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Learning @ Wharton with an India perspective (Notes from Class) PURVI SHETH, Vice President, Shilputsi Consultants – India/ USA The author is currently pursuing a Professional Development program at
the Aresty Institute of Executive Education, Wharton Business School. The following is an amalgamation of student reflection, ideas gained
through participant interaction as well as reference from class
material. Any information or opinion contained herein is personal and
restricted to specific and partial experience. ----------------------------------------------------------------------------------------------------------- Need for Mid career academic intervention It’s usually on a slow Wednesday afternoon, when the week seems never ending and one is surrounded by the limitless monotony of work, that there is an awakening to expand one’s horizon. For me, when this wake up call reappeared several consecutive Wednesdays and began to gradually frequent itself on many other days of the week, I felt it was time I treated myself to other perspectives or maybe just endorse my existing views on management and business. After a great degree of introspection and some Google searching, I concluded it was Executive Education time! Peter Drucker said “there is one pre requisite for managing the second half of your life: you must begin doing so LONG BEFORE you enter it!” To study newer concepts and theories, while simultaneously seeing them being applied to real corporate experience was the challenge. My focus was on strategy and leadership. Some research and applications later, I found myself on a plane from Mumbai to Philadelphia to help myself to slices of the Wharton Business School intellectual pie. The Wharton Methodology I believe the
aim of executive development through mid career education should be to
not only understand the complexity of business issues, but also the
practical applicability of their
management to your workplace through creative and breakthrough problem
solving. In the separate modules that I have attended at the Wharton business school, the methodology has been a combination of instructive teaching and highly participative learning formats like group discussions. Actual case studies and ideas that are validated by research are shared. Participants from varied businesses, functional expertise as well as different geographies temporarily reside in one location and enable valuable osmosis of ideas and views. Academic directors and professors bring a multeity of teaching, research and consulting expertise adding to the diversity profile of the classroom. Pre reading and course reading material is extensive and familiarity with it is recommended to leverage maximum out of the program. Content is laced with case studies, articles, relevant book excerpts etc. The view of coaching is “teach to need” and to find value in work for true and full benefit of the audience. Programs and curriculum could be chosen depending on the objective of obtaining the training and tutorship. The durations range from single day certificates to longer term education. I am sharing below some key classroom learnings and contemplation in the specific context of the Indian corporate turf! WHAT IS STRATEGY? “Strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value” - Hammel and Prahalad The reality of strategy is the pattern of resource
allocation. Every
intended strategy is partly realized and partly unrealized. It is this
emergent strategy that forms a learning point for the NEXT intended
strategy. Globally, companies use their competitive advantage to set goal and structure of policies and achieve success in a specific marketplace. However, sustaining success is difficult. Leaders of an era are no longer winners of today. Sunlight soap, Ambassador cars and EC TVs some of us grew up with have been replaced by other brands! In India, we have seen this change, especially in the last decade. In established industries like consumer products, corporate hegemony has radically shifted from just branding and distribution capabilities to competitiveness in innovation and price. Shelf space is shared and consumer spending is spread over a wider range of available products. Companies do not have the luxury of time – there’s always someone reverse engineering the leader! Factors that affect changes range from economic alterations to diffusion of technical know how to new competition with unique regional advantages. This last one is especially exemplified by the growing popularity of Ayurvedic products all over the world. On my way back from the USA in November, I noticed that P&G and Himalayan product ranges were both sold at the Dubai international airport! Organisations become vulnerable to market changes for a number of reasons. Resistance to change and inability to adopt new methods of competing can form the difference between exploring and exploiting the market. Apart from a motivating and actionable vision statement, an important aspect of winning is to do an industry analysis in order to understand profit drivers and industry evolution. The questions to ask are “what is happening to barriers of entry in my business? What alternatives are available to my customer? How do I manage my intermediaries?” Finally, strategy is about setting the architecture of the business. Michael Porter says “A company’s choice of a new position must be driven by the ability to find new trade offs and leverage a new system of complementary activities into a sustainable advantage” STRATEGY FOR THE SERVICE INDUSTRY Given that India is at the helm of developing a benchmark for the service industry in emerging markets, it was essential to know more about vision and focus for service strategy. With time, we have seen commoditization of product value and a transition to expansion of service value. The service business is differentiated and characterized by
In the service business, if you don’t generate capacity today- you may never get it again. Productivity is a big piece of the service puzzle that needs to be solved. In the manufacturing sector, there is economic efficiency in growing bigger where cost can be spread over increasing units. The importance of achieving service excellence lies in the fact that a customer needs to be with you for sometime to amortise the costs of customer service and delivery. Since the popularity of corporate destinations like India are felt in its’ significant cost advantages, it is very tempting for organizations to make decisions that are perceived to “optimize” cost. However, cutting corners in the name of optimization can lead to deteriorating service quality and unsatisfied customers. It is imperative to convert an unhappy customer from a zone of defection to that of affection and ensure retention. Sometimes, even generally satisfied customers are ones that a service business stands at risk to lose. The question is “Where do you create value for your clients and what are your customer service outcomes?” HDFC being a pioneer in the home loans market, put in place a higher level of customer than what the average Indian customer was accustomed to. This was done although there was no competition and it had every chance of optimizing. Examining the airline sector in India: Liberalization and opening up of the skies has changed the industry format. Companies are aiming to understand customer needs, pricing and packaging their service offering at distinctive levels simultaneously using effective marketing and communication tools. Low budget airlines like Air Deccan manage expectations by trying to not over promote and under deliver on service frills while larger airlines work to woo comfort seeking travelers. Even the railways are beginning to show customer orientation through introduction of computerized reservation and e ticketing! CROSS BORDER STRATEGY Apart from observing strategies of several international companies entering the Indian market, it is also relevant to Indian businesses (pharmaceuticals, technology etc) that are beginning to assert and develop their presence in other territories. Indian companies are at a juncture where they need to ask pertinent questions about their cross border plans. The first question these businesses can ask “Does your strategy have legs- can it move to another geography? What are the determinants of a global strategy?” Some ideas from Managing Across Borders: The Transnational Solution on terminology for global strategy: a) International Strategy – entails exploiting markets where local suppliers do not have capabilities to provide the same product or service. There is little adaptation to local needs with products developed at headquarters sold directly in these markets. The skills in these markets are low enough to not compete and competition in itself is low. This was seen in India in the 70’s with Coca Cola! b) Multi Domestic strategy – this requires customizing the product and marketing strategy to national demands. The basic product maybe transferred from the home country. The pressures for cost reduction are low and there is high local responsiveness. This strategy was seen adopted by many companies that are the present in the Indian market. Several food companies like Nestle, Cadbury and Fritolay have done this by incorporating distinctive local flavours like tamarind, kalakand and chaat masala to their basic products. Pillsbury even launched different types of wheat flour grinds (course, fine, medium etc) according to demands in various Indian regions! In the service sector, mutual funds are a good example of this type of strategy. And of course, HLL launched Fair and Lovely decades ago to cater to the distinctive Indian demand. c) Global Strategy – involves exploiting the experience curve and location economies. It is usually the lowest cost strategy, utilizing product standardization. This could be recognized in businesses like pens or cigarette lighters. There is no or very little product deviation from one foreign region to another. d) Transnational Strategy – operates under the assumption that core competencies could emerge anywhere from operations. This type of strategy allows flow of skills and product / service offering worldwide in the firm. It is implies scalability and is best applied where there is pressure for cost reduction as well local market responsiveness. The automobile sector would be a good example of such a strategy. LEADERSHIP AND STRATEGIC THINKING The questions to ask yourself are: “How do you prepare people and teams to make strategic decisions? How do you align individual and team leadership with organization goals? How should you build leadership to enable and foster effective thinking in the organization?” Leadership capabilities make great differences in
company performance particularly in a dynamic market environment and
under uncertainties. However,
it is not just the CEO but also the quality of management teams that are
good predictors of company performance. Here are notes for leaders to aid strategic thinking in permeating across the organization:
In the Indian context, leadership at large diversified groups have shown capability in pulling strategic decisions and their implementation together. In the last decade, these groups have emerged as winners in business strategy and execution in India and abroad. For example, at a historically traditional Indian diversified group, clear articulation of vision and conveying of strategic intent helped leadership to adopt radical retirement schemes. These were done with the objective of redesigning and restructuring the organization to suit new demands of the business and market, as well as to accommodate new talent. Separately, another pharmaceutical company in India focused on growth through acquisitions in areas of core competencies and divestments in non core businesses. The enabler for leadership here was deciding decisively, specifying a strategy and reinforcing values. ISSUES IN STRATEGY EXECUTION No strategy can be met with success without right implementation.
Merits of
good execution:
Common errors in strategy implementation:
Take the case of an Indian company that recently tried to deploy a company wide initiative on variable pay. While the scheme was designed with extensive industry benchmarking as well as near perfect precision by the corporate Human Resource department, its implementation was left to the SBU heads. These business heads were not all in agreement with the new policy largely because the strategic intent of the change from the old system wasn’t clearly communicated to them. Besides, there didn’t seem to be any explicit game plan on the method of enforcement. Further, there was no particular motivation for business heads to put the new system in place especially at those businesses that were doing well and employees were perceived to be motivated. As a result, the scheme was only partially executed in the first year and finally kept on hold in the following year till a better implementation methodology was devised! STRATEGY AND ROLE OF ALLIANCES “A strategic alliance is a cooperative arrangement between two or more organizations designed to achieve a shared strategic goal”. There are several reasons to form alliances. Share rewards/risk – businesses that typically have uncertain futures and unknown outcome, would use an alliance to share benefits and liabilities as the case may be. Joint ventures in the financial service space in India like JM Morgan Stanley and DSP Merril Lynch come to mind when speaking of such alliances. Market entry or extension – in the 90’s we saw several multinational companies partnering with Indian companies to gain advantages of local market knowledge, distribution capabilities and existing resource infrastructure. Memories bring back the Pepsi -Voltas alliance, the P&G – Godrej venture, the GE – Godrej alliance and many more. Share technology and innovation – This is especially true for specialized businesses like biotechnology where research and product development can be done jointly to pool in a variety of capability. The Ranbaxy Eli Lilly partnership is one that can be attributed to this reason. Response to regulatory issues- In India, with FDI in several areas still under question, global companies in sectors like insurance, real estate and retail have formed strategic alliances. Telecom in the early days post liberalization was another such example. However, there are challenges in partnering. Maintaining focus and boundaries –In the early ‘90s a US based MNC and an Indian company had a strategic alliance in the personal care product range. However, they parted ways when they were unable to keep a joint focus or manage lines of operational, management and resource control
Identifying strategic complementarity – A large Indian group and a leading American photocopying company that formed a successful allliance, lost their strategic complementarity over a period of time. The Indian group did not need to continue in that business and their interest lay in another direction. It just didn’t make sense to continue the venture. Organization system complementarity - One of Americas largest diversified multinational company had a venture with a entrepreneurial family owned company in western India to manufacture medical equipment. The venture ultimately could not continue thanks to constant differences in in organizational processes and culture. Strategic Continuity – A lighting company in Gujarat that came together with a multinational company to sell lighting products finally ended in a take over when the strategic continuity of the alliance became redundant. Precision in agreement – recently a European healthcare company and an Indian pharmaceutical group had to call off their alliance as the agreement did not precisely elucidate the objectives and goals of both parties coming together. The MOU itself was disputed to begin with by the partners! Michael Hammer said “ no matter how tough it is to get different departments to work together, getting different companies to collaborate is even harder” ------------------------------------------------------------------------------------------------------- My Wednesday and other afternoons are often spent reading these and many more notes! The effort to get exposure to newer vistas, ideas, impressions, estimations, opinions and conclusions is a continuous process. By sharing experiences and gaining access to the wisdom of many, one can uncover the power of group learning in diversity. In the words of Peter Drucker “ Do not try to
change yourself – you are unlikely to succeed. Work to improve the way
you perform”. -The author is vice-president, Shilputsi Consultants, India/USA |
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