Nielsen India president Piyush Mathur sees India as one of the fastest-growing markets, both as an economy and for his own business. But the problem, he says, will be retaining talent. “India has an abundance of labor but a shortage of talent,” he notes. “We have 400 million people in the workforce, but everybody’s after the [same] 4 million.”

Nielsen has put in place a system that motivates talent to stay with the company and garnered promising results. The global information firm is now introducing its international products in India. In the future, Mathur expects some launches to emanate out of India. Mathur expanded on this and other issues in a wide-ranging interview with India Knowledge at Wharton.

An edited version of the transcript follows:

India Knowledge at Wharton: Piyush, could you give us an overview of Nielsen’s operations in India?

Piyush Mathur: Nielsen’s history in India is one of joint ventures, mergers and acquisitions. The first organization was set up almost 50 years ago. It was called ORG — Operations Research Group. It was part of the Vikram Sarabhai Group and was essentially doing retail audits. After that, there was a merger between ORG and MARG. Then AC Nielsen came and bought a small company called MRAS. All of that is today Nielsen. It’s a fairly large organization; we have more than 3,000 employees. We also use plenty of freelancers. We offer most of the services that are present globally in India. The cycle time of bringing these services is really coming down. For example, we had a joint venture with McKinsey — called Nielsen McKinsey Incite. Within 45 days of its launch in the U.S., it was launched in India. We believe that in the future, some global launches might emanate out of India. So we are excited. Things are growing rapidly for us.

India Knowledge at Wharton: Before taking over as president of Nielsen India, you oversaw the company’s operations in the Middle East and North Africa region. What was your assessment of India’s economy and how did that influence the way you formulated Nielsen’s strategy for building a base in this country?

Mathur: When I moved to India, this was obviously high on the agenda. The fact is that this is one of the big markets; this is where our future growth lies. Still, I used to always debate in my mind that though [India’s population is] more than a billion people, per capita consumption of most categories is so low in India. It was hard to imagine when it would catch up.

During the 10 years that I was away from India, a lot happened. I saw that during some of my personal visits back to the country. I realized that India was changing rapidly. Globally, most of our clients are now focusing on emerging markets, and India is one of the fastest-growing among the emerging markets. That kind of drove me; it was the homeland calling at the right time. I truly believe that the next decade belongs to India, and the country’s growth story is a real one.

In India we have four pillars in our strategy. The first is portfolio management; the second is being an academy company; the third is cost leadership and the fourth is organic growth.

I wanted to bring the latest cutting-edge technology into India. We have a few examples of that. During the past 12 months, we have brought in a lot of solutions such as NeuroFocus, which involves neuro-marketing or getting to emotive responses of the brain. Also, we have some new global alliances with companies like Facebook, which we expect to be launching in India in the next few months. We also want to build alliances with some homegrown companies. We have an alliance in the mobile industry with a local organization to provide the kind of information our clients require. Our clients know, for example, that there are 500 million mobile subscribers in India, but they want to know what [those customers] do with their phones. Our strategy focuses on managing this portfolio of solutions and bringing them to India.

The second element is being an academy company. I think somewhere this industry lost out on bringing the best talent from the top institutes. We have just rejuvenated this in India. This year, we went to the top business schools and recruited students from there. At the same time, we are developing our own academy: We have a Nielsen Academy that we run in collaboration with the Northpoint Center of Learning [near Mumbai]. We have come together to run a one-year market research course that takes students to rural India, makes them live with the consumers, really understand those mosquito bites on the charpoy [a light cot made of wood and rope]. That is a perspective that most MBA students are unable to provide, which explains why some of the marketing strategies developed by those marketers are difficult to implement in rural India. Those are some of the key things that we’ve looked at as part of our strategy in India.

The third element is cost leadership. This involves looking at our processes end-to-end and bringing sustainable improvements. We have used Business Process Improvement (BPI) effectively to not only make sustainable changes within our organization but also to improve processes in our clients’ organizations, making it a win-win situation.

Finally, the fourth element is about driving organic growth. We believe there are several opportunities one can pursue, given the growing macro-economic scenario in India. Despite the slowdown, we remain one of the fastest-growing economies and the most optimistic country in Nielsen’s global consumer confidence index. I believe it’s really about picking your spots and keeping your focus on them and delivering with excellence.

India Knowledge at Wharton: Could you describe the biggest challenges you’ve faced in building Nielsen’s business in India? How did you overcome them and what lessons could other global firms learn from your experience?

Mathur: There have been plenty of challenges, but two of them stand out.

The first one involves prioritization. Everything in India seems to be a big opportunity. My team comes to me and they believe they have found the biggest opportunity for the organization – and there is a plethora of such instances. To cut this down and focus on the few things you really want to pursue is a big challenge. One question I often ask my team is, “What are we not going to pursue?” We have 700 clients in India. Our strategy is to focus on the top few priorities and build deeper engagements with our clients.

The second challenge we faced probably exists in many other organizations. In India, we have a legacy of not following a meritocracy. We tended not to have a performance-based culture; it’s more around keeping things equal rather than differentiating between high performers and low performers. Building a culture that values meritocracy has been a huge learning experience and a challenge. I can see the needle moving, but obviously it’s a journey, not a destination. It’s going to take some time before we feel we’ve done something remarkable.

Within our organization, we now classify high potentials differently. We fast-track them, give them global assignments outside India and bring them back in senior roles. The goal is to retain our top talent. What other organizations could learn from this experience, simply put, is to retain your best people. That is the biggest lesson that’s needed in India. If you succeed in retaining your best people, it will be very difficult for you to fail. That’s the way we look at talent. India has an abundance of labor but a shortage of talent. We have 400 million people in the workforce, but everybody’s after the 4 million. We feel good about what we’ve achieved in the past 12 months.

India Knowledge at Wharton: What are the key growth areas for Nielsen in India? Who are your competitors in the market and how do you position Nielsen vis-à-vis your rivals?

Mathur: At Nielsen, we are trying to be an ambidextrous organization. We want to significantly improve our growth and at the same time keep innovating for the future. Some of the growth areas I see are in the innovation space, like NeuroFocus, where we differentiate ourselves and we feel we add value to our clients’ decision making.

There are other areas like the recently-launched online campaign ratings, which I believe will be a huge hit when we bring it to India because they bring TV and the online industry on the same platform. In the past, TV has been bought on gross rating points (GRPs) and the online industry has been running on impressions and click-through rates. We are bringing GRPs to the online industry, so advertisers can see how much they should spend on TV and how much they should spend on online media — because these are comparable now. The future belongs to a lot of media consumption moving online to PCs and mobile devices. We are preparing for that growth to happen.

You asked how we differentiate ourselves from our competitors. One way is by looking at the buy and the watch space — what consumers buy and what they watch. You have to take a holistic view and connect the dots between consumers’ buying and watching behavior. If you see that the consumers are thinking in a particular way, they are behaving in a particular way and they’re watching certain kinds of things, then you can develop that holistic understanding. We can really make marketing and sales come alive for our clients. That is our biggest competitive advantage: I don’t think there is any agency in India or globally that has that kind of portfolio. We are not there yet in connecting the dots, but that’s where we want to be, where we are able to establish links between what consumers buy and what they watch.

India Knowledge at Wharton: You referred to NeuroFocus — could you explain that?

Mathur: Yes. It involves the science of neuro-marketing. The way we do it is we wire respondents who opt in to be part of our studies…. You wear a baseball cap and you’re shown a stimulus; we get 2,000 brain waves a second monitoring your mind as you react to what you have seen. Sometimes in research when you ask consumers questions they have several filters or attitude factors, and sometimes they are not able to articulate what they want to tell you. This way we monitor how the brain responds, taps into the subconscious and [we] analyze what that stimulus means to them.

A lot of global multinational organizations are adopting neuroscience and working with NeuroFocus. We help them build their advertising, packaging, and even their pricing. We work with broadcasters to get the right content in programming. We work with telephone companies and with banks to devise their strategies to see what their customers’ reactions would be to different messages. That’s NeuroFocus, and it’s already alive in India. We are setting up a lab. We’ve done a couple of projects for a large Indian company and they want to set up a whole lab dedicated to them. That is being done as we speak.

India Knowledge at Wharton: Nielsen recently released a report about the growing popularity of Android among smartphone operating systems in India. Could you tell us what is driving this trend and what it means for companies like Apple and RIM that compete with Android and Google?

Mathur: Let me take a step back and say that this new venture that I was talking about is exactly in that area. We call it the on-device meter. We put a meter on the smartphone of people who opt in and monitor usage — everything that is being done with that phone. We look at voice, SMS, e-mails, browsing on the Internet, usage of apps, which apps for how much time, how often your phone is charged — just about everything that happens on the phone is metered and that information comes back to us. Through an alliance with this organization, we are going to get access to all this data, and then we will bring those insights to our clients. It will show what people are doing with Android and Symbian in India. We see lots of users are migrating to Android.

One of the startling facts that I saw – and which I was quite amazed to read – is that only a quarter of the time spent on smartphones is for communication. SMS, voice and e-mails together constitute only 25% of the total time spent on the phone. For the remaining three quarters of the time, people are engaged with consuming multimedia – activities such as browsing, listening to music, or playing games. This is amazing. This could completely change the way we lead our lives.

In India, especially, this will have a big impact because a typical home in India has one TV set and four mobile phones. When the TV is switched on, everyone in the family has to be aligned in what they watch – and so the general entertainment category is the largest viewed category or genre in India. If you believe that media content will move to mobile platforms, it will be all individual media consumption. We don’t know when that inflection point will come but we know that it’s coming.

India Knowledge at Wharton: In July, Nielsen released a global report on consumer confidence, concerns and spending intentions. Why is consumer confidence declining in India?

Mathur: Let me start with the good news. For the past 24 months that we’ve been tracking consumer confidence in 52 countries, in every quarter India has been consistently topping the charts. Lately we have seen a decline but despite that, we still remain the number one in consumer confidence globally. I think what is happening is that inflation has taken its toll. There are lots of concerns with inflation: How do I manage my increasing fuel and grocery bills? And for those who have bought houses, mortgage rates are going up. They are among the highest they have [ever] been – at 13% or 14%. These concerns are affecting consumers and they are trying to figure out how to manage their wallets.

India Knowledge at Wharton: How has online advertising and usage of social media impacted consumer behavior in India? Do you see the same trends worldwide or does India differ in this respect?

Mathur: That’s a good question. We should treat online advertising and social media separately. Online advertising is fairly limited and, from my perspective, it’s highly underleveraged. The reason for that is there are no measurements that I can put together with TV and, say, where should I put my money? Historically, the way online advertising has been bought is based on impressions and click-throughs and that has not really led to the levels that they would have been expected to reach in India. So bringing relevant measurements will help the cause for online industry.

On the social media front, what we’re going through now is the demand revolution. We went through the industrial revolution, we went through the technology revolution, now we have the demand revolution. I lived in Egypt for a few years, and as we saw recently in that country, people got together on Facebook and started an uprising with Twitter and mobile technology all coming together. In 27 days they overthrew a 30-year-old regime. What does it look like in India? What the social reformer and activist Anna Hazare was able to do in part is because of social media. People were able to get together, get aligned. It was technology that helped them come together. What we are seeing now are indications of the beginning of a demand revolution, where social media is going to be key going forward. The way social media will impact organizations is still not clearly understood. All the CEOs are in their 40s and 50s, they are not the ones who are active users of Facebook, Twitter and this world will change very rapidly. It will have huge ramifications going forward. Today it’s not at the level where it is in the U.S., but having said that, for Facebook, India will be the second-largest country in the beginning of 2012. Today, it’s Indonesia but soon India will become the second largest.

India Knowledge at Wharton: What are some key challenges you face in analyzing consumers here in view of India’s religious, economic and linguistic diversity?

Mathur: India is not a country, it’s a continent. So there are 29 countries. How consumers buy and how consumers watch in each of these states is very different. And obviously, their religious habits, their parlance, their dialects, their viewership of different media, their food habits – all these are very different. India is a continent like Europe.

Let’s take a long-term view. Let’s crystal ball gaze 25 years from now and ask what will India look like? I would say some of the luxury product markets, premium product markets for certain products will be as big in India as they are in Europe. We are headed in that direction. But there are multiple Indias. There is still a very large and poor segment of the population that will take many years to rise. So it is challenging, because India is not a country, even though it might be treated as one. A lot of our clients are now saying, “I want granular information. I want a different strategy for Karnataka versus West Bengal.” Those two markets are like chalk and cheese – like Germany versus Italy. That is why we have to make the right investments to be able to get that granularity into our products and services.

India Knowledge at Wharton: How do consumer buying patterns vary in rural versus urban areas? What changes or patterns do you see emerging in rural India?

Mathur: One big shift in rural India is a movement from commodities to branded products. In the past, most of the products that rural consumers bought were commodities. It was not branded atta [wheat flour]; it was not branded rice; it was not color or hair dyes; it was not sanitary napkins; it was not all of that. Over the past three years in rural India, we’ve seen this conversion from commodities to branded products. Obviously that is because of growing prosperity and the fact that people have more and more money in their pockets with the NREGA (National Rural Employment Guarantee Act) scheme and several other schemes that have come up. That has led to rural India growing faster than urban India during the past three years, year on year. Even though it’s a smaller market than urban India for fast-moving consumer goods, it is growing faster than urban India. That’s a big trend.

This is challenging for our clients. You would have a different strategy for urban consumers since you can understand and empathize with urban residents. The rural market is 600,000 villages. Which village should you target? How do you reach there? How do you get your products there? A lot of innovation is needed. [Hindustan] Unilever is at the forefront of marketing products to the rural market by getting female entrepreneurs to work for the company. Godrej is doing something where they are jointly co-creating the product. The refrigerators are co-created and they’re actually not front-door opening, but top opening because in rural India you don’t have enough space to have a front-door opening refrigerator. Rural India is coming of age. The market is growing faster and that trend seems to be continuing.

India Knowledge at Wharton: Although women are the primary users of everyday consumer products, the household male in the rural community does most of the purchasing and is the key decision-maker. What are the challenges for brand names to capitalize on this market segment?

Mathur: That’s very interesting. Even though the male in rural India is the purchaser in many cases, we still believe that housewives influence which products to buy. In urban India, it’s either the maid servant or the housewife who goes to buy the products so the influencer and buyer are the same. In rural India if you have great brand equity, then you know that the housewife will tell her husband to go and buy that particular product. So influencing at the point of sales becomes critical for people in rural India.

India Knowledge at Wharton: What role do you expect Nielsen’s India division to play in the global company over the next three to five years?

Mathur: Wall Street rewards growth, not size. In the developed world, we have large revenues and as a proportion of our total revenues, India represents a fairly small proportion, in single digits. But the way we are going to grow in the next three to five years, even next year we will be close to being a double-digit contributor to the global growth of Nielsen.

India Knowledge at Wharton: Could you describe the greatest leadership challenge that you have faced as the president of Nielsen in India? How did you deal with it and what did you learn from it?

Mathur: I spent 11 years outside India before returning to the country. My biggest challenge, as I said earlier, has been trying to build our organization as a meritocracy. How can you differentiate talent? The way I dealt with it was by using what we call the ‘say-do-ratio’ – can you do what you say you should do? I said ‘we’ve got to deal with this because this is the right thing to do’, and then I went out and started doing it. I selected the top 25 people from among 3,000 people in the company to differentiate them. Some of them were several levels below. I engage with them personally and I am virtually accountable for their success. I have a target of 100% retention for those 25 people. Then obviously it is cascaded – I have a senior team and now everyone is building their own top 25, and that culture is being built. We have faced other challenges but this meritocracy piece was the biggest one. As I said, if we can keep our best people, it will be very hard for us to fail.