The Hindu Business Line : Sharing for self-interest

IS the inability to share information acting against Indian competitiveness? I have been pondering over this since my early career with Citibank and Crisil. In Citibank, I used to wonder at the opacity in the credit evaluation in the retail consumer lending business. Surely, I thought, the presence of a credit scoring organisation, which used data analytics on the credit trail of borrowers, would help fine-tune the lending process? Isn't it dangerous for an economy which owes its buoyancy to the freeing up of consumer credit not to have an accurate idea of debt delinquency? And yet, for a variety of reasons, lenders were ... are ... not comfortable with sharing information on their clients.

Later, in Crisil, the same thought occurred to me about institutional credit. While rating non-banking financial companies, it was routine to examine their non-performing asset records. With metronomic regularity, the same names would pop out at us, like familiar friends - it was soon apparent that a few borrowers had perfected the art of taking simultaneous loans, sometimes against the same collateral, from multiple lenders, and then had allowed their loans to lapse into inevitable delinquency. This was a serious problem, leading as it did to the demise of many a finance company. There was also a solution - creating a credit bureau which would analyse cross-company data and alert lenders to blacklisted borrowers. And yet, most bankers I spoke to, both then and now, were sceptical of the success of this venture. Then, and now, the barrier is that of a perceived competitive risk. Why give information on the good guys, who could be lured away? And why give information on the bad guys? Let the others lose money as well!

The arguments that Indian industry gives against sharing data often revolve around privacy and trade secrecy issues, but in reality, it is competitive insecurity that creates barriers to open information. Of course, there are many situations when it would work against consumer and shareholder interest to swap information. No one, for example, wants a cartel fixing prices. And it would be corporate hara-kiri to reveal details of strategic moves. Yet, is there a sweet spot in information sharing where the benefits could well outweigh the downsides?

Recently, I was poring over a study conducted by IIM, Ahmedabad. It made for interesting reading, revealing the different priorities of companies impacting competitiveness. The small print, however, was discouraging. The methodology indicated that though the researchers had tried very hard, their efforts hit one critical barrier: the sheer indifference of Indian companies to collaborating in the study. Consider this: the questionnaire was mailed to 1,000 medium/large companies in India. Follow-up letters were sent to all, and reminder phone calls made. Duplicate copies of the questionnaire were sent. Finally, the number of valid questionnaires that could be used for analysis: a measly 83.

Of course, everyone is busy in these gravity-free days of crazy competition and non-existent weekends. In a world where the question, "What you do in your free time?" invokes puzzled head-scratching by top executives, it is not surprising that few had the time to answer this questionnaire. But, a response rate of just 8 per cent is still a bit depressing. In contrast, when Jim Collins' team did the research for Built to Last, his sample of 700 companies cut across the Fortune 500 and they got a response rate of 24 per cent, personally responded to by the CEO (not delegated to someone else in the organisation).

So why should companies have responded to a study like this? Personally, I consider this a lost learning opportunity. At the very least, this provided a rare strategic introspective exercise, a chance to hunker down and do some thinking. With the process structured by two IIM professors, it was practically a free consulting assignment. Very often, just the process of answering such a questionnaire yields valuable insights into how an organisation works. And by partaking in a cross-sectoral project, cutting across India, each company head had a chance to see how his counterparts were thinking and to reflect on his own experiences.

I am not advocating that organisations share trade secrets or create information systems that are leaky: sure, there are issues that are vital to competitive improvement, and should be guarded. But a vast amount of information does not lie in this ambit. And there are always methods of sharing knowledge that need not impinge on competitive issues. You can scrub the individual data points, disguise the actual details, and still gain enormous value from the pooling of information at a macro level.

Indeed, I believe that organisations need to evaluate where it is necessary to be opaque, and where, in fact, transparency will be beneficial - because a paranoiac insistence on secrecy leads to a lack of data on where you stand. Without this reality check, organisations can easily tend to complacence (`we are getting better') or, worse, institutional hubris (`we are the best'), both of which may be quite unwarranted. Competitiveness, by its very definition, demands comparison. And without an open sharing of information, how can you create robust, constructive, comparison?

This morning I had a chat with a young executive who is pondering over the challenges of global competitiveness. I believe we should first begin contemplating the level of competitiveness at home. If Indian industry wishes to improve at a fundamental level, we have to begin with a far more collaborative approach to information. And that would arise when industry is convinced that competitiveness is not enhanced by hoarding financial or market information, insularly avoiding participation in surveys. Competitiveness stems from a huge sense of self-confidence of competencies, strategic differentiation and value creation. Everyone in the industry knows exactly what Dell or Infosys does - that hasn't spawned a lemming response of me-toos, has it?

Judicious pooling of information creates a cooperative and collaborative symbiosis whereby competing firms can work together to create new efficiencies in the economy. An open-source attitude to information has many benefits: for lenders it can be the avoidance of non-performing assets; for manufacturers, it could be a best-practices approach that allows you to open up your shop floor to others in search of improved productivity; and for marketers, it could help you plan your new launches or innovations with the knowledge of what really works and what doesn't. Surely that is a win-win equation?

(The writer is a Chennai-based management consultant. Karate-gy is the proprietary term for strategic exercises conducted by Paradigm Management Knowhow.)

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