International markets force companies to shape up in unique ways

Ankur Kothari, CEO, Kusumgar Corporates, suggests that the industry should think more in terms of process knowledge and technical experience instead of tools and recipes.

In 2018, I found myself in Guangzhou, China, on a visit looking for suppliers of carbon pre-pregs. In one factory, we were taken to an exhibition hall. It was an astounding display of carbon products for the automotive industry, civil engineering, luxury goods, phone cases, luggage covers and many more. It was one of many times, where my delight was mixed with the nagging disappointment of why we in India couldn’t produce the same quality or variety of technical textiles in India.

This experience is not uncommon. Any visitor from the technical textile (or any other manufacturing) industry can relate to the fact that in India, we are miles behind in technology and scale to China and other nations. Like any such issue, it’s not about one or two factors, but a combination of factors. While Govt support, source of raw materials and cost competitiveness gets discussed a lot, I would like to here talk about two factors which I believe areleast talked about, but as important as any other: process knowledge and export orientation.

Process knowledge is the kind of knowledge that’s hard to write down as an instruction. You can give someone a well-equipped kitchen and an extraordinarily detailed recipe, but unless he already has some cooking experience, we shouldn’t expect him to prepare a great dish.

In the industry, we make one major mistake when we talk about technology. We think about too much in terms of tools and recipes, when really we should think about it more in terms of process knowledge and technical experience.

Process knowledge is represented by an experienced workforce and detailed instructions. In my experience, when people gain process knowledge and become experienced in doing something, business becomes easier and profitable. Process knowledge can also be referred to as technical and industrial expertise; for example, in the case of synthetic fabrics, that includes knowledge of sizing recipe, warping tension, how to reduce creases, adjusting temperature and pressure etc. This kind of knowledge is won by experience. Anyone with detailed instructions but no experience actually making such fabrics is likely to make a mess.

The accumulated process knowledge (plus access to capital) allows companies to continue to produce ever-more sophisticated products. It’s not just about the machines, which anyone can buy; or the product specifications, which are hard to follow without experience.

The other fallacy that (many of) our companies struggle with is being inward-focused. By continuing to focus on protected domestic markets, we remain oblivious to productivity improvements and technological growth. Any business that wants to succeed should focus on serving the global markets; if you are competitive globally success in the domestic markets shall surely follow.

Domestic markets neither provide scale nor technical competence. By avoiding both, a company becomes cost and price focused, and not technology focused, which leads to a vicious cycle of poor quality, rejection and obsolescence.

The global market is the natural conduit for a quick technological learning process. While domestic market is important because firms understand local customers instinctively, international markets force companies to shape up in unique ways, adjusting their products to meet different demands and increasing their potential market by many times. Firms can’t hide behind tariff and other barriers and sell only locally.

Finally, there is a major realignment of global supply chains we are witnessing due to political winds. Major global economies are looking to reduce or shift their supply chains out of China for both geo-political and cost reasons. Either this business can go to Vietnam, Bangladesh, Africa or it can come to India. I personally see this as an amazing (but final) opportunity to make this happen. For that to happen, we need to have the twin combination of process knowledge and export orientation. Then, we can have the pleasure of having a wide range of products being made in India, for the world.