DEPRECIATING VALUE OF THE DOLLAR AND THE GATES THAT IT IS OPENING

This article has been written by Sudeep Bhargava of Globaladroit (www.globaladroit.com)

The depreciating value of dollar in comparison to the major currencies across the globe is a matter of great discussion. Indian software industries and the exporters are feeling the pressure because of the depreciating value.

The value of dollar which was as high as 49.5 rupees per dollar a few years ago, has now come down to around 39.5 rupees per dollar. This marks over 18% degradation in the value.

Is this some way a boon for the Indian business system? I feel YES. I firmly believe that this is an opportunity which has been bestowed to the Indian business to INNOVATE. This is time to rethink about the current business models that are being followed.

This gives an opportunity to look into your business models and shell off the “non value adding” steps which are unnecessarily eating into your operational costs. In other worlds, this could be the time to go “lean”. Applying simple lean principles can give the Indian industry the competitive edge that they badly want to be competitive in the world market.

Improving the “way you work” and not only the quality of the final product or service would see the Indian business develop the competitive advantage. Probably there is no better time than this to apply the principles of Six Sigma and Lean which have given excellent results to the Fortune 500 companies.

One key question to ask is how to develop other sources of competitive advantage, such as building high-level capabilities which cannot easily be replicated by competitors, or how to change the mix of activities carried out in India versus other countries.

In order to do this, we will have to change their mindset: We will have to stop thinking of themselves as Indian companies and think more like global companies of Indian origin.
Indian companies will need to analyze their portfolio of costs and move production to where it makes the best economic sense. Already, the Indian IT firms are trying to address rising wage costs by moving production within India to lower cost regions like Kolkata or Bhubaneswar and to Tier-II and Tier-III towns.

The challenge that the Indian economy faces is not that of an economic bubble burst but of moving on to the next growth trajectory and economic development. Going by the model proposed by Porter, India has to embark on a journey that needs sowing the seeds for catapulting India into an innovation driven economy unique value.

India will have to definitely accelerate its reform processes and start working to become an innovation driven economy, as that would determine whether the country would become a developed nation by the year 2020. The focus should be on building processes that would be driven by innovation; this would make the economy resistant to external shocks and vagaries of economic cycles and currency fluctuations.

The bottom line is, our policies should concentrate on enhancing our capability in manufacturing, promote entrepreneurship, and provide incentives for innovation.

A comparison: German vs. Indian way of education.

Before I get into any details; a disclaimer: This post is based solely on my observations while at the University of Köln on exchange and has by no means any scientific basis. So please treat it accordingly. So here goes.

Well the system here is on the other end of the system compared to what we have back at IIMA. Here first of all the Bachelor, Master system and hence have no strict conditions about time limits for finishing the degree, unlike us where there is the usual 4 yrs and 2 yrs. (Though they are now converting to the bachelor and master system to ensure universal acceptability of the degrees) The advantage of their old system was that you could take longer than required and interspaced your terms with as many internships as you wished. I know of people who have 4 or 5 internships before they graduate. This not only helps you to fund your own education, but also get a first hand feel of what you are learning. This coupled with the very open system of courses makes it a potent combination for exploring your career and likes. There is no restriction on the courses you take. A person registered for economics can also take courses in the political science stream or philosophy without anyone questioning him/her. And along the same lines, the responsibility of completing the required courses and credits lies solely with the students themselves. Contrast this with the very fixed and structured system we have back home where everything has been pre-decided based on the stream you choose. If you want to become a electronics engineer, you take courses A, B, C, D and if you want to become a CA you take courses X, Y, Z; but what if I don’t know whether I want to be a CA or an engineer? Well I guess this has something to do with our societal structure and income levels as well where there is not enough time or money with everyone to experiment with their life to see what it is that suits them. Not that either way is better but they are two very distinct ways one more exploratory the other more structured and well planned, pre-decided based on the basic skills essential for one to work as a particular profession.

So on one end you have a prescribed guide book. Learn this much and you will be an engineer, the other is more research oriented. Look at the way the courses are structured. Here though there is classroom teaching and the number of contact hours in class are very less compared to India but the amount of time you spend on your own independent study are comparatively higher. Most courses require you to write a thesis / seminar paper where the more research you do , the more thinking you put in the better grades you get. This system is designed to cater to innovation and creativity. Contrast this with a system where you have a lot of classroom teaching with an even larger number of practice assignments. This may not be the case but in my opinion this system is more designed to produce mass engineers who can do what they are taught to do, well mechanically within the predefined frameworks they have learnt and mastered. Though there will always be some who are really good. Recently there was a lot of talk about outsourcing etc where the developed nations spoke about how the developing countries like India and China are poor at innovation and that the best they can do is take away jobs that the mechanical and thus free up the people there to work on innovation and new products etc. Well, it might not be completely wrong either. Look at the professors here. At least at the Univ of Köln, the only time you are called a professor is when you get “a chair” i.e. when someone sponsors you at the University for “Life”. Thus you have guarantee of tenure, lot of freedom to pursue your own research, structure and decide how many and what courses you want to offer etc. At the same time, the fact that you need to have a PhD, need to have published X number of papers in international journals etc makes it very difficult for any lecturer to get a chair. Once you are a full tenured professor, you have your own library, lots of research assistants who are doing their research under you, who help you with not just the administrative work of your courses. So in effect each professor is more like an independent school in himself in a manner of speaking and students go and check the professor’s website for what courses he is offering and register for them etc. They you also inform the univ that you will be taking the exam for the particular course. Also there are very few courses that have “restrictions” on the number of people who can take the course. Their logic is, if someone is interested why stop someone from taking it. (in contrast to back home where people have to bid for courses) I have seen classrooms that are as huge as an auditorium used for lectures and are full. And in a way, since the education system is more geared towards research and less of classroom teaching the student professor ratio though important is not a limiting factor.

I am not saying that one system is better than the other. One is well suited to developing the required skill sets to pursue a decided profession in the shortest possible time and the other is more suited to exploring what you want to do but at the expense of time. Both have their pros and cons but that is for another post :P