In an interview to TOI on the sidelines of the Economic Times Global Business Summit, Zook backs the creation of Indian homegrown multinationals and says small-and-medium companies will be the vehicles for job creation.
What are the conversations taking place
in boardrooms now about challenges and opportunities?
One theme is we are in a world of capital super abundance. The cost of capital used to be 12% or 14% and now for many companies it is 3% or 4% or 5% and so when capital is super abundant what becomes scarce is talent and capabilities and one thing that CEO’s are worried about is retaining and capturing young talent. It is very hard for large companies to do that.
We did some work where we looked at all the acquisitions done by the big six hot companies that everybody talks about as huge — Alibaba, Apple
, Cisco, Google
— and we did the work actually in India
. We took their acquisitions from the last three years and we found that 85% of them were where the founder was still there as opposed to some other company to gain market share
or a bigger company or consolidation. They are really about buying energy and talent and second about 80% of the acquisitions were about capabilities, deep capabilities like face recognition software that they felt could not be acquired by hiring people. This would then strengthen their core business.
The number two concern is how to deal with digital technology. Clearly, people talk about disruption. Companies are seeing all these new technologies from Artificial Intelligence (AI) to real time big data analytics to using remote devices and being on top of those and they are finding that if they are not reasonably leading edge in these technologies they can begin to fall behind, particularly in their appeal to younger consumers who use those.
The third big topic is what we call engine 2. Most businesses focus on their current core business, but we are finding that a larger percentage of our clients are benefitting from creating almost a separate team or even a separate unit or a separate group to create the next generation version of the business model to continue to grow. Creating engine 2 is what CEO’s are thinking about and the fourth one is speed. It is about how do you get into a better physical shape as an organisation that has its own little strategies and layers.
How are companies dealing with automation and also the need to create jobs
and push growth in their firms?
Large companies are not creating jobs anymore. Automation is eliminating jobs and very large companies on an average are growing less than the economy. Hope for job growth won’t come from the government, most of it won’t come from big companies. It will come from small companies like Marico scaling or OYO scaling or Flipkart scaling and hiring people and the medium-sized companies growing in India and hiring people.
We need a large number of jobs. Do you think the trend of big companies or the government not creating jobs is worrisome?
12 to 15 million people a year enter the workforce. Nobody has really figured out under-employment in the grey economy or the unorganised economy. I think it’s terrifying. I honestly see what are the hopes? You bring in large multinational companies from the outside? But do you really want to do that or want western companies just coming in and building a division? I wouldn’t be against it, but in priority of hierarchy, I would much rather have Indian entrepreneurs and this is a country more than most have the spirit and heritage of great founders.
Doesn’t this border around protectionism?
You could create a company with a hospital chain in India far big and said I want to raise all the possible money to build 500 hospitals across India and to think in those terms. I think that is scale and thinking big.
So you are in favour of home-grown multinationals?
Yes and home-grown founders. So how does India create the conditions of Silicon valley here to make sure the founders have role models, advisors, access to capital, low barriers to starting businesses.