Harish Hande: India Can Show The Right Way To Do Business

Harish Hande
The Man: Selco India’s MD showed the way to light up homes using solar energy, and in 2005, fought a tough battle with its majority investor
to gain control of the firm he founded 10 years ago. He says India now has a wonderful opportunity to show the world the right way of doing business.

The Oeuvre: He is now in the process of replicating the success of Selco across the country—not by scaling up, or by creating a network of franchisees, but by creating a new set of entrepreneurs, who, in effect, could be competing with Selco.

X-Factor: Has a clear sense of what he is good at and what he is not.

The Message:  It’s time for India to show its leadership in creating market-based solutions that strive on sustainability and ethics.

The Hypothesis
The greatest threat to India and the world is poverty. Amidst rising income inequality, corporations need to realise social responsibility is essentially an insurance against social instability.

So What?
Irrespective of floods, strikes and holidays, the street vendor comes around selling her vegetables. Every morning, she borrows money at an interest rate of 10 percent a day, pays Rs 50 for her cart rental and Rs 15 for kerosene. In the evening, she has to determine the pricing strategy for vegetables that remain, as she has no refrigeration at home. After all these expenses, she has to feed herself and her family. On the other hand, there is Lehman Brothers or Kingfisher Airlines. The street vendor knows how to balance social and financial sustainability. We need to learn from them.

The 21st century has brought India to the fore as one of the world’s leading economies. Considerable attention is being paid to the performance of stock markets, quarterly results, increased middle-class incomes and rising consumerism. These are all regarded as signs of growth—but is this sustainable growth?

The growth is also followed, though not covered in-depth by traditional business media, by an increasing divide between the haves and the have-nots. This particular divide is socially, economically and environmentally unsustainable for India. The overall effect is that the existing disparities are leading to simmers—some justified, others not—termed by both businesses and governments as ‘anti-development’.

In today’s world, a truly financially sustainable business must be able to balance social and environmental sustainability. Needless to say, the greatest threat to India and the world today is poverty. The social sustainability that we speak of—the basic eco-system fabric required for all businesses to flourish—is threatened by the very existence of poverty.  

Businesses in India and around the world need to look at social sustainability in a long-term and holistic manner. Amidst rising income inequality, corporations need to realise that social responsibility is essentially an insurance against social instability. Occupy Wall Street, the protests in Spain and Greece and the London riots are some classic examples to take cognizance of and learn from. They were not one-off events. Each of them has a deeper connection to social ‘un-sustainability’ that has crept in over decades of poor prioritisation by businesses and governments in their respective countries. India has a wonderful opportunity to show the world the right way of doing business.

Unfortunately, younger minds in our country have begun to believe that business has to be ruthless and corrupt. An over-arching emphasis on excel-sheet planning in most top B-schools is leading young business minds to concentrate solely on profit maximisation. Let me caution—profit maximisation and financial sustainability are two completely different things. In the business world, we have conveniently merged them together.

Learn from the street vendor. My mother has been buying vegetables from a particular street vendor for two decades now. Think about it—irrespective of floods, strikes and holidays she comes around selling her vegetables. Every morning, she borrows money at an interest rate of 10 percent a day, pays Rs 50 for her cart rental and Rs 15 for kerosene. In the evening, she has to determine the pricing strategy for vegetables that remain, as she has no refrigeration at home. After all these expenses, she has enough to feed herself and her family. And she does all of this without an MBA. Has one ever been cheated by a street vendor? Has one ever heard about a street vendor going out of business?

On the other hand, we are aware of what happened with Lehman Brothers or now with Kingfisher Airlines or with so many of the software companies in the ‘90s. The street vendors know how to balance social and financial sustainability. We need to learn from them.

Repeated studies around the world show that maps of conflict zones and those of energy and economic poverty overlap. We, the so-called ‘educated Indians’, should take note of rather than sweep these problems under the carpet or believe that existing market forces and market capital will provide the solutions. One always hears from the business world—‘to increase the value for shareholders’. This is a very lopsided statement. What businesses should really work towards is ‘to increase the value for all stakeholders’, that include end-users, employees, management and shareholders.

To ensure long-term sustainability of the business and loyalty amongst users, the eco-system required by the market—financing, technology, skilled human resources—must be adequately developed. The end-users’ satisfaction with the value of the service provided is also equally important in ensuring this loyalty. Only if the employees and management are measured qualitatively rather than purely on financial results can one expect loyalty from them. The end result is a creation of a sustainable organisation that focusses on long-term sustainability and not purely on quarterly results.

In the present day, aren’t we, the ‘educated Indians’, taking advantage of poverty? Are we not subsidising ourselves by enjoying the ‘lower than market rate’ services of the poor, as domestic help and drivers? A number of companies are branding their strategies as being inclusive by producing ‘cheap’ products that target the ‘bottom of the pyramid’. The justification of inclusion here is that by buying cheap products, the poor are paying their, read management, salaries. These types of justifications are insulting for a ‘fast’ growing nation like India, where there is often a complete lack of understanding of the poor and their needs. For sustainable solutions to be provided by enterprises in a market-based manner, enterprises must look beyond shareholders as their primary stakeholders and quarterly results as their primary goals.

The street vendors of the country, small farmers in the seventies and eighties, Gandhi’s model of business sustainability in a decentralised manner have all conveyed modern businesses a message—society can be served in sustainable manner—without charity and in a market-based fashion. Mindless attention to Internal Rate of Return (IRRSs), incentives purely based on numbers and the neglect of social and environment sustainability are ingredients of financial disaster—ironical, right? Prove me otherwise.

I end with how I began—in the 21st century, India is one of the leading economies. Now is the time for India to show its leadership in creating market-based solutions that strive on sustainability and ethics.