If you look at the Indian business landscape, you will see several successful services companies in fields like airlines (e.g., Jet, IndiGo), healthcare (e.g., Apollo, Manipal), mobile phone services (e.g., Idea, Airtel) and IT services (e.g., TCS, Infosys).
Many of these companies are comparable to global peers, if not potential world-beaters. What we don't have are the corresponding product companies. We don't have an aircraft-maker like Boeing, a pharma company like Pfizer, a network equipment company like Cisco, or a software product company like Microsoft.
Is this a problem? Yes. Because Boeing and Airbus alone generate almost as much profit as all global airlines put together. Pfizer's profits are more than those of the top 100 hospitals in the US. Cisco's profits are more than those of all European mobile operators. Microsoft generates more profit than those of top 20 pure-play global IT services firms. If India remains bereft of product companies, it won't be a sustainable economy in the future.
Building product companies is hard. Despite the fanfare, Tata Motors' Nano has failed. And, sadly, Bajaj has been humbled by Honda in the last two years. In hi-tech, Ittiam, despite its success in developing core intellectual property in online video, hasn't broken into the main league. With our borders open to global competition, is it too far-fetched to imagine that in a few years, Amazon will have pipped Flipkart and that Uber - not Ola - will rule our roads? Google already owns our search, Skype owns voice messaging, Facebook owns social media.
Is India destined to lose all these battles? Maybe not. But if we are to win, we have to embrace a new game plan. Products, especially software products, are a winner-take-all business. Either you win or you are anobody. It's not a place for the faint-hearted. In fact, tentativeness translates into a loss. It leads to subcritical investments.
We are staring at a costly example of this in the nuclear reactor industry. India can build 700 MW reactors. But economies of scale now kick in at 1,600 MW. Since we didn't invest enough in the last 20 years - despite the wonderful start Homi Bhabha gave us in the 1950s - we are not a player in this large-reactor segment.
So, we will spend more money on buying these bigger reactors from France, Russia and the US in the next three years than what we have spent on our entire nuclear industry in the past 50 years.
This, unfortunately, is not a one-off case. In telecom, despite C-Dot,C-Dac and Sam Pitroda, we have only created one Tejas Networks, a nifty networking start-up from Bengaluru. But Tejas gets a piddly 1% of the annual telecom capex buys in the country. The rest is imported. Such failures don't even faze us. We pretend they don't matter.
Building a world-class product company needs a different mindset. You have to go all-in and bet the company on the market or on the technology shift underway. This mindset is new to us. Our success in building services companies comes in the way.
To be sure, we are not the only victims of this effect. Taiwan, too, isn't aplayer in mobile phones, ironically, because its design services legacy holds it back. Venezuela is not able to crack the chocolate market. El Ray owns the high-end cocoa market, but comes up a cropper in high-end chocolates. The Belgians or the Swiss are a chocolate nation because they don't have the 'cocoa mindset'.
Lack of a services industry legacy helps not just South Korea but also Estonia (which created Skype) and Finland (the land of Nokia and the Angry Bird game). Mindset matters,big time.
We have to jettison two ideas that hold us back. One, we have to accept that no matter how well-run IndiGo Airlines is, it'll not become a Boeing. Similarly, a Narayana Hrudayalaya Hospital will never bring a drug to the market like Pfizer does. Airtel will never build a router like Cisco. And TCS will never be a Microsoft.
Two, we must discard our mentality of unbridled greed and reluctance to make bets - best showcased in our penchant for large Olympics contingents. Nobody cares about how many athletes you send to a sports competition. They only care about the number of medals you win. To improve odds of winning, small focused efforts produce better results than grandiose schemes.
Today, we have four times more new start-ups than Israel for one-sixth the outcomes. One reason is that the ecosystem enablers are narrowly sector-focused in Israel. The accelerators that help medical device companies don't work with cybersecurity start-ups there.
Can't we have a sector-focused approach in India aiming at solar energy or medical devices? Anything that smells like a generic 'start-up' programme will have a low impact, and is quite likely to be a scam.
Software product entrepreneurs when successful make a big economic impact in this winner-takes-all world. So they are being courted worldwide. The US is trying to get the 'start-up visas' in place for them. Canada already has a working programme. Singapore has start-up tax exemption. Britain is in the game too.
In our last Budget, there was a tantalising line about "a special focus on software product start-ups". Nine months have passed and nothing material has happened yet. Maybe this new Budget will bring some well-thought-out policies to light. This year, 75% of newly-funded software product start-ups will re-domicile themselves in Singapore or the US (up from 54% last year).
It is time India wakes up to its Product Nation imperative. In 1998, the National Democratic Alliance government had introduced a 108-point policy for IT services whose benefits we see around us today. The present government must do the same for software products.
For the first time in modern India's history, we have a chance to create world-winning products from India. The decisions we take today to support our fight to become a Product Nation will decide whether tomorrow's Google, Viagra, Facebook or Uber comes from our nation.
T V Mohandas Pai is former CFO, Infosys, and Sharad Sharma isformer CEO, Yahoo India R&D