"If the 20th century was an American century and the 19th the European, the 21st century will be global century that no one country will dominate," predicted Nitin Nohria, HBS Dean at a special session marking the 50th anniversary of HBS-IESE Committee.
In his talk, "Innovative Leadership: Learning from Asian Companies," Nohria discussed how the competitive advantages enjoyed by emerging countries have moved beyond low labor costs. Today Asia boasts much more, including innovative management and leadership.
When Nohria started teaching at Harvard 25 years ago, students were drawn to the institution to learn about American business, he explained. Today, Harvard MBAs are initiated into the case method with Narayana Hrudayalaya, an Indian hospital that, thanks to extraordinary leadership, offers open-heart surgery at a tenth of the price of Massachusetts General, the leading U.S. hospital.
According to Nohria, Asian companies combine three key dimensions in competitiveness: efficiency, local responsiveness and innovation.
Japan was the first country to challenge the U.S. on efficiency, followed by Korea and China. Nohria cited Foxconn, the Chinese company that employs over a million people and makes many of Apple’s devices, yet bids for projects with no margin. They do this as a strategy, convinced that they can improve productivity faster than the competition. "They have a ruthless learning curve in production," he added. He also mentioned the huge efficiency savings of Indian IT service companies like Infosys, which trains 100,000 programmers a year.
To illustrate the importance of local responsiveness, he pointed out that in all emerging markets the dominant local player is growing faster than the global players because they recognize the realities of the local market. "We each bring into global competition a home country bias. But what works at home may not work locally."
"Reverse innovation" where you take an existing product and deliver it at a tenth of the price, is, according to Nohria, the third lesson we can learn from Asian companies. "There are 5 billion people who don’t want new stuff because they still don’t have the old stuff. They don’t have anything. They haven’t even got a fridge. To capture this market you need to innovate on price," he said. And while emerging markets have tended up till now to copy, he warned against selling them short in their capacity to innovate.
"We should not underestimate the quality of management and leadership in emerging countries," he continued, adding later that he thinks the debate on Western vs. Eastern leadership styles discussion is overstated. "Good management is more alike than different," he said.
When asked about the impact of the MBA Oath, a voluntary pledge for graduating MBAs and current MBAs to "create value responsibly and ethically," he praised it and other similar initiatives as worthy. However, he emphasized that "the best definition of a business person is someone who you can take at their word and for whom a handshake is worth more than a contract."