My Journey as a consultant - 5

 Two Early Clients and Lifelong Association

Early in my career as a management consultant in 1984, I worked on assignments with two well-known and respected entrepreneurs in Hyderabad. These assignments blossomed into lifelong relationships with the entrepreneurs, which gave me immense satisfaction and a firm conviction that I was on the right track. Successful consulting businesses are built around such lifelong associations established through building trust and adding value to the business over time. Here in brief are the actions that led to career-changing associations for me and my associates.

 

They were much older Individuals and came from two opposite ends of the entrepreneur spectrum. One was a technocrat with foreign education coming from a well-to-do community from the interior of Andhra Pradesh. The other was from a Gujarati trading community from the Kutch region whose family had settled down in Hyderabad several generations ago and had an established traditional trading business. He was not formally educated beyond high school or intermediate level but the first person from that family who decided to venture into manufacturing in engineering. Both were very successful in their respective businesses. Both had different approaches to their business. The technocrat understood technology and focused on developing new products and launching them every year. The businessman used his acute sense for managing money and using technology to establish niche businesses.

Mr D V S Raju was the founder of Elico Private Limited in 1962. He had a background in instrumentation engineering and was a first generation entrepreneur. After going to the UK for higher education, and having worked with a large electronics company there, he decided to return to India and start his own business. He found that the National Research and Development Council (NRDC) had developed several products and offered the technology to potential entrepreneurs to commercialise these products for a nominal fee. Mr Raju bought some of these basic designs along with their prototypes and, using his engineering skill, made them into commercially marketable products. Since most of his products were cheaper substitutes to imported ones available in those days, his company, Elico Pvt Ltd, became an established player in their business very soon. 

I had first met Mr Raju around 1979 as my customer, when I was working for a public sector company supplying imported electronic items required by the electronics industry. Later, when I started on my own, I contacted him around 1984 to look for business based on my unique value proposition. Since I had an electronics engineering background he felt I would be able to understand the technical nuances of his business and decided to hire us.

He had the same set of problems that have been mentioned in my earlier posts (see my blog My Journey as Consultant - 3). After my feedback, he decided to engage me on a regular basis for addressing various problems of management that he was facing. During this period he also decided to diversify into manufacturing other electronics products unrelated to instrumentation, like telephones, speakers and personal computers, and involved me with those diversifications. Since he was not exposed to the emerging new technologies, he took my help to connect with some of my classmates from IIT Bombay who were offering technology consultation based out of Bombay and Pune, and took me with him to various government organisations involved in approving these projects in New Delhi to present these project proposals. 

What I discovered during this time was that he was trusting me more than his regular employees. Apart from this, he started introducing me to other business units and local government agencies promoting small and medium businesses by registering me to attend their seminars on behalf of Elico Pvt Ltd. This led to wide exposure for me among small and medium business units and I got small assignments from some of them. He went one step further and invited me to join the Rotary Club of Hyderabad North, where he was a founder member since 1966, and got me admitted to that club in 1986. This club had many entrepreneurs operating from the same or nearby industrial estates and many of them approached me for help. 

As he got older, and found managing the day-to-day affairs of Elico strenuous, he handed over the business to his nephew and focused his energy to working with Instruments Society of India. When he took over as its President, he invited me to help him perform his role effectively. Even after I had moved on to look for and get work from large corporates from 1993, when the Indian business environment changed giving consultants like me opportunities, he continued to call me to help him in some aspects of his work life, which he never stopped till he passed away in 2005. He always introduced me as his Management Consultant, emphasising that he valued me as an important person in his life, like one does with a lawyer or doctor or chartered accountant or an architect, at a time when management consultants were not recognised like the other professions with any legal status.

Mr Bhanu Sanghani was a soft-spoken businessman who founded Unicorn Industries Pvt Ltd in the early 1970s when Amul, the famous milk brand from Gujarat, was looking for Indian suppliers for setting up new milk plants across the country on behalf of National Dairy Development Corporation. He had met the legendary Verghese Kurien who encouraged him to set up the facility to fabricate stainless steel products required for dairy and other food industries since the imported equipment was very costly. Mr Sanghani, with his business acumen and strong networking ability, succeeded in building Unicorn Industries as a name to reckon with for manufacturing stainless steel equipment not only for the dairy industry but also for other food and beverages industries which needed them.

I literally bumped into Mr Sanghani over a cup of tea during a seminar organised by the Hyderabad Management Association. After self-introduction and exchange of information about each other, he gave me his visiting card and asked me to call him and meet in his office. The way he talked to me, he sounded very soft spoken, very inquisitive and always looked eager to learn. I was quite impressed with him. 

After a couple of days, I called him up and met him at his office at the appointed time. He delved deeper into the kind of work I had been doing and was keen to understand the value-pricing model and how I used it to ensure that the engagement with a client was beneficial to both. During this meeting, he also expressed his disappointment with his inability to study beyond intermediate level and made sure all his four sons went to college. He even encouraged two of his youngest sons to go abroad and get qualified in some specialisation of their interest. 

All his sons were involved with his business at the time I met him. He had already diversified into other businesses and the eldest son was handling that project. The second son was actively involved in running the dairy equipment manufacturing plant and he was thinking of helping the last two to start a new business based on their interest acquired abroad. He introduced me to all his sons and I was wondering why he was sharing all such information with me. Then he said he would call me one of these days with a specific aspect of his current business and take my help. After a few weeks, I got a call from his office and, when I reached there, found his second son in discussion with his accountant on how to get proper management information quickly from their accounting information. He posed his problem to me, saying that, though they maintained all the books of accounts manually, they did not get any financial analysis done fast enough, and ended up with guesswork to make business decisions. That was the time personal computers (PCs) had entered the market and I had a few associates who had developed financial accounting software for use by small and medium businesses. (How I got to know them and built up a business around the use of PCs for small and medium business is a separate chapter in my life.) I suggested that they should use PCs to achieve their purpose. At Mr Sanghanis' request, I undertook to build a good management information system in association with one of these software developers. Thus started my association with Mr Sanghani and his sons. 

A few months after completing the first project, Mr Sanghani called me asking if I could help his third son to put together a project report for his business idea, and also some other ideas he had which were unrelated to his current businesses. Thus I kept getting work from him at regular intervals. 

A few years later, when he had decided to step down from all his current businesses and hand over the day-to-day operations of all the businesses to his four sons, Mr Sanghani asked me to be available when the sons met, to guide them how to run their businesses the corporate way instead of like a typical family-run business. During my first meeting, I noticed that the four sons were pulling each other in different directions to run all their businesses. I ended up giving them some gyaan on how they should look at their roles as financial stakeholders of all their businesses and have each one of them manage one business of his interest and be fully accountable to the stakeholders. Each one of them would be paid for his job as a CEO for his business according to the market salary that they would have paid a professional if employed, and all of them would get a share of the profit from each business in the form of dividends and support each other where needed to ensure all the businesses were run successfully. They liked the idea and decided to follow my advice. 

I moved on from there to other assignments and was later told by one of the sons that they had implemented my suggestion totally and it was working well. Today Unicorn Industries has grown to become a large business house with interests in many other areas and the four brothers are still managing it the way I had advised and remain united. Recently I found similar advice being given to large family owned companies by many consultants. 

In the meanwhile, Mr Sanghani had become very close to me on a personal level. He started an NGO to promote education-related activities and travelled extensively. In order to fund the NGO, he started another new business involving export of floriculture products, using the profits from this business to support the NGO. He was good at networking and connected with educationists all over India and abroad to share his ideas and take their help where possible. He got me associated with his NGO in the early stages for formulating his ideas into a report which he could use and kept calling me for guidance when he needed it.

Apart from this, Mr Sanghani also arranged for me to address his business community which, as he put it, was languishing due to their shopkeeper mentality. He wanted me to expose them to technological and other changes which required them to change and adopt. This exposed me to the traditional business community who never thought an outsider like me could be of any help. But soon after my round of addresses, I started getting requests from some of those businessmen to help them grow. 

One day, Mr Sanghani shared his thoughts on why he was focusing on education so much, when he himself came from a community which valued making money through business more. His view was that money is chanchal and could not stay at one place all the time but education is solid as a rock. Once you acquire it, it will remain with you. That is why he had more respect for educated people and made sure his sons, unlike him, got properly educated. This, he said, was the reason why he valued my association all these years. I was very humbled by his words and kept wondering where he would have been if he was educated. He had grown fond of the South Indian snacks and South Indian coffee that my wife prepared, and would drop in to my home once in a way for breakfast specifically for this. He continued to stay in touch with me even though I had stopped working with small and medium businesses post 1993, until he passed away in the early 2000s.

Both Mr Raju and Mr Sanghani were instrumental in helping me believe that I was on the right path in my approach to work and helped me to mentally sustain my faith through bad as well as good times. And they were both amazing entrepreneurs coming from different backgrounds but left behind solid institutions. I met Mr Raju’s nephew a few years after he passed away and he insisted I visit his factory which he had grown to new heights and sent his car to pick me up. He said I had helped establish a base on which he could build his business and it had become a global supplier of high-tech instrumentation. 

Similarly, I later met one of Mr Sanghani’s sons who told me that the project for which I had helped prepare the report had been sold to a global conglomerate for a huge sum and he was now in charge of managing the family finances in the manner I had advised them so many years earlier!!

In my next post, I shall share my encounter around 1984 with a self-taught computer professional in an assignment referred by a bank, and how we together built up a business around getting small businesses to use PCs as important tools to run their businesses.

My Journey As Consultant - 4

 Two Early Major Assignments and Insights Learnt.

Let me share the excitement of two major assignments, early in our consulting career, which gave us wide exposure to product marketing. These assignments also honed our business development efforts for our unique service model of management consulting which became a great hit with prospective clients. While we were getting small assignments with low yields per engagement till then, these two assignments brought substantial billing that matched our earning potential. 

Of the two, one was a new electronics components manufacturer and the other was a medium-sized two-wheeler manufacturer based out of Hyderabad promoted by the AP state government. The lessons we learnt from these assignments stood us in good stead all through our consulting career and will be of value to readers of this blog. 

Professional Grade Components Ltd. (PGCL) was a new entrant in the manufacture of Carbon Film Resistors (CFR) and Metal Film Resistors (MFR). It was set up around 1983. The company was promoted by two technocrats with manufacturing background in a large public sector electronics company based in Hyderabad along with a businessman dealing in electronics products being supplied to the electronics industry. They had appointed as Chairman of PGCL an eminent former CEO (let me call him AML) of a major consumer product company who was also, post retirement, a member of the Board of Governors of Administrative Staff College of India (ASCI).  Mr GVS Murthy took me along to meet him in another company where he was associated as an adviser. AML immediately recognised me as he had been  instrumental in selecting me as marketing faculty in ASCI and had received good reports about my work there. His first comment was that ASCI had lost a good professional in my leaving and he knew the reasons for my leaving  which made him unhappy with the  management. I saw that the meeting had started on a positive note and I explained to him my new avatar as a management consultant in association with two other associates. When he found that I had an electronics background, he asked me if I could conduct a market study for electronics components to assess demand and give recommendations for launching a product. Since I had an early background working in the electronics industry and a marketing background I immediately said yes. He arranged for me to meet the MD of PGCL and his team to get a briefing and finalise the terms of reference and a contract.

During the meeting with the PGCL MD and his team I noticed that, while all of them had a very good background in manufacturing and technology in the electronics industry, they had no one with a marketing background in the team at that stage. They had already invested in an imported plant with a huge capacity to manufacture both consumer grade CFR and professional grade MFR. CFRs were used in consumer products like radios, television, etc. and MFRs were used in industrial electronics and military and space applications. In those days, the Department of Electronics was the nodal department giving licenses and other permissions to set up new manufacturing facilities for the electronics industry. They had allowed a large number of small and medium units to manufacture these products as they were considered to be import substitutes, which was an important consideration for licensing in those License Permit Raj days. After some initial discussion, the PGCL MD agreed to my suggestion that I undertake both secondary data collection from published sources as well as primary data collection from both the end-users and the electronics market supplying these industries. We agreed on my travel to a few major cities and smaller towns across India for field work and acquiring certain government reports and other publications having information on the electronics industry in India. Keeping in mind the amount of work involved for me, and the time it would take to get all the data from both primary and secondary sources, they agreed on the substantial fee which I indicated to cover my time and travel costs. I was given 45 days to get back with my report giving my findings and recommendations for a marketing strategy to launch the product. Since I needed money to start work and travel, they also agreed to 50% advance, with the balance payable on submission and acceptance of the report and recommendations.

First, I spent a few days poring over the secondary data available and to my surprise noticed that PGCL’s installed capacity was four times the entire effective demand for these products in the Indian market as available from the published sources. At the same  time, the total approved capacity for small and medium units for these products was ten times the effective demand projected in the next 5 years! I parked this information in my notes and went on my field work to get data from both end-users and dealer markets  located around Bombay, Pune, Ahmednagar, and New Delhi. These field data also confirmed the huge supply against effective demand within the country, apart from some of the trade practices which indicated that these components were  now sold like commodities instead of speciality technology products. 

Finally, when the time came to make  my report, I decided to first sensitise the client about my findings through discussions, to ensure that  he understood the magnitude of the challenge the company would face to enter this market. It was clear that they had to look beyond the Indian market right from the beginning if they had to be economically viable, and they had not even thought of this when preparing their  project reports!! To my mind, this project was heading for trouble from the word go; but, without saying so, I presented to them the reality, and the options available to survive initially, which would involve exploring the export market from the beginning, apart from competing in the Indian market purely on price. With hard data  backing my report and recommendations, they accepted my findings and paid the balance amount. After a few years, I noticed that many component manufacturers who had set up new capacity in this industry along with PGCL folded up, and PGCL itself changed hands before it also folded up. 

This assignment taught me an important lesson about how not to start a major project. Demand assessment  before starting a project, and understanding  competitive information and market dynamics, is essential to formulate a new project. We started using this insight while guiding anyone, particularly technocrat entrepreneurs who were encouraged by industry promotion financial institutions looking for business opportunities to start a new venture using their technical competence.

As I was completing the PGCL assignment, Mr. GVS Murthy spoke to me about AP Scooters Ltd (APSL). He had worked for them as marketing manager earlier and, after he left his job with them, they had appointed him as an adviser for marketing on a nominal monthly retainer since they had recently signed a technical collaboration agreement with Piaggio of Italy to produce the famous Vespa brand of scooters. Since Mr. Murthy was not finding enough time to APSL, after discussions with MD of APSL, they agreed to transfer the contract from him to us with Mr. Murthy available in the background.

Originally, Vespa had a collaboration with Bajaj Auto Ltd. but, due to government policies changing during the change of government in 1977, Piaggio had to leave the Indian market along with many other major foreign brands. Bajaj continued making the same products under their own brand names and improved on them using good R&D backup. In those days, they had a waiting list of 7 to10 years to supply a scooter to those customers who had booked with them. There were other manufacturers of scooters, but they did not command such huge demand as Bajaj for various reasons. 

In 1982, the government changed its policy and allowed Indian manufacturers to bring in foreign brands with only technical collaboration, to manufacture and  supply four-wheelers and two-wheelers to meet the surging demand in the country. 

Vespa was still a very sought-after brand and, due to the long waiting list for Bajaj scooters which were originally based on Vespa design, Piaggio felt that relaunching their products under a new collaboration would help meet the pent-up demand. Piaggio signed up with Lohia Machines Ltd. (LML) based out of Lucknow, which was entering the two-wheeler business for the first time, and AP Scooters Ltd based out of Hyderabad. Both were  licensed to produce only 100 cc and below scooters, whereas Bajaj was selling 150 cc scooters, which was considered the standard for the Indian market. 

By the time AP Scooters finalised their collaboration and were ready for launching the Vespa brand, LML had successfully launched its product and collected Rs. 100 crore as advance with 20 lakh bookings. This put pressure on APSL to match LML to some extent and get significant bookings to show that they were also a serious player in the two-wheeler business.

It was against this background that APSL engaged us. Soon after that, they also needed us to get more involved in the launch process, and signed up a major contract to avail our services in all aspects of marketing involving advertising, promotion, booking and allocation and appointment of distributors. It was indeed a de facto Marketing Manager’s role except that the product decision was already taken as per the collaboration agreement. 

We had a major role to play initially in finalising the advertising campaign. One major decision was to give a unique brand identity differentiating their product from the Vespa 100 cc scooter which was already used by LML. At this stage, we discovered that, while Piaggio had signed two collaborations, the product they offered for APSL was a different variant from the LML one: LML had the wide body variant and APSL had the narrow body variant. The wide body variant looked very similar to the popular Bajaj brand in the market but had a 100 cc engine, whereas the narrow body variant looked totally different, though it had the same 100cc engine. However, on studying the finer technical details, we found that the load carrying capacity of the APSL version was 170 kg whereas the LML scooter had lesser capacity due to its body weight being higher. So we positioned the APSL scooter as VESPA PL170 to emphasise the load carrying capacity, using the short form for Pay Load as PL. This was a major shift in the industry since, till then, all two-wheelers were described only in terms of engine capacity. 

APSL had appointed a major national advertising agency based out of Chennai for designing and executing their ad campaign which included all the major media mix available at that time, like newspapers in many major languages, magazines, cinema and in-showroom merchandising displays. We had to help approve the campaign and the timing of release of these campaigns. We noticed that, although the teaser campaign was started, the company had not imported demo models for display at their showrooms before announcing opening of bookings. So we had to slightly delay the further ad releases till all the showrooms across the country had a nice display model before going ahead with the bookings announcement. Since LML had already skimmed the market, we did not expect to match their numbers but hoped to get at least 20 to 30% of what they got. Finally, VESPA PL170 ended up with 5 lakh bookings and collected Rs 25 crore as deposit. Before the announcement of bookings, we also had to help finalise the printers for printing of the booking forms and getting them distributed across the country at their showrooms and an agency to collect the booking deposit and account for it and deposit the collections in APSL’s banks.  We also had to locate a  data processing agency to randomly allot the priority using a suitable computer program, and another agency to post the allotment letters to customers with their priority numbers, but without committing when the actual delivery would happen!!!

At this stage, we had too much attention from the media and most of them were trying to look for some negative news that they could carry to the public. The MD quietly made us deal with the media and I learnt how to be circumspect in answering them without giving them much to write about. Once the bookings came, there was clamour for appointing more new dealers across the country who wanted to encash the opportunity to get  into the automobile dealership business. We had to guide and advise on the need to exercise proper caution while doing so, since there was also political pressure being brought about to appoint dealers in many places which were likely to be unviable in the long run.

The drama of both the LML and APSL booking stories did not end there. New problems started as soon as the allotment letters with priority numbers reached the customers. Two types of problems, in fact. In the first case, all those customers who got a very low priority number, where they felt they would not get delivery even in the next one year, started cancelling their bookings and there was a major logistical nightmare dealing with refunding of the deposits and reallotment of fresh priority numbers for the remaining bookings. 

The second reason for cancellation had to do with the capacity of the 100 cc vehicles. In the case of  LML’s design, the scooter had a wide body design and looked similar to the 150 cc Bajaj scooter, but its pulling capacity was perceived as poor compared with the Bajaj vehicle, leading to cancellations. In the case of the APSL scooter, the pulling capacity was better than the LML model because of its lower body weight; however, the narrow body design became an issue since scooters were treated like family vehicles where husband, wife and two or three children were carried, and the narrow body did not give enough space for that. So another set of negative feedback followed, leading to more cancellations. 

Later, both LML and APSL had to indigenize their manufacture progressively as per their license approval and, when the later models hit the market using locally made components, quality problems multiplied, adding to more customer dissatisfaction and word of this eventually destroyed these new launches. In the middle of this, Piaggio decided not to renew their collaboration agreements and both  companies were denied the use of VESPA as the brand name which was the last nail in their coffin!!!!

For my colleague and me, this was a major lesson in how not to take customers for granted and give them what they did not want. Over the years, the market for scooters changed and other major two-wheeler brands came up with variations of scooters to meet different customer segments. In addition, motorcycles slowly took over the scooter market to the point where today Bajaj scooters don't exist, and Bajaj has moved on to become a major player in the motorcycle market. Scooters have become a niche product and Vespa has returned to the Indian market as a premium scooter along with other major brands like Honda and TVS.

Both these assignments gave us wide exposure and showcased our business development efforts for our unique service model of management consulting, which was appreciated by prospective clients. But we never again got another assignment like these two early projects for various reasons about which I shall discuss later.

In the next post, I will share my experiences with some clients who had great appreciation of our work and had long associations spread over their lifetime and who made it a point to refer us to others. 

My Journey As Consultant - 3

 Market Opportunities and Insights gained from early assignments

It took us six months to establish our credentials as trustworthy and reliable consultants, or rather, partners in progress, of the owner-managers of small and medium businesses. We learnt the art of navigating our way past the maze of road-blocks in each of the three  principal categories of consultancy assignments on which we focused our attention. Here in brief is our mantra for success.  

We built the wherewithal for the first category by establishing our credentials with a public sector bank which was the major lender to many small and medium enterprises in Hyderabad. Companies that were in this category were businesses which were having financial problems due to various reasons and were approaching the banks for more money to manage their day-to-day affairs; such units usually got referred to us through the bank for stock audits and diagnostic studies. 

Personal references of well-known businessmen like my friend GVS Murthy (referred to in the last post) and building a portfolio of success stories brought success for us in the second category. These were businesses that were doing well but the promoters were having difficulties growing the business and were seeking outside help. This approach worked well for us in Hyderabad but is an infallible route to success anywhere in the country. 

Market studies and project reports are a major opportunity for any consulting business and formed the third category of our assignments. Building a portfolio of well-documented and thoroughly researched reports, backed by extensive field work, built our credibility both with entrepreneurs and banks. These were new projects promoted by first-time entrepreneurs looking for funding from financial institutions. They needed a market survey along with a project report to be presented to these institutions and, if necessary, our help to negotiate with them for getting approvals.

Looking back at those engagements, we notice certain patterns of issues in each type of assignment. The businesses facing financial problems were of two types. In the first case, there was systematic diversion of funds from working capital to other purposes and covering up these with overstating the value of their stocks to get more funds from banks. These diversions could be deliberate or misguided decisions to use working capital to build long-term assets like an additional building or expansion of capacity, hoping to get more business which never came.

The second  category was mostly due to inability to manage receivables from their customers effectively, thereby upsetting the working capital cycle. In some of these cases our diagnostic study also brought out an interesting aspect. When the units were running a small business with a short working capital cycle they were very profitable. But when they expanded capacity and started going after newer markets, mainly  with large government organisations as their clients, the working capital cycles increased, eroding their margins and also affecting the cash flow. Since we were engaged by the banks on behalf of these units, our role ended with submitting our findings to the bank and also to the business owner. Since the units were already financially stressed, no additional work came from these units.

The second category  of businesses had different sets of problems. They were financially very successful. The original promoter had started with a few known, trusted people working for him who were essentially good errand-boys but very loyal. They also had the ear of the promoter. Once the firms started growing steadily, they needed to hire new people to work for them who also had better professional qualifications and were younger. These newcomers had expectations of growing in their careers. They also wanted to earn more and most of them, coming from a middle-class background, wanted for job security. In those days, in the command and control economy, public sector jobs were paying better than many of these smaller organisations and there was job security. Most youngsters who had joined these client organisations right out of college used these jobs as a learning  ground to gain experience and quit the moment they got a job in a government-run organisation. To add to their discomfort, the older employees who were with the promoter from the beginning used to carry tales about them behind their back, which also made the promoter distrustful of them. So, getting and retaining people to help manage the growth was a big challenge for which these  units had no immediate solution, affecting their growth. 

Another related problem was that these units also had no proper systems and procedures, and the owner was used to taking all decisions on an adhoc basis as he was in charge of all business activities and everyone was expected to do his bidding. This culture continued even after they started growing and this caused a lot of resentment among the employees. I got many of these insights when I insisted on starting my engagement with an attitude survey  of employees in an unstructured freewheeling discussion with a cross-section of the employees before coming up with ideas for improvements. This is also when I realised that I was confronted with the challenge of change management along with growth management. I also noticed that the older employees who formed the inner circle of the owner resented my being appointed as consultant and were constantly trying to  undermine my work. So the first focus was to get the promoter to trust me.

When I used to present my initial findings in confidence to the promoters, they would willingly agree, saying that they didn't see any  other way to deal  with their situation but realised that the  problem was with themselves. So my first engagement was to help them set up proper systems and procedures, along with some semblance of structure and an information system, so that all work would go on as smoothly as possible without the owner getting involved in every aspect of running the business at the operating levels. To keep the old-timers at bay, I suggested that they be given independent responsibility for particular areas of operations where they had already established an understanding of the business operations and they had to now report to the owner only these aspects and nothing else. 

In the beginning, this was not easy but I noticed that, with my role as an external change agent -- and constant  prodding -- some order finally came into an otherwise chaotic situation. 

The next challenge was to recruit, at the middle management level, professionals who also had exposure to working in a structured organisation. This is when we took the responsibility for recruitment and placement activity, where we had to use our network along with some head-hunting to identify good candidates. We noticed that in those days many youngsters who were working in other big cities but had roots in Hyderabad were looking to shift back here. We were able to identify such individuals and sell them the idea that, since Hyderabad had a large number of mid-sized organizations who could gain from their experience and would give them a good opportunity to grow, why not consider these options? After initial hesitation, they would join and we as consultants would make sure that they made a smooth transition and stayed put in their job. 

This kind of role also ensured that we were with the same organisation, implementing and monitoring our recommendation over a longer period: in some cases, the association lasted for 2 to 3 years. This also got us steady revenue from a few of these clients over this period. Some of these clients subsequently engaged us for helping them in diversifying their business operations. 

In a few cases, the professional equations became closer than the arm's-length one usually seen between consultant and client. Some of them went to the extent of trusting me in particular with their personal issues at the family level, and many employees also started confiding in us. I realised that we were getting sucked into roles for which we were not trained or engaged and decided to  move on by slowly winding up these assignments. 

In the third category, where market surveys and project reports were required, we found two types of clients. The first type were the most avoidable since they approached us to fix a deal with the financial institutions to get funding in such a way that their margin money was also funded!! We took a stand of saying a point-blank “No!” and let go of such opportunities. In a few instances, however, we found that it was possible to convince the promoter not to do this if he was serious about earning by running a successful business, since such an approach was doomed to failure. 

The second category was the  serious promoter who wanted to go by the rule books but found that in many financial institutions in those days there were some black sheep who would not fund a project unless they were taken care of. This is where we were able to take advantage of our connections to bypass such individuals while making sure a solid project report, backed by a good market study well defended by us, would get the funding it needed. My Bangalore  associate had become particularly good at this over a period of time and he used to handle such assignments. 

During this period we also had to hire additional staff, particularly to conduct market surveys. Most of these were industrial market surveys which required our staff to visit potential clients located across the country, to assess demand gaps and opportunities for new entrants. We also tried to use them to do some follow-up work on getting new prospects. We soon realised, however, that they were not  coming up with new clients since they required a deep understanding of the selling process for client acquisition and closing the deal, for which they were not yet trained. 

Between 1983 and 1986, we had regular business in Hyderabad and  Bangalore but we noticed that in Chennai, where we had registered our firm hoping to get more business from an established industrial base, we were not getting any new business after the first study we got in the beginning of 1983. I shall discuss in the future posts how this kind of skewed business development causes its own problems in running a small consulting outfit. 

Apart from this, we also got a few large assignments which gave us big exposure in Hyderabad and we started getting enquiries about our services from prospects. These assignments also gave us a good exposure to markets in some industries, and challenges involved in launching a new consumer product. I shall discuss a couple of these engagements in the next post.

My Journey Through Management Consulting as an Independent Consultant - 2

Acquiring Clients – The Early Years

Getting clients and getting paid for services are the two most important aspects of doing any business, and Management Consulting is no exception. But when you start for the first time this looks like a daunting task. And no doubt it is not a simple task either. When I look back at how it all happened, I realise that three things helped us to get introduced to prospective clients, and our Value Pricing approach ensured that we could start work quickly once the prospect was convinced. And eventually we always got paid. Officially, we started our business on September 1, 1982.

The first thing that worked for me was my personal contacts. The moment I left ASCI and was planning to start my new life as an Independent Consultant, I just went around telling everyone I knew. In the process, I met a friend who was the husband of my colleague from ASCI, a Chartered Accountant by profession, who was also running a printing press along with another partner. When I shared my plans with him, he said he would like to hire me and be my first client. He was thinking of diversifying his business to make cardboard cartons for packaging, for which he felt there was good demand around Hyderabad. Would I be able to help him identify prospective clients in the pharma industry which had proliferated around Hyderabad, and guide him how to enter that market? Without even blinking my eyes, I said “Yes!” and asked him to give me a letter which I could use to meet prospective clients for his new venture. I didn’t bother to discuss any terms of a contract and such other niceties. 

In a week’s time, I gave him a list of persons in various companies whom I had met, and who had shown interest in his offering and would like to meet him. I went along with him in the next round to introduce him to some of these prospects and then left it to him to finalise the deals with them. I just simply moved on after a few days, looking for the next client, when he sent word through his wife asking me to meet him to take payment for my services. I told him to pay whatever he felt like paying and he was very generous. Today he has moved on to start and grow a large Financial Services business with a national presence, but he continues to remain a good friend, who also was my first client.

The second client was referred by one of my course participants when I was in ASCI. This happened towards the end of October 1982. I was the course director along with another colleague for Indenting Agents of a large chemical products company which wanted its agents to get trained in modern marketing approaches in a changing competitive environment. One of them was from Hyderabad and I had informed him that I had left ASCI and was working as an Independent Consultant. Being a businessman himself, I asked if he could refer me to anyone who could benefit from my services. One evening, he landed up with another businessman who was a semi-wholesaler in sarees. The person was one of his customers who owed money to him as he was facing financial difficulties. Could I help him get out of this situation? Without hesitating a bit, I said of course I would and set up a meeting at the office of the textile dealer the next day. The address I was given turned out to be a small shop located in a nearby textile market from where the dealer was doing his business as a semi-wholesaler. No discussion on fees and contracts; I just started listening to his problems. I realised that I needed to spend time understanding his business first, and only then could I come up with ideas for solving his problem. We agreed that I would spend two hours at his shop every evening for the next few weeks. I also told him I may need to go into his books of accounts and other operational information including his financial details, which he should share without hiding anything from me. He agreed to cooperate fully and kept saying that he was on the verge of bankruptcy unless I helped him out. 

Then he also said something which made a big difference to my approach with small businessmen. He said whatever advice I came up with I would have to hand hold him to implement, since he had no one to do so. Thus I embarked on an assignment for which I was neither formally trained by education nor had I any clue how I was going to do it, except by just diving into his problems as my own, and finding ways to help him address them. Needless to say, it took me one year to get his operations from heavy losses to breakeven, at which point he decided that he was in a position to carry on without my physical presence every day. In the process, I also learnt quite a lot about trading businesses and the approach to earning money on a daily basis followed by his business community. 

The third advantage I had was having a good mentor and well-wisher who went out of his way to help me get clients. This was my friend, GVS Murthy, who had been closely interacting with me since my days in ASCI, as he was interested in my work in management education. He took it upon himself to hand hold us to get new clients, sometimes literally dragging us to meet some of his business friends and telling them to hire us with strong recommendations on our behalf. We got quite a few assignments through him over the next couple of years and made a big breakthrough in the Hyderabad market. Mr Murthy was like a Guru who also guided us how to deal with many tricky situations in our client engagements, and I owe a lot to him in getting a sound foundation as a Management Consultant.

Apart from the above three approaches, we also got work from the small business services group of a large public sector bank. My Chennai colleague’s sister referred us to her friend, who was heading the small business services unit of the bank. So we went and met her and talked about our new venture. When she saw our profiles, she felt that  banks could use our services in doing stock audits and diagnostic studies of incipient sick small units they had funded. On her reference, one of the local branches of a bank hired us to do a stock audit of a small engineering company which had never repaid its loans over the previous several years.

Normally stock audits are done by Chartered Accountants who have no knowledge of the engineering-related aspects of the stocks. Being engineers, we brought in this insight and showed to the bank in our audit report that the owner of the unit was over-stating the stocks to the extent of his margin money. This revelation pleased the bank officials since they got a  better understanding of the situation, and we got recommended to other branches to use our services not only for stock audits but also for diagnostic studies of sick units which in their opinion could be revived. 

During the early days of our work, we had an assignment from a government industry-promotion organisation in Chennai for doing a study on small business development. The assignment took me to Bangalore in January 1983, where I was introduced to one more person who was freelancing as a Management Consultant doing market research and project reports. He was from IIT Bombay and IIM Calcutta, and remembered me from our IITB days. He agreed to join us and cover the Bangalore market and merge his existing business with ours from April 1, 1983. He was independently getting work from Bangalore-based clients and this led to our business booming from the second year onwards. 

We also converted our business structure into a private limited company registered in Chennai so that we could show a professional face to the market. All three of us became founder directors. 

To summarize, the key takeaways from the early days were:

1. Focus on demonstrating value and do not bother about financial returns; 

2. Get involved and learn the client’s business so that you can offer assistance of practical value; and 

3. Have a good Mentor from the beginning.

As we progressed, we started getting references to new prospects from these early clients. But we also noticed that our yield per client was not very large and we needed to handle more assignments to develop good top line growth. This required us to hire people to work for us, which added to our overheads. I will discuss later the issues that we had to address because of this, since the overheads were a fixed cost which had to be borne every month while our new business acquisition rate was not fast enough to cover the idle time cost of these overheads. 

In the next post, I will discuss the market environment and the kinds of business opportunities we could see and the new clients we could acquire in the mid-1980s.