Is innovative workplace training fueling an Indian economic miracle?

Entrepreneur and business professor Vivek Wadhwa who is executive in residence for the Pratt School of Engineering at Duke University, and a Wertheim Fellow at Harvard Law School, sent me the following dispatch which I have titled,

"Is innovative workplace training fueling an Indian economic miracle? What the US can learn from India."

It’s worth careful reading. Please do not miss the last section of this message which compares China with India.

Cheers,

Ram Narayanan
US-India Friendship
http://usindiafriendship.net/
http://usindiafriendship.blogspot.com/



Is innovative workplace training fueling an Indian economic miracle? What the US can learn from India -- A Note from Vivek Wadhwa.

Ram, many have been predicting the demise of Indian industry. They say that rising salaries, poor infrastructure, a weak education, etc. will cause Indian industry to implode….that the Indian IT industry was just a flash in the pan.

Yet my research at Duke and Harvard has shown the opposite -- that despite all the obstacles, India is rapidly becoming a global R&D hub. I used to be a tech CEO, and was one of the first to outsource R&D to India. What I saw the Indian IT industry achieve in 15 years is happening in half the time in an assortment of industries -- Its scientists are doing sophisticated drug discovery for Big Pharma, its engineers are designing key components of jetliners for Boeing and Airbus, helping to design automobile bodies, dashboards, and power trains for Detroit vehicle manufacturers, and are developing next-generation networking solutions for companies like Cisco. Indian companies are also developing innovative solutions for the Indian marketplace, such as the $2500 car produced by Tata.

My own research has shown that India is in poor shape with its higher education – the country graduates less than 1000 PhD’s in engineering – which is not even enough to staff the growing universities, let alone build an R&D machine. So how is India doing all this?

Duke/Harvard and the Kauffman Foundation published a detailed report, which I authored, called "How the Disciple became the Guru: Is it time for the U.S. to learn workforce development from former disciple India." It shows how India’s companies learned the best practices of Western companies and perfected these. Indian industry has developed a surrogate education system which can take workers with weak education and turn these into world class R&D specialists. Here is a link to download this http://papers.ssrn.com:80/sol3/papers.cfm?abstract_id=1170049 (select the download location at the top of the page).

Below are 2 articles which I authored for BusinessWeek and the Wall Street Journal on this. Harvard International Review also published an abstract and will spotlight this in the next edition of their journal.

Bottom line: Just as the Japanese achieved major advances in manufacturing management in the 70’s, which led to their rise as an economic power, India is achieving similar feats in workforce development: India has learned and perfected the best practices of leading companies that have been outsourcing their computer systems and call centers. We believe that this will fuel the Indian economic miracle. And we believe that the best way for America to respond to globalization isn’t to construct trade or immigration barriers: it needs to re-learn some lessons in workforce development from its former disciple, India.

Regards,

Vivek Wadhwa
Duke University, Pratt School of Engineering
Harvard University, Labor and Worklife Program, Harvard Law School


http://www.businessweek.com/technology/content/jul2008/tc20080722_958899.htm?chan=search

BUSINESSWEEK

Viewpoint July 23, 2008

What the U.S. Can Learn from Indian R&D

Engineering companies in India play a leading role in educating their research employees, a practice the U.S. can adopt to help keep its global competitive edge

by Vivek Wadhwa

We’ve heard the dire warnings before. The U.S. is falling behind in math and science. A recent admonition came from the Business Roundtable, which cautioned that the U.S. could lose its competitive edge to India and China unless it doubles higher education graduation rates in engineering and science. Intel Chairman Craig Barrett, a member of the influential association of executives, said America’s economic future lies with its next generation of workers and its ability to develop new technologies and products. This means we must strengthen math and science education, he said. Yes, we need to keep improving education.

But too great an emphasis on education at the university and high school level lets off the hook another crucial contributor to the education of U.S. workers: the workplace.

India knows well the role companies must play in educating employees. A new report I co-authored for the Ewing Marion Kauffman Foundation titled How the Disciple Became the Guru reveals that Indian industry isn’t relying on India’s education system to gain an edge. Indian industry has developed a surrogate education system that can take workers with weak educational backgrounds and turn them into world-class R&D specialists.

Perhaps it is time for America to learn from its former disciple.

Click here for the rest http://businessweek.com/technology/content/jul2008/tc20080722_958899.htm .


http://online.wsj.com:80/article/SB121675006375274155.html

THE WALL STREET JOURNAL ONLINE , JULY 23, 2008

India’s Workforce Revolution

By VIVEK WADHWA

July 23, 2008

American businesses are increasingly moving their research and development operations to India. Companies like General Electric and Cisco now have their second-largest research centers in Bangalore. Debates rage in the U.S. about whether this will lead to greater prosperity or threaten the country’s global economic leadership. But it’s more productive to ask how India is training a workforce capable of handling such complex work.

The global engineering and entrepreneurship project team at Duke University traveled to India several times between September 2006 and May 2008 to meet the executives of dozens of multinational and domestic Indian companies to review their R&D projects and operations. What we found was astonishing: Despite its low science and engineering graduation rates, India is rapidly becoming a global hub for R&D, with a momentum and scale similar to what it accomplished in information technology services.

But how? Adjusting for different definitions of which degrees count as "engineering" degrees, India graduated roughly 140,000 engineers in 2004, about the same as the U.S. Additionally, it graduated 17,000 at the masters level and 900 Ph.D.s -- a small fraction of the U.S. numbers and not even enough to meet the growing staff requirements of Indian universities. Nor is the quality of its graduates consistent. India’s Institutes for Technology, for instance, are equivalent to the MITs of the world, but many other, smaller institutions aren’t even licensed.

So if engineering education is so critical to global competitiveness, how is India succeeding? It’s picking up on the best practices know-how it effectively imports from foreign companies outsourcing to India, and perfecting those techniques. This is hardly novel -- it’s exactly the path Japan followed in the 1970s and ’80s.

A new report by the Kauffman Foundation, which I co-authored, breaks the Indian innovations down into seven key areas:

- Employee recruitment: The companies we studied are innovative not only in how they recruit, but also in whom they recruit and where they look for talent. Most hire for general ability and aptitude, rather than specialized domain and technical skills. They rely on training and development to bridge skill gaps.

Technology companies like HCL and Wipro recruit from second- and third-tier colleges all across the country, and also in arts and science schools. India’s largest call-center operator, Genpact, has recruiting storefronts in 22 cities, without even requiring a resume. It is also targeting retired bank clerks and housewives.

- New-employee training: Companies in India assume new recruits will have to be trained practically from scratch. So they invest substantial time, money and effort in the training function. Most large companies have built dedicated learning centers and some employ hundreds of training staff. The Infosys Global Education Centre at Mysore can train 13,500 people at a time. New recruits attend a 16-week boot camp which strengthens their technical, communications and management skills. For its science recruits, TCS provides seven months of training in computer programming, customer orientation and project management.

- Continuing employee development: Indian companies have to invest in making their employees more productive and rapidly moving them up the skill and management ladder. This increases billing rates and the productivity of employees, and lessens attrition because of the rapid career advancement that employees can achieve.

Employees are typically required to participate in a wide range of education programs, including not only technical and domain training but also soft skills and management skills encompassing training in quality processes; communication; and cultural, foreign-language and personal-effectiveness skills. Career advancement and salary increases are usually tied to the completion of such training.

- Managerial training and development: Shortages in managerial talent have made it necessary to foster talent from within. Managers are typically groomed through fast-track programs that provide management training and mentorship to high-performing employees. The average age of first-line managers in the Indian companies we studied is below 30. Preference is usually given to internal staff to fill management openings.

- Performance management and appraisal: All of the companies we studied have implemented sophisticated performance-management and appraisal systems to create greater transparency and fairness in evaluation and rewards. Managers are evaluated on a variety of nonfinancial measures, including employee satisfaction, attrition rates and mentoring.

- Workforce retention: Most companies have achieved dramatic reductions in employee turnover by carefully analyzing recruitment, performance and attrition data to identify patterns. This has led to constant refinements in recruitment, training and development, performance management and other human-resource practices. Corporate communications and employee engagement in the company and its programs are always a priority.

- Education upgrades: Indian companies appear to have an unusual level of interaction with the private colleges and universities that supply them with talent. This involves working with these institutions in developing customized degree programs; training the educators; creating new curricula and training programs; and negotiating deals to hire graduates in bulk -- without job interviews.

* * *
The result of this workforce productivity is clear to see. In the aerospace industry, Indian companies are designing the interiors of luxury jets, in-flight entertainment systems, and collision-control and navigation systems for American and European corporations. In pharmaceuticals, Indian scientists are discovering drugs and performing clinical research for nearly all of the largest multinational drug companies. In the automotive industry, Indian engineers are helping to design bodies, dashboards, and power trains for Detroit vehicle manufacturers -- and soon may develop entirely outsourced passenger cars.

The Indian experience highlights what can be achieved by investing in upgrading workforce skills. That lesson has implications for policy makers in the U.S. who worry about how the economy will adapt to globalization. If workforce training can take the output of an education system as weak as India’s and turn its graduates into world-class engineers and scientists, imagine what could be done with an American worker base that has received amongst the best education in the world.

Mr. Wadhwa is executive in residence for the Pratt School of Engineering at Duke University, and a Wertheim Fellow at Harvard Law School. This op-ed is adapted from a report, "How the Disciple Became the Guru," released today by the Ewing Marion Kauffman Foundation.

_____________________________________________


I asked Vivek: Where does India stand vis-a-vis China with reference to his research?

Vivek’s answer:

In China the only significant R&D is being performed by MNC’s and that is targeted at the Chinese market. In India, MNC’s are doing a lot of advanced research for global markets, but they are greatly overshadowed by Indian companies doing research for the global and Indian market. China today excels at imitation -- not innovation.

China increased engineering bachelors graduation rates by a factor of 4, its masters and PhD’s by a factor of 6 to 7 over a decade. It now publishes 4 times as many academic papers. And it is investing massively in research. One can only marvel at the magnificent infrastructure and gleaming cities of China. In India, the government is focused mainly on playing vote bank politics with its higher education system – setting 52% university admission quotas for groups in which the vast majority does not even complete high school. India still only graduates less than a thousand PhD’s in engineering – not even enough to staff its educational institutes. The country looks like it is falling apart.

Yet India is leapfrogging China in R&D. In China, the vast majority of R&D is being performed by MNC’s to adapt their products for the Chinese market. This is usually managed by expats and returnees. There are a few exceptions, but by and large, China is excelling at imitation, not innovation. Now, go inside the labs of hundreds of companies in several industries in India, and you’ll be amazed. There are literally hundreds-of-thousands of engineers developing advanced technologies for global markets. (Now they are developing innovative products for their own markets also).

If K-12 education, investment in research and S&E graduation could make all the difference by themselves as is the mantra in the U.S., then India should be imploding and China should be the world’s new innovation hub. This story from the Washington Post shows some of the issues in China -- A Long Wait at the Gate to Greatness (http://www.washingtonpost.com/wp-dyn/content/article/2008/07/25/AR2008072502255.html?wpisrc=newsletter). But China faces even greater challenges in laying the seeds for innovation and entrepreneurship. It takes much more than people who want to make money…you have to build the culture and systems for entrepreneurship…and you need to enforce IP laws.

Bottom line: China’s growth is government-led. India’s growth is entrepreneur-led. Education is an enabler. Not having this ensures failure. But more education doesn’t ensure success. The U.S. needs to bring education to those that are left behind (which is a horrifyingly high number for an advanced country). And the U.S. needs to focus on improving the skills of its existing workforce. If it waits for its next generation to make it more competitive, it will be too late. Indian industry isn’t relying on its education system or government – it has learned the best practices in workforce development from the west and put these together to form a whole which is giving the country a badly needed edge.
___________________________________________________

http://www.rgemonitor.com:80/asia-monitor/253103/indias_nuclear_deal_and_benchmarking_against_china

RGE MONITOR, ASIA ECONOMONITOR

India’s Nuclear Deal and Benchmarking against China

Nirvikar Singh Jul 25, 2008

The successful confidence vote for Prime Minister Manmohan Singh’s government in India, which had been shaken by his standing behind the nuclear deal with the United States, prompted me to reflect on the undercurrents and implications of this exceptional agreement. The 2005 announcement of the agreement on sharing nuclear knowhow was certainly a coup for India, and it is a pity that it took so long for the Indian government to cut loose its obstructionist communist allies.

Why did the U.S. make a nuclear exception for India? According to the Washington Post in 2005, “much of the plan was conceived by Robert Blackwill, former ambassador to India and a deputy national security adviser under Condoleezza Rice, along with his close confidant, Ashley J. Tellis, a specialist on U.S.-India relations” at the Carnegie Endowment for International Peace. Tellis had earlier laid out a vision for India-U.S. relations in a paper titled “India as a New Global Power,” promoting strategic cooperation between the two countries rooted in U.S. defense sales to India, and support for India’s growing military nuclear capability. This is an easy connection to see, between the explicit agreement on “civilian nuclear technology” and the strategic, military goals of both nations. It is also clear that competition for natural resources, the oldest (and traditionally the only) driver of geopolitics, remains a salient factor in these interactions. India’s push for a natural gas pipeline from Iran, which failed to get a positive response from the U.S., also falls in this category. India’s current attractiveness to the U.S. comes from its potential role as a partner against terrorism and as a fellow democracy – pragmatism and principle, as the Prime Minister put it, in his 2005 address to the Joint Session of the U.S. Congress. On the Indian side, abandonment of the “holier-than-thou” attitude that characterized India’s earlier approach to diplomacy is welcome. Instead, India seems to be falling more in line with the Chinese realpolitik stance, to achieve some degree of nuclear parity with China.

While acknowledging the importance of security, and of access to natural resources, it is imperative to take a broader view of what constitutes “success” for a country like India. International prestige and military clout should not be goals that divert attention from raising the economic wellbeing of the population. It is better to be a Japan, than a Soviet Union. While the nuclear deal’s avowed purpose is to serve India’s future energy needs, one should take that objective with a grain of salt. There are other things that India’s policymakers can do that would provide greater immediate and lasting benefits, including more rational energy pricing and organizational reform of public sector energy suppliers.

In fact, economic growth should be the main goal where India benchmarks itself against China. It is also where India falls short. Comparing how the two countries tackle some of the means to achieve this end of high growth is illuminating. Begin with higher education. As far back as 2004, China announced some opening of the education sector to foreign participation. Six months later, a wide variety of joint ventures in higher education were under way. There are now over 700 foreign-affiliated colleges in China. Along with this injection of foreign organizational expertise have come successful attempts to hire internationally renowned faculty and host high quality foreign visitors. There has also been a shake-up of the incentive system in China’s universities, with a new emphasis on rewarding productivity and talent rather than seniority, and paying internationally competitive salaries.

In contrast, India produced a committee report in late 2005 on the entry of foreign universities, which was full of qualifications and restrictions that can only discourage investment: no “poaching” faculty from Indian institutions; no repatriation of profits; no franchising or offshore campuses. The committee stipulated probationary periods and large security deposits, and suggested that only foreign universities from countries that offer Indian universities reciprocal opportunities abroad should be allowed entry. These conditions are designed to protect inefficiency in Indian higher education and restrict supply, rather than promote positive change and growth in a sector that is even more important than energy. The report’s recommendations are bad economics, and a resurgence of the license-permit raj mentality. And all this, in a country where quality higher education is in such short supply that there are coaching classes to prepare students for entrance exams to qualify for other coaching classes, which then prepare students for the IIT entrance exams.

Next, consider research and development (R&D). A report in the Wall Street Journal in March 2006 described a surge in foreign-invested R&D centers in China, its top place in the list of countries slated for R&D expansion by multinationals (with the US and India following), R&D spending well ahead of India’s (1.3% of GDP compared to 0.77% for India – translating to six times as much spending), and clear targets to boost spending and to train and attract talent. In contrast, India’s “top official” was quoted as saying, “the scale of investment is not much” because of budgetary constraints. India is “trying to build R&D,” but the government does not have the financial resources or expertise, nor does it seem willing to allow those to come freely from abroad. According to the US National Science Foundation, China (with Israel) tops emerging economies in technological competitiveness, with India a long way behind.

Finally, consider venture capital. Also in March 2006, the Wall Street Journal ran a headline “Venture Capital Swarms China.” The story reported that a flood of venture capital is competing to fund tech companies, with funds raised by VC investors reaching $4 billion in 2005. This compares with well under a billion dollars of foreign investment for true venture deals (excluding late-stage private equity deals) in India in the same year. Of course VC investment in India has increased. The problem in growing it even more is India’s policy environment, with the persistence of needless government controls and interference.

The bottom line is that India has much to learn from China in areas of international economic policy as well as foreign policy. Even if the government cannot become more efficient in its basic functions, it can at least create an enabling environment for foreign capital and expertise to enter more freely in areas where they can make a long run difference to India’s growth: higher education and R&D. This will ultimately be more important than matching China in nuclear prestige, and more fitting with India’s new global confidence.

NIRVIKAR SINGH is Professor of Economics and Co-Director of the Center for Global, International and Regional Studies at the University of California, Santa Cruz.

Harsh Pant on India's Search for a Foreign Policy‏

The following article by Harsh Pant is a critique of India’s foreign policy or rather, the lack of it -- perhaps the best critique to appear in recent months.

His main point: An incoherent foreign policy [as it is now] will ensure that India will forever remain poised on the threshold of great power status, but will be unable to cross it.

While India’s policymakers, including the think tanks, should carefully read this article, I hope Harsh Pant will do a follow-up piece to answer the following questions:

If you (Harsh Pant) are the policy-maker, what will be India’s foreign policy? How will you convince India's Parliament that what you are suggesting is the best foreign policy for India?

What will be your "grand strategy to integrate the nation’s multiple policy strands into a cohesive whole?"

What should India do with the accretion of economic and military capabilities and with its purported great power status?

"The portents are hopeful if only the Indian policy-makers have the imagination and courage to seize some of the opportunities." What are the opportunities that India must seize?

Ram Narayanan
US-India Friendship
http://usindiafriendship.net/


http://pragati.nationalinterest.in/2008/07/%e2%80%9cadamant-for-drift-solid-for-fluidity%e2%80%9d/

PRAGATI: THE INDIAN NATIONAL INTEREST REVIEW, JULY 2008

FOREIGN POLICY: “Adamant for drift, solid for fluidity”

India needs leadership and a renaissance in its foreign policy

HARSH V PANT

AS THE United Progressive Alliance (UPA) government completes its four years in office, there is a whiff of fragility and under-confidence in the air, as if at any moment the entire facade of India as a rising power might simply blink out like a bad idea.

The absolute control of the Communists on all realms of policy-making, the single point agenda of the Congress party to stay in power as long as possible and the insistence of the Bharatiya Janata Party upon destroying its credibility as a national party—all have ensured that Indian foreign policy continues to drift without any real sense of direction.

The seemingly never ending debate on the USIndia nuclear deal has made it clear that today India stands divided on fundamental foreign policy choices facing the nation.

What Walter Lipmann wrote on US foreign policy in 1943 applies equally to the Indian landscape of today. He had warned that the divisive partisanship that prevents the finding of a settled and generally accepted foreign policy is a grave threat to the nation. "For when a people is divided within itself about the conduct of its foreign relations, it is unable to agree on the determination of its true interest. It is unable to prepare adequately for war or to safeguard successfully its peace."

In the absence of a coherent national grand strategy, India is in the danger of losing its ability to safeguard its long-term peace and prosperity.

As India’s weight has grown in the international system in recent years, there’s a perception that India is on the cusp of achieving ’great power’ status. It is repeated ad nauseum in the media, and India is already being asked to behave like one. There is just one problem: Indian policy-makers themselves are not clear as to what this status of a great power entails. At a time when the Indian foreign policy establishment should be vigourously debating the nature and scope of India’s engagement with the world, it is disappointingly silent. This intellectual vacuum has allowed Indian foreign policy to drift without any sense of direction and the result is that as the world is looking to India to shape the emerging international order, India has little to offer except some platitudinous rhetoric that does great disservice to India’s rising global stature.

There is clearly an appreciation in the Indian policy-making circles of India’s rising capabilities. It is reflected in a gradual expansion of Indian foreign policy activity in recent years, in India’s attempt to reshape its defence forces, in India’s desire to seek greater global influence. But all this is happening in an intellectual vacuum with the result that micro issues dominate the foreign policy discourse in the absence of an overarching framework.

The recent debates on the US-India nuclear deal, on India’s role in the Middle East, on India’s engagements with Russia and China, on India’s policy towards its immediate neighbours are all important but ultimately of little value as they fail to clarify the singular issue facing India today: What should be the trajectory of Indian foreign policy at a time when India is emerging from the structural confines of the international system as a rising power on way to a possible great power status?

Answering this question requires one big debate, a debate perhaps to end all minor ones that India has been having for the last few years. However much Indians like to be argumentative, a major power’s foreign policy cannot be effective in the absence of a guiding framework of underlying principles that is a function of both the nation’s geopolitical requirements and its values.

Otto Van Bismarck famously remarked that political judgement was the ability to hear, before anyone else, the distant hoof-beats of the horse of history. In India’s case, everyone but policymakers it seems is hearing the hoof-beats of history’s horse. Indian policy-makers seem to have come to believe that just because the country registers economic growth rates of 8 percent, they don’t really need a serious foreign policy and that they can afford to get by with ad hoc responses or grand finger-wagging.

Foreign policy requires a serious look at the causal chain of events as opposed to mere reaction. A strategic framework is necessary to bring some measure of order out of an increasingly chaotic world. India needs a coherent, holistic approach to its foreign policy that is rooted in the deepest tectonic plates of its geography and history. It is the underlying and immutable characteristics of a nation that shapes its interests as it struggles for power and survival in an anarchic international environment.

But India’s foreign policy elite remains mired in the exigencies of day-to-day pressures emanating from the immediate challenges at hand rather than evolving a grand strategy that integrates the nation’s multiple policy strands into a cohesive whole.

The assertions, therefore, that India does not have a China policy or an Iran policy or a Pakistan policy are plain irrelevant. India does not have a foreign policy, period. It is this lack of strategic orientation in Indian foreign policy that often results in a paradoxical situation where on the one hand India is accused by various domestic constituencies of angering this or that country by its actions, while on the other, India’s relationship with almost all major powers is termed as a ’strategic partnership’ by the Indian government.

More recently, Indian government has been accused of betraying its ’time-tested friends’ such as Iran and Russia as if the only purpose of foreign policy is to make friends. A nation’s foreign policy cannot be geared towards trying to keep every other country in world in good humour. India has been extremely fortunate that it has encountered an incredibly benign international environment for the last several years, making it possible for it to expand its bilateral ties with all the major powers simultaneously.

This has given rise to some rather fantastic suggestions such as India being well-placed to be a ’bridging power’, enjoying harmonious relations with all major powers—the United States, Russia, China, and the European Union. Such a suggestion not only implies that the major global powers are willing to be ’bridged’ but also that India has the capabilities and influence to be such a ’bridge’.

Moreover, the period of stable major power relations is rapidly coming to an end and soon difficult choices will have to be made and Indian policy-makers should have enough self-confidence to make those decisions even when they go against their long-held predilections. But a foreign policy that lacks intellectual and strategic coherence will ensure that India will forever remain poised on the threshold of great power status but won’t be quite able to cross it.

Let not history describe today’s Indian policymakers in the words Winston Churchill applied to those who ignored the changing strategic realities before the Second World War: "They go on in strange paradox, decided only to be undecided, resolved to be irresolute, adamant for drift, solid for fluidity, all-powerful to be impotent."

India is being told that it is on the verge of becoming a great power. But no one is clear what India intends to do with the accretion of economic and military capabilities and with its purported great power status. India today, more than any other time in its history, needs a view of its role in the world quite removed from the shibboleths of the past. An intellectual renaissance in the realm of foreign policy that allows India to shed its defensive attitude in framing its interests and grand strategy is the need of the hour.

Despite enormous challenges that it continues to face, India is widely recognised today as a rising power with enormous potential. The portents are hopeful if only the Indian policy-makers have the imagination and courage to seize some of the opportunities. Instead we have to bear witness to the sorry spectacle of the nation’s prime minister reduced to asking his coalition partners to "listen to voices of reason" on the crucial issue of the nuclear pact with the United Sates.

At crucial moments in its history, a nation needs a leader who can inspire, infuse its people with confidence and remind them that greatness is theirs if only they would push a bit harder. India is in the danger of losing that moment and right or wrong, Dr Manmohan Singh will be blamed for it by history.

Harsh V Pant teaches at King’s College, London.