Consultants cannot always be right, they also make mistakes, says the Mckinsey India boss who believes consulting is coming of age in India.
Adil Zainulbhai is a good sport — he doesn’t mind when I ask him if he’s heard all the McKinsey jokes. “I love them,” he says. In fact, the McKinsey India managing director’s down to earth attitude, candour and sense of humour are quite a revelation since it is not common with his tribe. A self-confessed foodie and a sailing enthusiast, Zainulbhai picks Royal China for our lunch. Over a light meal of dim sum, he marvels at how Indian entrepreneurs are now setting the standards for project execution because they can do it cheaper and faster, writes Shobhana Subramanian.
Royal China is crowded on a Monday afternoon and it’s like Mumbai is celebrating the election results. The stock markets have already hit circuit filters and that’s not surprising because people like Zainulbhai are convinced money will now pour into the country with the change in sentiment. India, he points out, didn’t really market itself to portfolio fund managers, yet the money flowed in. It could be much the same story with FDI investments, for which the government has made the effort, he says. We decide we’re going to stay mainly with dim sum, which is what Royal China is known for. Poring over the special dim sum menu we select some steamed prawn dumplings with coriander, glutinous rice dumplings, fried chicken wantons, sesame paper prawn rolls and just for a change of taste spare ribs in black bean sauce.
Zainulbhai has spent 30 years at McKinsey which he joined after picking up a management degree from Harvard — eBay’s Meg Whitman and Enron’s Jeff Skilling were classmates — and describes his story as boring. “Like many of us from IIT Bombay, I was part of the diaspora that went out and then came back,” he says. Now that he’s back home he’s so busy, he doesn’t have time to read enough of the mysteries that he loves or the non-fiction and history. I ask whether consulting is a profitable business. The McKinsey chief is circumspect. “We’re quite happy with what we’re doing in India; we’ve invested for the long term. But it’s not as though this is a hugely profitable market — or a hugely loss-making market — but the consulting industry seems to be doing fairly well. As a proportion of business profits though, consulting revenues are still relatively low because the market penetration is low, just one-fifth to one-tenth.”
He believes though that more companies today understand the value of consulting simply because they have to compete in an open market — it’s a question of how to expand and survive globally. “In the last five years a lot of companies have come out of nowhere, many are family-owned firms who want help in figuring out how to become professionally-managed. They know they have to be professional, otherwise they can’t grow — a father and his two sons can grow the business only up to a point, they can’t become ten times their size. However, the only thing they won’t give up is complete control to a professional management team.”
Contrary to perception, he says Indian companies are happy to pay for advice as long as they see results. Will we see more professionals controlling firms like in the West? Zainulbhai believes it won’t really make much of a difference. “In certain industries there’s more professionalism because the sector demands it. But, in emerging spaces such as infrastructure or real estate, it will take some time.” The McKinsey chief feels that most companies around the world go through an initial wild phase but the next generation inevitably settles down. “When there’s a business reason they will professionalise because if they don’t they’ll die. Look back over 20-25 years and you’ll be surprised at how many of the top 25 companies have fallen by the wayside. Several.”
My guest marvels at India’s many tough entrepreneurs who have forced the Indian industry to become better. He admires the innovation at the business level, even in areas such as the social sector, a case in point being the emergency ambulance services offered through a public-private partnership in several states. Most of all, he’s impressed with how Indians are now able to set up plants at substantial savings and faster than their western counterparts. How do they do it? “Well, they’re brutal when it comes to paying attention to costs and but they over-invest in engineering and people. People are now benchmarking their large plants to India and China.”
It’s also true, I say, that many business groups have burnt cash, they haven’t really got their calls right and the quality of balance sheets leaves a lot to be desired. True, he agrees, many of the bigger acquisitions, especially in the last two to three years, are probably not going well. But Zainulbhai refuses to ignore the positives. “The better practices will come in a little later, not in the high-growth phase. That’s the way it happened in the West, too. As they get bigger, businessmen have to get smarter and cleaner.”
I can’t resist saying that it’s the consultants who’re advising companies to go out and buy all these businesses at preposterous prices. Once again, Zainulbhai’s a sport. “Listen, it’s not as though we don’t make mistakes, we can’t be right on everything,” he says laughing. And he goes on to regale me with some hilarious scenarios of how investment bankers must have wooed companies, banging on their doors and luring them with cheap money. How they would have compared them to peers, making them feel they’d missed the bus and lost out, until they succumbed. I’m in splits by the time he finishes because I can imagine how the scenes must have played out.
Given this talent for spinning out imaginary scenarios, I ask whether he’d like to write a book, a mystery story? No, says Zainulbhai. “I would rather organise a competition, pay a lot of money and get the rights to the winning author’s work.” Spoken like a true consultant.
