"Indian companies need to invest ahead of time to prove their capability to customers" | Outlook Business
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Digvijay Dixit

Feature

"Indian companies need to invest ahead of time to prove their capability to customers"
Four entrepreneurs share their journey of scaling up and going global at the Smart Enterprise Cluster Meet in Pune — Part 2

(L-R) V Keshavdev, executive editor, Outlook Business; Hariprasad Rao, regional director, Asia-Pacific, Lear Corporation; Vikram Salunkhe, MD, Accurate Gauging & Instruments; Tushar Mehendale, MD, ElectroMech and Srikrishna Karkare, MD, Enpro Industries

V Keshavdev, executive editor, Outlook Business: Tushar, in your case how critical were alliances in scaling up and going global?

Tushar Mehendale, MD, ElectroMech: If you want to go global, then you should know how global companies work. We have emerged as a company that has a wide product portfolio — right from manufacturing small cranes for small workshops to big cranes and tower cranes for construction sites. We have a tie-up with two German companies ABUS and Stahl, a joint venture with Zoomlion of China, which is the world’s largest manufacturer of tower cranes, and a recent tie-up with Hyster-Yale. These alliances allow us to increase our product portfolio, but the most important aspect is the tremendous amount of learning that happens while dealing with these companies.

For example, if we place an order with our German partner ABUS, it would say that the order would be delivered on week 36. Sure enough, the order would be dispatched on week 36. That has been a tradition for the past 13 years and it has never missed the delivery or fallen short of a commitment. So, it's not only about the output you see. When you interact with such clients and observe the systems that work at the backend, you are exposed to a lot more things and begin to see how the evolved the processes are. It helps you realise the requirements of the global market.

These partnerships have helped us in improving our product processes, understanding the requirements of the international market and have played a significant part in our going global. When I first entered the international market, I was quite naïve. It took me quite a few tumbles to learn it and I was lucky to survive. The main hurdle that we face in going outside India is that capital goods, which are made in India, are not in the top five list. So there is a tremendous amount of headwind that comes your way. But you have to be able to keep that aside for a while and present to the customer your approach towards executing the order. You have to understand those pain points and come up with solutions. You have to be able to supply the equipment to them on time and have all the aspects of reliability, quality, safety and performance. Building up your reputation is a step-by-step process.

Keshavdev: Vikram, in your case of precision equipment, how did you go into the global market and fetch those deals?

Vikram Salunkhe, MD, Accurate Gauging & Instruments: We have a very wide range of products and some of these can go through a very standard channel. This means that the customer can buy it and use it for his/her own company. But there is a lot of integration required with electronics, software knowledge and application engineering. In India, we are strong on all these aspects. That is how we have built our business. When you want to sell these products outside, it is equally important that we bring these aspects to the customer’s notice. Nobody would buy the machine only because factory X is cheaper than an alternative source.

We started with building partnerships outside — that is, the distributors in countries abroad could also contribute to some part of the solution. With these kind of partnerships, we could approach the customers to show that we had local support. That is how we started selling machines in America, Europe, and Russia. Wherever we have been able to build these partnerships, we were able to go into the market. Otherwise, it becomes a little difficult.

Keshavdev: Hari, you look at the Asia-Pacific region for sourcing. What are the strengths of Indian SME suppliers vis-a-vis China? Do you see the Chinese still having the upper hand in terms of quality and price? Do you also source for the domestic operations in India from China?

Hariprasad Rao, regional director, Asia-Pacific, Lear Corporation: We do buy a little from China. Whenever we try making comparisons between India and China, we see Indian sources to be competent enough. We have chosen Indian suppliers based on their competitiveness, so they have earned it when it comes to the business. There are certain areas in which we still depend a lot on China, particularly the tooling industry. The kind of scale, machines, investments, processes, the fact that multinationals have been around there more – all this makes it difficult for Indian companies to match up to them. Where there is less variety and high volume, it is difficult for Indian companies to compete in that space. But where you have high variety and low volume, Indian companies have a good edge and I do see significant differences there.

Keshavdev: Srikrishna, have you encountered the Chinese in the market, especially when you have gone global? How do you stand vis-a-vis the Chinese?

Srikrishna Karkare, MD, Enpro Industries: Like Hari said, where there is high variety and low volume, we have a natural advantage. Similarly, when there is a greater degree of customisation, Indian companies tend to have an advantage. Due to the language barrier, smaller Chinese companies do not have the competence of dealing internationally in English. Unfortunately, ours is a niche business, which does not interest larger Chinese corporations. So we don't see much competition from China or, for that matter, from most non-English speaking countries. It is not that we don’t have any competition — we simply seem to have an advantage over other countries due to the language barrier. For a Japanese customer, we face competition from a Japanese supplier; for a French customer we would face competition from a French supplier. But we have very few truly global competitors. There are some based out of the US and the UK, but we do enjoy a cost advantage over them.

Keshavdev: What is the value proposition that you bring to the table vis-a-vis your other competitors?

Karkare: The value proposition that we bring to the table is solutions. We did start as a semi-ancillary to a Japanese customer, but over a period of time we have had a very good knowledge management system. We have been assimilating everything that we learnt along the journey. Today, we are clearly the knowledge leaders in the field of lubrication worldwide. Our customers depend upon our knowledge to provide the right kind of lubrication system for their product. We are all familiar with the end-customer specifications across the globe. So, suppose a system is to be supplied to a shell project in Europe, we would know the requirements to build that system much better than any of our customers would, and they depend on us for that knowledge.

Keshavdev: Tushar, in your case how did you move up the value chain and how are you maintaining an edge? Like you said, initially quality was an issue for you and alliances brought a change later.

Mehendale: I mirror exactly what Mr Karkare said about learning from different customers and economies. Luckily for us, when it comes to cranes, we know what is required because we have been in this industry for close to 37 years now. Having said that, what really helps us is our knowledge about the industry when we’re sitting across the customer and discussing requirements. Understanding the criticalities of the crane in its processes helps us to configure the system and design it in a way that helps us speak the language of the customer. 

This has been possible over a period of time. My entire sales team comprises mechanical engineers. When they come on board, we teach them to be designers first and only then salesmen. That allows them to speak the language of an engineer and not that of a salesperson. This goes a long way in crafting the right solutions for the customers. We have our systems in place and review meetings and, by way of quarterly reviews, take corrective actions for continuous improvement. On the systems front, we have new ideas and action plans to address the problems we come across. We have now captured all our knowledge and learning in what we call electronic operative system. We have built up our SOP, which gets continuously updated and which we have tried to make more process-dependent, less person-dependent as quality is always consistent.

Keshavdev: What about you, Vikram?

Salunkhe: In our business, we have to do a lot of value addition for our customers in India. Until we satisfied customers in India, we were unable to export. After the advent of globalisation, our first goal was to make sure that the needs of all the MNCs that came to India were fully met, and to make knowledge our tool for going global. Holistic but application-based knowledge is key to solving customer problems. Today, this is is one of our biggest strengths, apart from the products. We provide a lot of services — we handle measurement programmes, we have a make for our machine that can be assembled anywhere in the world and so on. For any problem that we work on, we first solve it for Indian customers before going global to deliver it. 

Keshavdev: Hari, how are you hand-holding your SMEs? You had refused and let them handle their own problems. Is the process working?

Rao:  I don't think hand-holding is necessary at this stage. It is possible for SMEs to cluster or rather group themselves and make some common investments. If they realise that there is only 5% utilisation of a particular measuring instrument, they might question the need to invest in it. They  can find specific clusters to join. Such an ecosystem should develop here. I don’t think multinationals would then want to pitch in when there’s such an ecosystem.

Also, it's necessary for people to move up the value chain and define the standards. I have known so many companies that do this. In Germany, you could go in the middle of the black forest and find a niche company there, which would be a master in its  field. It could come up with solutions that would be of a certain standard. There are companies that have developed a niche in their own specialised areas. I don't see any reason why Indian companies cannot do that. It's a matter of time and needs the right partnerships to grow together.

Keshavdev: What are the three things a company should do to scale up and three things that are not to be done? 

Karkare: Indian companies need to invest ahead of time to prove their capability to customers. How you invest — whether you get the investment from outside or you plough back all of your accruals — is a question that individual entrepreneurs can answer for themselves. Secondly, companies should embrace technology. Ten years ago, among our peer suppliers, we were the first to embrace 3D designs because that was the need of the customer then. We were among the first to undergo computerised testing for our equipment, whereas our Japanese customers were still struggling with it. So, embracing technology is a must if you want to emerge on a global scale. Thirdly, I would say that maintain the hygiene of quality, safety and sustainability as far as the multinational customer and international market is concerned.

Mehendale: As an entrepreneur, you have to take it as it comes. You have to be responsive and remember that in every adversity, there is an opportunity. It is very easy to be vain about the topline you have or your margins. But the most important thing is the cash flow of the business. My defining philosophy is to focus on the cash flow and ensure that the cash keeps coming into the business. You have to build your business around that particular philosophy. It’s about building a model that will really set your business apart.

Salunkhe: Invest in teams because the business ahead is into solutions, which in turn is all about knowledge. In several companies, the founder has all the knowledge. But if teams don’t have the knowledge, companies cannot scale up. We need to have teams who are able to deliver entirely on their own. Therefore, investment in people is foremost.

Rao: It is the innovation differentiation that is important. For me, the primary thing is whether or not the people have differentiated themselves and have a clear innovation plan. Secondly, SMEs by nature are also fragile, which large corporations are not. Decision-making in a large corporation is very complicated. SMEs have the advantage of taking quick decisions and moving forward. So, this flexibility is something that they need to keep. They have to scale up while staying fragile. Thirdly, anything that SMEs do needs to be sustainable. It cannot be a fad — they cannot keep changing frequently. Sustainability is very important, which also means that they cannot ignore small issues.

 This is the second of a two-part series. Read the first part here.

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