'We should use our own environment as a laboratory'

THINK TANK: Harvard Business School professor Tarun Khanna

Tarun Khanna

If he weren't a Harvard don, Tarun Khanna would have liked to be a "professional reader of history books".

Not a particularly unusual comment, except that the speaker holds an engineering degree from Princeton University, a doctorate in business economics from Harvard, and is the Jorge Paulo Lemann Professor of business administration at Harvard Business School (HBS).

The connection with history, though, goes back to his undergraduate days in the US. Khanna left for the US after spending just a few days at the Indian Institute of Technology, Chennai (then Madras).

The transition, he says, was like "moving from a black-and-white-no-sound theatre to the talkies". At Princeton, in addition to his engineering courses, Khanna signed on for subjects like Philosophy and Soviet Literature. Even now, icons from history are a greater source of inspiration than any modern-day business legends.

Still, history doesn't find its way into his teaching or consultancy work. The 38-year-old Khanna has been a member of the HBS' Strategy group since 1993 and also acts as a consultant on strategic issues to several corporations across the globe.

His client list includes a number of Indian companies that he's helping to reach world-class status. Like a true consultant, Khanna shies away from sharing names, but does admit that the list ranges across industries "" from automobiles to retail and leisure.

A recurrent theme in Khanna's work is the need to tailor a company's strategy to local context. The most challenging issue in developing a strategy, according to him, is understanding the extent to which the same strategy can be used in various countries.

Citing an instance, he says that while it's easy to raise funds in the US to invest in a new project, the same strategy cannot be applied in the case of China.

"That's because China, like many other emerging markets, lacks a deep enough capital market infrastructure that will allow entrepreneurs to raise funds directly from arm's-length investors," he explains.

By infrastructure, Khanna means factors like accounting systems, auditors, securities analysts and so on. "Under such circumstances, it is hard to convince an unknown person to part with his/her savings with confidence. So, many would-be entrepreneurs cannot start the companies they would like to," he adds.

Most of Khanna's research focuses on understanding the drivers of entrepreneurship worldwide. He has studied companies in Brazil, South Africa, Turkey and other emerging markets. Each of these countries is home to budding world-class companies, he says. "The companies in each of these can learn from the efforts of others," says Khanna.

Specifically, Khanna is something of an authority on the Indian and Chinese business models. A project he completed recently for HBS "" The Dragon and the Elephant "" zeros in on the two countries, identifying best practices for local entrepreneurs and multinationals operating in both these countries.

According to Khanna, the big challenge for Indian companies in managing their strategy lies in figuring out what part of their competencies can be used globally. The way Indian companies penetrate rural markets, especially, can be of use in the global context, he says.

"That same approach can then be used in other developing countries. We don't realise that we can use our own environment as a laboratory for other countries," Khanna points out.

Yet another challenge lies in appropriate utilisation of concepts such as restructuring, Six Sigma and so on. In Khanna's opinion, 99 per cent companies fail in emerging markets because they don't know how to adapt these concepts to suit their context. "These ideas need to be tailored to a local context," he says.

For example, for restructuring to work in the US requires financial intermediaries, labour lawyers, bankruptcy law specialists, adjudicators and so on.

Says Khanna, "If such intermediaries are absent, the way in which the restructuring will be carried out, will have to be different. Restructuring will remain a good idea, but the idea will end up being expressed differently."

Khanna's work has been published extensively in academic journals, including Journal of Industrial Economics, Journal of Finance, European Economic Review, Journal of Economics and Management Strategy, Strategic Management Journal, Academy of Management Journal, Organisation Science and Management Science, Harvard Business Review and Foreign Policy.

He is also a co-editor of Journal of Economics and Management Strategy and Journal of International Business Studies, and serves on the editorial boards of Administrative Science Quarterly, Strategic Management Journal, Organisation Science, and the Asia-Pacific Journal of Management.

But surprisingly, his first book "" Foundations of Neural Networks (Addison-Wesley Press, 1989) "" is not about management, but science. It has been translated into Italian and Japanese, and is widely used as a reference text in engineering and applied science departments.

Clearly, even if history can't find a place in his professional world, science still can.