It happens ever so often that a foreigner realises the potential of a nation or community and sets up for the kill before any of its insiders can. So it was with Wim Elfrink, one of the five executive vice-presidents at networking giant Cisco, who approached the company board three years ago with a proposal to set up a ‘second headquarter’ in India and soon landed in the country. In an interview to DNA Money, Elfrink debunked some of the accepted wisdom about globalisation and described what he did as the chief globalisation officer at the world’s top networking equipment maker, among other things.
Chief Globalisation Officer is a fancy designation to have. What exactly do you do?
Cisco wanted to make a point saying, for future corporations, having a global strategy is essential. As chief globalisation officer, my job is to look around the world for access to growth, access to new talent and access to new innovation.
Is it like offshoring?
Not really. Globalisation basically started when Columbus discovered America and Vasco-da-Gama, the way to the east. It has always been trade —- you have to sell what you make... But the dynamics in India and eastern markets, upcoming countries like Brazil and Africa are different. You can’t manage all of them from one place or one market. My aim is to find new spots of innovation, growth and talent.
So, is the main driver cutting costs?
Cutting costs is always a bonus, but it is not a strategy. The strategy is to find new growth, new markets. The US is shrinking, ageing. The growth is here, the explosion of young people —- new markets —- is in India, in Indonesia. Here, there are different price-points we have to bring in, there are different drivers... Our driver is much more finding innovation and new business models.
Let me explain further. At Cisco, we don’t do manufacturing; we have outsourced it. We are much more on the creation side; we are always trying to look at inflection points —- new markets. For example, everything that has to do with urbanisation and globalisation. India’s only urbanised to 30%. What is the role that technology can play here? For example, the mobilisation of the wireless internet will be at a speed and scale that we haven’t seen in the world yet. Also, new business models. There are really things that will be driven out of this world. So if you are not literally into it, live it; if you don’t decentralise your invention, you cannot be part of it.
How far have you done it in Cisco? How many of your top ten executives sit outside of the US?
When I came here three years ago, we made a commitment to say that India is our first choice to make a second head office. We decided that 20% of our top management will sit here. We are also looking at South America, Russia, Europe. But India is where we have started. At that time, we said it would take three years and we are almost there.
In concrete terms, how far have you implemented your intention to globalise?
Remember, it’s not just about the work anymore. We call it the globalisation of corporate brain. It’s about globalisation of accountability, the creation. So we have in Bangalore end-to-end business units. We have people who do product research, marketing, design.
How do you decide when to have a local team?
You have a local team where you have a sustainable, different market need, where you have unmet needs.Take the development of the rural areas in India, or the question of how we can make technology relevant in education. For example, in Chindwara, we have done a public-private-partnership in education, setting up kiosks. But at the same time, it is not just about the technology; it’s also about finding a new business model. In Karnataka, we have donated $10 million to build 4,000 houses, two schools and a hospital in a connected way.So, it’s not just a product, but a business model. Five hundred million people are being urbanised in the next five years. That’s the equivalent of 2 Tokyos a year. This is creating a middle class who will want cars, TVs, bank accounts etc. In the US, we don’t live in entire cities any more. Here we can form partnerships.
So India is at the centre of the new Internet?
Three billion people will be connected to the Internet over the next decade. This has led to the Industrialisation of the Internet.
Phase 1 of the evolution of the Internet was the business Internet — booking your tickets online is today common place. Phase 2 was the consumer Internet — with Facebook and Twitter. We believe Phase 3 will be the industrial Internet. We believe 14 billion devices will be connected to the Internet by 2010. In the new world, one has to think of the network as the platform. The utility of the 21st century is the network.So we are developing a new industry. We call it the Internet of things where everything will be connected. That, end-to-end, is done in India — the business model, the ecosystem.
You must have faced a lot of opposition within the company to this model of having new businesses conceived, developed and implemented out of a place like India?
When I came here, a lot of people said ‘end of Wim’s career! What’s he going to do?’ The mindset, the constant talking…
Were you afraid?
You can only do these things if you believe in it. I am at an age and maturity in the company when nobody tells me what to do. I presented the plan to the board. I presented it as access to new talent, new growth and new innovation. Of course, there’s a time lag before all your employees understand it. The mindset is still ‘it’s about labour arbitrage’. I constantly have to educate, to talk about what the opportunity is, what the different drivers are.
But aren’t there people who question the need to go to a low-margin, low-price market like India?
You run into these problems if you are trying to sell what you are already making (in the US). For example, the average revenue per user (for mobile operators) is $60 in the US. In India, it’s $5. But in India, you potentially have 400-500 million users. So it’s obvious you have to think of a different business model. Our strategy is based around learning how to do it, not claiming that our models in the West will work here. Having set up an office here with the authority and ability to come up with products tailored to this market, you can make a difference.
Your model differs from the ‘relative strengths’ model advocated by some other votaries of globalisation, under which China will be the manufacturing hub, India the services hub, US the research hub…
If you ask me, 5-10 years in the future, may be Cisco will have four global centres. One will be in India, one in Brazil, one in Russia... We will create different innovation centres. Different types of innovation will happen in different centres depending on different drivers. Innovation is driven by unmet needs and the needs will be different in the US and India.
Comments