Strategies that India Inc must follow
Meenakshi Radhakrishnan-Swami | January 02, 2007
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
Vijay Govindarajan, Professor, Tuck School of Business Dartmouth College
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.
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 100,000 car.
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.
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.
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.
true core competency is her talent base. With the right mindset,
Indian corporations can unleash this huge force - and we can all
V S Mahesh, Programme director, service management University of Buckingham
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
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.
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.
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.
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.
Jagdish Sheth, Charles H Kellstadt Professor of Marketing, Goizueta Business School, Emory University
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.
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.
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.
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.
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
there is the rise of the services industry. Service providers will need
to understand the difference in customer behaviour for services and
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.
Bala Balachandran, J L Kellogg Distinguished Professor of Accounting Information and Management Kellogg School of Management
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.
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.
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 varies widely.
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
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.
distribution, supply and communication channels will help companies
satisfy their customers' different needs and offer greater perceived
Rakesh Khurana, Associate Professor of Management Harvard Business School
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.
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.
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.
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
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.
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.
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.
Nirmalya Kumar, Professor of Marketing and Director, Aditya Birla India Centre, London Business School
the consumer packaged goods industry, the biggest challenge will
continue to focus on a few brands where one can win against the
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.
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.
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
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.
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.
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.
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.
S Raju, Joseph J Aresty Professor, Professor of Marketing, Executive
Director, Wharton Co-Sponsorship of Indian School of Business
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.
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.
Mahajan, Professor and Holder of the John P Harbin Centennial Chair in
Business, McCombs School of Business, The University of Texas at Austin
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.
Chinese are already ahead in this game, but they still don't have
enough knowledge about emerging economies, especially in Africa.
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
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.
Malhotra, Founding Chairman and Chief Knowledge Architect, BRINT
Institute, LLC, and Professor, Faculty of Management, Syracuse
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.
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.
a key responsibility and challenge for corporate executives lies in
cultivating and nurturing such smart minds that provide perhaps the
only sustainable competitive edge.
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.
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.
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.
Subir Chowdhury, Chairman and CEO, ASI Consulting Group
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.
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.
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
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.
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.
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 optimization - do it right the first time. Take
the time to make the process and the product right.
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.
K Sudhir, Professor of Marketing, Yale University
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.
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.
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.
HR department especially needs to change, both in terms of the type of
employees it hires for the organisation and the incentive schemes it
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.
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
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
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.
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.
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
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.
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.