An Urgent To-Do List: What India Needs To Do In The World Of Digital Products

Let me acknowledge upfront that the information technology (IT) industry has accomplished a great deal. It largely put India on the map as a global leader in technology, although the reality is a little different. The IT industry also made a number of people and several companies quite wealthy, and earns revenues of some $150 billion. It employs perhaps three million people directly, and some 8.9 million indirectly. It accounted for about 7 per cent of India’s GDP in 2016.

These are not numbers to sneeze at. And in intangible ways, the outcome has been even more impressive. I can remember a time way into the 1970s, when PL-480 shipments of grain from the US demonstrated to the world that India was a basket case, essentially unable to feed its own people. American self-perception of its generosity was matched by Indian perceptions of its own inadequacy. This was reflected in American and world perceptions about India and Indians.

It was only in the 2000s, when India established itself as a power in IT, that perceptions changed. Today, the image of an Indian in many countries is often that of a technologically advanced and educated person, and a valuable member of society, an engineer, or a professor, or a doctor, not an economic refugee. And since perception becomes reality, Indians started believing in themselves. It was largely due to the fact that Indians did so well in what was arguably the most advanced technologies people had ever encountered: the arcane world of semiconductors and software.

Global champions, and three reasons why Indian firms have been left behind

Therefore, it remains a mystery as to why, despite a brief moment of glory when Indian IT firms were valued very highly, they are now also-rans, whereas American and Chinese companies dominate the list of the world’s most valuable companies, especially the technology companies which account for many of the top 10 (as of September 2017, from Wikipedia):

1. Apple

2. Alphabet (Google)

3. Microsoft

4. Amazon

5. Berkshire Hathaway

6. Alibaba Group

7. Tencent

8. Facebook

9. ExxonMobil

10. Johnson & Johnson

There are three explanations for this. First, the near-total lack of original R&D in Indian universities (and also Indian firms); second, the absence of a permanent ecosystem that is broad, deep and nimble enough to smoothly migrate from disruption to disruption; and third, and this is a new insight for me, a lack of understanding of what drives business success in the digital world.

The first explanation is the best known. In a rigorous examination of India’s research, Gangan Prathap (“A three-dimensional bibliometric evaluation of recent research in India”, Scientometrics, Vol 110, Number 2, Feb 2017, Springer), a former star aerospace researcher and retired vice-chancellor, compares India to Australia, the Netherlands and Taiwan, all countries with similar levels of GDP, and concludes, “…India’s research base is completely skewed towards the physical sciences and engineering, with very little for biological sciences and medicine, and virtually none in social sciences and arts and humanities, when excellence against peers at the highest level is considered… (B)enchmarked against three nations… which are similar in size of GDP and scientific output… it is seen that… its performance lags considerably behind due to the very low expenditure on R&D”.

A successful entrepreneur once told me that the reason venture capitalists are keen to invest in startups in Silicon Valley is that it is often not just the entrepreneurs that they fund, it is also their professors at Stanford and Berkeley that they are engaging: they can be expected to come up with a pipeline of ideas. This is virtually unheard of in India, with an exception or two such as Ashok Jhunjhunwala at IIT Madras, whose R&D work result in viable technology. The situation is no better in in-house company labs. There is virtually no worthwhile R&D, and the funding is far below standard global levels as a fraction of sales, which is around 12 per cent for technology companies.

The second issue is that of a lack of sustainable institutions that can leap on to completely new industries that come up unexpectedly. In this context, Silicon Valley has been uniquely successful, and even its US competitors such as Boston and Research Triangle Park have not been able to close the gap. The institutional support consists of not only venture capital, but also a cluster of legal, marketing, intellectual property, manufacturing, and other outsourced partners, but more than anything else, an institutional memory and culture of experimentation and risk-taking, that can take a company through good days and bad. Sad to say, even in Bengaluru, enough sustainable institutions have not come up, and to an extent, the IT services companies are to blame, as they have not thoughtfully created future infrastructure for the time when their current businesses and business models lose their shine (as is happening now).

In contrast, Stanford archivist Leslie Berlin’s recent book Troublemakers: Silicon Valley’s Coming of Age, and her earlier biography of Intel’s Robert Noyce, suggest that the pioneers of the Valley left a lasting legacy that others built on: people like Frank Terman of Stanford, Bob Taylor of Xerox PARC, Mike Markkula of Apple and Bob Swanson of Genentech. Of course, we do have our pioneers, but it is an open question as to what legacy the likes of Infosys’s Narayana Murthy, Wipro’s Azim Premji and Ashok Soota, et al, have left, primarily because their business model was one of factories offering scalable software manufacturing on demand. This leaves little behind, once the people move on. The processes remain, but they are easily copied, leaving no barriers to entry.

But this, too, can be overcome, as demonstrated by, for example, the Taiwanese semiconductor industry, which was built up practically overnight by luring away researchers using generous state support according to a masterplan. And China has, in a way, created an entire artificial intelligence (AI) competence from scratch by directing industrial policy. India, too, could possibly do this, if the government figures out (perhaps through strong industrial policy) what its priorities are.

China’s industrial policy is a version of what Japan’s Ministry of International Trade and Industry (MITI) used in the 1980s, although it is far more brutal and mercantilist. MITI identified a few core sectors in which Japan should achieve core competency (eg. semiconductors), and orchestrated industry-wide efforts to innovate. China has done the same (eg. in AI), but its tactics also include industrial espionage and, alarmingly, coercive use of market power to force the surrender of intellectual property (when the Chinese don’t just go ahead and steal it outright). In addition, they have built massive protectionist walls, behind which homegrown companies such as Huawei, Baidu and Alibaba have thrived.

The digital business model is different (truly) and focuses on grabbing your attention

The third factor, however, is much more daunting: the fact that the digital world is indeed different, because its currency is no longer money, but another limited resource — attention. What it means is that unless you really know your customer very well, you will not be successful. It is also a positive feedback loop that leads to winner-takes-it-all situations. The firm that takes a lead can often, through network effects, become the 800-pound gorilla in the market, dominating it.

This is a difficult problem for India’s digital developers. On the one hand, they typically have not had to deal with the wretched question of who exactly the customer is. That’s because they have often dealt with just one customer: the firm that has tasked them to either write software for internal operations, or to write a module that fits into some larger scheme of things. Thus, their customer is known, it’s a B2B transaction, and since it’s just one customer, and the customer can give you precise specifications, the developer can concentrate on the coding, and be done with it.

That paradigm is turned on its head when you develop for a B2C market. You really need to start thinking about what the customer wants, and, first of all, identify specific customers. This is difficult in India, as the user experience is not something anybody has concentrated on: in a socialist economy, the end user is forced to take whatever is on offer, as there is no choice. Let us remember the humiliations heaped on customers (“Customer experience? What customer experience?”) by erstwhile monopolists BSNL and Indian Airlines.

Even now, with increasing customer choice, the Indian digital experience is far from delightful. Not to beat up on them, and they have indeed improved a lot, but the railway booking site, with its plethora of pointless Capchas and arcane logic (I have noticed that it pretty much always allocates upper berths to senior citizens in your group), is not exactly wonderful. There is no culture of customer service, or of thinking from the user point of view. Of course, mechanisms like “design thinking” can make a vast difference to this, especially in the public sector and its increasingly digital interfaces to citizens. I had written earlier in these pages about how a little design thinking might have made the Aadhaar experience far less fraught in terms of usability as well as security.

But the issue of attention grabbing is a quantum leap altogether from just having a decent U/X (user experience design): and this is what design ethicist Tristan Harris, formerly of Google, has been pointing out for some time. In an interview on KQED Forum, Harris explains how it is not accidental that you are sucked into a never-ending cycle of addiction to social media: it is intentional, and a rational economic decision by the giants of that world, such as Facebook, Google and Twitter.

On the one hand, these giants, and others in the top 10 list above, such as Microsoft, Apple and especially Amazon, have a trove of information about citizens (and so do, at least in the Chinese market, Alibaba and Tencent). That is, in fact, their business. There is an axiom that when something is free, then you, dear customer, are the product. These companies are packaging you up and selling you to advertisers to dice, slice and target with pinpoint accuracy the exact customers they want: say, 25-year-old non-smokers with a college degree, female, unmarried, in white-collar jobs in Adyar in Chennai. It is quite likely that these companies know you better than you know yourself, and thus the news and the ads that pop up when you log in, which seem startlingly appropriate.

Harris suggests that it makes complete sense for the social media companies to try their best to grab more and more of your attention through any means possible. If you are a product manager for these companies, that is your exact objective. He mentions how popular teen site Snapchat introduced a “streak” counter, which shows the number of consecutive days in which you have exchanged a message with a friend. If on one day you do not, the streak ends. It turns out people go to great lengths to maintain a streak, and there is social pressure to do so. Similarly, Youtube turned on auto-play of the next video when you finished seeing the one you wanted to watch, and this increased time spent on the site by 5 per cent, and this was promptly copied.

All of us measure ourselves on how many Facebook “friends” or Twitter “followers” we have, despite knowing that some (many) of these are bots, and that you can easily purchase more of them. Product managers exploit this vanity to induce us to create ever more content for them for free. Some of us, who shall remain nameless, go buy “followers” from Turkey in large numbers! In a way, this has become a proxy for self-worth.

This is the art at which social media sites excel. Early stage investor Roger McNamee (an old friend and advisor to Mark Zuckerberg of Facebook, and now a collaborator of Tristan Harris) suggests that there is another ill-effect, that of creating echo chambers in which motivated negative sentiments can get amplified: his examples are Hillary Clinton’s defeat and the Brexit win, both of which he attributes to manipulation by foreigners. He talks about the Russians, but then the Chinese have been doing this since the days of the early Internet: they descend in hordes upon anybody who makes the slightest negative comment about their country, forcing them to self-censor. The only difference is that it was (human) trolls in the 1980s; it’s bots today.

How can India compete and win?

All this brings us back to the original question: can India’s digital warriors create compelling products that induce people to stay on, pay with their attention, and thus monetise the customer base? Let us note that the Chinese local champions did exactly that, but the Chinese government enabled them by kicking Facebook, Google and Amazon out, so that they could grow unhindered. In India, on the other hand, top e-wallet Paytm is a subsidiary of Alibaba with roughly 60 per cent in ownership; and the Indian government, far from curbing Paytm, has helped it by allowing it as one of the e-wallets on Indian Railways.

Personally, I think this is a bad idea. The US cancelled a proposed takeover of MoneyGram by Alibaba for security and privacy reasons.

What has helped Alibaba and Tencent to grow so fast is their access to troves of data on Chinese customers, and thus the ability to sell them stuff. It would be much better if similar quantities of Indian data remain in the hands of Indian companies (eg. UPI), so that they have a competitive advantage. This is one reason I have not signed up for Paytm; I also only have a nominal presence on FB, an account I never read.

It’s psychology at play in the digital universe, not technology alone. I believe Indians are at a disadvantage in this realm, partly because we do not teach our engineers anything about human behaviour or psychology or behavioural economics (such as the insights of psychologists Daniel Kahnemann and Amos Tversky). On average, American IT industry people may have broader exposure, and in some cases, companies are deliberately hiring humanities people to bring in their perspectives. I don’t see this happening in India yet, although I hear NASSCOM has been reaching out to academia to figure out how to upskill people in the industry.

I am not sure Indian companies and governments understand this paradigm shift well enough; I suspect many in India think that it is enough to make their processes internet-friendly. But that’s only a necessary condition and not a sufficient one for success. In the jargon of innovation-speak, we need “T” shaped people, not only “I” shaped people, that is, broad and shallow people, in addition to deep and narrow people.

The second part is systems thinking. As in the case of Aadhaar, there is a tendency to just “fix” one little piece of a whole system — in this case, it is making the database itself foolproof, while there are many other parts of the system that are vulnerable. A system is only as secure as its weakest link. Although bureaucrats are generalists (thus, one assumes they are “T” shaped), they also think in silos and focus on turf wars and empire building, so that they fail to see the system in its entirety, which was another issue I mentioned in my earlier piece on design thinking and Aadhaar.

To succeed in the world of digital products, Team India will need to do several things on a war footing: become far more customer-focused, instead of treating user experience design as an afterthought; develop an appreciation for methods to ruthlessly capture customers’ attention; bring in broad-scale systems thinking; and stop, for heaven’s sake, giving away our precious data to the Chinese (we are already doing it with Chinese-made smartphones that are doubtless leaking data to some server in China) and to the Americans (it is unfathomable that consumer credit rating agency CIBIL is now owned by TransUnion, a US giant). That would be a start.