 "Complacency is an enemy; successful companies are restless: Joseph Fuller")
Organisations that are successful are never convinced that they are doing things as well as they could, Joseph Fuller tells Devina Joshi
Can firms possess a sustainable competitive advantage in today's marketplace? Most corporate firms seem to be diversifying into often unrelated fields to be more 'holistic'.
Yes, there are a number of ways in which corporations can be differentiated. This need not be just about brands, trademarks and proprietary technologies. The companies that are consistently competitive have two attributes: first, they are extremely effective at managing certain internal processes that are directly related by the essence of their strategy. Not all processes are equally important in a company. Good companies understand what are the four or five processes they absolutely have to be good at to succeed, and then they get good at those processes. For example, in the professional services or consulting industry, recruiting is an absolutely essential process. Such companies cannot succeed unless they are competitive in the marketplace for young talent. Say, if they buy their laptops 3 per cent cheaper than an investment-banking firm, they aren't going to get good in the marketplace. But if they get the right talent, they will.
In a pharma company, the firms that are very effective about managing and filtering their R&D programmes, particularly when to stop developing something, outperform others.
Second, successful companies learn. They are open to new ideas, and are always looking to improve. They are rather restless. Complacency is the enemy of competitiveness.
It is difficult to do many things well for any company. It is okay to have value-added services, but a company must understand that it isn't in the same business as another company whose core competency is that value-add. They are not in competition. They are actually complementing each other. People tend to over credit the relevance of their own skills to a business. The fallacy is to think: "That fellow's business seems like an interesting one, and I'll bet we'd be good at that."
What are some of the key lessons that companies from emerging markets can learn from those in the developed world?
The first lesson for companies aspiring to be global is that there is no path to success based on emulating paths taken by companies 50, 30, 15 years ago. You have to be ready for today's era.
The second is, you have to be very cautious about assuming that simply because you are good at something in your home market, you will be relevant somewhere else. There are very few markets that are not being served for anything you can imagine. But the question is, are you able to serve that market more competitively than a strong player there?
Look at Embraer (an aerospace conglomerate) from Brazil. It has got a very carefully cultivated strategy. Or look at SAB (South African Breweries). It had some very interesting skills in the area of technology of brewing, and ironically, they studied the business because of the adversity of sanctions. It understood that the market for beer was set to grow rapidly worldwide, more than in the developed markets. It understood how you ran a distribution network in Goa, for instance. It had a strong, dedicated workforce, perfectly happy to go and reside, say, in Panama. It is a reluctance to move like this, in the case of some European or American companies.
How can good corporate governance help fulfil India's potential to become a global economic powerhouse?
The Indian economy and Indian companies will over time have to be stronger if they have to compete in their home market against the world's best players.
It isn't in a country's interest to try and create a lot of barriers to protect the home market. It can be in the interest of politicians and certain managers to do that, but not in the nation's interest. Second, the urgent priority for India, ripped raw, is to address the six or seven sectors that provide the fundamental services to allow other businesses to be successful.
People talk endlessly about the electricity sector in India but the absence of reliable clean/green power deters people from investing in India, including Indian companies from expanding investment here. The lack of international trade-oriented infrastructure whether one talks of railroads to get to ports, is a barrier. Having said that, the type of service goes beyond the infrastructure of water, power etc. Look at banking - it needs to be liberalised, so it can prove its mettle against other world-class institutions. You can see the Chinese very carefully trying to understand how to do this.
Do you believe companies are investing enough in best practices when it comes to succession planning?
Succession planning at the senior-most level is one of the hardest things to do well. Even if you run a complete business unit, running a multi-business unit, particularly in a global company, is a profoundly different experience than running a single business unit.
It is interesting to see that when some of the most successful CEOs around the world were succeeded by brilliantly successful persons that had worked as their right hand for years, the successors weren't very successful. The reason is, they were good at working as the right hand; they weren't good at actually being the decision-makers.
Companies also do a very poor job of planning for succession for their boards, what the composition of the board should be etc. That is an area for innovation. Let's look at it in an Indian context. If you are running one of the big Indian groups now and you are anticipating that 50 per cent of your assets will hail from international shores in 10 years, and you have a main board that comprises an all-Indian leadership, it will take years to identify replacing some of the directors with international ones. You have to start now.
Indian managers are usually extremely knowledgeable about the specific tasks they run, being rooted in science or engineering. They know what it takes to be competitive, but not many decisions are taken without engaging the CEO.
ACADEMIC BENT
Can firms possess a sustainable competitive advantage in today's marketplace? Most corporate firms seem to be diversifying into often unrelated fields to be more 'holistic'.
Yes, there are a number of ways in which corporations can be differentiated. This need not be just about brands, trademarks and proprietary technologies. The companies that are consistently competitive have two attributes: first, they are extremely effective at managing certain internal processes that are directly related by the essence of their strategy. Not all processes are equally important in a company. Good companies understand what are the four or five processes they absolutely have to be good at to succeed, and then they get good at those processes. For example, in the professional services or consulting industry, recruiting is an absolutely essential process. Such companies cannot succeed unless they are competitive in the marketplace for young talent. Say, if they buy their laptops 3 per cent cheaper than an investment-banking firm, they aren't going to get good in the marketplace. But if they get the right talent, they will.
More From This Section
Second, successful companies learn. They are open to new ideas, and are always looking to improve. They are rather restless. Complacency is the enemy of competitiveness.
It is difficult to do many things well for any company. It is okay to have value-added services, but a company must understand that it isn't in the same business as another company whose core competency is that value-add. They are not in competition. They are actually complementing each other. People tend to over credit the relevance of their own skills to a business. The fallacy is to think: "That fellow's business seems like an interesting one, and I'll bet we'd be good at that."
What are some of the key lessons that companies from emerging markets can learn from those in the developed world?
The first lesson for companies aspiring to be global is that there is no path to success based on emulating paths taken by companies 50, 30, 15 years ago. You have to be ready for today's era.
The second is, you have to be very cautious about assuming that simply because you are good at something in your home market, you will be relevant somewhere else. There are very few markets that are not being served for anything you can imagine. But the question is, are you able to serve that market more competitively than a strong player there?
Look at Embraer (an aerospace conglomerate) from Brazil. It has got a very carefully cultivated strategy. Or look at SAB (South African Breweries). It had some very interesting skills in the area of technology of brewing, and ironically, they studied the business because of the adversity of sanctions. It understood that the market for beer was set to grow rapidly worldwide, more than in the developed markets. It understood how you ran a distribution network in Goa, for instance. It had a strong, dedicated workforce, perfectly happy to go and reside, say, in Panama. It is a reluctance to move like this, in the case of some European or American companies.
How can good corporate governance help fulfil India's potential to become a global economic powerhouse?
The Indian economy and Indian companies will over time have to be stronger if they have to compete in their home market against the world's best players.
It isn't in a country's interest to try and create a lot of barriers to protect the home market. It can be in the interest of politicians and certain managers to do that, but not in the nation's interest. Second, the urgent priority for India, ripped raw, is to address the six or seven sectors that provide the fundamental services to allow other businesses to be successful.
People talk endlessly about the electricity sector in India but the absence of reliable clean/green power deters people from investing in India, including Indian companies from expanding investment here. The lack of international trade-oriented infrastructure whether one talks of railroads to get to ports, is a barrier. Having said that, the type of service goes beyond the infrastructure of water, power etc. Look at banking - it needs to be liberalised, so it can prove its mettle against other world-class institutions. You can see the Chinese very carefully trying to understand how to do this.
Do you believe companies are investing enough in best practices when it comes to succession planning?
Succession planning at the senior-most level is one of the hardest things to do well. Even if you run a complete business unit, running a multi-business unit, particularly in a global company, is a profoundly different experience than running a single business unit.
It is interesting to see that when some of the most successful CEOs around the world were succeeded by brilliantly successful persons that had worked as their right hand for years, the successors weren't very successful. The reason is, they were good at working as the right hand; they weren't good at actually being the decision-makers.
Companies also do a very poor job of planning for succession for their boards, what the composition of the board should be etc. That is an area for innovation. Let's look at it in an Indian context. If you are running one of the big Indian groups now and you are anticipating that 50 per cent of your assets will hail from international shores in 10 years, and you have a main board that comprises an all-Indian leadership, it will take years to identify replacing some of the directors with international ones. You have to start now.
Indian managers are usually extremely knowledgeable about the specific tasks they run, being rooted in science or engineering. They know what it takes to be competitive, but not many decisions are taken without engaging the CEO.
ACADEMIC BENT
- Fuller is a senior lecturer in General Management and co-leads The Entrepreneurial Manager course, part of the MBA programme at Harvard Business School.
- During his three decades in consulting, Fuller served clients in a wide variety of industries with particularly deep experience in life sciences, ICT and the defense and aerospace industries
- His publications include The Accounting Transparency Gap" (Harvard Management Update; 2002), and End the Mythmaking and Return to True Analysis (Financial Times; 2002)