IMPORTANCE OF FOCUS

 IMPORTANCE OF FOCUS

How often we come across a situation when someone starts a discussion on an issue and soon we find that the subject has digressed to so many unrelated topics. It is so amazing that despite such a development most of us don't recognise this digression and get caught up in the discussions on new topics till someone points out we have moved away from the original subject. Today I want to share with you the Importance of Keeping Focus.

Whether an entrepreneur discussing a business problem or a manager discussing a situation it is imperative to keep Focus. The focus should be on the core subject under discussions and any temptation to go around to other related topics should be managed so as not to lose focus.

Let me explain with a few examples. A small business man met me other day with a request to help him grow his business by addressing his marketing problem. When I met him first I asked him to give an idea of what his business is all about and what his present customer profile looked like and what volumes of business he has from each of them and what spare capacity he has. I also needed some idea about his costing, pricing and competitors' information. In the course of discussing these he started narrating his problems with getting reliable labour to work in his factory and other problems relating to managing his business and after about 20 minutes of listening I had to remind him that we are discussing his marketing problem for which we must first focus on the market related information to take some basic decisions and then we can go inside his factory and address his operations related problems.

In another instance, we were working in a large manufacturing company implementing a Business process reengineering concepts in their supply chain management process. While collecting background information the discussions veered round to the need for accuracy of sales forecasting and soon we had a spectacle of the production executive and the marketing executive picking up a big fight over how each of them in their opinion is foolish and don't know how to do their job. Very soon as consultants we had to bring order and get the team to focus on the subject in hand and help defuse a potentially explosive situation.

Why do we lose focus? It is not that everyone wants to lose focus. But in our desire to communicate the issue, sometimes we feel it is important to share other related information which we believe may have bearing on the issue at hand. There is nothing wrong with this except that these related issues should not end up becoming the main issue. That is the main problem in keeping focus.

Another reason I found we lose focus is when someone in the group feels that the related issues are more important than the main subject under discussions and tries to steer the discussions towards them. Here the personality of the team members come into play. A dominant member of the group has a tendency to hijack the discussions in whatever directions he wants and most of the time after the meeting is over other members would privately express their resentment to this but would not dare to intervene during the meeting to bring the focus back.

Some time I found that the problem definition has not been articulated properly hence there is a scope for digression as the discussion goes on. I will illustrate this with an example. In a very large company we were working on a culture transformation exercise and formed cross functional teams around different problems they were addressing. One of the team was working on the condition of the toilet facilities in the factory at various locations. When we started the exercise we asked the team members to define the problem. While it looks ridiculous now to ask what is the problem in the toilet facilities, at that time we found the five team members from various departments who had stake in the upkeep of the factory toilets spent first full day listing out the problems based on their departmental perspective which essentially said that we are doing our job but other departments are not. As a part of the culture transformation process we allow deliberately in the first sitting to let everyone say what they want to say and simply ask them to document everything that is said without any debate. As the session progressed in the first one hour they listed more than 50 problems and by lunch time they had reached nearly 200 problems when some one in the group started observing that each member is presenting the problem from his perspective whereas the problems listed reflects the issues faced by them created due to the way other departments worked. This realization suddenly made the team members come out of their adversarial positions to an accommodative position when every one said that the real problem lies in the combination of the problems listed so that they can define a single problem which is the problem that they need to address. The team got its Focus right and from then on  the exercise became very meaningful and rewarding for all.

The lack of Focus leads to waste of time and also frustration as the real problem does not get addressed. Quite often it is useful to have an outsider in a discussion unrelated to the problem under discussion so that he can act like an umpire, bringing the focus back and reducing waste of time. But it is not possible to have an outsider all the time. Hence it is important to cultivate a habit to get your focus right whether we are involved in a discussion or engaged in an activity to address a problem.

I have presented here a few perspectives so that this topic can form a basis for a good discussion in this forum. I would like to invite readers to present their own perspectives and views on this subject.

IMPORTANCE OF BRAND IMAGE

 IMPORTANCE OF BRAND IMAGE 

As a marketing consultant I have had several occasions to work with companies with established brands and had a ringside view of how some companies systematically work to destroy such great brands without realising that they are doing so.

I will share here a couple of cases which can be quite illuminating as to how not to work against your own brands. While each of these cases had some unique market situations the basic lessons can be extended across all brands for any type of products or services.

Every marketing man swears by the importance of brands and would give his life metaphorically to protect his brand and its image. But quite often this passion for the brand starts and ends with the marketing executive whose role is to build communications around the brand. When the rest of the organisation doesnt think it is their concern to protect the brand that the problems arise.

My first major experience was when I was involved as a marketing consultant to help launch a new 2 wheeler brand using the established brand identity of the famous brand “Vespa” of Piaggio of Italy which had recently relaunched itself in India after a gap of nearly 20 years in the early 1980’s. Shortly after the first wave of liberalisation in the auto industry was announced in 1980's, several international brands in the 2 wheeler market decided to enter India through their local collaborators. Vespa, which was an established name before their brand name had to be removed from the Bajaj scooter brands due to end of their collaboration agreement with Bajaj Scooter, decided to re-enter the Indian market with 2 collaborations: one with Lohia Motors in the north and another with AP Scooters, a public sector undertaking in the south based in Hyderabad. Both the companies knew from the background of the starved Indian market during the permit license Raj and also from the huge wait list for the Bajaj scooters running for more than 7 to 10 years at that time, they had a killer product in their hands. And both the companies aggressively relaunched their respective scooters using the Vespa Brand name as a prefix and got huge advance bookings which should have kept their factories running for the next 10 years. However today both these companies don't exist in the market for scooters and Vespa had to wait for another 20 years to re-enter the Indian market recently with a relatively soft launch to hopefully re-establish their lost image.

What went wrong. One of the lessons in marketing is that Brands represent the value benefit as perceived by consumers. By using the brand companies can effectively communicate the promise of the values embodied in that brand. But customers also would like to experience that benefit when they actually use the brand and if the experience reinforces that value the brand becomes stronger in the marketplace. In both the case of Lohia and AP Scooters while the Vespa name helped them get customers to wait for delivery, once the product started hitting the market the experience of the customers was far different from the Value promised by the brands. For example in the case of Lohia they had introduced the wide body design very similar to the Bajaj scooter but due to a policy of excise duty prevailing at that time to keep the price of the vehicle down they launched the product with 100CC engine. The first impact was that these 100CC engines could not carry the whole family consisting of man, woman and at least 2 children with enough power and the vehicle started failing on the road. In the case of AP scooter they had launched the narrow body version of the same model with 100cc engine but their problem was that power was not an issue but the size of the scooter was too small for this whole family. Apart from this basic flaw they also faced problems of quality hitting the customers hard and over a short period of time all those who had booked having got these reports and negative publicity associated with these models started cancelling their bookings. By the time these companies could address these problems and come back to the market with improvements they had lost their so called Vespa Brand Equity and other players had taken over the enlarged share of the market created by the relaunch of Vespa at that time.

Another example is from a building materials industry where the company was pioneer in the launch of several brands of building materials in the decorative laminates market and they also had commanded a premium for a long time. Customers were used to long delivery delays from this company due to this premium image and the whole company was managed based on a philosophy that there customers would be willing to wait for their production to deliver. But the situation started changing after 1992 when liberalisation and certain policies of the government favouring small businesses gave them excise duty differential benefit in pricing and soon several small units with simpler technology to make decorative laminates came up with both price advantage and also faster delivery. And many of them were prepared to supply directly to customers even for order sizes of one sheet at a time which was impossible to emulate unless our major players were prepared to reinvent themselves in terms of both manufacturing practices and also manage the supply chain differently to compete with the local small players. This was a tall order for the management of the company who had got used to the comfortable lifestyle of being in the sellers market and suddenly finding themselves competing in the buyers market and unwilling to let go of their old practice. Half hearted attempts were made to change but  I found the lack of committed leadership to bring about change was a major limiting factor and soon the company became a victim of sickness and BIFR case. Even though the brand image of this company was very strong they could not capitalize on it due to their inability to respond to the customer expectations.

I have many more cases on these lines but the principle lesson I wanted to share was that Brand Image is a double edged sword. In the hands of a competent management it becomes a cash cow and in the hands of others it becomes like a knife in the hand of a monkey.

POST REFORM REALITIES

 POST REFORM REALITIES

After 1989 when the political scene in India became very chaotic, unstable coalitions were formed and many political decisions taken at that time had severe economic impact leading to Indian businesses finding themselves going on a downward spiral along with the economy. The worst situation emerged when the VP Singh led government announced the introduction of Mandal reforms leading to country wide agitation further taking the economy down. The ultimate situation was that the foreign currency reserves fell to such a low level that the Congress minority government led by PV Narasimha Rao had no option but to announce major liberalisation and economic reforms. One of the consequences of this was that most of the consumer and industrial goods were freely available for imports and also opened the economy for foreign direct investments.

Suddenly we found what was earlier available in Singapore and Dubai only for Indians to shop were available in many department stores in major cities. Many foreign brands of consumer and Industrial goods found shelf space with local brands. Slowly these moves started having their impact on the Indian manufacturing sector affecting both small and large businesses alike which had thrived under the License Permit Raj.

I remember meeting a classmate of mine from Indian Institute of Technology in Mumbai and the discussions we had on the electronics industry post liberalisation. My friend had established a niche business as a consultant in the electronics industry and had also helped establish a few small units to make specialised electronics products around Mumbai and Pune. One such unit was making power supplies which are needed to power any electronic product. Most of these convert 230V AC supply to 6 to 12V Dc supply with different current ratings in milli and micro amps for use in the electronic devices and products. Due to the earlier policy of indigenisation there were many local manufacturers who were making these power supplies using mostly critical imported components and some locally available parts. My friend narrated the story of the fate of the unit which he had helped set up post liberalisation. They were very successful before supplying to major customers like Siemens India and others and they were charging a price of Rs 1200/- per unit. Post liberalisation, he attended a major electronics exhibition in Mumbai where he found one of the Taiwanese suppliers was displaying an identical power supply unit to one his supported unit makes for US $9/- unit. At the exchange rate prevailing then for US $ to Rupee, even after paying customs duty and other expenses he calculated that the landed cost was coming to less than Rs 200/-. Quickly he advised his client to stop manufacturing and start importing these power supplies and sell in the local market!!!

Post liberalisation one of the major casualties was all those small businesses which were established based on the policy of Indigenisation. All of them had to fold up when they found that what they were making locally at whatever prices they could sell were available at much lower prices from other countries particularly Germany, Japan, Taiwan and Korea. In many other cases they discovered that the technology used by them were outdated and they had no money to upgrade their technology to meet the global competition.

The opening up of the Indian economy had created a new opportunity for global manufacturers to set up large operations in India to tap the huge untapped and hungry market of India. One impact of this was that employment opportunities and the corresponding higher wages offered lead to exodus of many talented professionals to these new industries. Small and medium businesses suddenly found that they could not afford to match the salaries offered by the new industries and that further eroded their ability to survive.

There was a positive impact of liberalisation too. Many new small businesses started coming up in many industrial sectors taking advantage of liberal import policy announced to set up more efficient and technologically advanced operations to compete with the old established businesses. Thus we found in many building materials products and other consumer industries local brands started by small businesses competing with national brands and taking away market shares. Reform also opened opportunities for many small businesses to come up and flourish in the service sector since the economic growth now offered more opportunity and larger market for this sector to thrive. So we saw many consultancies and service providers in IT, Advertising, Marketing Research, logistics   setting up shops. Apart from these due to increased consumer demand post reform retail business also underwent many changes and we started noticing many local Kirana shops run by traditional Marwari families upgrading into Super Markets. 

I remember one such case in Hyderabad where I live. The neighbourhood Kirana store was run by an energetic young man who used to supply regularly to our household needs and to many other families in the upmarket neighbourhood giving them even credit for a month. The store was popular because of the quality and honesty of the shopkeeper and he had a large clientele. But his market was typically local.

I had a habit of chatting up with him when I went to shop and during one such chat I told him the threat he would face from supermarket chains that would come up soon and since he was very energetic advised him that he should explore setting up a supermarket store in his neighbourhood so that he won't lose his upmarket clients who would be the first to ditch him when the other supermarket stores come up there.

I forgot all about it till one day he called up and showed me the neighbourhood place he had rented to start a super market and wanted my advice on how to proceed further!! I gave him ideas and suggested that he go and see how other stores that have come up elsewhere are running and try to replicate their model in his own way. It is now more than 25 years since he started that supermarket and his business is thriving. Recently I noticed that he has taken over the location of another national supermarket chain in a nearby locality which was floundering and set up his second store there. When I met him recently and asked him about his business he proudly informed me that he has also taken over a corrugated carton making unit and running it to use for his own business as also to supply to others. Now he has opened more supermarkets in other parts of the city competing with larger national chains!!!

So I realised that reform was a double edged sword. In the hands of the old businesses it was a tool to cut their throat and in the hands of the new age entrepreneur it was a tool to find cutting edge opportunities.

There are many cases of such failures and resounding successes. But I notice one other major development is the entry of many women entrepreneurs post the millennium 2000 in many areas where one had never imagined any business opportunity existed. I will discuss these cases in later posts to show how for the enterprising small businesses now with the internet revolution global opportunities are awaiting them and for those who would not like to adopt only dark futures!!

ASPIRATIONS AND REALITIES

ASPIRATIONS AND REALITIES

IT was during my early days as a management consultant that I was faced with these issues from many SME owners. In fact one of my classmates TEEVEE who had started his own enterprise before I did and was partially a motivating force for me to take the plunge one day accosted me with a statement: Why should I struggle to work very hard to run a small business to earn very little when with the same amount of effort if I run a large business I can earn more!! Very logical and obvious statement. But he also made another observation in the same breadth. He said he found many old timers from business community backgrounds seem to be making more money with little effort than what he can ever imagine he could do with his expertise as an IIMB product. More valid observation.

It was obvious that in business if you want to make more money then you must definitely have more capital if everything else is equal. So capital is definitely a necessary condition. But is it sufficient? Obviously no. But the answer to what is THE sufficient condition is not a simple one. This I learned over a period of time when I had to interact with many of the small and medium and sometimes even large enterprises on the path of managing growth and many of them floundering and some of them succeeding.

The pattern of issues I did come across varied over time due to a phenomenal changing environment one witnessed from 1992. So I will try to group them into 2 categories. Observations made before 1992 when reforms were announced in India and post 1992 when reforms started to have an impact on many Indian businesses particularly the small and medium ones. The issues faced by the larger businesses were of a different kind compared to the SMEs. 

In this post I will present some interesting observations I made when working with SMEs before 1992.

Before 1992 I noticed there were 2 types of small businesses which were active. One type of businesses were floated by those who came from a family with a tradition of trading and the new generation had moved into manufacturing as an extension of their trading strength. For this group of businessmen the problem of raising capital was never there but they faced other problems of transition from a trading mentality supported by family members to a manufacturing milieu where they had to work with specialists and professionals and also use of technology and machinery and other resources combined with a plethora of governmental regulations.

The other types of businesses were promoted by professionals with a background in the technology or industry where they have worked and leveraging their expertise to start a business without any previous background in running a business. This group of SMEs were also strongly supported by various governmental schemes to raise money and basic infrastructure but their main limitations used to be raising money independent of public financial institutions unlike the traditional family owned businesses which had resources through their community network. This group also had to deal with a large number of governmental regulations. 

In fact in those days most of the businesses were subject to permits and inspections and there was a popular slogan called license permit raj prevailing along with an inspector raj to enforce these rules under license permit. At one point of time any business with a manufacturing operation had to deal with more than 27 government agencies every year to be in business!! And a large number of problems faced by SMEs had some link to these interfaces with government agencies and naturally this had a cost impact on the business which affected the small businesses most.

There were certain statutes and government schemes favouring small businesses below a certain size and this prevented many of them from growing as these incentives would disappear when they crossed certain size limits leading to splitting of a large business into several small businesses to remain below the size desired to benefit from these incentives with hilarious complications affecting their growth. 

Looking back before 1992 the environment was not conducive to growth for small businesses and I realised this quite early and one of my approaches was to get them to focus on making money and optimise within their existing capacity. Moreover most of these businesses had captive clientele and market was not a major problem in a shortage economy and the only way one made money was being very efficient in operations. Most of the cases I came across where the unit was losing money despite a captive customer base was due to not keeping an eye on the small expenses. I remember once Mark McCormic, the founder of the famous The Professional Management Group, observed that it is important to keep an eye on the pennies if you don't want to lose money in your business!! And how true this observation was I noticed working with small businesses in the early days.

One of the reasons small businesses succeed is the passion of the entrepreneurs for their business. For its success they would do anything that needs to be done right and no compromises. This personal passion is their strength when they are small and a weakness when they try to grow. In the initial stages they would have assembled a group of people who were willing to work with them since they had no other option. And most of them turn out to be very good errand boys for the entrepreneur and some of them graduate to be trusted right hand men. Now when they start on the process of growth, I found many of these trusted men would take advantage of their proximity to their master to ensure no newcomer finds a place in the firm firmly. Moreover the entrepreneur instead of establishing good systems and processes would like the newcomers to take instructions from him on all aspects of work and try to convert them to another set of errand boys. Since he also was involved in all aspects of business as a small business, he would like to be involved in all aspects even when the size and complexity of operations required him to delegate. On many occasions I used to notice that the combination of the trusted lieutenants cultivated before and this desire for micromanaging typically would lead to very few new employees of any competence willing to stick with the firm.

Another personality dimension of the entrepreneurs is their feudal attitude towards employees. This was perfectly alright with the older employees who had grown with the entrepreneurs. But this was a big problem when they had to recruit younger generation specialists to manage their growth. Many of these youngsters had the confidence that they could get a job if they left this firm and were not prepared to work based on absolute loyalty which the older generation employees had perfected into an art!! The entrepreneurs used to such abject fawning from his older employees would find it difficult to deal with the younger employees and there would be significant instability in manpower retention.

The salary structure was very restrictive in those days. So in order to compensate for that employees would be given fancy designations in a small business even though the work content was not reflecting such designations. In one organisation I was asked by the owner to conduct a study to reorganise the structure. It was amazing to see for such a small set up they had a very deep hierarchy starting from supervisor at the lowest level to vice president reporting to the owner who called himself Managing Director. In between they had close to 12 different designations. When I asked everyone to write down what work they did, in every function right from the supervisor to VP mentioned the same work content with an additional sentence that they supervised and controlled the lower level!! This was before the days when Business Process Management concepts had become fashionable and every small business wanted to structure itself similar to large organisations around functions when they started growing.

Most of the small units would have started with limited resources committed to providing good office space and other comforts normally taken for granted in a larger enterprise. When a small business starts doing well the first priority of the owner would be to impress everyone with outward signs of success. Hence he would start committing himself to providing a good office space and proper facilities for employees. In many cases these were planned without any proper financial analysis of the impact of such commitments on the cash flows and method of funding. Typically working capital would be diverted for these infrastructure related expenses and very soon they would land up in a mess with cash flows affecting the growth plans. In most of the cases referred to me by banks for diagnostic study this was one of the causes of incipient sickness.

There were many other observations which were specific to the units studied but the ones discussed above were common patterns among many small units I had the opportunity to interact with. In the next post I shall discuss the post 1992 scenarios both in small business context and some of the corporations which were successful during the license permit raj and how they floundered when the liberalisation opened up the Indian economy to global competition.