K.C.LALL MEMORIAL LECTURE

(Delivered by Anup Singh'48 on Club Day)

Distinguished guests, and my equally distinguished young friends.

For forty years I was a practicing manager. In the earlier part of my career I managed technology. Then seniority took its toll and I moved to managing people. I have since been uniquely privileged to move into academia and preside over a new centre of learning encompassing both technology and management. While I often feel humbled by the enormity of task, what gives me strength are occasions such as this when I stand before gatherings of bright young people and I am called upon to talk to them. For this reason along, this is an honour for which I feel greatly privileged.

Change has become the `mantra’ of the coming era. In business organisations and government, we hear a constant murmur of the `necessity of change’, the "imperative of effecting major transformation". Undoubtedly, managers in the current decade are faced with unequalled disorder. A continually shifting political situation has lead to volatility in economic conditions, major technological advances, are leading to repaid obsolescence and greater international competition is leading to market dislocations. Over and above this, is the unprecedented change in the world of business caused by the blurring of boundaries between firms and between functional disciplines.

To respond to this challenge of external chaos, management of change has become the prime occupat8ion of those who inhabit the executive offices of leading enterprises. This need of change is being addressed by one or more powerful technique3s described variously as `re-engineering’, `re-structuring’, down sizing and the like. Such techniques are designed to allow enterprises to operate more efficiently, usually by becoming smaller, leaner and hopefully smarter. Regrettably, a number of firms which have become markedly more efficient, have not necessarily become competitive, atleast not in the global sense. To my mind their failure has resulted from an inadequate understanding of the management of knowledge as I firmly believe that the only way organizations can grow in a sustainable manner is by generating knowledge and then managing it efficiently so that it creates wealth.

Knowledge is already a widely recognized currency in world business and commerce. The use and deployment of knowledge as a competitive weapon has gained its present prominence due to advances in information technology and Global Telephony. The Netherlands was probably the first country that accorded knowledge a national priority, in order to derive a variety of competitive advantages well into the next century. What many advanced economics are now saying is that ‘we will derive competitive advantage from the generation and management of knowledge as a surrogate of trade in goods and services’. Most other advanced and advancing economics will quickly jumps on this bandwagon in order to reinforce core competencies at the firm level, in different sectors, as well as at the national level. Thus knowledge is fast becoming the dominant component in determining global terms of trade.

Let us briefly trace the development since 1947 in order to place India in the global knowledge management matrix in 1997. Although India’s post-independence development history is well known, it is worth recalling a few key features since they have a bearing on the present status of knowledge management in India. In 1947 Indian was economically fragile nation, with rudimentary infrastructure, sub-optional agriculture, dominated by large land holders, a substantial trading community but a vestigial private sector industrial base. Much of rest of Asia was still under colonial rule and China was two years away from establishing a communist regime. America was preoccupied after the war with rebuilding Europe and Japan, its future trading partners and the Soviet Union was busy trying to recover from the ravages of the war. Nehruvian policies, planning and economics, as they are popularly known, must be understood in this background. They key operative elements in those early days were self-reliance, import substitution and entrusting the commanding heights of industry to the public sector. These were soon to be supplemented by Soviet style central planning and abolition of Zamindari or large land-holdings. Socialism came to be identified as the prime tool for achieving socially equitable economic development in a resource-poor country, while at the same time creating barriers to any predatory advances of the former colonial powers. In subsequent years nationalization of banks mobilized agrarian credit and the green revolution helped India to become self sufficient in food. That the Green Revolution was a product of knowledge management derived from science was less well understood.

The predominant philosophy was to achieve a self-contained economy which progressively became more or less insulated from the rest of the world. The twin goals of India striving for : economic independence and political alliance with newly independent countries as a non-aligned third force, provided the basis for the next twenty-five years of India’s development. As we all know, we only partly achieved our stated economic goals, primarily because of the failure of our political, social and managerial efforts. But a few facts will need to be remembered. India had very few choices and alternatives in 1947 and Nehruvian policies did provide a reasonable industrial and agriculture base for a newly independent nation. The problems arose because we could not use this abase to jump into the next phase of development as China did. By the late 1970’s it was apparent that India had acquired a critical mass for economic take-off as indeed had China. China decided to experiment with opening its economy, India decided not to. The subsequent events are too recent to bear recalling. This key difference between China and India has an important bearing on the political and economic status of the two countries. The argument that India being a democracy was slowed down, needs to be seriously challenged.

Before we return to a discussion on knowledge management in India in the above context, it is worthwhile now to describe the evolutionary elements of knowledge management and its various hierarchical phases, I will then attempt to link it with events in India, past, present and future.

In the past 50 years, various patterns of economic development and global trade have emerged which have some common features. These common features override national, social and political systems, which exert their own influence in the governance of civil societies in nations around the world. For example, the complete and utter failure of Soviet style planning to generate wealth and social equity is now universally acknowledged, and was the prime reason for the break up of Soviet Union as well as other former communist states. Laissez faire capitalism and uninhibited free market operations do not operate in any country either, and if it did, could very soon lead to anarchy and chaos. It is rather a balance between social obligations and civil governance by elected leaders on the one hand, and freer trade and global competition by private enterprise on the other, which operates in various degrees in a vast majority of nations. It is the degree of balance between the various country specific social and economic factors, which less define a nation’s self-interest which, in turn determines the position of a nation in the developmental hierarchy.

Based on this preamble, let us now dwell on the four commonly accepted phases of economic development as they relate to knowledge. I will keep this very brief and somewhat empirical. The reason for being empirical is because there is no absolute demarcation for movement of countries from the one phase of development upto the next higher one or for its slippage back into a lower order. For instance, uniform development across a geography does not occur in any country. Each country adopts a pattern of multi-faceted development best suited to its regional propensities, self interest and thus acquires a critical mass which then enables it to enter the next higher phase. Thus though India was more or less ready to enter a higher phase of economic development in the late seventies, for whatever reason, it decided not to until 1991. China, on the other hand, entered the second phase tentatively in 1978 launched by Dang’s "colour of the cat" philosophy and the consequences are there for all to see.

India is an example of the first or start-up phase of neo-industrial development. This phase is marked by gradual liberalization of laws governing investments and increasing interaction with the rest of the world of a country’s economy. This phase is also marked by tentativeness and flattering progress, which is inevitable, when harsh winds of competition start blowing across any insulted economy. The other distinctive features of this phase are greater foreign direct investment, rising productivity of existing assets through reengineering of domestic firms and selective privatization of the public sector commences.

Present day China and some countries of South Latin America are good examples of phase two development. The key features of this phase, in addition to accelerating pace of phase one events, include massive investment in education, health and, most importantly, in research and development. Thus, this phase stands out its emphasis on institution building to raise the overall level of national skills and competencies to match the human resources demand of a rapidly growing economy. These also happen to be key measures, which are essential to prepare a country to be able to participate in the competitive management of knowledge for greater value addition to goods and services.

The third phase is probably best illustrated by the achievements of the so-called Asian Tigers. In this phase, a country begins to become a global knowledge player. The economy is by now fully liberalized per capita income and growth rates rise at a consistently high rate and local currencies tend to be freely convertible, temporary speculative setbacks not withstanding. The rate of investment remains high and sustained and export competence and complexity begin to rise. Significantly, shortage of knowledge workers becomes a key impediment.

Finally, the OECD countries best represent the fourth or the mature phase, which also happens to be the most advanced knowledge phase. It can truly be said that OECD countries have undoubted leadership in generating and creating wealth through the rapid accumulation and exploitation of new knowledge.

In the background of the phase dynamics of contemporary developments, it is now appropriate to explore conditions in India as they exist today. Each of the development phases described by me earlier has a transition span varying between ten and twenty-five years depending on various national conditions. For example, although India is well into phase one, there are still lingering doubts about India’s commitment to reform. It is also however only fair to assume that while reforms in India may sometimes falter, they cannot be reversed. The critical issue of enlightened national interest vis-a-vis globalization has yet to be exclusively explored.

In developing the ability to acquire and mange knowledge, each country has to overcome some historic hurdles. What, for example, are some of these hurdles in India? Because our economy was derived from socialist planning and our public sector was unable to generate surplus with which to fund primary health and education, our leaders tried to seek alternatives in what was fast becoming an increasingly disillusioned nation. One such alternative was the historic, and probably the most telling political act, i.e. reservation of economic opportunities for the most deprived sections of society based on caste rather then means. Broadly, this policy stated that in a poor country, the poorest of the poor tend to belong to the historically backward castes. Without admitting that our economic policies had failed to alleviate the problems of every group in our society, the policy of reservation was meant to impart some social justice to the most deprived in our society. This has been cynically described as `redistribution of poverty’. This action was, however, not without some historic inevitability and merit. Unfortunately, anything that did not fit this reservation mode started to be perceived as being elitist. This is in direct conflict with the fact that the exploration, pursuit, generation and exploitation of knowledge by its very nature are elitist. In other words, the generation and management of knowledge cannot be`reserved’. As a result of this single political act, we have imposed upon our country some unusual hurdles which may further erode India’s already fragile competence and skill base. For example, the increase in illiteracy and neglect of primary education are telling examples of India’s shortsighted priorities. Although the number of Universities have increased from 25 to over 200 in the past fifty years, it is now widely acknowledged that with few exceptions, their standards of teaching, research and scholarship have dramatically deteriorated. Similarly, Institute of Technology and Institutes of Management which at one time, were considered to be the best of their kind in the developing world, are no longer so. Institution building in the third phase countries and even in China has progressively overtaken India with regard to their quality and relevance. At one time India boasted that as a country we had the third highest number of scientists and technologists in the world. This may still be true numerically but certainly no longer in terms of quality.

The second major hurdle in India originates from our policy of self-reliance and import substitution. While the most attractive features of this policy led to the creation of numerous national and regional R&D institutes and also some spectacular achievements in technologies relevant to national security, it generated some serious frailties in the civilian sector. They key frailties were the gradual decline in the scientific quality and temper in the country, our gradual isolation from the global scientific community and frequent claims of technological and scientific originality in the absence of peer challenge or scrutiny. Import substitution was successful but was fuelled primarily by the use and application of second-hand knowledge. India’s disregard of the sanctity of intellectual property and rights during this period can be traced to this attitude and completes the picture. It is indeed telling that in the transition to economic liberalization beginning in 1991, there was no interest at the national level or even a debate on the state of Science and Technology in the country during the past seven years. It is essential that we acknowledge the existence of these barriers and explore ways and means of starting to dismantle them. I will describe two barriers by way of illustration, no doubt, there are several others.

Finally, let us discuss the inevitability of the change process currently ongoing in India and the role of knowledge management in both accelerating the process as well as seeking competitive advantage by breaking down barriers.

The first and most important step is to acknowledge that there are some important impediments to change due to past policies and the need to tackle them by policy changes. The recent initiatives to modernize our R&D institutions allocate more resources to primary education and the changing attitude towards intellectual property rights portent a positive wind of change.

Secondly, the emergence of a growing number of cost and choice conscious Indian consumer, is generating market dynamics which will force cost-management and quality consciousness on traditionally inefficient Indian private industries, as also the public sector.

Thirdly, people are the key change agents. Our ability to expose our people to international developments as well as training them to acquire the skills and competencies to manage a paradigm shift is the only way to create a knowledge-friendly climate. Such a change process should spread across all section of Indian society including educational institutes, managers, trade unions, farmers and the like.

Research and Development are the primary source of new knowledge in its turn is the motive force for new innovations. Ultimately, it is successful innovations which help convert opportunities into wealth. To operate such knowledge chain forces a society to seek and develop leaders with the necessary competence and skills. Universally, the rate of obsolescence in the generation, application and management of knowledge has become so rapid, that most academic institutions as well as business schools are unable to keep up with the pace of change. Thus, industry all over the world are under unprecedented pressure to comprehend and manage such changes almost on their own, before their main comprehend and manage such changes almost on there own, before their main competitors do. India is no exception. It is in this context that the rising primacy of the WTO and the emergence of a new knowledge dominated and knowledge driven society must be understood.

Under such conditions of business realities, world class companies are being forced to become what is popularly knows as "Learning Organisations". The sole preoccupation of such organisations is to keep changing in every way in order to be able to acquire and exploit new knowledge ahead of competitors.

There are some key characteristics which distinguish Learning Organizations, such as

First, they invariably have a profound understanding of consumers and they continuously update their knowledge of what the consumers want in different markets of world.

Secondly, they have the ability to couple their consumer knowledge with leading edge science and then convert market information into proprietary products and services, using managed innovation as a tool to link and drive the value chain.

Thirdly, these firms are also known to allocate huge resources to re-profile managers and employees in order of them to constantly upgrade their skills and competencies, with the help of a number of techniques such as on-the-job specialized training, continuous learning etc.

It is now fairly widely acknowledged that in the next millennium hardly any World class firm or global player will survive who is not driven by value creation with the help of knowledge in the manner I have described. Only a handful of Indian companies have demonstrated self-staring qualities of this type or have undertaken the necessary level of corporate re-engineering and renewal. It is also obvious that the vast majority of Indian firms both in the public as well as in the private sector are finding the present transition to be traumatic. Different "Knowledge leaders", some are seeking the assistance of well known international consultants, and many, some sort of continued "protection" from the Government. The shared realization is that all firms will have to radically transform in order to survive and thrive.

I have already mentioned that due to historical reasons, most Indian academic and R&D institutes have become obsolete knowledge generators. There is a keen awareness of this serious problem and a desire to change in at least some these institutions. Such changes of modernisation will achieved only in those few instances where leadership is highly competent and whose vision and commitments are clear.

But above all, new and massive investment will have to be made by Indian Firms to ignite a nation-wide knowledge movement. Some obvious areas requiring massive investments are:

For the Government - in primary, secondary and higher education, and

For Industry - in corporate re-engineering, world-class business driven R&D and in employee training and continuous learning.

The intangible issue is how long will it take India to change in attitude and unabashedly acknowledge the role of industry in wealth creation. Technological advances now make it possible to radically shrink the time span required to make a quantum leap from where we are to where we wish to go. But in India there are no visible signs of any accelerating pace of such change as yet. As a people we should worry about this slow pace rather than about knowledge per se.

It is reasonably simple to comprehend the theoretical and philosophical underpinnings of managing in a knowledge era. This is because it is as old as human civilization. What has changed is the speed and dynamics of the emergence of new knowledge. As a consequence, making use of knowledge in creating wealth, gaining leadership, spreading sustainable social justice, have become mush more complicated.

It was not so long ago that closely guarded knowledge provided the means of dominance and subjugation of one nation over another. But the exploitation of education, information, technology and telephony has made knowledge accessible to all and, to an extent, suppressed human exploitative sentiments. But if people and nations fall to take advantage of these new opportunities, economic dominance and exploitation may re-emerge. India is at the crossroads with respect to these developments. We can protect freedom, reinforce democracy and build a nation in which social justice prevails as envisioned by our founding fathers, only if we can take a quantum leap in mastering and managing knowledge to generate increasing levels of national wealth and use if for human well being.

I hope that what I have said will go some way to raising your awareness of both the opportunities as well as the threats.

Thank you for your patience. I wish you well.