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‘Technology will be the major disruptor for India Inc’

Vinay Kamath | Updated on March 17, 2015

Noshir Kaka, Managing Director, India, of McKinsey & Company,



The keynote speaker at the recent annual convocation of the Madras Management Association, Noshir Kaka, the lanky Managing Director, India, of McKinsey & Company, reeled out a spate of statistics to reinforce that digital technologies are going to have a profound impact on the country as well as corporate India. It’s a fact, he says, not lost on the government as well, which has put digital India as a centrepiece of its growth strategy. In an exclusive interview, Kaka outlines the coming changes and the challenge they hold for leadership. Excerpts:

What are the big trends that you see impacting the corporate sector in the coming years?

Investment in technology is the big shift. If you look at the total capital spending in the US – bridges and ports to roads — and if you look at the technology share in that spending, it is 40 per cent right now and rising to 50 per cent. The implication of this is that return on invested capital is rapidly making it equivalent to return on technology. Because if you are able to extract more from your technology, be it data, sensors or traditional technology you are going to be much faster and therefore, more effective.

The impact of technology on (a country’s) GDP is 9X. In other words, there is a direct co-relation between the upliftment of the global GDP and spending on technology.

We had done a study on the 12 disruptive technologies that are going to impact India’s economic growth and we have grouped them in three areas: Technologies that digitise life and work such as the mobile Internet, the cloud, the automation of knowledge work, digital payments, and verifiable digital identity; Smart physical systems such as the Internet of Things, intelligent transportation and distribution systems, advanced geographic information systems (GIS), and next-generation genomics and technologies for rethinking energy — for example, unconventional oil and gas (horizontal drilling and hydraulic fracturing), renewable energy and advanced energy storage. These technologies used effectively in India could add between $550 billion to $1 trillion of incremental GDP growth in the next ten years. This is equivalent to the entire manufacturing sector’s contribution to the GDP currently. It is equivalent to 20-30 per cent of India’s incremental GDP growth.

What are the implications for the Indian growth story and jobs?

The chances of a knowledge worker being impacted is the highest. Up to 30 per cent of the jobs that we currently do for global clients could get affected by this in the next ten years. The industry has to figure out how to use the new form of capital effectively and its people have to be skilled on a scale that has never been done before.

Recently, NASSCOM announced that the IT industry continues to grow 12-14 per cent which is very heartening. But if you look at what’s underlying that, for about 16-17 years, till about 2008, the industry had a one-to-one correlation between headcount and revenues. In the last four years, from 2010 onwards, that’s halved. So the net incremental people added to the net revenue side in the last two years is 0.5 per cent from what it was and we estimate it to go down.

A lot of things are becoming automated. And productivity is improving. As for the growth, 12 per cent on a $100 billion base is different from 20 per cent on a much smaller base. So, the absolute numbers still continue to look very encouraging. But at the same time, the underlying shifts that are already occurring in industries one needs to take note of. We estimate that the next $100 billion of revenues, will take one-third the manpower than the first $100 billion of revenues for the industry.

In which sectors do you see more jobs being created in the Indian market?

Entire new categories of jobs could be created. We estimate that a number of those jobs will be created at the lower end and not at the high-end. For example, if you look at medicine, through technology you can up-skill a para-medical practitioner. Traditionally, it would take seven years to train an ICU nurse but by enabling them through training as well as tablet-based technology they can cut that to two years.

You can also see increasing trends of hiring in e-commerce businesses. Data analytics is going to be huge.

We think about 14 million non-farm jobs could get created. There is an equivalent re-skilling that has to occur because you can’t make this transition without acquiring the skills.

What challenges does a fast changing landscape present for leadership?

Our global MD, Dominic Barton, says: ‘Leaders have to look through both a microscope and a telescope at the same time.’ It could make you a little cock-eyed ( laughs), but the reality is that there is no getting away from the microscope, which means that you have to see the realities on the ground.

At the same time, if you are not looking through the telescope you may do extremely well for the next four quarters, and you may miss a major disruption in your business. The challenge in front of the leaders is how to put the microscope and telescope together at the same time without getting a bit dizzy.

Corporates have to continue to invest in people, given the pace of change. Leadership talent is always in shortage. I don’t think you would ever hear a leader say, ‘I have surplus leadership talent’. In fact, we will see the reverse.

You will see companies that have been able to attract leaders are the companies that grow. Staying on that path is a very critical indicator of the health of a company in the future, not the performance. Performance can go up and down depending on what happens in the near term but the health of a company is very much judged by the leadership quality and its depth.

McKinsey provides thought leadership to clients. How do you see the next big thing happening before it happens?

We are very fortunate to be working with the clients in the public, private, social sectors and with the governments.

So, often clients are our stimulus, because they are our closest and most visible point at which we can learn from.

And so it’s inevitable that I would say the stimuli for a large amount of what we are doing actually comes from what our clients are asking of us.

And in response we are changing the way we serve our clients dramatically.

Published on March 17, 2015

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