Thursday, June 04, 2015

Breaking Into Indian Higher Ed Market - What Have I Learnt

India is one of the most complex markets of Higher Education in the world. It is complicated with multiple layers of regulation, with the States and the Centre having a say, and neither of them having a definitive say. It is a strange marketplace with a modern service economy overlaid on a middle class created by public sector careers, where conservatism and aspiration are in constant conflict. It is unusually corrupt, and this is one sector where Private Sector matches or betters Public Sector corruption (see my lament here). All this makes any new idea, and market entry for a new institution, global or local, extremely difficult. (see more here)

I have done several projects with global organisations trying to enter Indian Higher Ed market, and understand why they must try. (see my earlier post here) Despite the complexities, India is simply the biggest market for education. It is the arena where the big questions of education innovation are being played out, and to be a player, any Higher Ed innovator must win in India. 

Of course, such global companies mostly fail in India. There are some apparent reasons, or at least one reason broken into three parts.

First, many global organisations, when they approach India, they assume Indian Higher Ed market to be underdeveloped. Given the chaotic regulation, confusion and corruption, this is an obvious assumption to make. However, this is a mistake, because Indian Higher Ed is matured, and competition in India is fierce. This may be a contradiction of terms, but it is usually known that everything and its opposite is true for India. More specifically, in Indian Higher Ed, like everything else, one encounters huge institutional failures and a thousand ways of improvising around it. No wonder India is one country where employers report most satisfaction with Higher Education institutions, perhaps because there are many different layers of Higher Education exist side by side. This competitive challenge is usually underestimated, and the fact that a basic solution is not good enough is usually overlooked. In the quest to develop low-cost solutions - everyone knows India is a poor country - global players forget that cheap would not do, because Indian players will easily match it.

Second, unlike many other regions of the world (say, Sub-Saharan Africa), India does not seem to have a capacity problem in Higher Education, particularly after the massive, private sector led expansion in the recent years. So, whoever wants to go to an Engineering college, can more or less go to an Engineering college. This is another difficult conceptual leap, and only so because India is many countries at once. The parts visible to Global Players is the developed parts of India - the big cities - and the Sub-Saharan Africa hidden in India, where there is a problem of education deprivation, is not visible to any Global player. 

Third, and this is really a continuation of the earlier point, because the Global companies usually want to operate with their develop country cost structures, even if it is a scaled down version. That limits them to the richer parts of the population of India, where there is no educational deprivation and the choice is abundant. Besides, the global courses, offered in English, are self-limiting too. If one knows English, has the money and lives in a big city, there is no educational problem to solve for him. This is hardly understood by education investors and entrepreneurs, whose business models are often based on aggregate data and miss the granular understanding of the Indian education market.

So, is there a market in India, and how to approach it?

My strategy suggestion, after many years of working, few successes and some failures, is to create a differentiated offering with local inputs and great value. So, instead of hankering for scale, one should start by targeting the Upper Middle Class students and figuring out how to create value for them. They have a lot of options, but one can still create value with differentiation. A degree from a developed country is sought after, and if it could be delivered at Indian costs, it would be different. So would be courses in advanced technology areas, or for professions, which is still quite limited in India (but growing fast). Offering travel options, which an Indian competitor can not easily offer, may create further differentiation, as well as an opportunity to connect with global employers through internships or projects. 

All this, at an Indian price, which is basically to factor in the Purchasing Power Parity equation (a $ in India buys 5.5 times as much it would do in the United States) and the low per capita earning in India (which is about one-fifth of that of China), because Middle India is an extremely value conscious market. This could indeed be created with a combination of global frameworks and Indian input costs, though this needs deeper understanding of the country. 

This last bit, deeper understanding, is indeed the missing piece, which primarily comes from hubris that inform most global businesses (See, for example, Professor Pankaj Ghemawat's work on the subject). Following the logic of the market is business common-sense, but, as we all know, this is not always so when a company starts talking global. The strategies, then, are not defined by the usual logic one would follow, but some kind of top-down logic which misses the point. This leads to misplaced priorities and assumptions. One company I worked with wanted to incorporate a personal leadership framework in their courses, and assumed that it would be a great selling point. This leadership framework, quite well-known, was a Western one, informed by Christian religious thinking, something that was once popular in India. However, the conversation in India today is mostly about new frameworks and ideas about leadership, with various new models gaining huge popularity (see my earlier post, though it perhaps betrays my scepticism about all religiously-informed teaching), and this particular framework, popular in the 90s, is seen as tired and irrelevant. The fact that the company and the market were putting different value emphasis on this element of education is symptomatic of the disconnection that ails global companies.

This is indeed a classic global versus local dilemma discussed in International Strategy playbooks. However, my contention that India (and China in its own way) needs special treatment is based on the uniqueness and size of the Indian market. I am fully in agreement with the observations of Rama Bijapurkar, who calls India A Never-Before Market, and know from experience that most global companies completely miss the point. 





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