Why it’s so hard to be a business leader in India

Thanks; Ravi Venkatesan, Published: JUNE 17, 8:30 AM ET

India may be one of the toughest markets in the world for a global company, but this also makes it one of the best incubators for next-generation global leaders. Adversity, after all, breeds leadership. This fact is not lost on major companies like GE and Nestle, which are using the role of India head to groom their rising executives.

Yet many companies, put off by the country’s chaos and adversity, are redirecting their efforts and investments elsewhere. It’s hard to build a global business in India, and much of the success or failure hinges on getting the right leaders in place who can tackle the country’s unique challenges–the first being the structure of the market.

20130618-133821.jpgRajanish Kakade/AP
India has a small affluent segment that is quite well served by global products at global prices, but to become relevant and really succeed in India, executives need the patience and perseverance to crack the large, fast-growing middle market. This can be a long and expensive journey.

Indian consumers expect to pay $75 for basic smart phones, 1 cent per minute for calls, $500 for open-heart surgeries and $5,000 for an entry-level car. To compete at these prices requires a very different mindset and approach to innovation that most companies find challenging. For example, today India is one of McDonald’s fastest growing markets, but it took the company nearly a decade to nail its menu, business model and supply chain. Any executive of a multinational has to be bifocal: faithfully replicating the company’s established business model at the high end, while also entrepreneurially leading a long-term, company-wide assault on the middle market.

The second leadership challenge is managing chaos. To succeed in India, you need to cope with pervasive corruption where there is a “price list” for even routine approvals and transactions. In industries like telecom or infrastructure, where the government controls access to resources or contracts, bribery is an integral element of the business model. Moreover, government policies are highly uncertain, making it difficult for companies to plan major decisions. Is software going to be treated as a product or as a service for the purposes of import duties? Is the government going to dramatically increase the price of diesel? Is it going to retroactively change tax laws? Is it going to revoke telecom licenses and put them up for auction again?

The bureaucracy can be mindboggling, as routine approvals and decisions get deferred by months if not years. Transportation strikes, harassment by tax authorities, woeful infrastructure are all part of the game.

Building a capable organization is in my view the third greatest challenge. When a company has 20-percent growth and 15-percent attrition, as many companies do, it essentially has to hire and onboard a third of itsentire workforce every year. This is no ordinary HR task. Capabilities that are taken for granted in developed markets–project managers, supply-chain experts, sales managers who can close a million-dollar deal, competent people managers–are quite scarce.

Even hard-working and smart employees often struggle with teamwork and personal accountability. Indian culture places an emphasis on individual achievement right from childhood, which tends to breed workers who are capable, but competitive rather than collaborative. Successful company leaders have little option but to fill in all these gaps personally, by constantly teaching, inspiring and driving performance.