Interesting Experiences from Providing Consultancy as a Service
I feel immense satisfaction when I look back at a rewarding and successful career in management consulting. As an independent consultant, I sometimes had to juggle time between projects and, at other times, wait expectantly for the next project to come my way. A notable feature was the wide range of interesting projects I got from diverse industries. These projects brought out the best of my training in holistic and systemic thinking that was inculcated in me at IIM Bangalore. I was also able to leverage my networking skills that kept me in touch with a wide circle of professionals from IIT and IIM who gave me valuable insights into industries and technologies that I was new to. What gave me the greatest satisfaction, however, was the level of value addition I brought into major projects that won the respect and approval of all stakeholders of the project. Here’s a look at some of the projects that I rate high on the satisfaction scale in the early years and my approach to these demanding but absorbing assignments.
Once I became an independent consultant, it became imperative that I had to singly work on getting new assignments even while executing a contract that was in hand. When one is busy working on an assignment, there is no time to look for a new one, and when an assignment gets over it takes some time before getting a new one. Sometimes, more than one assignment used to land up at the same time and it required juggling time between both so as to meet the time deadlines, without compromising on quality. Hence I had to engage an assistant to help me with my assignment and most often I had to choose from fresh graduates from a local management school or engineering college who were taking up the job offered by me as a learning experience before moving on. I therefore had to be prepared all the time for managing alone. I always managed that, but felt the need for an additional associate to increase bandwidth while helping to grow the business.
The first lesson in marketing I learnt here was “never say no, I can't do it”. Therefore I always said I would do any assignment offered to me, and started working on each engagement with an open mind to understand the basic issues and use my training and experience to come up with ideas to deal with the issues. Quite often, I also approached some knowledgeable people from the same industry to get insights before adopting their inputs to my assignments. As I mentioned earlier, I had meticulously kept in touch with my network of contacts from IIT and IIM, along with friends across the country, and these came in useful in many of these assignments. Hence, throughout my consulting career, I had the good fortune to work across many industries and sectors and sizes of organisations, both Indian and multinational.
There were two distinct phases in this: the early years between 1983 to 1992, and the later years between 1993 to 2009. I will share some insights from a few interesting assignments between 1987 to 1990 before the Mandal Commission report acceptance put a brake, forcing me to change my approach from 1992. I then had to reinvent myself to be relevant in the post-liberalisation period, which I will share in later posts.
Elico Private Limited: I mentioned Mr DVS Raju, founder and Managing Director of this company, in my previous posts. I was helping Elico to diversify to manufacture personal computers, mainly IBM PC clones. In those days, government policy was to encourage local manufacturers to produce these PCs using imported semi-assembled kits; later, they were to import only critical components, and combine these with locally available components in a policy framework called Phased Manufacturing Programme. This project required some technical expertise about PCs which I arranged through my classmates from IITB based out of Bombay and Pune who were offering technical services in the field of electronics, and Elico created the necessary infrastructure based on my project report and got the government approval for making PCs in 1987. Unfortunately for Elico, by that time, the market prices for PCs crashed across India due to many small and large players creating surplus capacity.
Around this time, Computer Maintenance Corporation (CMC), a public sector undertaking, was looking for a local manufacturer to produce some products they had designed and developed for telecom industry applications, and supply them in large numbers within a stipulated period. They had identified Elico as a possible vendor, along with a few others, and invited Elico to make techno-commercial offers. Since I was actively involved with Elico at that time, Mr Raju asked me to handle this whole project. This required me to prepare an offer document based on the tender floated by CMC, negotiate the final order, procure all the components from across the world, get them assembled and tested as per the drawings and specifications provided by CMC using the facility created for making the PCs, and get the CMC inspection team to approve the finished product before taking delivery and getting the payments. I was indirectly playing the role of a General Manager while having a consulting contract and was, ofcourse, supported by my lone employee, who had an electronics engineering background, and the Works Manager of Elico. This was a one-of-a-kind assignment.
During the course of this engagement, I had kept the CMC fully informed of the status of progress in our efforts to deliver on time and finally ended up delivering all the units ordered 1 month ahead of time, without any quality acceptance issue. CMC was so pleased that they gave additional orders for the same items, while inviting Elico to produce another product in the same category but with a different design. By this time, I had trained the Elico employees how to handle such business on their own without my physical presence, and I decided to move on.
Udayam: Udayam was a leading Telugu Newspaper launched by the famous Telugu film producer and director, Dasari Narayana Rao. It was a big hit as a new newspaper launched with more than 1 lakh readers right from the start, and was considered a big threat to dominant Telugu newspaper Eenadu at that time. Four years after its launch, however, it was having severe financial problems and was struggling with working capital shortage. A consortium of financial institutions and banks led by Andhra Bank had funded this project based on the reputation of the promoter as a successful film producer and also with some strong political backing. After one of our presentations to the financial institutions on another project, we got a call from Andhra Bank and AP State Financial Corporation asking us to help them conduct a diagnostic study of the Udayam newspaper, since they were not able to understand the underlying issues leading to cash losses despite the newspaper circulation increasing steadily and the advertising revenues showing healthy growth, though the number of debtors in the books was also growing. So the terms of reference were very comprehensive and literally asked us to investigate if there was any diversion of funds.
When I met the officials of both the banks and the Udayam newspaper in the introduction meeting, I realised that this was going to be a very complex engagement requiring going into many aspects of newspaper and magazine publication and the business models which dictated the survival of such units. I asked for 60 days’ time and a large fee to cover our costs and, if needed, outstation travel costs to be borne by the client. They agreed to all our terms but insisted that the report should be available within 60 days, as they had to take some major decisions regarding continued support to the newspaper group.
Whenever I have undertaken any diagnostic study, I have initially spent time talking to the key operating personnel about how the business is done and the issues they are facing in the day-to-day operations. Then I have gone through their financials for the past years, upto five years if needed, to see the evolution of the financial problems as available from the P&L and Balance Sheet. While in many businesses there will be some margin over variable costs, to my surprise the sale cover price of the newspaper and the magazines did not cover even the cost of the paper on which they were printed. During discussions with both internal executives and other industry veterans whom I had spoken with, using my contacts, I also realised that this industry runs on advertising revenues to cover all costs and generate profits in the long run. However, in the initial years, the promoters need deep pockets to invest in increasing circulation, which in turn only increases the operating losses, before the advertising revenues start pouring in based on circulation figures and other demographic data of the reach.
There was another aspect of types of advertising revenues that accrue. All casual advertisers had to pay the charges in full as advance to book advertising space, while large regular advertisers who went through advertising agencies got credit facility, with the ad agency guaranteeing payment, if they were the accredited agency.
In the case of Udayam, they had a third kind of advertiser who booked full page ads directly with the newspaper, when they needed. They were all film producers known to Mr. Dasari Narayana Rao and if the film was successful they paid the money immediately; if the film failed, however, that payment would never come. In the course of understanding this, I had to visit various cities and meet these film producers who all promised to pay their debts once their next film succeeded.
Udayam was really faced with a double whammy. Its increased circulation was increasing its operating losses and its bad debts in the books were only making matters worse. So I asked for and got a meeting scheduled with Dasari Narayana Rao and questioned him on his understanding of the economics of running this business. During the meeting he said honestly that he never understood this business like he did the film business, but felt that running a successful newspaper would give him better political leverage.
After I gave him my analysis of the issues faced by him, he asked me what he should do and I advised him that he should sell out before he lost even more. On the 60th day, I submitted my report and, in the meeting with the consortium that followed after they read the report, they asked the same question: should they continue supporting the current management? I told them clearly that they should look for a new investor with deep pockets who could fund this venture without borrowing from the banks. After a year, a large liquor group bought over the Udayam newspaper along with all the other publications and, after struggling to keep it running for a few years, closed it down.
Digiana Television: Shortly after I finished the Udayam study, Canara Bank, which was one of the consortium banks, approached us for conducting a stock audit of Digiana Television, which was already closed and was under Central Bureau of Investigation (CBI) scrutiny for fraud. Thinking it was a small assignment, we quoted a modest fee and started work. Soon I noticed that we had to do a lot of work in sorting out the stocks in the stores, since the promoters had deliberately mixed up all the stocks to confuse the banks. This process required more work to be done and I kept pointing out to the bank officials that we had not provided for this work in our fees and they should get it done from the promoter before we could complete the work. The lower level officials kept assuring us that they would recommend additional payments once the work was done, since they would then have a clearer picture of the extra work done by us, and asked us to complete the audit. In the meanwhile, the CBI officials called us and said that, since there was a criminal investigation going on, we should do a thorough job so that our report could be produced as evidence in the Court for proving the fraud. In good faith, we completed the work, which took a much longer time than we had planned for, and gave our report showing the difference between our assessment and the stock statement issued by the promoter.
Shortly after that, both the bank and CBI officials called me and suggested that our names would be given to the Court to act as receivers in the bank's recovery proceedings. I politely rejected their suggestions, saying this was not our expertise, but asked them what happened to our request for additional payments. They asked me to meet the Regional Manager, saying only he could take the decision. Typical of a public sector bank, the Regional Manager said that, once a contract had been given, the bank could not give any additional payments for whatever reasons after the work was completed. After a few months, there was a news report about a fire in the godowns of Digiana Television where we had done the stock audit, and the report said the cause of the fire was a short circuit. And, after a few more months, the bank manager approached us again saying they needed additional help in dealing with the same company based on our stock audit. This time I told him politely that we were very busy and asked him to find another consultant.
The above three cases are illustrative of the kind of exciting work of various kinds one gets to do as a consultant, and ended up widening my knowledge and horizons and confidence to take more challenges in the future. However, by the middle of 1990, all this excitement came to an abrupt halt due to the worsening Indian economy and the Mandal Commission report reactions across the country.
In the next post, I shall narrate how I waded through these tough times.
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