Going beyond quick fixes

RBI governor's reminder appropriate and timely

In delivering the Fourth C K Prahalad Memorial Lecture in Mumbai last week, Reserve Bank of India Governor Raghuram Rajan made a substantial case for a deliberate, cautious and integrated approach to sustainable growth. He referred to the need to put a number of building blocks in place before a robust take-off could occur. This approach requires patience, persistence and, most importantly, a holistic view of the large number of fronts on which constraints to growth had to be tackled. He concluded his lecture by expressing concerns about the widespread use of jugaad by Indian businesses, which by providing short-term and quick-fix solutions to problems, took attention and focus away from more robust and durable solutions. He felt that, instead of relying on jugaad, the business environment had to be improved through better policies, regulatory frameworks and implementation.

Not surprisingly, the media coverage of this speech pushed much of its substance into the background and gave headlines and column centimetres to the point about jugaad. Over the past several years, this term has transformed from a pejorative expression to one which connotes praise and appreciation for the people and businesses practising it successfully. Rather than paying attention to long-term viability, businesses seem to be getting attention for patchwork solutions and workarounds. Case studies and books have been written on jugaad innovation and these are presumably finding their way into business school curricula as an essential requirement for business success in India. Against this backdrop, Dr Rajan's speech comes as a significant and timely warning that the road to economic greatness is paved not with jugaad but with solid institutions that are both durable and flexible. It is only such institutions that will create a business environment, which rewards long-term strategic approaches by companies rather than quick fixes.

This reminder also serves as a fitting tribute to Prahalad's intellectual legacy. His analysis and dissemination of businesses that profitably serve the "bottom of the pyramid", a phrase that he entrenched into the emerging market business lexicon, are actually a validation of the need to build strong organisational structures regardless of the nature of the product or service or the economic status of the clientele. The common message from all of his cases was that a robust business model emerged from putting the right mix of resources into a system characterised by formal and inviolate processes. Entrepreneurship certainly had a role in discovering the connection between a product and a client group, but after that, institutionalisation had to take over for the venture to have any chance of lasting success.

Dr Rajan's lecture extends this fundamental point to the public sphere by suggesting that the government needs to focus on putting exactly these attributes in place into the policy and regulatory framework. Jugaad in business, however entertaining it might be, doesn't do much for sustained productivity enhancement. Jugaad in government, however expedient, cannot substitute for building and nurturing institutions that will work towards creating the kind of environment in which businesses, whether they cater to the classes or the masses. He argues that growth acceleration on a weak and flimsy institutional foundation simply cannot be sustained. There are umpteen examples from recent history to support his point. But, then, jugaad is a response to extreme impatience.