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The Rediff Business Interview/ C K Prahalad

'MNC's assumptions about India are untenable. But don't underestimate them'

'India will see dramatic changes from within, not from the top'

Why have not all the MNCs done well in India?

I don't know where they failed. But their assumption was that the middle-class is very large and that the Indian consumer would certainly gravitate towards global brand and global prices.

I think those assumptions were not tenable. But if I were you, I would not underestimate the MNCs. We tend to celebrate success prematurely. They can always regroup and come back. They can say that initial assumptions were wrong. So let's rework on that. I expect to see that happen.

What do you think is in store for the Indian software companies in the post-Y2K phase?

Smart companies have moved away from overdependence on Y2K. However, Y2K is part of the portfolio of most companies. But smart companies understand the problem and they know that there cannot be overdependence on Y2K. So many companies have used Y2K as an entry in the customer product segment; these products may not be dependent and time-bound.

According to Professor Sumantra Ghoshal, in the traditional family-run large business houses, the first generation creates wealth, the second generation enjoys it and the third generation destroys it. What is your opinion about the Indian businessmen?

I don't know what Sumantra has said. So, I cannot comment on that issue.

But I think Indian businesses have looked upon business as the family-owned enterprise, just like we own a piece of land. They think that they can fight for their companies as they fight for a piece of land.

If you look at most of the "family businesses", their investment is not a significant portion -- public fund is the source of many of the "family businesses". So, family fights can have disastrous consequences for companies which are not really family-owned.

I think we must have a clear distinction between the family-owned and family-not-owned companies. If I own a five per cent stock and others own 95 per cent, then certainly I have more obligation to those 95 per cent of the people than I have for my family. Somehow, that debate has not taken place.

Do you think things are changing for the better?

I think these things are changing now. But it's better, I won't name individual companies though.

The patents issue -- there is a view that the Indian companies are not serious enough...

I can say that there is less respect for the intellectual property rights in India.

Photograph: Jewella C Miranda

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