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Indian companies need to build human capital: Ghoshal

Our Correspondent in Bombay

The challenge for business leaders today is to look beyond financial capital, strategic content and shareholder capitalism, and focus on building human capital, shaping an organisation's behavioral context and ensuring equal distribution among different investors, said Sumantra Ghoshal, professor strategic leadership, London Business School, and Dean, Indian School of Business.

He was speaking at the Nasscom 2001 international IT conference in Bombay recently.

He said that the need for the hour for Indian business is to go through a fundamental transformation to focus on human capital because that is at the core of success in the new emerging trends.

He said that the fundamental shift required is in the mindset -- the evolving perspective on people. People, he said, should be looked at as a factor of production, as a strategic resource and as volunteer investors.

This can be achieved by minimizing employee cost, aligning human resource strategies to business goals and helping each individual become the best he or she can, he stated.

He said that Indian companies should accumulate best talent and build on them. The team spirit should be there -- a team which could share and integrate knowledge, skills and be able to leverage their collective intellect.

Ghoshal said that there was need to watch out for growing competition.

He said that an enormous challenge lies ahead of Indian companies.

Emphasizing on how the challenges in the Indian industry today are different from the challenges faced in yesteryears, he said, "During the last decade, India experienced a metamorphosis which saw a transition from a very regulated economy of 90s to internal competition."

But this challenge, he said, is viewed differently by different people. He categorised these groups into three parts:

1. The ones who do not have any background in this industry -- but seeing the IT boom decided to be part of the industry.
2. The ones who have established themselves in this field and have an in-depth knowledge of this segment.
3. And then there's the young entrepreneur who has a brilliant business plan and is looking for a VC to fund his project.

Like businesses, human beings too are deeply affected by their heritages -- and hence, depending on different backgrounds face different challenges.

He said that during the last decade, India has gone through an enormous change and this transition has been mainly led by the way technology has evolved changing the way business was conducted.

He reasoned that, what looked like global competition on the face of it was actually local competition. He cited the example of companies like Infosys, Wipro and TCS competing with each other on the same ground -- with similar resources, constraints and ways of working.

He said that the local IT industry currently faces three problems of differing nature: shifting from the 'licence raj' to local competition, local competition to global competition, and finally gearing up to face the challenges of the new economy.

Talking about the new economy, he said that, although nobody quite understands politics, it has a major role to play in enabling the country face these challenges.

He broached the topic of China's growing exports relating it to why global competition should be looked at seriously with immediate effect.

"To ready ourselves for the future, we should ask two basic questions -- how to lower the cost to consumer and how to get better customer engagement. The fundamental question at the root of this is what the basis of business success is and what must be achieved and how to ensure that one gets the monopoly right," he said.

He said that it is important for Indian companies to understand the dynamics of the international financial market and gear up to adjust to the changing international standards. He also said that many Indian companies are in the process of adjusting to this competitive system by which the world operates.

He said it is irrespective of whether one belongs to the old regime or is the product of the new economy, one has to adapt to the emerging ways of the new economy. This, he said, is not all about technology, but about a total social change.

"There is a need for continuous self-renewal, customer value creation and human capital to move on from a regulated economy to a competitive economy," he opined.

SEE ALSO:

Nasscom 2001: The complete coverage

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