Ram Charan is a world-renowned business consultant, best-selling author, and speaker who has spent six decades working with some of the most prominent companies and executives. He has advised CEOs and boards of Fortune 100 companies in every major industry, from manufacturing and financial services to technology and pharmaceuticals, as well as leading Indian conglomerates, over the past few decades.
So, at a time when the Indian economy and businesses, especially family businesses, face a number of threats as well as opportunities, BT asked him about the impact of artificial intelligence (AI), why it is imperative for the country to focus on manufacturing, and how boards can enable foolproof succession planning.
Born in 1939 in Uttar Pradesh, India, Charan learned his first business lessons in his family’s shoe store, where he developed the instinct for cash flow, people and the fundamentals of business that still underpins his business today. Later, he earned an engineering degree in India, and then an MBA and PhD from Harvard Business School, where he graduated with high distinction as a Baker Scholar.
His most recent book is “The 90% China Model: China Controls America by the Throat.” Here’s How to Fight Back and Win reveals how China systematically dominates global industries by building up excess capacity to meet 90% of global demand, then flooding markets by pricing at or below marginal cost to destroy competition. He talks about the importance of policy reforms for Indian manufacturing and SMEs, the impact of the coming AI revolution, and overcoming thorny administrative issues. Edited excerpts:
Over the years, manufacturing as a proportion of GDP has declined in India. Given that our focus is on services, how will this impact the growth of industries and the Indian economy?
India cannot prosper and improve its per capita GDP without developing manufacturing. a period. Secondly, the nation is built through its medium, small and micro projects.
Most of them own land, know how to do it, and it’s time to expand their reach. For example, they can manufacture textiles and furniture for internal consumption. This would cut India’s trade deficit by half.
What is the impact of artificial intelligence on Indian companies?
Artificial intelligence is not a technological issue. It’s leadership. Every CEO and board in India must understand this.
Artificial Intelligence is the most powerful real-time learning tool ever. It puts the world’s data at your feet. It changes the way you think, how quickly you learn, and how quickly you turn ideas into action.
As for Indian companies, the opportunity is huge. Artificial intelligence expands the imagination of executives. It allows them to sense opportunities that did not exist before. Companies are already envisioning and building systems for preventive maintenance, customer intelligence, supply chain optimization, and more. The speed of execution increases significantly.
But here lies the danger. If Indian CEOs leave AI to their technology teams, they will fall behind. This is not a technology project. It’s one business transformation. Leaders must become coaches. You can no longer drive by instinct alone. You must lead with data. This requires every senior leader to invest in learning.
India has talent. India has ambition. What is needed now is leadership that acts urgently. Companies that master artificial intelligence will define the next decade. People waiting will be identified through it.
From your experience with global companies in the area of succession planning, are there any lessons for Indian companies?
The choice of CEO remains, ultimately, a matter of judgement. Most people will tell you that Jaguar made a mistake in selecting its CEO even though it follows one of the most stringent selection processes. This has happened to Ford Motors as well. What matters to the new leader is a precise understanding of what needs to be addressed in the first two years. People believe that if a business leader can achieve good results in the long term, that is enough. My point is that if he doesn’t get the first two years right, he’ll never make it. This is where selectors need to focus. I don’t use word boards because in many cases headhunters recommend word boards. These headhunters are in fact the ones who choose to do so. The rest of the hiring process is just a process.
Secondly, most companies rely on psychometrics because they can indicate something, and hence you have to evaluate what the chosen person can handle in the first two years. His track record will then convince selectors that he can learn how to manage the first two years. Even if he doesn’t have this skill, he can hire people to get the job done. There is no way to predict what will be needed in 10 years.
I have been an advisor to many CEOs and powerful global companies. What makes you so special that one business magazine named you “The World’s Most Influential Consultant”?
I fail too. The old rule is there. You have value when you are needed. Don’t go to the CEO and say I am the solution to your problem. You go to a CEO who has a problem, and you have to say to him, “Maybe I can help, maybe I can’t. But I have to do everything to help.” I recently solved a problem for a Chinese company for which I was sitting on the board of directors. It had a $3 billion business but was making huge losses. It took me about nine months to understand the problem. Now, it has a profit of RMB 1 billion.
I wrote about 10 industries in the United States that will be obliterated. What do you think are the key sectors in India that could be affected by China’s 90% model?
Every industry. nothing. There is a ratio of 3:1. You buy something for $3 in India, you can buy it for $1 in China. It’s a fact.
Therefore, as long as the above continues, India will not be able to compete with China. What do we export to China? Very little: processed foods, raw materials, things like that. This is not manufacturing. This is the limitation of manufacturing.
Can you tell me a little about your early life and family?
In the 1920s, my father and uncle got together to start a clothing business. My father could write a little, but my uncle was illiterate. They would buy, for example, 20 yards of cloth from the market and make T-shirts for the villagers. They also sold Indian sarees.
In 1947, during the Partition riots, their shop was burnt down. My brother started a shoe store, which he did well. When I was in school, my teachers came and told my parents that this kid is smart and needs to go to engineering school. I applied and was accepted within 24 hours. That’s how I started.
