Full text of Wipro Chairman Azim Premji talks at Stanford. This event took place on October 27, 2006.
Azim Premji – Chairman, Wipro
Thank you for having me over professors and students. I am an alumni of the Stanford engineering school but I must warn you that I never was a very good engineer.
I came here for engineering because at the time when I came here the Government of India only gave exchange for an engineering education for undergraduate. But what I enjoyed most about my engineering education, I was telling Dean Ross about this, is the broadening opportunity one got as an engineer which opportunity is not available in India. We tend to get funneled into engineering from your one unlike most engineering schools in the United States.
I had to leave Stanford in ‘66 because my father suddenly died and had to take over some family responsibilities of the company. We were a small company then. Today our run rate — in a rapidly growing company I think run rate becomes more relevant than the sales of the previous year — is over $3 billion. And we’re growing in excess of 34%, 35% a year.
Our market — we are listed on the Indian stock exchanges and we are also listed on the New York Stock Exchange, and the market capitalization of our company is little over $20 billion, which really puts us in the league in terms of software consultancy of the Accenture’s plus in terms of at least market capitalization if not in terms of revenue size.
Since the our entry into information technology in 1981, we have grown in revenue but we have also grown in headcount. The total number of people which we have in our information technology business today globally and in India are in excess of 60,000 people. And the interesting statistics is that they drink 1400 gallons of coffee a day and they drink over 3,300 gallons of tea a day, roughly equal in terms of size.
How we were able to do what we did?
And you know I don’t think we are unique in this. There are other companies in India who have repeated this and we’re finding now that many other companies in India have built up a scale of ambition which is completely different than the scale of ambition which the head two years back. We’ve seen this happening in pharmaceuticals. We’ve seen this happening on a more smaller base in biotechnologies. We’ve seen this happening in auto ancillaries. And recently with a very large acquisition, we’ve seen it happen in steel, very interestingly in the Quantum acquisition which a company in India did.
And I think this firing of ambition in terms of the globalization of Indian companies has in part been generated by the success of the software and the IT enabled services industry. And I figured we set the example and our fellow businessmen figured that if these fools in software can do it, so can we — which is really the quantum change and it’s a very pleasant quantum change in the scale of ambition of Indian business leaders, particularly over the past two years.
How do these changes happen? In every market at every juncture, incumbent companies dominate almost every industry. Established customer relationships, well-entrenched products, powerful brands, and significant scale advantages make these companies a pure invincible to aspiring entrants. Yet time and time again and particularly you see this in United States and particularly you see it in Silicon Valley, upstarts create a disruption in the marketplace, a very strong disruption in the marketplace, innovating on delivery, innovating on process, innovating on technology, innovating on products and very very often, innovating on business models which I think is becoming the most important determinant of success in the marketplace.
And they change the rules of the game and because they’ve changed the rules of the game, they have equality of a competitive space.
For consumers, innovation means higher quality and better value for goods, more efficient services, both private and public and higher standards of living.
For businessmen, innovation means sustained improved growth, higher profits. And in a interconnected world, innovation improves lives. Here are some examples, very interesting simple examples.
Poor fishermen in Kerala which is the southernmost tip of India use cell phones now on the way back from their catch, so that they can find out where they can get the highest prices and head straight for that part of the market, straight from the sea.
We’re finding farmers now subscribing to cell phones and they do that in India in the small villages because typically farmers in small villages used to sell their produce in the local market which is called mandi – MANDI. They very often found that the mandi wholesalers used to exploit them on rates. Today the farmer before he brings his produce to the mandi would check out what are the rates in competing markets from a relation or a friend in the competing markets and then decide whether he wants to sell the produce, what is the cut-off at what he wants to sell the produce or take his bullock cart to a mandi which is a little further away because he’s able to get rate realization which is better.
The more enterprising of them will go to the extent of also trying to follow the closing rate on the Chicago Board of Trade the previous day to see whether any trends are building up and whether he can expect better rates going forward and it’s what sitting on his produce.
In Bangladesh, Grameenphone which started with microfinance and now it’s extended its reach, enabled mobile phone connectivity to over 40,000 villages. Mobile, public phones are managed by village phone women who run it as a business. These micro entrepreneurs buy the phone with a loan from the Grameen Bank and then sell the use of the phone on a per-use basis or on a per call basis, because people cannot afford to buy the unit value of the phone.
The initiative of [each Opal] by a leading agricultural produce company which incidentally happens to have built his fortune in selling cigarettes links directly with rural farmers for the procurement of agricultural produce and agricultural outputs like soya, like coffee, like prawns plus food grains, transactions worth $100 million were carried through these [sarpas] in the first year and this company is rapidly scaling this up.
What really is innovation? How is it different from creativity?
The simplest definition I have come across is that creativity is about making new things. Whereas innovation is about doing new things.
Innovation comes from applying creativity or applying thought. It is about action versus just ideas. It is about implementing as much as it is about design.
Similarly innovation needs not be restricted to products or to technology. To me, innovation applies to productivity; innovation applies to service. It applies to service models which India is becoming a pioneer on. It applies to financial disciplines. It applies to employees attitudes and renewals. It applies to business models most importantly.
Wipro is an example of business model innovation. We pioneered ways to deliver services like research and development, testing infrastructure management and application development and maintenance remotely.
Today, as a company, we are the largest third-party R&D service provider in the world to multinational R&D companies. We have more than 16,000 engineers in this area.
The digitization of the world along with globalization with India, China, and Russia deciding to enter the global economy has meant that the emerging markets in this digital world are becoming caldrums for innovation both in terms of product design and in terms of business processes required to deliver these products to the market.
So how does a leader create a culture of innovation?
I can share some thoughts with you based on our experience and based on some of my personal experiences.
Innovation is just not about incremental improvements in the course of daily operations, or one of new brilliant ideas. Innovation is a culture that needs to be created consciously and pursued assiduously by the organization and always, always nurtured and that’s probably the most difficult thing to do as one gets larger and as one gets more bureaucratic.
First, we need to appreciate that all success create its own gravity and please do not under-estimate this. It is easy to believe that what has succeeded so far must continue to succeed in the future as well. This builds up a kind of dominant logic that is comfortable to the thinking of the management. Any new idea will be pulled to the ground with the force of gravity.