| Is there a single change in strategy that will put
Indian companies firmly on the road to success in the
coming years? the strategist asked some of the world’s
leading management thinkers to identify what they think
is the most important change required in their areas of
expertise. Excerpts: |
| |
 STRATEGY
Vijay Govindarajan
Professor, Tuck School of Business Dartmouth
College
In order to show impressive gains in the
future, Indian companies must innovate. I studied dozens
of corporations over five years where the main
conclusion is that big corporations build management
processes for promoting efficiency — processes that hurt
innovation. |
| |
| No doubt, Indian companies have created breakthrough
innovations in the past. Witness, for instance: ITC’s
e-choupal project; the poverty alleviation scheme of
Kudumbashree; Mumbai’s dabbawallahs’ supply chain
revolution; and Tata Motors’ Rs 1-lakh car. |
| |
| Indian corporations must overcome two important
management hurdles in order to promote large-scale
breakthrough innovations. First, they must change
internal performance measurement systems — hold managers
accountable for learning, instead of for results. |
| |
| Large companies have a strong focus on
accountability. Their systems measure and reward
efficiency in core businesses whereas innovation is
about managing uncertainty. Results are rarely in the
short-term. |
| |
| Second, large companies suffer from “silo” mindset.
There are thick walls between functions and between
business units. In order to encourage breakthrough
innovation, seamless collaboration across products,
across functions, and across business units is needed.
|
| |
| India’s true core competency is her talent base.
With the right mindset, Indian corporations can unleash
this huge force — and we can all benefit. |
| |
 SERVICE MANAGEMENT
V S
Mahesh
Programme director, service managment
University of Buckingham
India is increasingly
being seen as the service provider of the world, where
China is the factory of the world. But although the
country has moved quickly from outsourcing to knowledge
services, it is still factory-centred. |
| |
| The biggest challenge for Indian service providers
will be to manage services differently from factories.
Service-centric organisations need to invert the pyramid
of organisation. In traditional organisations, the CEO
is at the top, followed by the vice-presidents, then the
senior managers and so on. |
| |
| In services, on the other hand, business depends on
what the frontline employee does or does not do.
Therefore, the people in touch with customers should
form the topline and the rest of the organisation should
work towards supporting them. |
| |
| This is difficult to achieve. The high-powered
distance culture prevailing in most organisations – in
India and across the world – means that the people at
the lower levels don’t communicate effectively on what
they need to do their jobs better. |
| |
| Organisations, therefore, need to learn to manage
their employees better, empower them and support them.
Unfortunately, the command-and-control mind-set is still
predominant across most organisations. Few companies
have cracked the code on how to manage people. |
| |
 MARKETING
Jagdish Sheth
Charles H Kellstadt Professor of Marketing,
Goizueta Business School, Emory University
As the
balance of power shifts from the manufacturer to the
retailer, an attitude shift in brand and marketing
managers of consumer product companies is going to
become increasingly important.
They will have to
stop treating the retailer as a pain and start
considering him a customer. Also, increasingly, market
segments will have to be defined by the retailer. |
| |
| Traditional methods of market segmentation, such as
psychographics and demographics, will not be of as much
utility as market segmentation on the basis of retailer
patronage. |
| |
| Such knowledge will also impact marketing
strategies, which will have to become more
pull-oriented, in terms of branding, advertising and
sales promotion. |
| |
| The second change in strategy is a consequence of
the rise of the internet. As backoffice operations and
the value chain becomes increasingly automated, the flow
of operations will have to reverse — companies will have
to drive manufacturing based on customer insights,
rather than depend on capacity-driven manufacturing.
|
| |
| The nature of advertising, and this is especially
true of India, will also change. As New Media becomes
ubiquitous, you will see more and more ads on cellphones
(as text messages) and online, which also means the
capabilities of agencies in TV advertising will become
less relevant — they will need to upgrade their
abilities to match the requirements of New Media. |
| |
| Then there is the rise of the services industry.
Service providers will need to understand the difference
in customer behaviour for services and products. |
| |
| Each purchase is a separate transaction and customer
loyalties can waver. With services, on the other hand,
if a customer is satisfied the first time, he doesn’t
usually shop around. Marketers will now need to pay
attention to the first interaction. |
| |
 FINANCE
Bala Balachandran
J L Kellogg Distinguished Professor of
Accounting Information and Management Kellogg School of
Management
There is no such thing as the “average
customer”. Companies need to understand which customers
are profitable to service, and which customers are a
drain on resources. Often, organisations tend to become
satisfied with what customers are adding to the topline.
|
| |
| But warranty, distribution and special handling
costs, to name just a few, may add up to three to four
times the gross profitability of a customer. If your
support costs are greater than your gross profit, you
will sink – fast. |
| |
| Trouble is, not too many companies track these costs
and attach them to specific customers – they are
dismissed as general costs. Companies need to realise
that the cost of goods sold is the same for every
customer, but the cost to serve (CTS) varies widely.
|
| |
| While customer-centricity should be all
organisations’ long-term strategy shift, tracking CTS
should be an immediate operating strategy. Organisations
need to decide which customers to keep, and which to
discard. |
| |
| In fact, tracking CTS also has implications for
capital investment decisions. Since customers have
different value chains, tailoring channels of
distribution and communication will work towards turning
around some loss-making customers – for instance, some
customers may prefer shopping online, while others will
need brick-and-mortar structures serviced by real
people. |
| |
| Multiple distribution, supply and communication
channels will help companies satisfy their customers’
different needs and offer greater perceived value.
|
| |
 ORGANISATIONAL BEHAVIOUR
Rakesh
Khurana
Associate Professor of Management
Harvard Business School
There is a trend among
organisations today towards lighter, less bureaucratic
structures. This can be seen in the shift from
integrated entities to porous boundaries in the context
of outsourcing functions, alliances and allowing
modifications based on customer demands. |
| |
| But the biggest challenge in the future will be for
firms to gain and retain their legitimacy in society, in
the context of these open boundaries – organisations
will need to be even more careful when considering their
impact on the various people and societies they touch.
|
| |
| Most organisations are particularly susceptible to
hubris – they begin to believe in their self-worth. The
trouble begins when they start considering themselves
autonomous of the society in which they are embedded.
Executives who are not conscious of this interdependence
will find themselves at a disadvantage. |
| |
| If society feels there is a misalignment between its
goals and those of business, business will suffer. And
business executives will find themselves – as they do in
the US today – among the least trusted in society.
|
| |
| Daily scandals in the US make it apparent that there
has been created a subgroup of top executives whose
interests have become unhinged not only from the
interests of society, but also from the companies whose
interests they were guarding as fiduciaries. |
| |
| As we move towards an increasingly global economy,
organisations will find themselves operating in a
variety of environments and institutions, They will be
judged by consumers and if they are found wanting, the
default trust society rests in them will be summarily
removed. |
| |
| When Arthur Andersen’s acts took it outside the
parameters of operation set by society, society took
away its legitimacy and, by default, its right to
survive. Organisations should remember that institutions
are never murdered; they commit suicide. |
| |
 MARKETING
Nirmalya
Kumar
Professor of Marketing and Director, Aditya
Birla India Centre, London Business School
In the
consumer packaged goods industry, the biggest challenge
will continue to focus on a few brands where one can win
against the retailers.
In the B2B world, the
challenge will be to demonstrate value in the face of
tremendous price pressure. In both cases, the push will
be to sell solutions instead of simply selling products.
|
| |
| Selling solutions is about making the customer’s
life easier by taking on a greater part of the process.
By cross-selling products and services as an integrated
package, manufacturers can expand the value-added
market. |
| |
| Solutions include a large service component and so,
they are not comparable. Over time, the seller develops
a better understanding of the customer’s business
processes, and changing suppliers then becomes difficult
and costly. Selling solutions requires taking
responsibility for customer outcomes. |
| |
| For instance, instead of selling gallons of paint, a
seller of painting solutions has agreed to charge
customers for every car it paints and manages paint
shops at automobile plants. |
| |
| Similarly, instead of selling animal feeds to
farmers, a solution seller has promised them gains in
livestock weight. Such commitments require solution
sellers to manage customer processes and increase
customer revenues or lower customer costs and risks.
|
| |
| Many companies see the idea of selling solutions as
a strategy to sell more products at higher prices. They
develop combinations of products and services that work
more or less seamlessly, and call them solutions. Then
they look for customers with problems that may fit their
solutions. |
| |
| That never works. A good solution provider starts by
working with customers to understand their problems
before designing customised solutions. In order for the
solution strategy to succeed, the customer must gain
real value from integration and enough customers must
value this service. |
| |
 MARKETING
Jagmohan S Raju
Joseph J Aresty Professor, Professor of
Marketing, Executive Director, Wharton Co-Sponsorship of
Indian School of Business
One of the biggest
changes the Indian market will see in the next few years
is the forceful advent of organised retailing. This will
force fast-moving consumer goods companies to rethink
their core strategies. |
| |
| Now their buyers will be players who may be more
powerful than the companies themselves. This likely
shift/adjustment of power between the manufacturers and
retailers will result in a scenario that will most
likely require a major change in thinking in the FMCG
sector. |
| |
 MARKETING
Vijay Mahajan
Professor and Holder of the John P Harbin
Centennial Chair in Business, McCombs School of
Business, The University of Texas at Austin
The
coming battle is for the 86 per cent of the world’s
population who are citizens of countries with per capita
gross national product of under $10,000. Finding the
right products and the right strategies to appeal to
this emerging consuming class is the challenge. |
| |
| The Chinese are already ahead in this game, but they
still don’t have enough knowledge about emerging
economies, especially in Africa. |
| |
| Companies will have to come up with products and
services that leapfrog over the lack of basic amenities
in these countries – the absence of running water,
electricity and hygiene, among others. To their credit,
Indian companies are already coming up with products
that would suit such markets. |
| |
| The advantage Indian companies have is that none of
these problems really surprises us – we are used to
them, we are used to dealing with diverse cultures. We
can work around them. Besides, if it can work in India,
it can work anywhere. It is now upto Indian companies to
seize the opportunities available in the 86 per cent
markets. |
| |
 KNOWLEDGE MANAGEMENT
Yogesh
Malhotra
Founding Chairman and Chief Knowledge
Architect, BRINT Institute, LLC, and Professor, Faculty
of Management, Syracuse University
Future
strategic advantage and competitive performance will not
derive from simply adoption and use of new information
and communication technologies. Rather, they will be
determined by smart minds using smart technologies, with
greater emphasis being on smart minds. |
| |
| In the new knowledge management paradigm, smart
minds hold the key to the success or failure of business
systems based upon even the smartest technologies. Some
studies have even found an inverse correlation between
IT investments and business performance. Apparently,
spending more on information technology in itself does
not translate into productivity or performance. |
| |
| Hence, a key responsibility and challenge for
corporate executives lies in cultivating and nurturing
such smart minds that provide perhaps the only
sustainable competitive edge. |
| |
| In a world characterised by continuous, radical and
unpredictable change, there is hardly any competitive
advantage or core competence that is sustainable. This
applies as well to any competitive advantage based upon
IT and information. |
| |
| Therefore, a viable competitive strategy seems to be
one that is based upon making your own knowledge
obsolete before it is obsolesced by the competition or
the environment. |
| |
| As IT and information become more easily accessible
and affordable global commodities, the real competitive
advantage will rest with those who continuously devise
and exploit knowledge-based advantages. |
| |
QUALITY
Subir Chowdhury
Chairman and CEO, ASI Consulting
Group
Indian companies need to make sure that
quality becomes everybody’s business. Right now, the
senior management in most companies – in India and
globally – tend to believe that quality is the
responsibility of the vice-president of quality and his
department. |
| |
| Granted, there are several companies that are
ISO-9000 certified and that are practising Six Sigma,
but in reality, it is just small groups in these
companies that are actually conversant with the quality
issue. |
| |
| Ask the worker on the shopfloor or the marketing and
finance executives and typically, they won’t be able to
tell you what their company’s quality statement means.
|
| |
| This is the main reason why so many companies find,
to their complete frustration, that the huge sums of
money they spent on quality turn out to be such a dud
after just a few years. |
| |
| Three steps can help companies instil quality in the
DNA of their employees. First, emphasise the need to
listen to customers. By this I mean not just about the
person who buys your company’s goods, but internal
customers as well – your colleagues and coworkers, and
your family. At present, people tend to work in
isolation without realising how their jobs impact
others. |
| |
| Then comes enrichment, continuous improvement. If
you’ve succeeded in doing something, look around and see
how you can help others achieve the same. The third step
is optimisation – do it right the first time. Take the
time to make the process and the product right. |
| |
| TQM, TPM, kaizen, poka-yoke and the like are just
tools – organisations need to watch out that they don’t
become so focused on the tools that they forget the
actual goal. |
| |
 MARKETING
K Sudhir
Professor of Marketing, Yale
University
As companies seek to become more
market driven, they shift focus from the product to the
customer. Marketing departments are traditionally the
closest to the customer pulse and, therefore, champion
sweeping changes to execute a customer-focused strategy.
|
| |
| But often, the rest of the organisation is not ready
to deal with those changes. Without buy-in from finance,
IT, HR and other departments, customer-focused marketing
activities do not succeed. Direction from the top
management — especially the CEO — that all departments
should realign, all at once, to execute the new strategy
is critical. A piecemeal approach is a recipe for
failure. |
| |
| The HR department especially needs to change, both
in terms of the type of employees it hires for the
organisation and the incentive schemes it devises.
|
| |
| A customer-focused organisation should favour
employees who innately care about customer needs,
solutions and service; these employees need a different
type of cultural and intellectual attitude, compared to
employees in a product-focused organisation, who tend to
be internally focused and care more about operational
efficiency. |
| |
| HR should also revise performance incentives for
employees. Product-focused managers have little
incentive to cross-sell consumers and offering total
solutions that combine different products, because they
are simply rewarded for maximising own product sales,
profits and market share. |
| |
| In contrast, customer-focused managers will try
various ways of acquiring, retaining and cross-selling
customers in their segment — by tailoring the right set
of products through the right set of channels, through
appropriate promotions in order to increase the
customer’s wallet share. |
| |
 CUSTOMER SERVICE
MANAGEMENT
A “Parsu” Parasuraman
Professor and Holder of the James W McLamore
Chair, University of Miami
Strategic success in
the coming years will depend significantly on customer
service. In an environment where all products and
services are essentially similar and there are dozens of
competing brands —whether for tangible products or
intangible services — it is the interaction with
customers that will set companies apart. |
| |
| But here, companies need to be careful in their use
of technology to interact with and serve customers.
“Technology” in this context is a generic term used to
represent whatever customers might consider to be a
radically different way for them to interact with
companies, and purchase/obtain products or services from
them. |
| |
| This is not about CRM software or technology that
companies might use behind the scenes to segment,
target, or “manage” customers. Still, a number of
companies are jumping onto the technology bandwagon,
primarily to reduce costs. But they forget that
technology takes away the “high-touch” element that is
still expected by sizeable segments of customers. |
| |
| Another danger with the rapid espousal of technology
is that companies fail to recognise that not all people
are equally “technology-ready”. There is a distinction
between being technology-savvy and being mentally ready
to embrace customer-interface technologies such as the
Internet, self-service checkouts in retail stores, ATMs
and so on. |
| |
| There is a lot more to customer adoption of
technology than merely having the technical competence
to do so. One of the biggest strategic challenges for
companies in the coming year, therefore, will be to
determine what type of interface — high or low tech, or
some combination thereof — will be more effective for
which customer, in what transaction.
|
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