Bengaluru 2.0: How The City Can Continue To Be India’s IT And Startup Capital

If winds of change were to lay Bengaluru to ruins a la Detroit, the post-mortem might find Indian cities themselves (possibly even Lucknow, Guwahati, Patna etc) as the cause. In today’s age, the Indian business locale offers ample space and opportunities for different stages of production, operational barriers like law and order notwithstanding. While an upshot of the above scenario is the acknowledgment that India can have opportunities for diverse stages of production under the same geographical roof, for the city laid to ruins, nothing can be more detrimental than the adverse consequences on its psyche.

As noted management scholar Pankaj Ghemawat once put it – albeit in an unrelated context – there exist two waves of industry, both travelling in opposite directions. The first one is of the established, expanding and consolidating firms and the second, of the emerging ones visualising themselves as the next global giant. Their head-on collision can produce unforeseen results.

To state that Bengaluru’s monopoly is at risk is stating the obvious. It is not about delving about the odds of Bengaluru surviving the gales of creative destruction, but about what Bengaluru ought to do in steering clear of these storms.

Analogous to firms and processes, cities too suffer from what noted innovation theorist Henry Chesbrough terms as the commodity trap dilemma. Cities thus become susceptible to decay when they are neither able to prevent others from emulating or adapting their business/manufacturing process nor avoid ceding their shelf space to substitutes. This is prominent in a circumstance where practicalities necessitated leveraging arbitrages generated by cost asymmetries. Borrowing from branding literature, cities are perched on a greasy pole wherein there is constant threat of sliding down, often with a very hard landing. Not without wonder, central positions occupied by cities lie on a precarious turf.

This is further consistent with what Stan Shih of Acer terms as the smiling curve. To Shih, maximum value addition happens in the conceptual or the design stage. It is the battle of ideas or dreams that count. Assembling the product given the blueprint is perhaps the easiest component of the production process and effortlessly substitutable. Incontestably, the process-driven, low-value, back-end activities offer the best compass for relocation. Cities relying on these easily-replicable drivers of advantage seem most open to losing their advantage to others.

Furthermore, the perceptible ever-growing chaos, in all likelihood, will result in Bengaluru experiencing diseconomies of agglomeration, the converse of what helped it attain the current status. It would be of little consolation that competitor cities too suffer from similar chaos, plausibly a bit worse in few cases. However, what is implied here is that Bengaluru’s competitive advantage rests on the principle of ‘least inefficiency’ than on the criteria of highest efficiency. To add to the woes, unlike Estonia whose innovation capabilities were driven by policy entrepreneurship, India at various levels, barring exceptions, prides itself on the policy ‘disentrepreneurship’.

The IT industry, original anchor of Bengaluru’s modern growth, is at a crossroads of sorts. Lowering costs make IT pervasive, which as scholar Nicholas Carr notes, makes it invisible, undermining its primary competitive advantage. While the strategic value or potency of IT increased manifold, with every firm being built with its foundations on IT, there was an aspect of predictability of withering away of the competitive advantage. Value creation now had to happen over and above the infrastructure services that dominated the business landscape hitherto. Bengaluru will have to come up with an answer that involves scaling up on the value chain.

Given the external and internal turbulences, it is arguable to examine the line of response Bengaluru should assume to prolong its advantage. Borrowing from resource-based theories of management literature, indubitably, the pitch should be underpinned on a resource that is valuable, rare and non-substitutable. Perhaps, an answer might lie in what John Seely Brown would term as ‘The Power of the Pull’. What drives Silicon Valley in California, US, is not the push-driven mechanisms, but the magnet which it is for ideas and dreams that emerge all over the globe coupled with an ecosystem that delights itself on risk taking. In the Renaissance period, Amsterdam, being the hub of free ideas, commanded significant presence in the realm of the birthing of what we term the modern science and technology. Idea conceptualisation occupies the highest node in the value add-production stage interactions of the smiling curve and this is precisely what Bengaluru needs to harness.

For Seely Brown, the power of pull is anchored in three different forms – access, attract, achieve – all operating at personal, institutional and societal levels. No doubt, the journey needs a trajectory generating a sufficient leverage to operate at a desired pace. In the past, more often than not, these have been accidental byproducts and not an outcome of systemic pursuit of objectives. Continual dependence on serendipitous occurrences might seem regressive, yet merit warrants creating induced serendipity.

In a universe of two engineers, both strangers ending up meeting accidentally in a pub on MG Road commands a probability of near zero, yet in a world of thousands of engineers, designers, entrepreneurs, technologists, scientists, craftsmen, managers etc, the probability would be appreciably higher. The ensuing induced serendipity needs large presence of targeted populace. Therefore, what is obvious is the need to attract population that is large enough to cause these ‘accidental’ interactions. Bengaluru needs to continue and maybe accelerate the process of attracting the thousands of aspiring individuals bristling with ideas and passion to create the next gen Google or Facebook etc. Bengaluru has to symbolise the very idea of creation, space for dreams and execution of those dreams. Finances will flow into ideas being executed and not the other way round.

Bengaluru’s ability to be a platform for finding people and resources as and when we need them will decide the tempo of the trajectory it seeks to move in. The era of continual disruption and intensive competition demonstrates inadequacy of knowledge stocks. Knowledge flows and the pace of such flows are a function of city’s capacity to tolerate access to resources besides the knack to exert a pull on the resources. Accompanying this is the creation spirit that provokes the resources to achieve and aim for higher pedestals with every passing day. Countries like Britain or France often find themselves laggard in frontier technologies ostensibly in the inability to monetise large body of academic knowledge while Israel and Singapore advance miles despite low internal knowledge stocks thanks to their mastery of utilising external knowledge flows.

Adapting Osterwalder’s Business Model Canvas to the cities, the value proposition for Bengaluru Inc is uncomplicated. Bengaluru should be an enabler for monetisation of dreams, a market exchange for the product called an idea, where hundreds of risk-taking dreamer entrepreneurs collaborate in monetising the wealth of thoughts in an environment of openness, sharing, integrity and interdependence. Its key resources are its thousands of minds, young and old alike, each with an ambition, each with a prospective solution to address problems faced by people, coupled with owners of financial capital, who are animated in their quest to sponsor these dreams.

Entrepreneurship begins with a question, ‘what problem am I solving?’. The key activities of Bengaluru should be those interactions, both physical and virtual, internal and external, which attempt to find answers to these questions, and seek to identify new evolving problems, and try and move forward to be the first one to solve them. Scores of engineers, technologists, designers, creators, academic institutions that churn out these aspiring dreamers and entrepreneurs, venture capitalists, angel investors, infrastructure service providers, government functionaries, policymakers, white and blue collar employees are critical partners in this project.

If we were to summarise, Bengaluru would remain the prima donna of technology as long as it encourages dreams and dreamers to risk-taking behaviour where failures are not deemed a badge of shame and rather become hallmark of fame. And if one were to suggest to the government, it would be fittingly simple. Provide bijli, sadak and pani, maintain law and order, set up structure for protection and enforcement of property rights and stay away from the rest.