August 12, 2015      

A Chinese company, Changying Precision Technology, has built a “robots-only” factory. All tasks and processes will be handled by robots — 90 percent of the factory workforce. Humans need not apply.

What is fascinating is that China still has plenty of cheap labor despite rising wages. So, why is Changying Precision Technology uprooting jobs, the foundation of modern society? The answer is demographics (among other reasons).

The working-age population — aged 15 to 59 — dropped by 3.71 million people in China in 2014 because of aging and the one-child policy not adding enough new workers.

Japan has a similar problem, if not worse. A quarter of the Japanese population is already 65+ years old. There are only 80 million people left in the working-age category. So robots are becoming the new citizens and workers of Japan.

While the business case for robotics in China and Japan seems obvious, what about India?

China and India's demographics curves

China and India have different demographics. Source: Rand Corp.

India does not have a demographics crisis: 33 percent of its population is under 15, and 50 percent is under 24.

Without robotics, India has produced several billion-dollar startups, such as Ola Cabs (taxis), Flipkart (retail), and Quikr (classifieds). According to one count, India is graduating 1.5 million engineers a year. The average labor cost is merely 92 cents an hour.

Why is India embracing robotics?

‘Unskilled Indian’ labor a result of brain drain

In 2012, a study looked at who was starting a business across the U.S., not just within Silicon Valley. One in three immigrants starting a business was from India. Yet, back in India, only 25 percent of engineering graduates are employable.

That makes no sense, for sure. India is growing talent, and the U.S. is eating the fruits of that talent.

If some skilled employees are sitting abroad and local workers’ skills are not up to the mark, it is no surprise that nearly two-thirds (61 percent) of Indian employers reported that they lacked the required skills.

And, of course, they are not going to wait for the 400 million people that India intends to train by 2022 or rely on the Band-Aid ways to deal with the problem of staff turnover that could reach as high as 25 percent in some cases.

Hence, from large enterprises to small and medium-sized businesses, all kinds of firms are turning to robots to fill the skills gap.

Here is a bizarre twist of fate: The land that gave zero to the world now has to rely on machines to do human work. The robot is the new “skilled Indian.”

New dynamics of competition

Until recently, cheap labor was the basis of competition in India. Anybody who got the job done cheapest took the trophy home.

Now, the dynamics of competition are different. Few, if any, are paying attention to how Infosys and IBM are competing. All eyes are on Ola Cabs versus Uber.

Technology has displaced cheap labor as the basis of competition. The trophy belongs to those who can quickly see what’s next, imagine new possibilities, and connect the pieces to reinvent value. In other words, innovation, productivity and disruptive value are defining competition — also — in India.

Where does robotics fit in this new competitive scenario?

Like Uber, Amazon also wants to make India its largest non-U.S. market, and like Uber, it too is pumping billions into India. Not surprisingly, India’s Flipkart — sometimes also known as “Amazon of India” — is taking steps to compete with Amazon’s super-efficient order processing, reliable deliveries, and personalized customer service.

Flipkart is putting robots in all 13 of its warehouses to sort, pick, and dispatch items. The goal is to make deliveries superfast and reliable.

Becoming future-ready

India does not have a clear vision or plan to be future-ready. Yet, from “Make in India” to “Digital India” to “100 Smart Cities,” you can get some ideas of where India is headed.

With “Make in India,” since India wants to compete head-to-head with China, the goal is not to make clothes and coffee makers cheaper and faster than in China, although that too will remain a priority to employ the hundreds of millions of semiskilled workers and those displaced by automation.

The real game-changer will be when India builds the smart factories with robots and Internet of Things (IoT) and a domestic firm becomes the next Apple or Foxconn (the company that makes Apple devices) or when Tesla sets up its next factory in India or when the next Tesla emerges from India.

Unlike China, India’s consumer model is miles ahead. The Indian consumer may not have the purchasing power of the American consumer. But, the battle for the hearts and minds of Indian consumers is as intense and sophisticated as in the U.S.

Smart products coming out of smart factories in India could give businesses — domestic and foreign — the new consuming class in a land that is expected to become the most populous nation on earth by 2022.

But can India pull it off with 1,900 robots that it bought in 2014 versus the 56,000 robots that China purchased? Is robotics just another one of those things where, once again, India talks big but does little to make it happen?

The future is as much for India to own as any other nation. But, for that, India will need to become future-ready and develop a strategy to achieve it.

Like money, technology is loyal to no one. India is no exception.

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