was doing an assessment on how the world will look like in 2015, a friend told him, "you mean, at 8:15 this evening". With this anecdote, Laudicina, who was featured among the "Top 25 Most Influential Consultants" by Consulting Magazine, illustrates the short-term planning mentality that's taking a toll on companies across the world. As Managing Officer and Chairman of the Board for management consulting major ATKearney, a post that he took over in September 2006, Laudicina is only the seventh person to lead the firm in its 80-year history.
In India to feel the pulse of a country, where the amplitude and velocity of change, according to him, is nothing short of remarkable, Laudicina, in an interview with Prasad Sangameshwaran, speaks about how important it's for companies to take a longer term view of things and how India is uniquely positioned to take advantage of the globalisation process. Excerpts:
Are the needs and demands of Indian businesses any different from the rest of the world?
The needs of businesses generally are pretty universal, but where one is in the development cycle determines the special needs. There are probably more Indian companies that are becoming truly multinational now than just running businesses internationally.
Therefore, Indian businesses are progressing along the national, international and transnational trajectory more quickly than companies in other parts of the world.
The market is growing very fast. What are the associated risks?
Companies absorb their installed capacities very quickly. We are already seeing some signs of that inability to develop both the hard and soft infrastructure (people and physical infrastructure) to meet increasing demand. That's clearly one of the big challenges going forward.
As business expands rapidly there is an intense pressure on infrastructure. What is the perceived impact on business?
It's great for businesses that can adapt. While the velocity and amplitude of change has increased geometrically, our ability to understand the speed of change lags behind. Companies must have huge economies of scale on one hand and on the other hand be nimble enough to seize opportunity and manage that risk.
Traditionally, Indian business has been neither global-scale, nor nimble, because of an insulated economy. How do you see Indian business playing to the new rules?
Indian business has started welcoming FDI and we have begun to see the impact in terms of the response. Till some years back India used to get $ 2-3 billion as FDI on an annual basis.
In the first quarter of this year the country got $ 6 billion. The importance of FDI is less about capital and more about the innovation. It's the technology and innovation that an open market provides and Indian businesses are getting and leading the benefit both ways. They are welcoming more investment into the country and are also moving out by investing abroad.
There is a huge transformation going on in terms of the capacity of Indian management to not only take advantage of, but in many ways lead and change the requirements for creating successful global entities.
It's the ability to innovate, co-operate and align with other players around the world which is very consistent with the Indian character and culture of doing business historically. That positions India perhaps better than most to be able to make this transition.
Is there a co-relation between culture and the way a country runs its business?
The demands on management require a 360-degree vision. Peter Drucker said that businesses fail not because they do the wrong things, not even because they do the right things poorly, but because they have misunderstood a change in the theory of business.
Culture is the ability to be sensitive to the kaleidoscopic variety of inputs (impact of technology, demographic changes, consumer behaviour and so on) and will have a strong impact on the ability to succeed in a rapidly changing environment.
As Indian companies are on a major expansion exercise globally, what should they watch out for?
There are decision traps that any company without a 360-degree peripheral vision can fall prey to. Companies need to look beyond the horizon to find the next big thing.
In 1998, when Bill Gates was asked who was Microsoft's next biggest competitor, he said, they probably do not exist yet. That was the year Google was born. Many of the Fortune-500 companies no longer exist because they could not foresee a change in the theory of business.
Companies need to develop a peripheral vision that I would like to call the "helicopter" effect "" hover above to get that long strategic view and then you are able to come to the ground and see what it means operationally.
As businesses go increasingly global, is there a strong case to have a board with directors from different nations?
When we did a research on transnational corporations, we found that there are very few transnational companies that really have multinational boards.
No matter which giant you look at, most of them have a uni-cultural board of directors. I think one of the big challenges is to develop a peripheral vision, if you are looking at things through a particular cultural or national prism.
If China is accepted as the factory of the world, what identity would you recommend for India?
India should not put itself into any bucket. The country needs to strive for what Jack Welch used to say is maintain an entrepreneurial soul in a big corporate body. You need to have a scale that allows you to seize opportunities and manage risks, but at the same time be nimble. Indian business needs to be sensitive to the need for continuous innovation and rapid change.
So it essentially depends on how quickly businesses change track....
Yes. This is because of two factors, the integration of markets and the impact of technology. Change is more rapid and fundamental than ever before. Those companies that are able to discern the requirements of change and get ahead of it will win.
Companies need to understand the dynamic nature of the drivers of change ""globalisation, demographics, natural resources, consumer behaviour, regulations "" to decide the future course of their strategy.
There is a lot of debate on CEOs being excessively paid. Your comments.
Part of this has to do with the short term mentality in managing businesses. The reason we have escalated CEO salaries, particularly in the US, is because the shelf life of the CEOs is short.
CEOs are demanding more money upfront as they don't have a long term tenure. We expect that CEOs will deliver immense shareholder value in a short period of time and we got to build them a bridge of gold to get there.
Part of the problem is we do not have a long enough vision to allow managements to make decisions that will be in the best interest of the company in the long term.
Next year, the International Standards Organisation (ISO) is will start publishing standards on sustainability. Once we start measuring the effectiveness of companies on a sustainability index, they will take a longer term view of things.
