This following quote, from one of the leading earth equipment industry leaders, has inspired me so much that led me to write the article that you are now reading.
It says, “Desk is a dangerous place to take view of the world.” It is a warning to all our armchair CEOs, sitting in oval offices and sweating a lot in making an attractive annual plan or long range plan(LRP). While strategy for the LRP can be discussed threadbare in the board room, the information as input stays out of the office. Companies that keep their ears to the ground can only hear the sound of business opportunities and real life cases are plenty. Information is a resource but all business schools tell us materials, machines, money and manpower are resources.
A company, B2B in nature, known in the market as price leader, raked in tons and tons of money as its product was first of its kind in India during the ’70s. Money in the proverbial term, pouring through the roof was true in this case and it went ahead for nylon tarpaulin production. Some insiders apparently cautioned the management against the B2C venture, saying that it calls for a different DNA. Market nonetheless more attractive then, since 3 million trucks moved goods and even a conservative market penetration of 2%, translated into a 60,000 tarpaulins, whereas, half of it is enough to touch break even. The brand manager’s optimism was due to the product value delivery being way ahead of cotton tarpaulins in the market.
It is light weight, 100 per cent water proof, washable and available in attractive colors. The firm even believed that this could be their flagship business for the group as a whole. In exactly 24 months, the product became a money drainer and the brand manager had a transfer. When probed for the lukewarm response, what were considered to be value creators were actually value destroyers. Market frowned at the product due to attractive colors, as it is like a magnet pulling pilferers. Light- weight undermined its ability to hold excess cargo loaded on the trucks and tarpaulins are used only for cargo protection from road pirates and plastic sheets only prevented rain seepage!
In Mumbai, it was a different story, when fire brand Datta Samant was ruling the roost. His hall mark was hefty pay hike once in three years, well ahead of even real wages and labor unions saw him as a saviour. Fortunately, it was during the license raj in India and labour cost could be palmed off to poor customers. It is known as cost plus pricing. Nevertheless, CEOs felt that settlements were like one way movers and came up with the concept of counter demand. In a way, it is seen as prosperity sharing and key management demand was rise of productivity. The financial rule is cost saved is profit made and productivity rise adds to cost competitiveness, as resources are managed better. To put it bluntly, tarpaulin is a cargo protector in India from road pirates than from rain! This move can also lower supervision on blue collars in shop floors.
The seasoned Datta agreed and hiked pay, like 4000 rupees and 5000 rupees, since productivity gets a boost. But to management’s horror, nothing happened. Workers blamed poor maintenance, low quality raw material for stagnant productivity and when management complained to Datta, his characteristic answer was “Work extraction is manager’s work and not his”. It only left the pay roll ballooned and output dithered. It is a case of accuracy and reliable irony. What is reliable must be accurate and vice versa. Rise in pay must raise productivity – case of accuracy but is that reliable? Money lost, management credibility lost and in some cases, some HR heads were asked to “get lost”! It is a case of counter demand, becoming counter-productive.
As things stand today, change is constant. Unless the person at the helm keeps his ear to the ground, seismic movements get missed out and firms become hostages. Externally, a firm needs to manage political environment and as business and politics boundaries get more and more blurred, task complex increases. Many countries openly say, “Government budget exercise is not economical and it is political”, and so business is at great risk. Our petrol price since it crosses, subsidizes diesel, petrol cars face sluggish sale. In a free Market economy, why we need to bear the brunt when SUVs burn oil like no body’s business, 17 rupee tax payers money wasted! For the people and by the people government like ours, giving free TV and free laptop when 40 percent of the population is below poverty line and such huge free bees kill the market for LG and Dell business overnight.
The man at the helm, without exception thinks money, man power, machinery and material but in the world of information, super high way information is a strategic resource and there is nothing like a CEO gets it as a first hand. Typically, all organizations are pyramid by design and line staff by virtue of it in the forefront in all functions gather information and pass it to immediate superior. However due to the syndrome of “Wanting to hear what we want to hear”, information is added with more flavour so that boss is happy. The distorted information at every layer is further buttressed and by the time it reaches the oval office, it is totally mutilated. Thus decision based on it, ends up in failure. Sony India had realized this when the brands failed to perform to its expected level. The globally popular, Sony, that gives a run for rivals’ money in other nations had to face the reverse in India. When a consultant, upon a study said “Culture” as the cause to it, it puzzled every one. In India, with strong joint family system and using TV for 14 to 16 hours by all, it called for a rugged one and Sony’s feather touch lagged the users confidence and we are not quality led. We have been brought up in a culture where we believe that quality products are expensive and only the rich can afford it. It is due to this reason, some marketeers claim their brands as “cheap and best”. But the fact is, what is cheap cannot be best and what is best cannot be cheap.
World’s first celebrity management company, IMG Internationals founder, Mark McCormack, who authored a very popular book, “What they don’t teach in Harvard business school”, said that there are occasions he had to travel 4000Km for a five minute meeting with a client. Yet, he loves it, since there is nothing like meeting people in flesh and blood. Besides, it gives a message of our commitment to customers. We can hear all from the customers first hand, unadulterated. The person who took GM to glory, Alfred Salon, once observed that for a Chairman, the enterprise doesn’t confer privileges like a good looking personal secretary or a swanky office, instead it imposes responsibility. All companies that have non-performing assets (NPA) made to do well by removal of another NPA called the chief executive officer. Man in driver’s seat is safe only when the seat is in front and not at the back. Try it out (Back seat driving). It can be dangerous to people inside the car as well as to people outside.Courtesy:Karnataka Muslims
http://karnatakamuslims.com/portal/desk-and-the-risk/