‘Break the mould before it’s too late’ What Indian Business groups need to change?

‘Break the mould before it’s too late’ What Indian Business groups need to change?

The industrial landscape of India is characterized by diversified business groups. The Indian economy has undergone a radical shift both structurally and operationally since the economic reforms were introduced by the Government of India in 1991 and where could this be more evident than the Indian business houses. But sadly enough, numerous companies still exist where members of family have been employed since several generations. The question which stems up here is that how ideological is it for a company which boasts of being the emblem of ethics and professionalism to keep its top management manned by only a particular religion and worse family members? Is it just a coincidence or is it a foretaste of the corporate hierarchy of most of the Indian family run business houses. Off late this phenomenon has become quite common especially in family owned companies wherein vital positions on the board are held by family members or members of the same community.

The work environment and business attitude at these corporate houses is in serious need of an overhaul. The business groups which were tolerant earlier regarding the efficiency and effectiveness should adopt tougher down to business measures. They need to comprehend that it can be very difficult to remain profitable for a company while having a charitable attitude toward business. Seeds of accountability and professionalism need to be cultivated and the work environment should be more proactive.

Another common issue doing rounds among the echelons of the family run groups is of gerontocracy and succession planning. It’s not acceptable for a director, howsoever experienced he is, to hang on to a crucial position till his death. Companies cannot afford to keep its young Turks, hungry for promotion and recognition, waiting in queue just because the senior management is not willing to vacate the position. India Inc. has a long way to go for putting in place its succession planning which greatly influences the market valuations of the companies. In some cases this has even led to intra family disputes.

Many a times, one can be an audience to the strife between pride and economics. The lamenting question here is how prudent is it to hung on to sick, unprofitable units just to protect the company ideals? Will it be sensible to divest or harvest the ailing unit by putting stakeholders’ interest before inflated egos?

The answer indubitably is YES. Profits, the main motive behind any business, should never be sacrificed for clinging on to the much fabled traditions/ ideals of the company at least when there is no long term harm to the company’s bottom-line.

In his research paper “Family Business Groups in India: A Resource-Based View of the Emerging Trends”, S. Manikutty[1] acknowledges that the shortcomings of business groups are owed to the following reasons “…lower salaries as compared to MNC's, perceived lack of scope for initiatives, a culture that was seen as autocratic, sycophantic, emphasizing personal loyalties rather than professionals, lack of scope for application of professional management tools and techniques…”

Unfortunately several business groups have been unable to break the mould in which they were cast decades ago by their founders. Induction of fresh talent is still resisted at crucial positions. The risk taking ability, unfortunately, is becoming stinted. Its time they look more charily at their resource mix to decide on the course of the portfolio change rather than merely going by the hoary, often anachronistic company traditions

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[1] S. Manikutty is a professor at the Indian Institute of Management, Ahmadabad, India.

GLOBALIZATION: IS IT WORTH THE RISK??

The Indian economy has undergone a radical shift both structurally and operationally since the economic reforms introduced by the Government of India in 1991. In this era of cutthroat  competition, where scale  and competence have become the buzzwords, the companies have realized the need to grow beyond the local boundaries where the resources are depleting fast, customers are becoming more demanding , markets increasingly competitive and inter firm rivalry turning hostile.  Globalization seems to be a panacea for the companies as they wrestle to gain competitive advantage. The recent spurt in the M&A activities by Indian companies is a testament to this fact.  Despite the recent financial meltdown, the pressure on firms to globalize their foothold is building up, thanks to the glorification of being global by media and even the investors. The inevitability of this fact might even make the best of the corporate strategists to overlook the mistakes committed by even the most celebrated companies in the past. The German auto giant Daimler-Benz and the US auto behemoth Chrysler, merged to reap the promised benefits which might arise out of the common supply chain integration. But they were unable to acknowledge the fact that they were different in almost every respect be it culture, operating practices or the procurement of materials. The end result Jurgen Schrempp the mastermind behind this deal had to resign under shareholders pressure and Chrysler ultimately got sold out to the private equity giant Cerberus. 

In an attempt to outsmart the rival companies by gaining economies of scale and scope, sometimes managers seem to overlook the vital questions that 

• Whether there are potential benefits arising out of the deal?

• Will the arising profits surpass the costs involved? 

• Does the management have the necessary expertise and experience to successfully execute the deal?  

Just because a strategy has worked for a particular company or industry, doesn’t make it imperative that it will work for the company too. Ben Q, the Taiwanese electronics giant like several Japanese companies in order to venture into foreign markets, entered into a deal with the German mobile manufacturer Siemens AG, creating one of the world’s largest mobile handset makers BenQ Mobile, in order to create a global brand name, and access to Siemens superior R & D and access to European markets.  But the incompatible cultures, different work practices , lukewarm product response, poor sales and recurring losses  forced BenQ Mobile to file for bankruptcy. The myopic view of the strategists created serious problems for the parent company. To circumvent increasing local competition and to realize economies of scale, even companies in the formerly  fragmented and localized industries like retail, consumer banking and insurance,  are relying increasingly on globalization. In some cases this has done little or no good to the merging entities. Companies fail to acknowledge the fact that even the global customer has distinct needs and customization  rather than standardization is what a customer expects out of a contact. It’s no wonder that even companies like Wall Mart, McDonalds and FedEx had to amend ways and acknowledge the fact that company need to reconfigure even their “prized strategies”  as they ventured into diverse geographical markets. I do not intend to mean  that globalization strategies are flawed. There are innumerous path breaking stories where company’s prized handsome returns, but the need of the hour is that the companies involved must not forget what their core competencies are i.e. what are they best in and whether apart from theoretical on-paper benefits what will be the realizable practical returns a company can gain out of it. 

The new mantra : customer evangelism!!!!!

Evangelism marketing is an advanced form of word of mouth marketing in which companies develop customers who believe so strongly in a particular product or service that they freely try to convince others to buy and use it. The customers become voluntary advocates, actively spreading the word on behalf of the company.
Evangelism marketing is sometimes confused with affiliate marketing. However, while affiliate programs provide incentives in the form of money or products, evangelist customers spread their recommendations and recruit new customers out of pure belief, not for the receipt of goods or money. Rather, the goal of the customer evangelist is simply to provide benefit to other individuals.
As they act independently, evangelist customers often become key influencers. The fact that evangelists are not paid or associated with any company make their beliefs perceived by others as credible and trustworthy.
Evangelism literally comes from the three words of 'bringing good news' and the marketing term justly draws from the religious sense, as consumers are literally driven by their beliefs in a product or service, which they preach in an attempt to convert others
In their book, "Creating customer evangelists: How Loyal Customers Become a Volunteer Sales Force", Ben McConnell and Jackie Huba outline six steps to creating customer evangelists:

• Customer plus-delta (Continuously gather customer feedback)
• Napsterize knowledge (Freely share your knowledge)
• Build the buzz (Create intelligent word-of-mouth networks)
• Create community (Encourage communities of customers to meet and share)
• Make bite-size chunks (Devise specialized, smaller offerings to get customers to bite)
• Create a cause (Focus on making the world, or your industry, better)

The 11 P's of marketing !!!!!!!!

1. Product: The product aspects of marketing deal with the specifications of the actual goods or services, and how it relates to the end-user's needs and wants. The scope of a product generally includes supporting elements such as warranties, guarantees, and support.
2. Pricing: This refers to the process of setting a price for a product, including discounts. The price need not be monetary - it can simply be what is exchanged for the product or services, e.g. time, energy, psychology or attention.
3. Promotion: This includes advertising, sales promotion, publicity, and personal selling, branding and refers to the various methods of promoting the product, brand, or company.
4. Placement (or distribution): refers to how the product gets to the customer; for example, point of sale placement or retailing. This fourth P has also sometimes been called Place, referring to the channel by which a product or services is sold (e.g. online vs. retail), which geographic region or industry, to which segment (young adults, families, business people), etc. also referring to how the environment in which the product is sold in can affect sales.
5. People: Any person coming into contact with customers can have an impact on overall satisfaction. Whether as part of a supporting service to a product or involved in a total service, people are particularly important because, in the customer's eyes, they are generally inseparable from the total service . As a result of this, they must be appropriately trained, well motivated and the right type of person. Fellow customers are also sometimes referred to under 'people', as they too can affect the customer's service experience, (e.g., at a sporting event).
6. Process: This is the process(es) involved in providing a service and the behaviour of people, which can be crucial to customer satisfaction.
7. Physical evidence: Unlike a product, a service cannot be experienced before it is delivered, which makes it intangible. This, therefore, means that potential customers could perceive greater risk when deciding whether to use a service. To reduce the feeling of risk, thus improving the chance for success, it is often vital to offer potential customers the chance to see what a service would be like. This is done by providing physical evidence, such as case studies, testimonials or demonstrations.
8. Personalization: It is here referred customization of products and services through the use of the Internet. Early examples include Dell on-line and Amazon.com, but this concept is further extended with emerging social media and advanced algorithms. Emerging technologies will continue to push this idea forward.
9. Participation: This is to allow the customer to participate in what the brand should stand for; what should be the product directions and even which ads to run. This concept is laying the foundation for disruptive change through democratization of information.
10. Peer-to-Peer: This refers to customer networks and communities where advocacy happens. The historical problem with marketing is that it is “interruptive” in nature, trying to impose a brand on the customer. This is most apparent in TV advertising. These “passive customer bases” will ultimately be replaced by the “active customer communities”. Brand engagement happens within those conversations. P2P is now being referred as Social Computing and is likely to be the most disruptive force in the future of marketing.
11. Predictive modeling: This refers to algorithms that are being successfully applied in marketing problems (both a regression as well as a classification problem).