Business - India;Time for Jugaad

Kanika Datta

The Japanese gave the world Just-in-Time Management. The Chinese offer ultra-large-scale manufacturing efficiencies. What management philosophy can India give the world? No, not low-cost operations but an extension of it: jugaad.

This unique verb loosely translates as “making do” and is sometimes unfairly used in the pejorative sense. But extend the idea a little more and it could be interpreted as “maximising scarce resources”. There is no better time to cash in on this outlook than now, as the world heads for a slowdown and corporations struggle to grow top and bottom lines.

One of the most potent examples of this is the “jugaad” itself, a hybrid piece of machinery ubiquitous in rural India that can be used as a mode of transport, a pump to irrigate fields and a source of short-term power, all for minimal cost. It’s been (and still is) a mainstay of India’s agrarian economy, spawning an entrepreneurial opportunity based on a shortage of basic rural infrastructure such as electricity, water and transport.

But cashing in on a shortage economy is not the only entrepreneurial opportunity that Indians have leveraged. They have also learnt to do things at minimal cost and maximum efficiency within the available and often sub-optimal infrastructure. The decades-old office meal delivery service, Mumbai’s famous dabbawalas, is a case in point. Most of us took the dabbawalas for granted until management guru C K Prahalad measured their efficiency in terms of Six Sigma and declared them “masters of supply chain management”.

Today, UTI Asset management, in urgent need of investment for its new mutual fund schemes, is using the dabbawala distribution network covering 2 million to distribute forms and publicity material. That’s a smart extension of the technique of stuffing bushels of sales leaflets into popular daily newspapers.

The jugaad approach partly stems from a realistic assessment of resource availability. Nehru’s socialist ideology and Indira Gandhi’s fierce nationalisation drive forced Indians and Indian businessmen to cope with inefficient and skewed resource allocation and the corruption that inevitably flowed from it. Competition, thus, was hedged in by licences, irksome monopoly-restricting laws — all supposedly aimed at “garibi hatao” but kept the majority of Indians in poverty and a Hindu rate of growth. Liberalisation and exposure to global competition from the nineties onward changed all that and forced Indian businesses, many of which boasted some of the world’s highest cost structures, to make the painful transition and streamline their operations just to survive.

Stage II in that evolution to global standards has been the outbreak of innovation by Indian corporations to produce world-class products by maximising resources and infrastructure that are hardly less scarce even today. Mahindra & Mahindra’s sports utility vehicle, the Scorpio, is one potent example of the jugaad outlook. It was developed in-house by M&M in the mid-nineties at a significantly lower cost than its counterparts in the West. M&M famously bucked the trend of high-cost product development by involving its suppliers closely in the process. M&M’s mid-sized car, the Logan, which was developed at fully 15 per cent below cost, was an extension of that approach.

Tata Motors’ controversial small car, the Nano, may be deriving considerable benefit from tax breaks and cheap loans offered by an unusually generous state government. Still, efforts to deliver a more affordable car for Indian have yielded creative solutions in logistics and material usage that a struggling Detroit could well consider.

And, finally, nothing exemplifies India’s ability to parlay cost advantages into world-competing solutions with Chandrayaan I, the lunar orbiter that was successfully launched on October 22. The only good news in a month in which the Sensex fell a record 23 per cent, Chandrayaan’s cost at $80 million was the cheapest ever and catapulted India into an exclusive six-country club.

Chandrayaan I represents an apogee for the Indian Space Research Organisation. Before this, ISRO had already developed a profitable business in geostationary launch capabilities at a third of the cost of western nations. And it has achieved this despite a relatively small budget ($1 billion) and, till recently, sanctions from the US for our nuclear policies that cut India’s access to technology and parts.