6X: Is it just about the size?

China vs. India. 6X. Is size the only measure of health?

I will keep this article brief. A week ago, I read about Narayana Murthy saying India cannot become the world's manufacturing hub, and one reason is because their economy is six times the size of India's. While I agree with Mr. Murthy's statement, I do not believe he reveals the complete story of why China is ahead of India.

Size is not the only measure of a country's strength; neither is size (or turnover) the only standard by which you evaluate a company's strength. For the sake of size, size is only a measure of a leader's ego and nothing else. No one will deny the advantages of high sales revenue, a considerable GDP, and other similar measures. For instance, they benefit the negotiating table and help a wise person gain favorable terms. If size alone determined competitive advantage, then a small country like Singapore would not be an attractive investment destination. Neither would Israel (much though I dislike the country now) be a mighty nation.

Evaluating a nation's competitive advantage. A few points.

When you evaluate a country's competitive advantages, you must consider many factors. I'd like to list a few of these factors without further pontification:

1. Education: does the country invest in primary and higher education? What is the quality of the teaching? Does the student evaluation system focus on rewarding rote learning, contrasting with developing critical thinking and applying the lessons learned? Does the education system prepare children for the dynamic environment we live in?
2. Innovation: any country that does not focus on proper education cannot build an innovation culture. In a dynamic world, innovation is a vital strength.
3. Health: What is the physical and mental health of the citizens? Foreign Affairs Magazine has two excellent articles on the impact of mental health. Click this link, and this link also. What is the country's status on health and hunger? Instead of wasting and adulterating food, we must ensure every citizen can access clean, healthy food.
4. Environment: I don't have access to the tweet, but a famous author mentioned that while Europe's economy is sluggish, it is home to the world's most livable cities. The author, Amitav Ghosh, tweeted that Delhi will be unlivable in a decade. I live in the National Capital Region of Delhi and state that Delhi has reached that stage. Toxic water, air, food, traffic, rising temperatures, and awful attitudes on the street do not make a city livable, no matter the number of shiny towers that dot the landscape.
5. Social Stability: Western writers comment on China and criticize its authoritarian regime. China's government deserves criticism for the way it treats Tibetans and Uighur Muslims, but barring these areas, the level of social stability is better than that in Western countries.

I can expand this list, but I hope I have made a good point. Some may read the paragraphs above and wonder how these points relate to their businesses. I have turned around several troubled businesses and will list a few observations.

An anecdote from long ago.

Allow me to start with an anecdote from the early stage of my career. This story is also about the first time I turned around a business. In the month I moved to Delhi to head a sales territory, we recorded our highest sales revenue, and our branch head threw a grand party to celebrate. Even though I played no role in achieving this milestone, everyone hailed me as 'The Next Big Brown Hope.'

Sales crashed the next month, and our downward spiral continued. Other measures, like distributors' stockholding, followed the same downward trajectory. Price undercutting followed, our reputation nosedived, and the team froze, with everyone blaming the other person for the mess. I was the team leader, and the same branch manager who called me the 'big brown hope,' now called me the 'big brown disaster.'

We achieved a grand milestone, but what? Our business parameters–sales, distributor stockholding, price stability in the market, team cohesiveness–went down the toilet, and I knew we needed to act before someone pulled the flush. The task was straightforward: restore the business's health and sales revenue.

Pay full attention to the last sentence: I placed business health ahead of sales revenue. Without a solid foundation, I could not hope to build a sustainable stream of respectable sales revenue.

Never assume that repairing and rebuilding even a tiny sales territory is straightforward. The process took me a year, and while I worked to repair and rebuild, I had to manage the internal environment. My immediate superior and the branch head continuously bayed for my blood and demanded quick results for my head. They worried about their careers and did not wish to report the full details of the disaster to their bosses. Most managers and company leaders are experts at sweeping issues under thick, woolen carpets, but, like global warming, you reach a tipping point.

When turning a business around, identify the key members of your team who will stick to the task, be willing to challenge you, wish to build a healthy business, and have a solid ethical foundation.

Build sound foundations. Ensure your foundations remain healthy.

I started with a celebration marking a record-high sales turnover, but, as you may agree, we had built the record on shaky foundations. The business was unhealthy, and we worked hard to create a firm foundation for my successors to achieve sustainable, healthy, long-term sales growth.

Before I end, I wish to caution that building a foundation once is not enough. Everything erodes, and it is wise to pause and ask yourself if the foundations are still solid or need to be repaired and strengthened.

Leaders must wish to build a genuine legacy, not just their own glory. While Mr. Murthy made an excellent point when he compared India with China, he did not tell the entire story. Dig deep.