Can Indian companies compete in foreign markets?

In recent years, India's growth story has primarily revolved around its booming domestic market. Focused inward, Indian companies have shown less interest in venturing abroad, with even the historically outward-looking Tata Group directing the bulk of its investments to domestic sectors. And it makes perfect sense. With the Indian economy projected to grow at 7% a year in the foreseeable future, surpassing other regions, why divert resources to costly and uncertain foreign ventures?

But does this mean that Indian companies will shy away from building a global presence in the coming years? Absolutely not!

Anand Chandrasekaran, partner at VC General Catalyst, provides a captivating insight into what he calls the three categories of Indian startups, which I think can also be extended to Indian companies in general. The first group simply replicates successful global models, adapting them to fit India's unique landscape. Take Ola, for example, replicating the Uber and Lyft model for the Indian market. The second group builds models that cater specifically to India, addressing the idiosyncratic needs of its diverse population. Take 80wash, for instance, which is developing a machine that washes clothes in 80 seconds without any water, thus addressing the problem of water scarcity in many Indian regions. Or take Khatabook, which provides small businesses with software to keep track of their daily cash flows while progressively adding services like credit. And finally, we have a third group with the companies with an outward projection, designing products intended to dominate foreign markets. These companies tend to adopt an arbitrage strategy, leveraging unique or cost-effective resources at home to conquer foreign markets. Look no further than the impressive SaaS startups like Zoho, Browserstack and Freshworks. These unicorns are making waves in the US market while tapping into India's (lower cost) talent pool. In this regard, they continue the legacy of Indian IT, leveraging local advantages to thrive on a global stage.

I believe it is within the second and third groups that the true potential for future dominant Indian brands lies. The third group for obvious reasons, as its design is precisely to compete globally. But it is not a very big group beyond the IT industry, perhaps the platform and technology parts of edtech (e.g., Emeritus) and a few selected others.

Instead I would argue that it is in the second group where it gets really exciting, thanks to the potential of reverse innovation. Remember when GE Healthcare developed a simpler, stripped-down, portable electrocardiogram (ECG) medical device tailored for the Indian market? Not only did it become a success locally, but GE also exported this innovation to mature markets as a low-cost device for mobile ER units and other new applications, thus expanding beyond its traditional core business. This is the power of reverse innovation—Indian companies designing products to meet specific needs of the Indian consumer, only to later disrupt foreign markets with their unique advantages.

Imagine a future where Indian companies revolutionize the education industry with test-preparation personalized coaching sessions, provide micro-credit solutions for households and small businesses, introduce cutting-edge agritech services for small-scale farmers, and deliver fast and affordable essential healthcare to remote rural areas, among many other use cases. The potential for reverse innovation is immense, offering Indian companies a clear advantage when entering foreign markets. That advantage will not only be about the design of the product but also will be built on scale (thanks to the unmatched size of India’s bottom-of-the-pyramid) and on the ability to adapt the offer to local preferences (thanks to the market heterogeneity that Indian companies themselves face at home).

In a world already saturated with fierce competition, Indian companies understand the difficulty of competing and catching up to leading companies on a “same” basis and thus the need for disruption from the bottom up. By addressing unmet needs and serving dissatisfied customers with uniquely Indian models, they can carve a path for domination on a global scale.