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.

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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.
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