Infosys-the IT bellwether firm- which could be said to have been the face of Indian capitalism and the visage of the New India is in trouble. The pioneering firm took advantage of globalization , India’s meshing into the global economy and other germane structural factors is no longer the firm which animates and captivates the market. What accounts for this? Has the law of diminishing returns set in? Did the firm merely ride the tide of reforms that swept India after 1991 and given this, does this mean that it was destined to be second class? Has the firm reached its ‘strategic inflection point? Have its competitors been more nimble? Do cultural and sociological factors account for this?Or is it the Scumpeterian creative destruction kicking in?
It would appear that the catch all explanations that may explain the plight of Infosys are a combination of cultural and sociological explanations coupled with creative destruction. What does this mean?
Pared down, these assertions mean that India, sociologically and culturally, may not have capitalism wired into its DNA. As a corollary, dynamic risk taking and entrepreneurship may be missing in India. The reasons for this are manifold: the socialist legacy bears down heavily on the Indian psyche. However, more poignant reasons may be nature of Indian society and culture. That is to say that given that India is what may be called a communitarian society, the nature of society and its dynamic revolves around the group. This stifles creativity and the thrust of the group’s approach is toward seeking security and overall, in the main, the group is risk averse. Was Infosys an aberration then? Are Indian firms and potential entrepreneurs condemned to mediocrity?
No. Neither. The percolation of capitalism to India and India’s intermeshing into the global economy means that the country made its tryst with an altogether different, hypercompetitive, turbocharged capitalism. Infosys benefited and profited from this initial foray but may have reached or hit the law of diminishing returns. Can it recover?
The answer lies in creative destruction. By creative destruction, the reference here is not to apocalyptical , Marxian visions and prognoses of capitalism’s ultimate demise but the dynamism inherent in capitalism. The phrase creative destruction was popularized by the genius of geniuses, Joseph Alois Schumpeter. In Schumpeter’s schema, capitalism was defined by an inherent dynamism that destroyed the old and created the new. It is worth quoting Schumpeter here:
“Capitalism [...] is by nature a form or method of economic change and not only never is but never can be stationary. [...] The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates. [...] The opening up of new markets, foreign or domestic, and the organizational development from the craft shop and factory to such concerns as U.S. Steel illustrate the same process of industrial mutation [...] that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in”( http://en.wikipedia.org/wiki/Creative_destruction).
This is what may have happened to Infosys. That is, while the firm itself was beneficiary of the creative destruction process, it too may have been overtaken by the same dynamic. Infosys may or may not recover its pivotal position. Whether it does or whether some other Indian firm takes its place or even goes beyond, the principles to bear in mind are that in the contemporary world, capitalism is turbocharged and hypercompetitive. Creative destruction them takes at a faster pace and speed. No firm can rest on its laurels and continue to survive let alone thrive.
To recover then, Infosys needs to rejig itself. This rejigging cannot and should not merely mean tinkering revamping its business model but realigning the entire concepts upon which it was premised upon. This means more entrepreneurial verve and risk taking which in turn means reviewing cultural assumptions and even creating new ones instead in the new Infosys culture. Once this is done, the rest-creating and crafting a new business model, and other issues of business structure and strategy- become mere detail.
India has made its tryst with capitalism. This is irreversible. To reach a level that is coeval or commensurate with the developed world, it is imperative that the country develops a culture that is aligned with the needs of capitalism. It is then that the country can boast of Bill Gates or Steve Jobs. Till then, the country and its firms can go only so far. Infosys demonstrated that India and Indians could compete. Now it’s time to demonstrate that India stands prepared for any challenge that capitalism throws at it.
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