Building Organisations For Success

GUEST COLUMN

Partner, Strategy, Organisation and People at Andersen, Business Consulting

The decade of the 1990s brought home the reality of global competition. In the process, it has separated the men from the boys. Those who were mentally unprepared, or unwilling to face reality are falling by the wayside. But organisations that have pursued a consistent, coherent business strategy and created equity based on quality, service, differentiation and customer loyalty, are better prepared for the future.

But being proactive alone is not enough to help an organisation cope with the seismic shifts in the business landscape. For the paradigm has shifted irreversibly. Creativity and experimentation beyond the confines of management architecture is becoming critical. The core strategy for competitiveness, survival and growth is to aim for planetary dominance based on a deep understanding of megamarkets, an infallible customer focus and a sharp eye for results.

Corporates everywhere are now learning to tweak their strategies, albeit purposefully, towards segmenting product categories that offer opportunities to enlarge and globalise. Others who possess the capability to balance world class products with unique local competencies are also meeting with success.

Corporates such as the Aditya Birla Group operate in several international locations, doing both manufacturing and marketing. They have been effective long before global dominance or environmental relationships were seen as a strategic survival standard. Arvind operates both manufacturing and marketing operations in all critical geographies. Being near to the customer and added value being a stated and pursued strategy, these enterprises are run in the spirit of comity, all with the idea of pleasing the customer. In that subtle strategy lies the prospect of dominance.

VISIONING

Arvind articulated its original vision statement in the mid-1980s: "To become a globally dominant player in select product segments". The vision statement was pursued through a denim manufacturing and marketing strategy and the company became the world's third largest producer in 10 years' time.

Today, Arvind is a dominant producer of superfine cotton shirting, denims, gabardines, twills, knit fabrics and knitwear, and a very large apparel brand manufacturer with dominant brands - Lee, Arrow, Flying Machine, Excalibur, Ruggers, Ruf and Tuf and Newport. Each brand offers a lifestyle to discerning consumers. The vision was large, substantive and not meant for the faint-hearted. It could challenge the stakeholders, who would have typically written off textile products as having limited growth opportunity.

The vision now is not only to be a dominant global player in chosen product segments but also to leverage its strengths and core competence in product/process innovation, technological advantages and effective cost management.

With changing times, the vision has become more dynamic. To make it all happen, Arvind has, in turn, restructured in the last several years strategically and structurally. The corporation has encountered, in varying degrees, people departures, flattening of structures, global marketing presence, new project investments, renewed customer emphasis, and multiple business units to facilitate focus and growth.

It has revitalised HR strategies and operationalised its desktop business goals and strategies. The company continues to look at acquisitions and leveraged buyouts as an effective strategy for growth. Today, it has invested in SAP, communication facilities, databases and internet-based leased lines to service customers online with maximum impact.

Citibank NA saw an opportunity for consumer banking in the third world in the 1980s. At the cost of corporate banking growth, a simultaneous strategy was designed to grow the consumer business through retail banking, credit cards, consumer durables loans and auto and mortgage financing.

The bank brought in capital, hired the best talent from the world over, trained all management staff on service and people management, transferred successful experiences, created a state-of-the-art technology base, and integrated the country organisation with the global outfit. The bank created products that leveraged technology, made banking a pleasure and won customer delight.

Every leader who ran the business was a visionary. The corporate headquarters communicated and supported the country organisation through its transition and difficult periods. Today, Citibank NA holds dominant marketshare in all the product segments in consumer banking. No doubt the hallmark of a great organisation.

Unilever subsidiary Hindustan Lever pursued a product strategy involving toiletries, soaps, detergents, personal products, agri-products, chemicals and a minimal foods business, despite its parent company's dominance in foods. Its success today demonstrates the single-minded pursuit of excellence. Recessionary cycles could have affected its growth. But in a relative sense, the organisation has distinctively proven its economic understanding and ability to forecast problems. And in the last decade Hindustan Lever merged, amalgamated, acquired or divested many products. But in the process its has consolidated its dominance and demonstrated its might in the market.

ENVIRONMENTAL FRIENDSHIPS

Dominance necessitates management of the environment and all players who interact in a variety of dynamic situations. The environment includes socio-political issues, regional pressures and priorities, political pulls, policies on trade and investment, ecological factors, and unfortunately, in the current scenario, even religious and fascist forces who have to be managed and considered in corporate strategy.

Trade policy and macroeconomic factors for corporates are driven more by external pressures, WTO, trade controls and barriers, quotas, restrictive entry and exit practices, duty structures, investment and disinvestment opportunities, capital convertibility, inflation, balance of payments, infrastructure development, poverty and population management methods, protection to the small and overall economic trends and forecasts.

At the microeconomic level, industry and competition analysis, growth rates, resource and financial structuring, regulatory bodies, alliance opportunity scoping, market segment analysis, technology strategy, research and development and demand elasticity play critical roles. The external environment is thus here to stay. Organisations need in-house facilities to make the business-economics interface real for strategic thinking and execution to be effective. In the 21st century, adept organisations see business enterprise and the management of economic environment as two sides of the same coin.

Reliance Industries has time and again proven corporate cynics wrong in their choice of business, its economics, its location, the project deadlines, project financing and eventual success. They were heretics and eclectics. They believed in themselves and in their strategy to dominate. Today they dominate. Underlying their domination strategy is close environment management. Their economic analysis cell tracks the local government machinery. Their think-tank for scenario planning and alternative analysis groups works through the year on current and projected realities and possibilities. In addition, the group makes resources available for hospitals, emergency and trauma care, flood and famine relief material, programmes for the poor and earthquake management squads. At every point of crisis, they are leading from the front. This is no hyperbole.

Another example is the Tatas. Between Telco and Tisco, they own Jamshedpur. The place is actually called Tatanagar. The people of Jamshedpur in turn own them. Tatanagar is one large business enterprise. It is a classic example of an environment-managed firm.

Arvind, in its global strategy saw the need for influencing the environment through a combination of programmed and need-based interventions. Its current programmes range from quality-of-life programmes, investment in education, rural development and infrastructure support, technology analysis and evaluation, transfer of learning programmes and concurrent engineering to supplement the vagaries of the commodities market.

RENEWAL PROCESSES AND REVITALISATION

Business Week recently declared that the path from the new economy to the 21st century is likely to be a bumpy one. Each innovative surge creates economic and social ills, from recessions to stockmarket crashes to widespread job losses. But that is the price a nation must pay to achieve the benefits of dynamic change. For an organisation, revitalisation involves creating and managing its purpose, identity, values, beliefs, core mission and culture with renewed vigour and vitality. Reinventing the culture that performs is revitalisation. In its consistency lies renewal.

Renewal would necessitate understanding the people interaction processes, the shared meanings, beliefs, language, customs, traditions and rituals of the corporation. It would seek to redefine the pattern of shared assumptions that the group has learned as it solved its problems. It would prescribe the ways new members would join in and assimilate themselves into the work environment and learn the correct way to think, perceive and feel in relation to others and the problems.

There is nothing right or wrong about an organisation's culture and revitalisation needs. "It" exists and is observed, commented upon, criticised or praised. In working through the values and building the culture, organisations facilitate socialisation, and help work on changing paradigms as it evolves and influences. Organisations in pursuit of the 21st century dream embed in people deep-rooted feelings of belonging and loyalty, help them develop their skills and competencies and prepare them for the New World.

To Andersen, the vision was the future - the dream, the mission statement - the focus and purpose.

Objectives and measures were goals to be achieved in a time frame, strategies and competitive advantages were the differentiators, product portfolio strategies were the business mix and strategic plans, the road map. For Hewlett-Packard, at the core of the organisation is the HP way. Essentially, it is about relationships based on trust, not power. The minimum expectation is that people will be open and honest in their dealings with others and they will readily accept responsibility.

Nordstrom, the retailing giant, titled America's No 1 customer service company, has articulated values on service by becoming "other" centred, rather than self-centred, valuing the nobility of service, finding and bonding with customers, serving and keeping those customers and giving frontline people the freedom to make decisions. This is the Nordstrom Way.

The P&G culture has several upfront statements that can be summarised in a few sentences. Charles L Decker summarises it thus: "Do the right thing; strategic thinking is a way of life; winning is everything; know all that is knowable; truth has its own rhythm and harmony; keep commitments. Nothing happens unless it is on paper; pass on history. Corporate bodies in the process of revitalisation and renewal need to keep their basics in place. What worked as a value will always work. This is not negotiable."

(This article appeared in the June 2002 issue of Indian Management magazine)