Chartered Quality Institute, United Kingdom : August 2010 issue

Chartered Quality Institute, United Kingdom : August 2010 issue

Converting a Billion Minds
indian-lady-august-2010

India is a giant of a country. With 28 states, 7 union territories and 3 million square kilometers of sovereign territory, it is the seventh largest country in the world.  To give a rough idea of the size we are talking about, it would fit 23 countries the size of England.

Flanked by the Arabian Sea on the west, the Bay of Bengal on the East, and the Indian Ocean to the South, roughly 40% of India’s geographical boundaries border the sea, making it a convenient hub for the transit of goods to South East Asia, North Asia, the Middle East and on to Europe and Africa.

With a Gross Domestic Product of 1.2 trillion USD, it is the world’s eleventh largest economy.  Use Purchasing Power Parity as the indicator and it jumps to fourth place with 3.5 trillion USD.

Home to 1.2 billion people, India is the world’s largest democracy and its second most populous nation.  Abundant sunshine all through the year in most states gives unlimited potential to the concepts of clean energy and solar power.

For centuries, agriculture was the primary industry. In fact, 200 years of British rule had made India an agricultural base from where raw materials could be sourced to other countries at cheaper prices.  Even after independence in 1947, in fact, as late as the 1980s, agriculture contributed to over half the national GDP.

With an economy evolving from an agricultural base, where incomes came from the produce sold from a hectare of land, if the rains were on time; where Individual relationships and trust were far better understood than words like ‘systems’ and  ‘procedures’, terminology like ‘professionalism’ and ‘quality’ must seem almost pretentious.  It is easy to assume, then, that the transition to a quality focused India would be a slow, painful process.

The change, when it did come, came rather more suddenly than expected.  Before 1991, retarded by extensive regulation and protectionism based on socialist policies, India relied on government to government agreements to move trade.  Just under half of export revenues came from selling mediocre goods to the USSR and other Eastern bloc members.

In a dramatic achievement, Dr. Manmohan Singh as Finance Minister in 1991, spearheaded the liberalisation of the Indian economy.  In spite of severe opposition that threatened to topple the government, surveys indicate that the move turned out to raise roughly 95 million people above the World Bank’s measure of absolute poverty within a span of ten years, faster than any country in the world, except China, has ever managed to do.

In addition to the astronomical boost to economics, liberalisation brought in competition that forced quality upwards, allowing India to begin some serious trade with the rest of the world.  Exports post an average growth rate of 13.2% after 1991, where figures indicate that the growth rate had been 1.5% in 1990.  Today, there is a greater than average probability that the clothes, the utensils, the gadgets available in the supermarkets of the world were made or assembled in India.

An open market brought other more subtle changes like newer technologies, skilled manpower, the opportunity to travel and to broaden the Indian perspective on quality as perceived around the globe.  Business practices began to change; public and private institutions made prerequisites for tendering, based on evidence of compliance to quality standards.  Soon, ‘quality’ was a buzz word in the Indian market.  The problem now arose on how to get everyone to agree on what it meant and to implement it in spirit.

Enter the regulatory bodies.

The Quality Council of India was initiated in 1997 to promote quality and improve competitiveness.   The National Accreditation Board for Certified Bodies (NABCB) was set up under its wing.   To ensure that quality percolates to all levels of Indian society, the government subsidises implementation and third party certification of quality management systems for small scale industry.

The Bureau of Indian Standards is a governmental body that distributes and propagates international standards within the country.  It also operates various product inspection schemes for a whole gamut of manufacturing industries.

So, how goes the service industry?  According to the National Association of Software and Services Companies (NASSCOM), the Knowledge process outsourcing (KPO) industry is projected to reach 17 billion USD by 2010 of which 12 billion is expected to be bagged by India.  This is hardly surprising, since India’s large resources of manpower are equipped with soft skills that include proficiency in mathematics, science and engineering, and an ability to communicate in English, the current language of global commerce and trade.

Although it all began with essentially non-core processes like general enquiry handling and customer billing, today India attracts essentially high-value operations requiring topnotch technical skills.  Indians are being hired to analyse stocks in western markets, read MRIs for hospitals around the world and write software to help Air Traffic Controllers prevent mid-air collisions. Strict regulation, skill mapping, and regular auditing against standard operating procedures ensure that the industry continues to grow at healthy rates.

On the pharmaceutical front, the clinical research industry is the newest kid on the block, with a current value of 300 million USD.  This is expected to go up to 1.5 billion USD by 2015 as per a Mckinsey and Co. Study.  The government has traditionally been overly cautious with clinical trials being carried out on Indian soil to prevent any possible exploitation of its population.  The Institute of Clinical Research in India (ICRI) is focusing heavily on building awareness on the need for compliance to ICH-GCP guidelines, which deal wholly with the rights of study subjects.  According to the ICRI, within the next five years it will have drawn up enforceable regulations that ensure penal provisions for fraud and misconduct in clinical trials.

Regulation bodes well for India.  This is because, India’s greatest challenge, as she continues to be one of the fastest growing economies in the world, is to alter the mindset of her people to be more proactive.  Ask an Indian about TQM and the Japanese quest for Zero Defect seems perfectly defective, not to mention stress inducing.

The problem with the Indian psyche is that it has the hardest time relating to the concept of Risk Management.  Whether this comes from the optimistic attitude of a people swathed in ten months of sunshine or the laidback ‘chalta hai’ attitude, the end result is that it is extremely difficult to get the average Indian to see any value in preventative measures.

Such shortsightedness has cost this country several times and severely.

To cite only a few instances, there is the Union Carbide debacle that still rages on in the thousands of babies affected by polluted water streams, the loss of Indian ‘Basmati’ rice to an American patent and the state of dilapidated deterioration of India’s exquisite archeological heritage, from the Maratha fortresses to Mughal archiecture.

Recently, the Quality Council of India has been attempting to bring Ayurvedic medicine under its purview to insist on regulation for manufacturers.  Currently, Ayurved, which could be a huge money spinner, besides being of enormous benefit to medicine the world over, is held back, in part, by a lack of regulation amongst the manufacturers of such remedies.  Despite its elemental knowledge of how to eradicate the cause rather than the symptom, something other forms of medicine cannot always claim to do, it has not built up the credibility it should have, largely because manufacturers of ayurvedic medicine feel no compunction to self regulate, giving skeptics a foothold to dismiss this age old scientific system as ‘alternative’ or ‘new age’.

Public infrastructure planning often falls below par.  In an example not unique to India, through the years, proposals for a river network that would link the waters of India and facilitate distribution have been shot down. As a consequence, every year, India suffers both drought and floods in different parts of the country and money and lives are lost each time.

Still, in this country of fascinating contradictions, there are also examples of world class project management in infrastructure. The metro in New Delhi, a success story feature by Nat Geo in its ‘Megastructures’ series, is a project that was completed three years ahead of time under strict international norms and close supervision.  The metro boasts of clean stations, trains that run on time and management that would compare with the best in the world.

The message is clear. Where an industry is bound by tight regulation, quality improves.  Where a lack of will and regulation combine, quality suffers.  So where some industries can compete on an equal platform with the rest of the world, some would simply not make the cut.   This, then, may be the truest reflection of India there will ever be.  As Shashi Tharoor, India’s nominee for UN Secretary General, says, “Anything you say about India, the opposite is also true.

How does India do on innovation?  In 2009, the Global Competitiveness Report ranked India 27th in business sophistication and 30th in Innovation, ahead of several advanced countries.  While India may not be big on product innovation, its innovativeness lies in the little things that make life more convenient for a billion people; and millions in other countries.  The April edition of the Economist describes this type of “frugal innovation” as ‘…not just a matter of exploiting cheap labour. It is a matter of redesigning products and processes to cut out unnecessary costs.’ It reports how mobile service provider, Bharti Airtel shares radio towers with its competitors and outsources the construction of its networks, its operations and support to specialists like IBM and Ericsson.  This means its rivals are now its vendors and its customers receive world class service from the best in the business.  Ingenious.

The Tata Nano demonstrates the concept of ‘frugal innovation’ perfectly.  One of India’s biggest corporate houses undertook to create a car to offer to the people at the bottom of what the late management guru, C.K. Prahlad, called the wealth ‘pyramid’.  The idea was to price the car at 2500 USD.  5 years of research and development went into the project.  Steering wheel, engine, gear shifting system, tyres: every component was separately considered against two criteria: cost and quality.  The design allows 20% more seating capacity simply by placing the wheels further out on the edge of the car.  It is lighter than other models in the same range because it uses less steel in the frame.  It gives an average of 21 kilometers to the litre and can be assembled on location.  As Bloomberg Business Week puts it, ‘In effect, the Nano is being sold in kits that are distributed, assembled, and serviced by local entrepreneurs.’  All these factors combine to make a model that’s affordable, effective and eco-friendly.

Another global success story is the Aravind Eye Care System (AECS).  AECS, one of the largest eye care systems in healthcare, carries out over 200,000 cataract operations a year, nearly half of which are free. Yet the business remains profitable. Let’s take a look at how that happens.

With the volume of surgeries that AECS performs, it requires only 25% of the total to be paying patients to compensate for the non-paying ones.  Based on McDonald’s model of scale and repeatability, the aim is to make the service affordable and offer as consistent quality as you would expect from a Fillet-o’-Fish.

Much the Toyota way, AECS works on eliminating ‘muda’ (waste).  The operations model is such that a surgeon’s time is cut down simply to the actual surgery time, with paramedics stepping in for everything else, thus freeing up the surgeon for maximum surgeries.  There’s lean manufacturing for you.

Once the operations and the financing models were in place, AECS realised that it needed to make the operation itself cheaper.  The biggest cost in a cataract operation is that of the intraocular lens (IOL) . So, AECS decided to make the lens itself in its ‘Aurolab’ .

By employing local labour that undergoes rigorous training, with Aurolab’s innovations in material selection and sourcing, instrumentation, its lean manufacturing techniques, and the volume of production, the cost of IOLs reduced from over $200 per lens to under $5 per lens.

Aurolab’s IOLs are now exported to over 120 countries and meet several international quality and safety standards including stringent European regulations. This example in innovation is now being replicated all over the developing world.

India has always had much going for it in terms of natural and human resources.  Now, with its new found resolve to stamp its identity on the global map, the last couple of decades have seen what has largely been touted as ‘the arrival of India’.

Education will continue to play a key role. The model being implemented by the current regime, which aims to widen the base of India’s educated, is a welcome example of progressive policy that India’s citizens are increasingly coming to expect.

Goldman Sachs predicts in its paper, ‘Dreaming with BRICs: the path to 2050’, that India will be the dominant global services supplier; with China as the dominant manufacturer of goods and Russia and Brazil as the chief raw material suppliers.  India will have to continue its tryst with quality, specifically with its nuances in the service sector, to capitalize on the commanding position it appears to be gaining.  It will be a long and interesting journey and, no doubt, its progress will be keenly watched by the world.

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Khushnoor Dastoor - Head- Quality Assurance

PPCE

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