Manufacturing in India

Bloomberg has an excellent article by Andy Mukherjee on how India needs to look beyond its knowledge industries and focus on getting its manufacturing sector to take-off if India has to “catapult itself from poverty to prosperity”:

For those who believe India will on the strength of its “knowledge” industries, here’s a sobering statistic: three-fourths of Indian workers, or 300 million people, don’t have high-school diplomas.

India’s educated elite is too small, and its purchasing power too limited, to lift the broader economy. What can really make India prosperous is something that will boost the incomes of workers who are stuck in low-productivity occupations — farmhands and housemaids — that pay the national average of $500 a year, or less.

And that something can only be manufacturing.

“The services sector, and in particular the knowledge-based industries, is unlikely to provide opportunities to the poorly educated sections of our society,” say Sanjay Jain and Uday Bhansali of the consulting firm Accenture India in a study titled “Making Indian Manufacturing Globally Competitive.”

Create more factory jobs, and India’s economic growth rate can easily accelerate to 10 percent a year, making it the fastest- growing major economy in the world, the authors argue.

It’s easier said, than done. There are many factors — high cost of credit, inflexible labor laws, expensive and unreliable electricity supply, and inefficient ports — that hamper Indian industry’s global competitiveness; although, by far the biggest problem with Indian manufacturing is its insularity.

Thanks to the blinkeredness left over from Soviet-style socialism of 1960s and 1970s, the Indian industry treats the local population, a large part of which earns subsistence wages, as the main source of demand for factory-made goods. Manufacturers go on producing large volumes of low-quality, low-margin products to turn a profit. Much of what they make, can’t be exported.

Where does one begin to break the vicious cycle? The surefire way is to “force” Indian manufacturers to tap global demand, so they’re able to expand operations, and create more and better-paying factory jobs. As more workers find employment in manufacturing industries, they’ll have the spending power to demand better goods and services.

In a chaotic democracy like India, how does one draw out local manufacturers and make them go global? The easiest way is to open more of the domestic consumer-goods market to overseas investors. Competitive pressures, thus unleashed, would ripple through the supply chain and force even small manufacturers to look beyond the local market.

The biggest assistance the Indian government can give local manufacturers is to open the floodgates of competition wider by slashing import tariffs…More than anything else, such a step would be in India’s own interest. Let the U.S. worry about saving white-collar jobs, creating more blue-collar jobs should be India’s immediate priority.

I will discuss this in more detail as part of my ongoing Tech Talk series “As India Develops.”

Reducing Friction in Knowledge Work

Jim McGee writes:

Unlike physical processes or information factory processes, knowledge work processes aren’t readily susceptible to conventional reengineering/industrial engineering approaches. You can’t impose industrial structure and control on these processes without destroying the fluidity and adaptability that characterizes them as knowledge work processes.

That raises the question of what can you do to make those processes more effective and possibly more efficient. I have a series of concepts I use as heuristics to make a knowledge work process better. I find them helpful for my own thinking. I’d be curious to hear whether others find these helpful as well as what else they find useful when attacking knowledge work.

I look at four things when I look at a knowledge work process; friction, visibility, indirection, and granularity. Today, I want to focus on friction; we’ll come back to the others in later posts.

In conventional process design work, you look for bottlenecks; places where work backs up. Break the bottleneck and move on to the next one. I think of friction as the things that create bottlenecks or slow knowledge work down. It’s a bit more subtle than just focusing on obvious bottlenecks.

Let’s start with some examples of some friction reducers I currently take advantage of in my own work.

My preference for using RSS aggregators can be viewed as one example of attacking friction in knowledge work…I can monitor an order of magnitude more material than I can by trying to manage and visit sites via a blogroll.

I’ve been a long time proponent of ActiveWords because of its ability to attack knowledge work friction in so many ways. Not having to remember a web address or not having to type out words and phrases I use frequently smooths my day.

Software isn’t the only way to attack friction in knowledge work (as often as not software solutions add friction). Good ideas by themselves can help. David Allen’s Getting Things Done approach is full of ideas that attack friction. One of his ideas I like best is the notion of to do lists that are organized around the context of where they can be used.

Thinking in terms of friction can be helpful because it lets you identify opportunities for improvement without having to redesign or replace entire processes. I don’t need to rethink my entire information scanning process to get benefit out of using RSS and news aggregators.

Local Search and Advertising

SearchEngineWatch has an article by Greg Sterling about the US market:

Despite the fact that the quality of local search results is still very mixed, local search is clearly gaining traction with users.

The other side of local search, of course, is geo-targeted advertising. And the biggest potential market is small business. The U.S. has roughly 10 million small businesses, the majority of which have fewer than nine employees and conduct most of their business within 50 miles of their physical locations.

To achieve any sizeable revenues from the local market, paid search needs to gain small business advertiser adoption. But how much of the small business market will pay-per-click (PPC) be able to penetrate? There are some very practical challenges, which include:

  • The complexity and time involved in keyword bid-campaign management
  • Limited ad inventory and competition between national and small business advertisers for that inventory
  • The absence of local sales channels to “push” PPC to small business advertisers
  • The lack of websites among as much as 70% of small businesses

    These are not insurmountable by any means, though they should not be minimized. It’s also important to point out that many small businesses are currently users of paid search advertising. But for the great majority of small business, there may be considerable ignorance and even skepticism about PPC.

  • How RSS can Succeed

    Roland Tanglao points to a commentary by Stephen Downes which captures the essence of RSS:

    The only way to aproach content location on the internet is to treat it as a self-organizing network. What this means is that inherent in the structure of the internet there are distinct layers of filtering mechanisms, each consisting of a “gather filter forward” mechanism. In some cases, the mechanism is fulfilled by a human agent, as in the case of blogs. In others, it is fulfilled by automatic mechanisms, such as Edu_RSS. And it is likely that Robin Good’s newsmasters will in their own way also play the same role.

    What’s important here is that each node of each layer need not worry about the rest, and need not be focused on the goal of the system. The agent seeks what is available, the way a retinal cell gathers light, and passes on what is relevant, the way a neuron passes on a signal. The filtering occurs not in the individual node, but through the independent actions of the aggregation of nodes.

    The reason why this system works, while other approaches do not, is that there is no reasonable mechanism which can apply the vast requirements of filtering on a single resource. If we use metadata, the indexing soon outweighs the content. If we use search engines, each resource must be subject to extensive analysis to determine context (or, we do without context, which results in a search for ‘calf’ linking to sites on agriculture an anatomy).

    The layered mechanism works because at no point is the entire weight of the filtering process concentrated in a single individual or a single resource. Decisions about selection and classification are made on a case by case basis using very coarse, and unregulated, mechanisms. It means that individual agents can work without the need for central control, with the only requirement for a functional system being an open set of connections between the agents.

    RSS is, today, the transport mechanism of choice. There is nothing magical about RSS, except for the fact that it just is an autonomous agent system providing a high degree of connectivity. As tye system matures, additional encoding systems, such as FOAF, say, or ODRL, will play their own important roles, offering different kinds of connections within the same network. The decisions make will become richer, without a corresponding increase in the complexity of the system.

    So, RSS could succeed. It will probably succeed. But it is important to keep our focus on what it does well: it allows an individual to scan, filter, and pass forward. That’s all it ever has to do. The network will do the rest.

    Enterprise Instant Messaging

    InfoWorld tests four solutions: Lotus Instant Messaging and Web Conferencing 3.1, Microsoft Live Communications Server 2003, Novell GroupWise Messenger 1.0, and Jabber XCP (Extensible Communications Platform) 2.7. The conclusion: “Lotus IM works well with Notes and Web browsers, and provides smooth transitions from chat to app sharing to whiteboarding. Microsoft truly offers a rich experience, but much of the wealth depends on an all-out adoption of Microsoft products and architectures from top to bottom. Jabber is the king of flexibility and provides an extensible platform, which programmers can use as the basis for almost any sort of message-based enterprise application imaginable. Novells messenger ties nicely into GroupWise, but unless the circumstances require deploying right now, customers who are leaning towards GroupWise Messenger should probably wait for the major upgrade thats right around the corner.”

    Friedman on Outsourcing

    Thomas Friedman is one of the most intelligent and sensible writers. He is travelling in India, and provides a view which should silence the anti-outsourcing lobby in the US:

    when I came to the 24/7 Customer call center in Bangalore to observe hundreds of Indian young people doing service jobs via long distance answering the phones for U.S. firms, providing technical support for U.S. computer giants or selling credit cards for global banks I was prepared to denounce the whole thing. “How can it be good for America to have all these Indians doing our white-collar jobs?” I asked 24/7’s founder, S. Nagarajan.

    Well, he answered patiently, “look around this office.” All the computers are from Compaq. The basic software is from Microsoft. The phones are from Lucent. The air-conditioning is by Carrier, and even the bottled water is by Coke, because when it comes to drinking water in India, people want a trusted brand. On top of all this, says Mr. Nagarajan, 90 percent of the shares in 24/7 are owned by U.S. investors. This explains why, although the U.S. has lost some service jobs to India, total exports from U.S. companies to India have grown from $2.5 billion in 1990 to $4.1 billion in 2002. What goes around comes around, and also benefits Americans.

    JadooWorks, [an Indian animation company,] has decided to produce its own animated epic about the childhood of Krishna. To write the script, though, it wanted the best storyteller it could find and outsourced the project to an Emmy Award-winning U.S. animation writer, Jeffrey Scott for an Indian epic!

    “We are also doing all the voices with American actors in Los Angeles,” says Ashish Kulkarni, C.O.O. of JadooWorks. And the music is being written in London. JadooWorks also creates computer games for the global market but outsources all the design concepts to U.S. and British game designers. All the computers and animation software at JadooWorks have also been imported from America (H.P. and I.B.M.) or Canada, and half the staff walk around in American-branded clothing.

    “It’s unfair that you want all your products marketed globally,” argues Mr. Kulkarni, “but you don’t want any jobs to go.”

    He’s right. Which is why we must design the right public policies to keep America competitive in an increasingly networked world, where every company Indian or American will seek to assemble the best skills from around the globe. And we must cushion those Americans hurt by the outsourcing of their jobs. But let’s not be stupid and just start throwing up protectionist walls, in reaction to what seems to be happening on the surface. Because beneath the surface, what’s going around is also coming around. Even an Indian cartoon company isn’t just taking American jobs, it’s also making them.

    TECH TALK: As India Develops: A Tutorial on Development (Part 2)

    Atanu writes that credit constraint is the most important constraint that keeps an economy from developing:

    Economics concerns itself with one fundamental problem, that of allocating scarce resources efficiently and optimally. The most succinct definition of the economic problem is therefore a constrained maximization problem. Constraints are all over the place. Physical resources are limited. It is interesting to ask if there is one single physical resource which if not constrained would release all other constraints. There are some basic limited resources such as land, labor, energy, water, etc. Of these, energy is that resource which if it were unconstrained, all the other basic resources constraints will be released.

    If you had sufficient energy, you could transform whatever you had into whatever you wanted and recycle old stuff into new stuff. For instance, water. Using energy, clean the water; use the water; and then clean and reuse the water. You can use energy to desalinate sea water (lots of that around) and grow food hydroponically (don’t need too much land). You need basic minerals and metals? Use energy to get it by the millions of tons from the sea. Bottom line: if you had unlimited energy, you don’t have any real scarcity.

    Consider the problem of economic development. There are constraints that bind an economy and keep it from developing. I asked myself if there is one fundamental constraint that if released, will free an underdeveloped economy. The answer I arrive at is yes, it is the credit constraint.

    Atanu suggests that to get out of the low-level equilibrium trap of high population growth and low educational attainment, India needs to provide access to credit for its poor people, along with female empowerment, universal literacy at the minimum, and reduced population growth rates. He elaborates on the credit constraint issue: The single most important and binding constraint in this situation is the credit constraint. Given access to credit, a poor household would be able to invest in factors that systematically reduce the need for having a large number of children and also educate the children that they have adequately. If a household could pay for health care, for instance, childhood mortality rates would be low and hence the need to over-insure against childhood death would be mitigated. Having access to credit would also allow families to invest in education and the returns on education could be higher than the cost of education. Higher educational attainment would imply higher household incomes and thus lower incentives to have more children in the next generation. Higher household incomes would on the aggregate translate to greater availability of social security and thus a lower need for children for old-age insurance.

    Atanu writes that we cannot ignore the rural populace: India is a two-sector economy: the urban educated sector and the rural uneducated sector. The latter forms the base of the huge pyramid and toils away at a subsistence existence. The urban sector is seeing a boom what with BPO and ITES and all sorts of stuff. Policy makers, politicians, journalists, management gurus, TV reporters, and everyone and his brother are totally wrapped up in this incredible phenomenon. India, they all scream, has arrived. Having convinced themselves of that, they focus entirely on that part of the urban sector that is involved in the boom. This leads to a shocking neglect of the larger rural sector. Then when the boom runs out of steam, the country is worse off than what it would have been without the boom at all.

    On the need for education, Atanu writes: The urbanization of India is not taking place because the rural population does not have access to education. Thus when forced to move, they migrate to urban India to be employed at menial jobs and live in mega slums. This has got to change if India is to develop. No amount of BPO and ITES is going to cut it: the only hope is to educate the rural population and do so efficiently and with no loss of time. IT has the potential to do just that: bring education to the hundreds of millions in rural India.

    Next Week: As India Develops (continued)

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