There are nations and people that our modern economists have labelled as the ‘convergence club.’ This group mastered and used the tools of their era to become industrial, democratic, scientific and rich. They left the age of kings and feudal lords, of alchemists and all-knowing priests, behind.
At the same time, a ‘divergence club’ appeared. These nations missed the essential turn. They were trapped. Old ideas, useless habits of power, inescapable history — varied shackles held them back from the punctuated shift to a new, more advanced equilibrium. China, India, much of Latin America and Africa—for them, the leap to being honestly modern was fatally elusive.
Growth in divergent economies is no miracle but there are only 13 developing countries that have managed to grow for 25 years or more at an average rate of 7% or more. Given that there are 180 developing countries in the world, it is not a long list but, clearly, it is a very high bar to clear. China is the largest and fastest on this list, India is yet to make it to this list.
While China’s current shift away from exports and high-leverage leads to a more consumption-oriented economy, it also slows its growth. The country is poised for its weakest expansion since 1990. India’s advantage lies in our huge domestic consumption (59.6% of GDP as against China’s 37%). So how convergent is India’s consumption growth story?
As per a recent report in The Economist, this development-through-conventional industrialisation model is no longer working. IT has enabled global firms to unbundle manufacturing and scatter their supply chains to countries around the world, while capturing most of the value by controlling the overall design and marketing of their products and through the financial optimisation of their far-flung operations.
As technologies continue to advance, emerging markets are starting to experience what’s been called premature de-industrialisation. India needs to recognise this reality. What India needs is ahybrid of stewards (to conserve) and entrepreneurs (to create). Stewardship versus entrepreneurship — that is the fundamental distinction between conventional companies and the revolutionary wealth creators.
Stewards polish grandma’s silver – they buff up assets and capabilities they inherited from entrepreneurs long retired or dead. They spend their time trying to unlock wealth by hammering down costs, outsourcing inefficient processes, selling off bad businesses and spinning out good ones. Talking about the consumption dimension, let me use an example from the food industry to illustrate the associated complexity.
Since the Green Revolution, food production (especially of the packaged variety) has been pretty opaque. Enamoured with convenient food, consumers didn’t seem to care enough to ask where things came from. For decades, big brands really didn’t have to think too hard about the product, vis-à-vis how wholesome it was, quality of ingredients and the integrity and sustainability of the process.
Food and restaurant companies can no longer sustain growth by solely relying on legacy products. This shift is primarily being attributed to change in demographics: emergence of millennials (born between 1984 and 2000) and Generation-Z (born after 2000), and of course internet.
If food and restaurant companies like Coke, Nestle, Pepsi, McDonald’s, Burger King or Starbucks want to address consumer or product related issues, they will have to collaborate with new-age entities like Zomato, emerging chefs, nutritionists, etc. The future of product development no longer resides within boundaries of conventional companies; it lies in the broader ecosystem.
The making of your next new burger or health beverage would involve a collaborative effort from all the food-related constituencies – analytics and insights from internet companies, chefs/freelancers will use the feedback to come up with new product ideas, they in turn will work with farmers, nutritionists, food safety and flavour experts to fortify these products and then sell it to food companies (end consumers).
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