 per capita income as a country. We need to create 90 million jobs over the next 10 years. So, we are still a poor country from that perspective. So, we have a long way to go. And every industry will have to contribute to make their India really change, from let's say where we are, to a developed nation. And the reason it gives me comfort factor is, one, we talked about trust deficit which we reduced between the bureaucrats and us, which helped us take the right policy decisions. Now, there are a couple of things which we did along with it. First was, again going back to when we started NASSCOM, we said we will represent 80% of the top line of the industry. Like Mr. Kohli of TCS at that time, was hesitant to join. We delayed forming NASSCOM till he said yes. Because without TCS, we would be representing 30% of the top line. And at 30%, you are nobody. You are like some local association, that’s it. You're not going to make any national impact. So, till Mr. Kohli agreed, we didn't form NASSCOM. After he agreed, we said “okay, let's go ahead, now we have the strength to do it.” So, with the 80% voice, and partly the kind of, the way we used to work together, we would go and recommend a policy change to, let's say bureaucrats or policy makers. Not a single person, I don't remember a single person has gone outside the NASSCOM platform and taken a different position. And these bureaucrats would tell us about other associations. They’ll recommend something and within 24 hours, some of them would come and tell us, “No, I don't agree with that.” So, they were confused when there were multiple voices. “First of all, we don't know your industry, we don't understand technology. So, we need to have a trusted partner whom we can rely on. So, we would prefer a single voice and not multiple voices coming in.” And till today, we have maintained that. I don't know what will happen tomorrow, but we have still maintained that single voice for the industry, as far as the policy… And before the single voice, internally there were massive debates and discussions, and whatnot. Till we all agreed to a particular composite view, because everyone has their own view. But then you need to come back to a composite view, which is finally the single recommendation to the government. And that's what again paid a huge dividend. In my view, policy decisions were taken very quickly. And there were enough stories to talk about in terms of real anecdotes where they got comfort and confidence that we will not recommend anything which is against the country.

But anyway, so that's one value, you can say this India-first, fiercely competing companies working together, and then solving the problem. The second thing which happened in those meetings is, which again, I have not seen because I have been attending many other meetings of other associations, I don't see the creative juices flow to solve a problem. You have the best of best people around you. All the CEOs are the best of best Indians in a way. And if their creative juices don't flow, they're not getting any suboptimal solution. But in our case, we saw that by having NASSCOM as a trusted, neutral, independent platform, which consciously was nurtured, and we still nurture it, where a small company, large company, product company, service company, MNC, Indian company, all are equal in some sense. Everybody has an equal voice. And we encourage people to talk, so large companies don't carry their voice, or the celebrity CEOs don't carry their voice. You listen, you respect all that, but overall arrive at a decision which is good for the industry or good for India.
 

Rajshree Shukla: 14:29

Yes, that was very interesting, actually. Lots of parallels, and how other industries can also follow the same route. That united front, you know, and how these swift policy decisions and the importance of consensus all of it, I think, drove that setting. So, what are some of the core values that may serve as the guiding principles when creating a representative body of NASSCOM’s stature or a ‘think tank’ for any industry? Could you elaborate on those?
 

Harish Mehta: 15:00

We have about nine, I would say such values, which work in sync, what have made NASSCOM a success. These are – no personal agenda, collaborate and compete, keeping India first, growth mindset, proactive consultative policymaking, robust conflict resolution processes, sense of ownership, and so on. So, I'll just talk about the first four. Now the first is, let's say, no personal agenda. Now it was very clear to us that in order to build an ecosystem, we need to have no one or two groups, what do you call, monopolising the policymaking process. So, every policy has to be provided a level playing field in the country. And we believed very strongly that it's a theory of abundance, that if we all contribute and grow the industry pie, there is more for us to grow, as well as we allow new ones to take birth. So, with that as a thought process or principle behind it, we said we cannot let the personal agenda get mixed up. And that has to start from the ground level up. So, a simple thing like, we will not pay anyone's expenses for travel to attend the meetings. Or anyone gives a presentation about a particular issue, he or she cannot use his company's brand name in the slides, very simply saying that you are on a neutral, independent platform where your company’s brand should not be mixed up with that. Again, to give another story here. Prime Minister's Office had taken a delegation to Russia – Pharma Association and the IT Association. So, NASSCOM and there was a pharma association. Now, when our turn came for the presentation, Som Mittal who was the President of NASSCOM, normally he would do the presentation. But Som looked around and he saw Harsh Manglik, Chairman of NASSCOM and also Chairman of Accenture India, present, so he said, “Harsh should give the presentation, he's the Chairman of NASSCOM.” So Harsh said fine, but then he looked around and he saw N. Chandra who is now Tata Sons Chairperson. He was TCS CEO. He said, “The largest company in India is TCS, their CEO is with us, so Chandra should give the presentation.” So, they approached Chandra and he said, “Yes, I'll do it.” Then they said, “but, in this presentation, there are four case studies of your competitors. Would you give it?” Without blinking, he said, “Yes, I am speaking on behalf of India.” So, when the Prime Minister's Office saw this, they were completely, what do you call, surprised at the behaviour of these individuals.

The other value we can talk about is collaborate and compete. Now in our case, the collaborate and compete goes, we extend it. We say it is keeping India first or industry first, be consensus-driven, with no personal agenda to be mixed up there. And also, when we do come up with a consensus, we try our best to end up with the highest common denominator, not the lowest common denominator. Because it's very easy, when some little, tricky issue is there, people tend to go to the lowest common denominator and maybe take no action at the lowest level. While we would like to confront the issue, explore it, and see if we can find a solution. So, try to get an optimal solution. And I can again tell you one anecdote here about how that collaborate and compete works. There was a time when the government didn't allow 100% ownership by MNCs in India. Now, our customers are MNCs, basically. So, they approached us saying, “would you allow 100% ownership for our back-office operations? It's a back office, it is our internal confidential stuff, we cannot give it to third-party service provider. Anyway, and we know your talent because you guys are doing a great job with us here. So, we would like to come to India and leverage your labour arbitrage benefit, as well as the talent available in India.” It made sense to us but again, we were all worried. If they come, they'll take away our people by paying double the salary, even the business we're doing with them now, that may also, under some garb, will get shifted to the back office. So, we'll be the big losers. But on the other hand, we also realised that they'll bring in quality processes, which we were not familiar with in those days. They will bring in HR processes, infrastructure processes, number of best practices that MNCs have developed, we’ll have access to it indirectly, and that will help us also. So that debate was going on, somebody remarked, saying that, “How do you take a decision when two major conflicting thought processes are there?” Somebody at that point said, “Whoever develops human capital of India is us, us meaning NASSCOM. And who doesn't develop human capital is not us. Even an Indian company, if they're not developing human capital, they're not us.” So, who is us? Normally, it was India-based company, as a very simplistic way of looking at it. So, we changed the definition to human capital-based. So, we went to Dr. Manmohan Singh, who was the finance minister then, and said we recommend 100% ownership for allowing MNCs for the back-office operations. Now that particular decision today has 1,800 R&D centres in India, employing 1.2 million engineers. Today, they are co-creating future with their parent companies, which is the highest level of work that our industry also aspires to do. And some of them already started doing it. So that's the collaborate and compete, solving a very different problem, creative juices flow to solve a problem, and almost an impossible problem gets solved, which benefits everybody.

The third value I talked about, let's say, is the growth mindset. When we started, we were, let's say about 100 million, we started dreaming of a billion dollars. So, when we met Mr. Vittal, he says, “Do you know how many zeros are in a billion?” But we, coming from an industry that is technology driven, so 10x thinking is built into us in that sense. Because we like to aim high, and then work backward. As CK Prahalad would say, “Fold the future back.” So, then you work out the roadmap and work towards this, look at the entire ecosystem of reaching that number, and number of activities get started in parallel. So, that US$1 billion ambition came in. When we started NASSCOM, we didn't have this vision of US$200 billion, even a billion was a big number. It kept on evolving as the time passed. So, when we crossed five billion, we started dreaming of 50 billion. So, Mckinsey was roped in to come up with a sturdy plan. They came back actually with the whole US$50 billion plan, saying how industry can reach and what are the roles and responsibilities of every stakeholder of the industry. So, from education, policies, infrastructure, industry, all that was spelled out reasonably well. So that became a sort of a guidebook for everyone to follow. If that is the vision we have, let's go after it. And that allowed, whenever the growth came – in our industry, the growth came for every new technology wave coming in. And then growth will come like a steep curve. And if you are not ready with either a full infrastructure and the people, you can't scale, you will be bogged down. Like today also, digitalisation has gotten us a huge opportunity, we don't have enough skills. So, we are not able to capture the sudden growth which may... So that would have happened at that time also. But we were ready to capture the maximum growth potential for us. So, that I would say, the growth mindset or dreaming big or thinking big, is absolutely essential. And we all know in management that if you don't grow, it starts stagnating and all other negatives that go with it.

And the fourth is proactive consultative policymaking. There are so many such technologies relevant for India to accelerate towards becoming digital India. So, startups to Digital India to technology services industries, all these advanced technologies, like when we started ‘what is software’, policymakers didn’t know. Today, there are 18 such words, which industry, I'm sorry, policymakers don't know. What is crypto, what is genomic sequencing, what is blockchain? How many policymakers would deeply understand to come up with a policy? It’s impossible. In our industry, we don't have it, forget about them. So, it has to be a consultative process of policymakers, industry, subject matter experts, thought leaders, coming up with, you can say a plan, and it will be a sort of flexible plan to come up for government to implement. So, I believe very strongly that proactive consultative [policymaking] is the way to go. It also means that we need to build the capacity and the capability of policymakers in the newer technologies. There are lots of other things to be done in parallel, for proactive policy to become effective.
 

Rajshree Shukla: 25:24

Absolutely! All these stories and examples speak of actual change in a way. So, as you rightly said, amalgamation of all these values together, I believe, would have the potential for any true impact, and other industries could definitely learn from that. Okay, so moving on, while the ‘technopreneurs’ are busy making their mark in the field of fintech, what should they be mindful of, in your opinion?
 

Harish Mehta: 25:50

Well, I'm not a fintech expert. However, I do have passive investment in some fintech companies. So, as an outsider, I would say, industry has enjoyed an explosive growth over the last many years. And there is a potential of same growth to be maintained over the next decade, let’s say. However, I do see that the fintech as an industry, multiple views I hear… each successful fintech player has their own view about where the industry should be going, which is very confusing. So, there is a need, as per me, that fintech industry should create a platform equivalent to NASSCOM. A platform where small companies, large companies, niche companies, come together under one umbrella and have a single voice for the industry. And once you succeed in doing it, also develop a vision for the industry. It should be an India-centric vision, not copying a western model. Because Indian needs are different as we all know, affordability is number one criteria for 1.3 billion to come mainstream on the finance side. So, keeping some of those Indian challenges in mind, they should develop a vision where… and of course, second, I will say India's a very diverse country, so the needs are quite different in different segments. So, the vision should be to allow innovation-driven entrepreneurs, not only to take birth, but also nurture them. Similarly, for social entrepreneurs, rural entrepreneurs, to be encouraged to come up in the fintech world. So, my sense is that if that happens, it will be so easy to carry regulators, policymakers, opinion makers, influencers, and it will hopefully create a very positive, healthy environment, and an ecosystem in parallel will keep developing which will ensure that the explosive growth they have enjoyed over the last many years will continue. So, that would be my first suggestion that these technopreneurs should be mindful of. This association or the platform, forum – whatever one calls it, will help [in] multiple ways. For example, today, most of the fintech players are funded by VCs and the VCs have funding coming in from Indian investors and foreign investors. Now, substantially again, I would say, foreign investors. So foreign investors’ primary focus is wealth creation. Now, there will be many situations in India, where one will have to probably sacrifice short-term profit for the long-term gain. The question then is, will these foreign investors agree to such a game plan? To me, this platform, which is sort of independent, neutral, will help a lot in coming up with a composite view, carrying every player, which is beneficial to both individual player as well as to the industry.

Another way to look at it is, today we hear murmurs about startup entrepreneurs not following minimum corporate governance standards. Now, if this… if that message or that signal gets amplified, government high hand will come in, and in order to control the few, large number of innocents will get hurt. That's my experience. So, for example, take Reserve Bank of India, few years back came up with a… when they sensed that the crypto industry is not aligned to India strategy, they came up with a regulation, and overnight crypto entrepreneurs went out of business. So again, if this platform emerges as a self-regulatory body, I think it can minimise many of such unpleasant reactions.
 

Rajshree Shukla: 30:01

Completely agree with that. India-centric innovation, I think, is key at the moment. And, yeah, they have to come up with things which are solving a real problem in that sense, specific to our culture and needs.

So, as we move towards the end of this conversation, Mr. Mehta, are there any leadership lessons you’d like to share for leaders of tomorrow, while they attempt to build a brand for themselves in the middle of fierce competition, and, of course, as they manage multiple stakeholders?
 

Harish Mehta: 30:29

Enough has been talked about it, in some sense, about this particular subject. And the management schools are teaching beautiful… I mean a number of things that are required for entrepreneurs to be global. I think one suggestion I would give is, what I have learnt from my experience, is when you are at the peak of your career, and if you spend at least 10% of your time building the industry, building the ecosystem, in the long run, it's a win-win for all. Because when you build the ecosystem, what happens is, you are not only growing the ecosystem, in a sense, the overall market and the size, and the infrastructure needed. So, there is more for you to grow as well as the new ones to take part. So that 10% time leverage is many, many times for the segment as a whole. So, if we look at the IT industry, which was 52 million, now it is $220 billion. Substantially, it happened because of like 30% compounded growth, each company enjoying the benefit, plus 3,000 new companies have taken birth. So, the big guys have benefitted, and the small companies have benefitted, and it has given a balanced growth. And the small ones who have taken birth, they are adding nice, what do you call, specialised niches into the marketplace, which again helps the big companies who are growing also equally fast. So, there's a huge value add from that perspective of, by sharing the pie, the pie gets bigger for you, as well as new ones take birth. So that would be my suggestion, that you spend 10% of your time at the peak of your career, when your creative juices are at the peak, in essence that you want to change the world when you are young, and please do so. So, as the entire ecosystem expands, you will scale many manifolds over the next 20 years. It may not be very apparent in the first two-three years, but when the economy of scale comes in and the ecosystem develops, you would be amazed how it will be beneficial to you also.

Then you must have a very strong value of identifying noise versus signal. So as a result, when IT industry took birth and was growing, the BPO industry, we could sort of see it in the horizon. It could have been killed if we had assumed it’s a noise, but we assumed it’s a signal. With our analysis, we allowed that segment to grow and then the BPO took off. Same thing happened with the R&D centres, same thing happened with many such segments kept on coming up, because we could identify signal versus noise, because every signal had a potential to give billion dollars, create 10,000 jobs in the country. So, we didn't want to miss out those signals. So that again, identifying signal and noise would be applicable throughout the world. Anybody. If you look at… of course, then some few common things are like sense of ownership, that you must have. It’s not just because it is a nonprofit doesn't mean it is a third party. But if you have a sense of ownership, you behave like the CEO of that company, again, you start taking decisions in a very different way, which are very frugal in nature in some way, and efficient, which helps everyone.
 

Rajshree Shukla: 33:55

Here’s what I’ve learnt from this conversation. An ecosystem constitutes multiple stakeholders and despite stiff competition, it is possible to collaborate, when guided by a singular vision. We heard that an institution driven by shared values and trust, along with proactive consultative policymaking is likely to go a long way in delivering impactful outcomes.

The power of collective wisdom can never be overstated. Perhaps it’s time that more such neutral, independent platforms are encouraged to chart out the next chapter in India’s growth story. 

And on that note, I would like to thank you for your valuable insights and time today. It was truly lovely having you with us, Mr. Mehta!
 

Harish Mehta: 34:40

Thank you, Rajshree. It was a pleasure to share my views.