September 29, 2006

Prof. Madhukar Shukla of XLRI has written an interesting post on Why Business will move "Beyond Business". He extends the idea of "socially oriented capitalism" that I discussed in my post "Future of Business: Socially Oriented Capitalism".

Professor Shukla points to some recent developments and highlights some facts and figures that point to the imminent paradigm shift of business perspective from business alone to one that encompasses business and society in equal measures.

September 23, 2006

Some questions marketers should ask to survive in today’s ever changing marketing landscape:
  1. Am I driving the industry or the industry is driving me?
  2. Where will my industry be 2 years down the line? (Anything longer is too difficult to predict in today's nano-technology world.)
  3. How is my brand making a difference to my customer's life?
  4. What is my brand's heart share of customer?
  5. Can I measure customer delight?
  6. What if my product/ service becomes obsolete overnight?
  7. What story am I telling?
  8. What am I doing to hook future customers?
  9. Is my brand over shadowed by my advertising?
  10. Am I aware of all the moments of truth that my customer can have? How am I managing them?
  11. How is my brand making a difference to the world?
  12. Does my portfolio have shock absorbers?
  13. What my customers are telling me?
  14. Who are my potential competitors?
  15. How am I bringing my customer closer to my brand?
  16. How am I protecting my brand from any possible commoditization of the category?
  17. What am I doing to keep my brand relevant in my customer's life?
  18. What is my brand’s customer attrition rate and resulting cost?
  19. How often does my customer involuntarily says to my brand, 'thank you for making my life easier'?
  20. Does my customer consider my brand as one of her family members?

September 22, 2006

Never try to manage your people; always lead them.

There is difference between human resources and material resources. Material resources are made of nuts, bolts, or micro-chips, but human resources are made of intellect and emotions. Managing creatures of emotions is virtually impossible. They have to be led in the direction you want them to take.

The human nature is such that in its natural state it abhors any kind of management from external sources. It has to be internally managed and that is possible only if outside leadership manipulates emotions and facilitates the inner self management.

So lead your people; and manage everything else.

September 17, 2006

Times are changing and so are the rules of business. Generation of steady profit and keeping the shareholders happy is no longer the start and the end of the purpose of business. Increasingly, social factor is coming into play. Some view this phenomenon an advent of corporate citizenship and corporate social responsibility (CSR) while others term it as corporate philanthropy. But this trend towards integration of social factor with purpose of business is much broader than corporate citizenship and corporate philanthropy. I prefer calling this trend a move towards "socially oriented capitalism", the only sustainable way of doing business in the long run.

Perhaps time has come for businesses to realize that they cannot exist in isolation of society at large. In coming years, survival and sustenance of businesses will be dependent on how well they empathize with the society and their surroundings. Striking an optimal balance between wealth generation for shareholders, betterment of the society at large, and judicious and sustainable use of natural capital will be the essence of doing business in future.

The problem perhaps lies in the current paradigm of doing business. The current paradigm focuses predominantly on a single parameter – maximization of shareholder’s wealth. In pursuit of this goal, often the business becomes short-sighted and neglects the long term scenarios. The present paradigm follows what Milton Friedmen advocated when he said, “The business of business is business”. But fortunately or unfortunately, this concept of business is soon going to be obsolete and unsustainable. The reason is simple. Single minded pursuit of wealth generation for shareholders often entails ruthless exploitation of natural capital as well as concentration of wealth in a few hands which is detrimental to social inclusiveness. Ruthless exploitation of natural capital means faster depletion of natural resources than its renewal leading to ever decreasing availability of resources for increasingly demanding population. Similarly, concentration of wealth in a few hands prevents diffusion of wealth, a prerequisite for holistic social development.

Tomorrow’s star businesses will be those who proactively make society a business partner. Corporate social responsibility and corporate philanthropy may not do as much good to business as entering into a social partnership with society will.

I feel following are some of the behaviours that will drive the success and sustainability of corporations in coming years:

  1. Society as a shareholder: Time has perhaps come to view society as a shareholder – someone whose interests are at stake and expectation of some economic return is there. The concept of giving back to society must change to sharing the profits with the society just as profits are shared with a shareholder. This sharing should be in the form of proactive investment in well being of the society to make it robust and strong so that the society can invest more in the corporation and a cycle of constant synergistic interaction is there between corporation and the society.
  2. Society as a limitless consumer: The world is a pyramid and currently only the top of the pyramid is considered as a market by corporations. The rest of the pyramid remains like a non-entity for the corporations around the world. And this is based on the assumption that this large segment has no purchasing power hence making them a non-market. This assumption is flawed and this will have to be changed if corporations want to be alive and sustain their growth. For succeeding in future, corporations will have to focus on these markets which seem to have no purchasing power when seen from naked eyes, but which have immense potential as a huge market if seen from third eye. Perhaps, the philosophy of Henry Ford, who raised the salary of his employees to sell his cars, is needed. For tapping into the bottomless market represented by the poverty stricken mass, you need to invest in them, develop them, educate them, help them generate wealth and thereby turn them into a lucrative market.
  3. Corporation as a catalyst for social inclusiveness: More than providing purchasing power, multi-dimensional transformation of the underprivileged society is needed. Apart from money, one needs identity, respect, social standing, love, and belongingness. By some quirk of fate, these are missing from the lives of underprivileged who form the bulk of society. Social inclusiveness is concerned with these softer but vital issues. The corporations of tomorrow will have to address these and act as a catalyst for social inclusiveness. It will be the emotional glue that will bind the corporations with the society to ensure a symbiotic relationship and coexistence.
Ultimately it is a one world. Corporation and society cannot exist separately. For sustained prosperity they have to enter wedlock and live happy ever after!

September 14, 2006

Whenever I see two dining halls in any office I wonder why there is a need for two dining halls – one for lower mortals and the other for directors, presidents, and vice-presidents. And I completely lose my sense when I see separate toilets for managers and other staff. Really confusing! Isn’t it corporate casteism?

Why this bias? Why cannot all eat in one dining hall? Why this boundary? Or is it the myth of power lunch? Whatever it is I don’t care because this sounds dumb to me. Just imagine how many opportunities these hot shot guys are missing by not breaking bread with the ordinary mortals – the life and blood of any organization. They already lead a secluded life in their corner office away from the grim and dirt of the battle front. And now they are forsaking golden opportunities to be in touch with the corporate infantry by deciding to break bread in yet another corner dining hall. Breaking bread and mingling with the ordinary mortals of their organization would have meant opportunity to know more about the people who work for them. It would have given them some great insights on how employees are feeling, what gossip is the flavour of the week, what are the problems of their people, and how to motivate and engage the people more. Sadly, very few top executives break the bread with their people in one common dining hall.

And if this is not enough, some organizations practice corporate casteism to the extreme by having separate toilets for managers/ top executives and another one for rest of the lowly mortals in the organization. I don’t understand why it has to be so. Or is it that they are promoting the concept of power pissing!!

Things can become pretty bizarre in corporate world. Really!

September 10, 2006

One of the key ingredients of the GE script directed by legendary Jack Welch was the concept of boundarylessness. He declared that turf wars within the organization needed to be treated on par with grave organizational crimes like leaking company secrets. This strategy worked wonders for GE because turf wars are typical bottlenecks within an organization that immobilize the entire organization.

Despite the success achieved by GE and other companies from removing turfism, a large number of companies are yet to learn and imbibe this simple yet profound strategy. Numerous organizations today are suffering from the cancer of internal turf wars and are performing below potential. All these despite a rich organizational vocabulary of teamwork and collaboration!

Functional priorities still command great deal of attention. As a result, suboptimization becomes a fairly common sight. Functions get optimized while the entire system becomes suboptimized bringing friction and inefficiency in the system.

There are perhaps three reasons why turf wars are so widely prevalent in organizations despite many earnest attempts by the leadership to minimize them.
  1. Leader's inability or failure to immaculately weave the organization around a broad agenda.
  2. Lack of metrics to measure performance on collaborative results.
  3. Lack of metrics to measure the cost of turf wars.
Unless there is a concept of ‘one organization, one goal’, functional barriers cannot be removed. Very often it is seen that every department/ function has its own goals which at many times conflict with the organizational goals. For example, it is often seen that purchase department tries to reduce cost of raw material and end up purchasing slightly inferior material which results in compromise with quality delivered to customer. Similarly, it can be changing suppliers for minimizing cost and compromising timely availability of raw material resulting in erratic supply chain. On a similar note, operation can engage cheapest transporters with scant regard for proper stacking on trucks resulting in damaged goods. All these are cases of functional optimization but suboptimization of the system.

Here the role of the leader becomes vital. He has to ensure that each and every employee of the organization thinks of the organization goals and the role they are supposed to play in it. It needs simple and clear communication of the organizational goals. Perhaps a story telling leader can be more effective in ensuring that the concept of ‘one organization, one goal’ is absorbed across the organization. A constant reinforcement of this theme can go a long way in making people rise above functional affiliations to organizational affiliations. A better analogy will be to make Indians rise above regional affiliations like Bihari, Bengali, Gujarati, Tamil, etc. and think of themselves as Indian first and anything else second.

Next step is design of right metrics to measure level of optimization of the system. The prevalent metrics that measure the optimization of the function rather than system has to go. Currently, performance of people is measured on how well they are meeting functional goals thereby increasing the tendency of the people to view functional goals at the top of the priority list. But business is more of a process. Individual performance needs to be measured in terms of the performance of the system/process. So if a process has players from marketing, sales, finance, and supply chain then individual performance should not be based on functional part of the process. Collective responsibility rather than individual responsibility is needed. So if the process fails to deliver, none can play blame game. Also, it will ensure that people become more concerned with getting things done rather than just doing their part.

Another metric that I feel is needed is the metric to measure the cost of optimization of functions and suboptimization of the system. Unless there is a way to quantitatively and unambiguously measure the associated cost of functional focus, it will be difficult to rally the entire organization around organizational goals.

In the end, it has to be a culture of ‘one for all and all for one’.

September 2, 2006

Sometimes I wonder what the HR guys are up to. There are big talks these days about the strategic role HR has to play. But do the HR guys really know enough of operational and business issues to play a real strategic role?

A few days back I was attending a high level cross functional meeting. The discussion drifted to an issue involving improvement of order processing at depots. The HR guy readily came up with a solution that seemed theoretically perfect. But for anyone who has been to depot and witnessed how orders are processed, the solution would seem impractical and devoid of commonsense. No surprise that the top guy of supply chain present at the meeting promptly brought sense to this HR guy. This is not an isolated case. These kinds of things happen too frequently.

The problem with HR is that it is too self centered. It views things from an HR perspective rather than a business perspective. It often fails to see the big picture and lacks a deep understanding of business.

Before HR guys can play strategic role, they need to become more market savvy. They need to understand their customer and her needs - what she wants and what she doesn't - well before they formulate an idea and sell it to her. Just peddling ideas generated by their own myopic understanding will do no good to either the organization or themselves. An example: The HR comes up with a training program for frontline sales personnel. The vice president of sales, someone well aware of ground realities and way things happen at ground zero, goes through it and frowns and then wonders how that would help his boys. No wonder so many training programs fail to get desired results!

So if HR really wants to find a place under the strategy roof, then it should focus on the following:

  1. Learn the business first; think about HR later.
  2. Frequently visit market place, shop floors, R&D laboratory, packaging development labs, IT guys’ terminals, and bean counter’s den. Learn how things move in the organization.
  3. Customize theories into practical solutions based on the insights gathered through frequent interaction within and outside the organization.
  4. Think business, think leadership, think of the big picture and how you can help fit the different pieces of puzzles to reach that big picture.
  5. Learn to ask “what if” type questions frequently.
Hey, the typical HR guy, awake, arise, and move fast up the strategic ladder before big time trouble starts. Time is running out!

September 1, 2006

How many managers understand the economic cost of human resources at their disposal? Perhaps very few. Some managers just don't understand allocation of work based on economic cost of human resource and scope for value addition. It's basically a mismanagement of cost – payoff equation.

The result of this mismanagement is an organization saddled with non-value adding activities, poor productivity, and chaos all around. People who are paid big bucks and are supposed to be spending 80% of their time on value adding activities end up spending 60% of their time on non-value adding activities. So the real things that are supposed to be driving an organization end up being the victims of managerial myopia. The managers simply fail to manage the non-value adding activities in the most efficient and cost-effective way.

As far as my understanding is concerned, there are only three ways to manage non-value adding activities. Any one or combination can do the job.

  1. Automate – The best solution to free your organization from the tyranny of non-value adding activities is to automate the activities. With the flooding of sophisticated technology these days, almost 70-80% of non-value adding activities can be taken care of through automation.
  2. Outsource – This is the next best way to plug the seepage of productivity due to burden of non-value adding activities. Majority of the non-value adding activity remaining unresolved by automation can be effectively tackled by outsourcing. Definitely it is a cost effective solution.
  3. Put the most efficient hand in action – Not every non-value adding activity can be handled by automation and/or outsourcing. In any organization some non-value adding activities will still need to be taken care of by human beings. Automation and outsourcing can ensure that proportion of such activities requiring direct human interface does not exceed 5-10% of all non-value adding activities in an organization. In such cases which require human expertise, it is better to find adept and skillful hands that can efficiently do the job. Efficiency is the guiding principle here. A great doctor cannot be a great nurse and a great nurse cannot be a great doctor. Similar is the situation in business and organizations. Some people are experts in doing non-value adding work who cannot excel in value adding work. Find those people or if need be hire them and set them in action to take care of the non-value adding work that can neither be automated nor outsourced. But for Heaven’s sake don’t saddle people who are supposed to be concerned with value addition with non-value adding activities. It is a crime to ask someone who can add value multiple times to do something that is not at all adding any value.
Managers need to give some serious thought to ineffective utilization of human resources at their disposal. It would go a long way in ensuring that limited human resources are put to best use based on their expertise, and maximum value is created for an organization.