'Indian companies are not shy of buying expertise'
Adil Zainulbhai heads McKinsey in India. ET caught up with him to discuss the strategic consultant’s India odyssey. Excerpts from an interview:
By TNN |
Adil Zainulbhai heads McKinsey in India. ET caught up with him to discuss the strategic consultant’s India odyssey. Excerpts from an interview:
You entered India in 1992. What has the experience been like?
It has been a phenomenal experience. India is one of the strategic markets for McKinsey and we are doing fantastically well. Our experience here has mirrored the way the economy has developed. There was the first rush, the opening up, interest by MNCs and lots of investment by Indian companies.
We grew like crazy at that time. Then the Indian economy slowed down and our practice mirrored that. Indian companies were not willing to invest or pulled back their investments; interest rates had gone up. MNCs lost interest in India and our practice also was slower. Since 2004, as the economy took off, we have taken off incredibly, as if tied to a rocket.
How does McKinsey’s India practice compare with that in other countries, China in particular?
We are among McKinsey’s fastest growing practices worldwide. In terms of people, India would be one of the largest. Both India and China are strategic priorities. Among emerging markets China is the biggest. But India is bigger than you would expect for the size of the economy. Chinese economy is three times bigger than the India one.
Our people strength is three-quarters the size of China. And that’s because there are lots of Indians in McKinsey. Also, given the Indian market is more open, there are lots more private companies here than China. Besides the Indian market has been more open for the service providers than China.
McKinsey is a knowledge creator and accumulator in terms of management practices, restructuring, etc. What has India contributed to this?
India is a big contributor. We started hiring people of Indian origin in the US in 1971 when no firm of our quality was hiring Indians. As a result, we have many Indians who grew up in India, went to IITs and business schools and then joined McKinsey. So, the number-one contribution of India to McKinsey is the senior leadership talent. Two, we have a thriving practice in India that is actually quite unique compared with other practices around the world.
That is of huge value to our clients around the world. We have helped bring a large number of companies into India. If we look at FDI in India, we are probably involved in two-thirds of all the companies that have invested in India. Three, McKinsey has 1,500 employees in India, not professionals but employees. That is because we have the McKinsey Knowledge Centre. We started KPOs in India by setting up the McKinsey Knowledge Centre.
Every KPO in India of any size is either run by or has in its management a team people who were with the McKinsey Knowledge Centre. In terms of knowledge, there are a few topics that we contribute to the firm quite substantially. Indian companies have figured out how to scale up faster than almost anyone else. With that knowledge, on things like scaling up, building a plant at 40% less, redesign, etc — the firm (Indian) is a centre of excellence.
India has unique business models that have evolved locally. IT companies train 70-80 thousand people and maintain huge margins. China doesn’t seem to have produced such models but at a macro level it continues to do better.
It has been a phenomenal experience. India is one of the strategic markets for McKinsey and we are doing fantastically well. Our experience here has mirrored the way the economy has developed. There was the first rush, the opening up, interest by MNCs and lots of investment by Indian companies.
We grew like crazy at that time. Then the Indian economy slowed down and our practice mirrored that. Indian companies were not willing to invest or pulled back their investments; interest rates had gone up. MNCs lost interest in India and our practice also was slower. Since 2004, as the economy took off, we have taken off incredibly, as if tied to a rocket.
How does McKinsey’s India practice compare with that in other countries, China in particular?
We are among McKinsey’s fastest growing practices worldwide. In terms of people, India would be one of the largest. Both India and China are strategic priorities. Among emerging markets China is the biggest. But India is bigger than you would expect for the size of the economy. Chinese economy is three times bigger than the India one.
Our people strength is three-quarters the size of China. And that’s because there are lots of Indians in McKinsey. Also, given the Indian market is more open, there are lots more private companies here than China. Besides the Indian market has been more open for the service providers than China.
ADVERTISEMENT
McKinsey is a knowledge creator and accumulator in terms of management practices, restructuring, etc. What has India contributed to this?
India is a big contributor. We started hiring people of Indian origin in the US in 1971 when no firm of our quality was hiring Indians. As a result, we have many Indians who grew up in India, went to IITs and business schools and then joined McKinsey. So, the number-one contribution of India to McKinsey is the senior leadership talent. Two, we have a thriving practice in India that is actually quite unique compared with other practices around the world.
That is of huge value to our clients around the world. We have helped bring a large number of companies into India. If we look at FDI in India, we are probably involved in two-thirds of all the companies that have invested in India. Three, McKinsey has 1,500 employees in India, not professionals but employees. That is because we have the McKinsey Knowledge Centre. We started KPOs in India by setting up the McKinsey Knowledge Centre.
Every KPO in India of any size is either run by or has in its management a team people who were with the McKinsey Knowledge Centre. In terms of knowledge, there are a few topics that we contribute to the firm quite substantially. Indian companies have figured out how to scale up faster than almost anyone else. With that knowledge, on things like scaling up, building a plant at 40% less, redesign, etc — the firm (Indian) is a centre of excellence.
ADVERTISEMENT
India has unique business models that have evolved locally. IT companies train 70-80 thousand people and maintain huge margins. China doesn’t seem to have produced such models but at a macro level it continues to do better.
We started reforming much after China did. China’s model of development was infrastructure investment-led and centrally driven. That has led to changes that are more visible such as buildings and roads. On the other hand, if you look at the proportion of the companies that are directly and indirectly controlled by the government that is still very high in China. We have dealt with the PSU problem much better than China has solved its state-owned enterprises problem.
That said, there are lots of stories in China which we have not heard of. However, look at Lenovo. It scaled up very fast and bought out IBM. Look at China Unicom and China Telecom. China Unicom has 250 million subscribers. Their power companies have scaled up enormously. They have five companies with 100,000 mega watts of generating capacity. So, it is not true that they have not scaled up. It is just that they are different kind of companies.
Do consultants from India get pulled into world-wide projects also? How does the McKinsey Knowledge Centre work?
Every consultant who joins McKinsey spends at least six months to a year outside India before they become a partner. Our value proposition to people we hire is that we would give you the best opportunity in the world. At any point of time at least 20-25% of our people are working on international projects.
The McKinsey Knowledge Centre is essentially a KPO. We took a lot of knowledge development that was occurring all around the world and moved it here because we could hire very high quality people who could do that, and scaled it up. So, lots of basic research, company and industry analysis, analytics services are done here. We have about 500 people. The knowledge centre was set up specifically as a worldwide resource, so 80-90% of the work they do is for rest of the world. It is the only centre of its type in the world right now.
ADVERTISEMENT
How receptive are Indian companies to advice?
Seventy per cent of the work we do is for Indian companies. They would be quite receptive otherwise we wouldn’t be doing that work. Only about 20-25% of the work is for MNCs. Indian companies are very smart. They are mainly proprietor-driven. They want to make sure they are getting value for their money. If they see value, they are willing to pay, like any other investment.
And it is not because McKinsey is a big name. I don’t think Indian companies are shy of buying expertise or paying for expertise. As profits have grown, more companies are seeking our services. Even the smaller companies are willing to pay. Right now, the issue is not one of demand. We cannot meet the demand, and that is a good situation to be. We can pick and choose, and thus make an impact.
What kind of impact has McKinsey had?
ADVERTISEMENT
Our impact has been on three fronts. Number one, we are very proud of the impact we had in helping the country grow and get better. We have talked to all the governments that have been around since 1992 and helped them on various policy issues. We have helped them think about how international companies look at India, how to attract more FDI and how to increase the growth rate.
We had done a seminal piece of work at the McKinsey Global Institute on raising India’s growth from 5% to 10%, way back in 2000 when no one thought it was achievable. We worked with Nasscom and said IT could be a $80-billion industry. At that time the industry did not enjoy any credibility. We helped setting up the Public Health Foundation of India and the Indian School of Business. We have done work on the auto industry.
Second, Indian companies are doing fantastic work. We have been involved in helping them get better. It is not that we made them get there. That credit goes to managements. But we help them get there. We feel terrific about that. There are companies that are now worth 50 times more than what they were 10 years ago. We are very proud of helping Indian companies become globally competitive.
Our third contribution is that we have recruited the brightest youngsters in India and gave them world-class opportunities. We are the largest recruiter by far from the top 20% of the five IIMs.
Is McKinsey not a quasi investment banking firm rather than just a strategic consulting firm?
We (can) help bring companies together. We don’t execute the transaction. In some cases we work very closely with investment banks; in others, there are no investment banks. We do more of this type of work in developing markets than we do in developed markets as strategy, acquisition and execution all gets merged in such markets. We have to make something happen as opposed to suggest a strategy.
ADVERTISEMENT
We are involved in cross-border acquisitions and domestic ones. By and large, we are involved with major trends happening in Indian companies or an MNC coming into India.We might even have created some trends. If you take the top 50 companies in India, we talk to them all the time. And we are working with a lot of them. Likewise, we talk to the top 50 multinationals in India all the time and we are probably working with a fair number of them.
This is the first time that McKinsey’s director’s conference is being held in India? What is the significance?
Our worldwide directors, which number almost 400 now, get together once every two years. It is a very eminent group of people, as they are senior members of the business community. We are in 50 countries and in every one of those countries, the McKinsey senior directors are very much part of the business community. It is a wonderful opportunity for them to learn about India.
They influence strategic directions of companies around the world. They talk to CEOs and management teams all the time. From that perspective, we are excited as we have got a chance to talk about India and impress a very influential body. If they go back with a good experience and a good view of India that affects the advice they give other people. That’s why I think from India’s perspective it is a good thing.
ADVERTISEMENT
These events are held all over the world. We had one in Russia, in St Petersburg, when the country was opening up. We had one in Turkey and another in Shanghai. In that sense it is a recognition of India’s role in the world economy that they are coming here
(Interviewed by Bodhisatva Ganguli & Vinay Pandey)
Download
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
ADVERTISEMENT
