Scenarios for Infrastructure Development in India

Introduction
Indian economy is now poised for a growth phase and exciting times have started for the infrastructure industry. Infrastructure as an industry is still evolving in the country and the evolution has not been commensurate with the growth of economy.

Infrastructure is the edifice on which many other businesses flourish. It is like a big gear which transmits motion to many other smaller gears. Infrastructure can be broadly classified into three categories i.e. Core (Ports, Airports, Freight corridors, Express ways, Power plants, Desalination plants, waterways etc), Social (Hospitals, solid waste management systems and sanitation, Water supply systems, Urban areas maintenance, and educational institutions and residential and commercial real estate etc) and Virtual (Wireless, telecom, Data transfer networks, Satellite phones, Cable networks, Video transfer networks etc). The numbers of other businesses that run on the basic structure are innumerable. In other words infrastructure is the engine of growth for many other businesses and also impacts the quality of life in general. Better growth generates surplus money and also simultaneously generates demand for better infrastructure. Hence it is a reinforcing cycle. The linkage between growth of economy and infrastructure is interdependent.

Corporatization of infrastructure companies, strong tie ups with foreign firms for technical collaboration, willingness of investors to offer funds to infrastructure companies, resolve of the government to encourage public private partnership in infrastructure projects, tax holidays and an unquenchable aspiration of people to have a better quality of life are the visible trends that favor the infrastructure industry. It is inevitable that the government needs to drive the infrastructure development with more vigor. Apart from the self realization, global trends also favor the infrastructure industry. The western and US markets have become dormant in terms of growth and investors from these countries are looking for avenues for investing. India offers an excellent opportunity because of the huge dormant demand for products and ability to give huge returns on the investment. The dormant population growths in western countries and aging workforce are the factors that can not be corrected so fast and there is no option for these countries except looking at developing economies to fuel their sustenance. Further there are no visible progressive changes being made in their immigration laws. Considering a host of other factors, it is a foregone conclusion that there are exciting times ahead for the infrastructure industry.


The Focal Question

The government has been facing constraints on account of funds ($5 bn required in next ten years) and ability to execute large infrastructure projects in the country. It is a matter of concern because of the increasing pressure from international agencies to improve the domestic infrastructure and open the domestic markets for the developed economies. The government also realizes that there are huge fund shortages for infrastructure projects because of large investments, low returns and high gestation periods. There are more public goods like urban maintenance, solid waste management and water supply and sanitation which the government has been failing to distribute properly because of lack of funds, expertise and also lack of organizational ability and a host of other factors. There could be hidden fear about trusting the private sector because a large chunk of population lives below poverty line and still needs subsidized infrastructure. The political compulsions may prevent the government to restrain from driving public private partnership with conviction. Hence the pace of change is a critical uncertainty.

The second challenge that the country faces is the effectiveness of infrastructure firms in driving the projects at the desired pace. The organizations require expertise in technical, legal, managerial and commercial areas on account of long gestation periods of the projects. The longer the gestation period, the bigger is the risk. The corporatization of infrastructure firms has just now started and organizations are yet to come to terms with the challenge they have on their hands. The understanding of the whole system and how the system will behave in a high speed scenario is yet to be comprehended.

Hence the focal question is how the interplay of Public Private Partnership promoted by the government and the ability of organizations to effectively utilize this business opportunity will resolve the issue of linkage between the growth of economy and infrastructure.


It is not known today as to how the future will unfold while resolving the above focal question or dilemma for the business of infrastructure development in India. Different futures could be unfolding depending on the interplay of various critical drivers and uncertainties and predetermined trends. There are four scenarios that have been built up considering the interplay of the forces.

Westward Ho!
Hope Unlimited…….
Forcing Change?
Running Backwards

The four scenarios have been titled as above for different futures and any one of them can unfold. Sometimes a combination of scenarios can also unfold. Each of the scenarios is described below. The scenarios also help the entrepreneurs to have a fresh look at the validity of a host of assumptions that have been made while working out business models for infrastructure companies. The scenarios also will help the promoters of infrastructure companies to keep a continuous watch on the environment to see the emergent signposts and make changes in their business models and suitably initiate change management measures in their organizations.
















Scenario I Westward Ho!

Adequate money is available to the infrastructure firms from the investors who see a great future and unlimited encouragement is given by the government for infrastructure creation. The state or the government is fully committed to the development of infrastructure because of the realization that the growth of economy is linked to the infrastructure creation (Growth of IT companies in different parts of the country and golden quadrilateral are good sign posts which ignite people to demand for infrastructure). Apart from the deep desire fuelled by electoral politics the government is under continuous stress by the pressure groups nationally and internationally to increase its focus on infrastructure creation. The government by its own resolve aligns itself to the task and evolves an aligned thinking into the whole issue. The first act is to create a viable model of Public Private Partnership. Partly the government is forced because of its inability government to conceive and execute large infrastructure projects. It is also true that the government is willing to think differently and evolve a better model for development.

The government creates a single window clearance mechanism after aligning the agencies in state and central governments. The single window mechanism covers all kinds of infrastructure requirements or proposals .The infrastructure companies have to work on viable models to share the risk and reward with the government and seek approval for the project execution. The central and state governments think alike in defining the PPP projects and suitable laws are created.

The foreign investors and NRIs watch the progressive trend by the government and provide funds for the government for the projects. This happens through the route of partnering with local infrastructure firms and presenting a combined face to the government and politically such a situation is acceptable. The government has to work continuously to align the multi stakeholders like the local governments, Non governmental Organizations etc. The single window clearance through the regulator handles the complete function of satisfying the multi stake holders before the project approval is given.

The government through the regulator sets up mechanisms to identify the core sectors for prioritization of PPP. The need for up gradation of airports gets the first priority. The economy growth is only possible with faster mode of travel and air travel is the viable model till railways catch up. Time is treated as commodity and people prefer faster travel to save time. Government proposes to upgrade more airports and PPP becomes the viable model. All the airports are considered for better facilities as this will reduce the congestion at the metro airports. Metro cities get their second airports which cater to the international traffic. The new generation airports are made capable to handle larger aircrafts and also have maintenance facilities. The aircraft manufacturers find the growth of aviation in India exciting and sustaining and make suitable investments through local partners for maintenance and certification of aircrafts. The regulator also enforces the partners in the PPP model to make substantial investments for maintaining the security at airports. There is a new business avenue for the infrastructure companies in the form of providing professional security arrangements.

Special emphasis is laid by the regulator to build cargo hubs at all airports and cargo hubs become a significant link in the global supply chain. The PPP investments will rope in foreign investors whose interest is in opening the Indian economy to the world and cargo hubs at the airports are an attractive proposition to the foreign investors. Infrastructure companies become service providers to the importers and exporters and the management of supply chain becomes a viable business model by itself.

The cargo hubs serve as centers for distribution and the regulator ensures that these cargo hubs are connected by road and rail to the consumption centers. The government promotes PPP in creating railheads from the airport cargo hubs to the next stage of the supply chain. The aviation companies make a foray into the business of flying cargo planes and revenues soar for them. The rail heads from airport to the main railway grid is entirely done through the PPP model and infrastructure companies expand to this sector seamlessly. Infrastructure companies focus on cargo transfers through the rail head and reap rich benefits.

The regulator also ensures seamless connectivity of the airports to the road grid. The infrastructure companies provide the required connectivity to the highways through toll roads from the airports to the nearest contact on the grid. The high speed high quality roads provide great relief to the users and they become viable economic models for the infrastructure companies. The seamless connectivity between air, rail and road fuels the economy and growth.

The regulator does not lose sight of the next steps in developing infrastructure. The regulator sets up the pace for the infrastructure companies by bringing in waterways to create cheaper ways of transportation for goods and people. The regulator draws up plans to connect the seamless road, rail and air connectivity to the innermost parts of the country and invites the attention of infrastructure firms to this new opportunity. The infrastructure firms realize the significance of the new opportunity and start developing plans to the next phase of infrastructure growth. Waterways bring in new business opportunities for hospitality business to the infrastructure firms. Hospitality through hotels and motels at the airports and riverside resorts on waterways becomes an exciting proposition and viable business models are evolved.

The traveling population increases in number as the economy grows and the hospitality business becomes a source of great income to the infrastructure firms. Some firms make a direct entry into this business so as to retain control of the land and infrastructure. Some others adopt a franchisee model. Marketing the space available at the airports and on the toll roads is a specialist process and infrastructure firms look deeply at ways and means to improve revenues by hiring out space for business partners and also space for advertisement. The revenue per unit of space has to be maximized and infrastructure companies look for innovative methods in this direction. Seeking business partners for generating revenue requires expertise and infrastructure firms develop the expertise required for the same.

The opportunities available to infrastructure organizations to handle large projects and generating huge funds need high amount of organizational effectiveness. The projects have large gestation periods and hence organizations look at the future continuously. Hiring experts and retaining remarkable people is a common phenomenon. Looking at the future holds the key for the infrastructure companies.

Future trends of migration of people from rural to urban areas, demographic changes and currency fluctuations, cultural and social changes, laws of corporate governance have huge impact on the future of infrastructure companies. The shift of people to urban areas opens up a host of opportunities like solid waste management, maintenance of urban infrastructure, water supply and sanitation. The ability of the organizations to accurately map the future improves tremendously because of the internal focus that these organizations develop on improving the effectiveness. Infrastructure companies realize that cross functional specialists have to work together as teams to handle the complications that are associated with the future. Organizational development becomes a priority for the infrastructure firms and HR practices change radically to suit the business of the future.

Some of the pioneers in infrastructure industry tie up with academic institutions to undertake research and development activities for cheaper and durable materials as well as management practices. Some of the pioneers open up schools for infrastructure and generate the required expertise for the industry. The oil scenario continues to worry the government and public as well. Government encourages public private partnership in areas of energy and power in order to reduce the dependence on hydrocarbon fuels. Wind energy and other forms of new energy (bio, nuclear etc.) sources get opened for expansion and infrastructure companies develop plans to expand into this area as well. This can also become an excellent area for industry academia bonding.

Due to lower growth rates in US and Europe, and the low returns on investments PE finds start flowing into the country. The Indian infrastructure companies get access to the FDI and also through them to better technology. The demand for good infrastructure firms increases and big business houses make the competition interesting and tougher. Apart from the funding capacity and willingness to pump funds into bullish markets, the internal capability of the organizations also becomes a factor for PE players to pump in money into companies.

The war for talent continues and good companies focus on the quality of manpower and innovate profusely to retain talented manpower. The human resource becomes critical to the success of the infrastructure companies and there is a rush to catch the talent early. The successful infrastructure companies generate their own talent by investing substantially into infrastructure schools, finishing schools and leadership development institutes. The fist movers get the advantage of being the industry resource for the talent and derive huge advantage over others. They change the quality and methods of education.

The greater mobility of work force in infrastructure firms generates huge amount of diversity in the organization. Managing diversity of global workforce is unknown to the infrastructure firms which are just graduating from construction frame. The change management requires tremendous amount of soft skills at middle and top levels of the organization. The soft skill development in infrastructure firms becomes a challenge and a possible cause of failure of the organizations. The culture change is daunting for the drivers of the organization. The dilemma between the available windows of opportunity and organizational effectiveness continues to occupy the mind of top management of the infrastructure firms.

The induction of global workforce into the infrastructure firms makes English as the only possible means of communication. The products of the current education system fail to reach the standard required by the organization in terms of spoken and written English. Infrastructure firms feel the need to create back up institutes for creating an English speaking workforce.

The leading infrastructure companies vertically integrate upstream and down stream as well. The integration with construction firms downstream and sourcing firms upstream happens simultaneously. This helps them to handle any part of the infrastructure industry. It is common to see the infrastructure companies taking stake in material supply firms leading to corporatization of those firms. The corporatization helps those smaller firms get access to more funds from banking industry which propels the growth further. The infrastructure companies become the engines of growth for the economy in general.

The government’s attempts to control terrorist activities across the country succeed. The various political parties come on to a common platform to tackle the violent activities. They succeed to curb the entire activity by strengthening the enforcement mechanisms. The government generally succeeds to create a climate of trust and safety to the citizens by overcoming the partisan politics in the interest of growing economy.

The investor activism and judicial activism do not share the same enthusiasm of the government. The regulators and judiciary seek high amount of accountability from the infrastructure firms because the money is blocked over a longer period of time for majority of the investors and they seek constant protection from the regulators. Corporate governance becomes the critical driver for reputation of the infrastructure firms. This puts additional pressure of learning on the whole organization. The need for transparency which has not been so important for a construction firm becomes the need of the hour for infrastructure firms. The financial institutions also force the organizations to cater to the needs of governance.

The growth rates in this scenario will be the highest of all the scenarios. The challenges to the infrastructure companies also will be tough. The issues of pricing and hiring will dominate the landscape for them. The economic forces dominate the democratic processes and fuel the growth of infrastructure in the country.

























Scenario II Hope Unlimited……………………….


The aspirations of the stake holders and general public make exceptional demands on the government to provide high quality infrastructure. The international business and political community continues to keep the issue of poor infrastructure in India as a cause of concern and failure. The government continues to feel the pressure of being seen as a failure on infrastructure front. The political compulsions of fighting the anti-incumbency force the government to opening more areas of infrastructure for public private partnership. The available opportunities for infrastructure firms are ample and plenty.

The infrastructure companies have less appetite for rising to the occasion on account of less organizational effectiveness. The corporatization of infrastructure firms is still brittle and lack of managerial experience in the first generation entrepreneurs is a serious bottleneck for growth of companies. Huge investments and delayed gestation periods in infrastructure projects requires organizations to be very robust on processes. Special skills required to run infrastructure companies are not available abundantly and hence the huge gap between expectations of the government and ability of the infrastructure firms. This scenario is the interplay of these two major trends.

Higher disposable incomes of knowledge workers become a critical driver for the infrastructure industry. Time is treated as a commodity by these knowledge workers and money value of time becomes a measure of success. The trend of working from remote locations generates a demand for self contained townships. Self contained townships create a window of opportunity for the infrastructure firms to scale up their operations. This forces them to involve deeper with the realty sector for survival. The infrastructure firms can not resist the temptation of cash flows in realty and they become myopic in their thinking.

The demand builds up also because urbanization propels people to migrate to towns and cities. The infrastructural needs increase multi fold due to the heavy influx of people into the towns and cities. The government at every level is forced to think about the creation of infrastructure for all towns and cities. Though the economy remains largely dominated by agriculture, there is an unimaginable increase in the number of sun rise industries. The retail revolution integrates the rural economy with the urban economy and the movement of people and goods increases. This puts additional pressure on the government to focus more on creating infrastructure at every level.

The coalition politics remain the order of the day because of vast diversity in a country dominated by caste, creed and religion. There are different political parties in power at state and federal government. The power of a single party rule all across is over and no single political party is in a position to call the shots. The weakened parties understand the change and consensus largely remains that infrastructure has to be on the agenda of every political party in power. In spite of such unwritten consensus, political expediency still controls the democratic processes. When ever the government fails to match the rise in aspirations of all stakeholders, the parties in opposition take the opportunity to expose the bad governance. Every government is forced to look into innovative ways to deal with issue of creating infrastructure. The political future of the parties in general becomes brittle due to the rising criticism against the government in power and democratic processes take over. The people power creates an unknown force in the democratic process and government is compelled to act fast.

There are huge changes made in regulation due to the pressure of aspirations. FDI norms are loosened and entry into all sectors (Except defense and may be Nuclear).Inflow of money is plenty and PEs and Venture capitalists from all across the world vie for their piece of cake in a truly liberalized economy. The government realizes that there is no way to speedup the creation of infrastructure if the government uses its own resources. Government realizes that there is no expertise available with it and it is too slow to create such infrastructure which the people desire. Government does not want to be seen as a failure and delivers huge impetus at all levels for more public private partnerships.

The trend becomes widely prevalent and even local bodies adopt the private public partnership as the only way to create infrastructure. The general growth of economy improves the per capita income and people are willing to pay for the services of good infrastructure. The local governance which is favored by all political parties becomes proactive because of the smaller scale and ropes in infrastructure firms for waste disposal systems, water treatment and sanitation, maintenance of roads and power systems. The desire of the people to improve the quality of life at all levels becomes the guiding factor for governments at all levels. The towns and cities seek better transportation facilities and good roads. The metros seek mass rapid transit systems like metro and mono rail. The metros demand for second airports. The towns and cities seek up gradation of airports. The energy requirements go up exponentially and government encourages entrepreneurs to set up power plants. The regulation is very favorable and processes are simplified. Permissions are given fast and statutory clearances are given fast.

The government’s affirmative action changes the landscape for the entrepreneurs who are caught unawares. With few number of infrastructure firms into an organizational mode, the change in the scale of opportunities baffles them. The owner driven infrastructure firms suddenly find themselves lacking in expertise to grasp the challenges to meet the scale of opportunities. Home grown entrepreneurs have not imagined that the size of opportunities available will become so huge suddenly. The firms did not connect that the growth of economy throws up their pitfalls and they are drawn into a spiral of pressure.

The government driven by the mandate of people and forces of democracy starts categorization of infrastructure companies. The visible shortage of large number of good infrastructure companies results in empanelment and allocation of projects rather than creating a competition. This is widely accepted at every level because of the imminent need for capable firms who have the muscle to take up large projects.

Lacking in capability to meet the demands of opportunity, infrastructure firms look for collaboration from foreign companies for technical and managerial expertise. Exclusivity agreements and special purpose vehicles between Indian companies and foreign infrastructure firms become the order of the day. The credentials of the foreign companies are used by Indian infrastructure firms to attempt bigger projects. The tie ups also become possible for some companies because of the preconditions dictated by the foreign firms. The governance and brand become important parameters for any foreign firm to decide on the tie up.

The availability of money is abundant in this scenario and the appetite for blocking large monies in projects of long gestation becomes the key for growth. Long term agreements between financial institutions and infrastructure firms give a great boost to the firms. The banking and financial institutions become partners in business and provider of funds. This sets in a virtuous cycle for the transformation of construction firms to infrastructure firms. The evolution of construction firms into infrastructure firms is a long process because of lack of understanding the bigger system and larger forces at play.

The existing firms are focused on specific segments of infrastructure. Integrated infrastructure companies are in a better position to manage the scale of opportunities and leverage for growth. The paucity of technical skills and managerial skills starts to occupy the mind of entrepreneurs and huge pressure builds up on the organization. To compete to get business or manage the existing scale becomes the dilemma.

The war for talent becomes acute with the firms competing for the best. The pressure on HR in the organizations will become more acute. The pressure of fresh induction of talent on one side and retention of existing talent requires a very delicate balancing act. The organization structures create further hindrances to the smooth functioning of the HR department in infrastructure firms. Parity becomes a curse on the system and differentiation will not be acceptable to employees so easily. As a result infrastructure firms feel the need for matured managers with exceptional soft skills to manage the transition and this becomes the order of day. Managing change becomes the challenge for the HR and functional managers on a day to day basis. Need for greater inter functional coordination is critical to the success of the infrastructure firms.

A systemic change sweeps across the infrastructure industry because of one significant change in the mental models. The infrastructure firms start to evolve out of construction firms. Construction firms have more of a transactional orientation towards completion of projects. The project orientation restricts the thinking of the managers to a limited system and limited appreciation of the forces at play. As the infrastructure firms start operating on a bigger canvas and wider system, the inadequacies in the managerial capabilities come to the fore. The change takes place slowly but surely from a result orientation to process orientation. The management of this change is the real differentiator between a successful infrastructure company and a failed one. The failed ones go back to the construction business more unable to see the wider forces at play and bigger opportunities. The earlier an infrastructure firm sees the bigger system and the changes in the bigger system, first mover advantage is achieved.

The limited competition due to lesser firms creates an imbalance in demand and supply of capability to handle bigger projects with longer gestation periods. Money and material become abundant and the crunch is the ability to manage. This is the dilemma that forces the firms to have unlimited hope about the future and creates a platform for growth. Even though growth rates are satisfactory for the infrastructure firms in this scenario, the lack organizational effectiveness prevents exponential growth.





















































Scenario III Forcing change?

The pace of corporatization of the construction firms picks up at a blistering pace because of the visionary leadership by pioneers and a “can do” attitude by new entrepreneurs. The transformation happens not because of the pace of infrastructural development but because of the futuristic look of the entrepreneurs. The only driving force is the desire for growth and being prepared in advance for opportunities. The transformation of the construction firms almost is complete and the industry is yearning for action.

The state or the government is moving much too slowly for the comfort of the infrastructure industry and the old timers in government still fighting to retain the government agencies for execution of infrastructure firms. The public private partnership model is being preferred in a limited manner by the government and the infrastructure firms become restless about the attitude of government. The coalition government is unable to make up mind and move forward to encourage infrastructure firms to take lead and build world class infrastructure. This scenario of Forcing change is about the interplay of these two major forces.

The economy growing at a rate of 10% generates huge amount of surplus money in the country in general. The government reduces the lending rates leading to increased consumption which fuels demand for infrastructure. The lack of investment opportunities for international investors elsewhere in the world brings more money than imagined to the shores of the country. A very strange strategic shift happens in the flow of money. The investors who have seen their money getting smaller returns are faced with the dilemma of either withdrawing money from existing ventures or make a proactive attempt to create markets for those ventures in developing economies. The democratic set up in India attracts those investors to target India as a favored destination because of huge demand potential and the vast talent pool. The compulsion to protect their existing investments in countries with low growth rate and create opportunities for expanding markets to those firms by infusing fresh money is the strategic shift.

This shift can yield results only when the government and political parties are roped into the vision of these international investors. It is possible when the pressure on the local governments at all levels is built up. As a part of this strategy the investors become innovative by adopting a two pronged action plan. One is to help the domestic entrepreneurs to become bigger and better by creating alliances for technology and organizational effectiveness. The technical expertise that exists in developed countries gets into the hands of the domestic entrepreneurs. The need to handle sophisticated technology makes the infrastructure companies to change themselves fast and improve on their organizational effectiveness to transform themselves from construction firms to infrastructure firms.

The role of non governmental agencies becomes wider and active focus by these organizations on infrastructure development puts the issue in the lap of the governments at all levels. The NGOs receive huge support in terms of money and information from those investors and these organizations take up infrastructure as a rallying point. NGOs speak in one voice for better infrastructure and this pressurizes the government to look at the bottlenecks for permissions and clearances. In addition the pressure makes it imperative for the government to look at the issue innovatively. Transparency and speed are in demand by the stakeholders and the movement catches on.

The entry of FDI into media and television is used cleverly by the foreign investors and infrastructure firms to create more pressure on governments. The political parties no longer look at the issue of infrastructure with a jaundiced eye because media exposes inaction brutally. There is an all round pressure on governments to change drastically their own methodology of providing the infrastructure. The principle of “user pays” guides the government while conceptualizing workable models for public- private partnership.

The entrepreneurs see the developing scenario and launch development on another front. They start offering stake to foreign investors in return for technology, funds and expertise. Being relieved of lobbying with governments, they find time to focus more on organizational development. The desire for achieving the state of readiness for the ample opportunities forces them to look at the new ways of managing the infrastructure business. The managerial styles change and very strong industry bodies emerge. Industry bodies become a powerful force in guiding the change in the pace of infrastructure development in the country. Notwithstanding the competition, the industry members come together in search of an identity.

The infrastructure companies being very futuristic adopt the strategy of creating huge land banks for future development. The also identify areas for port and airport development for the future. Companies realize that a port and an airport will be highly significant in the scheme of things to come and they will aid diversification into international trading, ship building and maintenance and become a part of the global economy.

The need for identity and the need for forcing change make the infrastructure firms very proactive and innovative. Innovation is visible within and outside the organization. The infrastructure industry starts selling dreams to all stakeholders. Each of the firms specializes in few areas of infrastructure business and the firms create models and blue prints of the future. The wait for infrastructure opportunities is over and they start creating opportunities. The blue prints for the new projects like ports and airports get priority. It is because of the lobbying by the foreign investors who want to create entry points for the goods of those businesses across borders where their investments are delivering low returns.

Innovation in products, processes and projects is seen to be embraced by the infrastructure companies. Innovation being the key for the infrastructure companies, there is no opportunity left out. The social trend of nuclear families leaves lot of senior citizens to fend for them. The population of senior citizens with sound finances also increases in number. Creating secure and specialized living accommodations all across the country is an innovation. This will help infrastructure companies to get connected with the social responsibility also. Creating home maintenance services is another innovation. Establishment of finishing schools for management of realty and commercial segments as a part of the schools for infrastructure management is another innovation. Building leadership development institutes and convocation centers is another new avenue of development. Construction of hospitals and clinics with multi specialty facilities and help line services on USE & PAY basis by Doctors is another innovation.

Identifying projects and selling dreams is done by infrastructure firms in a professional manner. The areas like city maintenance, water treatment, waste disposal, sanitation, mono and metro rail, power generation, distribution and maintenance, cargo hubs, logistic and distribution centers ,irrigation methods, non-renewable sources of energy etc, catch the fancy of infrastructure firms and models are developed and economic viabilities are evaluated. In comparison the boom in retail malls, is very insignificant.

Human resources are developed keeping the foray into innovative businesses in mind. The infrastructure firms realize that expertise in areas of infrastructure exists across borders and they have to make their organizations truly global to leverage the expertise. The opportunity for handling infrastructure projects in countries other than India becomes another enticing factor for infrastructure firms to embrace global mindset. Managing diversity and creating conducive working environments figures on the agenda of the HR managers. The infrastructure firms realize that creativity and innovation can be fostered in a climate of trust and freedom. The traditional command and control style of leadership no longer delivers the results required for growth in a scenario like this. The empowered leadership style is preferred over the traditional style and professionals are given freedom to produce creative and innovative models for development of infrastructure for the whole country.

The covert pressure developed by foreign investors and overt pressure developed by NGOs and public forums catch the attention of the government. The democratic forces start playing a positive role in attacking the government in power for changing the pace of development of infrastructure. In fact the warring factions within the government also start to create pressure on the government to look at the issue of infrastructure from an innovative perspective. Each of the governments starts consulting the industry bodies for ideas. Infrastructure firms share their models with the government and seek actionable areas and developmental rights.

The appreciation of rupee makes the fundamentals of the infrastructure companies very strong .The appreciating Indian currency brings in foreign technology much cheaper and in abundance. This helps the infrastructure companies to be well equipped to handle any kind of projects because of improved resources and better organizational effectiveness.

The appreciated rupee also ushers migration of labor from abroad to India. In particular artisans like carpenters, masons, plumbers etc. come back to the country and the infrastructure companies use the influx to strengthen the vertical integration. The shortage of these skills in the country is acknowledged and these companies evolve different methodologies to preserve these skills in the industry. The influx of labor changes the vote bank for the politicians significantly.

The pace of change initiated by the government is felt slower by the stakeholders and the pressure becomes more. Infrastructure firms with great organizational expertise behind them and funding available at doorstep consolidate their vertical integration strategy. The buy stakes in steel and cement manufacturing companies, ports and logistic companies. They help the building material suppliers in funding and help them to get more professional in their approach. The vertical integration of suppliers and manufacturers of building materials helps infrastructure companies to compete better and create ease in working. It creates lot of transparency in the system which the foreign investors desire as a prerequisite.

The public outcry and the world class infrastructure companies make the government finally relent and give way to liberalized scenario of public private partnership and government creates single-window clearances and reduces the hurdles created by archaic systems and procedures. The infrastructure industry enters the big league as dominant players in the business climate of the country and can not be ignored by the government. The change is forced by the organizational effectiveness of the infrastructure firms which very cleverly exert huge pressure on the government and change is forced upon.

The growth rates in this scenario for infrastructure are low initially. As the force of pressure increases for change, the growth rates go up exponentially and a virtuous cycle of growth sets in. The model of growth is one of sustainability and all inclusive.





































Scenario IV Running Backwards


The government or the state is run by fragmented mandates and hence consensus on key issues is rarely achieved without putting disproportionate efforts by the government managers. On an ideological level there is alignment with regard to developing the infrastructure in the country. The efforts required to drive the execution of policies do not exist and hence the initiatives take a backward step. It is helplessness of the government amply aided by the organizational ineffectiveness of the infrastructure firms.

Infrastructure firms are yet to be corporatized and the transition from owner driven to professional management does not happen to the required extent. The realization of the opportunities available for growth exists in the promoters of the infrastructure firms but there is no capability to build up organizations that can exploit the windows of opportunity available. RUNNING BACKWARDS is a scenario about the interplay of the above forces.

The fragmentation of the mandates given by the people in democratic process creates lack of ownership in the whole system. The regionally powerful political parties enjoy dictating terms to the federal government without taking responsibility. They corner the resources by forcing the government to give in because of tight political equations. They have very little regard to the needs of the big picture and very narrow in their thought. The federal government being at the mercy of these regional parties driven by caste, creed and religion is engaged with protecting the government and has no time and energy left for taking up reforms to build world class infrastructure. There is no opportunity available for the government to take up comprehensive and holistic measures to put up necessary reforms in place for the infrastructure firms to become partners in the business.

As if this is not enough the attention of the governments at all levels is also engaged with worsening security situation. Terrorism becomes a state sponsored activity from across the borders and security agencies are not equipped to deal with the sophisticated methods of the terrorists. The frequency of attacks and the consequential mayhem does not allow the government to focus on critical issues like infrastructure. The future is sacrificed at the altar of present. The diversity of caste, creed and religion drive the political parties and this leads to further aggravation of the security situation by inflaming the emotions of the people.

The lack of focus of the government and worsening security situation allows no concrete or affirmative action on the part of government managers. The scourge of corruption raises its ugly head to unprecedented levels and controversies mar the progress of projects. The government is always in a bind about the priorities on whether the focus should be on agriculture or urbanization or industrialization or infrastructure. Different signals keep coming at different points of time from different wings of the government.

The opportunism is visible blatantly in the manner the infrastructure companies exploit the various lobbies that exist on the political landscape. The focus of the infrastructure companies is on aligning with political groups and overtly or covertly garners prime projects. The focus is on managing the external environment. The focus is to protect the existence rather than improving the organizational effectiveness. The focus is on short term gains and thus losing sight of the long term losses.

The effort of the infrastructure companies is more on niche projects and securing niche projects requires intense lobbying. So lobbying experts continue to dominate the infrastructure scene and there is less focus on improving the organizational capabilities. Apart from this, infrastructure companies lose the opportunity of engaging with low value and low margin projects. This is in spite of the fact that these kinds of projects have the capability to create a value proposition for the company and also create huge economies of scale. The brand value that gets created because of being engaged with large number of projects of low value and low margin is immense but unrealized by the infrastructure companies. An opportunity is lost for infrastructure companies to differentiate the turf of play. The competition for niche projects forces the infrastructure companies to look away from innovation as a means of differentiation and every company competes for the same quantum of pie. They fail to think out of box and as a result the total pie is not expanded. The vicious cycle of competing for few projects and getting drawn into a limited turf and have few victories and few losses continues to play havoc with the future of infrastructure companies. At the same time the government and political parties know their short terms in power and play to favor those firms which can play the game along with them. Thus the vicious cycle continues.

The long gestation period of the infrastructure projects does not help the cash flows because the investor confidence erodes and funding becomes difficult. The investors also expect the infrastructure companies to be more transparent in terms of corporate governance. The evolution of construction houses into infrastructure companies is slow because of lack of managerial expertise and hence investors are turned away. Further the quick returns from other investment options attract the investors and infrastructure companies are seen as a last resort for even long term investment. The infrastructure firms fail to realize that only organizational effectiveness and transparency provide sufficient confidence to investors. The branding which is so essential in these times is absent for infrastructure companies. The lack of brand value for the infrastructure companies also erodes investor confidence.

Added to that the infrastructure companies fail to acquire talent for because there are other attractive options available for talent. The talent required for infrastructure companies needs to be multi faceted at middle and senior levels of the organization. It has to come from different industries and each industry has a unique culture of its own. The integration of different cultures at all levels requires exceptional managerial skills. At the junior or operating level the talent must be sound in technical skills. Engineers and project management specialists seek attractive options like IT which project a very decent white collar working climate. The infrastructure companies fail to create such an image and it is seen by talent that the jobs are bluer collared. The lack of brand further erodes the confidence of these candidates. It is the projection of an organization rather than the compensation that attracts talent and infrastructure companies fail to provide a sound value proposition to the young managers.

Infrastructure companies in India have no bench mark industries to draw talent from. They require functional specialists and managerial experts in equal proportion. The functional experts with technical skills are required for execution of the projects and mature managers are required to conceptualize and manage cross-functional teams. In absence of viable brand value and strategic outlook, infrastructure companies poach from each other and the war for talent is again happens on limited turf. This vicious cycle results in too much money chasing too few people. Again infrastructure companies look at the issue of talent from a narrow perspective and create difficulties for themselves in the long run. Focus on providing a value proposition is not understood at all by the infrastructure companies.

The scenario RUNNING BACKWARDS is full of vicious cycles. The growth rates improve in the short term because of the expansion, but long term unintended consequences generate unseen problems for the future of infrastructure companies.


Note to the reader:

The above scenarios are very sketchy and can be enriched by incorporating data from reliable sources. The data can help the scenario planner to have a better idea of the trends. A group of cross functional experts can further enrich the scenarios with their knowledge. Further enrichment can come if remarkable people are asked to comment and give their perspectives on the future. Professional managers and entrepreneurs together can make these scenarios enriched.

After enrichment, the scenarios can be used to test the current strategy of the organization in each scenario, evolve future strategies, evaluate specific projects, risk assessment, critically examine the competitor strategies and also reexamine the thinking of the decision makers within each organization.

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