Business environment in India is better but not good: Porter

A handful of corporate titans, young entrepreneurs and researchers on Wednesday got an opportunity that even some students of Harvard Business School do not get. They got a crash course in business and economics from Michael Porter. The business strategist and economist teaches at Harvard. A student who wants to attend his lectures has to clear a special test. But in Mumbai on Wednesday, delegates at an event got to hear Porter’s views on India and its prospects.

When he had visited India 14 years ago, people were “obsessed with talking about electricity” as the major challenge. The economy has improved a lot since, but much remains to be done, Porter suggested. “The business environment is better but it is not good. Infrastructure is better but it is not good,” he told the delegates, many of whom paid about ~25,000 to listen to and interact with him.

But, Porter’s bet is still on India, rather than China. The difference in growth rates between the two countries is closing and India could catch up with, and perhaps even overtake, the levels of its larger neighbour, he said. “We need this incredibly complex democracy to win.” The event came a day ahead of a NITI Aayog lecture in Delhi that he will give, in the presence of prominent ministers and policymakers. “The harmonised tax system to be implemented is an important move,” Porter said, adding that the government seemed to be taking steps in the right direction. The economist, who recently turned 70, embodied the demeanour and voice of a younger man. The venue, the Taj Mahal Palace Hotel in Colaba, was filled to capacity by the time he began speaking, about 350 people in attendance. At the back-to-Bschool moment, India Inc’s personalities took notes, raised their smartphones to take photographs of PowerPoint slides, and posed questions. Porter was invited by the Institute for Competitiveness. The professor used three short sessions to explain key concepts he has developed over the years and outlined his views on the Indian economy.

He began by talking of how businesses often confuse “goals” with a “strategy”, and struggle to align various aspects of the business to achieve this strategy.

Later during a “fireside chat” with ITC Chief Executive Officer Sanjiv Puri, he was asked how to balance a company’s desire to be competitive, with the larger expectation of employing more people. In Porter’s view, given the abundance of unmet needs in the country, such synergy would be easy. Services that emerge to take care of these needs would create jobs for the young, growing demographic, he observed. “Most of the growth in India will be domestic.”

But the academic went on to lay a charge on the audience, saying it was not up to the government or non-profit organisations to influence social progress. “The societal needs we live in the middle of are business opportunities.” He described at length the idea of “creating shared value”, which he had first illustrated in the Harvard Business Review.

He said he wanted companies to use an alternative model, in place of traditional philanthropy or corporate social responsibility. “Businesses acting as businesses, rather than charitable givers, will be the force that addresses social issues.” According to him, companies — including Jain Irrigation working on water conservation, and Aravind Eye Care tackling cataract treatments — are on this path already.

There are challenges, he admitted, responding to questions from the gathering. Around 26 per cent of the top 300 companies have not even met the minimum requirement of CSR investment, one audience member pointed out. Companies would have to be persuaded to think social, the strategist said. “The government will need to give out prizes and incentivise such action.”

If his vision of shared value was implemented, Porter reckoned employees would want to work for companies and citizens would respect these companies.

Best known for developing the “five forces model”, used to gauge the profitability and attractiveness of any industry, Porter is among a few in Harvard University’s tenured faculty to be given the title of university professor. Competitiveness has been a constant theme of his examinations. He is also researching how “divisive politics is standing in the way of social progress.”