Description
The opening of the new IIMs augurs well for an interesting third growth model, in addition to ‘scale’ and ‘replication’, which were used to build the previous six. It is a model that we often invoke in wishful conversations about fasttracking our nation’s climb-up, but ‘innovation’ comes loaded with very real possibilities when it is hitched to the nation’s premier knowledge brand.
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smart leader india comes to IIM
28 www.thesmartmanager.com
The Smart Manager
Sep-Oct 2011
smart leader
india comes to IIM
a fine balance india comes to iim
growth through innovation
pp 31–35
rishikesha t krishnan & sourav mukherji, iim bangalore
illustration by: nilesh juvalekar
The Smart Manager
Sep-Oct 2011
www.thesmartmanager.com 29
smart leader india comes to IIM
The third fastest growing city in the world1 A tiny city in the
households in India3 A city at the center of the ‘rice bowl’ of India4
‘land of gods’2 The city with the highest number of SEC A
juggling the feudal with the modern8 The sixth fastest job-creating city in
India9 A city best known for rolling hills and rock and roll10 The second best city to
reside in India11 A city switching from tanneries to technology12 A city of lakes and palaces13 1 Ahmedabad 2Kashipur 3Bangalore 4Raipur 5 Calcutta 6Ranchi 7Indore 8Rohtak 9Lucknow 10 Shillong 11 Kozhikode 12Tiruchirappalli 13Udaipur
India comes to IIM
30 www.thesmartmanager.com The Smart Manager Sep-Oct 2011
tribal movement6 The Commercial Capital of Central India7 A city
The city with the second-largest bourse in India5 A city at the heart of a
smart leader
IIM Bangalore
Krishnan is Professor of Corporate Strategy at IIM Bangalore.
growth through innovation
? rishikesha t krishnan & sourav mukherji
Mukherji is Faculty in the Organizational Behavior area at IIM Bangalore.
SMART SUMMARY The opening of the new IIMs augurs well for an interesting third growth model, in addition to ‘scale’ and ‘replication’, which were used to build the previous six. It is a model that we often invoke in wishful conversations about fasttracking our nation’s climb-up, but ‘innovation’ comes loaded with very real possibilities when it is hitched to the nation’s premier knowledge brand.
hat does it take to double the scope of a premier brand? Not much, a cynic would say, if the brand has the luxury of almost limitless, price-inelastic, demand. But as the Indian Institutes of Management (IIMs) undertake the largest ever expansion in their fifty-year history, we have a unique opportunity to reflect on growth strategies, brand equity and the future of quality higher education in India. Until the recent expansion, the growth of the IIMs was modest both in terms of number of institutes and enrolments. After the first two institutes (Calcutta -
W
The Smart Manager
Sep-Oct 2011
www.thesmartmanager.com 31
growth through innovation
by krishnan & mukherji
‘C’, and Ahmedabad - ‘A’) were set up in 1960, it took thirteen years to set up the third IIM at Bangalore (‘B’) and another decade to set up the fourth at Lucknow (‘L’). While two more institutes were set up in the mid-1990s (Kozhikode - ‘K’, Indore - ‘I’) till as late as the early years of this millennium none of the institutes had gone beyond admitting 180 students every year to the core MBA (PGP) program. And it was only in the course of implementing the government’s new reservation policy in the last five years that the intake at the older IIMs neared 400 students apiece. Why didn’t the older IIMs expand their intake faster? While faculty shortage and lack of infrastructure were two reasons, there was a lurking fear that the job market was not big enough to absorb more IIM graduates without dilution in compensation levels. Constraining the supply was believed to be essential to maintaining the exclusivity and value of the brand. Before we look at the growth strategy of the IIMs, it helps to understand the four principal sources of value creation for the IIMs—admissions, teaching, knowledge creation, and placements. IIMs create value by identifying and selecting the top 0.5% of the eligible student population of the country. Thus, they reduce search and evaluation costs for the end customer—corporate India and global corporations that recruit IIM graduates. The selection process of the IIMs, despite occasional hiccups, has stood the test of time and therefore seems to be a key value driver. IIMs run an efficient placement process by inviting
national and international recruiters simultaneously. During the placement season, this creates an efficient market where both the recruiters and the students exercise their choices with adequate information, resulting in superior identification, price discovery, and, in most cases, better satisfaction. Thus, IIMs add value through the placement process by being a market maker. Does IIM teaching add value? As faculty members of an IIM, we hope so. Unfortunately, the impact of the teaching at IIMs is rarely a subject of discussion among the stakeholders of IIMs. While we seem to be good at conveying management knowledge (eg, teaching about financial valuation, leadership behavior, entrepreneurial traits and innovation models), how good are we at developing managerial skills (being a leader, an entrepreneur or an innovator) in our students? While we are good at analyzing case studies of ethical and responsible behavior, are we able to make our students imbibe values of ethics and responsibility? About these, we are not sure… Research and knowledge creation are the well known Achilles’ heel of the IIMs. Though many IIM faculty are striving hard to put the IIMs on the knowledge map of the world, these efforts may take some time to fructify. Given the current value-creation logic of the IIMs, does the geographic expansion of IIMs make sense? Expansion is unlikely to make much impact on the two value-creation sub-processes: admissions and placements. When there are hundreds of thousands of students applying to get admission to IIMs every year, doubling the intake from 0.5% to 1% is unlikely to
Constraining the supply was believed to be essential to maintaining the exclusivity and value of the brand.
32 www.thesmartmanager.com
The Smart Manager
Sep-Oct 2011
growth through innovation
by krishnan & mukherji
In a country where the pressure on land is high and acquisition of land a fraught issue, horizontal sprawl is difficult to justify.
create any dilution in competition in the input market. Competition in the output market and placements are a function of national and global macro-economic conditions. If economies do well, IIMs will be able to place their students well above the industry-average price points. But, teaching and teachers are not easily scalable resources. IIMs have so far witnessed two models of growth, namely growth by scaling and growth by replication. The older IIMs—A, B, and C—have grown in scale by increasing the number of students in their programs, and increasing the number of programs. In growth by scaling, the management and ownership of the organization remains the same, the organization derives economies of scale and scope while creating a complicated organization structure and increased bureaucratization. Given that some top US business schools like Harvard Business School admit as many 1000 MBA students every year, there is potential for increasing the size of individual IIM MBA programs. With appropriate layouts and architecture, the 100acre campus of a typical IIM should be able to support many more full-time students than they do at present. And with a judicious supplement of adjunct faculty, it should be possible to offer enough courses for a larger intake. Optimally sized classrooms and the use of technology should allow larger class sizes. In the older IIMs, this would mean replacement of some of the old infrastructure by the new. The second model of growth, growth by replication, happened with the opening of IIMs L, K and I, where the intention was to leverage the IIM brand but not to embrace organizational complexity. Thus, the formula was by and large to replicate the models of the older IIMs. Replication is suitable for businesses where there are little or no economies of scale or scope, where the standard operating procedures or theories of business are fairly well defined and where the purpose is to leverage the brand without increasing the overhead cost that is associated with increased size of an organization. If MBA program rankings are to believed, growth through replication has had only limited success as there are two clusters today, one represented by IIMs A, B and C and the other by IIM L, K and I. Therefore, given the current realities, scaling IIMs A, B and C appears to be a better strategy of increasing the footprint of the brand rather than growth through replication. As institutions with an all-India visibility and a national selection process, the IIMs did not need to have a pan-India physical presence to cater to students from across the country. A multi-campus structure does not make sense from the perspective of economies of scale and resource utilization either. So, what then is the logic of the multi-campus model? In a country where the pressure on land is high and acquisition of land a fraught issue, horizontal sprawl is difficult to justify. New campuses should be built to be rapidly scalable, and to adapt to the future improvements in information and communication technologies that are bound to happen, just as new factories provide the opportunity to implement new manufacturing concepts or be more environmentally sustainable. But the bigger benefit will come from the opportunity to experiment that the new institutes provide. The world over, there is a concern today whether MBA education adds any value and even premier institutes such as Harvard, Yale and Stanford are actively involved in experimenting with the curriculum to ensure that the MBA remains relevant.
The Smart Manager
Sep-Oct 2011
www.thesmartmanager.com 33
growth through innovation
by krishnan & mukherji
The older IIMs tend to be conservative, and hesitant to make significant changes in their MBA programs. As in any organization, the “success” of the past reinforces inertia and acts as a significant barrier to change. Faculty are set in their teaching styles and pedagogies and see no obvious reason to modify these. Given the unlimited demand and limited supply of the IIM-MBA, there is very little incentive for the incumbent IIMs to change. Creating new IIMs is a good way of introducing competition. Thus, the new IIMs have a historic opportunity to create a third model, growth through innovation. Given that they do not have the inertia and complacency of IIMs A, B and C, they must experiment and innovate with new models of course content, teaching styles, student profiles and faculty diversity. There are already several questions being raised about the relevance of MBA education globally. Even in India, there are several recruiters who prefer to recruit students directly after graduation and provide them on-the-job management training rather than to recruit from MBA programs. When the core formula for success is under threat, growth through innovation is an ideal way to rejuvenate the brand. There are several things the new IIMs can try out. To start with, there are several opportunities to innovate at both ends of the pipeline—in admissions and placement. They can seek diversity more aggressively and select students from unconventional backgrounds. They can buck the trend of peer pressure-led job
choices by introducing career management systems supported by external facilitators. There are many new things possible in the program offering too. Linking theory and practice does not need to be restricted to summer internships; instead practiceoriented project courses and labs can become an integral part of the MBA curriculum. There is an opportunity to provide a more integrative core curriculum rather than the functional silo-driven core of most MBA programs. And, there is also the opportunity to supplement the conceptual rigor of the MBA program with a host of skill-based courses that would help develop better leaders. In the area of knowledge creation, by building a culture of engaged scholarship from day 1, the new IIMs have the opportunity to produce research that is rigorous, conceptually sound as well as practically relevant. The process followed by the Ministry of Human Resource Development (MHD) in setting up new institutions is friendly to such innovation, for it is essentially an entrepreneurial model. The first directors of the new IIMs have a fresh slate on which they can formulate the blueprints of their institutions. Of course, there are boundaries to the innovation sandbox in which the new IIMs are being incubated: [pertaining to the availability and use of] financial resources, rules for hiring, purchase, salaries and other administrative tasks, and a government-selected board to whom the directors are accountable. But though each new institute
When the core formula for success is under threat, growth through innovation is an ideal way to rejuvenate the brand.
34 www.thesmartmanager.com
The Smart Manager
Sep-Oct 2011
growth through innovation
by krishnan & mukherji
What can the IIMs learn from Indian corporates regarding growth and change?
has a mentor institute, it is free to evolve its own course structure, curriculum and pedagogy. Will the IIM brand be diluted by the doubling of the number of IIMs and the location of the new ones in places like Ranchi, Rohtak and Kashipur? The negative impact is likely to be small as the market recognizes both the umbrella brand and the sub-brands representing different campus locations. While the umbrella brand stands for the rigor and selectivity of CAT and the IIM admission process, the sub-brands take into account the differences in quality and the educational experience. If the new IIMs blaze new trails and establish themselves as distinctive institutions, they might in the long run end up enhancing rather than diluting the IIM brand. What can the IIMs learn from Indian corporates regarding growth and change? The big growth stories of the Indian corporate sector have been based on big global-scale visions and dreams (eg Reliance), customerinsights and innovation (Future Group, Titan, Bajaj), exploitation of platforms coupled with exploration of new technologies and ideas (Tata Motors, Biocon), and high quality execution processes (TCS, Infosys). We are yet to see an IIM incorporate any of these ideas into its plans. Some of the directors of the new institutes have been emphasizing the importance of rapid scale-up; they might do well to study successful Indian companies carefully if they want to be successful in their endeavor. What can corporates learn from the IIMs’ experience? Regarding the newest IIMs, it’s too early to tell. But we are excited by the potential of providing a platform for entrepreneurship and experimentation represented by the MHRD expansion initiative for IIMs. With the country eager to embrace innovation in this ‘Decade of Innovation’, the IIM experiment promises to inspire and motivate new modes of venture creation.?
exhibit01
“theory Of business”
different
growth by innovation
same
growth by scaling
growth by replication
same
different
location
This article represents the authors’ views and does not purport to reflect the official view of IIM Bangalore.
The Smart Manager
Sep-Oct 2011
www.thesmartmanager.com 35
doc_411034666.pdf
The opening of the new IIMs augurs well for an interesting third growth model, in addition to ‘scale’ and ‘replication’, which were used to build the previous six. It is a model that we often invoke in wishful conversations about fasttracking our nation’s climb-up, but ‘innovation’ comes loaded with very real possibilities when it is hitched to the nation’s premier knowledge brand.
Start your Gold Membership to enjoy the full value of The Smart Manager.
Check http://www.thesmartmanager.com/goldmember.aspx for more information.
smart leader india comes to IIM
28 www.thesmartmanager.com
The Smart Manager
Sep-Oct 2011
smart leader
india comes to IIM
a fine balance india comes to iim
growth through innovation
pp 31–35
rishikesha t krishnan & sourav mukherji, iim bangalore
illustration by: nilesh juvalekar
The Smart Manager
Sep-Oct 2011
www.thesmartmanager.com 29
smart leader india comes to IIM
The third fastest growing city in the world1 A tiny city in the
households in India3 A city at the center of the ‘rice bowl’ of India4
‘land of gods’2 The city with the highest number of SEC A
juggling the feudal with the modern8 The sixth fastest job-creating city in
India9 A city best known for rolling hills and rock and roll10 The second best city to
reside in India11 A city switching from tanneries to technology12 A city of lakes and palaces13 1 Ahmedabad 2Kashipur 3Bangalore 4Raipur 5 Calcutta 6Ranchi 7Indore 8Rohtak 9Lucknow 10 Shillong 11 Kozhikode 12Tiruchirappalli 13Udaipur
India comes to IIM
30 www.thesmartmanager.com The Smart Manager Sep-Oct 2011
tribal movement6 The Commercial Capital of Central India7 A city
The city with the second-largest bourse in India5 A city at the heart of a
smart leader
IIM Bangalore
Krishnan is Professor of Corporate Strategy at IIM Bangalore.
growth through innovation
? rishikesha t krishnan & sourav mukherji
Mukherji is Faculty in the Organizational Behavior area at IIM Bangalore.
SMART SUMMARY The opening of the new IIMs augurs well for an interesting third growth model, in addition to ‘scale’ and ‘replication’, which were used to build the previous six. It is a model that we often invoke in wishful conversations about fasttracking our nation’s climb-up, but ‘innovation’ comes loaded with very real possibilities when it is hitched to the nation’s premier knowledge brand.
hat does it take to double the scope of a premier brand? Not much, a cynic would say, if the brand has the luxury of almost limitless, price-inelastic, demand. But as the Indian Institutes of Management (IIMs) undertake the largest ever expansion in their fifty-year history, we have a unique opportunity to reflect on growth strategies, brand equity and the future of quality higher education in India. Until the recent expansion, the growth of the IIMs was modest both in terms of number of institutes and enrolments. After the first two institutes (Calcutta -
W
The Smart Manager
Sep-Oct 2011
www.thesmartmanager.com 31
growth through innovation
by krishnan & mukherji
‘C’, and Ahmedabad - ‘A’) were set up in 1960, it took thirteen years to set up the third IIM at Bangalore (‘B’) and another decade to set up the fourth at Lucknow (‘L’). While two more institutes were set up in the mid-1990s (Kozhikode - ‘K’, Indore - ‘I’) till as late as the early years of this millennium none of the institutes had gone beyond admitting 180 students every year to the core MBA (PGP) program. And it was only in the course of implementing the government’s new reservation policy in the last five years that the intake at the older IIMs neared 400 students apiece. Why didn’t the older IIMs expand their intake faster? While faculty shortage and lack of infrastructure were two reasons, there was a lurking fear that the job market was not big enough to absorb more IIM graduates without dilution in compensation levels. Constraining the supply was believed to be essential to maintaining the exclusivity and value of the brand. Before we look at the growth strategy of the IIMs, it helps to understand the four principal sources of value creation for the IIMs—admissions, teaching, knowledge creation, and placements. IIMs create value by identifying and selecting the top 0.5% of the eligible student population of the country. Thus, they reduce search and evaluation costs for the end customer—corporate India and global corporations that recruit IIM graduates. The selection process of the IIMs, despite occasional hiccups, has stood the test of time and therefore seems to be a key value driver. IIMs run an efficient placement process by inviting
national and international recruiters simultaneously. During the placement season, this creates an efficient market where both the recruiters and the students exercise their choices with adequate information, resulting in superior identification, price discovery, and, in most cases, better satisfaction. Thus, IIMs add value through the placement process by being a market maker. Does IIM teaching add value? As faculty members of an IIM, we hope so. Unfortunately, the impact of the teaching at IIMs is rarely a subject of discussion among the stakeholders of IIMs. While we seem to be good at conveying management knowledge (eg, teaching about financial valuation, leadership behavior, entrepreneurial traits and innovation models), how good are we at developing managerial skills (being a leader, an entrepreneur or an innovator) in our students? While we are good at analyzing case studies of ethical and responsible behavior, are we able to make our students imbibe values of ethics and responsibility? About these, we are not sure… Research and knowledge creation are the well known Achilles’ heel of the IIMs. Though many IIM faculty are striving hard to put the IIMs on the knowledge map of the world, these efforts may take some time to fructify. Given the current value-creation logic of the IIMs, does the geographic expansion of IIMs make sense? Expansion is unlikely to make much impact on the two value-creation sub-processes: admissions and placements. When there are hundreds of thousands of students applying to get admission to IIMs every year, doubling the intake from 0.5% to 1% is unlikely to
Constraining the supply was believed to be essential to maintaining the exclusivity and value of the brand.
32 www.thesmartmanager.com
The Smart Manager
Sep-Oct 2011
growth through innovation
by krishnan & mukherji
In a country where the pressure on land is high and acquisition of land a fraught issue, horizontal sprawl is difficult to justify.
create any dilution in competition in the input market. Competition in the output market and placements are a function of national and global macro-economic conditions. If economies do well, IIMs will be able to place their students well above the industry-average price points. But, teaching and teachers are not easily scalable resources. IIMs have so far witnessed two models of growth, namely growth by scaling and growth by replication. The older IIMs—A, B, and C—have grown in scale by increasing the number of students in their programs, and increasing the number of programs. In growth by scaling, the management and ownership of the organization remains the same, the organization derives economies of scale and scope while creating a complicated organization structure and increased bureaucratization. Given that some top US business schools like Harvard Business School admit as many 1000 MBA students every year, there is potential for increasing the size of individual IIM MBA programs. With appropriate layouts and architecture, the 100acre campus of a typical IIM should be able to support many more full-time students than they do at present. And with a judicious supplement of adjunct faculty, it should be possible to offer enough courses for a larger intake. Optimally sized classrooms and the use of technology should allow larger class sizes. In the older IIMs, this would mean replacement of some of the old infrastructure by the new. The second model of growth, growth by replication, happened with the opening of IIMs L, K and I, where the intention was to leverage the IIM brand but not to embrace organizational complexity. Thus, the formula was by and large to replicate the models of the older IIMs. Replication is suitable for businesses where there are little or no economies of scale or scope, where the standard operating procedures or theories of business are fairly well defined and where the purpose is to leverage the brand without increasing the overhead cost that is associated with increased size of an organization. If MBA program rankings are to believed, growth through replication has had only limited success as there are two clusters today, one represented by IIMs A, B and C and the other by IIM L, K and I. Therefore, given the current realities, scaling IIMs A, B and C appears to be a better strategy of increasing the footprint of the brand rather than growth through replication. As institutions with an all-India visibility and a national selection process, the IIMs did not need to have a pan-India physical presence to cater to students from across the country. A multi-campus structure does not make sense from the perspective of economies of scale and resource utilization either. So, what then is the logic of the multi-campus model? In a country where the pressure on land is high and acquisition of land a fraught issue, horizontal sprawl is difficult to justify. New campuses should be built to be rapidly scalable, and to adapt to the future improvements in information and communication technologies that are bound to happen, just as new factories provide the opportunity to implement new manufacturing concepts or be more environmentally sustainable. But the bigger benefit will come from the opportunity to experiment that the new institutes provide. The world over, there is a concern today whether MBA education adds any value and even premier institutes such as Harvard, Yale and Stanford are actively involved in experimenting with the curriculum to ensure that the MBA remains relevant.
The Smart Manager
Sep-Oct 2011
www.thesmartmanager.com 33
growth through innovation
by krishnan & mukherji
The older IIMs tend to be conservative, and hesitant to make significant changes in their MBA programs. As in any organization, the “success” of the past reinforces inertia and acts as a significant barrier to change. Faculty are set in their teaching styles and pedagogies and see no obvious reason to modify these. Given the unlimited demand and limited supply of the IIM-MBA, there is very little incentive for the incumbent IIMs to change. Creating new IIMs is a good way of introducing competition. Thus, the new IIMs have a historic opportunity to create a third model, growth through innovation. Given that they do not have the inertia and complacency of IIMs A, B and C, they must experiment and innovate with new models of course content, teaching styles, student profiles and faculty diversity. There are already several questions being raised about the relevance of MBA education globally. Even in India, there are several recruiters who prefer to recruit students directly after graduation and provide them on-the-job management training rather than to recruit from MBA programs. When the core formula for success is under threat, growth through innovation is an ideal way to rejuvenate the brand. There are several things the new IIMs can try out. To start with, there are several opportunities to innovate at both ends of the pipeline—in admissions and placement. They can seek diversity more aggressively and select students from unconventional backgrounds. They can buck the trend of peer pressure-led job
choices by introducing career management systems supported by external facilitators. There are many new things possible in the program offering too. Linking theory and practice does not need to be restricted to summer internships; instead practiceoriented project courses and labs can become an integral part of the MBA curriculum. There is an opportunity to provide a more integrative core curriculum rather than the functional silo-driven core of most MBA programs. And, there is also the opportunity to supplement the conceptual rigor of the MBA program with a host of skill-based courses that would help develop better leaders. In the area of knowledge creation, by building a culture of engaged scholarship from day 1, the new IIMs have the opportunity to produce research that is rigorous, conceptually sound as well as practically relevant. The process followed by the Ministry of Human Resource Development (MHD) in setting up new institutions is friendly to such innovation, for it is essentially an entrepreneurial model. The first directors of the new IIMs have a fresh slate on which they can formulate the blueprints of their institutions. Of course, there are boundaries to the innovation sandbox in which the new IIMs are being incubated: [pertaining to the availability and use of] financial resources, rules for hiring, purchase, salaries and other administrative tasks, and a government-selected board to whom the directors are accountable. But though each new institute
When the core formula for success is under threat, growth through innovation is an ideal way to rejuvenate the brand.
34 www.thesmartmanager.com
The Smart Manager
Sep-Oct 2011
growth through innovation
by krishnan & mukherji
What can the IIMs learn from Indian corporates regarding growth and change?
has a mentor institute, it is free to evolve its own course structure, curriculum and pedagogy. Will the IIM brand be diluted by the doubling of the number of IIMs and the location of the new ones in places like Ranchi, Rohtak and Kashipur? The negative impact is likely to be small as the market recognizes both the umbrella brand and the sub-brands representing different campus locations. While the umbrella brand stands for the rigor and selectivity of CAT and the IIM admission process, the sub-brands take into account the differences in quality and the educational experience. If the new IIMs blaze new trails and establish themselves as distinctive institutions, they might in the long run end up enhancing rather than diluting the IIM brand. What can the IIMs learn from Indian corporates regarding growth and change? The big growth stories of the Indian corporate sector have been based on big global-scale visions and dreams (eg Reliance), customerinsights and innovation (Future Group, Titan, Bajaj), exploitation of platforms coupled with exploration of new technologies and ideas (Tata Motors, Biocon), and high quality execution processes (TCS, Infosys). We are yet to see an IIM incorporate any of these ideas into its plans. Some of the directors of the new institutes have been emphasizing the importance of rapid scale-up; they might do well to study successful Indian companies carefully if they want to be successful in their endeavor. What can corporates learn from the IIMs’ experience? Regarding the newest IIMs, it’s too early to tell. But we are excited by the potential of providing a platform for entrepreneurship and experimentation represented by the MHRD expansion initiative for IIMs. With the country eager to embrace innovation in this ‘Decade of Innovation’, the IIM experiment promises to inspire and motivate new modes of venture creation.?
exhibit01
“theory Of business”
different
growth by innovation
same
growth by scaling
growth by replication
same
different
location
This article represents the authors’ views and does not purport to reflect the official view of IIM Bangalore.
The Smart Manager
Sep-Oct 2011
www.thesmartmanager.com 35
doc_411034666.pdf