Enterprise Excellence 2

Spirit of Enterprise

Jack Welch – hero of Indian enterprises

General Electric's former chief Jack Welch is widely regarded as a hero in India's booming technology industry. While many analysts point to the Y2K bug as the beginning of the movement of software jobs to India, major developments occurred almost a decade earlier, when General Electric (GE) became the first large multinational customer for many of the Indian companies who now dominate the outsourcing industry.

Today India earns more than $17 billion from corporations worldwide seeking low-cost overseas talent to do everything from writing software to collecting debts to designing semiconductors. GE in large measure stoked the phenomenon.

GE's technology partnership with India came amid the country's economic liberalization, which began in 1991 when New Delhi began systematically dismantling tariff and export controls. A number of Indian executives claim that early investments by GE in India gave their technology and business service sectors crucial credibility and cash when other companies still viewed the country as a risky backwater.

Moreover, exposure to Welch's culture of cost-cutting and efficiency taught them business skills they are now using to compete globally, often against U.S. Firms.

Subramanian Ramadorai, CEO of India's largest software company, Tata Consultancy Services (TCS), has said that what his company learned out of its relationship with GE was 'phenomenal'. Business from GE helped TCS boost its annual revenue to nearly $1.6 billion in the year ended March 2004 from around $37 million in the early 1990s, Ramadorai claims.

Today, GE still accounts for 15 percent of TCS's overseas revenue and the Bombay company has used the GE relationship to spread into new markets such as China and Eastern Europe.

Publicly, GE has been reluctant to take credit for its role in stimulating Asian enterprise – probably because shipping white-collar jobs overseas has proven controversial.

Understandably so, as demoralized American workers have had to train their foreign replacements. No wonder, then, that during the 2004 presidential campaign, the Democrats threatened to impose tax penalties on companies that move jobs overseas.

But the outsourcing strategy has been pivotal for GE and for Indian development. In 2000, GE inaugurated the Jack F. Welch Technology Center in Bangalore that employs thousands of researchers working on everything from new refrigerators to jet engines. This year, the conglomerate plans to spend about $600 million on computer-software development from Indian companies, according to a recent company report. The company estimates that similar products would cost it as much as $1.2 billion in the U.S.

Jack Welch's success as CEO of GE can be attributed in large part to his extraordinary leadership skills. He was a master at communicating key ideas to his staff, and repeated them many times to ensure they were driven home. He despised bureaucracy and red tape, preferring to see GE as an informal learning environment. He therefore got to know his employees, interacted frequently with them, and involved himself in all aspects of the business. He specialized in personal touches, such as handwritten memos to his employees.

Nevertheless, he was a tough and demanding leader, earning himself the nickname Neutron Jack.

For further reading, see Thomas O'Boyle, At Any Cost: Jack Welch, General Electric and the Pursuit of Profit (Vintage); Robert Slater, Jack Welch and the G.E. Way: Management Insights & Leadership Secrets of the Legendary CEO (McGraw-Hill); Jack Welch, Straight from the Gut (Warner); Jack Welch & Suzy Welch, Winning (HarperCollins).

Youth entrepreneurship in East Africa

One of Transforming Business' partners is Integra Ventures. This is a Slovakian-based network of economic agencies in Central and Eastern Europe. It offers practical, professional and financial help for entrepreneurs to climb out of poverty through starting and growing their own businesses. It also promotes practical marketplace ethics and corporate social responsibility, thus helping to strengthen civil society, democracy and the free market economy in these countries.

Recently, Integra began operations in sub-Saharan Africa. It is now launching a new project aimed at creating opportunity and capacity for youth entrepreneurship in Kenya, and subsequently in Zambia and Malawi.

The project's target group is young people keen to start their own business but lacking the opportunity, skills and finance to do so. It will set up an East Africa Youth Venture Fund, conduct a business plan competition, mentor development, carry out client training in investment, market access, CSR implementation. An initial goal is to create, through the use of venture capital, thirty youth-owned small enterprises with sound growth potential.

More information here.

British parliament considers private sector approach to development

The International Development Committee is made up of Members of Parliament from across the political spectrum in Britain and is renowned for its tough questioning. Its purpose is to scrutinise the British government's Department for International Development (DFID), which spent almost $7billion (£4 billion) in 2004/5 on aid programmes.

It is currently conducting a special study into the role of the private sector in development and related reform of the aid business.

The Director of the Shell Foundation, Dr Kurt Hoffman (a Patron of Transforming Business), recently appeared before this Committee to discuss the Foundation's 'private sector' approach to development. This is explained in the Foundation's report Enterprise Solutions to Poverty, which has been described in The Times newspaper as 'required reading in Downing Street'.

The report criticises traditional approaches to giving aid, noting that there has been limited development in many parts of Africa despite decades of handouts. Instead, it advocates helping entrepreneurs and small businesses as a way of creating sustainable economic growth – and thus reduce poverty.

The committee is also collecting written evidence and visiting examples of private sector projects in Botswana, Mozambique and Malawi. Its final report is due out later this year.

Editor's note: The Shell Foundation's report Enterprise Solutions to Poverty featured in the 'Resources' section of Enterprise Excellence 1.2. A subsequent report, Aid Industry Reform and the Role of Enterprise features in the 'Resources' section of this edition of the ezine.

Venture capitalist turns his skills to poverty alleviation

A former venture capitalist claims that there are close similarities between building a technology startup and lifting people out of poverty.

Chris Brookfield, from Seattle, has decided to leave the fast-paced, lucrative world of venture capital to apply his investing skills to microfinance.

'I have to take the same hard analytical approach to this as I did in venture capital', he says.

This synergy reflects that fact that he will be working with Unitus, which, in contrast to most microfinance organizations, works with invested capital, rather than exclusively with donations.

Read more here.